Harmony in Diversity

INAFI Asia Members’ Profile Exploring Different Institutional Methodologies Practiced in Microfinance Delivery Services to the Poor

INAFI Asia Trust

December 2005

Contents

Acknowledgements

Preface

Members’ Profile: Bangladesh Association for Social Advancement (ASA) Bangladesh Rural Advancement Committee (BRAC) Buro Tangail Palli Bikash Kendro (PBK) Shakti Foundation

Members’ Profile: India BAIF Dhan Foundation

Members’ Profile: CSD Nirdhan

Members’ Profile: Pakistan SRSP

Members’ Profile: Philippines NRBSL

Members’ Profile: Sri Lanka SEEDS

Acknowledgements

INAFI Asia is a network of forty practitioner NGOs/MFIs of diversified approach and methodology. Member organisations also vary in size and delivery mechanism. INAFI Asia’s member activities range from unisectoral product provision to multisector service providers, from direct financial intermediaries, to NGO promoters helping to develop people’s organisation at the community level to create an enabling environment for pro- development.

Asia is better known as fertile place for NGOs and MFIs in the world. A number of good initiatives in terms of innovation, product development to cater to the varied needs of the client, measuring social impact have been observed among the NGOs and MFIs in the Asia region. Fortunately, most of them are Member Organisations of INAFI Asia. Many of these efforts remain unattended because of proper promotion and marketing. INAFI believes that there is no straightforward formula that can be employed to uplift the poor out of poverty. Therefore, building knowledge of best practices and promoting innovation to cater to the needs of the poor, including the hard-core, have become evident.

INAFI Asia is keen to know about different diverse methodologies that have been practiced by its member organisations with a view to explore different options how to serve the poor people in a best way. As part of this exercise it has collected institutional methodology of eight selected practitioners of divergent methodologies. These organisations are chosen from Bangladesh, India, Nepal, Pakistan, Philippines, and Sri Lanka and information are generated through a structured questionnaire and format. INAFI Asia has complied and documented these institutional methodologies with a view to share this knowledge with different interested stakeholders. I believe this document will provide a good knowledge about target clients, delivery mechanism, institutional arrangement, and about its products and services.

We are very grateful to our Member Organisations (BRAC, BURO TANGAIL, SHAKTI FOUNDATION, ASA, PBK in Bangladesh, BAIF and DHAN in India, NIRDHAN and CSD in Nepal, SRSP in Pakistan, NRBSL in Philippines, and SEEDS in Sri Lanka) for their support and cooperation in providing information to prepare this document. Despite their busy and preoccupied schedules they have made time to provide information for this document, therefore, I thank all of them again. I am also indebted to my colleague Ms. Mahbuba Haque, Programme Officer Asia for taking responsibility contacting with all our members’ organisations and generate information to prepare this document. My thanks are due to Mr. Sirajul Islam, Consultant for both INAFI Asia and Bangladesh for editing and compiling this document. My thanks are also due to Mr. Rashed-Al-Hasan, Programme officer Bangladesh for helping me in developing questionnaire for this study. Lastly, not the least I must thank Mr. Ruhul Quddus Shanti to formatting and designing cover page of the document.

Finally, I am indebted to Novib for providing financial support to conduct this study.

On Behalf of INAFI Asia,

Atiqun Nabi Executive Director

Preface

Microfinance organisations working directly with the poor, and have gathered valuable experience to understand the formidable challenge to ending poverty. Through years of work, microfinancing NGOs/MFIs have learned that there is no single straightforward formula that can be employed to uplift the poor out of poverty. The solutions and methodologies that are used to achieve this uplift are as diverse as the problems the poor face in their everyday lives. They are designed to suit the NGOs’/MFIs’ as well as their clients’ real and particular needs and are flexible to accommodate their needs as they change in time. Efforts have been put up in Asia in particular to both increase and improve microfinance initiatives; building on existing experiences and learning from new perspectives on poverty and livelihoods were as much as a central focus as it is now. Financial services for poor people were particularly important in helping them take advantage of opportunities to improve their lives and to maintain and build up their asset base. Microfinance, therefore, has been an integral component of all sustainable livelihood development strategy of the NGOs/MFIs concerned. Microfinancing NGOs/MFIs have observed, however, that as all of the poor were not equally destitute, and as they had different financial requirements, therefore, they made microfinance products and services innovative and flexible. Some of them included the provision of general-purpose credits, affordable business and microenterprise loans, easily and speedily accessible credit to take advantage of income-generating opportunities as they arise, and affordable emergency consumer loans. As the poor need accessible and secure places to save money that will enable them to build up their asset base, both for security against unforeseen disasters or for future investment in productive activities, many of the microfinancing NGOs/MFIs offered different savings products. There had been a growing demand for insurance products from the poor, such as health, life, livestock, or natural disaster. So, many microfinancing NGOs/MFIs in Asia offering different insurance products and services to their clients. Then there was a real need for the microfinancing NGOs and the MFIs to move for their sustainability. Many have achieved that…many more are in the process of achieving sustainability while pursuing social goals etc.

Asia is the hub of divergent microfinance practices, and different microfinance methodologies have been in practice since long in the Asian region. NGOs/MFIs in Asia are as distinct from each other as the countries they work in. They differ in context, outreach, service delivery mechanisms, and structure. Some only provide microfinance services; others have added technical assistance and training programmes, while others still manage integrated social development programmes. Some provide direct financial intermediation while others assume promotional roles and support self-help grass-root groups, mainly women, and are putting them in contact with banks or other lending organisations. A few of the members are still struggling but emerging steadily while a large number are working on scaling up their portfolios and coverage, both in terms of region and clients served. Finally, some members have already reached scale, are undertaking highly efficacious operations, and not even have become major players in their respective countries but in the world.

So, to learn several Asian ideas, ambitions and processes of microfinance have led to this initiative. This publication of INAFI Asia offers the opportunity to see and discuss the approaches and outcomes of Asian microfinance methodologies and practices in particular that, as we all know, set off with the Grameen model, and later became successful in many forms like linking SHGs to commercial banks to village banking etc. In addition, all the readers, especially the microfinance practitioners in the Asian region by going through the publication will get the chance to compare them with others. The general objective of this publication, however, is to obtain a deeper understanding of why and how rural poor benefits (individually, group-wise or with third parties) and how country context and cultural conditions affect development motives, preferences and forms. The more specific objective is to assess the relative importance of flexible strategies for livelihood supports to the poor in the form of delivering microfinance services as an option in different country contexts compared to other ones.

INAFI Asia wanted to know, and disseminate, all these to support its member services programme simply because this learning process, we mean, sharing of information, exactly provide the background and/or reason for NGOs/MFIs to design or redesign their operational strategies and methodologies and/or developing their products/services lines. This type of publication is a method itself to know how different strategies and methodologies of microfinance develops in given situations, and how country context supporting the development of effective pro-poor microfinance practices in the Asian region. We, in INAFI Asia Secretariat also believe that this type of compilation work also can identify issues and concerns of modelling or remodelling MF programmes within the MOs of INAFI Asia.

Readers of this publication can review the NGOs/MFIs from their operational perspective. Readers, however, can find, with a few notable exceptions, that the record of NGOs/MFIs in mainstreaming microfinance is a modest one if they view from the context of NGOs/MFIs as microfinance institutions. Readers also get a clear picture if they judge the NGOs/MFIs by the two criteria of success that much of the microfinance world has adopted – outreach to the poor and financial sustainability. Members chosen as microfinance practitioners that have achieved and/or achieving both objectives simultaneously. There had also been a consideration point to choose MOs that have evidence of aggregate impact on poverty reduction, and have succeeded in facilitating social intermediation criteria. It is here that INAFI Asia feels that its MOs, whether a NGO or a MFI or a bank, all have laudable works in their credit, and are strategically right in focusing on both social and financial intermediation or in ‘social’ or ‘financial’ piecemeal basis. Microfinance is never easy for practice it, it is not, as this publication tried to explain. It is a field where only that institution has natural advantage that cares for both the poor and money.

This publication seeks to gain knowledge to the extent that NGOs/MFIs incorporate activities in mainstreaming their portfolios, and gained. This publication seeks to gain knowledge too to the extent NGOs/MFIs reorient their mission, vision and personnel towards the microfinance agenda, as a large number have done in the last decade, and were successful.

Compilation of this profile began in June 2005, with sharing of a guideline to use by the members to prepare their profile themselves. INAFI Asia also commissioned studies in some cases. After the drafts received, INAFI Asia did some editorial job, mainly to skip repetitions of information, and reasons for clarity. Information used or provided is solely of organisations’, mainly provided by the organisations themselves, and in some cases, they were collected through the outsourcers, and from the web sites of the concerned organisations. Profiles are validated, and presented in the form as they were prepared by the organisations, and/or the organisations endorsed, and preferred to present or not to present any information.

Members’ Profile - Bangladesh

ASA

Address 23/3, Khilji Road, Shyamoli Mohammedpur, Dhaka-1207 Bangladesh Phone: (+880-2) 8110934-5, 8119828, and 9116375 Fax: (+880-2) 9121861 & 8111175 E-mail: [email protected] http://www.asabd.org

Year of establishment 1978

Legal status Registered under the NGO Affairs Bureau and Societies Registration Act, XXI of 1860

The Founder and the President of ASA Md. Shafiqual Haque Choudhury

ASA-Governing Body Chairperson Mrs. Tahrunnesa Abdullah Member Secretary Md. Shafiqual Haque Choudhury Treasurer Mr. Alauddin Ahmed Member Mrs. Husniara Huq Member Mr. Mahbubul Alam Member Mr. Matiur Rahman Chowdhury Member Mrs. Mahmuda Islam

Mission To reduce poverty and improve the quality of life of the poor through the provision of qualitative and responsive micro finance services in an innovative and sustainable way

Microcredit and Savings Program Start from 1991

Overseas activities ASA is already recognized as an International Technical Service Provider (ITSP) under UNDP's MicroStart Program in The Philippines and Nigeria.

Technical service ASA has been providing technical services to MFIs in several countries of the world. ASA's cost effective Sustainable Microfinance Model is implementing in Indonesia, India, Yemen, Afghanistan, Pakistan, Tajikistan, Jordan, Ethiopia, Myanmar, Peru, etc. including Philippines and Nigeria under UNDP's MicroStart Program.

History ASA, one of the biggest sustainable specialized microfinance institutions in the world, was established in 1978 and started microfinance during 1991. Since its inception, ASA has been successfully able to carry its reputation as fastest expanding MFI home and abroad. Through crossing over many hurdles, ASA has achieved tremendous success in the years since it started the microcredit and savings programs in 1991. As ASA is an innovative institution, it has features different from other MFIs. ‘Cost–effective sustainable microfinance model’ which is known as ASA’s own microfinance model is being adapted in many countries in Asia, Africa, South America and the Middle East. ASA has been contributing to the proper implementation of microfinance programs throughout the world. ASA’s most important contribution is to help both the grassroots people and development institutions to build up their capability and enable them to reduce poverty. With its simple and practical model ASA ensures a low cost operation. ASA’s microfinance service includes the small loan, small business loan, loan for small entrepreneurs, loan for BDS, loan for hardcore poor, male member’s loan, education loan, famine (Monga) protection loan, flood and rehabilitation loan and member’s security funds (life insurance). Through extending these services, ASA goes on contributing to the field of poverty alleviation. It helps empower the women through increasing their participation in the process of decision-making. In addition, it continuously provides support to poor people and helps them in creating self-employment. Thus ASA commits with firm determination to go ahead with its mission to wipe out the curse of poverty from society.

Microcredit and savings programs After independence in 1971, disarray of the war-torn economy intensified the poverty of the people. Having no scope for survival their sufferings increased day by day. In this critical situation, ASA appeared and sought to enlighten the hopes of the poor of the country. ASA has played a vital role in reducing the poverty of the distressed people with its innovative microfinance model. As of December 2005, the credit program launched by ASA has reached 5.97 million people. ASA has introduced voluntary savings along with mandatory weekly savings of Tk.10 per week. These savings promote the habit of saving by the people, while also accumulating loan funds for the institution. ASA’s credit program benefits mainly poor women, in both urban and rural areas. ASA’s goal with this program is to empower its clients in their families as well as in society. Accordingly, to start Income Generation Activities (IGA), poor women get loans from ASA. Under the small credit program, Tk.4,000 to Tk.6,000 is given as an initial loan, which has to be repaid with a 15% service charge within a year and in 46 equal installments. Borrowers must make payments on a weekly basis. Repayment begins after 2 weeks from the disbursement of the loan. Borrowers enjoy 6 weeks in a year as a grace period as well as the exempted period of national holidays.

Active members: At the end of December 2005, the number of ASA’s active members stood at 5.97 million.

Savings: ASA started Microsavings on July 1992. Since 1992, total savings of Tk. 19,444 million and Tk.16,422 million were withdrawn and returned by the members and the organization respectively. At the end of December 2005 the savings balance stood at Tk. 3,022 million.

Active borrowers: In December 2005, the number of active borrowers of ASA stood at 4.17 million.

Loans: The total amount of loan disbursed (cumulative) at the end of 2005 was Tk. 148,150 million and the loan outstanding as of December 31, 2005 was Tk. 19,313 million (with service charges).

Small Loan The initial loan for small loan member is Tk. 4,000 to Tk. 6,000 with an increase of Tk. 1,000 to Tk. 3,000 per year. Each loan has to be repaid within a year along with a 15% service charge. Loans outstanding at the end of December 2005 was Tk.16,278 million (with service charges).

Small Business loan ASA’s achievements in diversifying product for small business by providing loan, which contributes enormously to the poverty alleviation initiative of the institution. The capable female members are provided with small business loans. In addition, small business loans are usually extended to the male members capable of handling a bigger amount of capital. Under this program, the initial loan is Tk. 20,000 with an increase of Tk. 4,000 to Tk. 6,000 per year. Each loan has to be repaid within a year along with a 15% service charge. The total amount of loans outstanding at the end of December 2005 was Tk. 1,651 million (with service charges).

Small Entrepreneur Lending (SEL) ASA currently has 21 specialized branches for its Small Entrepreneur Lending (SEL) program. Initial loans under the SEL program range in value from Tk. 30,000 to Tk. 200, 000 with terms of 1 year, 1.5 years or 2 years. Entrepreneur’s loan has the potential to create employment for the hardcore poor, which contributes directly to reducing poverty. The service charge on this product is 12.50%. At the end of December 2005, ASA had 11,907 clients in SEL program. Total loans disbursed were with service charge Tk.1,640 million and Tk.451 million loan outstanding. The recovery rate of the SEL program has been 98.41%.

Loans to Hardcore Poor The hardcore poor are getting loans for conducting income-generating activities (IGA). Loans to hardcore poor range from 1 month to 12 months, while repayments schedules may be monthly, bi-monthly, one-time at the end of the term. The service charge on this product is 1% monthly. At the end of December 2005, ASA has 160,058 clients in the program of hardcore poor. Total loans disbursed were with service charge Tk. 619 million and Tk. 225 million loan outstanding. The recovery rate of this program has been 99.98%.

Education Loan ASA introduced the program of education loan for the children of the group members. The product has been introduced with the objective to help the group members to keep continue their children’s education especially in time of depositing the fees for examination. Loan size is Tk. 2,000 with 10% service charge. ASA disbursed a total amount of Tk. 24.67 million as education loan to its 3,568 members at the end of December 2005. The recovery rate for the education loan program has been 99.91%.

Loan for Business Development Service (BDS) ASA started providing BDS to the defaults and bad-debt members. In the course of implementing credit programs ASA experienced that many members in spite of willingness could not repay their loans due to scarcity and extreme poverty caused by natural calamity like flood, heavy rain, drought etc. Through this program ASA selects the poor vulnerable members who do not have the capacity to change their financial conditions and make repayment of the loan. ASA provides complementary loans to these members for conducting income-generating activities (IGA). The loan size is determined according to their ability and experience of this kind of business. At the end of December 2005, ASA had 6,058 clients in the program for the business development services (BDS) and total loans disbursed to them with service charge was Tk. 22.18 million and loan outstanding was Tk. 11.31 million (with service charges).

Flood and Rehabilitation Loan ASA has been implementing flood and rehabilitation program for its group members who are affected by the devastating flood and other natural disasters like flood, tornado etc. For the flood victims ASA sanctions interest free loans on long-term basis. ASA not only provides cash loans but also distributes medicines free of cost among the victims.

ASA Insurance

Loan Insurance: ASA introduced loan insurance facilities for its members to ensure their better and secured life. Only Tk.3 per thousand loans is charged as insurance premium. The benefits of this service help the successors and families of deceased borrowers. The amount that can be claimed is equal to the current principal loan amount. The successors have to repay the outstanding loan in full before claiming the insurance benefits. ASA made insurance payments of Tk. 188.70 million to the families of deceased members since 1993.

Member’s Security Fund (Life Insurance): In addition to loan insurance, each small and small business loan members deposit Tk.10 per week as security deposit or premium for insurance. For the SEL members, the premium is Tk.50 per month. In the case of a member’s death, the deceased member’s successors would receive 6 times of the total premium paid by the members. Otherwise, the members will receive the total deposited amount along with at least 4% interest after 400 weeks of contributing to the life insurance fund. ASA made security fund payments of Tk. 20.02 million to the 9,437 families of deceased policyholder since August 2003.

Security fund (Life Insurance) for borrower’s husband/ guardian: Along with member’s security fund for the borrowers, ASA has offered another product with a view to strengthen the support to be given to the family. The product is security fund (life insurance) for borrower’s husband/guardian in which a small member deposits Tk.10 per week on behalf of her husband/ guardian. In the case of husband’s/guardian’s death, his wife/successors would receive 3 times of the total premium paid by the member. Otherwise, he/she will receive the total deposited amount along with 2% interest after 200 weeks of contributing to this insurance fund. ASA made security fund repayments of Tk. 2.65 million to the 4,469 families of deceased policyholder since October 2004.

Countrywide coverage The programs of ASA have been expanded tremendously throughout Bangladesh. By December 2005, ASA’s total number of branches stood at 2,291 among which there are 2,030 branches in the rural and 261 branches in the urban areas. Besides these, 21 specialized SEL branches are in operation at the field level.

ASA'S cost-effective sustainable microfinance model ASA has succeeded in establishing a cost-effective management system in its field level branch offices. It has been proved effective in reducing poverty using its cost-effective sustainable microfinance model. Branch offices in the field, which are decentralized, implement this model. Each branch office consists of one manager (BM), four loan officers (LOs) and a peon. On an average, each branch is responsible for managing 1,800 group members. Initially, a new branch requires an investment of around Tk.5.0 million. Around Tk. 36,200 is needed per month for salary of the staff of a branch. The total expenses of office management (office rent, electricity, water, gas, TA/DA, stationery, entertainment and office maintenance) are Tk.6,200.

The special feature of ASA model is that it ensures a cost-saving operation, which helps a branch office to generate enough income that it becomes self-reliant within a period of 12 months.

ASA extends coverage through small MFIs ASA not only helps the poor of the country with its own micro finance programs, but also cooperates with small local NGOs through its NGO partnership program. These partner NGOs are benefited in many ways. By providing skilled manpower, technical support and loan funds, ASA supports them vividly. ASA has 30 partner NGOs throughout the country under this program. As of the end of December 2005, partner-NGOs have received Tk. 209 million as loan funds from ASA. During this period, total active members of the partner NGOs stood at 231,088 million. These members have created a savings balance of Tk. 296 million. The number of total active borrowers at that time was 150,348 and the loan outstanding among them was Tk. 665 million inclusive of service charge. In Bangladesh, ASA has initiated a new window through which it has become easy for small NGOs to access donor funds. Thus it is possible for them to get soft loan funds channeled through ASA. CORDAID-Netherlands has approved 11.60 million EURO soft loan for 12 NGOs for provision of microfinance services. ASA took the responsibility to channel these loan funds to those enlisted NGOs. Technical services for improving NGOs capacity to receive loan funds from other sources such as PKSF and Commercial Banks are also provided.

ASA as International Technical Service Provider ASA has been providing technical services to MFIs in several countries of the world. In fact, ASA is already recognized as an International Technical Service Provider (ITSP) under UNDP’s MicroStart program and has extended services to a number of MFIs in the Philippines and Nigeria. By helping the MFIs to build their capacity and implement programs effectively, ASA has built its reputation as a Technical Service Provider in the field of microfinance. ASA has rendered consultancy services to many MFIs in Indonesia, Philippines, Yemen & India. ASA has been providing technical assistance to Bandhan since its inception. Many of ASA’s field level as well as senior level staff are deployed to the Bandhan on deputation. Bandhan has been replicating the ASA model, and growing fast with cost-effectively. The ASA-Bandhan collaboration program, although started in 2002, has achieved a tremendous success. Starting from only 512, the number of beneficiaries reached to over 10 thousand members at the end of December 2005. ASA - at a glance (up to December 2005)

Sl.# Description 1 Total number of Branch Office (ASA - 2,250, HP - 41) 2,291 2 Total number of Village 63,226 3 Total number of Upazila / Thana 511 4 Total number of District 64 5 Total number of active group : Small 92.60% 165,674 (Function as a collection center) : Small business 5.49% 9,825 : HP 1.90% 3,405 178,904 6 Total number of active member : Small 62.65% 3,751,270 : Small (male) 32.02% 1,917,625 (end of the month) : Small business 2.36% 141,055 : SEL Program 0.20% 11,888 : HC Poor 1.52% 91,011 : HP 1.16% 69,236 : BDS Loan 0.10% 6,049 5,988,134 7 Total Active Families No. 4,070,509 8 Savings (end balance) : Small 88.73% 2,693,631,355 : Small business 10.83% 328,834,847 : HC Poor 0.20% 6,219,207 : HP 0.20% 6,047,425 : BDS Loan 0.03% 1,001,928 3,035,734,762 9 Total numbers of Security Fund : Member 96.68% 3,935,314 policy holders : Husband/Guardian 48.73% 1,917,625 5,852,939 10 Security Fund : Member 77.69% 2,340,235,933 (end balance) : Husband/Guardian 22.31% 672,075,278 3,012,311,211 11 Total number of active loanees : Small 82.79% 3,462,089 (end of the month) : Small (male) 9.76% 408,302 : Small business 3.06% 128,077 : SEL Program 0.28% 11,888 : Education 0.24% 10,163 : BDS Loan 0.14% 6,049 : Rehabilitation Loan 0.06% 2,610 : HC Poor 2.07% 86,369 : HP (Special) 1.58% 66,047 4,181,594 12 Loan Outstanding (with service Charge) : Taka 19,378,528,650 Disbursed (cumulative) Taka 148,196,817,219 Realized (cumulative) Taka 128,818,288,569 13 Rate of Recovery 99.88% 14 Total Number of Staff : (Male - 13,137 & Female - 1,732) 14,869

BRAC

BRAC Centre, 75 Mohakhali, Dhaka-1212, Bangladesh E-mail: [email protected] Website: www.brac.net

Key Persons Fazle Hasan Abed, Chairperson; Abdul-Muyeed Chowdhury, Executive Director.

Type of Organisation

BRAC is a Non Governmental Organisation with multifaceted development interventions encompassing microfinance, health, education and social development operating nationally and internationally.

Legal Status

BRAC is registered under the Societies Registration Act (Act No.XXI/1860) and the Foreign Donations (Voluntary Activities) Regulation Rules 1978 and registered with NGO Affairs Bureau, Bangladesh, No. 46,1978, dated 22 August 1981

Overview

BRAC started as a small scale relief and rehabilitation project initiated by Fazle Hasan Abed in 1972 following the devastation left by Bangladesh’s war of independence in 1971. Over the last three decades BRAC, with its uniquely holistic approach has emerged as one of the independent, virtually self-financed paradigm in sustainable human development. It is the largest in the world employing 97,192 people, with 72% women, and working with the twin objectives of poverty alleviation and empowerment of the poor.

From the time of its modest inception, BRAC recognized women as the primary caregivers who would ensure the education of their children and the subsequent inter-generation sustainability of their families and households and women and children have therefore been at the centre of all of BRAC’s activities. Its comprehensive approach to development combines Microfinance under BRAC’s Economic Development programme with Health, Education and Social Development programme, linking the programmes strategically to counter poverty through livelihood generation and protection. While BRAC believes that micro credit is an important tool in breaking the cycle of poverty, it also places equal emphasis on training its members in income generating activities and facilitating their linkage with consumer markets. Instituting linkages between producers and consumers, BRAC has assisted in the entire process of income generation, juxtaposing itself so as to counter market failures and make it possible for the poor rural producers to be linked to the market for sustainable livelihood.

BRAC’s Economic Development Programme has so far organized 4.96 million poor and landless people-mostly women-into 160,197 Village Organisations (VOs). BRAC’s Microfinance Programme strives to ensure economic and social sustainability of the poor by offering them credit, as well assistance and encouragement to save. For the 25 million absolute poorest that BRAC defines as the ultra-poor who cannot access traditional microfinance, BRAC pioneered the Challenging the Frontiers of Poverty Reduction – Targeting the Ultra Poor (CFPR-TUP) programme in 2002. Through this unique, groundbreaking initiative, BRAC has been working to help the ultra poor merge into its mainstream microfinance programme.

Yet another one of BRAC’s innovations that has been replicated in about a dozen countries is the Non Formal Primary Education Programme set up in 1985. The programme began with 22 one-room schools and has grown to about 31,577 schools in 2005, accounting for about 11% of the primary school children in Bangladesh. It provides those traditionally outside formal schooling access to education.

BRAC’s contribution in the field of public health has also been substantial. BRAC’s Essential Health Care Programme, aside from partnership programmes with the government covering tuberculosis, malaria, immunization and sanitation programmes, offers a broad range of services to the poor including critical services in reproductive health care and disease control, mobilizes women and disseminates information among the poor.

Various Support Programmes some of which include the Training Division, Research and Evaluation Division, Advocacy and Human Rights Division, Public Affairs and Communications, Administration and Special Projects, and Internal Audit and Monitoring, provide continuous support that is essential to the success and smooth functioning of BRAC’s core programmes.

BRAC has invested substantially in commercial enterprises one of which is Aarong (retail handicraft chain stores), that links poor rural producers, or in this case artisans, with the expanding urban markets. Such enterprises also include the BRAC Dairy and Food Project that is the second largest liquid milk plant in Bangladesh and has an integrated system of milk procurement from rural dairy farmers to the production of quality dairy products. Six Poultry Farms and three Poultry Feed Mills have been set up to meet the increasing demand for healthy chicks and quality feed in rural areas as well as to provide supply access to women trained in a variety of aspects of poultry rearing. BRAC Printers, a Cold Storage, Tissue Culture Lab, 15 Grainage and Reeling Centres (Sericulture), 12 Fish and Prawn Hatcheries, an Iodised Salt Factory and a Bull Station to improve cattle breeds through artificial insemination are also among its Programme Support Enterprises. Such commercial enterprises not only ensure economic sustainability for poor rural producers, but also earn revenues that the organisation can retain to fund its core development programmes.

BRAC has come to stand as a unique example of how a development organisation of the South can be sustainable without being largely dependent on donor assistance. BRAC’s outreach covers all 64 districts of Bangladesh and 78% of the total number of villages in Bangladesh and has been called upon to assist a number of countries including Africa, the Middle East and Afghanistan.

Major Events

1972 BRAC starts at Sulla (Sylhet) as a relief organisation. 1973 Transition to a development programme. 1974 Relief work among famine and flood victims of Rowmari, Kurigram started. 1974 Microcredit started. 1975 Research and Evaluation Division (RED) established; Jamalpur Women's Project commenced. 1976 Manikganj Integrated Project initiated. 1977 BRAC commences 'targeted' development approach through Village Organisations (VO). 1977 BRAC Printers set up in Dhaka. 1978 Training and Resource Centre (TARC) set up at Savar; Aarong set up in Dhaka. 1978 Sericulture starts in Manikganj. 1979 Outreach, Rural Credit and Training Programme (RCTP), Poultry Programme commenced. 1980 Oral Therapy Extension Programme (OTEP) launched. 1983 Livestock Programme initiated. 1985 Non-formal Primary Education Programme (NFPE), Income Generation for Vulnerable Group Development (IGVGD) Programme launched, Rural Enterprise Project (REP) launched. 1986 Rural Development Programme (RDP) formed by merging Rural Credit and Training Programme (RCTP) and Outreach; Child Survival Programme (CSP) commenced. 1988 Monitoring Department set up. 1990 Rural Credit Programme (RCP) commenced; Management Development Programme (MDP) set up; Vegetable cultivation becomes a separate programme. 1991 Women’s Health Development Programme (WHDP) commenced. 1992 BRAC Centre for Development Management (BCDM) established. 1993 Training Division, Women’s Advisory Committee (WAC) set up. 1994 Non-formal Primary Education programme (NFPE) sets up a desk in Nairobi under the auspices of UNICEF to advise some African countries in primary education. 1995 Fifteen Adult Literacy Centres opened under NFPE; BRAC enters Global Partnership for NGO studies, education and training; Gender Quality Action Learning (GQAL) and Gender Resource Centre (GRC) established. 1996 Rural Development Programme (RDP) IV commenced; Micro-Enterprise Lending and Assistance (MELA) launched; BRAC BDMail goes into operation. 1997 Urban Development Project starts. 1997 Delta BRAC Housing programme launched. 1998 BRAC Dairy and Food Project commissioned. 1998 Chittagong Hill Tracts Development Project underway. 1999 BRAC Information Technology Institute launched. 2001 BRAC University launched. 2001 BRAC Bank launched. 2002 Challenging the Frontiers of Poverty Reduction – Targeting the Ultra Poor (CFPR-TUP) programme launched. 2002 BRAC-Afghanistan programme commenced. 2002 BRAC Advocacy and Human Rights Unit set up 2003 BU-IED launched. 2004 Office of Ombudsperson established. SHarE unit set up.

Vision

A just, enlightened, healthy and democratic Bangladesh free from hunger, poverty, environmental degradation and all forms of exploitation based on age, sex, religion and ethnicity.

Mission

BRAC works with people whose lives are dominated by extreme poverty, illiteracy, disease and other handicaps. With multifaceted development interventions, BRAC strives to bring about positive changes in the quality of life of the poor people of Bangladesh. BRAC firmly believes and is actively involved in promoting human rights, dignity and gender equity through poor people’s social, economic, political and human capacity building. Although the emphasis of BRAC’s work is at the individual level, sustaining the work of the organisation depends on an environment that permits the poor to break out of the cycle of poverty and hopelessness. To this end, BRAC endeavours to bring about change at the level of national and global policy on poverty reduction and social progress. BRAC is committed to making its programme socially, financially and environmentally sustainable, using new methods and improved technologies. As a part of its support to the programme participants and its financial sustainability, BRAC is also involved in various income generating enterprises. Poverty reduction programme undertaken so far have bypassed many of the poorest. In this context one of BRAC’s main focuses are the ultra-poor. Given that development is a complex process requiring a strong dedication to learning, sharing of knowledge and being responsive to the needs of the poor, BRAC places a strong emphasis on their organisational development, simultaneously engaging itself in the process of capacity building on a national scale to accelerate societal emancipation. The fulfilment of BRAC’s mission requires the contribution of competent professionals committed to the goals and values of BRAC. BRAC, therefore, fosters the development of the human potential of the members of the organisation and those they serve. In order to achieve its goal, wherever necessary, BRAC welcomes partnerships with the community, like-minded organisations, governmental institutions, the private sector and development partners both at home and abroad.

Values

• Concern for people, especially the poor • Human dignity • Belief in human capacity • Gender equity • Fairness • Honesty and integrity • Discipline • Creativity and innovation • Participation • Accountability • Cost consciousness • Teamwork • Openness • Sharing information • Transparency • Professionalism • Quality products and services • Respect for the environment

Governance

BRAC has a governing body consisting of nine members. Apart from the Chief Executive Officer, Fazle Hasan Abed, who is the founder of BRAC, all other members of the governing body are non-executives. Distinguished individuals with high reputation in business and professionals with pro-poor mindset have been elected into the governing body to bring their diverse skills and wise counsel in the governance of BRAC. The executive body consists of one Chief Executive Officer, one Adviser, one Executive Director and three Deputy Executive Directors and twelve Directors who are also engaged in management.

Organizational Set Up

BRAC programmes are carried out through 1,177 branch offices, 498 area offices, 139 regional offices are supporting the management of BRAC to implement its programmes.

