Case Study

Commercial Microfinance in Egypt - The Case of the National Bank for Development

Commercial banks can play an important role for microfinance

This paper is a case study of the program started by the National bank for Development (NBD) to aid microfinance development in Bangladesh. The paper states that:

  • The NBD program combines the attitude of NGOs and the sound financial principles of banks to make micro enterprise lending a sustainable operation;
  • In the short run:
    • The bank's objective is to provide microfinancial access to credit to those who would be denied credit by conventional banks.
  • In the long run,
    • Its objective is to enable the transition of these borrowers into clients under more conventional banking standards.

The paper also discusses the following:

  • Features of the NBD program are:
    • Mobile banking units;
    • Repeat borrowing;
    • Quick and transparent loan approval procedures.
  • Challenges faced by the bank are:
    • Maintaining steady growth in its client base;
    • Incurring high costs;
    • Finding a level of loan charges that maintains profitability but does not cut off program growth over time.
  • Impact of the program, which has been an increase in:
    • The number of employees in enterprises;
    • Incomes by more than 50%;
    • Living standards of micro credit recipients, including nutritional benefit.
  • Success factors are:
    • Senior management and staff commitment to the program;
    • An enabling policy environment;
    • Institutional innovations;
    • External catalysts;
    • The ability to change market-determined rates and fees.

The paper concludes that the NBD's experience has proved that:

  • The poor are willing to pay to have continued access to simple, quick credit;
  • Significant growth can occur in the microfinance industry if commercial banks join in;
  • Public policy could help the industry grow by making it easier for microfinance NGOs to borrow from banks or to become banks themselves and accept deposits.

About this Publication

By Iqbal, F., Riad, E.
Published