Microfinance for extreme poor, a renewed effort

Transcription

1 Microfinance for extreme poor, a renewed effort An approach to operate sustainable microfinance for poor and extreme poor through Community Based Organisation in Bangladesh A paper to be presented in a Development s future conference to be organised from November 2007 at National University of Ireland Galway By Achyut Hari Aryal Technical Advisor-Microfinance Concern Worldwide Bangladesh November 2007 National University of Ireland Galway 1

2 Abstract While the current approaches to micro-credit have been successful in providing income opportunities to millions of poor rural households (and more recently also urban) in Bangladesh, they have generally failed to reach the extreme poor (an estimate of 20-25% of the population 1 ) in the country. Reaching the poorest of the poor however, is an issue that must not be overlooked, and despite some recent initiatives 2 to address this serious short-coming, further actions are required to ensure the inclusion of this vulnerable section of Bangladeshi society. Concern Worldwide, Bangladesh has initiated a microfinance service delivery system which has a tremendous potential to encompass this group. This DFID- funded action research project ( Promoting Economic Development of the Poor with Community Based Microfinance Initiative in Bangladesh ) was developed in recognition of the Community Based Organisations (CBOs) tremendous capacity to contribute towards poverty alleviation and empowerment of the extreme poor. Traditionally, CBOs have been unable to gain access to sustainable microfinance services through the formal financial sector. Through strengthening the CBOs organisational capacity and assisting them with forging links with commercial banks however, the overall livelihood security of the CBO members (90% of whom are women) can be significantly raised while at the same time ensuring sustainability of the CBOs microfinance activities, as this linkage enables CBOs to ensure better credit terms for its beneficiaries, as well as engendering a stronger sense of empowerment and ownership. This novel approach thus encompasses the two most crucial issues in the microfinance sector: extending micro credit services to the extreme poor, and expanding the banks portfolio to the microfinance sector. In a country where traditional micro credit approaches are well established and well accepted, the evidence based advocacy approach of this project should prove to be the determining argument for widespread adoption of this approach. 1 BRAC, a seminar presentation on a International MF Workshop, organised by Concern Worldwide Dublin, March Unlocking the potential, a national strategy for accelerated on Poverty reduction (PRSP), October 2005 Bangladesh 2

3 1. Country Background and its poverty situation: Bangladesh is considered to be the highest densely populated country in the world. In a size of just 144,000 sq Km, a total of around 150 million 3 people are living; out of which around 45% (2004) of them live below the national poverty line and around 36 % 4 are living in US$ 1 per day. While Bangladesh has demonstrated positive progress in national poverty indicators in recent years and has reduced poverty on average by 1% per annum since 1990, there are still 68 million people Table 1: Bangladesh and Ireland Bangladesh Ireland Areas (sq km) 144,000 70,273 Population 150 million 4.2 million Population density (per sq km) 1, Population growth 2.1% 1.14% Infant mortality per 1000 live birth 59 5 Life expectancy (years) Per Capita (PPP) Health expenditure (2003) 68 2,500 (US$) Per capita GDP (US$) 2,300 45,500 HDI rank 137th 4th Source: living below the poverty line. Although poverty is a largely rural phenomenon in Bangladesh, rapid urbanisation, at an estimated current rate of 6% per annum, is anticipated to add 18 million poor to the urban areas by 2015 (DFIDCAP, 2003, p5). This may serve as an enormous challenge to the government s commitment to addressing the Millennium Development Goal (MDG) of eradicating extreme poverty and hunger. 2. Microfinance sectors in Bangladesh and its impact on poverty Microfinance services in Bangladesh have been successful in providing millions of poor households with access to credit. At present, approximately 1,200 microfinance institutions serve more than 13 million households across the country (CDF, 2002,) 5. Despite this success, microfinance services have been bemoaned for their inability to reach the extreme poor. 3 Estimated UNDP Human Development Report Hassan Zaman. The scaling-up of microfinance in Bangladesh: Determinants, Impacts and Lessons. World Bank Policy Research Working Paper 3398, September

