Challenges for Second Generation Microfinance: Regulation, Supervision and Resource Mobilization

Two decades of development practice have highlighted the importance of financial services in the fight against poverty. Accordingly microfinance organizations have scaled up their operations in many developing countries, with Bangladesh being a notable example. However, the traditional form of support for microfinance via donor grants and concessional loans is not sustainable. Microfinance organizations are therefore, having to raise additional funds through private means such as deposit mobilization and commercial loans which in turn poses numerous “second generation” issues and challenges for the sector. Using Bangladesh as its context, this book presents some of these issues and concerns, as well as some general recommendations to minimize and manage the risks involved with “second generation” microfinance. The book focuses on resource mobilization and the legal and regulatory framework for microfinance supervision. Case studies are also presented of microfinance organizations in Bangladesh engaging in sustainable microfinance. With its large scale successful operations, the policy implications from Bangladesh microfinance organizations should be of interest to microfinance practitioners and policy makers in Bangladesh and beyond.