Increasing Access to Rural Finance in Bangladesh: The Forgotten "Missing Middle"

Aurora Ferrari

No 6832 in World Bank Publications - Books from The World Bank Group

Abstract: Increasing access to rural finance is often the last frontier for financial sector development in developing countries. Financial institutions aiming to operate in rural areas in these countries usually have to deal with high transaction costs, low population densities, remote areas, and a heavy focus on agriculture, with related weather and commodity risks. Although Bangladesh is highly vulnerable to natural disasters, its high population density lowers transaction costs considerably. This report seeks to: measure the quantity and quality of access to finance by rural micro, small, and medium-size enterprises (MSMEs) and marginal, small, and medium-size farmesr (MSMFs). In Bangladesh these are also referred to as the missing middle -- a segment not served by banks or microfinance institutions (MFIs). The report also identifies constraints that financial institutions face in serving MSMEs and MSMFs. The institutions analyzed in detail include, Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank (RAKUB), MFIs, private banks, and insurance companies. These institutions have been selected because they are among the largest providers of finance to the missing middle. Moreover, given their size, they have a considerable impact on the current dysfunction of rural financial markets. The report finally develops a realistic strategy and options for sustainably increasing access to finance for the missing middle.

Keywords: Banks; and; Banking; Reform; Finance; and; Financial; Sector; Development-Debt; Markets; Finance; and; Financial; Sector; Development-Access; to; Finance; Finance; and; Financial; Sector; Development-Bankruptcy; and; Resolution; of; Financial; Distress (search for similar items in EconPapers)
Date: 2007
ISBN: 978-0-8213-7333-0
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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