4 There has been a rapid growth both in the microfinance institutions (MFIs) and the clients served in Bangladesh. 6 Therefore, expanding outreach (breath) is not an issue now but the issue of inclusion of the poorest segment of the population (depth of the outreach) through an innovative and sustainable mechanism is the prime objective now set by the sector. The problem of reaching to the depth of outreach is basically due to two major factors 1. Supply side; where the MF service providers are not able to develop products flexible enough for the extreme poor people and 2. Demand side; the extreme poor, due to lack of their regular cash inflow, are not willing to obtain the services available due to its template nature of weekly savings and repayment. Therefore, unless some mechanism is developed to address the problem at the supply side, extreme poor families will always have difficulty in benefiting from the services. Additionally, as donor funding for MF is diminishing, scaling up of its operation is possible through commercial sources of funding only and linking MF providers to the formal financial market particularly from the commercial banks would help to operate and expand MF service in a sustainable way 7. Similarly, the Government of Bangladesh, to address this issue, plans to promote innovations in reaching this group. In their PRSP 8 document, which has been widely accepted by multilateral, bilateral and donors organization, more emphasis is given on renewed efforts in reaching to the extreme poor people with appropriate microfinance services. 6 CGAP note book 1, Hassan Zaman. The scaling-up of microfinance in Bangladesh: Determinants, Impacts and Lessons. World Bank Policy Research Working Paper 3398, September Unlocking the Potential: National Strategy for Accelerated Poverty Reduction, Government of Bangladesh, October

5 3. Some Initiatives in the country to support extreme poor with microfinance Recognising the fact that traditional microfinance in Bangladesh does not generally offer flexible options for the extreme poor to participate, there have been some positive recent initiatives by large microfinance institutions in the country to include the extreme poor. Currently, those initiatives only have the potential to reach a small proportion of the impoverished population, and may not have the scope to reach the extreme poor in remote and isolated rural areas due to higher operational costs. The policies and institutions that regulate microfinance continue to exclude Community Based Organisations (CBOs) which have the potential to reach this marginalised group. The formal banking sector, as a nationwide network, has the potential to offer not only a sustainable microfinance product, but also to contribute towards government efforts in alleviating extreme poverty, yet these services have thus far remained untapped. In order to facilitate access to mainstream microfinance for the extreme poor, it is therefore necessary to develop micro-macro linkages, through which community needs can be advocated at policy level. This would provide the opportunity to support poor and excluded people to enhance their capacity to organise and get their voices heard and to demand better services and better access to them 9. As indicated by the Consultative Groups to Assist Poorest (CGAP), a unit of World Bank to support Microfinance, microfinance has thus far been underutilised and therefore it is necessary to develop replicable strategies for unlocking country level capital markets for microfinance to scale up their services DFID, 2005, The Civil Society Challenge Fund, p CGAP, 2004, Building Inclusive Financial Systems: Donor guidelines on good practices of microfinance (December) 5

6 4. Concern Worldwide and its efforts in alleviating extreme poverty in Bangladesh Concern supported extremely poor people 11 to achieve their own socio economic rights in remote rural areas and urban slums in different parts of Bangladesh through empowering their own organisation. Concern adopted the approach Composition of households in CBOs of developing and promoting member owned 10 % 11% 79% CBOs with flexible savings schemes suitable for the extreme poor people with both savings and credit activities managed and Non poor poor ext reme poor owned by the groups themselves. Concern learned the group approach to microfinance from India s successful experience of the SHG approach 12 where groups are eligible to obtain loans directly from a commercial bank. The legal environment in the country is not as conducive to SHG working independently as in India, despite commitments to getting recognition for larger service access for CBOs/SHGs. Despite this, group members who have worked together and gained self confidence in the groups through accountability, transparency, solidarity, and social justice wanted to continue building their own organization to the point of adequate capacity and legal identity. Moreover, as suggested by some studies 13 Concern realised that creating federations of groups as self-financing and self- 11 Concern Bangladesh normally selects most poverty stricken areas of the country for its projects and once the project is approved then through PRA tools (social mapping and wealth ranking) number of extremely poor will be identified and selected. 12 The Self Help Group (SHG) is an affinity group of poor people at the grassroots; it consists of members, having some specific homogenous characteristics. In this approach, chairperson, cashier and secretary are selected rotationally in every meeting in order to ensure participatory leadership, shared responsibility and accountability in the SHGs. Once the SHG, which is informal in nature, is matured to manage their savings they become eligible to obtain wholesale loan directly from a commercial bank on their name (SHG s) and SHG on lends to their members using their one loan criteria. First time NGO working with the SHG needs to introduce the SHG to the banks. Now Indian government has decided that in local areas particularly in the remote areas every government support should go through SHG and in an area where SHGs have not been formed, it is the prime responsibility of service delivery organizations to form SHG first before delivering any services. 13 Monohor P.Sharma, Community Driven Development and Scaling up of Microfinance services: case studies from Nepal and India. IFPRI discussion paper 178,