Programme Management Structure The frontline member of the BRAC hierarchy in programme management is the Programme Organiser (PO) who remains in the closest proximity of BRAC’s beneficiaries. Usually in an Upazila, BRAC has a main post that oversees the execution of its different core and support programmes. In a high growth Upazila, the outpost from where microfinance programme is operated called a Branch Office. This outpost usually consists of 4-6 POs, one PO (Accounts cum computer data entry person), one PO in-charge. But in an Upazila, one Area manager is responsible for looking after all programmemes including credit and other support programmes. The Area Manager sits in the main-post office, which is situated in its own building. The Out post might be their rental office. A regional manager is responsible for looking after the microfinance programme of 13-15 Area Offices and their outpost.

Human Resources BRAC has a total of 99,537 staffs, among them 36,476 staffs are full time, 62,563 are BRAC education programme staff, and 2,439 are project staff. Here staff recruitment is done through a competitive and fair selection process. BRAC employs highly educated and qualified personnel from all over the country. To ensure accountability and transparency of BRAC staff, all employees have a job specification and their job is transferable.

Staffing by Gender The BRAC management actively seeks to promote gender equality and encourage women to join BRAC. As of December 2005, 70% of BRAC staff including regular staff, project staff and teachers is female.

Geographical Coverage

BRAC currently covers 68,408 villages in 480 Upazilas in 64 Districts of Bangladesh. Client Coverage

As of June 30, 2005, BRAC catered to 4.96 million clients with its micro finance programme, among whom women constitute more than 99% of the total clients. Network

BRAC has two Donor Consortia, one for the BRAC Education Programme (BEP) and the other for the Challenging the Frontiers of Poverty Reduction – Targeting the Ultra Poor (CFPR-TUP) programme. These two programmes account for a large part of total donor finance at BRAC. The consortia conducted their own audits and external reviews and met twice in 2004 to discuss findings. The Consortia donors include the European Commission, Department for International Development (U.K), DGIS (the Netherlands), CIDA (Canada), NOVIB (the Netherlands), NORAD (Norway) and World Food Programme (WFP). Other major donors include: AusAid (Australia), DANIDA (Denmark), SIDA (Sweden), The Government of Bangladesh, The Global Fund and UNDP.

Development Approach

Focused Area: Keeping with its mission and vision, BRAC tries to reach the extreme poor, moderate poor and vulnerable non-poor with qualitative financial and social development services in a comprehensive way. To achieve its objectives, BRAC reaches out to disadvantaged, low-income and poverty stricken areas throughout Bangladesh. In recent years it has even stepped beyond the borders to countries in distress like Afghanistan and Sri Lanka and plans to initiate development programmes in countries in East Africa.

Target Client: BRAC microfinance target clients are usually landless women. BRAC has already covered 4.96 millions clients under DABI, UNNOTI, PROGOTI and different microfinance programmes. The organisation has already covered the ultra poor, poor and near poor in rural and urban areas and taking up new challenges to cover the very poor of the “Char” and “Hill” areas. In general, land, income and activities of the clients segment the clients into different groups.

Field Institution Building Process – Village Organisations: BRAC forms groups called Village Organisations to gather poor, landless people and help them improve their socio-economic positions. The organisation staff to identify the target population conducts a formal survey. Formation of a group takes place through personal contact as well as small and large group discussions. Each member has to fill up an admission form before enrolment. After three Village Organisation (VO) meetings the loan disbursement procedure takes place. A member is eligible to take loan after four weeks of her enrolment in the VO. The criteria for VO formation are:

1. Only the functionally landless poor are eligible to form a Village Organisation (VO) 2. All members of the VO must be residents of the same village 3. A VO is formed with people who are like-minded and have similar economic conditions and who can mutually trust each other 4. A VO must have only one member from the same household 5. Members must not belong to any other microfinance organisation 6. Each VO must have a team leader and an assistant team leader elected by the members. Elections must be held at the time that the group is formed and thereafter annually. 7. Each Village Organisation must comprise of 35-40 members. The VOs provide a platform where members can discuss their concerns and other social issues and conduct their financial transactions with BRAC.

Service Delivery Mechanism BRAC has held to the belief that community partnerships and institution building go a long way in sustainable development and the spreading and transferring of knowledge to future generations. The Village Organisations serve as forums where the poor can collectively address the principal structural impediments to their development, receive credit, and open savings accounts and build on their social capital. The main goal of VO is to strengthen the capacity of the poor for sustainable development and enable the poor to participate in the national development process. Side by side of group approach, BRAC is also adept in individual approach for providing credit facilities. BRAC’s microfinance staffs meet VOs once a week to discuss and facilitate credit operations. The social development staff and health staff meet VO members twice a month and once a month accordingly to discuss various socio-economic, legal and health issues.

Financial Service Delivery Mechanism BRAC uses Village Organisations (VO) as a platform for launching and implementing its various activities. VO is an association of poor, landless people that come together with the assistance of BRAC and try to improve their socio-economic positions. Credit decisions are taken in weekly VO meetings. BRAC considers three things before considering a loan application:

- The member’s capacity to utilize the loan money - Types of business - Profitability of the Income Generating Activity (IGA)/business

All activities are carried out through Branch Office as well as the Area offices. An area office usually covers one Upazila. Usually in a Branch Office there is one PO in-charge, one accountant and 4-6 programme organisers. A programme organiser should cover 350-450 members through 12-15 VOs.

Direct Financial Intermediation BRAC directly disburses credit to individual member through Village Organisations from its Area Offices and outpost offices.

Social Intermediation BRAC organizes rural women into groups known as Village Organisations (VO) for implementation of any social development work. Most of the time, it uses VO members as a pressure group for overdue collection from the default members of the VO. Messages from the organisation are communicated to the groups through VO leaders.

Products and Services

BRAC’s programmes can be categorized according to three major focus areas:

1. BRAC Core Programmes 2. BRAC Support Programmes and 3. BRAC International Programmes

BRAC Core Programmes BRAC’s Core Programmes include (a) Economic development, (b) Education, (c) Health, and (d) Social development and legal services programme

BRAC Support Programmes BRAC support programmes include (a) Training, (b) Research and Development, (c) Human rights and Advocacy, (d) Public Affairs and Communications, (e) Publication and Audiovisual, (f) Administration and Special projects, (g) Finance and Accounts, (h) Internal Audit, (i) Monitoring, and (j) Human Resource Development

BRAC International Programmes BRAC’s international programmes currently include BRAC Afghanistan and BRAC Sri Lanka. To help the reconstruction and rehabilitation of these countries following man-made and natural devastation respectively, BRAC has tailored its unique development interventions in microfinance, education, health, capacity building and livelihood programmes to meet the needs of the people.

BRAC Economic Development Programme

This programme serves as the cornerstone for all of BRAC’s development work. It uses a participatory, peer supported and multi-sectoral strategy to offer poor rural women the skills and opportunity to achieve sustainable improvement in their livelihoods, and attain dignity and self-reliance. This programme covers microfinance, institution building, income generating activities and programme support enterprises. Launched in 1974, BRAC’s microfinance programme aims to:

1. Make credit available to poor women, especially in rural areas 2. Provide credit at a reasonable price 3. Involve poor women in income generating activities through credit provision 4. Promote the economic development of the country by increasing the income level of the rural poor 5. Operate self-sustaining credit activities

FINANCIAL SERVICES In BRAC, three broad base financial services are available for its clients. These are credit, savings and death benefit. BRAC realizes that since the poor do not constitute a homogenous group, one-size-fit-all type of an approach with microfinance will not be suitable for all categories of the poor. BRAC addresses this by offering differentiated financial services designed according to the needs of different people living at different poverty levels. First, the CFPR/TUP (Challenging the frontier of poverty reduction/Targeting ultra poor) programme builds the foundation for a sustainable livelihood for the destitute, ultra poor households by providing/ transferring productive assets in kind, basic skills training and backup support like health and legal services. Gradually, these ultra-poor women are able to benefit from BRAC’s mainstream microfinance services. Secondly, IGVGD, the Income Generation for Vulnerable Group Development programme is another approach that helps the extreme poor attain a basic level of food security, provides them with training to build up their self- confidence and skills, and a timely supply of high-quality inputs and credit to give them the opportunity to start their own income generating activities. Thirdly, DABI organizes landless groups of women in rural areas and urban slums and provide them financial services and self-employment opportunities. Fourthly, UNNOTI organizes farm and non-farm entrepreneurs and provide them a range of financial services. Lastly, PROGOTI is geared towards serving the financial needs of the more entrepreneurial amongst BRAC members and non- members alike through provision of financial services targeting micro entrepreneurs.

The table below illustrates BRAC’s Microfinance client segmentation:

Poverty BRAC Definition Terms and Product details Supports Group Programm conditions e IGVGD Household owning no One must become Starting loan size Enterprise more than 15 decimals a BRAC VO is Tk. 1,200 development of land. member after Interest rate 15% training Women who are joining the flat. Social divorced, separated, or programme. 46 equal development have disable husband. Member must save instalments. training. Age between 18-49 with BRAC in order Social years. to be eligible in awareness Extreme loan. training poor Health support CFPR/ Dependence upon At least one adult After completion Asset transfer TUP female. active woman of 2 years under and subsistence Owning less than 10 member in CFPR, group allowance. decimal of land. household. members can Enterprise No adult active male No association with attain IGVGD development member in the other MFI. loan products. training household. Social No productive assets in development the household. support Essential heath care support. DABI Owning up to one acre Must be a BRAC Loan range Tk. of land (including VO member. 4000-Tk. 30,000 homestead) Must be save with Interest rate 15% Sell manual labour to BRAC regularly flat. earn. 46 equal instalment within Moderate a year. poor UNNOTI Owning more than one Save regularly. Loan range Tk. acre of land. Attend regularly in 10,000- Tk. Involve in farm and weekly meetings. 50,000. non-firm activities. Interest rate 15% flat. 12 and 18 monthly loan products with equal monthly instalments. Vulnerabl PROGOTI Large loan to the Must have good Loan size Tk. e non- BRAC and non-BRAC entrepreneurial 50,000- Tk. poor micro entrepreneur skills. 300,000 Must open a bank Interest rate 15% account to receive flat. loan 12, 18, 24 monthly loan products with equal monthly instalments.

IGVGD: Income Generation for Vulnerable Group Development (IGVGD) programme covers the poorest women who own no land, have little or no income, or are widowed or divorced. The objective of the IGVGD programme is to alleviate poverty of the hardcore poor by providing long-term sustainable income and employment opportunities through food assistance, training and access to credit facilities.

DABI: DABI members are those who own up to one acre of land (including homestead) and sell their manual labour to earn their living. Any BRAC Village Organisation member is eligible for DABI loan. Major types of credit under the DABI credit programme include General Loans, Housing Loans and Disaster Loans.

General Loans range from Tk. 4,000 – Tk. 30,000 (US$ 50 – 500) with a flat 15% interest rate. Loans are payable over one year through 46 weekly instalments. The clients and their representatives at the centre perform most of the roles and responsibilities with facilitation by the animators of BRAC at the branch.

Housing Loan: One of the effects of having facilities for safe drinking water is the enhanced buying capacity that helps members participate in other types of credit also. This credit is similar to sanitary credit for the customers. The credit size is up to Tk. 10,000 payable over one year through 46 weekly instalments at a flat interest rate of 10%.

Disaster Loan: Disaster credit is given to those customers who are affected by natural disasters and have used credit from the organisation. The disaster credit helps the customer contain economic erosion due to disaster.

Credit size: Need based Period: 1 year Repayment: Stipulated period Rate of interest: Need based

UNNOTI: UNNOTI members are those who have more than one acre of land and are involved in farm and non- farm enterprises. UNNOTI borrowers are required to attend weekly meetings with BRAC. Loan sizes range between Tk.10, 000 - Tk.50, 000 with an interest rate of 15% flat. 12 and 18 monthly loan products must be repaid in equal monthly instalments. Through UNNOTI, BRAC provides support mostly to the marginal farmers who own more than one acre of land.

PROGOTI: Started in 1996, this programme aims generate income and create new employment through enterprise development in the rural and semi-urban areas of Bangladesh. This is achieved by providing credit facilities and technical assistance to new and existing small businesses. PROGOTI borrowers are required to open a bank account in order to receive the loan. Loan sizes range from Tk. 50,000 - 300,000 with an interest rate of 15% flat. 12 or 18 monthly loan products must be repaid in equal monthly instalments.

Savings: Savings are a part of income not consumed immediately in favour of the future. An important part of the credit operation is the collection of savings. A VO member can save in three ways:

1. Own Savings: On average, members are required to save a minimum of US 10 cents (Taka 5) every week. 2. Compulsory Savings: When members take loans, it is mandatory that they deposit 5% of the loan amount into their savings account. The interest rate for the savings is 6%. Normally borrowers can withdraw their savings anytime. 3. Current Account Savings: BRAC has recently introduced Current Account Savings that bear no interest but allow the group members to make unlimited withdrawals. This has the following features:

Important Features

Convenience: It is convenient for all members to access their current accounts at the BRAC Area Offices. Liquidity: Members can withdraw any amount of savings from these accounts at any time. Safekeeping: The BRAC Area Offices serve as a safe place for keeping member savings. The PROGOTI programme of BRAC micro finance also has a savings scheme for its entrepreneurs. Under this scheme, the entrepreneurs are encouraged to deposit a certain fixed amount each month.

Death Benefits: BRAC introduced a death benefit policy for its VO members beginning in June 1990. The key features of BRAC’s insurance policy are:

1. Any poor woman, when she becomes a VO member, is eligible for this benefit. 2. BRAC’s insurance service provides Tk.5,000 to the dependants of the deceased 3. No premium is charged to the members. BRAC pays the money to the family from the interest earned through its credit programme.

Microfinance for STUP Members In addition to the training on Income Generating Activities (IGA) provided to the Specially Targeted Ultra Poor (STUP) members, at the end of 24 months’ close supervision of the STUP model, they are brought under the microfinance scheme so that they can get continuous access to financial assistance for their businesses. This is a crucial part of their graduation to the mainstream development programme.

Rural Enterprise Project Due to rapid population growth in Bangladesh the scope for employment and income earning sectors have narrowed down and thus new livelihoods are essential for reducing rural poverty. Rapid urbanisation and globalisation has opened new avenues of opportunities, but such opportunities may not be accessible to the poor. Realizing this, BRAC initiated the Rural Enterprise Project (REP) to encourage employment and income generation through entrepreneurship. REP was formed in 1985 to find and test new opportunities for rural development. The primary objective was to experiment with various income generating enterprises that can be owned and managed by landless, rural women.

Important Features 1. Interest Rate: BRAC charges 15% interest in flat rate per annum on most of the credit programmes. 2. Loan Size: Size of a loan varies with the loan products. Loan sizes of DABI, UNNOTI, and PROGOTI are not the same. For every product, flexibility of loan amount depends on the projects, capacity and ability of the client. 3. Loan Duration: Duration of different loan products varies with the type of clients. For DABI clients, the duration is 1 year. On the other hand, for PROGOTI clients, the duration is 1-2 years. 4. Repayment Terms: In general, most of the loan repayment made is weekly with 46 instalments in a year or monthly instalments for PROGOTI with 12 or 18 instalments with 1-2 years of loan duration. 5. Savings: BRAC’s experience shows that the regular savings of a VO indicates a better discipline in VO credit operations. From the member’s point of view, savings represent an opportunity to earn interest, which they cannot enjoy from the formal market or regular financial institutions. Savings opportunities with BRAC provide members with funds for consumption, children’s education and other investments. It also provides security for old age and serves as a contingency fund during natural disasters. 6. Death benefit: As of December 2005, death benefit claims were Tk. 29,375,000 against 5,562 clients.

Some other programmes 1. Retrenched Garment Workers: Recent changes in the international trades and quota systems have caused many businesses in the garments industry to close down or operate at reduced activity. This has resulted in layoffs for the predominantly women garments workers. To facilitate their rehabilitation into alternative income generating activities, BRAC has now started absorbing a number of these retrenched garment workers into its microfinance programme with an average loan size of Tk. 5,000.

2. Microfinance for Acid Victims: BRAC and the Acid Survivor’s Foundation (ASF) are jointly working to help acid victims. BRAC Microfinance helps rehabilitate the acid victims through credit and savings facilities, so that they can earn income through investing in different income generating activities (IGA).

3. Employment and Livelihood for Adolescents: Employment and Livelihood for Adolescents (ELA) is a programme for BEP (BRAC Education Programme) school graduates, and it primarily focuses on the financial empowerment of adolescent girls. ELA groups are comprised of 20-40 members and all are girls. Loans disbursed to the ELA members invest the loans primarily in poultry, livestock, nursery, fisheries, and other small businesses.

4. Women Enterprises Development Programme (WEPD): BRAC started Women Enterprises Development Programme (WEDP) tailored for women in urban, rural and hill tract areas. Managed only by women staff, this programme gives women entrepreneur’s access to funds to become not only self- sufficient, but to also become job-providers.

Performance monitoring system

1. Management Information System: Management Information System and financial information system at BRAC are computerized at the Area and Head office. Programmes and financial reports are generated effectively to analyse managerial and financial conditions of the organisation.

2. Internal Control: Internal Audit, Monitoring and Financial monitoring section deals with BRAC’s internal control. 100% audits are conducted where irregularities are detected in the course of normal internal audit, which is on sample basis. The frequency of audit in each of the Area offices, Head offices and commercial projects is at least once a year but two or more are conducted at locations and programmes that warrant a close watch. In 2004, a system of continuous audit, whereby all financial transactions at BRAC Head Office are checked within a week, and risk based auditing was introduced. Internal audit, during 2004, was conducted in 2,915 locations and 26 reviews undertaken. These reviews were discussed in review meetings and corrective measures were taken. Quarterly reports are prepared on unsettled irregularities of the review meeting decisions and submitted to the audit committee. BRAC Inventory & Internal Financial Monitoring Section consists of 14 staff, periodically monitoring on inventory and internal financial control at the BRAC Head Office and projects. The total number of inventory monitoring spots/areas was 68 and the figure for financial control was 13 in 2004. Audit reports for all projects, along with FD-4 certified by the Auditors, were submitted to the NGO Affairs Bureau, Prime Minister’s Office. A total of 31 external auditing missions, from 6 audit firms, reported on different BRAC programmes in 2004.

3. Reporting System: BRAC's reporting system is from bottom to top. Information is always collected from member level of BRAC. In every branch BRAC has an automated reporting and management information system. It allows both manual and computerized entry of data. System is used for accounting purpose and totrack loan portfolio, and maintaining member wise information. At present more than 5 million members’ records are available in the system. The system automatically generates the borrowers' schedule. Usability, accuracy and timeliness are considered in reporting. The system-generated information is 99% error free because of a number of validation/error checking features.

5. Impact measurement: Selected findings from BRAC micro finance programme:

1. 80% of BRAC loans were used for productive investment, asset purchase and housing. Only 3% of loans were used for household consumption. 2. Nearly 4% of member households have graduated from landlessness and shifted to different landholding groups upon joining BRAC. 3. About 45% of BRAC members are directly involved in income generating activities. Before joining BRAC the percentage was only 28%. 4. BRAC member households have been found to have twice as much savings than the comparison households. 5. Level of education, adult literacy and primary school enrolment of group members have significantly improved after joining BRAC. 6. Average per capita calorie consumption and total food and non-food expenditures were significantly higher for BRAC member households. Ratio of non-food to total expenditure was also higher for BRAC, which mainly increased with increase in the household income. 7. BRAC members were found significantly better off than the comparison households in terms of value of their dwelling places and per capita floor space utilization.

5. Standard Practices: BRAC has been following some of the internationally accepted reporting systems and prudential requirements. This is being done to conform to the standard norms and practices pursued worldwide and to prepare for any future requirements in the country. These practices and the relevant indicators paint a comprehensive picture of BRAC's financial and managerial soundness.

Other important features 1. Loan Loss Provisioning: BRAC management regularly assesses the adequacy of the loan loss provision based on the age of the loan portfolio. At the end of the year, BRAC calculates required provision for loan loss based on the loan classification and provision methodology and adjusted if needed.

Loan classification Days in arrears % of Provision required Standard No arrears 2% Watch list 1-30 days 5% Substandard 31-180 days 20% Doubtful 181-350 days 75% Loss Over 350 days 100%

2. Loan write-off: Loans within their maturity period are classified as “Current loans”. Loans, which remain outstanding after one month of their maturity period, are considered as “Late Loans”. Late loans, which remain unpaid after one year, are classified as “Non-Interest Bearing Loan (NIBL)”. The total amount of NIBL, which are considered bad and have no possibility to recover is referred to the Governing body of BRAC for approval of write-off, generally within one year from the date when a loan is transferred to NIBL. Generally loans are written off twice a year, i.e. July and December. Any collection realized from loans previously written off is credited to statement of income and expenditure.

3. Depreciation: Property, plant and equipment are started at costless accumulated depreciation and impairment losses. Depreciation is provided for on a straight-line basis over the estimated useful lives at different rates as accounting standard.

4. Delegation of authority: A clear-cut policy regarding authority of each level of staff has been laid down. The staffs are empowered to take decision at Area, Region, and programme level. Procedure manuals and policy documents contain organisational policies and procedures, which are open to all.

5. Ombudsperson: BRAC has established the office of the ombudsperson with a comprehensive mandate to investigate any incident of mal-administration and misuse of power within BRAC. This includes grievances, such as corruption, abuse of power or discretion, negligence, oppression, nepotism, rudeness, arbitrariness, unfairness and discrimination especially gender-based discrimination.

Growth of Microfinance Programme As of November 30, 2005, the growth in the microfinance programme since December 2004 is summarized below: a. Clients' growth rate is 2.13% b. Net deposit growth rate is 12.93% c. Net loan outstanding growth rate is 19.00% d. Average loan size raised to Tk.8,665

BRAC has other indicators in management & finance that reveal its positive growth.

1. Portfolio quality: Cumulative recovery rate (CRR) is 99% (30 Nov, 2005), which reveals that performance of BRAC is very well from its inception. 2. Overall microfinance on time recovery rate (OTR) is 91.30% (30 Nov, 2005) 3. Portfolio at risk (>60 days) is only 5.10% (30 Nov, 2005), which is more positive than the preceding year.

NON-FINANCIAL SERVICES: Besides financial services BRAC also provides a large number of non-financial services. Some of BRAC’s core programmes are also non-financial like education, health, and social development programmes.

Education

BRAC began its Non-Formal Primary Education Programme in 1985 with 22 one-room schools and by 2005 it was operating 31,577 schools under the new name of BRAC Education Programme or BEP. These schools account for about 11% of the primary school children in Bangladesh and go towards fulfilling BRAC’s stated goal of poverty reduction through access to Non-Formal Primary Education for those traditionally outside formal schooling. BRAC hopes that providing an educational outlet for students outside the government formal schools will lead to the strengthening of the national education. This can only be done by an improved, full-range primary curriculum that will allow learners to retain and use the literacy, numeracy and life-skills that it provides. The BRAC schools teach the same competencies as the government schools; however, they enrol and retain a higher proportion of hard-to-reach children, such as girls, who make up 65% of the student body. BEP has been particularly successful in persuading conservative communities in remote rural areas to send their girls to school. The importance of maintaining literacy outside the school setting has been addressed with BRAC’s 964 rural community based libraries (Gonokendras), of which 185 are equipped with computers that are connected to the Internet and 8,016 Kishori Kendras that give members access to a variety of reading materials. The BEP model has been adopted in about a dozen countries, although none to the same scale as in Bangladesh. In 2002 BRAC opened its first international office in Kabul and is currently operating more than 800 schools for adolescent girls in rural Afghanistan.

Health

BRAC initiated its health programme just nine months after its inception through health care centres. BRAC's health programme provides preventive, curative, and rehabilitative grassroots health services that have proven effective in the past. Lessons learned from the past enabled BRAC to restructure the BRAC health programme to cope with demands of national priority and policy and for this purpose it has strengthened its partnership programmes with the government through various national health initiatives. Building on the experience of past successes, the health programme has evolved and responded to emerge national health problems and scaled up former pilot projects. It Engages 29,736 Community Health Volunteers called Shastho Shebikas who are members of the Village Organisations, trained to provide health education, sell essential health commodities, treat basic ailments, collect basic health information and refer patients to health centres when necessary. Today, BRAC offers comprehensive health care to 31 million people, and through Tuberculosis (TB) control programme it reaches about 83 million people.

Social Development and Legal Services

BRAC Social Development, Human Rights and Legal Services programme aims to promote greater awareness of social, political and economic issues. The programme staff provides assistance to community members whose rights are being seriously infringed. BRAC believes that women must be aware of their legal rights to protect themselves from discrimination and exploitation, and be encouraged to take action when their rights are infringed. To take such steps, women often need external assistance, such as the help of a lawyer or the police. BRAC feels that it should and can assist poor women obtain access to these services, either through legal aid clinics, by helping women report cases at the local police station, or when seeking medical care in the case of acid victims.

BRAC Community Road Safety Programme A campaign for Road safety through public awareness was launched on the Dhaka- Sylhet highway following an MoU signing between Director in charge of BRAC Road Safety Programme and Project Director, Road Rehabilitation and Maintenance Project of Roads and Highways Department, Ministry of Communications of the Government of Bangladesh. Project activities included formation of Community Road Safety Groups (CRSG), deployment of Student Traffic Cadets (STC), providing road safety training to the students and teachers of educational institutions, local NGO executives, heavy vehicle drivers and rickshaw pullers. Two well-researched training films and plays were developed and used for the training of local road users. The campaign is continuing. Creation of animated film and broadcasting on Bangladesh Television is an ongoing project. Animated film series of 4 episodes is being produced for road safety education. While Globekids Inc. is extending the technical expertise; the World Bank under Road Rehabilitation and Maintenance Project of RHD, Ministry of Communications has provided the funding.

Vocational Training BRAC Special Projects carried out community-based skill training at Haragachha, Rangpur to generate alternative and health harmony employment of child labourers working in Biri making factories - a health hazardous occupation. Courses included tailoring, embroidery, stitching, etc. for boys and girls aged between thirteen to seventeen years registered under various partner NGOs of the ILO’s under USDOL Worst Forms of Child Labor Project. To meet the problem of retrenched garment workers in the readymade garment sector in Bangladesh caused by global economic recession, BRAC piloted a project titled, Skill Training for Employment of Retrenched Garment Workers. Considering the experiences of BRAC, the Ministry of Commerce had approved another project in September 2004 to provide skill training to retrenched garment workers in courses such as Jute and Paper Bag making, Embroidery etc.

In-house Training The BRAC Training Division (BTD) is responsible for capacity building and professional development of BRAC staff and programme participants through a wide range of training and exposure initiatives. The broad objective of BRAC Training is the enhancement of knowledge, skills and attitudes of the programme participants and staff as well as other external development practitioners working within and outside Bangladesh. A well-known feature of BRAC Training is its participatory nature, which is learner-centred, problem focused and need- oriented. It promotes individual involvement in the training process and group interaction. The training courses are designed and delivered from the perspective of the participants’ needs. The courses are continuously upgraded to meet the evolving needs of the BRAC programmes. At present there are 14 Training and Resource Centres (TARCs), three rented training centres and two BRAC Centre for Development Management (BCDMs) that operates year-round training courses facilitated by experienced trainers.

Research and Evaluation The Research and Evaluation Division (RED) was established in 1975 to provide research support to BRAC programmes. RED conducts multidisciplinary studies on various development issues and subjects of national and global importance. These include poverty alleviation, socio-economic development, agriculture, nutrition, health, population, education, environment, gender, and related fields. Although RED concentrates its activities on BRAC programmes, it also maintains strong linkages with the government organisations, UN bodies, and a number of academic and research institutions at home and abroad. RED emphasizes the importance of effectively sharing research findings with its stakeholders, such as BRAC management, donors, field managers, and also policy makers and researchers at home and abroad. Research findings are disseminated through reports, monographs, annual reports, books and book chapters, journal articles, vernacular research compendium, and short articles in newspapers and newsletters. The research findings are also disseminated through presentations in national and international conferences, seminars, and workshops. Summaries of major findings and important activities are also posted on display boards placed at all the training venues of BRAC. RED researchers published 102 journal articles, 18 books, 75 book chapters and 40 popular articles in newspapers and newsletters during 2001-2005.

Human Resource Department The Human Resource Department is responsible for modernising and executing BRAC's human resource development plan beside its regular function, i.e., recruitment, hiring of senior staff, orientation and performance appraisal. During 2001, the department developed and installed an automated system to develop staff profile, i.e., personal, academic and professional records of BRAC personnel to preserve and analyze the information for assessing the staff capacity, training needs, etc.

Internal Audit The Internal Audit Department undertakes routine internal audit, investigation, physical inventory and other assignments to maintain organisational transparency and accountability. Internal Audit emphasizes the credibility of all financial transactions and safeguard BRAC’s assets. The department ensures the implementation of policies and procedures set by the management. The frequency of audit in each Area Office, Regional Office, Head Office and commercial projects is at least once a year but two or more audits are conducted in a year at locations and programmes that warrant a close watch. This department also prepares a collection of detailed audit reports for the Review Committee. Quarterly reports are also prepared and submitted to the Audit Committee.

Monitoring BRAC established the system of monitoring its activities formally in late 1980s as a cell and later converted it into full-fledged department. The department has been striving to accommodate different scales and dimensions of BRAC programmes. It continuously evaluates individual programme quality and effectiveness. Its key role is to provide feedback to different level managers, which in turn helps them expedite effective decision-making. Apart from programme monitoring, the department has broadened its area of activities to support services like training, Gender Quality Action Learning (GQAL), accounts and finance, transport, procurement, construction, etc. In addition, the department has investigated a good number of grievances of some staff in the field offices as well as the Head Office.

Administration The Administration department consists of seven units: Procurement, Construction, IT cell, Transport, Workshop, Central Store and Special projects. The Procurement Departments supervise purchasing of goods and material distribution while BRAC Transport unit arranges for BRAC's transportation needs. The workshop unit deals with the maintenance of all BRAC vehicles. The Central Store holds the goods purchased by procurement before they are distributed. The construction department works with the development and maintenance of the infrastructure of BRAC. The IT cell provides in-house support to the organisation’s extensive information network system that, among other things, maintains the financial records of the credit and savings. The centre also oversees the ongoing process of computerisation of BRAC's field offices.

Other BRAC Initiatives BRAC University: BRAC University was inaugurated in 2001 to foster national development by creating a centre of excellence in higher education that is responsive to the needs of society, able to develop creative leaders and actively contribute to learning and creation of knowledge. Recently the University launched the James P. Grant School of Public Health that aims to counter an impending global health worker shortage. More information available at: http://www.bracu.ac.bd

BRAC Bank: BRAC Bank is a full service commercial bank focused on providing financial services to small and medium enterprises. It is rapidly expanding its coverage to provide services to SME clients throughout the nation. BRAC Bank started earning revenues in 2004.

BRAC International Programme BRAC stepped beyond the borders to assist in the rebuilding and rehabilitation of Afghanistan in May 2002. BRAC Afghanistan now provides services in micro finance, health, education, income generation, and small enterprise development. The programme takes the best practices of BRAC in Bangladesh and tailors its initiatives according to the needs of the Afghan people. As of December, 2005, BRAC Afghanistan has 2,676 staff, of which 2,519 are Afghans and is present in 15 provinces of Afghanistan

Following the devastating Tsunami, BRAC also stepped into Sri Lanka in May 2005 with rehabilitation and livelihood programmes. At present BRAC Sri Lanka programme covers 8 districts.

BRAC further plans to initiate development interventions in countries in East Africa.

Sustainability Return on equity (ROE) is 14% (30 Nov, 2005) Operating self-sufficiency (OSS) is 119.60% (30 Nov, 2005) Financial self-sufficiency (FSS) is 119.63%. (30 Nov, 2005)

The above ratios represent BRAC as an operationally and financially sound organisation.

Achievements/Awards BRAC Finance & Accounts Division received the World Bank 2004 CGAP Financial Transparency Award.

BURO, Tangail

Address House 12/A, Block CEN (F), Road 104 Gulshan-2, Dhaka-1212, Bangladesh Phone: +880-2-8857876,8858264, Fax: +880-2-8858447 E-mail: [email protected] [email protected]

Key Persons: S.K.Sarkar, President; Zakir Hossain, Executive Director

Type of Organisation BURO, Tangail is a non-profit specialized micro finance institution (MFI) that provides flexible financial services to low-income people.

