Uses and Users of MFI Loans in Bangladesh

This paper describes the 'financial diaries' methodology followed in Grameen II, and illustrates the financial behavior of 53 households in Bangladesh. The method involved helps the members in:

• Making diaries of their financial activities,
• Observing their loan usage patterns over a period of two or three years.

The paper provides data on the loan sources, both formal and informal, and the corresponding amounts.

• Out of the 53 'diarists,' 43 borrowed 239 loans from MFIs, which were worth $39,000.
• The borrowers used the loans for:
  • Trading or retail business stock;
  • Asset acquisition or maintenance;
  • On-lending to others;
  • Payment of other debts;
  • Consumption;
  • Mixed uses.

The paper broadly discusses the major findings of the study and states that:

• Most MFI loans could be allocated to a single broad category of use;
• Some part of the loans was held back for repayments;
• Some members handed over the loans to their family members;
• The loan sizes varied from $80 (lowest, for consumption) to $200 (highest, for business or on-lending).

Concluding on the study, the paper infers that contrary to the MFI expectation, not every loan is utilized in a microenterprise.