7 regulating organisations could be a viable and economical way to enhance sustainable access to the financial services for the poor people. To date 44 CBOs across the country are registered with the Social Service Department of the govt. of Bangladesh as not for profit organisations and at least another 10 are awaiting such registration. However, the CBOs, despite their legal identity, still can not get access to the formal financial services for their regular microfinance activities. In order for a CBO to run and manage their organisation in a sustainable way, it needs supports from an organisation that can capacitate it to a level to manage professional microfinance services and also help the CBO link with the bank to benefit from commercial credit funds. 5. A pilot project to support livelihoods through sustainable microfinance service with CBO In order to facilitate CBOs to get access to the formal financial service to operate microfinance services to their members in a sustainable way, Concern Bangladesh initiated a DFID supported project called Promoting Economic Development of the Poor Through Community Based Microfinance Initiatives in Bangladesh (see annex 1 for project at a glance). The project aims to strengthening the microfinance delivery capacity of the CBOs and linking them with the formal financial market for their sustainable microfinance operation. This linkage will allow them to obtain wholesale fund large enough not only to meet the credit need of their current members but also to help the CBOs attain their mission of incorporating more extreme poor people through appropriate flexible microfinance service. To implement this project, Concern in partnership with Credit and Development Forum (CDF), a national network organisation for microfinance organisations in Bangladesh, is now working with around 50 CBOs across Bangladesh under the above project. 7

8 5.1 Expected project outcomes The project endeavours to link the CBOs with the commercials banks to establish a system where the poor and poorest get sustainable access to sustainable microfinance with appropriate services products suitable even for extreme poor. This access to the service will have the following major impacts; firstly, it is widely accepted that women s (90% of the current member are women) access to income generating activities through savings and credit Some of the major activities to be carried out regularly by CBOs 1.Microfinance operation: including loan appraisal, loan disbursement, loan utilisation monitoring, loan collection MIS, auditing etc. 2.Social activities: including women day celebration, HIV/AIDS awareness, supporting government for social safety net programme, encouraging members to utilise loans for IGA, operating non formal education, sending their members to participate vocation and other training etc. 3.Networking: Participate in local level NGO coordination meeting, obtaining membership from appropriate network organisations 4.Partnering: Work in partnership with other organisation to implement socio economic activities for their members 5.Extreme poor mission: Identifying the extreme poor families in their areas and gradually accommodating in their microfinance programme activities and regular group meeting results in spending more money for their children education and welfare for the households. Secondly, by channelling bank s portfolio through the CBOs, it is possible for government to leverage their financial institutions to get better credit terms for the poor and poorest particularly women. The third impact is to empower the Civil Societies through local capacity building, imparting skills and knowledge to manage their organisation. Fourthly, as more than 2/3 of the current total loan outstanding comes from the members savings fund 14, raising local resources and leveraging will accelerate growth in the local economy. Fifthly, due to formation of an organisation, job opportunities have been created locally for youth (currently around 150 youth are employed in CBOs). Finally, after successful implementation of this project, Concern can prove the approach as an alternative MF approach in the country that could reach the extreme poor people who are currently excluded from the traditional MF services. 14 Out of US$ 1.1 million loan outstanding (July 2007) 63% comes from the members savings fund 8