Legal Status BURO, Tangail is registered under the Voluntary Social Welfare Agencies (Registration and Control) Ordinance 1961 and the Foreign Donations (Voluntary Activities) Regulation Rules 1978 and registered with: The Department of Social Welfare, Bangladesh, No-TA.0489 dated 9 April 1991 NGO Affairs Bureau, Bangladesh, No. 610 dated 19 March 1992

History BURO, Tangail was established in 1990 with the vision of a happy and prosperous society through the overall development of the people of Bangladesh. It is evident that effective development in grassroots level and real improvement in health or education standards among the poor cannot be possible without a significant development in village-based economic activity. The main factor impedes the development of the economic activities is the shortage of capital. Low income leads to low savings; low savings retards the growth of capital; inadequate capital prevents growth of productivity; low productivity leads to low income, i.e. vicious cycle of poverty that hinders the livelihood safety net of the poor. In fact, these were the issues that BURO, Tangail ingrained and sought to address them eventually. Its prime objective is to help reducing the poverty level of the poor people by allowing them access to flexible financial services viz. the loan, savings and insurance facilities. BURO, Tangail (BT) has been operating for last 15 years in the country. During this period it has emerged as a leading mid-level MFI pursuing financial intermediation with limited social intermediation and business development services (BDS). Its policies were amended, systems were developed and modified, products and services refined and innovated to fulfill the emerging needs of the clients.

Vision A happy and prosperous society through the overall development of the people of Bangladesh.

Mission An independent, sustainable, cost-effective microfinance institution that provides diverse, appropriate and market responsive quality financial and business development services at competitive prices to very poor, poor and vulnerable non-poor customers. Values Good Governance Strategic vision/mission- a long-term perspective on what is needed for the society to grow Responsiveness- serving the interests of all stakeholders Transparency- a free flows of information Accountability- decision makers must answer to the public as well as to their organisation Financial Prudence Cost covering principle for service delivery to the customers Capacity to mobilize funds from commercial sources or market Capacity for financial management, audit and control Customers’ Empowerment Access to flexible and quality financial services for the poor Money management capacity through savings and loan activities Customer responsiveness as a key to the development of the MFI

Governance BURO, Tangail has a general body consisting of 21 members who come from different professions viz. social development, academics, banking, business, law and journalism. A seven-member executive committee is elected bi-annually from general members of general body and a three-member Implementation Board of Directors (Executive Director, Finance Director and Programme Director) headed by Executive Director (ED). BURO, Tangail has an international microfinance advisor, who provides valuable inputs from overseas from time to time in the development of the organisation and helps the management in quality decision-making.

Organisational set up Programmes of BURO, Tangail are carried out through 90 branch offices in 20 districts of Bangladesh.

Programme Management Structure According to the management structure of BURO Tangail, operations consist of four tiers of office - Branch Office, Area Office, Zone Office and Head Office. The lowest hierarchy in programme management is the Programme Organizer (PO) who remains in the closest proximity of the customers. One Branch Manager, one Branch Organizer, one Accountant, and 6-7 POs manage the Branch. To develop smooth functional mechanism for programme implementation, 20 area offices are established at field level with an Area Manager for each area office. The key responsibility of the Area Manager is to monitor, supervise and facilitate 3-4 branch offices and respective operational area. Area Managers are supervised by Zonal Managers. One Zonal Manager supervises 4 Area Offices. The Area Manager and the Zonal Manager do not have any separate office. They sit in a suitable branch.

Human Resources The organisation has a total of 1,071 staff that includes 919 male and 152 female. The head office maintains a thin staff size of 18 only. In 2004, 219 staffs were recruited mostly at the entry level to fill up the entry-level positions at the branch level. Staff recruitment is done in a competitive and fair selection process with the help of a recruitment committee. BURO employees are from different areas of Bangladesh. To ensure accountability and transparency of BURO staffs, all employees have a job specification and their job is transferable.

Staffing by Gender Management always tries to encourage women to join in BURO, Tangail. Organisation gives many facilities for the female workers like - four months maternity leave, give priority for choosing working station, etc. Up to 2004, fourteen percent (14%) of the total employee is female.

Geographical Coverage BURO, Taingail has already covered 4,238 villages in 440 unions in 67 Upozilas in 20 Districts of Bangladesh with 90 operational branches.

Client Coverage According to the 31 December 2004, organisation already covered total 221366 clients with its micro finance programme. The women constitute more than 90% of the total clients.

Networks BURO, Tangail maintains partnership with various international organisations of the world viz. DFID (UK), SIDA (Sweden), SDC (Switzerland), CARE/USAID, JOBS/ USAID, AusAID (Australia), PACT Inc. (USA), CIDA (Canada), Stitching Gilles Foundation/ UNESCO, GTZ (Germany). BURO, Tangail also maintains partnership with various national organisations-like SAP, Bangladesh, Stromme Foundation, and Sonali Bank, etc. BURO, Tangail is associated with various other national organisations, e.g., The Federation of NGOs in Bangladesh (FNB); Credit and Development Forum (CDF); Network for Information, Response and Preparedness Activities on Disaster (NIRAPAD); International Association of Investors in the Social Economy (INAISE); International Network of Alternative Financial Institutions (INAFI); Campaign for Popular Education (CAMPE) etc. The organisation has now moved from the donors to a number of commercial banks in public and private sectors and earned their trust to work together. These banks include Sonali Bank, Pubali Bank Ltd., Jamuna Bank Ltd. and BRAC Bank Ltd.

Development approach Focused Area: According to its mission and vision, BURO, Tangail always tries to reach in those areas of very poor, poor and vulnerable non-poor clients with qualitative financial and business development services at a competitive price. To achieve its objectives, BURO, Tangail reaches to the disadvantage, low-income and poverty stricken areas, including "Char" area (strip of sandy land rising out of river bed), where they can find target clients.

Target Client: BURO, Tangail has already covered 221,366 clients from hardcore poor, moderate poor and micro enterprise. Major clients are from moderate poor. Those are the micro enterprise clients who have managed adequately substantial amount of loan from BURO, Tangail. Organisation is covering hardcore poor in rural and urban areas and taking new challenges to cover the very poor of most venerable and disadvantage "Char" area. In general, the clients of BURO, Tangail are poor and landless owning land less than 0.5 acre. They have annual income equal to or less than Tk. 18,000 or having assets less than Tk. 100,000 and the age limit between 18-60 years.

Field Institution Building Process: After an informal survey by organisation staff, the target population is identified. This is followed by motivational work. Formation of a group takes place through personal contact as well as small and large group discussions. Each member has to fill up an admission form before enrolment. The criteria of group formation are shown below: • Only the functionally landless poor will be eligible to form a group. • A group shall be formed with five members. • All the members of the group must be inhabitants of the same village. • A group shall be formed with persons who are like-minded and are in a similar economic -condition and enjoy mutual trust and confidence. • There shall not be more than one member from the same household in any one group. If more than one person from the same household intends to become member, they can do so by becoming members of different groups. • It is not desirable to form a group with close relatives. (e.g. father, mother, brother, uncle, father-in-law) • There shall be a group chief and an assistant chief in each group. The group members shall elect them. Election will be held at the time a group is formed and thereafter annually. People organize themselves in a group of five members. Eight groups of five members each join together to form a centre. A centre usually comprises of 40 members. Centre is a place where groups and their members can discuss their concern and conduct their financial transactions with BURO, Tangail and other social issues.

Service Delivery Mechanism Side by side of group approach, BURO, Tangail is also planning to adopt in individual approach of lending to bring in innovations in the delivery environment. But now BURO, Tangail provides major portion of social and financial services for its clients through group/centre approach and a minor portion through individual approach. Because in centre approach, it is - Easy to deliver services effectively to more clients - Easy to conduct meeting - Easy to collect loan and savings - Easy to supervise and monitor - Easy to deliver messages

Financial Service Delivery Mechanism All activities are currently carried out through branch offices. A branch office covers 50 to 70 villages in 2 to 4 unions. One manager, one Accountant, one Organizer, and 6 to 7 Programme Organizers (POs) form a standard branch office. A branch office covers 60 to 75 centres, which includes on average 35 members or 2000-2500 members in total.

Direct financial intermediation BURO, Tangail directly disburses credit to individual member through centre from branch office.

Social intermediation BURO, Tangail links groups and centres for implementation of any social development work. In most of the time, different MFIs use group members as a pressure group for overdue collection from the default member of the group. BURO, Tangail links centre leaders in annual centre chief workshop to share experiences among the centre chiefs of a particular branch and to deliver any messages from the organisation.

Products and services BURO, Tangail broadly categorizes it programmes into core and supplementary programmes. The core programme includes flexible financial services, domestic resource mobilization, institutional capacity building and human resource development. The supplementary programme includes disaster programme and operational research. Financial Services: In BURO, Tangail, three broad base financial services are available for its clients. These are credit, savings and insurance.

Credit There are nine types of loan products in BURO, Tangail 1. General credit: This is the traditional credit service. Most of the roles and responsibilities are performed by the clients and their representatives at the centre but facilitated by the animators of BURO, Tangail at the branch. Credit range: Tk.1, 000 – Tk.50, 000 Period: 1 year Repayment: 50 equal instalments Rate of interest: 15%

2. Supplementary credit: This type of credit is intended to work as a backward linkage to the general credit because at times the customers face shortage of capital while running their trade. The clients also face this capital shortage due to ceremonial expenditures or any economic erosion due to other reasons. The given opportunity is to infuse further capital in the running business. This loan is given after 25 weeks of general loan. Credit size: 50 percent of the general credit Period: 1 year Repayment: 50 equal instalments Rate of interest: 15%

3. Business credit: The genesis of identifying such a big volume of credit lies in the demand for more and more credit by the clients, which clearly indicates that the borrowers have learnt improved management capacity of capital and there exists marketing facilities of their respective trade and/or products. Credit range: Tk.15, 000 – Tk.50, 000 1st year : Tk.100, 000 2nd year : Tk.150, 000 3rd year : Tk.200, 000 4th year Period: 1-3 years Repayment: Stipulated period Rate of interest: 15%

4. Micro-enterprise credit: This is relatively a large credit that contributes significantly to enhance rural and urban economy through diversification of trade. This credit is offered to those who have managed adequately substantial amount of credit from BURO, Tangail. Credit range: Tk.15, 000 – Tk.50, 000 1st year : Tk.100, 000 2nd year : Tk.150, 000 3rd year : Tk.200, 000 4th year Period: 1-3 years Repayment: Stipulated period Rate of interest: 15%

5. Line of credit: This credit is intended to arrange necessary capital investment in their respective trade. The borrower of this credit is not mandated to repay the principal amount together with the service charge but shall only repay the service charge every week. Credit range: Tk.15, 000 – Tk.50, 000 Period: 1-3 years Repayment: Stipulated period Rate of interest: 15%

6. Hand/Emergency credit: This is a small credit for the borrowers who suddenly require very small amount of financial assistance. The hand/emergency credit has been promoted to benefit the customers because of their inability to access the said capital when it is required, for any reasons. Credit size: Tk.3, 000 Period: 3 months Repayment: Stipulated period Rate of interest: 15% Disaster credit

7. Disaster credit is given to those customers who are affected by natural disasters and have used credit from the organisation. The disaster credit helps the customer contain economic erosion due to disaster. Credit size: Tk.3, 000 Period: 1 year Repayment: 50 equal instalments Rate of interest: 10%

8. Sanitary latrine credit Instead of providing either subsidized or free capital to the customers, the promotion of sanitary credit will utilize institutional capacities intensively that will contain health hazards of the customers. Credit size: Tk.2, 000 Period: 1 year Repayment: 50 equal instalments Rate of interest: 15%

9. Tube-well credit One of the resultant effects of facilities for safe drinking water is the enhanced buying capacity that helps their participation in other types of credit also. This credit is similar to sanitary credit for the customers. Credit size: Tk.3, 000 Period: 1 year Repayment: 50 equal instalments Rate of interest: 15% Savings BURO, Tangail has three types of savings products for its clients. 1. General savings: The customers have different forms of opportunities to maintain the general savings, in that, customers can deposit savings at any rate and are also allowed to withdraw their respective savings any time. Savings deposit: Tk.10 – Tk.2, 000 (at Centre) Period: Unlimited (at branch) Interest compounded: 4.50% per annum

2. Contractual savings: This scheme has been identified to generate enthusiasm and encourage the customers for a number of long-term savings. The significant benefits are those the savers: (1) will receive more than the double at the end of the period; and (2) can open more than one account in the same name. Savings deposit: Weekly Tk.10 – Tk.250 : Monthly Tk.40 – Tk.1, 000 Period: 3, 5 or 10 years Interest compounded: 7% for 3 years : 8% for 5 years : 10% for 10 years 3. Time deposit savings: A one time deposit by the customers has binding conditions in two dimensions: (1) customers will deposit savings either minimum for three months or maximum for five years; and (2) the customers must deposit the amount at a time instead of staggering like contractual savings. The significant benefit is that after the stipulated period, the saver will receive more than double of what has been deposited while opening the account. Savings deposit: Tk.5, 000 – Tk.500, 000 Period: 3-12 months : 13-36 months : 37-84 months Interest compounded: 6% for 3-12 months : 7% for 13-36 months : 8% for 37-84 months

Insurance BURO, Tangail is offering Micro-Insurance product, which is named as Customers’ Security Funds. The poor and vulnerable non-poor clients have to pay in the mode of Tk. 50 and Tk.100, while the very poor clients are required to pay Tk.30 as subscription. The subscriptions are one-time payment in a year. The insurance will yield two benefits after the death of the client. Tk.50 and Tk.100 will include Tk.5,000 and Tk.10,000 cash payment respectively along with waiver of entire outstanding loan of the clients. Similarly, Tk.30 will yield Tk.3, 000 cash payment along with the waiver of loan outstanding. This product is valid for the loan period only.

Non-financial services Besides financial service BURO, Tangail also provides different non-financial services- like training, education, health, water and sanitation programmes for its clients.

Training Programmes BURO, Tangail provides different training programmes for its clients. (i) Basic Life Management (BLM): The BLM training is imparted when the customers meet regularly to carry out financial transactions and discuss the basic issues of their lives. (ii) Awareness Raising: The training addresses a variety of social and human issues that encompasses group mobilisation, literacy, forestation, family planning, health and sanitation, income generation, savings, and human rights. (iii) Enterprise Development and Business Management (EDBM): Around 55 percent of customers were identified as managing different small businesses/ IGAs. Of these, about 20 percent have gained institutional capacity to launch micro enterprises with capital/loan and technical assistance from BURO, Tangail. (iv) Annual workshop with the centre chief: To continue information and experience sharing at regular intervals among the centre chiefs, BURO, Tangail organizes annual workshop with centre chief. This workshop enables experience sharing among all the centre chiefs of a particular branch. Such workshop contributes to better productive programme management.

Disaster Management Along with the training programmes, BURO has taken a disaster coping strategy, which is a support service of the organisation intended to reduce economic erosion of the clients. Within this strategy, disaster loan provides for the clients and disaster training programmes for its staff, government officials, local government body members, and volunteers.

Business Development Services (BDS) BURO, Tangail is poised to undertake a pragmatic programme on a pilot basis to bring its assisted MEs at a platform from where they could contribute significantly to the growth of the national economy. The programme will also extend support to the local MEs (those who are not the registered customers) operating in its programme areas. The proposed programme is an attempt to facilitate BDS to the grassroots MEs to run their businesses in a sustainable manner and create a sustainable BDS market conducive for MEs.

Operations Research (R&D) BURO, Tangail continues to conduct operations research to enhance the flexibility and responsiveness of its financial services. The outcome is used to design and improve quality services. BURO is committed to further augment and improve the flexibility and responsiveness of its savings and credit facilities.

New Foundation to Undertake Social Development Services BURO, Tangail is contemplating to create a new institution to carry on various social development tasks to ensure more benefit to the poor clients. In order to provide quality education to children in urban area, it has set up an upgraded nursery school. The organisation is thinking to introduce quality education programmes in other operational areas as well.

Operational aspects Eligibility Criteria: The major criteria for a person to become as a BURO member in different segments of clients are as follows: 1. Hardcore microfinance clients: Owning less than 10 decimals of land, Annual income equal to or less than Tk. 6,000, Having assets of less than Tk.12, 000, Age between 18-60 years. 2. Moderate poor microfinance clients: Owning less than 0.50 acres of land, Annual income equal to or less than Tk.18, 000, Having assets less than Tk.1, 00,000, Age between 18-60 years. 3. Micro enterprise clients: Owning more than 0.50 acres of land, Annual income in the range of Tk.18, 000- Tk. 60,000, Having assets in the range of Tk.1, 00,000- Tk.3, 00,000, Age between 18-60 years.

Usage of Loan: According to 2003, the distributions of the loan projects are as follows: Small Business- 36%, Animal Husbandry -18%, Rice Processing-15%, Fisheries-12%, Land Mortgage-9%, Handicraft-8%, Others-2%.

Interest Rate: BURO, Tangail charges 15% interest in flat rate per annum on credit products except the disaster credit, which is 10%.

Loan Size: Size of a loan varies with the loan products. It's clear that, size of general loan is not same with the size of business and micro enterprise loan. According to the December 2004, average loan size per borrower is Tk. 5,459. In every product products, flexibility of loan amount depends on the projects, capacity and ability of the client.

Loan Duration: Duration of different loan products varies with the type of business, loan size, etc. For general loan, duration is 1 year. On the other hand, duration of business or micro enterprise loan is 1 to 3 years. But generally in most of the loan products, borrower will repay within a year with equal amount of instalments.

Approval Time: BURO, Tangail always tries to disburse loan on time to its clients according to their demand. According to the policy, a loan should disburse within 3 days to the respected client.

Repayment Terms: In general, supplementary, sanitary, disaster and tube-well loan are repay with a pre-defined structured way. But other loan products repayment terms are flexible and delivery date is stipulated in the contract with the clients.

Savings: BURO, Tangail provides more stress on savings mobilization and offers highest rate in the industry. To this end, it occasionally observes savings week through rallies/campaign to motivate potential low-income clients and mobilize more savings. According to the financial statements, up to 31 December 2004, 38% of loan portfolio contributed from savings and average savings per member is Tk.1393.

Other Financial Products Apart from loan and savings product, BURO, Tangail is offering micro-insurance product for its clients. BURO, Tangail has two objectives to back its insurance idea- the social and the commercial agendas. Social agenda recognizes that there is an increased recognition of poor households' needs for protection against risk. Insurance reduces the vulnerability of households and increases the ability to take advantage of economic opportunities. On the other hand, the commercial agenda assumes that the insurance reduces the impact of client risk on loan and savings portfolios, generates additional revenue and enhances services. According to the 31 December 2004, net insurance outstanding is Tk. 13 millions.

Outreach: BURO, Tangail provides flexible financial services to poor people at 4238 villages of 20 districts through 90 branches including two hardcore poor service branches. Mainstreaming the Hardcore Poor. There is a going perception among the MFIs that the hardcore poor people cannot match with the existing microfinance activities. Against this backdrop, BURO, Tangail was groping to figure out a way to work with the very poor in order to mainstream them with the microfinance sector. BURO, Tangail had eventually designed a programme.

Mainstreaming the Hardcore Poor in the Charlands: According to the latest available information, a total of 4.3 million people were living in the main river charlands. River erosion, floods and drought are the regular natural phenomenon of these riverside areas. The char dwellers are vulnerable and lead a very precarious life. In the past BURO, Tangail has commissioned operational research on hardcore poor and has eventually designed rollout programmes for the very poor and is successfully running its operations. BURO, Tangail is planning to work with these segments of population.

Strengthening micro enterprise support: BURO, Tangail is currently financing ME clients in a limited way. It believes that ME is an area where more investment should be forthcoming as this has high potential of employment and income generation. The organisation will focus to create employment opportunities in the rural areas, particularly in non-conventional businesses.

Emerging as Technical Assistance Provider: There are many MFIs around the globe from where practitioners and others come to Bangladesh to learn about BURO, Tangail’s systems and operations. Encouraged by this response, BURO, Tangail is in the process of organizing a wing to provide such assistance in the future on a larger scale.

Rural Piped Water Supply: The latest statistics on the outcome of arsenic contamination in groundwater of Bangladesh shows that about 75 million people are at risk. For reducing the health hazards, the World Bank has planned to provide financial grants support of 40-50% for implementation of pilot village piped water supply for the rural people and the rest will be borne by the sponsor. BURO, Tangail has been selected to work in this field and will implement the scheme. Every family will have to access to connect the piped water for domestic purpose. They will pay upfront contribution for water connection and also pay monthly tariff. BURO, Tangail will provide safe water through individual tap facility and the community will have round the clock safe water supply.

Lending Methods: BURO, Tangail has introduced a quality approach to address the financial needs of the rural poor. All activities are carried out through Branch Offices. Steps in lending process: 1st - Loan proposal made in the group for client/clients, 2nd - Verification of the proposed loan will be completed within the group by programme organizer (PO), 3rd -Loan proposal papers and documents will be completed by PO and submitted to organizer, 4th - Organizer will again verify the proposal and make recommendation about the proposal and submitted to branch manager, 5th - Branch manager will approve and sanction every loan except Business loan, Micro enterprise loan and Line of credit. The Area manager can approve these loans. 6th - All documents will be accomplished by the PO before the disbursement of the approved loan. Client will come to the branch office to take loan, 7th - After signing of the agreement between client and organisation, loan will be disbursed to the borrower. Total procedures of a loan disbursement take maximum 3 days.

Client Satisfaction: BURO, Tangail carries on marketing intelligence mostly on its own by reading journals, magazines, research and study reports, news papers, interacting with clients, staff and other service providers and talking to other microfinance practitioners of different organisations. Organisation takes feedback on clients' reactions on products and service delivery mechanism. Market research is used to understand the environment in which BURO, Tangail is operating and to identify the needs of its existing and potential clients. A continuous market research is conducted for: Improving current outreach activities Modifying existing product Developing new product Re-engineering the delivery system. BURO management is always concerned about the client's satisfaction. If any problem is found in any area of operations then instantly takes necessary actions to correct or to solve the problem.

Training: Some MFIs follow a minimalist approach, but BURO, Tangail follows credit-plus approach. It provides different training programmes for its clients, such as awareness raising training, enterprise development training, annual centre chief workshop, and basic life management training. During 2004 year, 808 staff received training (both internal and external). On the other hand, 9,387 customers were trained in 2004. These training were, however, organized as per target and necessity of the customers.

Flexibility BURO, Tangail offers flexible savings and credit services. Though, standard number of customers for every branch to reach break even has been the central point of the model, depositing more savings and the demand for more credit works as the centrifugal force to open more and more quality financial services. This, in turn, contributes to accelerating the process of achieving financial self-sufficiency for both the customers and, in turn the organisation itself. Its flexible financial services have three components: (1) savings services, (2) loan services, and (3) customer security funds (micro insurance).

1. Qualify to Receive Loan: According to the credit policies, a client is able to get a loan if he meets the member selection criteria related with land, total assets, income and age and also the performance of regular savings deposit and credit repayment. But in some circumstance, past loan repayment performance of a client can be relaxed for the economic improvement of the clients. 2. Savings Option: Receiving loan from BURO, Tangail is optional and is not linked with savings balance. Clients of BURO, Tangail are able to deposit savings in three forms- general savings, contractual savings and time deposit savings. These three savings product have some flexibility also. 3. Loan Repayment Schedule: Clients can enjoy prepayment facilities in order to qualify for new and large loan. Currently BURO, Tangail loan repayment modes are on weekly, fortnightly, and monthly basis. 4. Loan size: Loan sizes vary with loan products. BURO, Tangail provides large loans for micro enterprise borrowers along with limited business development support and small loan for very poor and poor clients. 5. Loan Pricing: The rate of interest in all loans carries of 15% per annum except the disaster loan, which is 10%. Organisation provides different loan with different pricing. 5. Restriction about more than One Loan: In addition to an existing loan(s), the clients can avail of short-term loan for meeting the emergency needs. If the clients face shortage of capital while running their trade or ceremony or any economic erosion, clients has opportunity to inject additional capital to meet those needs. 6. Optional Loans: BURO provides sanitary latrine and tube-well loan not for the income generating activities, but for the safety of the client's health. BURO always tries to make much more flexibility to customize its loan products with the clients' requirements.

Performance monitoring system (Financial and management) 1. Management Information System: Management information system and financial information system of BURO, Tangail are computerized at the head office level. Programmes and financial reports are being generated effectively to analyse management and financial conditions of the organisation. In BURO, Tangail, different management information system (MIS) tools are used to preserve portfolio and programme information and financial information system (FIS) tools are used to preserve financial information. Operations staff always crosschecks information of MIS and FIS to reveal real picture of the organisation. 2. Internal Control: Internal control is a system that coordinates among - Systems of accountability, - Systems to identify the errors and problems of operations, - Systems to improve quality of operations. Financial control is the main part of internal control. Financial control in BURO, Tangail is generally exercised at three levels- Executive Committee (EC), Head office and at Branch offices. The EC monitors all financial matters quarterly through the EC meeting; the Executive Director/Finance Director exercises financial control through internal auditors by routine visits and also based on monthly financial statements. At branch level, the managers usually do the financial control on the basic of the budget and the financial projection plan. The crucial areas of financial control in BURO, Tangail include the field operational activities (savings collection/withdrawal and loan disbursement/repayment) and monitoring the budget utilization. However, financial control will be carried out with regard to the following four areas as per current practice: (a) field level transaction control, (b) treasury management, (c) budgetary control, and (d) accurate financial reporting. BURO, Tangail pursues a decentralized system of management for its branches. The branch officers control cash flow at field level. This necessitates close monitoring of fund transactions through regular supervision and monitoring. The audit department of BURO, Tangail maintains a team of trained auditors who visit the branches at regular intervals, review all books of accounts and prepare reports with findings and suggestions for the respected branch and submitted to the head office and send a copy to related branch offices. Reputed national audit firm is engaged to conduct annual audit of BURO, Tangail. The Organisation also controls its operations with the systems and procedures of administrative rule, service rule, rules of business, financial and internal control policy, internal audit manual, and programme implementation guide.

3. Reporting System: BURO, Tangail reporting system is down to top process. Information is collected from branch level of BURO, Tangail. Branch level information is crosschecked at the Area office then at the Zone office and then all reports including MIS and FIS will be consolidated at the head office. This four tiers crosschecking system made a transparent and authentic repot, which depicted a true picture of the overall organisation. 4. Impact measurement: Benchmark Information: BURO, Tangail enrols members in microfinance with a survey contains enormous information. This information also preserved at the branch and head office level. BURO has good relations with the different MFIs, NGOs, GOs, Donors, and also different professionals as well. BURO has benchmark information in different areas like best practices of different MFIs and NGOs in client selection criteria, disbursement procedure, members to field officer ratio, loan outstanding to field officer ratio, rate of interest, duration of loan, products of loan and savings, savings interest rate etc. Periodical Tracking of Benchmark Information: BURO, Tangail continuously monitor the changes of the products and always tries to cope with the changes. 5. Use of Poverty Assessment Tools: Organisation assesses the poverty of its clients by the programme officers on a regular basis by continuous monitor client's repayment mode of loan and savings. 6. Monitoring Poverty Assessment Tools: After the loan disbursement, BURO credit staff always monitor its clients. If a client does not use loan on time and efficiently then client will not be able to repay loan and deposit savings regularly. And if a client uses microcredit efficiently then the client will be able to payback loan and savings instalment regularly. All field workers meet with all clients within a week (or month). So within a week (or month), programme organizers will cover all members of BURO, Tangail. It is the regular duty of BURO staffs to keep close contact with their clients; otherwise organisation may not be able to maintain a good loan recovery rate. Loan repayment and savings deposit, on a regular basis, is an important toll to assess the economic improvement of a client.

Standard Practices BURO, Tangail has been following some of the internationally accepted reporting and prudential requirements. This is being done to conform to the standard norms and practices pursued worldwide and to prepare for any future requirements in the country. These practices and the relevant indicators paint a comprehensive picture of BURO, Tangail's financial and managerial soundness. 1. Loan Loss Provisioning and Write off: Management makes provisions for loan losses every quarter in order to maintain the loan loss reserve at adequate levels for bad loans. The write-offs of any loans, if necessary, are charged against reserve. Loans are indeed written off in full after one year of the loan term. 2. Liquidity Management: Based on experience, 6-10% all savings balance of all branches is deemed adequate to meet the liquidity reserve ratio. For the liquidity requirement, 40% has been earmarked for general savings, 30% for contractual savings, 10% for time deposits and 20% for operating and financial expenses. Management 3. Human Resource Development (HRD) is well organized in a manner that provides clear guidance and support to operations staff - including recruitment and training of new personnel. BURO, Tangail has formalized all key processes and the effectiveness with which it controls risk throughout the organisation. 4. Risk management: Organisation is aware about the dependence on continuous grants may threaten the longevity of the organisation. In this view, the organisation prefers commercial sources of funds. No donors sought for BURO, Tangail after 1999 for operational expenses/ programme expansion in mainstream microfinance. Organisation manages a disaster fund for the clients to mitigate external risk. Organisation also managing current and future risk of credit programme by increasing amount of net savings and insurance, diversify saving and loan products, aging portfolio, loan loss provision, products flexibility, quality of staff and beneficiary training.

Growth According to the information as on 31 December 2004, clients' growth rate is 20%, operational area coverage increased by 18%, net deposit growth rate is 38%, net loan outstanding growth rate is 37% and surplus or profit growth is 73% and net 51 employees increased in 2004. BURO, Tangail has so many indicators in management & finance that reveal its positive growth. 1. Portfolio quality: Cumulative recovery rate (CRR) is 99.35% (31 December 2004) reveals that BURO performance of operations is very well from its inception. On time recovery rate (OTR) is 98.19% (31 December 2004), which is higher than preceding year, Portfolio at risk (>60 days) is only 1.82% (31 December 2004), which is more positive than preceding year, Loan loss provision declined to 1.44% (31 December 2004), indicates portfolio quality is improving.

Sustainability Return on equity (ROE) is 25% (Dec 2004) Profit margin is 17% (as reported in the Audit Report, but 37% (as reported in the Annual Report) Operating self-sufficiency (OSS) is 164% (Dec 2004) Financial self-sufficiency (FSS) is 135% (Dec 2004)

From the above ratios, it indicates that BURO, Tangail is an operationally and financially sound organisation. Achievements/Rewards. M-CRIL, India has done rating and BURO, Tangail achieved Alpha plus ((+) grade, which is indeed among a few MFIs in Asia that achieved this excellence. Notably, this is also the ever-highest grade achieved by any NGO/MFI in Bangladesh.

Palli Bikash Kendra (PBK)

Address 27/C, Asad Avenue, Block-E Mohammadpur, Dhaka-1207, Bangladesh. Tel: 880-2-9132389, E-mail: [email protected] Key Persons Md. Atiqun Nabi, Chairman Md. Hasan Ali, Executive Director

Type of Organisation PBK is a non-profit micro finance institution (MFI) that provides financial and non-financial services to poor people.

Legal Status PBK is registered under: 1. The Joint Stock Companies, S-2597 (10)/2001 in 2001 2. NGO Affairs Bureau, Bangladesh, No. 544 dated 23 October 1991 3. The Department of Social Welfare, Bangladesh, No-02256 dated 16 March 1989

History Palli Bikash Kendra (PBK) was established in 1990 at Pakundia in Kishoreganj District. Following its initial funding from CIDA, IIRD, PKSF, and Oxfam America. PBK has expanded its activities and now spearheads an integrated approach to poverty reduction through a combination of programmatic interventions, including microfinance, income generation, and institution building, education and health, and enterprise development. Through these programmes, PBK broadly aims to improve the socio-economic status of the rural poor, especially women and children, and to enhance community capacity and the ability of the poor to control their own lives.

Vision: Make virtuous society free from poverty

Mission: To ensure the standard of socio-economic condition of the poorest people in rural Bangladesh by their active participation in environmental friendly viable rural development activities.

