Microfinance in Bangladesh: A case study on Islamic microfinance

This thesis paper aims to study microfinance operations in Bangladesh. Besides, the study examines the Islamic microfinance activities in general. Qualitative method and secondary data have been used in this study. Since independence, Bangladesh has seen many ups and downs in its economy. In this context, it is notable that the country's per capita income has exceeded around two thousand US dollars in recent years. All the indicators of GDP growth are going upward. The overall economic growth is more than 7% consistently. This study has found that, with the development of microfinance services in Bangladesh since the 1980s, the poverty rate has been decreased, and significant results have been observed. The poverty rate declined gradually since 1991, which was 57% in 1991, decreased to 21% until 2018. Microfinance has an essential place in the economic growth of Bangladesh. By the end of 2018, microfinance institutions have $ 7.17 billion in outstanding annual loans and collected 10.46 billion in the form of paid loans within approximately 31.20 million members. Over the past two decades, Islamic microfinance (IMFs) has been a socio-economic development approach along with traditional microfinance in many countries. This thesis paper concludes that Islamic microfinance plays a vital role in poverty reduction with aid financing tools such as zakat and charity. Islamic microfinance institutions also offer micro-credit by means of various mechanisms based on the principles of sharia such as Karz-i-Hasan, Murabaha, Mudaraba, Takaful, Ijarah, and Salam. Moreover, Islamic microfinance is supporting the strengthening of the economy by financing entrepreneurs and sharing possible risks. Therefore, there is a significant potentiality for Islamic microfinance in achieving the 2030 SDGs.