9 5.2 Initial results in achieving CBO-Bank linkage objective Due to continuous advocacy and lobbying, bankers are now showing much interest to support the CBOs with microfinance loan funds. Recently, one commercial bank 15 decided to extend wholesale MF credit fund to two CBOs in a pilot basis in order to know the mechanisms and dynamism to work with CBOs directly. They agreed that once they understand such dynamism, they would make necessary amendments to their current policy to cover more number of CBOs in future. 5.3 Sustainability Through enabling CBOs to gain access to a long term source of commercial credit, the project External Capital Vs Internal capital will facilitate the withdrawal of Concern and Concern RLF 22% donor resources from their activities. With increased financial sustainability, the CBOs will also be able to continue expanding their Own savings f und 78% membership capacity to include the extreme poor and will be able to continue their social and community development activities. One of the major risks of most of the donor supported projects is to find out a clear exit strategy where one can really see that the impact and effect that a short term project brings will be continued without direct support from the project. But in this project, there is also a clear exit strategy for Concern and DFID support, as it is anticipated that following the three year implementation period, CBOs will be members of CDF with access to commercial sources of funding, and consequently donor financial resources will no longer be required. Additionally, CDF disseminates all information and regulation regarding MF to its members and also they 15 Mutual Trust Bank of Bangladesh 9

10 A case study ANKUR CBO in Chittagong Bangladesh Established in 2000, a Community Based Organisation (CBO) called Ankur, got registration in 2002 from Social service Department; Government of Bangladesh, to work as an NGO to extend microfinance and other service to their members in their community. The CBO was developed by Concern under a five year project called Amader Shongothon (March 2001-April 2006). An elected 11 member executive committee (EC) manages all activities of this independent CBO. To manage the CBO, the EC is being assisted by 9 staff (7 female and 2 male), which also creating local employment generating opportunity for the local educated youth. The CBO consists of 49 groups totalling 910 members (97% women) of which more than 90% members regularly meet and deposit their saving. To date, Ankur is able to accumulate a very substantial amount of savings of taka 6.3 million (around US$ 95,000). As the savings scheme is voluntary where members are allowed to deposit and withdraw savings as per their requirement and convenience, the CBO operates on an equity concept where it distributes dividend to the members based on their individual savings deposit, as opposed to the traditional system of allocating fixed interest percentage. The CBO s cumulative disbursement, as of August 2007, from internal resources (savings fund) taka 9.2 million (US$ 140,000) compared to 2.6 million (US$ 39,000) from external sources (Concern s loan) clearly shows how members of this organisation of the poorest are striving to be internally resourced for their microfinance operation. On top of groups savings fund, CBO also created its own loan fund of taka 350,000 (US$ 5,300) from the profit they make from microfinance operations. So far the CBO has given loans to 2373, making an average of 2.6 loan cycles per member. They are not only supporting their members who are now graduated to poor from extreme poor, but they are also willing to encompass all extreme poor in their community. They identified that they have around 120 extreme poor families in their community who were excluded and they have already included at least 45 of them as their members and extended microfinance support and they are planning to include the remaining families once their capacity and loan fund increase. With the assistance of Credit and Development Forum (CDF) they are now moving towards establishing formal linkages with commercial banks by fulfilling the criteria set out by the banks for such linkage in order to manage professional microfinance services to their members. Part of this process is to maintain very good repayment and the commitment of this CBO is clearly manifested in its repayments, which are 100% in recent loans they obtained from CDF (external) and 96% in their loans distributed from internal savings fund. As the CBO is trying to accommodate loan instalment based on the cash flow of the borrowers they are focusing more on overtime repayment than the traditional on time repayment that impacted in lowering repayment to their internal account. However, in order to maintain their financial discipline they are consistently maintaining 100% repayment for their loans obtained externally. They have also introduced an emergency support system to help the members overcome their crisis particularly illness or death of the family members. Under this scheme, CBO immediately avails some cash to the members during their crisis to meet their immediate cash needs. While extending these services, they are particularly focused on their sustainability. Therefore, the CBO, on top of their microfinance service, is undertaking some other income generating activities like renting sewing machine, renting some of their space etc. to generate more income. In the month of August 2007, they were able to generate a total income of taka 70,715 (US$ 1,050) but their expenditure was just 32,008 (US$ 450) leaving a net profit of US$ 600. This profit, as per the CBO, goes to grow their internal loan fund. The CBO is also involved in other social activities like running primary schools (where around 105 pupils are studying) for extreme poor people. They also channel legal aid services to their members; particularly extreme poor people with the support from one legal aid NGO called DSK. Due to their commitment and interest to work with poor and extreme poor, they are now getting recognition in the areas as an organisation of the poor and other organisations are also coming to them to work, for example, an organisation called Moytree Bangladesh recently undertook a partnership with the CBO to implement HIV/AIDS related programme. Their awareness on HIV/AIDS has been very effective, as they have now printed message relating to HIV/AIDS in some of the documents that members always carry like loan and savings passbooks and library cards. Due to this innovative awareness system a Government level National AIDS and STD Programme (NASP) has acknowledged Ankur s work in HIV/AIDS and decided to work with it. support its members to comply with the government instructions as necessary and thus the CBOs being their regular member will also benefit. 6. CBO s potentials to offer sustainable microfinance and its performance According to a study conducted by CDF, most of the CBOs can become eligible to obtain loan from banks if appropriate support and mentoring are provided to them. Before commencing the project, CDF did a small study to a sample of CBOs on their current capacity to manage microfinance using CDF s regular capacity rating format used for their NGO partners and they found that most of the CBOs have strengths on governance, leadership rotation, participation, single entry account keeping and undertaking social activities as well as a commitment towards supporting the extreme poor. What they lack is an understanding about professional microfinance, 10