Objectives 1. To reduce poverty by at least 50% in each operational area where PBK works. 2. To foster a comprehensive and integrated development process whereby the main development works under-taken in any Upazilla can be completed and the above-mentioned objective can be achieved within 15 year’s. 3. To help promote a more balanced, diversified and vibrant economy in each working area with special emphasis on viable yet neglected sectors, such as rural agro base industries. 4. To ensure the creation of new employment opportunities and that economic assets and income go to the poor whenever possible. 5. To improve and sustain the availability of primary health care and curative services, including sanitation and safe drinking water. 6. To promote women’s equality, child development and leadership among the poor. 7. To be fully committed to protect and improve the environment. 8. To achieve sustainability on micro-credit programme but also that is retaining its commitments to the mission of the organisation.

Governance According to the organisational structure, PBK has four tiers to administer and manage its programmes and activities. These are- General body, Executive committee, Coordination committee, and project implementation team. PBK has a general body consisting of twenty-one members from different professionals. A seven member executive committee is elected bi-annually from general members of general body. Coordination committee is consists of executive director and mid/filed level managers meet once in every month to review the progress of different projects and programmes. Project implementation team consists of higher and mid-level managers to supervise, monitor and implement the activities of PBK. Organisational set up Programmes of PBK are carried out through 12 units in three districts (Gazipur, Narshindhi, and Kishoregonj) of Bangladesh.

Programme Management Structure According to the management structure of PBK, operations consist of three tiers of office, Unit Office, Region Office, and Project Office including Head Office. Unit office is the nearest office of PBK to implement its programme. The lowest hierarchy in management is the Programme Organizer (PO) who remains in the closest proximity of the customers. One Unit Manager, one Unit Accountant, and 6 POs manage the Unit. To develop smooth functional mechanism for programme implementation, now 12 unit offices are established at field level with a Unit Manager for each unit office. The key responsibilities of the Regional Manager are to monitor, supervise and facilitate 5-6 unit offices and respective operational area. Unit Managers are supervised by Regional Managers. The Regional Manager (RM) has no separate office. Regional Manager sits in a suitable unit office. Programme Manager (PM) is the chief for the respected programme to implement. PM is the immediate higher position of the RM.

Human Resources The organisation has a total of 180 staffs. The head office maintains a tiny staff size, only 8 personnel. Here staff recruitment is done in a competitive and fair selection process with the help of a neutral recruitment committee. PBK employees are from different areas of Bangladesh and very much accountable and transparent to its management.

Geographical Coverage PBK has already covered 358 villages in 53 unions in 9 Upazilas in 3 Districts of Bangladesh with 12 operational unites.

Client Coverage As on 30 June 2005, organisation has already covered total 28,104 clients with its micro finance programme. Among them women constitute 100% of the total clients.

Networks PBK maintains partnership with various organisations viz. Palli Karma-Sahayak Foundation (PKSF), BRAC, Concern Bangladesh, INAFI, Micro credit summit campaign, NGO Forum, CARE and MIX MARKET etc.

Development approach

1. Focused Area: PBK strives to ensure the standard of socio-economic condition of the poorest people in its working area by their active participation in environmentally viable rural development activities through various financial and non-financial services. Now PBK is working with the poor and hardcore poor in the North-Southern districts of Bangladesh.

2. Target Client: As on June 2005, PBK has already covered 28,104 clients. Major clients are from poor. Those are the micro enterprise clients who have managed adequately substantial amount of loan from PBK. Now organisation is covering hardcore poor in rural areas and taking new challenges to cover the very poor of most vulnerable and disadvantage "Haor" area. In general, the clients of PBK are poor and landless owning land less than 0.5 acre and having age limit is between 18-60 years.

3. Field Institution Building Process: After a formal survey by the organisation staff, the target population is identified. Formation of a group takes place through contact by the programme organizer. Each member has to fill up an admission form before enrolment. The criteria of group formation are shown as below: -Only the functionally landless poor are eligible to form a group. -A group is usually formed with 25-30 members. -All the members of the group must be inhabitants of the same village. -A group is formed with the persons who are like-minded and have similar economic -condition and enjoy mutual trust and confidence. -There shall have only one member from the same household under any group. -It is not desirable to form a group with close relatives. (e.g. father, mother, brother, uncle, father-in-law etc.) Members of any other microfinance organisations are not able to join in PBK and vise versa. -There shall be a group chairman, secretary, and a cashier in each group. The group members shall elect them. Election will be held at the time a group is formed. -Group meeting held in a convenient meeting place where groups and their members can discuss their concerns and conduct their financial transactions with PBK.

Service Delivery Mechanism PBK provides major portion of social and financial services for its clients through group/centre.

1. Financial Service Delivery Mechanism: All activities are currently being carried out through unit offices. One manager, one Accountant, and 5-6 Programme Organizers (POs) form a standard unit office.

Direct financial intermediation-PBK directly disburses credit to individual member through group from unit office. Social intermediation-PBK always links group for implementation of any social development work. Most of the time programme organizer use group members, especially group president, Secretary and Cashier, as a pressure group for overdue collection from the default members of the group.

Products and services: Financial Services: PBK has three financial services for its clients. These are credit, savings, and insurance.

Credit: There are five types of loan products in PBK. Rural micro credit (RMC) This is the initial credit product. The clients and their representatives at the centre perform most of the roles and responsibilities with facilitation by the animators of PBK at the unit. Credit range: Tk.1, 000 – Tk.19, 000 Period: 1 year Repayment: 45 equal instalments Rate of interest: 12.50%

Micro-enterprise loan (MEL) This is relatively a large credit that contributes significantly to enhance enterprise of the poor to up-lift his/her small business. This credit is offered to those who have managed adequately substantial amount of credit from PBK and proven client. Credit range: Tk.20, 000 – Tk.50, 000 Period: 1 year Repayment: 45 Weeks/ 12 months Rate of interest: 12.50%

Micro finance and technical support (MFTS) loan MFTS loan provides to enhance the live stock development to sustain the poor and hardcore poor through livestock. Credit size: Tk.4, 000-19,0000 Period: 1 year Repayment: 45 equal instalments Rate of interest: 12.50%

Hardcore Poor Credit (HCP) Programme HCP loan provides to the most vulnerable and distress poor of the society to eradicate poverty from the bottom line poor in the society. And build confidence and scope of the hardcore people for the future up gradation of their livelihood. Credit size: Tk.1, 000-Tk. 10,000 Period: 1-3 year Repayment: 45/90/140 Weeks Rate of interest: 6%-10%

Consumer Credit Consumer credit loan provides to the existing credit member to meet their general home appliance product of the poor like-Furniture, Sharee, Lungi, Mosquito curtain, Blanket, Mattress etc. Credit size: Tk.200-3000 Period: 1 year Repayment: 45 Weekly instalments Rate of interest/charge: 10% charge add upon production cost.

Savings: PBK has only one type of savings product for its clients. General savings The customers have opportunities to maintain the general savings. 100% savings return in case of member drop but partial withdraw (50%) savings after 3 years of enrolment of a member. Savings deposit: Tk.10 – Tk.20 (at Centre) Period: Unlimited (at unit) Interest compounded: 6% per annum

Death benefit fund (DBF) PBK provide death benefit fund to its borrowers. Borrower select nominee and provide these information in a prescribe form. Borrower has to pay TK.5 per thousand of loan to PBK in order to enter in death benefit fund. In case of borrower death, (i) For the first time loanee, client's nominee will receive TK. 1000. For the second time loanee, client's nominee will receive TK. 2000. For the third time loanee, client's nominee will receive TK. 3000. For the fourth time loanee, client's nominee will receive TK. 4000. For the fifth time loanee, client's nominee will receive TK. 5000. In case of borrowers' guardian death, (ii) Total outstanding of the borrower will automatically waive.

Non-financial services Social developemnt Microfinance was introduced as a programmatic intervention of PBK in 1993 to enhance the sustainability of the beneficiaries as well as the organisation. In response to the social service delivery, PBK has so far distributed 11433 sets of Water & Sanitary Latrines (WSLs), 485 Tubewells (TWs), and 455892 seedlings to keep its clientele’s health sound and their surroundings environ-friendly. PBK’s response to special needs of its group members was moderate with distribution of 6000 quilts and mattresses. Wage employment by rural industry; and wage employment under consumer product service is two value-added microfinance services that PBK introduced to its clients that came out successful.

Disaster Management Along with the training programmes, PBK has taken a disaster coping strategy, which is a support service of the organisation intended to reduce economic erosion of the clients. Within this strategy, disaster loan for the clients without any interest and charges.

Training PBK’s non-financial services includes training, issue based meeting, motivation for awareness build-up, education, safe drinking water & sanitation, horticulture and disaster management etc. Under microfinance and technical support programme (MFTS), PBK provides livestock and small business training to its clients. The training also provided to the very poor as well as hardcore poor. Training impact shows an upward trend of the livestock business and changes of food intake with high protein because of availability of livestock.

Non-financial products PBK has established a sister concern namely "Bikash Food Products" with a view to create employment / income and to enhance participation of the poor which will eventually lead towards their ownership. Forty-three (43) quality bakery items are producing in this bakery and sales in both the urban & rural areas. PBK also encourage poor women to produce various items such as: quilt, mattress, mosquito net etc. and distribute those items among the poor families on a soft loan basis.

Operational aspects Eligibility Criteria: The major criteria for becoming a BURO member under different segments of clients are as follows- 1. Hardcore microfinance clients: -Owning less than 10 decimal land -Taking only one time meal in a day -Food consumption is less than 15000 Kcal -One income-earning member -Female-headed household, -Family size is big.

General microfinance clients -Owning less than 50 decimal land, -Able fulfil basic needs, -Age between 18-60 years. -Micro enterprise clients: -Minimum 3 times loan had taken from PBK with successfully repayments, -Trusted and disciplined members, -Permanent residence, -Age between 18-60 years

Usage of Loan According to June 2005, the distributions of the loan projects are as follows- Small Trade- 28% Agro Activities 22% Rickshaw/Van 13% Land reclaim, lease 12% Poultry & Livestock 12% Others 13% Total 100%

Interest Rate PBK charges 12.50% interest in flat rate per annum on credit products except the disaster credit, which is 0% and flexible rate in consumer loan.

Loan Size Size of a loan varies with the loan products. It's clear that, size of general loan is not same with the size of business and micro enterprise loan. According to the June 2005, average loan size per borrower is Tk. 3500. For every product, flexibility of loan amount depends on the projects, capacity and ability of the client.

Loan Duration Duration of different loan products is same except disaster and consumer loan. For RMC, ME/MEL, MFTS duration is 1 year. On the other hand, duration of micro enterprise, disaster consumed loan is varies with consumers ability. But generally in most of the loan products, borrower will repay within a year with equal amount of instalments.

Approval Time PBK always tries to disburse loan in time to its clients according to their demand. According to the credit policy, a loan should be disbursed within 30 days to the respective client.

Repayment Terms In general, clients are to repay the loan after one week as grace period with equal amount of instalments including principal and service charge. But disaster and consumer loan products repayment are flexible and stipulated as to the contract with the clients.

Savings PBK has only one savings product as reported earlier, which is called as general savings. If any clients want to leave then he/she is able to take his/her own savings. But if any clients need any money, the he/she will be able to take money of 50% of the deposited amount only when client cross 3 years of membership. PBK provides more stress on savings mobilization and offers highest rate i.e. 6%. According to the financial statements, up to 30 June 2005, 42% of loan portfolio is contributed from savings and average savings per member is Tk.1223.

Outreach PBK tries to reach to the poorest people in the Kishoregonj district (North-eastern) and it started a credit programme for the hardcore poor and tries to cover "Haor" people. PBK also tries to increase its credit coverage area from 14 branches to 50 branches. Lending Methods All activities are carried out through Unit Offices Steps in lending process: 1st - Loan proposal is made in the group for clients, 2nd - Verification of the proposed loan is to be completed within the group by programme organizer (PO), 3rd -Loan proposal papers and documents are to be completed by PO and submitted to unit manager. After that unit manager will again verify the proposal and make recommendation about the proposal, 4th - Unit Manager has authority to approve maximum of TK. 6,000 and Regional Manager TK. 12,000 and Programme Manager above TK. 12,000. 5th - All documents will be accomplished by the PO before the disbursement of the approved loan. Client will come to the unit office to take loan, 6th - After signing of the agreement between client and organisation, loan will be disbursed to the borrower. 7th - Only for micro enterprise loan, Programme manager is responsible to approve the ME loan. Because, micro enterprise loan is larger than other loan. Total procedure of a loan disbursement takes maximum 7 days.

Client Satisfaction PBK always tries to get feedback about its programme quality. For this reason PBK update market information by reading journals, magazines, research and study reports, newspapers, interacting with clients, staff and other service providers and talking to other microfinance practitioners of different organisations. Organisation takes feedback on clients' reactions on products and service delivery mechanism, which is a part of regular basis supervision and monitoring system. PBK management is always concerned about the client's satisfaction. If any problem is found in any area of operations then instantly necessary actions are taken to correct or to solve the problem.

Training PBK follows credit-plus approach. PBK has its own training centre with the facility of accommodation for 30 trainee including trainer / resource persons. PBK provides various training to its member clients and staffs. 87 staffs were provided professional training such as operational management of microcredit organisational development, financial management & control, leadership, MIS etc. For the member clients (beneficiaries) PBK provide training such as formation of village organisation, legal aid, primary health care, poultry livestock skilled training, MCH etc. During the period July 2004 to June 2005, 97 staffs were provided training and 2,354 member clients were provided various training during the same period.

Flexibility PBK don't offers high flexible savings and credit services. But it has least flexible financial services in three components: (1) savings services, (2) loan services, and (3) customer security funds (micro insurance).

1. Qualify to receive loan: PBK don't compromise with the criteria of the members in different segments of the poor. According to the credit policies, a client becomes able to get a loan, when he meets the member selection criteria- related with land, total asset, and considerable age and also the performance in regular savings deposit and credit repayment. But in some circumstance, past performance of loan repayment can be relaxed for the economic improvement of the clients. 2. Savings option: Receiving loan from PBK is linked with savings balance. But clients of PBK are able to withdrawal savings if the client wants to leave the organisation or member able to take 50% of the savings if he/she has passed 3 years of enrolment with PBK. Now PBK is trying to flexible its saving products with the client's satisfaction. 3. Loan repayment schedule: Clients can enjoy prepayment facilities in order to qualify for new and large loan. Mainly PBK has weekly repayment mode with some flexibility in some specialized IGAs according to the design of the projects like MFTS and ME. It tries to introduce different loan repayment modes as: weekly, fortnightly, and monthly. 4. Loan size: Loan sizes usually vary with the loan products. PBK is providing large loans among micro enterprise borrowers with limited business development support and small loan to very poor and poor clients. 5. Loan pricing: Organisation provides different loan with different interest rate. The rate of interest for major loans is 12.50% per annum except the disaster and consumer loan for which interest rates are 0% and an 10% charge on the production cost. 6. Restriction to have more than one loan: In addition to an existing loan, the clients can avail of getting another loan for meeting the emergency needs. These are during disaster period soft loan and consumer credit. 7. Optional loans: PBK provides sanitary latrine and tube-well loan with a view to ensure safety health coverage. PBK always tries to make the programmes more flexible as to the clients' requirements.

Performance monitoring system (Financial and management)

Management Information System: Accounting information system of PBK is computerized at the head office. PBK tries to get a unique computerized management information system to generate a faultless, quick report of the programme and helping the field staff not to give any manual posting which seems to be a bulk work for them. Programmes and financial reports are being generated effectively to analyse managerial and financial conditions of the organisation. In PBK, different management information system (MIS) tools are used to preserve portfolio and programme related information and accounting information system (AIS) tools are used to preserve financial information. Operational staffs always crosscheck the information of MIS and AIS in order to reveal real picture of the organisation.

Internal control: Financial control is the main part of internal control. Financial control in PBK is generally exercised at Unit offices. The EC monitors all financial matters quarterly through the EC meeting. At unit level, the managers usually administer the financial control on the basis of the budget and the financial projection plan. The crucial areas of financial control in PBK include the field operational activities. However, financial control would be carried out to the following four areas as per current practice: (a) field level transaction control, (b) budgetary control, and (c) accurate financial reporting. PBK pursues a decentralized system of management for it's unites. The unit officers control cash flow at field level. This necessitates close monitoring of fund transactions through regular supervision and monitoring. Reputed national audit firm is engaged to conduct annual audit of PBK. The Organisation also controls its operations according to the procedure of administrative rule, service rule, financial and internal control policy, internal audit manual, and programme implementation guide etc.

Reporting System: Information is always collected from unit level of PBK. Unit level information is crosschecked at the Region office then at the Head Office. All reports including MIS and AIS are consolidated at the head office. These three tiers crosschecking system has made a transparent and authentic reporting system and help management to take actions to achieve its desired goal.

Impact measurement: Benchmark Information PBK enrols members under microfinance programme with a benchmark survey contains enormous information. This information preserved at the unit level. PBK has good relations with the different MFIs, NGOs, GOs, Donors, and different professionals. In this context, PBK has to maintain relationship with different service providers and networks. This way PBK has access to get the benchmark information in different areas like best practices of different MFIs and NGOs in client selecting criteria, disbursement procedure, members to field officer ratio, loan outstanding with field officer ratio, rate of interest, duration of loan, products of loan and savings, savings interest rate etc.

Periodical Tracking of Benchmark Information To work in a sustainable way in the micro finance industry, PBK is continuously monitoring the changes of the products and always tries to cope with the changes with the help of its monitoring tools and supervision and monitoring management team.

Standard Practices PBK has been following nationally and internationally standard reporting system. These practices and the relevant indicators paint a comprehensive picture of PBK's financial and managerial scenario.

1. Loan Loss Provisioning: Management makes provisions for loan losses in every quarter in order to maintain the loan loss reserve at adequate levels for bad loans. PBK designed its LLP policy with the help of the policy of Palli Karma-Sahayak Foundation (PKSF), which is as follows- Standard loan outstanding (Loan outstanding without any due) 1% Substandard loan outstanding (1 day to 180 days due) 6% Doubtful due (181 days to 365 days due) 60% Bad loan (One year overdue) 100%

2. Management: Human Resource Development (HRD) is well organized in a manner that provides clear guidance and support to operations staff - including recruitment and training of new personnel. PBK has a committed management team to control the risk of the organisation. 3. Earnings: The management has been effectively using and mobilizing the available surplus amount to ensure sustainable benefit and aiming at a modest return of the investment from the micro finance programme. 4. Risk management: PBK divert its risk by managing overdue with loan loss provision, regular supervision and monitoring by the internal management and external expertise like external auditors. Organisation manages a disaster fund for the clients to mitigate external risk. Organisation is also managing current and future risk of credit programme by increasing amount of net savings, diversify loan products, aging portfolio, quality of staff and client training.

Growth As on 30 June 2005, some growths for last year are as follows: i. Clients' growth rate is 19%, ii. Net savings deposit growth rate is 46%, iii. Net loan outstanding growth rate is 86%, iv. Surplus or profit growth is 25%. PBK has so many indicators in management & finance that reveal its positive growth.

Portfolio quality According to 30 June 2005, Cumulative recovery rate (CRR) of PBK is 99.83%, which reveals that performance of PBK is very well from its inception. On time recovery rate (OTR) is 98%, Portfolio at risk is only 1.3%,

Sustainability As on 30 June 2005, Return on equity (ROE) of PBK is 22.88%, Profit margin is 15.80%, Operating self- sufficiency (OSS) is 120%, financial self-sufficiency (FSS) is 105%. The ratios represent that PBK is an operationally and financially sound organisation.

Shakti Foundation for Disadvantaged Women (SHAKTI)

Address House No. 44, Road No. 2/A Dhanmondi R/A Dhaka 1205, Bangladesh

Key Persons Taheerah Haq, President, Humaira Islam Ph.D., Founder and Executive Director

Type of organisation Shakti Foundation is a non-profit development organisation that provides financial and non-financial services to poor women in the urban area.

Legal status Shakti Foundation is registered under the Foreign Donations (Voluntary Activities) Regulation Rules 1978 and registered with: NGO Affairs Bureau, Bangladesh, No. 626 dated June 01,1992.

History Shakti Foundation for Disadvantaged Women was founded in 1992 by Humaira Islam, Ph.D. and a group of men and women committed in poverty alleviation and brings qualitative change in the life of women living far below the poverty line. Shakti Foundation provides access to credit and savings facilities for women living in the slums of Dhaka, Chittagong and other major cities of Bangladesh.

Vision: Poverty alleviation focused on women. Mission: Social and economic empowerment of poor women’ by creating strong economic and social resource bases. Objectives 1. Economic empowerment of poor women through creation of their capital and resource base. 2. Social empowerment of women through leadership and capability development. 3. Overall development of women as entrepreneurs, decision makers, leaders and change agents in their families and communities. 4. Integration of women in the decision making process of Shakti Foundation.

Governance Fourteen founder members and two general members constitute sixteen members "General Body" to govern Shakti Foundation for Disadvantaged Women. It has eight Executive Committee members, which is composed of the President, Vice President, treasurer, four members and a member-secretary. The Executive Director (ED) of the Foundation is the Member Secretary of the Executive Committee.

Organisational set up Programmes of SHAKTI are carried out in urban areas through 64 branch offices in 12 districts of Bangladesh.

Programme Management Structure According to the management structure of SHAKTI, operations consist of two tiers of offices, one is Branch Office and other is Head Office. The lowest hierarchy in programme management is the junior officer (JO) who remains in the closest proximity of the client. Usually a branch is consists of one Branch Manager, one Accountant, and 4-10 junior officers manage the Branch. To develop smooth functional mechanism for programme implementation, branch supervisor (BS) post are created. A branch supervisor has no separate office. Branch supervisor sits in a suitable branch. The key responsibilities of the branch supervisor are to monitor, supervise and facilitate 6-12 branch offices and respective operational area.

Human Resources As on 30 June 2005, organisation has a total of 692 staffs that includes 382 male and 310 female. The head office maintains 56 staffs only. Here staff recruitment is done in a competitive and fair selection process. SHAKTI employees are from different areas of Bangladesh. To ensure accountability and transparency of SHAKTI staffs, all employees have a job specification.

Staffing by Gender Management always tries to encourage women to join in SHAKTI. Up to 2004, forty-five (45%) of the total employees are female.

Geographical Coverage SHAKTI has already covered 54 Upazilas in 12 Districts of Bangladesh with 64 operational branches.

Client Coverage As on 30 June 2005, organisation has already covered total 1,31,499 clients with its micro finance programme. 100% of the clients are women.

Networks SHAKTI maintains partnership with various national and international organisations-Credit Development Forum (CDF), Coalition for the Urban Poor (CUP), International network of alternative financial institutions (INAFI) & Citi Bank n.a. in Bangladesh; and Women’s World Banking (WWB), NOVIB & CAF America etc.

Development approach

1. Focused Area: According to its mission, SHAKTI always tries to reach in the urban areas of very poor, poor and vulnerable non-poor clients with qualitative financial and business development services at a competitive price. To achieve its objectives, SHAKTI reaches the disadvantage, low-income and poverty stricken areas, including "Slum" area. 2. Target Client: ‘A poor woman who aspires for a better quality of life for herself and her family’. SHAKTI has already covered 1,31,499 clients under microfinance programme. Now organisation is covering most vulnerable and disadvantage urban-slum area. In general, the clients of SHAKTI are poor living in the urban area with maximum family income is Tk. 3000 or maximum individual income Tk. 1000 per month and has potential for self employment with age limit is between 18-56 years. 3. Field Institution Building Process: SHAKTI field operation is organized as Grameen Bank model. After an informal survey by the organisation staffs identified the target population, residents of urban slums and squatters. At the bottom tiers are beneficiary groups, each of which has five members. These are usually formed through personal contact with project staff. Usually six such groups combine to form a centre. These centres are the basic units through which SHAKTI organizes its grass-roots level activities. SHAKTI members meet weekly at the centre place. Centre is a place where group members can discuss their concern and conduct their financial transactions with SHAKTI and other social issues. The junior officer collects loan instalment from the borrowers on weekly group meeting.

Service Delivery Mechanism Side by side of group/centre approach, SHAKTI is also adopting in individual approach of lending to bring in innovations in the delivery mechanism. But now SHAKTI provides major portion of social and financial services for its clients through centre. Because in centre approach, it is easy to deliver services effectively to more clients, easy to conduct meeting, easy to collect loan and savings, easy to supervise and monitor, easy to deliver any messages quickly.

Financial Service Delivery Mechanism All activities are currently being carried out through branch offices. Each branch office has a branch manager, an accountant (depends on the size of the branch) and 4-10 junior officers. A junior officer on an average looks after 360 members. So a branch office covers 1500-2500 members in total. Direct financial intermediation- SHAKTI directly disburses credit to individual member through centre from branch office. Social intermediation-SHAKTI always links groups for implementation of any social development work. Most of the time, it is found different MFIs use group members as a pressure group for overdue collection from the default members of the group.

Products and Services Main programmes of Shakti Foundation: 1. Urban Credit Programme, 2. Business Development Services, 3. Small Enterprise Development, 4. Health Programme, and 5. Women in Development

Financial Services: In SHAKTI, three broad base financial services and one small base financial service are available for its clients. These are credit, others, and savings. Credit: The Urban Credit Programme is a model through which Shakti Foundation provides services to its members. The major activity under this model is financial interventions to poor women through credit delivery and savings mobilization. And over the years in response to the needs of the members, some non-financial services have also been added as supplementary to the main programme. Thus, what started primarily as financial intervention has gradually become an integrated programme responding to the primary needs of disadvantage women. The Urban credit Programme was first started in the slums of Dhaka city in April 1992. Five years later the success of the programme encouraged its replication first in Chittagong in April 1997 and currently working in Bogra, Nator, Rajshahi, Narayongonj, Munshigonj, Gazipur, Comilla, and Cox's Bazar districts also. SHAKTI also tries to expand its working area to other major cities of Bangladesh. Credit Products are:

1. General Loan: The main thrust of the urban credit programme of Shakti Foundation is focused on the general loan scheme. General loan is given for financing income-generating activities (IGA) of a member. A member is entitled to repeat loan after the repayment of all previous loan instalments. Credit range: Tk.5, 000 -Tk.16, 000 Period: 1 year Repayment: 50 equal weekly instalments Rate of interest: 12% (Flat Rate)

2. Business Loan: Business loan was introduced in Shakti Foundation in December 1995 with the objective to facilitate members to scale up their businesses. A member after completing 2 general loan cycles is able to access a business loan. Credit range: Tk.16, 000 - Tk. 50,000 Period: 1 - 2 years Repayment: Weekly or monthly instalments Rate of interest: 15% (Flat Rate)

3. Small Enterprise Development: During recent times, Shakti realized that some of the members have the potential to be successful entrepreneurs and if they get proper guideline and extra money, they will be able to run and expand their businesses more successfully. To meet the need of these clients, Shakti recently introduced small enterprise development loan (without any guaranty from the group or the centre). Members who are at least 2nd cycle borrowers have good reputation in the group and centre and who have good repayment history on all their previous loans are eligible for the loan. Credit range: Tk.50, 000 and above Period: Flexible (1 - 2 years) Repayment: Monthly instalments Rate of interest: 15% (Flat Rate)

4. Housing Loan: Recently Shakti foundation has introduced housing loan to their members. Housing loan will be provided only to individual members of Shakti who has land in her own name or to some extent it may be jointly owned with her husband or other family member. The member must be at least in their 5th cycle of general loan or more. Credit range: Tk.100, 000 - Tk. 500,000 Period: 3-7 years Repayment: Stipulated period (Monthly instalments) Rate of interest: 15% (Declining balance rate) Head Office will determine tenure of loan but member has the option to bring down the loan tenure but not for extension. Processing fees will be 1.0% of sanctioned loan (up to loan amount of Tk. 200,000), which will be non-refundable because these fees will be utilized for legal formalities. In case of loan amount more than Tk. 200,000 processing fee will be negotiable and depend upon the legal expenses because in this case land will be subject to mortgage and power of attorney for the organisation, which will incur significant expenses.

5. Seasonal Loan: This product was introduced 1996 in order to meet seasonal financial requirements of the project members. Seasonal loan helps women to inject additional working capital in the business when demand for the commodity or product is high. This loan is given during festivals particularly during EID and Puja. Credit range: Tk.4, 000 - Tk. 6,000 Period: 6-12 months Repayment: 25-50 equal weekly instalments Rate of interest: 15% (Flat Rate) 6. Health Loan: This is an interest free loan given to all project members and their children since 1994, so that she can meet expenses related to the treatment of serious illness. The amount of loan and terms of payment of the health loan is flexible and is decided upon by the member herself in consultation with other members of her centre. Credit range: Max Tk.10000 Period: Max 3 years Repayment: Stipulated period Rate of interest: 0%

7. Emergency Loan: Emergency loan was launched in 1998.This is also an interest free loan given to all project members affected by disaster both natural and man-made. The loan is used for buying food, clothing and household assets. The term and repayment method of the emergency loan is decided upon by the member herself in consultation with other members of her centre. Credit range: Maximum Tk. 3,000 Period: 1 year Repayment: Stipulated period Rate of interest: 0%

8. Consumption Loan: Consumption loan is given to purchase household items and any other things that are needed to establish social status of Shakti’s member. Members who have been in the organisation for three years can get access to this loan. Consumption Loan will be given not in cash but in kinds. Credit range: Kinds (Tk. 5,000-Tk. 25,000) Period: 1-3 years Repayment: Monthly instalments Rate of interest: 15%

9. Ramzan Special Loan: Members may borrow up to Taka one thousand to earn quick money by selling ‘Iftar’ (snacks) during the time of Ramzan. This is a short-term loan with a small additional charge. Credit range: Tk. 1000 Period: 1 month Repayment: One time Rate of interest: Addition only Tk.30

Other Financial Products 1. Leasing: This innovative product was introduced in 1999 to give equipment support to expanding enterprises. It enables entrepreneurs to acquire necessary working equipment through leasing and use their loans as working capital. Credit range: Maximum Tk.30, 000 Period: 1-2 Years Repayment: Weekly instilments Rate of interest: 15%

2. Security Deposit (Insurance): Only the borrowers of general, business and seasonal loan are able to have access to this facility. Every week member will deposit Tk.5 for five years. If the member or her husband died during the existence of a loan, then member or the nominee will get Tk.5000 and the loan outstanding amount adjust with the member savings. But if the saving amount is less than the loan outstanding, the rest amount will waived. If the borrower or her husband doesn’t die within the five years after the security deposit has started, organisation will return the deposited amount of security.

Savings Products Shakti Foundation offers different savings schemes to its members. The small weekly savings deposits accrue over time and create a resource base, which poor members can use as social security or old age insurance. 1. Personal Savings (Nijer Tohobil): Members save Tk. 20 every week at the centre meetings. Members can withdraw their entire savings with interest when they decide to leave the organisation. Savings deposit: Tk.20 Period: Unlimited (at branch) Deposit mode: Weekly (at Centre) Interest compounded: Bank rate (As per STD rate of Sonali Bank) 2. Business Savings: Along with the personal savings, members can save at the rate of 5 percent of their total loan amount at the time of receiving general loan. The fund promotes financial security among the peer groups. Members can take back their savings with interest in the group fund when they decide to leave the organisation.

Funds for Members: A number of funds have been created to respond to the various needs of the members: 1. Health Loan Fund: One fourth of the centre savings and donor’s grant comprise to make the health loan fund. This fund acts as a revolving loan fund for the health loan. 2. Client Welfare Fund: In 1998 the client welfare fund was created with surplus interest income from member savings deposits. Member savings are invested in long-term deposit schemes. The spread is transferred at the end of each financial year to the client welfare fund. This fund acts as a revolving loan fund for the emergency loans and also is a source of fund for Shakti’s relief activities. It may be mentioned here that this is a dedicated fund for the welfare of the beneficiaries of the organisation only and under no circumstances will be used for the organisation and its employees. 3. Health Service Fund: A new financial service introduced in January 1999 is Life Insurance. A separate fund called Health Service Fund has been created for this purpose, which came into effect in 1999. Every week all members of Shakti Foundation contribute Tk.1 to this fund and for new branches Tk.50 per year. . The Health Service Fund helps finance the life insurance product. Health Service Fund: Upon the death of a member her nominee receives up to Tk.5, 000 from the health service fund.

Non-Financial Products 1. Business Development Services (BDS): In the last one decade many members have taken repeat loans from Shakti Foundation and have scaled up their business from survival levels to micro and small level. In response to the need of this new class of entrepreneurs, a special unit was created to provide services that would promote business skills of poor women enable women entrepreneurs to manage and control their businesses. One of the main activities of this unit is training on business management. The curriculum of the training is very simple and user friendly which teaches women members about business planning, marketing and simple accounting and bookkeeping.

