welcome to my presentation synthesis...welcome to my presentation. comparative synthesis of gb, brac...
TRANSCRIPT
12 November, 2010
Welcome to my Presentation
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
Inclusive finance
ProductsClients
Distribution
• 150 million borrowers with 39 billion USD has been disbursed globally
Background Information
Microfinance coverage
Percentages of borrowers by region
South Asia
52%
Africa
9%
Latin
America
16%
East Asia
14%
Middle
East
5%Eastern
Europe
4%
Source: MIX, 2010,
Remaining
20%Coverage
80%
Background Information
Microfinance coverage in BD and China
Bangladesh China
Source: Micro-credit world, 2009
Coverage,
36%Remaining
64%
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 OrganizationASA- Microfinance Institution
Market domination and Outreach
BRAC GBASAProshikaTMSSBKB & commercial banksOutreach of GB, BRAC and ASA
GB
28%
BRAC
28%
ASA
18%
Others
26%
• GB: Whole country through 2,564 branches
• BRAC: Whole country through over 3000 branches
• ASA: Whole country through 3,236 branches
Area coverage
Organizational Structure
Character GB BRAC ASA
BOD 13 m; 9 from
borrowers
16 m. executives
(2) non-exc. (13)
7 members
Structure Decentralized;
lending units-centers-
branches-area offices-
zonal offices-head
office
Decentralized;
Head office-
regional offices-
zonal offices-
branches
Two-tier system;
Central office-
branches
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 office-
supervise &
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
Extensive education, health, training and legal
aid services
Research Division
RemittanceServices
Operational mechanism
GB BRAC ASA
Group 5 mebrs.
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 office-
capacity, 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
GB BRAC ASA
Liability Group &
individual
Group & individual Individual
Collateral Free, no group
members are
resp. to pay on
behalf of others
Collateral free, no
legal documents
needed
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
GB’s decisions
Extensive training on
occupational skill dev.
Almost absent but
provision of 9 days
experience gathering
after new recruitment
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
• 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 for success !!
• Greater homogeneity- making solidarity group is easy
• Product diversity
• Fund availability
• Decentralization and efficient management
Reasons of success !!
• 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
Challenges !!!
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….
• It is the outcome of the combined efforts of
different stakeholders- Clients, MSPs and the
Government
So,
Thanks