11 delinquency management and double entry account keeping system in order to meet the criteria set out for bank linkages. Although the current microfinance transactions are less compared to their potential, the current financial health of CBOs is, however, satisfactory. Most of the CBOs are making some surplus after meeting their regular costs (operational sustainability) 16. Out of the 44 CBOs, 37 made surplus in the month of July Repayment rate is another important indicator for sustainable microfinance and in order to establish microfinance principle and practices, Concern has allocated a credit fund to CDF to be extended for CBOs to supplement their savings fund for loans to their members and CDF is consistently maintaining 100% repayment of all the loans that were disbursed during the project period by CDF. 7. CBOs and their microfinance for extreme poor All members of the CBOs were extreme poor when they first joined Concern s programme but due to the Concern s support many of them have been graduated to poor. A survey even found that 10% of the members in CBOs are now non poor. A recently conducted baseline survey also revealed that an average 11% of the households in the CBO s working areas are the extreme poor. 17 Interestingly, the baseline revealed that 35% of those extreme poor who were excluded previously by Concern 18 were included more recently by 2/3 of the CBOs. Those CBOs who already extended membership to more than 35% of the excluded extreme poor are willing to cover all once their capacity and capital increases. The other 1/3 CBOs are willing to incorporate them but they feel that even the current flexible products is not quite 16 Baseline survey January As per the criteria set out by the CBOs see annex 2 for detail 18 Most of these people who were excluded by Concern are due to 2 factors: recently migrated from other areas, were poor when Concern targeted but due to some calamities they slipped down to extreme poor now or were migrated temporary to other areas and came back later. 11

12 appropriate and they want to develop such products once they get access to the commercial market for wholesale loans. Interestingly, most of the CBOs have an estimated number of excluded extreme poor (see annex 2 for community s definition of extreme poor) in their areas and some of them have even the list of those people. 8. Key lesson learnt from CBO approach to manage sustainable microfinance Some of the key lessons learned during 12 years experience of MF in Bangladesh include 1) that the CBOs can be self managing but most need continuous support for some period and access to external finance 2) that CBOs are effective in mobilising local communities for achieving structural change for example by encouraging women s participation in the political system, 3) As the members were extreme poor when they joined Concerns programme, CBOs have the capacity and willingness to identify other extreme poor their community and provide CBO services appropriate to them, 4)CBOs are effective vehicles for locally determined development priorities such as flood protection 5) for the long term sustainability of CBOs need to adhere to and be held accountable to standards of mainstream microfinance and 6) that lifting the very poor out of poverty requires sustained, multifaceted support and that enduring results can be delivered through a community managed model. 9. Current coverage of this approach and potentials to upscale The project aims to facilitate linkages between the banks and an initial 48 CBOs, currently representing around 35,000 families. Those CBOs are located in 9 out of 64 districts in Bangladesh both in remote and urban areas. While meeting with the executive members in different CBOs they have clearly shown interest to cover more extreme poor from their community once their capacity in increased and once they link with the bank to obtaining micro credit wholesale fund. They even expressed the wish to develop appropriate products for their new members if need be. After successfully learning the dynamism and the potentials of the CBOs to run a sustainable 12