BDS Committee This body was set up to develop a group of expert trainers (BDS trainers) from among successful businesswomen who are members of the organisation. The committee consists of 50 members. The committee has two functions: (1) Provide business management training to members willing to take business loans, and (2) Acts as mentors to other women wanting to scale up their businesses. More than 10,000 women have taken this training.

2. Small Enterprise Development (SED): Shakti Foundation for Disadvantaged Women envisaging to involve potential women in Small and Medium Enterprises (SME). Shakti’s prime objective is to patronize women to be entrepreneur so that they can become significant contributor in their family vis-à-vis society, which will ultimately bolster our socio-economic scenario. Shakti introduced a new scheme called Small Enterprise Development (SED) in 2004. The objective of SED is to provide opportunities to project members in order to enable them to enter into small and medium markets. SHAKTI supports its members by counselling to: -Expand business, -Arrangement of backward and forward linkages, -Exploring new marketing areas and so on. The investment areas of this product are manufacturing, processing, distribution, retailing, other service related activities, etc.

3. Health: The project members of Shakti Foundation are women who live in slums and squatters in extremely unhealthy and unhygienic conditions. These densely populated slums give rise to a number of communicable diseases like tuberculosis, skin infections, whooping cough, worm infestations, etc. Moreover, most treatment is costly and in poor households, women’s illness and treatment get least priority. With this perspective at the background and with the objective to provide quick services and quality treatment at minimal cost, the organisation started the health programme in January 1997. The main Objectives of this programme is as follows: i. To make project members health conscious by giving health education. ii. To provide quality treatment at minimal cost iii. To provide easy access of health service to all project members. The main three activities of the health programme are: 1. Prevention Health educations: The health workers and the health communities’ members disseminate health education at field level. The medical Officers (Doctors) at periodic intervals visit centre meetings in order to discuss with the members about issues related to health and hygiene. 2. Curative Treatment: Qualified female doctors have been recruited for check up and primary treatment of the members. It is mandatory for all Shakti members to register with the health programme. Patients who require specialized treatment or surgery are referred to government and private hospitals. To increase coverage and facilitate delivery services directly to project members in far away slums Satellite Clinic has been set up in many areas. 3. Loan for Emergency Treatment: The health Loan of Shakti Foundation is designed to help members meet costs related emergency treatment including surgery. The health Committee is in charge of verifying and recommending Health Loan applications, setting up terms and conditions for disbursement and repayment of the loans, and following up the utilization of the loan. Each Branch has one health committee and each Health Committee comprises of 7 project members. The Committee meets once a month to discuss various health issues and recommend Health loans. The doctors and health workers are also present during these meetings. Additional Services: One of the additional Services provided by the health programme is to sell medicines to the members at cost price. Also, the Health centres are open to non-project members (Female patients of all ages and male patients up to the age of 12) including family members pay Taka 10 per visit as consultation fee. Shakti doctors also provide referral services to all patients. 4. Women in Development (WID): Gender trainings are given in centre meeting by the members wherein women are made aware of the importance of self-employment and loan utilization by women themselves. It is difficult to measure empowerment but its qualitative values will be reflected through women’s ability to make decisions, higher mobility, participation in processes and issues that are of interest to them, and finally and most importantly members’ involvement in projects that have been designed for their benefit. Primary Committee This innovative body has been set up to train project members as leaders and change makers. The committee is comprised of 100 members in small groups of 5-7 women and forms the link between project members and staff in the branch offices. The committee has two functions: (1) to provide gender awareness training to their peers, and (2) meet with branch staff to discuss matters related to programme implementation.

Operational aspects Eligibility Criteria: The major criteria for becoming a SHAKTI member under different segments of clients are as follows- 1. General microfinance clients: -Monthly family income maximum Tk.3000 or maximum Tk.1000 per individual in the family, -Family income irregular and/or is based on daily manual labour, -Potential for self-employment, -Maximum education level is class 5, -Currently involved in some survival or small business but cannot improve economic status due to inadequate capital in split of having necessary skills, -Lack of access to basic facilities such as health, drinking pure water, sanitation and education. -Age between 18-56 years. 2. Small Enterprise Development: -Potential women entrepreneurs (small and medium) either individually or jointly -Excellent nature of business -Large volume of turnover -Number employees working -Potentiality of business -Ability to cope with further investment -Marketing area along with the ability and experience of Member and their family members or business partners. 3. Usage of Loan: According to 2004, the distributions of the loan projects are as follows- -Processing & Manufacturing 27 % -Agriculture & Forestry 1 % -Live stock 6 % -Service 5 % -Trading 52 % -Padding 2 % -Shop keeping 7 % -Total 100% Interest Rate: SHAKTI charges 0% to maximum 15% interest rate per annum on credit products. Loan Size: Size of a loan varies with the loan products. It's clear that, size of general loan is not same with the size of business and small enterprise loan. According to the 30 June 2005, average loan size per borrower is Tk. 4,914. For every product, flexibility of loan amount depends on the projects, capacity and ability of the client. Loan Duration: Duration of different loan products varies with the type of business, loan size, etc. For general loan, duration is 1 year. On the other hand, duration of business or small enterprise loan is 1 to 2 years. But generally in most of the loan products, borrower will repay within a year with equal amount of instalments. Approval Time: SHAKTI always tries to disburse loan in time to its clients according to their demand. According to the credit policy, a loan should be disbursed within a week to the respective client. To disburse loan in time and to reduce the risk of carrying loan, SHAKTI disburses loans in the centre meeting from the collected amount. Repayment Terms: Generally loans are repaid on the weekly or monthly basis. But health and ramzan loans repayment are flexible and stipulated as to the contract with the clients. Savings: According to the financial statements, up to 30 June 2005, average savings per member is Tk.3321.

Other Financial Products Apart from loan and savings product, SHAKTI is offering life insurance and equipment leasing for its clients. SHAKTI has two different objectives to back its life insurance and equipment leasing idea. One is, after the death of any clients, her nominee will receive Tk. 5000 as life insurance. Other one is, enables entrepreneurs to acquire necessary working equipment through leasing and use their loans as working capital.

1. Outreach: SHAKTI provides flexible financial services to the urban poor women in 12 districts through 64 branches. SHAKTI also have small and medium enterprise development programme. SHAKTI is currently financing SME clients in a limited way. It believes that SME is an area where more investment should be ensured as this has high potential of employment and income generation.

2. Lending Methods: SHAKTI has introduced a quality approach to address the financial needs of the urban poor women. All activities are carried out through Branch Offices. The branch manager supervises the junior officers through daily and weekly scheduled field visits and controls the quality of work of junior officers. The branch offices operate in a decentralized way and managers take decisions independently, including the issuing of loan cheques. Although the loan approval for different loans have different authority, viz. General loan approved by branch manager, business and seasonal loan approved by branch supervisor, small enterprise development, housing and health loans approved by coordination (head office staff). 3. Steps in lending process: 1st - Loan proposal is made in the group/centre for client/clients, 2nd - Verification of the proposed loan is to be completed within the group/centre by junior officer, 3rd - Loan proposal papers and documents are to be completed by junior officer and submitted to the branch manager, 4th - After that, manager will verify the proposal and visit the business and home, 5th - Then Branch manager will decide about acceptance or rejection of proposed general business loan and approve loan except business, seasonal housing and health loan, 6th - All documents will be accomplished by the junior officer before the disbursement of the approved loan. Client will come to the branch office to take loan, 7th - After signing of the agreement between client and organisation, loan will be disbursed to the borrower. Total procedure of a loan disbursement takes maximum one week. 4. Client Satisfaction: Organisation takes frequent feedback on clients' reactions on products and service delivery mechanism. SHAKTI management is always concerned about the client's satisfaction. If any problem is found in any area of operations then instantly necessary actions are taken to correct or to solve the problem. 5 Training: Some MFIs follow a minimalist approach, but SHAKTI follows credit-plus approach. It provides different training programmes for its clients such as: Introductory training, Gender awareness training, Health awareness training, and Business development training. Up to 2005, organisation has already covered more than 10,000 clients by business development training.

Flexibility SHAKTI though offers different savings and credit services but much more categories for the flexibility in credit products for different types clients. 1. Qualify to Receive Loan: According to the credit policies, a client becomes able to get a loan, when he meets the member selection criteria- related with area, income, age, potentiality and also the performance in regular savings deposit and credit repayment. But in some circumstance, past performance of loan repayment can be relaxed for the clients. 2. Savings Option: Clients of SHAKTI are able to deposit savings in two forms- general savings, and business savings. These savings product have no specific flexibility. 3. Loan Repayment Schedule: Clients can enjoy prepayment facilities in order to qualify for new and large loan. SHAKTI has introduced different loan repayment modes as: weekly, monthly, or one time etc. 4. Loan size: Loan sizes usually vary with the loan products. SHAKTI is providing large loans among small enterprise borrowers with limited business development support and small loan to poor clients. 5. Loan Pricing: Organisation provides different loan with different interest rate. The rate of interest for maximum loan product is 15% per annum except the health and emergency loan, which are interest rate free and ramzan loan is only for a time business with an addition Tk. 30 as service charge.

Restriction to have more than One Loan In addition to an existing loan(s), the clients can avail of short-term loan for meeting the emergency needs. If the clients face shortage of capital while running their trade in any economic erosion, in that case, clients have opportunity to inject additional capital to meet those needs under different credit programmes.

Optional Loans Shakti Foundation provides health, emergency and ramzan special loan with a view to ensure safety of health, emergency and special religious ceremonial coverage. SHAKTI always tries to make the programmes more flexible as to the clients' requirements.

Performance monitoring system

1. Management Information System: In SHAKTI different micro credit information system (MCIS) tools are used to preserve managerial and financial information. Total system is computerized at head office and branch level. Operational staffs always examine the information of MIS and FIS in order to reveal real picture of the organisation. 2. Internal Control: Financial control in SHAKTI is generally exercised at all levels: Executive Committee (EC), Head office and at Branch offices. The EC monitors all financial matters quarterly through the EC meeting; the Executive Director maintains financial control through internal auditors by routine visits and analysis of monthly financial statements. Internal audit must be complying with the policies. The branches carry out necessary cash transactions and bank operations themselves. The branch offices are decentralized units responsible for disbursement and recovery loan in their designated areas. They maintain their own books of account and financial records. However, SHAKTI also controls its operations according to the procedure of administrative rule, service rule, rules of business, financial and internal control policy, internal audit manual, and programme implementation guide, which is a part of internal controlling system. 3. Reporting System: SHAKTI reporting system is down to top. Information is always collected in the branch level. Branch level information preserved in computer and with latest technology of information highway, all branches of SHAKTI are connected with Internet. In every end of the month, branches send all the information to head office in three units- field management units, planning, monitoring and evaluation unit and the finance unit. An auto generate consolidate report of SHAKTI makes at the head office. So the accuracy and crosscheck automatically generate by the computer makes SHAKTI a high productive in the report generation. 4. Impact measurement: Benchmark Information: SHAKTI enrols members under microfinance programme with a benchmark survey contains enormous information. This information also preserved at the branch and head office level. SHAKTI has good relations with the different MFIs, NGOs, GOs, Donors, and different professionals as well. SHAKTI has benchmark information in different areas like best practices of different MFIs and NGOs in client selecting criteria, disbursement procedure, members to field officer ratio, loan outstanding with field officer ratio, rate of interest, duration of loan, products of loan and savings, savings interest rate etc. 5. Periodical Tracking of Benchmark Information: SHAKTI is continuously monitoring the changes of the products and always tries to cope with the changes.

Standard Practices SHAKTI has been following some reporting system and prudential requirements with it's own management decisions. This is being done to conform to the SHAKTI financial and managerial soundness. 1. Loan Loss Provision and Write-off policy: Management makes provisions for loan losses in order to maintain the loan loss reserve at adequate levels for bad loans. Aging of the portfolio and loan loss provisioning calculation are as follows: -Current loan (Portfolio without any arrears)- 2.50% -Classified loan (More than 1 week but less than 1 year)- 10% -Substandard loan (More than 1 year but less than 2 years) - 20% -Doubtful loan (More than 2 years but less than 3 years) - 50% -Bad loan (More than 3 years)- 100%

2. Cash Management: Based on experience, at the end of the month no branches are able to have more than Tk. 10,000 in cash and Tk. 50,000 at bank. If any amount above that branch manager has to send that money to the head office.

3. Human Resource Management: The previous administration and training unit has been merged to create the HRD unit. Human Resource Development (HRD) provides clear guidance about office management, recruitment and termination, staff evaluation, promotion, code of conduct, assessment of manpower requirement, arranging staff trainings, annual general meeting and different workshops.

4. Risk management: Organisation is managing current and future risk of credit programme by increasing amount of net savings and insurance, diversify saving and loan products, aging portfolio, loan loss provision, products flexibility, quality of staff and client training.

Growth As on 30 June 2005, in 2004- 2005 -Clients' growth rate is 22%, -Operational area coverage increased by 25%, -Net deposit growth rate is 25%, -Net loan outstanding growth rate is 40%, and -Surplus or profit growth is 59%. -Net 24% employees have been increased in 2004. Shakti Foundation has so many indicators in management & finance that reveal its positive growth.

Portfolio quality: According to 30 June 2005, Cumulative recovery rate (CRR) is 99.90%, which reveals that performance of SHAKTI is very well from its inception. On time recovery rate (OTR) is 99.77%.

Sustainability As on 30 June 2005, Return on equity (ROE) is 11.21%, Profit margin is 33%, Operating self-sufficiency (OSS) is 127.89%, financial self-sufficiency (FSS) is 110.64%. From the above ratios, it represent that Shakti Foundation is an operationally and financially sound organisation.

Members’ Profile - India BAIF Development Research Foundation

Address BAIF Bhavan, Dr.Manibhai Desai Nagar Warje Pune 411058, India Phone: 91-20-25231661 Fax: 91-20-25231662 Email: [email protected] Website: www.baif.com

Key persons No. Name Academic background Designation 1 Dr.N.G.Hegde Ph.D, M.S, PMAMC President & Managing Trustee 2 Mr.G.G.Sohani B Tech (Mech), PGDBM Executive Vice President & Trustee 3 Mr.Ramesh Rawal MSc., PGDM, MBA Sr.Vice President 4 Dr.S.B.Karvande Chartered Accountant Sr.Vice President & Secretary 5 Dr.S.B.Gokhale Ph.D M.V.Sc Sr.Vice President 6 Dr.B.R.Patil M.Sc (A.S) Vice President 7 Dr.G N S Reddy B V Sc Vice President

Type of organisation: Voluntary organisation

Legal status: Public Charitable Trust registered under the Bombay Public Trust Act, 1950

History BAIF Development Research Foundation (formerly registered as the Bharatiya Agro Industries Foundation) is a voluntary organisation, established in 1967, as a Public Charitable Trust by Manibhai Desai, an associate of Mahatma Gandhi. Way back in 1946, Mahatma Gandhi visited the village Urulikanchan near Pune to establish a Nature Cure Centre for promoting community health through nature cure and to organise integrated rural development for eradication of poverty. Manibhai Desai joined Gandhiji and decided to dedicate his life to fulfil the mission. Manibhai worked closely with the villagers around Urulikanchan for over 20 years to tackle their problems related to unemployment and social evils. In 1967, he established BAIF to replicate his experiences in Rural Development. Indian socio-economic progress is heavily dependent on the rural economy as over 65-70% of the population is living in villages, depending on agro-based activities for their livelihood. Land, water, vegetation and livestock are the important natural resources, which are the major sources of income generation for the rural families. However, about 15-20% of them are landless and about 70% of the land holders own less than 2 ha land, most of which are heavily denuded and deprived of irrigation facilities. Livestock is another important asset of the poor, but most of them are low productive and uneconomical. In the absence of appropriate technologies, financial resources and support services, these assets have turned into liabilities. Although various Development Departments of the Government have been trying to help the rural families to provide essential support services, there is a wide gap in the extension services to help the needy families.

Vision -A self-reliant and vibrant rural economy -Sustainable development of Rural India, free from poverty and hunger. -A literate and enlightened Rural Community who care for the conservation of -Natural resources and a clean environment -Rural Society, with a priority to i. Reduce child mortality ii. Ensure safe potable water in all villages iii. Promote community health, family welfare and better quality of life. -Gender equity and social equality -Empowered Society especially of the weaker sections, capable of self-governance.

Mission Considering the challenges in rural areas, BAIF has set its Mission on creating opportunities of gainful self- employment for the rural families, especially disadvantaged sections, ensuring sustainable livelihood, enriched environment, improved quality of life and good human values. This is being achieved through development research, effective use of local resources, extension of appropriate technologies and upgradation of skills and capabilities with community participation. BAIF is a non-political, secular and professionally managed organisation.

Approach BAIF has developed a unique approach to address the problems of the poor. These are: -Identify the target families as the units of development and consider women as equal partners with men in the family -Promote a multidisciplinary development programme, blending livelihood programmes with health, literacy and development of moral values, to ensure Improved Quality of Life -Women Empowerment and Environmental Protection should cut across all our programmes -Blend the Development programmes with Research and appropriate technologies, as development without research becomes outdated and research without development becomes academic. Training is an important component of the multidisciplinary programme for capacity building and efficient transfer of technologies -Organize the village communities through formal and informal groups and local People’s Organisations, to ensure active participation of the target groups in programme implementation and promote socio-economic equality;

Jana Utthan – BAIF’s new approach: Under this approach, the members of the local community come together to identify the needy poor and select suitable interventions for them to adopt for sustaining their livelihood. It is a learning process to development. While the earlier projects could offer limited services, programmes, Jana Utthan approach can provide greater flexibility and address the needs of the poor. This approach also calls for the introduction of various off-farm income generation activities to augment the on-farm income of the resource poor families.

Programme Coverage The services of BAIF cover over 1.68 million rural families in more than 37,000 villages in 9 states in the fields of livestock development through up gradation of low productive cattle and buffaloes for milk production, wastelands development through horti-forestry, fodder production, agro-forestry, water resource management, tribal rehabilitation, empowerment of women through micro-enterprises and environmental protection. For effective implementation of the development programme, based on the local needs, with a bottom to top approach, BAIF has established independent Associate Organisations in different states.

Programmes 1. Livestock Development: Among different livelihood programmes, preference was given to promotion of livestock development for milk production, as most of the livestock are presently uneconomical and equally distributed among the rich and the poor. Looking to the field problems in providing efficient breeding services, BAIF has evolved a programme to provide various services at the doorsteps of the farmers, which will not only save time but also help in motivation and effective transfer of technology.

2. Watershed Development: Although, India has adequate rainfall, over 65% rainwater is wasted, in the absence of adequate soil and water conservation measures. To ensure economic viability and people’s participation, which are critical for success of this programme, BAIF has introduced several components such as catchments area treatment on watershed basis, construction of percolation tanks, soil and water conservation through land shaping, efficient use of water resources through improved irrigation techniques and selection of drought tolerant crops, promotion of food and environmental security, tree based farming, livestock development, forage and fuel wood production, development of people’s organisations, establishment of community grain banks, development of community corpus for micro financing, and empowerment of the weaker sections for equitable distribution of benefits.

3. Wastelands Development: As forage production plays a significant role in enhancing the profitability of dairy husbandry, BAIF has been promoting forage development through various trees such as Leucaena (Subabul). BAIF focused on development of forage on degraded wastelands and community pasturelands to promote fodder production. 4. The Wadi (Productive Orchard) Model: Development of degraded wastelands, which are presently serving, as liability is another programme benefiting over 75,000 families belonging to tribal and other weaker sections of the society. These families have developed agri-horti-forestry on their degraded lands, which were lying idle for decades. This model has not only provided sustainable livelihood to the participating families but also met their basic needs of food, fodder, fuel, timber and herbal medicines. These orchard-owning families were also able to enhance their agricultural production by 100-200%.

5. Empowerment of Rural Women: To ensure the participation of rural women, who are illiterate and powerless, in the mainstream of community development, BAIF has introduced several activities. These include the reduction of their drudgery by improving their health, development of safe potable water sources, installation of hand pumps, promotion of kitchen gardens, establishment of fodder and fuel trees in their backyards, installation of ball bearings on grinding stones, preventive health care and promotion of Self Help Groups and Micro- enterprises. BAIF has also been helping them to organize themselves to assess their needs and identify suitable interventions to solve their problems.

6. Environmental Protection: BAIF has launched various programmes to promote environmental protection. These include, conservation of natural resources, promotion of afforestation on degraded wastelands and industrial greenbelt development, organic farming, promotion of renewable energy sources and rural energy saving devices, involving various sections of the rural communities, including school children.

BAIF is one of the largest voluntary agencies helping the rural poor. The programmes implemented by BAIF are widely accepted as role models for helping the rural communities throughout the country.

Governance BAIF’s Board of Trustees consists of eminent persons from various fields who guide the organisation in fulfilling its mission, ensure its financial performance, and safeguard its interest and reputation. The Board of Trustees meets twice a year. To provide further guidance and monitor performance an Executive Committee of Trustees has been formed which meets every quarter.

The Board of Trustees Mr. Arvind N. Mafatlal, Chairperson, Chairperson, Arvind Mafatlal Group of Industries, Mumbai Dr. M.S. Swaminathan, Vice Chairperson, Former Director General, IRRI and ICAR Mr. Jagmohan L. Bajaj, Former Chairperson, UP Electricity Regulatory Commission, Lucknow Mr. Abheyraj H. Baldota, Chairperson, Mineral Sales Pvt. Ltd., Mumbai Ms. Rajashree A. Birla, Chairperson, Aditya Birla Group, Mumbai Mr. Atul C. Choksey, Managing Director, Apcotex Lattices Ltd., Mumbai Mr. Bhalchandra G. Deshmukh, Former Cabinet Secretary, Govt. of India Mr. Nanda B. Lohani,Chairperson, All India Inst. of Local Self Government, Bhopal Mr. Hrishikesh A. Mafatlal, Deputy Chairperson, Mafatlal Industries Ltd., Mumbai Mr. Deepak C. Mehta, Managing Director, Deepak Nitrite Limited, Pune Ms. Sudha N. Murty, Chairperson, Infosys Foundation, Bangalore Mr. Pratap G. Pawar, Managing Director, Sakal Papers Ltd. Mr. Hasmukh S. Shah, Chairperson, Gujarat Gas Company Ltd., Vadodara Mr. Girish G. Sohani, Executive Vice President, BAIF Dr. Narayan G. Hegde, Managing Trustee and President, BAIF

The Core management group (CMG), a decision making body consisting of the President and Vice Presidents meets Bi-monthly to review various aspects and take the required decisions. A Coordination committee, for review and experience sharing, consisting of the CMG, Heads of associate organisations and subject matter coordinators meets every quarter.

Organisational setup BAIF has its Headquarters in Pune. The field programmes are spread out in about 10 States of India. Additionally, based on the area of operation there are various regional offices and Field offices. BAIF has following organisational setup: -BAIF Development Research Foundation, BAIF Bhavan, Warje, Pune -Central Research Station, Urulikanchan, Pune -BAIF Development Research Foundation, New Delhi -Associate Organisations -BAIF Institute for Rural Development (Karnataka): Tiptur, Karnataka -BAIF Institute for Rural Development (Uttar Pradesh): Allahabad, Uttar Pradesh -Dhruva: Vansda, Gujarat -Dr. Manibhai Desai Management Training centre: Pune, Maharashtra -Gujarat Rural Institute for Socio- Economic Reconstruction Vadodra: Baroda, Gujarat -Rajasthan Rural Institute of Development Management: Udaipur, Rajasthan -Society for Promotion of Eco – friendly Sustainable Devlopment: Bhopal, Madhya Pradesh -Maharashtra Institute of Technology Transfer for Rural Areas: Nashik, Maharashtra

Staffing The employees are mainly graduates, Post Graduates, Doctors, professionals from different disciplines with job descriptions based on the projects in which they are involved. The personnel status is as under: Head office: Total 69 Other offices and field locations: 2330

Staffing by Gender Management: Male – 211 Female – 24 Field positions: Male – 2041 Female - 123

Implementing strategy

1. Focused Area: BAIF’s work is focused in the rural areas. In the rural areas, the focus is on the disadvantaged rural poor.

2 Target participants: The programmes focus on Families below poverty line, Tribal Communities and other disadvantaged sections of the rural poor. Based on the area of operation, the participants range from poor to the poorest. Micro Finance is one of the components of the development programmes being implemented.

3. Outreach Building process: The outreach building process varies across programmes and area of implementation. Several types of People’s Organisations are promoted based on the programme design, such as Self Help Groups (SHG), Village Level Planning Committees, Users’ Groups of various goods and services, Clusters and Federations of SHGs, Village Level Organisations and Processing and marketing Cooperatives. These organisations help in motivating the members of the community to sustain their interest and get actively involved in the various development initiatives. Micro Finance is built into the programmes and financial services are made available through the various peoples organisations promoted. Hence in some areas opportunity to save and access credit is made available to the people through primary groups like Self Help Groups and Water User groups. While in other areas Village level organisations act as conduits for financial services.

4. Service delivery methods: Based on the programme activity and design, the service delivery approach varies. Currently the financial services are made available to individuals through various Peoples Organisations like for example: a. Self Help Groups: Small groups of 10-20 members, b. Activity/User groups: Small groups formed by programme participants for specific purposes like Horticulture development or Water Resource Development, c. Village level Organisations: Village level Groups of 50- 100 members.

Financial services delivery Direct Financial intermediation is done in some programme areas. Credit is provided to the various Peoples Organisations like: Self Help Groups, Activity/ User Groups, Village level organisations, Cooperatives etc. Savings are maintained at the groups level with excess funds being deposited by the groups in their respective bank accounts.

Promotional services In many of the programme areas, financial services are made available for the various activities or to the participants through Peoples Organisations like Cooperatives, Federations, Self Help Groups, User/ Activity groups and Village level organisations by linking them to the nearest branches of the banks or financial institutions.

Products & services: Financial Products & Services

Savings Broadly, there are two main types of savings products: 1. Regular savings: This is generally a uniform amount which the members of certain POs save every week/ fortnight/ month. 2. Voluntary/ Purpose based savings: This is over and above the regular savings. The member decides the quantum and periodicity. This facility is used for specific purposes like savings for school fees, income generation activity.

Savings are mainly maintained at the primary group level like Self Help Groups, User Groups or Village level Organisations. This is in keeping with the Indian laws that allow only certain organisations to collect savings. In certain states where BAIF is working like Karnataka, there is a specific law for Federations and they can collect member savings. But in most cases savings are retained with the groups. Banks and other financial institutions play an important role in the Micro Finance activities. Almost all groups have a group account with the local branches of banks. In some areas, the village level organisations have encouraged their members to open individual accounts in banks that are utilized by the members for purpose based savings or for investing in fixed deposits.

Credit Credit is available to the programme participants through the following sources: 1. Own funds: The groups have built up funds through various sources like the savings of the members, funds generated through some group income generation activities and revolving funds provided in some programme areas. These funds are utilized to meet some of the credit needs of the members. The groups lends based on the repayment capacity of the member. Hence credit could be availed for consumption or productive or asset building needs. 2. Loans from banks: If the funds of the groups are not sufficient to meet the needs of the members, the groups borrow from banks. From an initial focus on credit for income generation activities, the banks now lend based on the quality of the groups & the group funds. The purpose of the loan is left to the groups. 3. Loans from BAIF: Credit is also provided by BAIF and its associate organisations to the programme participants in certain areas. Based on the needs of the people, various credit products have been designed. In certain Tribal areas, credit is provided in kind as an additional service along with technical support. The focus is mainly on livelihoods. The consumption needs of the participants in these areas are met mainly through the group funds.

Insurance The insurance cover is through the mainstream service providers. Need based insurance products have also been designed with the insurance service providers and are introduced at some locations on a pilot basis. In one area, the product is a combination of Life and Health, while in another it is a combination of health, asset insurance plus an accident cover. Some participants have been linked to some of the available schemes provided by the Public Sector companies. In some areas, credit provided has been linked to insurance for certain assets like livestock and pump set.

Non-financial products & Services In keeping with its holistic development approach, regular capacity building, livelihood promotion & strengthening programmes, community health services, research, surveys, documentation, activities for women’s empowerment & social awareness, business development services, functional literacy training & other development programmes are made available based on the programme design, to the programme participants. For access to financial services, specific training is provided to the group leaders and members on rules and regulations for the activity, fund use, preparing repayment schedules, importance of financial discipline etc. Additionally, exposure visits to other groups, banking operations are also arranged. The groups are also helped to open accounts in Banks, access credit through banks etc.

Operational aspects 1. Eligibility criteria: As micro finance services are one of the services in the development programmes, the eligibility criteria vary based on the programme design. While in some programmes like Watershed development, the eligibility will be area based, in Tribal development programmes the land holding, community and the economic status of the families will be part of the eligibility criteria. For availing loans either from banks or from the organisation, the groups are graded based on various parameters and ‘A’ grade groups are provided credit facilities. The gradation process is mainly to understand the quality of the group and their performance from a financial perspective. The parameters cover: Group constitution, Group discipline, governance & control, financial management & performance, credit policy etc. For loans taken for income generation activities from BAIF, the proposed activity is assessed from various angles like availability of input, market, viability, fund flow for repayment. Based on the assessment of the proposed activity, the credit is provided.

2. Loan use: Financial services are made available mainly through Peoples Organisations. The capacity of these POs is developed to provide savings and credit facilities to their members. The loans are provided through the groups’ own funds or through borrowing from bank or BAIF. Hence the group takes the decision on the amount and purpose of the loan. The loans are generally taken for Agriculture, Livestock, Water Resource Development, Education, Social and other consumption needs. Where BAIF is providing credit to groups, the credit is linked to livelihood and mainly provided for income generation activities. In some areas, various credit products have been developed & credit is also given in kind. For meeting the consumption needs of the members, the group funds are utilized. At some places pure on lending done irrespective of purpose of loan. The loan taken by the group depends on the needs of the members & is left to the discretion of the group. It could be for production or consumption purpose. But a family level planning is done to help the members assess their resources, draw up possible income generation activities, credit required and design repayment schedules.

3. Interest rates: The primary groups get loan from the bank at interest rates between 8% to 10%. Groups lend to their members at rates ranging from 15% to 24%. The Federations can access loans from banks at 9% to 11% and lend to their SHGs at around 15%. Where BAIF directly lends to Peoples Organisations, the rate is between 10% to 15% to the groups. As BAIF lending is mainly for income generating activities, some of which are for more than a year, the rates charged are low. Though the groups are free to decide the rate to be charged from the members. As BAIF works with the disadvantaged sections of the rural populace and Micro Finance is one of the services being provided to improved quality of life, in general, the approach is to keep the interest as low as possible.

4. Loan size: In the case of SHGs linked to banks, the loan depends on the savings and age of the group, with each subsequent loan of a higher amount. The group depending on the activity or purpose of loan & the repayment capacity of the member again decides the loan size of the members. Repeat loan, from the bank, is possible after the earlier is repaid. In case of direct intermediation by BAIF, the loans made available to the groups are based on the activities planned to be taken up by the members. The loan size varies with a minimum of Rs.500 and maximum Rs.25, 000 to a member. In some cases the loan could be higher for enterprises. Repeat loans are available to the groups only if the earlier borrowing is being paid as per schedule.

5. Loan Duration: The loan duration depends on the type of activity & loan amount & also repayment capacity of the member. The banks repayment period is over three years, but groups usually fix their own schedule. Where BAIF is on lending, the loan duration varies from a few months in the case of agriculture to four years in the case of bigger loans taken for some activities like water resources development. The loan duration can vary from six months to four years.

6. Approval time: The SHGs access loans from the nearest bank branch. The time taken by each bank is different and varies from a week to months depending upon the strategy and priority of the bank. Where BAIF on lends, the attempt is to disburse loans to groups within a fortnight of receiving the application from the group. The time varies based on the availability of the funds and the operational area. As the credit is provided largely for income generation activities, which are often seasonal in nature, the applications from participants are obtained in advance to ensure that credit is made available timely.

7. Repayment terms: The repayment is planned monthly or weekly by the groups from their members depending on the frequency of the meetings of SHGs. The repayment in BAIF’s credit line is designed to meet the needs of the people. Where specific products are developed, the repayment is pre-decided and based on the income flow from the activity. In other cases, the repayment schedule of each member of the group is drawn up based on the activity planned and a total schedule for the group is compiled which is attached to the application.

