Title_ Branch Expansion and Institutional Sustainability of MFIs in Bangladesh

Author_ Farhana Nargis, Mustafa K. Mujer, Farah Muneer

Pages 142-158

Abstract_ Sustainability of microfinance institutions (MFIs) in relation to branch expansion and relateddecisions has been widely debated in the microfinance sector. The present study exploresthe factors that are taken into consideration by the MFIs in Bangladesh while opening anew branch. Specifically, the study examines the locational considerations relating to branchexpansion and implications relating to service delivery and other MFI operations. The analysiscovers both head office and branch level information collected using stratified randomsampling approach ensuring proportional representation of small, medium and large MFIs.The study finds locational characteristics and number of potential borrowers as the mostimportant factors while deciding on opening a new branch.The decision on branch locationresponds to three main considerations: (i) reducing cost of loan operation; (ii) serving targetpeople in remote areas; and (iii) implementing targeted programs. It is seen that very largeand medium categories of MFIs have greater incentives for branch expansion relative to largeand small categories while larger MFIs tend to establish new branches close to growth centres.

Keywords_ Branch expansion, MFIs, Sustainability, Location