IS FSS POSSIBLE…

THE STORY OF ASA (BANGLADESH)

Is it possible…the story of ASA

ASA has been widely recognized one of the world's largest sustainable, cost-effective and fully grants free Micro Finance Institutions (MFI).

In 2001, ASA declared itself a donor free self-reliant MFI and has not accepted any donation since then.In 2007 and 2009,  ASA topped the famous US-based magazine's first-ever list of 50 top MFIs in terms of scale Scale, Efficiency, Risk and Returns

2007 MIX Global 100:

ASA was ranked in six of the seven MIX Global 100 MFI rankings by category. The variables for each category are as follows:

Outreach – Borrowers Outreach – Depositors Voluntary Depositors Scale - Gross Loan Portfolio Profitability - Return on Assets Efficiency - Cost per Borrower / GNI per capita (ranked

inversely) Productivity - Borrowers / Staff Member Portfolio - Quality Portfolio at Risk>30 days (ranked inversely)

ASA GROWTH

ASA GROWTH

ASA GROWTH

ASA GROWTH

ASA PERFORMANCE 2009

INDICATOR RESULTS

Staffs ratio: head office versus / field(total staffs 24,021 and head office 256 only )

1:94

Rate of recovery 99.64%

Portfolio in arrears 3.60%

Cost per money lent 0.68

Cost per loan made $12.26

Loan loss ratio 0.98

Average clients per loan officer 302

Average borrower per staff 167

Average member per branch 1,699

Average outstanding loan  per Loan Officer 34,494

Operational Self-Sustainability 140.27%

Financial Self-Sustainability110.63% 110.63%

HOW DO THEY DO IT? COST EFFICIENCY IS THE KEY

“When I see head offices of many MFIs around the developing world, the way they have been organized and the way they function, I often wonder whether these MFIs are genuinely serious about serving the poor cost-efficiently.” (Shafiqual Choudhury, Managing Director)

ASA’s commitment to cost-efficiency is reflected in the fact that it has only three vehicles. Many MFIs in Asia, because of their social development origin and generous support by donors, “have cost structures that are more bloated than they should be,” (Stuart Rutherford, former member of the ASA Board of Directors.

HOW DID THEY DO IT? COST EFFICIENY IS THE KEY

ASA committed itself to large outreach,cost-effective lending and achieving financial elf-sufficiency through efficiency within a

relatively short time. Once a branch starts operations, it takes (9-12) months for it to break

even and become self-sustainable: According to Mr. Choudhury, ASA’s CEO, sustainable outreach should

be the central objective of microfinance institutions (MFIs). He argues, “MFIs must commit themselves to achieve a significant sustainable outreach within a short time spell.” This means MFIs must be obsessed with cost-efficiency.

He asserts that MFIs have a social obligation to be cost-efficient because the poor cannot afford to pay for the inefficiencies of service

providers. According to him everything that ASA does and the way it conducts its operations flow from this “thirst for sustainable outreach of services to the poor.”

COST EFFICIENCY

ASA developed a flat management structure with only three tiers. The head office (in Dhaka) is the highest tier. It is housed in an old,

purchased and renovated building. It is a lean operation with only 95 staff, 1.4 percent of the total ASA personnel.

The field office reports to a Regional Coordinator in the Dhaka Head Office.

Between these two tiers are regional managers and divisional managers, who do not have separate offices nor a secretarial staff. They travel among the branches by public transportation and perform their supervisory functions in the branch offices.

A typical branch has a manager, four or five credit officers, and one support staff. The branch manager is authorized to approve clients, groups, loan size, office expenses, etc. following the guidelines of a detailed operating manual

Cost Efficiency is the key

Costs at the branch level are tightly managed. Branch offices are located in rented buildings and usually consist of three rooms, one for the office and two for staff residences.

There is no security guard. A standard set of furniture with other utilities and office supplies are all detailed in the operations manual.

Standardization of these items ensures cost control and contributes to cost-effectiveness,which facilitates access to remote areas and increases outreach.

Accounting systems are simple so branch managers perform the tasks of accountants and credit officers perform the tasks of cashier on a rotating basis, thereby eliminating the need for separate accountants and cashiers in the branches.

The uni-model standardized branch system has a major advantage. Because each branch is the same in terms of human resources and cost structure and operates exactly the same way in accordance with the operating manual

OTHER STRATEGIES

Decentralized and simplified staff recruitment procedures and short duration on-the-job staff training.

Simplified, understandable and standardized operational procedures

Cost effective and decentralized operation/ management system

Targeting optimum number of clients per loan officer and supervisor.

Adequate MIS to trace key performance indicators Rigorous monitoring by senior management

HOW DID THEY DO IT? COST EFFICIENCY IS THE KEY