8.Savings: Savings are retained at the group level. There are usually two savings products one is a regular savings that is an equal amount to be saved by each member. The other is voluntary savings that is over and above the regular saving and might be for a specific purpose like education, festival, agriculture etc. Some village level organisations also facilitate savings of their members in individual bank accounts.

9. Outreach: BAIF has promoted more than 8000 Self Help Groups in the various areas of operation, 80% of which are women’s groups. These are in addition to the various other village level organisations and user groups. The groups are linked to banks for credit. The members have to come to the bank to deposit savings, repayment or withdraw loan. The group members do this in rotation, so that all don’t waste their time plus different members get an opportunity to understand the banking procedures. The group meetings are also scheduled as per the convenience of members. Where BAIF is on lending, the groups are given support for collecting both their applications and in certain remote areas, their instalments in the villages. In certain village level organisations, the group accountant is given the responsibility of submitting the application to BAIF’s local office and also depositing repayments.

10. Lending method: the participants through their respective Peoples Organisations access The financial services. BAIF and its associate organisations, lend to Self Help Groups, User groups or Village level organisations. While the lending is to the groups, the activities proposed by the members are assessed at the individual/ family level.

11. Customer satisfaction: Need based credit products are designed by BAIF for lending. This helps the groups & participants to avail the required scheme. There is flexibility as far as the loan amount and purpose is concerned and it can be accessed through simple procedures. The repayment schedule is also designed to meet the needs of the group. There is a process of regular review of the systems and procedures with improvements made in consultation with the field teams. In addition to analysing the existing products for changes required, based on the needs of the people, new products are also designed.

12. Training: Micro finance is one of the services provided by BAIF both for improving access of people to financial services and for empowering people to sustain the development activities post grant based programmes. Hence Micro finance, viewed as one of the tools for development, is combined with various need- based interventions that contribute towards improving the quality of life of participants. Capacity building for the various activities is done on a regular basis for group leaders, group members, and field functionaries. Both backward and forward linkages for activities are also provided.

Supervision & monitoring system (financial & management)

MIS The accounts are computerized across programme area. Programme based software has been developed. For the Self-help groups, the data on the status of groups is compiled based on manual data collected from Field teams. Where BAIF is on lending to groups, loan-tracking software has been developed. Weekly status reports are generated. Detailed reports are generated every month. The major indicators tracked are the repayment rates, repayment at risk, average loan size, number of loans per credit personnel, loans per credit personnel. Information is produced for different levels. The cluster leader receives detailed information on the status of disbursements & repayments, as s/he has to take action. Each regional in charge receives area wise details and at the State office, region-wise status is received.

AIS/FIS As Peoples Organisations are conduits for making financial services accessible to programme participants, books of account are also maintained at the group level. A member of the group is trained to maintain the books. Where there are no literate members in the group, a local person is identified to help the group maintain books. The field teams do regular checking of these books. In some areas, external firms also audit the books. Where BAIF is on lending, separate details of the activity are maintained. Cost coverage and profitability is mainly examined.

Reporting system Each programme area has its well-defined reporting structure- from centre to block, Block to Region & from Region to state main office. The report from each state is received at BAIF’s central office. The reporting formats at each stage are well defined in prescribed format for ease of collection, compilation & analysis.

Internal Control There are organisational structures with built in supervision, well laid out systems and procedures with a system of audit and monitoring. For example: All payments require two signatures- One from Technical or programme team and one from finance. All vouchers are checked for adherence to the laid down rules and for arithmetical accuracy. Purchases are coordinated by a Committee comprising of technical, programme and finance persons. For onlending, the application form is designed to provide various checks. A loan committee comprising of field and finance team sanctions loans after examining various aspects. Repayments are collected at specified places only, with receipts being given for amount deposited. The records at field level are regularly checked, Balance confirmation from groups are obtained. As far as possible transactions are through banks. Certain parameters like repayment rates are tracked both purpose-wise and group-wise. The responsibility for follow up for the same has also been identified at various levels. The finance personnel have the requisite qualifications and are regularly trained. The adequacies of systems are regularly reviewed. The scope of responsibilities is communicated to all concerned. The separate finance team ensures adherence to the laid down systems. A system of regular monitoring, internal and external audit is also in operation in many areas.

Exceptions in practices/flexibility

1. Qualifying to receive loan: Generally groups are considered eligible after six months of formation. Where BAIF is on lending, the rules and regulations are pre decided and are to be adhered to. As far as possible, no flexibility is allowed in the Credit activities. A deviation, if any from the set rules has to be well documented, with permission from the authorized persons.

2.Savings option: The savings are based on the type of people’s organisation. For example in the case of Self Help Groups all members have to save an equal amount regularly, though the amount and regularity of the savings is left to the members. The members are also free to save more than the regular amount.

3. Loan repayment schedule: The repayment schedule is fixed based the activity to be taken up. The schedule is fixed and agreed to before sanctioning of loan and is expected to be followed.

4. Loan size: Where BAIF is on lending, the loan size is based on the programme design. If micro finance is for a particular enterprise, the needs of the activity will decide the quantum of loan. The loan is sanctioned based on the repayment capacity. The loan size is related to either the quantum of the groups’ funds or to the activity to be undertaken. For both these there will be pre decided norms for loan size fixed after examining various aspects. Any change, has to be justified and implemented only after the approval of the authorized persons.

5. Loan pricing: It is area based and uniform for all products in a particular area. At the group level, the pricing may vary based on the groups’ decision.

6. Restriction to receive more than one loan: The earlier repayment performance and capacity is assessed while giving a loan. In some areas, a basic loan is provided upto a certain amount and the group can avail of additional loans based on their needs. Some of the products like lift irrigation require two loans- one a long term loan for the pumps and pipeline and second a short term loan for agriculture. Hence various aspects are looked into as per the laid down norms while sanctioning loans.

7. Other loan options: The groups own funds are usually used for their consumption needs. In some areas the basic loan is expected to be availed for any Health, sanitation, consumption needs. Banks have no restrictions on the end use of the loans and SHGs utilize the loans for consumption or housing needs too.

Impact measurement 1. Benchmark information: Information about the Peoples Organisations promoted by BAIF is collected & kept at the local office. 2. Periodically tracking of benchmark information: Every six months information is updated to document changes if any. 3. Poverty assessment tools: Tools like wealth ranking, resource mapping etc. are used to assess poverty. Certain indicators are also defined for understanding the poverty at the field. The Below Poverty Line list generated by the government is also used as a guide. 4. Monitoring of poverty assessment tools: It is done periodically in certain programme areas to understand the progress & impact of the programme. It also helps to plan future interventions. 5. Conducted study to measure social impact: Over the years, studies have been conducted in various locations to understand the impact of different programmes.

Performance indicators BAIF has been mainly essaying an enabling role in the sector. The direct intermediary role has been taken up in some areas. The following ratios are of one such area.

1.Portfolio Quality: As on 31 March 2005, the Cumulative Repayment Rate was 96.90%. The Repayment at risk as a percentage of total outstanding was 5.6%.

2. Productivity & efficiency: As on 31 March 2005, Number of loans per effective credit personnel was 229. Average portfolio per effective credit personnel was Rs.0.33 million. Operating cost ratio was 12.87%, Cost per unit of currency lent was Rs.0.07 only.

3. Sustainability: As on 31 March 2005, OSS-Operating Self Sufficiency (Operating income as a percentage of operating costs +provision + financing cost) was 87.6%.

4. Profitability: Currently, after providing for the provisions, no surplus is generated.

Growth/ trend 1. Changes in operational indicators: BAIF’s area of operation is spreading. From a total outreach of 1.25 million covering 25,000 villages, it has reached 1.68 million families covering 37,000 villages. The number of Self Help Groups promoted has also steadily increased from 7000 to over 8000. The direct intermediary role is also being taken in additional areas during the year, from the earlier 162 villages, it is being taken up in an additional 150 villages.

2. Changes in financial indicators: The cumulative recovery rate (CRR) has increased from the earlier rate. The recovery at risk has gone down from the earlier rate. In keeping with the working of Self Help Groups that save regularly, the savings are also steadily increasing.

Future direction 1. Changes in current strategy: The Self Help Groups are being strengthened as conduits for financial services. A process of registering the groups with the organisation has been started in some areas. This is towards covering some of the costs of facilitation. As India has a network of banks operating in rural areas, the possibility of partnership with the banks for ensuring access to financial services for programmes participants is being explored.

2. New strategic plan /business plan: Micro Finance has been identified as one of BAIF’s core areas. Hence, the approach will be to ensure that over time, all BAIF’s beneficiaries have access to various financial services. While BAIF will continue its enabling role in the sector, based on the needs of the area it will also take up direct intermediation role if required.

DHAN Foundation

Address DHAN Foundation 18, Pillaiyar Koil Street S.S. Colony, Madurai - 625 010 Tamil Nadu, INDIA Tel: +91 - 452 - 2610794, 2610805 Fax: +91 - 452 - 2602247 Email: [email protected] Website: http://www.dhan.org

Key Person: Mr. M.P. Vasimalai

Organisational aspects Development of Humane Action (DHAN) Foundation, a professional development organisation, was initiated on October 2, 1997. It has been incorporated as a Trust under the Indian Trusts Act (1882). The Trust has been promoted with the objective of bringing highly motivated and educated young women and men to the development sector. They would work on bringing out new innovations in rural development and for upscaling development interventions to eradicate poverty in vast areas of the country. The Foundation works towards bringing significant changes in the livelihoods of the poor through innovations in themes and institutions. The broad purposes for which it stands are:

Mothering of Development Innovations: The institution aims to promote and nurture new ideas on different development themes, which have larger potential to address the livelihoods and development of the poor in a region viz., microfinance, small scale irrigation, dry land agriculture, working with panchayats.

Promoting Institutions to reach scale: Exclusive thematic organisations will be promoted to undertake development work with a sub-sectoral focus. The primary role of these institutions is promotional and to ensure that benefits reach a large number of poor with quality.

Human Resource Development: The institution would bring young professionals into the development sector and provide them an opportunity to practice and develop relevant knowledge, attitudes and skills to work long term in the development sector.

Programmes Kalanjiam Community Banking Programme The Kalanjiam Community Banking Programme focuses on women and believes that localised financial institutions owned and controlled by women are an effective strategy to impact on poverty and gender issues. The primary unit of community financial institutions is the Self-Help Group of 15 to 20 poor women and is called the Kalanjiam. They act as a single window at their doorsteps for the savings and credit transactions. The cluster and federation at panchayat and block levels are the nested institutions at next higher levels. They help the Kalanjiams address other social and development needs of the members such as drinking water, health, education, sanitation, access to basic infrastructure, alcoholism gender issues etc. there by enhancing the sustainability of these institutions. They help create linkages with banks and apex financial institutions to meet the multiple credit needs of members, collaborate with other development agencies such as government to demand and access their entitlements, implement civic programmes such as in health and education for their members, provide insurance services etc. The programme has taken the shape of a movement called the ‘Kalanjia Iyyakam’ working towards bringing more women into the fold of the Kalanjiams. The Kalanjia Movement is implementing a number of innovative programmes for reaching out to more women. The Kalanjiam Foundation has been promoted for upscaling the Kalanjiam nested institutions model.

Vayalagam Tankfed Agriculture Development Programme The programme works for the conservation, development and management of tank systems. There are numerous small irrigation tank structures spread over the entire Deccan Plateau, which serve several lakh of small and marginal families in South India. They have deteriorated over years of neglect and therefore need urgent renovation and good management. The programme believes that the regeneration of local management of the tank system can be a major solution to this problem in the long run. This will help stabilise tankfed agriculture and thereby the livelihoods of the farmers. This is being done by organising the farmers around the tanks and later on at the level of cascade, block, district etc. Also the programme is working towards establishing a South India support group. The programme is involved in constant interaction with the Local, State and Central Governments for funding the tank development work and for better policies in tank systems administration in the country.

Tata-Dhan Academy The Tata-Dhan Academy an institution for Development Management is the result of a unique partnership between DHAN Foundation and Sir Ratan Tata Trust, Mumbai. The Academy was initiated in December 2000. The Academy aims at becoming a Centre of Excellence in Development Management. It nurtures and grooms young graduates, both boys and girls, as Development Professionals possessing multidisciplinary knowledge including applied technologies relevant to the ‘context’ of the development work. Equally high is the emphasis on ‘learning’ and building knowledge’ through action-reflection-action mode. Side by side the focus is on building high quality techno-managerial competencies supported by appropriate motivations, values and attitudes to work with people, particularly the disadvantaged. The Tata-Dhan Academy offers an eighteen-month postgraduate programme in development management. It offers short duration programmes for NGOs, academicians, researchers, government agencies and others.

Information Technology for the poor Technology as a tool has broken many barriers in availing and using information across the world and increased the efficiency of organisations and individuals. However there exists a great divide in the access and usage between urban and rural, rich and poor, for profits and charities. DHAN Foundation has taken up Information Technology for poor as a new theme with the following objectives. Making information technology accessible to poor by developing relevant schemes through research and pilot activities. Collaborating with research and academic institutions on e-governance and computer education at schools in rural areas. As part of the programme, internet kiosks in the rural areas as well as urban slums are set up through which services such as computer education, e-mail, ePost, agricultural market intelligence, etc. are rendered. Computer aided adult literacy centres for the Kalanjiam and Vayalagam members and computer training centres for the children of members of Kalanjiam and Vayalagam are also set up through the programme.

Rainfed Agriculture Development The Rainfed agriculture plays an important role in Indian economy covering 68 per cent of the total net sown area spread over 177 districts. Uncertainty in production due to fluctuations in total rainfall and changes in its distribution, decrease in relative productivity in rainfed lands etc. affect the livelihoods of many poor and marginalized farmers. Considering the importance and issues of rainfed farming, DHAN Foundation initiated an experimental project on Rainfed Agriculture with following objectives. i) Understanding the status and issues of rainfed farming in the locations selected and identification of specific interventions. ii) Improving the total factor productivity of rainfed farming. The new theme was launched on October 2, 2002 on the occasion of the DHAN Foundation Day celebrations. The pilot project is in the initial phase of implementation.

Working with Panchayats The history of the village level Panchayat institutions in India goes back to hundreds of years. In the post- independence period, the Panchayat systems were largely neglected. DHAN Foundation has realised that these Panchayat institutions at the village need to be vibrant and responsive to the needs of the people to bring about lasting progress in the villages benefiting people of all classes. This will lead to the empowerment of the poor and weaker sections. The new theme on ‘Democratising Panchayats’ has been taken up on a pilot basis with the following objectives i) Promoting and strengthening of village level institutions as functional groups in the Panchayat to ensure people’s participation. ii) Sustaining the Panchayat institutions to access resources and reduce its dependence on the State. iii) Integrating the existing traditional systems with the Panchayats to enhance the participation of the people and achieve synergy.

Policy contribution at national and global level DHAN Foundation through the Tankfed Agriculture Development Programme has facilitated wider consultations among farmers, bureaucrats, scientists and academicians. This has been done through organising policy seminars and workshops, undertaking research and publishing documents and participating in various policy making bodies of State and Central Governments on development of water, small scale irrigation and rural development. In Tamil Nadu and Karnataka ‘Conservation Council for Small Scale Water Resources’ has been constituted with eminent personalities to influence the policies on water and small-scale irrigation in favour of farmers. While through the Kalanjiam Community Banking Programme, DHAN Foundation as a member of many policy-making bodies on microfinance and through participating in national and international conferences, strongly advocates refocusing of ‘microfinance’ to address poverty and empowerment of poor especially women. As a resource centre, it organises many capacity building events and training programmes for bankers, government officials and representatives of NGOs within and outside the country. DHAN Foundation is a founder member of INAFI (International Network of Alternative Financial Institutions) focuses on micro finance. It is currently coordinating the INAFI India Chapter.

Kalanjiam Development Finance: The Kalanjiam Foundation The Kalanjiam Community Banking Programme was started in the year 1990 as a pilot project. It has gone through various stages of development from project to programme and a movement of the Kalanjiam members. The success of the programme has given the inspiration to upscale it and to establish the Kalanjiam model as an enabling model of microfinance. The promotion of thematic institutions for upscaling development innovations is one of the core purposes of DHAN Foundation. In keeping with the mission, the Kalanjiam Foundation has been created to take the Kalanjiam to many more poor in vast areas of the country.

Purposes of Kalanjiam Foundation The broad purposes for which Kalanjiam Foundation stands are given below.

Upscaling the Kalanjiam Programme: The Institution aims to reach out the community-banking programme to large number of poor women. The institution would evolve new methods of upscaling and develop innovative strategies to reach the left out poor. As part of upscaling the Kalanjiam Foundation follows the following approaches.

Direct action by Kalanjiam Foundation Partnership with other NGOs –Promoting Kalanjiam Affiliates Acting as a resource centre – Capacity Building support to Govt., NGOs and Banks

In addition to direct action, the organisation would promote collaboration with other institutions guided by the philosophy of enabling and self-reliance and willing to reach large number of poor. It would also act as a resource centre to build the capacity of other players in the sector and also influence the policies to create an enabling environment for reaching out the ‘Community Banking’ to many poor.

Create, Nurture and Sustain Community Organisations of women in Microfinance for Development: The Foundation will focus on reaching large number of poor women in thousands of villages in the country through savings and credit programme and promote nested institutions, owned and controlled by poor women living in rural, urban and tribal contexts. It will involve in promotion, development and sustaining of these institutions at various levels and link them with mainstream financial institutions to canalise funds. Nested institutions (groups, clusters and federations) are promoted to provide sustainable microfinance services to begin with and these people organisations would be supported to graduate as civic institutions in the course of time to catalyse development action. In addition to providing financial services these institutions provide space for practicing democracy at the grassroots through developing women leaders.

Deepening the Microfinance for addressing poverty: The Institution would go beyond microfinance and develop methods and processes that would significantly address poverty. Microfinance seen as a means to organize the community and linkages are being established with other development institutions to impact livelihoods and address other development needs of poor. Focus would be given to build the capacities of people and their organisations to go beyond microfinance. The deepening of microfinance would include experimentation and development of suitable products to address development issues of poor in addition to providing business development services for sustaining the livelihoods of poor.

The guiding principles that are fundamental to the institution are Promote Self-regulation and self-renewal processes both at people’s organisations and at Kalanjiam Foundation. ‘Self-regulation’ would be seen as a critical element of growth and development of the people organisations at each level. The groups, clusters, federations and movement would act as self-regulatory organisations at each level and evolve the suitable process and mechanisms for practicing self-regulation. Promoting value based leadership and governance practices would guide the self-regulation for constant self- renewal and growth of the Kalanjiam Organisations. Promotion of people institutions with the prime focus on self-help, mutuality and sustainability. The primary group controls the supra structures to ensure the practice of democratic management and sustain the institutions. The focus will be on enabling the women and build the leadership to address gender inequalities. Building nested institutions of poor women through constant evolution and devolution of roles to build the grassroots leadership and capacity of the women to sustain their institutions and address their development. Value collaboration with mainstream financial and development institutions and promote direct linkages between community organisations and mainstream institutions to demonstrate the viability of linkages and sustain the collaboration. Promoting direct linkages between primary groups and mainstream financial institutions to ensure continuity and build mutually sustainable and viable relationships. This provides an opportunity for the poor to create demand on the mainstream and establish long term working relationship. The collaboration would move from ‘financial’ dimension to development dimension. The focus of collaboration would be to broaden the perspective of partners to promote development.

Promotion of sustainable nested institutions and graduate them as civic institutions. Going beyond microfinance to focus on poverty and women development through supporting and promotion of livelihoods, health, education and other social development of poor, more importantly to conceptualise the community banking to address poverty. In order to address poverty the nested institutions of poor would be graduated as civic institutions. Microfinance alone cannot address poverty and there is a need to find out the relation between microfinance and other development needs of poor. Working with poor women to address poverty and development of women. Primacy on upscaling through direct action to ensure constant learning and demonstrate on scale to influence the policies in favour of poor. Kalanjiam Foundation would not involve in financial intermediation but always play the promotional role through ‘social intermediation’.

Kalanjiam Community Banking Programme (KCBP) Sustainability Model As part of Kalanjiam Community Banking Programme (KCBP) groups, clusters and federations are promoted as independent organisations owned and controlled by members at hamlet, village and block level. Block is the development and administrative unit in India consisting of about 100 villages. These organisations are promoted as nested institutions with interdependency rather than ‘three tier’ type of organisation. Primary groups control both the clusters and federations. The following table describes these multilevel community institutions on various parameters. Primary Group Cluster Development Association Federation I. Purpose To create a separate line of credit To facilitate co-learning and sharing To provide an institutional for consumption and emergencies the leadership capacity. ‘identity’ for member groups. To redeem the poor from the To share the costs and services of To relate with the mainstream clutches of loan sharks. local worker and achieve the ‘Scale’ institutions and represent To strengthen and formalize the advantage members interests. indigenous savings and credit To achieve financial viability and To meet civic needs of members practices. sustainability (health & education) and go To establish a sound mechanism to To ensure quality through self- beyond savings and credit. regulate the household cash flow regulation across member groups. To ensure the quality across To reduce the cost of transactions To build the capacity of leaders and clusters through self-regulation. and link with mainstream banks. local staff To promote and develop new products 2. Members and eligibility 15-20 Individuals - poor women 15-20 primary groups 20-150 primary groups Poor women, preferably from a Only primary groups involved in Only well performing member neighbourhood in a slum or village. successful savings and credit groups of clusters in existence Married/widows/destitute women operations. for more than six months. /divorcees, in some cases, single Groups should be geographically close Should participate in various women identified through in a slum or village. preliminary processes and Participatory processes There should be interaction between training programmes organized the constituent groups for at least for evolution of the federation. three- months before cluster initiation Willing to abide by byelaws and Willing to abide by the norms and pay the equity and membership bylaws evolved by member groups. fee. 3. Legal status and area of operation Informal group at the hamlet or Informal association of the constituent A legally registered not-for-profit village level. Association of persons member groups at cluster of villages or organisation under the Indian legally recognized by the banks. slums. Trusts Act (1882) or Societies Registration Act (1860 Block level or cluster of slums in a city or town. 4. Formation Members are self-selected among Six months after groups are formed. After 18-24 months of group the poorest identified by DHAN DHAN Foundation staff facilitates the formation. Need for involving Foundation staff. process of formation. groups evolves federation. DHAN Foundation staff facilitates Groups interact to evolve the byelaws Groups across clusters interact first few meetings where group and operational systems. and organize workshops before evolves its own byelaws and initiating federation. operational mechanisms. 5.1 Governance: General Body After 18-24 months of group Each primary group is an institutional Each primary group is an formation. Need for involving groups member and represented by three institutional member and evolves federation. office bearers. The General Body represented by three office Groups across clusters interact and consists of 45-60 persons @ three bearers. The General Body organize workshops before initiating members/ group representing 15-20 consists of 450-600 leaders federation. groups. representing 150-200 groups. 5.2 Governance: Executive Committee Three leaders selected by the group Nine members constitute the Nine to eleven members include President, Secretary and Executive Committee selected from constitute the Board of Directors Treasurer. Rotation of leaders is the General Body and the term of of the federation. Each Director practiced once in two years office is for three years. is selected by the member groups of a geographical area - each slum to represent their interests at the federation for a term of three years. Five members of the Board constitute the executive committee, which include President, Secretary, Vice President, Treasurer and Joint Secretary. 6. Management – Staff Movement associate & group Each cluster identifies two - three local One Chief Executive and one accountants are local persons staff to work for the groups. The finance manager are deputed employed for each cluster and Executive Committee reviews the from DHAN Foundation to the groups share their services. Group performance of these local staff. Federation. The federation after accountant to write the books of Member groups share Training and three-five years of its promotion accounts and movement associate Capacity Building support is provided meets all costs. to provide auditing, linkage and by DHAN Foundation costs after one Memorandum of Understanding promotional, developmental support year of promotional phase. is entered between DHAN to primary groups. Groups pay costs Foundation and federation. 2-3 of these staff after one year of support staffs to provide promotional phase. specialized services like health, housing, education and insurance based on the age and needs of the federation. 7. Functions/Services Manage savings and credit To facilitate linkage for primary groups Meeting the credit gap at groups operations and deal with individual with banks and other development housing & business needs. members. agencies. Capacity building of groups and Mobilizes loans from Commercial Internal auditing and monitoring of clusters for self-management Banks and Cluster Development systems of primary groups. and problem solving. Associations through direct linkage. Capacity building of members, and Linkages with apex banks, Act as a local financial institution for leaders for self-management and municipality, district 15-20 members with needed Conflict resolution. administration and development systems. Promotion of new groups - reaching agencies. out to left out poor. Promotion and development of Acts as a conduit to canalise loans new products e.g. housing, from federations to groups. insurance etc. Promote special programmes to meet civic & developmental needs of members 8. Sources of funds Savings from members Entrance Fee and Equity. Entrance fee and equity. Interest income on loans. Service costs and interest on loan Service costs and interest on Loans from local banks and clusters Loans from federations without spread loan. at market rates (12% p.a.) on interest rate. Loans from apex/development banks for housing & microfinance. Grants from government and other philanthropic agencies.

Reach of the Kalanjiam programme Kalanjiam programme with its exclusive focus on poor is reaching out to 194,482 poor women benefiting a population of about a million poor. It is one of the largest microfinance programmes in Asia and probably the largest programme in the world focusing on community ownership based on the principles of self-help and mutuality. The geographical spread of the programme is in 4,249 villages/slums of 74 locations of 23 underdeveloped districts in the states of Andhra Pradesh, Tamil Nadu, Karnataka and Union Territory of Pondicherry.

The programme has demonstrated the success of community banking concept on scale in each of the rural, urban and tribal contexts. Though the basic principles and guiding philosophy were same each context has offered unique lessons and operations modalities to make the ‘micro finance’ relevant for the poor. It was demonstrated that in all three different contexts the concept of mutuality and self-help could be practiced and operationalised. Out of the total coverage 81 per cent are rural poor, 16 per cent are urban poor and three per cent are poor from tribal areas. Developing the inception document before initiating the programme followed by Saturation document after intervention is a unique process adopted by the programme to ensure the inclusion of excluded poor over a period of 4-5 years in a location.

Existing members, leaders of groups and federations play an important role in spreading the ‘Kalanjiam’ programme both in existing and new locations. Programme devised systematic processes for initiating new locations and evolved operational guidelines, manuals and capacity building support for new staff. Promotional costs required for the programme expansion are mobilized from donors, commercial banks and people. Kalanjiam programme is a pioneer in mobilizing promotional costs from commercial banks like ICICI bank and HDFC. The contributions of Rs.15 lakhs made by Kalanjiam members for promotion of two exclusive new locations in two most backward blocks of Thoppampatti in Dindigul district and Thalaivasal in Salem district through the ‘Kalanjia Jyothi’ programme is noteworthy achievement in reaching out to poor. Through providing a regular access to multiple credits the programme is able to relieve many poor from the clutches of moneylenders and arrest the income drain. In addition, the programme helped members to enhance their income and create assets. Many older groups and federations go beyond providing saving, credit and insurance services and meet the other social and development needs of members. The initiatives include addressing drinking water, health, education, housing, sanitation, basic infrastructure, alcoholism, gender issues and community development.

Products Promotion of savings, credit and insurance products have become an integral part of the micro financial services provided by the programme. The experience has demonstrated that ‘poor can save’ and savings by poor lay a strong foundation for successful micro finance programme. Similarity support for multiple credit needs and credit graduation coupled with services is essential to help the poor to come out poverty. The products developed have integrated the existing indigenous practices of poor and development needs of members that enhanced the acceptability and ensured continuity. All the three services savings, credit and insurance provided by the programme were complimentary in making the poor to manage their finances effectively.

Savings: ‘Kalanjiams’ have demonstrated that savings would bring sustainability for the microfinance programme. It helps in developing a discipline in Kalanjiams to demonstrate mutuality and self-management. Internal lending begins from the first Kalanjiam meeting in which savings are made. The total own fund mobilized contributes 60-70% of the total funds lent out to members. The members in primary Kalanjiams are involved in two types of savings. ‘Primary Savings’ is the regular contribution of savings made by members. Primary savings is not withdrawable. The savings made by members for a specific purpose for a particular period in addition to the primary savings can be withdrawn and is called as diversified savings. The members have mobilized a cumulative savings of Rs. 3390.78 lakh. The cumulative reserves and surplus available with the Kalanjiams is Rs.1026.18 lakh. The total internal fund available with the Kalanjiams is Rs.4416.97 lakh.

Credit: Primary groups would also provide a range of products to meet a variety of credit needs of poor including consumption, health, education, social obligation, business, asset creation, income generation and shelter. Small consumption loans are provided primarily out of the funds mobilized as savings from members. The loans range from Rs.100 - Rs.2000 and repaid over six months to one year. The interest rates range from 24 - 36% per annum. The support for income generation includes credit for either supporting an existing activity or initiating a new activity. As part of the support loans are provided for both working capital and asset creation. As the own savings are not sufficient to meet, groups through linking with local banks or Cluster Development Associations provide these loans. The repayment period and terms of repayment vary with the type of activity and the interest rates vary from 24-36% with repayment periods ranging from six months to three years. The members who have stabilized their income generation activities are provided with loans for shelter. As part of the shelter support credit is provided for construction of a new house, repairs and providing infrastructure. These loans are mobilized through federations by linking with apex financial institutions. The interest rates range from 15-18% p.a. and the repayment period spreads over 7-12 years.

Insurance: Federations offer insurance services to the members and their families. This insurance service has been in operation for the past seven years and has extended the service to more than 65,000 members during this period. The types of insurance include life insurance for member and husband, health insurance for family, livestock insurance and housing insurance. The federations identify the local needs and design suitable products in consultation with the insurance companies. Where the number of members is high in case of advance federations, the products are offered and managed on their own, as it is viable and cost effective. While, in case of new federations the products of the existing companies are availed. In both the cases federation acts as an intermediary and collects the premium from members and maintains the database and liaises with the insurance companies. Federation ensures timely settlement of claims to members. The federation out of the premium collected recovers all the costs of offering these services.

Collaboration Commercial Banks in India are expected to provide 40% of the credit towards the priority sector lending. But the experience of lending to poor so far has not been positive by banks, as many schemes for the poor are target driven and subsidy oriented. However the programme has made efforts to organize exposure programmes and training to orient many bank officials and influence their attitude through interaction with group members and visit to field. Many banks have linked very few groups initially with lot of resistance and hesitation. But after seeing the 100% repayment by the groups repeat support is being provided and the linkage is expanded to many groups. Banks provide the loans at market rates to groups. Through this linkage, bank is providing a bulk loan to group and group acts as a financial intermediary and takes the responsibility of managing the loan among members and repay to the bank. This group lending reduces the transaction cost for the bank and helps to reach large number of clients. More importantly banks were attracted to link more groups only after experiencing the 100% repayment rates.

A number of 29 commercial banks and Regional rural Banks are currently involved in the linkage programme with the Kalanjiams through 170 bank branches. The direct linkages by groups has significantly influenced the profitability of these branches and resulted in institutionalising the collaboration. Federations facilitate and sustain this partnership at the local level through constituting a branch level forum with the local bank. In addition federations have established linkages the credit gap at the group level and promote income generation and housing. The experience for more than a decade has demonstrated that people organisations are capable of implementing collaboration on a large scale with timely facilitation and support. So far 18 federations are involved in linkage with apex financing institutions and have mobilized to the tune of Rs.1, 880.71 lakh.

Creation of Kalanjiam Development Financial Services (KDFS), a section 25 company by member groups for bridge fund support has further strengthened the collaboration with mainstream banks. Many banks like ABNAMRO, Canara Bank, SIDBI, Rabobank Foundation have sanctioned loans at competitive rates with flexible terms and see a great business opportunity in future. ICICI Bank has provided promotional cost in addition to linking groups promoted through credit support. Community Banking Programme has demonstrated large-scale linkages of the primary groups with local commercial and rural banks and federations with apex banks address multiple needs of the poor and ensure sustainability of these organisations. The programme stabilizes the livelihoods of the poor by providing multiple credit needs, which include consumption, supporting existing income generating activities and creating new ones.

