Bangladesh’s microfinance sector witnessed a significant rise in loan disbursement in the first half of the current fiscal year, though concerns persist over the increasing volume of overdue loans.

Official data show that microfinance institutions (MFIs) disbursed loans worth Tk 1.32 trillion during July–December of the fiscal year 2024–25, marking a 9.0% increase compared to Tk 1.21 trillion in the corresponding period of the previous year.

For the entire fiscal year 2023–24, MFIs disbursed Tk 2.63 trillion in loans, reflecting a 5.6% growth from Tk 2.49 trillion in FY 2022–23. Total outstanding loans at the end of FY23 stood at Tk 1.50 trillion.

However, the disbursement growth has been accompanied by a steady rise in overdue loans. According to data from the Microcredit Regulatory Authority (MRA), overdue loans reached Tk 159.6 billion in the first half of FY25. This follows an increase from Tk 153.9 billion in FY23 to Tk 162.1 billion in FY24.

The ratio of overdue loans to the total outstanding amount rose to 10.37% in FY24, up from 10.23% in the previous fiscal year, despite improvements in loan recovery efforts.

Experts attribute the increase in overdue loans to the weakening repayment capacity of low-income borrowers, driven by high inflation and reduced purchasing power.

Dr Mustafizur Rahman, Distinguished Fellow at the Centre for Policy Dialogue, pointed to inflationary pressures as a key factor affecting loan recovery. He was optimistic that easing inflation in the coming months may stabilise the situation.

Md Fazlul Kader, Managing Director of Palli Karma Sahayak Foundation (PKSF), echoed these concerns, citing inflation and political instability as recent impediments to repayment. He emphasised the importance of addressing economic inequality and promoting inclusive investment to support disbursement and recovery in the microfinance sector.