13 microfinance services with a back up support from other organisation, this approach can be replicated to other areas. Even within Concern, an additional 20,000 households will benefit from this approach to be established in a recently launched rural livelihood project called HISAL. 10. Women s empowerment through this approach Bangladesh has traditionally been suffering from gender inequality due to imbalances in power, access to resources and decision making between men and women. This empowerment process is not only to get benefit from the commercial sector to operate their microfinance but also to obtain other benefits such as social safety net programmes for extreme poor and other government support that they are entitled for. As most of the members are women and they are the owner / manager of the CBOs, by and large the executive positions of the CBOs are held currently by the women too. However, as they recognise that in a patriarchal society without adequate participation of their male counterpart, they may face coercion and backlash, so all CBOs have tried to include one or two members for the executive committee from males representing their male members. Even in a CBO where 100% members are women, they recruited some males to their staff members or appointed some male members as advisors. 11. Innovativeness of the approach There are very few organisations adopting the CBO approach for community development. Rangpur Dinajpur Rural services (RDRS) 19, one of the oldest and biggest non governmental organizations (NGO) in Bangladesh used this approach to implement their program components including microfinance but they did not envision introducing CBOs as self-governing and self financing legal institutions. Similarly, another organisation called Asroi is also using a group approach similar to SHG where the SHG manages savings but they do not have so far a vision to federate the SHG for their legal identity like the CBOs. Other organisations like SIDA and FAO 19 ( 13

14 have promoted community based approach while introducing or implementing programmes but no organisations so far have been found to make the CBO an independent and autonomous organisation with adequate capacity to manage. Therefore, this approach is relatively groundbreaking in Bangladesh. 12. Addressing microfinance frontier issues through the approach: Developing replicable strategies for unlocking country-level capital markets for MF is one of the frontier issues identified by CGAP. This is true in Bangladesh too where most of the banks are unable to utilize fully their fund to be allocated for the MF because of lack of trust with grass root level organizations that normally could not produce the required collateral despite their strong commitment and good performance. Providing sustainable microfinance to the extreme poor is another frontier issue identified by CGAP and this effort could prove to be an alternative microfinance approach to reach to the extreme poor people without direct subsidy. Most of the microfinance programmes targeting the extreme poor 20 are woven with high subsidy in terms of asset transfer (including cash) with an objective of making the extreme poor ready for mainstream microfinance. It is not always possible that all people fit into the template microfinance after such incubation period of subsidy which is normally 1 to 2 years and the people who could not fit would again be excluded if the products are not design to suit them. 13. Some of the challenges In a country where microfinance is dominated by the Grameen approach, introducing a new approach which is not yet widely accepted is obviously a challenge. However, as Concern has experience that the approach has tremendous potential to sustain a microfinance approach managed 20 Programme like BRAC s targeting to ultra poor (TUP) 14

15 by the community and that the approach has the potential to reach to the extreme poor families in a sustainable way, we believe that this approach will be accepted by some, if not all, of the commercial banks. Similarly, advocacy from the project steering committee formed under the chairmanship of a former deputy central bank governor may also help to get acceptance of this approach where other representatives of the committee are from big organisations like PKSF 21. As the country is politically unstable and is under caretaker government, Commercial Banks may be reluctant to adopt new approach in larger scale to support CBOs. The situation, however, may improve once the current government hands over to the elected government in December 2008, which is before the current project period comes to an end. As the CBOs are located in different parts of the country with different context (far remote and inaccessible areas), where network of the private sector commercial banks has not yet reached to those areas, despite their interest, banks may not reach to all CBOs. Concern and CDF are discussing with some of the commercial banks on possible way to remove this barrier. 21 Palli Karma Sahayek foundation (PKSF) a government formed wholesale microfinance organisation 15

