Welcome to my Presentation 12 November, 2010
Comparative synthesis of GB, BRAC and ASA microfinance approaches in Bangladesh Presented by- M. Wakilur Rahman Intern IPRCC, China PhD Research Student NWSUAF, China Faculty Member Bangladesh Agricultural University, Bangladesh
Presentation Outline Background information Major service providers Outreach- selected MSP Product diversity Operational mechanism Financial sustainability Regulatory environment Reason for successes Challenges Concluding remarks
Background Information Development process
Background Information Development process Clients Products Inclusive finance Distribution
Background Information Microfinance coverage 150 million borrowers with 39 billion USD has been disbursed globally Africa 9% Middle East 5% Eastern Europe 4% Source: MIX, 2010, East Asia 14% South Asia 52% Latin America 16% Percentages of borrowers by region
Background Information Microfinance coverage in BD and China Remaining 20% Coverage 80% Remaining 64% Coverage, 36% Bangladesh China Source: Micro-credit world, 2009
World recognition and achievement UN declared Micro-credit year in 2005 Noble peace prize in 2006 awarded to Dr. Yunus and Grameen Bank Entrepreneur for the world in 2009 and Knighthood in 2010 awarded to Sir Fazle Hasan Abed founder of BRAC ASA won the award- Banking at the Bottom of the Pyramid in 2008- by IFC and Financial Times
Microfinance service providers Four types Grameen Bank (special kind of Bank) Commercial and Agricultural Banks NGO-MFIs- BRAC, ASA etc Govt. sponsored microfinance program BRAC- Development Organization ASA- Microfinance Institution
Market domination and Outreach GB Others 28% 26% ASA BRAC 18% 28% Outreach of GB, BRAC and ASA BRAC GB ASA Proshika TMSS BKB & commercial banks
Area coverage GB: Whole country through 2,564 branches BRAC: Whole country through over 3000 branches ASA: Whole country through 3,236 branches
Organizational Structure Character GB BRAC ASA BOD 13 m; 9 from borrowers 16 m. executives (2) non-exc. (13) 7 members Structure Decentralized; Decentralized; Two-tier system; lending units-centersbranches-area officeszonal offices-head office Head officeregional officeszonal officesbranches Central officebranches District office Function Branch- center of all activities, competition for 5 stars; Area offices -supervision and loan approval -head office become a secretariat Branch: center of all activities -zonal office monitors the programs; regional office monitor 15 zonal offices Branch: center of all activities maintaining the ceiling District officesupervise & monitor field act.
Microfinance Products Microfinance Micro-credit savings insurance Remittance others
Product Diversity GB: Micro-credit (7), savings (5), insurance, training, education and health BRAC: Micro-credit (3), savings (3), insurance, training (members and non-members), remittance and extensive social development programs ASA: micro-credit (7), savings (3), insurance and education Distinct: ASA does not have any training programs
Product Diversity BRAC- Distinct Remittance Services Research Division Extensive education, health, training and legal aid services
Operational mechanism Group 5 mebrs. GB BRAC ASA Gathering and discussions in the center meeting 30-40 mebrs. Platform of information, legal aid and health issues 20-40 mebrs Loans Group and individual Group and individual Individual Lending decision Area office Branch officecapacity, business type and profitability of IGAs Branch office upto certain level based on manual Approval criteria Familiarity with16 decisions-application accepted and approved in the center meeting Must be a VO member and save regularly After saving 3 months a prescribed amount
Operational mechanism Liability Collateral GB BRAC ASA Group & individual Free, no group members are resp. to pay on behalf of others Group & individual Collateral free, no legal documents needed Individual Collateral free Service Door steps Door steps Door steps Repayment Usually weekly Usually weekly Usually weekly Interest rate Varies (10-15%) flat rate Varies (10-15%) flat rate Varies (10-15%) flat rate Enterprise dev. Trained how to use the loans and knowing 16 Extensive training on occupational skill dev. Almost absent but provision of 9 days experience gathering
Financial Strength GB: stopped receiving grants since 1998; client savings (54%) BRAC: Microfinance program is self-sustaining; receive grants for extensive development programs (i. e, education, health etc) ASA: Stopped receiving grants 2001, PKSF, Banks and client savings- ASA cost effective approach is well known ASA cost effective approach: ordinary infrastructure, minimum staffs (no accountants, no guards), no investment on staffs, simple accounting, written manual and low cost programs
Regulatory environment Why regulation? Regulation concept emerged in 1990s as to ensure- Uniform & transparent services Settling reasonable interest rate Transparency of donor funds Legalization and Building a sustainable sector Client protection
College of Economics and Management Regulatory environment 50 countries have formulated special microfinance regulations NGO affairs Bureau (NGOAB) was estb. in 1991 Microfinance Regulatory Authority established after consultation with NGO and Bank leaders Licensing criteria: 1000 clients or balance of outstanding loan 4 m. BDTk. 503 NGO-MFIs have licensed out of 4240 applied for MRA Act 2006 was formed and it is in the way of amend
College of Economics and Management Regulatory environment MRA circular on 10 Nov. 2010 Effective interest rate maximum 27 % Banning deductions at the time of issuing loans 15-day gap between the dates of loan issuance and first repayment instalment Self regulation: GB, BRAC and ASA have strongly been followed self-regulatory mechanism beside government regulations
Reasons for success!! Lending Mechanism (door steps and collateral free) Responsible borrowers particularly the women Active community participation esp. the clients Learning from clients especially women Trust on MSPs Friendly relations (borrowers, loan officers, MSPs and govt.) Demand pushed
Reasons of success!! Greater homogeneity- making solidarity group is easy Product diversity Fund availability Decentralization and efficient management
Challenges!!! Need more comprehensive (holistic) approach Proper recognition to the clients (client protection!) Continuous innovation and adaptation Adjusting with changing demand MSP distribution Educative/supervisory credit Unique delivery mechanism Effective interest rate Political instability
Concluding remarks MSPs have demonstrated the effectiveness of microfinance towards sustainable development for the rural poor in Bangladesh; the effective and efficiency management skills, innovative approach and decentralised institutional patterns are remerkable However, It has been achieved due to active participation of the Bangladeshi people particularly the women and The credit culture, discipline, and commitment towards maintaining regular repayment and compliance with microfinance provider norms are creditable Last but not Least.
So, It is the outcome of the combined efforts of different stakeholders- Clients, MSPs and the Government
Thanks