Beyond Microfinance The programme has promoted 38 federations that are different levels of growth process in terms of addressing financial and social development needs of poor women. Federations existing for more than three years have initiated many social development programmes that include housing, infrastructure, health, education, sanitation, drinking water, skill building, insurance and business promotion. As part of this process these federations have established linkages and entered Memorandum of Understanding (MoU) with local, district administration, municipalities, apex banks, CAPART, HDFC SIDBI, NABARD and industrial houses. The notable initiatives include comprehensive health programmes offered by federation with health insurance, group housing programme for evicted urban poor Madurai city, remedial education centres and decentralized libraries, collaboration with business houses for providing employment and income for members and facilitating rural- urban linkages. Six federations have initiated special programmes a health and education and propose to upscale over next three years. Many federations actively participate in promoting philanthropy in each location by way of supporting education of children through scholarships, donations to people affected by fire accidents, floods and other calamities, and for meeting major health expenses of other members - and their families. Federations provide awards to meritorious students and people from various walks of life who have higher sense of social responsibility and involved in service.

Policy Advocacy The programme has been actively involved in capacity building of various stakeholders contributing to the growth and development of micro finance sector in India for over a decade. In collaboration with NABARD the programme played significant role in building the capacity of the bankers to promote SHG-bank linkage. In addition to organizing more than 200 training programmes directly covering about 3000 branch managers the programme contributed in designing and organizing in similar programmes by other commercial banks, NABARD, NGOs and State Governments. As part of ‘Regional Development Centre’ of SIDBI the programme organized a number of capacity building events for NGOs involved in micro finance and contributed significantly to design the micro finance programme of SIDBI Foundation for micro finance. The programme has organized exclusive training programmes, capacity building events, studies and assignments for various NGOs, Government agencies, special bilateral micro finance projects supported by CARE, DFID, Swa-shakti and significantly influenced their programme approach on promotion of self-help groups and federations. There is continuous demand for these programmes. Programme has conducted few international studies and assignments on micro finance. Programme has also organized capacity building events for international participants from ECLOF, INAFI and CARE primarily on the community banking and bank linkage. In collaboration with Tata-Dhan Academy programme offers an International programme on upscaling of micro finance. On request of SRTT the programme provides review cum resource support to selected partners of SRTT working micro finance in Rajasthan based on the local demand of the NGOs.

Many policies pursued by mainstream institutions for the development of poor, lack appropriate strategies that can really help poor though the goals are in the interests of the poor. Even when the policies are framed well, it does not get implemented in letter and spirit because of inadequacies and shortcomings among implementers who also cannot be held accountable by the system. Thus there is a need for policy intervention at the local and national level. The successful demonstration and growth of the programme for more than a decade has provided a legitimate space for influencing the policy at national and global level. The programme has represented and significantly contributed to all the major policy making initiatives on micro finance in India by Government of India, RBI, NABARD, SIDBI, Commercial Banks and other state governments. As a member of many policy making bodies working groups and committees on micro finance and through participating a natural and international conferences the ‘Kalanjiam’ programme strongly advocates refocusing of micro finance to address poverty and empowerment of the poor especially women. DHAN Foundation is one of the founding members of the INAFI (International Network of Alternative Financial Institutions) network both at global and national level that promote networking and policy advocacy on micro finance. In addition to organizing and participating at the policy seminars, the research studies and publications undertaken by the programme have also contributed to share new knowledge on micro finance and positively influenced the growth of the sector over the last decade.

Vision of Kalanjiam Foundation

Scaling up to reach one million: Kalanjiam Foundation plans to scale up its Kalanjiam Community Banking Programme to reach nearly one million poor families and impact on their livelihoods in a significant way in this decade. This is planned to be achieved through strengthening peoples’ movement setting up thematic organisations, intensifying its collaboration with Government and other institutions, etc.

Support to Federations for Social Sector: Kalanjiam Foundation’s approach to development is through the promotion of peoples’ organisations. By building the peoples’ capacity on a single theme (sub-sectoral focus) it builds their confidence to address their other needs. Mere improvement in the economic status of the poor does not lead them to a life of dignity and quality. Hence, the peoples’ organisations (federations) promoted by Kalanjiam Foundation will take up various social sector initiatives in the areas of health, education, pension etc for the overall development of their members. They would collaborate with other development agencies to fulfil this purpose, in addition to using part of their profits.

Establish a resource centre in micro-finance: Kalanjiam Foundation is strategically placed to take up all functions related to knowledge viz., acquiring, applying and building knowledge. In a decade of work at the grassroots in different social, political, economic, resource and demographic contexts, an appreciable body of knowledge, different perspectives and insights have emerged regarding grassroots (micro-environment). This would be captured, documented and disseminated among various stakeholders in the development sector.

Policy intervention: Many policies pursued by mainstream institutions for the development of poor, lack appropriate strategies that can really help poor though the goals are in the interests of the poor. Even when the policies are framed well, it does not get implemented in letter and spirit because of inadequacies and shortcomings among implementers who also cannot be held accountable by the system. Thus there is a need for policy intervention at the local and national level. The focus areas of policy intervention in the coming decade would be on NGO-GO collaboration, policy formulation, local planning etc. Kalanjiam Foundation would continue to do this by documentation and dissemination of experiences, interfacing with media, policy studies and research, networking, creation of pressure groups etc.

Perspective Plan for Kalanjiam Foundation: Kalanjiam Foundation as a thematic institution would focus on upscaling and deepening of the Kalanjiam programme and aims to reach a million poor over next one decade. It envisages promotion of nested institutions and facilitating partnerships with many mainstreams financial and development institutions. The proposed upscaling and growth of Kalanjiam Foundation is expected to be achieved through three distinct phases of stabilization, Growth and Significance. The focus and details of each phase is presented below:

Perspective of Corporate Plan over next ten years Particulars Stabilization Phase Growth Phase Significance Phase Period 2004 - 2007 2007 - 2010 2010 - 2014 Thrust areas Reaching to scale and Creating identity for Kalanjiam Leading Microfinance sector and stabilizing Kalanjiam Foundation in upscaling setting standards to impact Foundation Building nested institutions for policies Promoting nested sustainability Stabilizing the upscaling process institutions Promoting partnership with Stabilizing and upscaling civic and Institutionalizing mainstream financial business initiatives by federations mainstream linkages institutions. Strategic alliance with mainstream Initiating 'Kalanjiam' Expanding 'Kalanjiam Affiliates' Policy advocacy and resources Affiliates Deepening the microfinance support at global level Policy advocacy and intervention - supporting civic Resource support to and business initiatives banks, NGOs and government at national level Reach (Cumulative Number) Direct Action 400,000 700,000 1,000,000 Through Affiliates 25,000 50,000 100,000 Locations 175 250 350 Districts 20 25 30 States 4 5 8 Nested Institutions (Cumulative Number) Groups 25,000 50,000 70,000 Clusters 2,000 3,000 5,000 Federations 75 150 250 Staff (Cumulative Number) Professional & 400 600 800 Support Staff People Staff 3,000 4,500 6,500 Finances required (in Rs. millions) Own funds 570 700 800 Loans from 960 1200 1500 mainstream banks Promotional 400 550 600 costs (for the period)

Members’ Profile - Nepal Centre for Self-help Development (CSD)

Address Street: Dillibazar, Postal code: 8852 City: Kathmandu Country: Nepal Telephone: 977-1-4425597/4424787 Fax: 977-1-4430363 E-mail: [email protected] Web page address: http://www.csdnepal.org.np

Key persons Mr. Mukunda Bahadur Bista, Executive Director

Governing board members: Mr. Nanda Ram Baidya – Chairperson Ms. Saraswati Shrestha – Treasurer Mr. Kiran Man Singh – Member Dr. Sumitra M. Gurung – Member Mr. Keshar Bahadur Shrestha – Member Mr. Ram Kumar Shrestha – Member Mr. Janga Bahadur Khadka – Member

CSD members: Mr. Shanker Man Shrestha – is one of the founder member of CSD and currently he is the Chief Executive Officer (CEO) of Rural Micro Finance Development Centre (RMDC) Mr. Ganesh Ram Shrestha – is the Executive Director of Centre for Rural technology (CRT) Mr. Lumin Kumar Shrestha – is the Director of CRT Mr. Mukunda Bahadur Bista – is the Executive Director and Secretary of Governing Board of CSD.

Core staff of CSD: Mr. Mukunda Bahadur Bista – Executive Director Mr. Ram Kumar Shrestha – Director Mr. Shankhar Nath kapali – Deputy Director Mr. Govinda Man Shrestha – Senior Officer Mr. Sabin Bahadur Shrestha – Programme Officer

Type of organisation CSD, established in August 1991, is a micro-finance non-governmental organisation (MFI/ NGO). It has been implementing micro-finance programme since 1993 obtaining license from Nepal Rastra Bank (NRB) - the Central Bank of Nepal. CSD provides micro-finance services to the poor women with the group guarantee without any collateral security. It has been focusing to the needy women who need financial services in order to operate the small business such as operation of small cottage industries, establishment of teashop, opening of convenient store, vegetable marketing, fruit shop, livestock rearing, agricultural farming, fresh house, marketing of agricultural products in weekly market (Hatbazar) etc. As a multi service providers, the other wing of CSD facilitates in implementing integrated development programmes including drinking water system, micro- irrigation, micro-hydro, convenient toilet, afforestration, smokeless stove, community building, sanitation, community forestry and cellar storage etc. in partnership with other organisations for improving quality of life of the targeted community people.

Legal status CSD is registered in Kathmandu District Administration Office and affiliated to Social Welfare Council. CSD has also obtained license for financial intermediary under financial intermediary Act. 2055 from the Central Bank of Nepal.

History The rationale behind the inception of CSD is that the basic problems of wide scale and deep rooted poverty and the resultant socio-economic backwardness can not be addressed through the efforts of government alone and that complementary and supplementary initiation and efforts should come from non governmental organisations as well. Towards this, CSD has been executing development projects and micro-finance programmes intended for the benefit of the poor and disadvantaged families especially the women of those families. The self-help Banking Programme (SBP), a micro-finance programme of CSD, was started as an action research programme in one Village Development Committee (VDC) of each Siraha, Saptari and Udayapur districts. With good response of the communities, and the success of the micro-finance programme, the programme was gradually extended to other districts as well. CSD has also promoted a Development Bank in the name of “SWABALAMBAN BIKAS BANK” (SB Bank) in January 2002 to further broaden and deepen the micro-finance services to the poor women. Since then, the micro-finance programme of eight districts has been implemented through SB Bank. CSD, however, has been continuing to implement SBP in other districts namely Dang, Kathmandu, Lalitpur and Kavre. Two more districts Bhaktpur and Sindhupalchowk will be included in the micro- finance service delivery areas in near future.

Vision CSD has set its vision as creation of poverty free self-reliant society.

Mission CSD’s mission is to work with and for the poor and the disadvantaged people in alleviating poverty and improving their livelihoods.

Values and culture Poverty is a problem for developing countries irrespective of their level of development. It may be lack of income or resources, lack of coping capacity, lack of basic human capabilities, lack of institutional defenses or in extreme cases lack of all these. In a wider sense, it may be a combination of economic, social and political deprivations. Poor live in severe deprivation and despair; in fact, hunger and poverty are more female issues than male. Traditionally, they have to manage the family with virtually nothing to manage with. If any one has to go hungry in the family, it is usually the mother. Women are facing continuing discrimination. They are not properly treated as equal to men "whether to property right, rights of inheritance laws related to marriage and divorce, manage property or seek employment". For all these reasons, credit is much more significant for women than men. With credit, poor women turn out to be more empowered. Once they have access to credit, they are better equipped to manoeuvre the forces around them to their best advantage. Towards the CSD values, micro-finance to play a vital role to break the vicious cycle of poverty by creating self–employment and generating income.

Governance General assembly is the apex body of CSD, which is responsible for policy guidelines in setting vision and mission of the organisation. The Governing Board provides leadership for management in implementation of the set mission by the General Assembly through establishing effective policy framework and strategy. Executive Director as a top of the management team executes the overall management and smooth operation of projects and programmes. CSD head office has a Micro finance Division headed by a Deputy Director under the direct supervision of Executive Director. The internal audit and inspection of the micro finance programme operates under the direct control of the Executive Director.

Location of offices: CSD’s head office is located at Dillibazar, Kathmandu with its area office in Dang. There are offices at operational level in Gorahi, Tulsipur and Lamahi of Dang district, Sankhu and Mahankal of Kathmandu district, Luvu and Bandegaun in Lalitpur distirct and Banepa in Kavre district.

Staffing: CSD currently has 56 full time staff members engaged in various programmes and projects. Of them 14 are at Head Office in Kathmandu, and the rest are based in the field. Around seven percent of the staff is women. In addition, CSD avails services of highly qualified and experienced professionals under contractual arrangement to provide specific services as and when required.

Coverage: SBP programme has covered 55 VDCs/Municipalities serving more than 11000 members through nine branches. This programme has served about 7000 borrowers in total as of mid July 2005 under credit operation.

Implementation Strategy: The programme implementation strategy adopted by CSD is based on its set vision, mission, goals and objectives. CSD’s strategy in this process aims at empowering poor both economically and socially.

Focused area: The main focus of CSD is to serve the poor and disadvantaged women who do not have access to institutional micro credit services.

Target client: CSD works in rural areas where incidence of poverty is comparatively higher. The target clients are the women members of the households of the targeted area.

Outreach building process: The outreach building process adopted by CSD is to provide access to micro credit and other financial services to the poor women directly. Major outreach building process has been undertaken as follows:

Pre-group Training (PGT) is the entry point for the prospective target women to be eligible members for the programme. Hence, PGT helps them to orient on the concept and importance of micro-finance programme including group liability, saving and loan products as it is conducted at the initial phase of the outreach building process. Group cohesion is the asset of the low-income women to show their commitment and determination on their micro-enterprises and regularity in paying back their instalment without any default. Group solidarity and cohesiveness are major components of micro-finance and act as strong security or collateral for delivering the credit. At the time of outreach building, CSD organizes many interaction, training and observation visits to develop such capacity among the members. Because, CSD provides credit to the target poor women on the basis of their commitment, cohesiveness and capacity enhancement. Building solidarity through the formulation of group of five like-minded women and work collectively under a strong umbrella of 10-40 women as centre are the general phenomenon of rural women to initiate their micro-enterprises as per their personal capacity. Microfinance is a continuing programme, which never ends as long as target people demand it. Nor this is dependent on the donor support; however it is surviving through spread of income generated by on lending capital fund borrowed from Commercial Banks, Development Banks and other Financial Institutions.

Service delivery methods: Service delivery mechanism followed by CSD is to: 1. Promote development actions at the grassroots level by involving disadvantaged rural masses especially women. 2. Initiate contact and build up rapport and partnership with government agencies and financial institutions as NGOs and INGOs to channelise resources and technology. 3. Improve income, employment and productivity through the adoption of new alternatives and improved technologies.

Financial service delivery 1. Direct financial intermediation: CSD under its SBP lends to its clients (members of the group) directly on group recommendation. There are no financial intermediaries involved in lending process.

2. Promotional services: CSD has also established institutional linkages with various agencies sharing experiences and exchanging ideas of best practices. It is also a member of numerous other networks such as Grameen Network Nepal (GNN), MIFAN, and NEPAN etc. It has also developed close contact with a number of international organisations such as Grameen Trust, Bangladesh; Micro-credit Summit Campaign, New York, CASHPOR; Women’s World Banking (WWB) New York, USA; INAFI/ASIA; Grameen Foundation, USA.

Products and services Financial products: The financial product of CSD can be broadly categorized into three groups: loan products, saving products and protection schemes.

1. Loan products General loan: General loan is provided to the members for their various income generating activities. The individual loan ceiling ranges from NRs. 10,000 to 25, 000 depending on the applicants' loan cycle and their capacity to use the loan. The term of the loan is one year with a two-weekly instalment system. Seasonal loan: Seasonal loan is provided to complement the general loan for seasonal enterprises. Repayment of seasonal loan is determined based on seasonal income of the enterprise but not exceeding one year.

Micro-enterprise loan: Micro-enterprise loan is provided to those clients who have completed third loan cycle of general loan and have enough entrepreneurial skills and knowledge to run a project like poultry, dairy and other micro-enterprises. Housing loan: Housing loan is provided to construct clients' residential houses. Clients to be eligible to get the loan should have used five cycles of general loan successfully. Centre fund and group saving loan: The loan is provided mainly for medical, consumption, emergency and other social needs for a maximum period of one year. Special loan: Borrowers who complete five loan cycles of general loan and having excellent loan track records are eligible to get overdraft facility of up to Rs. 3000.

2. Saving products Group/centre savings: Members have to deposit a fixed amount of Rs. 10-20 at the time of each centre meeting as group savings. Centre savings, however, are collected from the members at the rate of 5 percent of loan received for the first five loan cycles of general loan. Individual savings: Members deposit voluntarily in their saving account and can withdraw and deposit the money as and when they need it. The minimum amount for the transaction is Rs. 10.00. Educational/ Pension savings: CSD provides members an opportunity to deposit a fixed amount on a regular basis for a specified period of time. The deposit would serve members with a reasonable amount of fund when they need money for specific purpose such as higher education support and during retirement period etc. Parba Bachat (Festival Fund): Members can save regularly small amount and withdraw at the time of festival so as to avoid any additional burden of borrowing from outside.

The members receive 8% interest in all type of their saving deposits.

3. Protection schemes Life and Housing Protection Scheme: The scheme helps the clients to compensate the damage of the member’s residential house caused by natural calamities and death of a member or her husband. Client has to pay Rs. 50 as protection fee for the first year loan and Rs. 100 per each successive loan. In case of death of member Rs. 5000 to Rs. 75000 is provided to the beneficiary as compensation on the number of premium she has paid. Similarly, 50% of the compensation amount is paid to the member in case of death of her husband. However, up to Rs. 2000 is provided in case of the damage of the house caused by natural calamities. Livestock protection scheme: The scheme compensates the borrower in case of death of livestock purchased from the loan. The scheme compensates the member to the extent of 80% of the protected amount in case of the death of protected animal and provides them an amount equivalent to 20% of fee as bonus in case the borrower does not claim for compensation.

Non-Financial Services

1. Pre-group training: Prospective members of the micro finance programme have to take part in the pre-group training before forming them into groups/ centres. The training helps them to understand the roles and responsibilities of members including centre chief and deputy centre chief. They are taught to write down their names as well.

2. Centre Chief workshop: Success of micro finance programme of CSD depends to a larger extent on the capacity of the Centre Chief. The Centre Chief organizes the centre meeting and helps maintain financial discipline among the members. Towards this, every year Centre Chief's workshop is held to help share their experiences and discuss different issues faced by them.

3. Refresher training: Refresher training are organized in each centre every year to remind them of their roles and responsibilities.

4. Public auditing: To make the micro finance programme more transparent to all the stakeholders, public auditing is held every year in each Village Development Committee. The public auditing helps the villagers to ventilate their feelings and understand the various activities of the programme.

5. Centre evaluation and reward system: Evaluation of centres are done in each centre meeting day by CSD field worker. The evaluation is based on specified performance indicators of the centres. Based on these evaluations the best performing centres are awarded a letter of appreciation along with a small amount of cash. This evaluation and reward system has helped CSD's microfinance programme to create a healthy competitive feeling among the members and to improve their performance of centres.

6.Centre House: Each centre is motivated to construct their own centre house where they can hold their two- weekly meeting more conveniently. The members themselves collect the construction materials and mobilize their internal resources to construct the centre house. About 50% of the centres have their own centre house.

7. Exposure visits: Members are taken to visit other centres of the area to discuss the activities implemented by the members. This helps to broaden their outlook and perception.

8. Health education: Members are made aware of health hygiene and sanitation. Household members are encouraged to construct pit latrines, improved cooking stoves and install hand tube well for safe drinking water.

Operational aspects (Set rules)

1. Eligibility criteria: CSD determines the programme area on the basis of following criteria. -Areas where majority of ultra poor and underprivileged group of people reside. -Similar type of programme not in operation by other banks, financial institutions or NGOs in this area -Availability of commercial banks' services in the programme area -Districts approved by Nepal Rastra bank (NRB).

The eligibility criteria for participating in SBP are: -Permanent resident of programme area -The people ranked below the poverty line are considered as the target people identified through the participatory wealth ranking (PWR) technique -Married women or women above the age of 35 years of the target households and able to participate in economic activities in the programme.

2. Loan use: Any member who has taken loan needs to utilize it in stipulated purpose within said time. Loan amount along with the interest should be returned back immediately in case the loan is not utilized.

3. Interest rate: The interest rate charged for all types of loan is 25 percent per annum except loan provided from centre fund and group saving deposit. The interest rate for this loan is 12 percent per annum. Declining balance method is used for calculating the interest of the loan.

4. Loan size: The maximum ceiling for general loan ranges from ten thousand to Rs. 25000 depending upon the number of cycle of loans. For other types of loan, loan limit is fixed as follows S.N Types of loan Max. Loan limit in Rs. Max. Loan limit for second time and onward in Rs. 1 Seasonal loan 5000.00 2 Micro-enterprise loan 15000.00 20000.00 3 Housing loan 20000.00 4 Central fund and group 1000.00 2000.00 saving Note: The total loan outstanding per group member should not exceed Rs. 30000.00 irrespective of types of loan.

5. Loan duration: Duration of loan also varies on types of loans as given below: Types of loan General Seasonal Micro- enterprise Housing Centre fund and group saving Duration in 1-1.5 1.0 2.0 5.0 0.5 year

6. Repayment terms: There is a different repayment term for different types of loan. General loan: a. Generally the repayment of general loan should be made within one year. The instalment is determined by dividing principal amount by 25. The instalment (Principal and interest) should be paid regularly in the central meeting, which is held in every two weeks period. b. Seasonal loan: The member who is borrowing third cycle of general loan will be eligible for seasonal loan. Seasonal loan should be repaid within one year. The instalment (Principal and interest) should be repaid regularly in the centre meeting and unlike the general loan, the seasonal loan can be paid back even in one lump sum. c. Micro-enterprise loan: The repayment of principal amount of micro-enterprise loan should be made within 2 years. The repayment schedule is determined on the basis of income generated by the business; however, there should not be the gap between two instalments more than six months. d. Housing loan: The repayment of housing loan should be made within 5 years in 125 two-weekly instalments. The repayment of instalment should be started after a month from the date of loan receipt. e. Centre fund and group saving loan: The repayment of loan received from centre fund and group saving should be made within six months in 13 two-weekly instalments. The repayment of instalment starts from the date of centre meeting held after the receipt of loan.

7. Savings: There is a provision of main two types of savings: compulsory and voluntary. Compulsory saving is categorized into: a. Group saving – is made to instill the habit of saving of the members. Each and every member of the group needs to save fortnightly. Eight percent interest would be paid in this saving. b. Centre saving – Each member has to deposit five percent of loan amount in this saving until five subsequent general loans. Eight percent interest would be paid in this saving.

Voluntary saving is categorized into: a. Individual saving – can be made by any member and can withdraw their money at the time of two weekly meeting. b. Marriage saving – is made regularly for 10-15 years by depositing certain amount of money in every centre meeting. The depositor can withdraw his saving after 10 years and it will be paid adding 50 percent more amount that is deposited. c. Education saving – is made regularly for 10-15 years by depositing certain amount of money in every centre meeting. The depositor can withdraw her saving after 10 years and it will be paid adding 50 percent more amount that is deposited. d. Pension saving - is made regularly for 10-15 years by depositing certain amount of money in every centre meeting. If the depositor withdraws her saving after 10 years, it will be paid adding 50 percent more amount that is saved. If she withdraws her pension after 15 years she will be entitled to receive the double of the amount she has deposited. e. Festival saving – is made for particular festival. Eight percent interest would be paid in this saving. Welfare fund – is made by the amount collected from penalty, grants, and other. Eight percent interest would be paid in this saving.

8. Outreach: Self-help Banking Programme (SBP) has covered 59 VDCs/ Municipalities serving 11192 through seven branches and 477 centres. This programme has served 6686 borrowers in total disbursing the amount of Rs. 196.22 million with Rs. 42.6 million outstanding loans as of July 2005. The total member saving balance has reached to Rs. 16.85 million, which is about 40 percent of the total loan outstanding balance as of July 2005. SBP has paid due attention to enhance the skill and level of knowledge of the members through organizing training, workshops and exposure visits. With the view of positive impact shown by the programme, SBP has set forth the goal of broadening and deepening its outreach.

9. Lending methods: The lending approach adopted by SBP is individual lending on a group guarantee basis. Individual member of the group needs to get recommendation from the group/centre to get loan.

10. Customer satisfaction: The poor members (all women) have realized that they have been able to get self- employment and to add family income. Their voices have been heard not only in their households but also in the communities they belong to. They have been more articulated and can express their feelings enhancing their decision making level.

11. Training: CSD under SBP follow credit plus approach by paying due attention to enhance the skills and level of knowledge of the members through organizing training, workshops and exposure visits.

Supervision and monitoring system (financial management): Supervision and monitoring are regularly done through its Area as well as Head Office. The branch manager looks into various information with regard to the progress made.

MIS: Monthly progress report is made by each branch and is submitted to the Area Office within the stipulated time. The Area Office scrutinizes the progress report, takes necessary actions and submits to the Head Office. The Head Office consolidates and checks the progress report and takes necessary action. Till date the progress reports are manually prepared and CSD is planning to computerize the programme.

AIS/FIS: Balance sheet and income statement are the financial statements that would be produced by each branches and CSD Head Office for analysis of its financial health.

Reporting system: Information is forwarded to the branches regularly. While at central level it is submitted in a monthly, quarterly, half-yearly and yearly basis. Information includes account statement, saving status, loan disbursement, collection, arrears in loans and members increment etc.

Internal control: Executive Director is accountable to mange and control the budget and programmes at the central level. Similarly, at the area and branch level respective managers are accountable for managing account and programmes. Nevertheless, the central and area offices perform inspection, supervision, monitoring and auditing in the branch offices regularly.

Exception in practices/Flexibility

1. Qualifying to receive loan: -A member to be qualified to receive loan should: -Women, and of target households -Participate pre-group training (PGT) and pass Group Recognition Test (GRT) undertaken by concerned branch manager -Able to take economic activities -Feelings of group solidarity and abide by group liability and other rules and regulations of the programme -Sincere and possess a good track record of loan repayment -Willing to deposit savings regularly -On time loan repayment and savings deposit. -Interested to participate in other socio-economic activities.

2. Loan repayment schedule: Generally loan repayment schedule is strictly adhered to loan size for first time and for subsequent loans. The loan size for the first time is limited to Rs. 10000.00 and raised by 2000.00 per each loan cycle for general loan till it reaches the ceiling of R. 25000.00.

3. Loan pricing: Within the framework given by Central Bank of Nepal, CSD is able to price its various loan products. CSD, furthermore, believes that the access to the credit is more important than the rate of interest on one hand and on the other MFI should be able to cover its cost from its interest earning to provide a sustainable micro finance services. Considering this, CSD has fixed the interest rate at 25% as per the declining balance method.

4. Restriction to receive more than one loan: There is no restriction to get more than one loan, however, the loan outstanding should not exceed 30000.00.

5. Other loan options: A provision of overdraft loan amounting Rs. 3000.00 of revolving nature have been designed for those members who have maintained a very good loan track record.

Impact measurement CSD’s micro finance programme has shown positive impact on the lives of the poor families especially the women of those families. The major impacts of the programme are: -Group solidarity -Increased family income -Enhanced decision-making level of women -Raised awareness in health, hygiene and sanitation Benchmark information: Prior to implement the programme, CSD conducts Participatory Wealth Ranking (PWR) in all programme areas to identify the level of poverty namely very poor, poor, and non-poor. In addition to this, the individual information sheet, which includes the asset, liabilities and net worth of each member, is prepared.

Periodical tracking of benchmark information: The individual information sheet is updated every year. The information in the individual information sheet of each and very member helps as benchmark information to assess and evaluate the changes brought by the programme

Poverty assessment tools: Participatory rural appraisal including wealth beginning ranking, rapid rural appraisal and household survey is frequently used for assessing the poverty.

Study to measure social impact: Impact studies are conducted on micro-finance programmes for identifying the impact of programme in order to ameliorate socio-economic condition of women. In addition, many case studies have been documented by CSD to measure the impact of the micro-finance programme.

Performance indicators 1. Portfolio quality: The loan portfolio quality is measured in terms of loan arrears, portfolio at risk and repayment rate. The loan arrear above 1 year is Rs. 8225 out of total arrears of Rs. 150295. Similarly, the portfolio at risk is Rs. 152055. The repayment rate of the loan portfolio is 99.9%.

2. Productivity and efficiency: The major performance indicators shown by the programme, as of July 2005, are members per field staff (361), member per centre (23), loan outstanding per field staff (Rs.1374966), loan outstanding per borrower (Rs. 6375) and per unit lending cost (Rs. 0.03), centre per field staff (15), borrower per field staff (216) and borrower per centre (14).

Sustainability The operational self-sufficiency (OSS) has reached to 118 percent and the financial self-sufficiency (FSS) is at 112 percent.

Profitability Regarding the profitability of the programme, the interest income has reached to Rs.70, 58,777 against the expenses of Rs.59, 98,666 made by the programme. The net profit generated by the programme is Rs. 1060111 as of July 2005.

Growth/Trend 1. Changes in operational indicators: The operational indicators such as member per field staff, centre per field staff, borrower per field staff have been increased as compared to previous years.

2. Changes in financial indicators: The financial indicators such as Loan outstanding per field staff, Loan outstanding per borrower, have been increased as compared to previous year. Similarly per unit lending cost has been decreased.

Future direction 1. Changes in current strategy: With the view of positive impact shown by the programme, SBP programme has set forth the goal of expanding outreach both horizontally and vertically.

2. New strategic plan/business plan: CSD has prepared a long-term business plan (2004/05-2008/09) to help follow the strategy for the implementation of its microfinance programme. Accordingly, by the year 2008/09 a total number of 23000 members has been planned to be outreached. Having one member from one household and assuming 5.5 members per family, CSD/SBP will be supporting a total number of 126,500 population to get them out of poverty by the year 2009.

Nirdhan Utthan Bank Ltd.

Address Himalipath-7, Siddharthanagar Bhairahawa, Rupandehi, Nepal Tel.: 977 71 523768,523764,527299, Fax: 977 71 521647 Email: [email protected] Website: www.nirdhan.com

Key Persons: Dr.Harihar Dev Pant, Chief Executive Officer Mr. Prakash Raj Sharama, General Manager

Type of organisation: Development Bank focused on Microfinance Business

Legal status: Public Limited Company. Licensed from Nepal Rastra Bank (Central Bank of Nepal) to perform development-banking activities. NUBL is a Taxable Company.

History: In 1986 Dr. Harihar Dev Pant, then senior officer with central Bank of Nepal, visited Grameen Bank in Bangladesh, and this visit inspired him to launch micro finance in Nepal. Shortly thereafter, "Nirdhan" was created. In April 1991 Nirdhan was registered as a tax-exempt NGO with His Majesty Government of Nepal and with the Social Welfare Council of Nepal. Nirdhan began its microfinance operation in Siktohan in Western Nepal near the Indo-Nepal border, with two staff in March 1993. Nirdhan obtained a limited banking license from the Central Bank of Nepal in 1994. Under its limited banking license, Nirdhan was permitted to mobilize voluntary savings only from its members/clients. By July 1996, Nirdhan operated 8 branch offices with 79 employees serving 4,481 active loan clients. Only three years later, in July 1999, Nirdhan managed 21 branch offices with 170 staff serving 15,382 active loan clients. In November 1998, Nirdhan Utthan Bank Limited, “the bank for upliftment of the poor”, was registered as a company. In April 1999, The Central Bank granted a license for Nirdhan to undertake banking activities under the Development Bank Act of 1996. In July 1999, Nirdhan NGO transferred all microfinance operations to Nirdhan Utthan Bank. As the microfinance operations are transferred to Nirdhan Utthan Bank, Nirdhan NGO continued to work technical education for youth/adults, skill development, health and entrepreneurship training.

Vision: The vision of Nirdhan Utthan Bank is to be a bank with a social conscience that enables poor to (i) contribute equally to a prosperous, self-reliant rural society through self-employment and social awareness, and (ii) help to reduce poverty in Nepal.

Mission: The mission of Nirdhan Utthan Bank is to extend financial services and social awareness to the poor in under-served and unserved areas of Nepal in a sustainable manner.

