1. © INCEIF 2012. © INCEIF 2014. A Study of the Relationship between Religion and Development: Evidence from the Microfinance Industry of Bangladesh. 6 November, 2014 Mohammad Ashraful Mobin Prof. Merouane Lakehal-Ayat, PhD

2. © INCEIF 2012. © INCEIF 2014. What it’s all about ? Looking into the effect of religion on development. Explaining the concept of development and microfinance. Examining the effect of religion on microfinance industry in Bangladesh.

3. © INCEIF 2012. © INCEIF 2014. Introduction/Background Research Puzzle Theoretical Framework Delineation of key concepts Data & Methodology Comparative observations Findings Questions 3 Outline

4. © INCEIF 2012. © INCEIF 2014. Background of the Study Several theories and studies argue that religious beliefs represent an important yet neglected factor in development. 16.1% of worldwide population lives with less than one US dollar a day and 57.6% with less than 2.5 USD. 44% of this extreme poor people is concentrated in the Muslim countries. About 65 million people around the world received small loans without collateral through microfinance.

5. © INCEIF 2012. © INCEIF 2014. Background of the Study 72% of the people in Muslim countries do not use formal financial services. 20%-40% people do not use conventional microfinance to avoid interest. Currently more than 300 Islamic Microfinance Institutions are working to alleviate the poverty. Little academic inquiry on the relationship between Islamic based institutions and development. Moreover, there is even less in the area of Islamic microfinance and development.

6. © INCEIF 2012. © INCEIF 2014. World Poverty Map

7. © INCEIF 2012. © INCEIF 2014. Prevailing Religion

8. © INCEIF 2012. © INCEIF 2014. Research Puzzle Focus on the relationship between religion and development. Specifically through examining the Islamic based approach to development through micro finance and economic performance both in Islamic and conventional sectors.

9. © INCEIF 2012. © INCEIF 2014. Theories supporting microfinance approach to economic development Neo-classical The Neo-classical growth model emphasizes the importance of savings in order for a country's economy to grow. According to Todaro et al. (2003), one of the main constraints for poor households in developing countries is the lack of access to financial services. Welfarist theory The Welfarist theory focuses on reducing poverty through credit, often provided in conjunction with services such as skills training and teaching of literacy and numeracy, health, nutrition and family planning.

10. © INCEIF 2012. © INCEIF 2014. Theories supporting Microfinance Micro-Finance Unity Theory This theory advocates for joint liability in the repayment of microfinance loans. The argument fronted by this theory is that joint liability could improve repayment rates and the welfare of credit-constrained borrowers. Empowerment Theory of Micro-finance The empowerment theory shows how microfinance loans can empower people to improve their standard of livings by enabling them to start businesses. The theory points out that women account for nearly74 percent of the 19.3 million of the world’s poorest people now being served by microfinance institutions.

11. © INCEIF 2012. © INCEIF 2014. Delineation of key concepts Religion and development: The notions of development and religion have so much in common Hindu idea emphasizes harmony with the living environment. Muslims believe that the ultimate aim of life is to return humanity to its creator in its original state of purity. Christians believe that personal transformation – inner change – is the key to the transformation of society. Microfinance: To provide credit to working poor who otherwise would not have access to credit services. MFI created for poverty alleviation and empowerment of the poor. Relying on traditional skills, poor people use financial services to start or expand self-supporting businesses.

12. © INCEIF 2012. © INCEIF 2014. Data and Methodology Cross sectional study Two of the largest institutions from two sectors as our sample. One is Grameen Bank and another one is Rural Development Scheme (RDS) of Islami Bank Bangladesh Limited. Data collected from http://grameen-info.org http://www.islamibankbd.com/rds/ Data has been updated to 2013.

13. © INCEIF 2012. © INCEIF 2014. Variables The particulars looked into …. Average Loan Size Female Members Profit rate/Interest rate Dropout Rate Disbursed Loans Loan Recovery rate

14. © INCEIF 2012. © INCEIF 2014. Comparative Performance Areas of Performance RDS (Rural Development Scheme, IBBL) Grameen Bank Year of Establishment19961983 Female members82%96.21% Male members18%3.79% Total members8992378540000 Members per branch37462625 Total staffs/ Field Officers266621851 Disbursement(mil) 87558.86126026 Recovery(mil.) 8690.337700 Outstanding loan(mil.) 15378.7984381 Profit/ Interest rate (flat)%10%22.5% Average investment size0.011012522 Rate of recovery%99.50 %98.30% Drop out rate%5 % 15% Total Members / Total Staffs264.5 390.82

15. © INCEIF 2012. © INCEIF 2014. Findings Average loan Size: Grameen Bank has an average loan size about 12,522 Taka. Rural Development Scheme (RDS) has comparatively a lower number specifically around 11,000 Taka.

16. © INCEIF 2012. © INCEIF 2014. Findings Female Members Percentage of Female clients for Grameen Bank is 96.21% while it is 82% for RDS. Results show that Grameen has better reach target than RDS.

17. © INCEIF 2012. © INCEIF 2014. Findings Drop out rate : It is 5% in the case of RDS while it is about 15% for Grameen bank. RDS is doing better in this category.

18. © INCEIF 2012. © INCEIF 2014. Findings Profit/Interest Rate: RDS is charging 10% while Grameen is charging 22.5%.

19. © INCEIF 2012. © INCEIF 2014. Findings With respect to total disbursements, Grameen bank amount is 126026 million Taka while it is 87558.86 million Taka for RDS. The loan recovery rate for RDS is 99.50% while it is 98.30% for Grameen bank.

20. © INCEIF 2012. © INCEIF 2014. Results Summary Generally, the results are mixed. RDS is performing better in categories of profit rate, dropout rate, loan recovery rate while Grameen Bank is performing better in terms of average loan size, targeting female members and total disbursements. As in other studies, it seems that religion impact certain categories of development. It is important that further studies are performed on this subject of inquiry.

21. © INCEIF 2012. © INCEIF 2014. Thank You! For any future queries please email us at 1400028@student.inceif.org