16 14. Conclusion The paper has sought to demonstrate that having the extreme poor as its target population; Concern always strives to uncover the hidden entrepreneurial talent of the bottom group of a poverty pyramid through forming their own organisations. Giving flexibility in savings and loans services thorough their organisation (CBOs) helps the extreme poor people, who are currently excluded from the traditional microfinance, improve their economic situation. Concern also believes that no one should take a loan unless it benefits their households. Similarly, participatory processes ensure empowerment and transparency which have been found in all CBOs that ultimately encourages the executive committee of the CBOs to negotiate with the services providers for better and reliable services. In a country where most of the government services in remote parts are absent, the areas where CBOs are functioning, those missing services are now becoming active. The approach has raised the voice of the extreme poor and the voices are being heard. On the other hand, the current interest and enthusiasm of commercial banks to support the CBOs have clearly shown an indication that with proper advocacy and lobbying, macro-micro linkages for microfinance to the poor is possible in a relatively short period. Additionally, due to CBOs improved capacity and commitment to extend quality services to their members as well as the significant savings fund generated by CBOs could also leverage the commercial banks to extend the wholesale credit on better terms. Thus, this approach has also created a situation where all three parties, commercial banks that look for profit, CBOs that strive for sustainable service to their members and members that want capital to undertake IGAs could benefit. Hence, this approach in Bangladesh is going to be a supplementary approach to reach to the extreme poor people with appropriate microfinance services and other services to help extreme poor people to graduate. After successfully implementation of this project, other countries may also espouse this approach with appropriate local adaptations. 16

17 Annexure Annex 1 Programme Approach Participatory, Right Based Wider Objective To contribute to sustainable poverty reduction in Bangladesh through enabling grass roots organisations to access financial services for the economic and social benefit of the extreme poor Cross-Cutting Themes HIV/AIDS Awareness Disaster Risk Reduction Gender Equity Advocacy Strategies through formation of steering committee consists of bankers and MF stakeholder Output 1 CBOs manage a professional micro credit service which meets set standard Immediate Objective To enable community Based Organisations representing over 40,000 members to gain access to commercial banking services and to demonstrate the potential benefits of this approach for extremely poor members of these grass roots organisations Output 2 CBOs gained access to the commercial financial institutions for MF operation Output 3 Successes of CBO approach documented and promoted as an alternative approach to microfinance to reach the extreme poor in Bangladesh Geographic Focus: 9 districts of Bangladesh covering even remotest part of the country Jointly implemented by partner Credit and Development Forum (CDF) and Concern The CBO-CDF Bank Linkage project Annex 2 Box: Ten types of criteria of extreme poor family as per CBO/Group members 1. Food: One meal daily or no meal, meal taken from others, do not get square meal. 2. Clothe: No dress or poor clothing. 3. Housing: No housing, bad housing condition, live/sleep on road or footpath. 4. Treatment: Cannot take treatment, chronic sickness. 5. Education: No educational facility. 6. Health: Disable/crippled, cannot work, old aged, incapable. 7. Income sources: Borrowing from friends, begging, work at other houses, day labourer, hazardous work 8. Asset: No land, no asset. 9. Dependency: Helpless, widow / separated / abandoned women, no nearest one, no body to take care, live on relief. 10. Crisis: Always crisis, cannot sleep, excess expenditure over income, big family size 17

18 References: 1. Department for International Development (DFID) (2003) Bangladesh: Country Assistance Plan (CAP) London 2. General Economics Division; Planning Commission; Government of People s Republic of Bangladesh (2006) the potential, a national strategy for accelerated on Poverty reduction (PRSP), Dhaka Bangladesh 3. UNDP (2006) Human Development Report New York Hassan Zaman. (2004) The scaling-up of microfinance in Bangladesh: Determinants, Impacts and Lessons. World Bank Policy Research Working Paper 3398, September 6. Sharma Monohor P., (2004) Community Driven Development and Scaling up of Microfinance services: case studies from Nepal and India. IFPRI discussion paper 178, 7. Faruque Ahmed (2006), Microfinance program of Community Based Organisation (CBOs) formed by Concern Bangladesh, A baseline study report, Credit and Development Forum Dhaka Bangladesh 8. Matin, I., (2003), Targeted development programmes for the extreme poor: Experience from BRAC experiments, CPRC Working Paper IFAD (2006), Country Programme Evaluation, The people s Republic of Bangladesh 10. Humberstone J. & J, Singer, (2006), Identifying Complementary program to Maximise Impact of Microcredit, FINCA 11. Concern Bangladesh (2005), Promoting economic development of the poor through community managed microfinance initiatives in Bangladesh, CBO-CDF-Bank Linkage project, a proposal funded by DFID CSCF 18