Governance: Nirdhan Utthan Bank has a three-level structure of branch offices, regional offices and the central office. Branch offices are the frontline offices for client relations and service and include loan officers, accountant, and branch manager. The branch manager supervises all activities and staff and reports to regional manager. Regional offices are responsible for fund transfers to branch offices, loan approvals, verifying client loan utilization, compiling reports and accounts for each branch, supervising branch budgeting, and testing client group/centres for poverty targeting. The bank has six departments at central office: Planning & Monitoring, Internal Audit, Administration, Accounts, Training and Branch Operation departments. The General Manager is responsible for day-to-day operations and works closely with Chief Executive Officer. The CEO sets vision and strategy and reviews operations carefully.

Organisational set-up NUBL has a Central office, a Liaison office at 125 Mirmiremarg, Anamnagar, Kathmandu, and 4 Regional Offices: Bhairahawa, Rupandehi, Bharatpur, Chitwan, , Bara and Nepalgunj, Banke. NUBL has forty branch offices (Service Delivery Offices) in ten districts: Dhakdhai, Sitalnagar, Majhgawa, Ramapur, Mahajidiya, Kotihawa, Harraiya and Bhairahawa in Rupandehi District; Barrohiya and Tilaurakot in Kapilbastu District; and Parasi, Belatari and Daldle in Nawalparasi District; Aryabhanjyang Bastari in Palpa District; Madi, Bharatpur, Bhandara, Tandi, Chanauli, Mugling in Chitwan District;Parsauni, Parwanipur, Kalaiya, Madhuban, , Telkuwa, Kolbhi in ; Ramgadhwa(Birganj) in Parsa District; Chandranigahpur, Shivnagar(Garuda), Sukdevchowk(Gaur), Basntpati in Rauthat district; Kohalpur, Udaypur, Ranjha and Paraspur in Banke District; and Sishaniya, Tulsipur and Gadhwa in Dang District.

Staffing: NUBL has two hundred seventy seven staffs (including 36 training staff) as of July 2005 among them 25 are in central office, 14 in regional office and 238 in branch offices.

Staffing by gender: NUBL has 247 male staff and 30 female staff. Three women staffs are in managerial position and twenty-seven are in assistant level.

Coverage: NUBL has covered 402 VDC in ten districts of Central and Western Terai region and one hill district. The programme districts are - Rupandehi, Nawalparasi, Kapilvastu, Chitwan, Makawanpur, Bara, Parsa, Rautahat, Banke, Dang and Palpa (10 out of 75 districts). NUBL is providing microfinance service to 64,037 household members as of Mid July 2005.

Implementing strategy

Focused Area: Nirdhan Utthan Bank is focused on disadvantaged areas where target clients are sufficient in number and provides microfinance services and social awareness to such poor people.

Target client: NUBL is committed to provide microfinance services to deprived families especially the women. NUBL has developed some tools to identify the poor families, which is as follows: -If irrigated land, a holding of less than 0.25 hectares per household of five family members. -If un-irrigated land, a holding of less than 0.5 hectares per household of five members. -No pucca (cement fixed and concrete ceiling) house at the time of joining the bank. -Permanently living in the area covered by the bank. -No family members employed in the formal sector. -No current loans from other financial service providers. -Families having per capita income of not more than US$310.

Outreach Building Process: NUBL staffs identify the target members with the help of household survey and means test and then form groups. The staff starts provide compulsory training to potential clients for seven days. The training includes: rules and regulation of bank, ability to write own name, peer support and peer pressure mechanism, etc. After completing the training, the manager takes test for group approval. After getting approval the members formally get the membership of the bank.

Service Delivery methods: The bank has adopted following types of service delivery systems: -Individual service based on group guarantee -Individual service based on group and collateral for graduated members to take big loans. -Wholesale lending services to the group.

Financial Services delivery: Financial services delivery by -Individual lending based on group solidarity and without collateral. -Individual lending based on collateral. -Wholesale lending based on village bank members

Group Financial Services: Focus on the bottom 20 percent of the population. -Maintain simple loan process. -Require compulsory training and group recognition tests. -Seek homogeneity of group members and collective group liability. -Require no physical collateral.

Individual Financial Services: Focusing on micro enterprises Seek client contribution of 20% to the project Require physical collateral

Wholesale lending financial Services: Wholesale lending through self-reliant groups -Maintain simple loan process -Require compulsory training and group recognition tests -Collective liability -Require no collateral

Promotional services: Bank has provided three types of promotional services: Micro life insurance, Remittance and business development skill training for members and their spouse.

Products and services 1. Financial Products and services: NUBL is providing: micro credit, micro saving, micro life insurance and remittance services.

2. Non Financial Products and services: NUBL has training department to provide training services to its staff and clients. NUBL uses market research tool to explore market, to modify the products and to design new products and services. Bank has recognized that access to micro credit in conjunction with other social services could do more for poverty alleviation than simply micro credit as a sole intervention. NUBL provides social awareness training, business skill training- piggary, goat farming, poultry, vegetable cultivation, etc. NUBL has also developed IEC (Information, education and communication) course including education, health and various types of information in its all centres in every weekly/ fortnightly meetings.

Operational aspects 1. Eligibility criteria: same as target criteria 2. Loan use: Loan utilization is the important aspect for micro finance clients. The bank gives emphases on loan utilization and it has developed loan utilization checking methodology. Loan disbursed on staggered basis i.e. 2+2+1 system for group based loan (Bank first gives loan to only two members and that must be utilized within 15 days, after then the other two members get the loan and at the last, the group chairperson.) Centre chief, Group chairperson and loan officer must check loan utilization four times during a year and maintain register. Branch Manager must check utilization of 20% total loan disbursement. Regional manager and central office staff also required check loan utilization during their field visit. 3. Interest rate, Loan size, Loan duration and Repayment terms: NUBL has adopted interest rate to cover all costs to secure sustainability. NUBL has set interest rate on the basis of nature of loans: direct income generating and supportive. NUBL charges interest rate 20% in declining basis in general and it will be 18% if the group/ centre themselves deposit the money at office. 16% interest is charged on biogas loans.

Products 1. General Loan: After completion of the compulsory group training and group recognition test, the clients are eligible to take general Loan. Clients choose their project as per their own knowledge. This loan is accessible to all clients with good repayment performance in the following sequence: Year Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 1 12,000 1 Year 20% Weekly/Fortnightly 2 15,000 1 Year 20% Weekly/Fortnightly 3 20,000 1 Year 20% Weekly/Fortnightly 4 25,000 1 Year 20% Weekly/Fortnightly 5 & above 30,000 1 Year 20% Weekly/Fortnightly Each client must contribute 5% of the loan amount at the time of loan disbursement as compulsory group saving. 2. Seasonal Agricultural Loan: This loan is used for purchasing of chemical fertilizer, seeds, etc. It is used to do seasonal businesses like purchasing & selling of vegetables, paddy, wheat etc. This loan is accessible to clients who have successfully completed 25 weeks of paying general loan with good repayment performance and having good credit discipline in the following sequence: Year Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual Each year 3,000 1 Year 20% Weekly/Fortnightly

As in general loan each client must contribute 5% of the loan amount at the time of loan disbursement as compulsory group saving.

3. Seasonal Business Loan: It is used to do seasonal businesses like purchasing & selling of vegetables, paddy, wheat etc., purchasing & selling of goats, buffaloes in festival season. This loan is accessible to clients who have successfully completed one cycle of general loan with good repayment performance and having good credit discipline and trading attitude. Year Maximum Loan Loan Term Interest Repayment Frequency Size Rs. Rate, Annual Each year 10,000 6 Months 20% Weekly/Fortnightly At the time loan disbursement, each loanee should contribute 5% of loan amount as compulsory group saving.

4. Tube-well/Sanitary Loan: The bank provides this services in rural areas where most of people have no access to safe drinking water. In past we had some default cases because of sickness in their family members. Most of sickness was due to bad sanitary condition in their houses. Keeping this fact in mind, the bank began to provide loan to install tube-well and toilet, which are considered essential to improve sanitary condition of client family members. This loan product has played a key role for the reduction of transferable diseases in the bank's working areas. This loan is provided to those clients who have successfully completed 1st loan cycle of general loan. This loan is provided only one time for one member. The loan size, loan term and other conditions for this loan are as follows: For Tube well loan Year Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 2nd year & 3,000 2 Year 20% Weekly/Fortnightly above For Sanitary Loan

Year Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 2nd year & 6,000 2 Year 20% Weekly/Fortnightly above At the time loan disbursement, each loanee should contribute 5% of loan amount as compulsory group saving.

5. Housing Loan: The bank's target clients are very poor. The first time borrower of the bank has no pucca house. To fulfill the clients' need, the bank has decided to provide housing loans to those who have improved economic condition and skills developed to handle bigger loans. It has three categories: (a) House Construction Loan: The target clientele for this loan are NUBL's graduate members who fulfill following criteria: -Have completed 4th year loan cycle -Have maintained strong credit discipline in the previous years -No clients with loan in arrears since last two years in the centre -Have improved economic condition from previous loans -Willing to contribute at least 20% equity (10% cash and 10% in-kind) The loan size, Loan term and other conditions for this loan are as follows:

Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 50,000 2 to 6 18% Weekly/Fortnightly Years (b) House Repair Loan: The target clientele for this loan are NUBL's members who fulfill following criteria: -Have completed 2nd year loan cycle -Have maintained strong credit discipline in the previous years -No clients with loan in arrears since last two years in the centre -Have improved economic condition from previous loans -Willing to contribute at least 20% equity (10% cash and 10% in-kind)

The loan size, Loan term and other conditions for this loan are as follows: Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 15,000 2 Years 18% Weekly/Fortnightly © Homestead Purchase Loan (Ghaderi Loan): The target clientele for this loan are NUBL's graduate members who fulfill following criteria: -Have completed 2nd year loan cycle -Have maintained strong credit discipline in the previous years -No clients with loan in arrears since last two years in the centre -Have improved economic condition from previous loans -Willing to contribute at least 20% equity (10% cash and 10% in-kind) The loan size, Loan term and other conditions for this loan are as follows: Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 15,000 2 Years 18% Weekly/Fortnightly

6. Micro-Enterprise Loan: The target clientele for this loan are bank graduate members having entrepreneurship skills in the family. The major sectors of financing for this loan are: Trading Enterprises, Cottage Industries, Food Processing, Transport Sector, and Agro-based Commercial Farming. The graduated members who fulfill the following criteria are eligible for this loan: -Have completed 2nd year loan cycle -Have maintained strong credit discipline in the previous years -No clients with loan in arrears since last two years in the centre -Have improved economic condition from previous loans -Willing to contribute at least 20% equity (10% cash and 10% in-kind) -Willing to submit collateral (land, house given document with prove) -Proven capability to operate micro-enterprises -Can provide physical collateral as loan guarantee The loan size, Loan term and other conditions for this loan are as follows: Maximum Loan Size Loan Interest Repayment Frequency Rs. Term Rate, Annual 100,000 1 to 3 18% *Weekly to Quarterly Years * Depends upon enterprise's cash flow

Approval time: The loan approval time is no more than a week.

Savings: The bank has a strategy to mobilize maximum amount of savings from its clients so that external dependency on lending funds could be minimized. The bank encourages members to save so that capital can be created internally to meet their needs in the long run. The savings products are: 1. Group Fund Saving: Group Fund Saving (GF) is a compulsory saving collected from members. The sources of GF are as follows: -5% of loan amount at the time of loan disbursement on selected loan products. -Interest paid by the bank in each semi-annual and annual closing. -Rs. Two per week per client 2. Personal Voluntary Saving: The bank also insists members to save when they have some surplus. A member can open her account with a minimum of Rs.10.00. They can withdraw whatever amount they want from this account. The bank gives 6% interest to the saving amount. 3. Centre fund saving: Centre Fund Saving (CF) is a compulsory saving collected from members. The sources of CF are as follows: -Rs. one per week per client -Penalty from member and staff to late attendance in centre -Interest paid by the bank in each semi-annual and annual closing. This saving is deposited in the branches of the bank. The bank provides 6% interest on the saving amount. The members have access to this saving for social work purposes like centre house built, copies & pen for attendance register, purchase mat & furniture for centre and for other social needs. Withdrawal from this saving account needs to be approved by the concerned centre.

Other financial products 1. Livestock insurance: NUBL has link with Insurance Company to provide insurance service to bank clients. Bank clients need to pay @ 3% as premium of insured amount. When her livestock dies, she will receive 80% compensation of insured amount. Insurance will cover for the period of loan term that is one year. 2. Microlife insurance: NUBL has been providing microlife insurance service as sub- agent of National Life and General Insurance Company. This service is open to clients, her spouse and guardians. This service covers for one-year period. Under this service, four products have been offered from Rs. 10,000 to Rs. 40,000. Premium has been set at Rs.70 for insuring Rs.10, 000 Rs.140 for Rs.20, 000 Rs.210 for Rs.30, 000 and Rs.280 for Rs.40, 000 respectively. In case of death from accident, compensation will be doubled of insured amount. 3. Money Transfer Service: NUBL has been providing this service as a sub agent of Nepal Investment Bank Limited. Nirdhan has designed this product for clients as well as non-client.

Outreach: Only poor women can get membership of NUBL. They have to balance multiple roles so bank manages its centre meeting at morning time for an hour near the clients' home. Members have good understanding about centre meeting that it is the forum to discuss on income generating, social awareness, etc. Bank also fixes centre meeting time in coordination with all centre members. NUBL has 64,037 clients in 2158 centres as of Mid July 2005.

Customer satisfaction: NUBL has developed new products on the basis of market research as per demand of members. The bank organizes centre chief workshop, Guardian workshop for diagnosis of field issues and find out customer's feedback, satisfaction level. Bank has committed to fulfill the customers' financial needs. NUBL is implementing CDMS (Client Data Monitoring System) to track the poverty level of clients on regular basis. Recently NUBL has made an impact study through Centre for Microfinance (CMF) and results yet to be received.

Supervision and monitoring system (financial and management)

Management Information System: The bank emphasizes transparency at each level of operation. The entire lending and saving activities of the groups and centres at the grassroots are performed at an open and transparent environment participated by the loan officers and all members of the centres. It also emphasizes on the internal transparency across the branch offices, which it considers as an important strategy for the membership drive and expansion. Following the GBFS, Bangladesh, the bank has developed its MIS in such a way that it can help to maintain high recovery rate and gives guideline to the management for further improvement.

Software: The bank's MIS is mostly computerized system. Presently, all 40-branch offices have been running computerized MIS. The MIS software has been useful for reducing work load of staff, tracking loan, producing report on time, decreasing financial fraud and increasing staff productivity. The bank has also developed new oracle software in which MIS and CDMS are included. New software is under going piloting test in two branches. After piloting test bank will speedily replace in all office.

Portfolio management indicators: Software finds out the portfolio management report centre wise, client wise, staff wise and date wise amount in Portfolio in Arrears (>1weeks), Portfolio in arrears %, Amount of portfolio at Risk (>1week), Portfolio at Risk % and clean Portfolio amount and clean amount % for tracking loan portfolio. The bank also monitors branch wise loan loss provision amount and loan write off amount for tracking portfolio.

AIS/ FIS: NUBL has used financial statements that is- Income statement and Balance sheet and analyze the various type of indicator from that report.

Reporting system: First of all, branch offices prepare the following reports in weekly/fortnightly, monthly, Quarterly, Semi-annual and Annual reports and send to regional office then regional offices compile and forwards to central office. Central Office prepares the consolidated report and it is used for self-evaluation. Reports usually prepared by NUBL: 1. Weekly report: Branch offices prepare the following two reports 0n weekly basis and send it to regional office. This is usually weekly loan disbursement and collection report. This report contains product-wise loan disbursement amount; number of loans disbursed, amount repaid, and the repayment percentage; 2. Weekly Loan overdue detail report: This report contains member wise loan in arrears and loan at risk (if any) 3. Monthly Report: Branch office prepares six types of monthly reports and sends it to regional office. 4. Monthly progress report: It contains five major headings namely Coverage, Loan account, saving, information on groups, and information on staff. -Coverage includes financial services being provided in VDCs. -Loan account heading contains mainly product and term-wise numbers of loan disbursed and amount disbursed, product-wise loan repayment, product-wise number of loans outstanding and product-wise loan outstanding. -Savings heading contains amount of saving collected in Group fund saving, Voluntary saving and other savings during the month. -Information on groups heading contains number of new members, borrowers, number of new groups formed, number of centres formed, number of dropout members, number of dormant members, term-wise borrowers, number of voluntary savings accounts etc. -Information on staff heading contains number of staff involved in the operation such as branch in-charge, accountant, loan officers, trainees, and female staff. 5. Monthly member attendance report: It contains centre-wise number of members, number of members absent during the centre meeting, and attendance percentage. This information is important in Grameen Bank Financial System, as centre is the heart of the bank where all financial transactions are carried out in presence of group members. 6. Loan utilization checking report: It contains number of projects visited and checked by loan officer, accountant and branch manager. It provides staff-wise information. 7. Monthly Income Statement 8. Monthly Balance Sheet, 9. Monthly loan product-wise ledger balance report: It contains outstanding balance of loans and savings such as centre-wise outstanding in General loan, Seasonal agricultural loan, Seasonal business loan, Tubewell/Sanitary Loan, Housing loans, Microenterprise Loan, Group Fund Loan. 10. Quarterly, Semi-annual and Annual reports. Quarterly, Semi-annual and Annual report aggregate the statistics generated through the weekly and monthly reports. The information generated by bank offices is timely, up-to date and tracks the right things. It tracks each loan or client performance, individual staff performance, branch level performance, and institutional standing.

Usage of reports: The bank's senior management uses the weekly and monthly reports to have a finger on the pulse of the institution. Regional Manager uses the weekly reports to track weekly repayments, disbursement, portfolio-at-risk and group formation statistics, and other branch issues. The Regional office deals with any problem identified, immediately with a follow-up visit. Regional office relies on the weekly report for cash and liquidity management purposes for the next week. The branch manager uses all the information for planning and branch management purposes. The monthly, quarterly, semi-annual and annual reports are used by CEO, DGM and other departments of central office to monitor the overall institutional financial position for cash flow, liquidity, planning and institutional and staff performance.

Internal control: The bank has Audit Committee and Internal Audit Department. The internal audit department reports to the chairman of Audit Committee. The reports are discussed in Audit Committee and necessary recommendations are given to Board and the Board gives direction to management. The internal audit team spends about 75% of time in the field. They check conformity with stipulated policies and procedures for the micro-finance operations. During the audit time the audit team visits centre meetings, interacts with villagers so that any weakness in both financial and non-financial service part of the bank could be identified and improved. The loan repayment and savings collection are handled at the centre meetings, where the field assistant collects weekly principal and interest instalments and savings, after publicly counting the amount. Loan disbursements and payment of savings withdrawal is made in the branch office to avoid underpayment and overpayment. All repayments and savings contributions are collected by the group chairperson, counted in public and handed over to the field assistants simultaneously and recorded in the field assistant's book as well as into the client's transaction passbook. Upon return to the office, the field assistant gives the vouchers to the accountant who records all transactions into a separate book. At the branch level, the cash and general ledger are reconciled and updated on a daily basis by the accountant, and is checked by the branch manager. The cash box is locked in a closet. The opening balance and closing balance are reconciled on a daily basis against all vouchers at the branch office. The accounting department at the central office monitors the cash transferred to the branches and regional offices through the income statement and balance sheet.

Expectations in practices/ Flexibility 1. Qualifying to receive loan: The bank has adopted the following criteria for qualifying to receive loan. -Group members’ compulsory training and group recognition test needed for membership -Be able to pay compulsory weekly/ fortnightly instalments of loans. -To follow bank rule and regulation and maintain centre discipline -Member must utilize loans properly -Members' attendance must be 80% to get subsequent loans -Member must increase income to get bigger loans

2. Loan repayment schedule: NUBL uses following repayment schedule, and there is no plan to change it.

Repayment schedule in equal fortnightly Fortnightly Factors at 18% Interest rate instalment at 18% interest

Fortnight Compounding Compounding Discount Capital recovery OB Ins Pri Interest CB factor for 1 factor for 1/month factor factor 1 5,000.00 210.80 176.18 34.62 4,823.82 1 1.006923 1 0.993125 1.006923 2 4,823.82 210.80 177.40 33.40 4,646.42 2 1.013894 2.006923 0.986296 0.505198 3 4,646.42 210.80 178.63 32.17 4,467.79 3 1.020913 3.020817 0.979515 0.337959 4 4,467.79 210.80 179.87 30.93 4,287.92 4 1.027981 4.041731 0.972780 0.254342 5 4,287.92 210.80 181.11 29.69 4,106.81 5 1.035098 5.069712 0.966092 0.204173 6 4,106.81 210.80 182.37 28.43 3,924.44 6 1.042264 6.104810 0.959450 0.170728 7 3,924.44 210.80 183.63 27.17 3,740.81 7 1.049480 7.147074 0.952853 0.146840 8 3,740.81 210.80 184.90 25.90 3,555.91 8 1.056745 8.196554 0.946302 0.128926 9 3,555.91 210.80 186.18 24.62 3,369.73 9 1.064061 9.253299 0.939795 0.114993 10 3,369.73 210.80 187.47 23.33 3,182.27 10 1.071428 10.317360 0.933334 0.103847 11 3,182.27 210.80 188.77 22.03 2,993.50 11 1.078845 11.388788 0.926917 0.094729 12 2,993.50 210.80 190.07 20.72 2,803.43 12 1.086314 12.467634 0.920544 0.087131 13 2,803.43 210.80 191.39 19.41 2,612.04 13 1.093835 13.553948 0.914215 0.080702 14 2,612.04 210.80 192.71 18.08 2,419.32 14 1.101408 14.647783 0.907929 0.075193 15 2,419.32 210.80 194.05 16.75 2,225.27 15 1.109033 15.749191 0.901687 0.070418 16 2,225.27 210.80 195.39 15.41 2,029.88 16 1.116711 16.858224 0.895487 0.066241 17 2,029.88 210.80 196.74 14.05 1,833.14 17 1.124442 17.974934 0.889330 0.062556 18 1,833.14 210.80 198.11 12.69 1,635.03 18 1.132226 19.099376 0.883216 0.059281 19 1,635.03 210.80 199.48 11.32 1,435.55 19 1.140065 20.231603 0.877143 0.056351 20 1,435.55 210.80 200.86 9.94 1,234.70 20 1.147958 21.371668 0.871112 0.053714 21 1,234.70 210.80 202.25 8.55 1,032.45 21 1.155905 22.519625 0.865123 0.051329 22 1,032.45 210.80 203.65 7.15 828.80 22 1.163908 23.675530 0.859175 0.049161 23 828.80 210.80 205.06 5.74 623.74 23 1.171965 24.839438 0.853268 0.047182 24 623.74 210.80 206.48 4.32 417.26 24 1.180079 26.011403 0.847401 0.045368 25 417.26 210.80 207.91 2.89 209.35 25 1.188249 27.191482 0.841575 0.043699 26 209.35 210.80 209.35 1.45 (0.00) NUBL does not give more than three loans at a time.

Impact measurement NUBL has developed Means test form for benchmark information CDMS is periodical tracking of benchmark information Household survey form, Means test form and PRA tool are used to identify the hard-core poor, CDMS is also used to monitor the poverty level NUBL has recently done an impact study through an independent consultant, its results is not yet received.

Performance indicators: Portfolio quality: Portfolio at risk= 5.1% Productivity and efficiency: Number of active borrower per credit officer = 474 Portfolio outstanding per credit officer = Rs.29, 81,515 Operating cost ratio = 22.7% Cost per unit of currency lent = Rs. 0.07

Sustainability Operational Self-sufficiency (OSS) = 100.3% Profitability: Profit margin = 0%

Growth / Trend:

S.no Indicators unit 2001 2002 2003 2004 2005 1 No.of Branch No. 26 26 26 36 40 office 2 No. of regional NO. 3 3 4 4 4 office 3 No.of district No. 7 7 8 10 10 covered 4 No.of centre No. 1173 1213 1217 1609 2158 5 No. of clients No. 35,268 35,388 34,817 44,862 64,037 6 No. of borrower No. 30,559 29,589 27,457 32,678 50,063 7 No. of staff No. 211 203 196 229 277 8 Loan disbursed NRs.'000 737,904 1,047,612 1,335,506 1,676,703 2,264,172 9 Loan NRs.'000 174,846 211,112 210,688 262,820 402,504 Outstanding 10 Total saving NRs.'000 52,925 61,630 64,281 80,212 117,449 11 Total income NRs.'000 40,459 44,438 60,200 60,807 85,375 12 Total expenses NRs.'000 40272 42,259 57,960 54,795 75,461 13 Net NRs.'000 187 2,179 2,240 6,012 9,914 surplus(deficit) Exchange rate US$ 1.00 = NRs. 70.65

Future Direction: NUBL makes yearly strategy and operational plan and long term business plan for future. NUBL is not planning to change its major operation but it wants to rectify the shortcomings, wants to make the portfolio quality better and, finally a bigger outreach and higher contribution on poverty reduction.

Members’ Profile - Pakistan Sarhad Rural Support Programme (SRSP)

Address 129 Defense Officers’ Colony, Street 2, Khyber Road, Peshawar, N-WFP, Pakistan Telephone: 0092 91 9211417/ 274540/ 285389 Fax: 0092 91 276734 E-mail: [email protected]

Key Persons in Microfinance Masood-ul- Mulk, Chief Executive Officer E-mail: [email protected] Wasiq Ali Khan, Programme Manager- Microfinance E-mail: [email protected]

Type of organisation Rural Support Programme, working as non-for profit organisation for poverty reduction in the rural areas of N- WFP.

Legal status Sarhad Rural Support Programme was established in 1989 as private (guarantee) Limited Company under Article 42, of the Company’s Ordinance 1984.

History SRSP was established to replicate the rural development programme for poverty reduction, which was successfully implemented in the northern areas of the Pakistan. It was established on the initiative of the government of NWFP and with the seed money provided by the USAID in the beginning.

Vision Managing self-sustaining self-managed financially viable grassroots institutions for poverty reduction

Mission: Harnessing people’s potential to help themselves through establishing a network of grass roots institutions for poverty reduction, sustainable and equitable development

Values -Building social capital by mobilizing communities for poverty reduction, livelihoods and sustainable development -Enhancing individual capacities for leadership; and organisational capacity for internal and external management -Building resource base of the poor and remove infrastructure constraints utilizing potential existing in communities -Expanding the frontiers of finance by providing access to credit to the poorer segments of the population -Enabling communities to link up with providers of social services

Governance SRSP has a Board of Directors, which have enriched experience in and an un-relinquishing commitment to people centreed development. The experiences are as farmers, entrepreneurs, past experience with the highest echelons of the government, environmentalists, sociologists and technocrats. The Board sets the policy, monitors its implementation and provides timely feedback on programme implementation. The next tier is the management, which is at the Head Office as well as heading the regional teams. The regions are completely decentralized in terms of operation and staff matters. The budget is allocated to the regional programme managers (RPMs), which they manage for effective implementation of the programme. The core management at the Head Office provides backstopping support to the regions, streamlining systems and monitoring programme progress and gives feedback to the BoD.

Organisational set-up SRSP is managed through its Head office, that is also works as its Liaison Office, and through Regional Offices located at Peshawar- House # 11, Saddiq Colony, Fagirabad No.2, Eidgah Road, Peshawar, Kohat-House # 334, Sector 4, KDA Kohat Town, Kohat, Mansehra- Opp. Old Circuit House, Moulana Ghulam Ghous Hazarvi Road, Mansehra, Abbottabad- House # 424, Al-Sultan, Kaghan Colony, Mandian, Abbottabad.

Staffing: SRSP has total staff strength of 460 staff members of which 241 are professionals and the rest are support staff.

Staffing by gender: Of the total professional staff members of 241, the women strength comes to 64. Against the management position, which is 10 in total, only 1 is woman.

Coverage: Geographic as well as clients: The microfinance programme of SRSP is spread in 9 districts of the total 24 districts that the province has. Over 25,000 clients has so far benefited from the microfinance facility of SRSP since 1991.

Implementing Strategy 1. Focused Area: Rural areas of N-WFP

2. Target client: Moderate poor, hard-core poor, enterprising poor, ethnic community, population living blow the poverty line, earning less US$ 1 a day

Outreach Building process: The regional teams conduct in depth dialogues and diagnostic surveys in villages which result in the preparation of village micro-plans consisting of detailed feasibility of various activities, expected beneficiaries, resource requirements, training needs, implementation and maintenance arrangements, repayment schedules in case of credit and project cost-benefit analysis with an emphasis on the envisaged impact on the poverty situation, especially of the poorest of the poor. Groups both of men and women with an average size of 30 members are formed which generally has a president, secretary and activist. All the development inputs received by the groups that are termed as M/WCO are need & opportunity driven. The villagers express their needs & opportunity in dialogues and in the form of resolutions passed during general body meetings. For the implementation of an identified activity, a term of partnership is finalized, if investment in a proposed activity is feasible. The villagers spell out the manner in which they will plan, implement, manage and maintain the specific activity.

3. Service Delivery methods: Group /solidarity/ individual. Groups with an average size of 30 members, is a prerequisite to access any kind of development inputs from SRSP.

4. Financial services delivery: All lending is done to individuals via group to ensure peer pressure as no financial collateral is required.

5. Products and Services: Financial Products: There are two loan products that are presently being offered to the rural poor. One is Emergency loan which has a ceiling of Rs. 10,000 maximum and which lasts for 12 months against no mark up. The second is Business Loan which has a ceiling of Rs. 20,000 and which lasts for a maximum duration of 20 months. It entails a mark up of 1 percent per month. Both products are advanced against a fixed processing fee of Rs. 900 that is being paid by the client regardless of the loan size.

Financial services: Only Loans as in accordance with the microfinance ordinance 2001, SRSP being a unlicensed MFI can not mobilize deposits. The organisation is however in a process of providing insurance facility to its target group against a nominal annual premium through an insurance company.

Non-financial services: social awareness training, business development services, health, education etc Various non-financial programmes are offered to the target group that mainly includes no-cost skill development training, enterprise development, natural resource management, development of physical infrastructure, awareness creation on rural health and education.

Operational aspects 1. Eligibility criteria: Regardless of gender, a client has to be a member of a community organisation (M/WCO), shall have a National Identity Card, must be aged between 18-60 years, demonstrate regular attendance and savings in the group meetings, must be only active member of the HH that s/he represents and the group in general and two members in particular are willing to take responsibility for his/her in time loan repayment. 2. Loan use: Believing that money is fungible, SRSP does not penalize clients if someone has used the loan amount for purchase of a badly needed HH asset, invested in his/her child education or spent the money on his/her own or her child or spouse health, as long as the client can demonstrate a repayment capacity to the organisation.

3. Interest rate: A mark up of one percent per month is charged in case of Business loan, which unlike Emergency loan product entails a loan graduation. A fixed amount of Loan process fee of Rs. 900 in also charged to cover for stationary and part to of the mobility cost of the staff involved while carrying out the loan appraisal at the clients’ door step.

4. Loan size: Emergency Loan: Rs. 5,000/- (minimum) / Rs. 10,000/- (maximum) per individual Business Loan: Rs. 10,000/- (minimum) / Rs. 20,000/- (maximum) per individual

5. Loan duration: Emergency Loan: 12 months (maximum) Business Loan: 12 - 20 months

6. Approval time: Average= 10 days Maximum = 15 days

7. Repayment terms: All loans are desired to be repaid to the organisation in equal monthly instalments.

8. Savings: Savings by the group members is not mandatory; however a group total outstanding portfolio does not exceed 10 percent of their savings balance in the designated bank account.

9. Other financial products: The organisation is in a process of providing insurance facility to its target group against a nominal annual premium through an insurance company.

10. Outreach: Poor people, esp., women have to balance multiple roles. They are day laborers, mothers, economic producers and community workers. This means that they have limited free time to take part in group meetings, and travel to a MFI and to take part in procedures to access credit. So, what is your position to address this issue? State your position to: the depth or breadth of outreach?

11. Lending method: All lending is done to individuals via group to ensure peer pressure as no financial collateral is required. The office bearers with the endorsement of 70 percent of group members place the loan application in favor of the borrower to the organisation with all prerequisites. A staff member from the organisation carries a household survey and meets the potential client after a day or two. If the client status against the three essential indicators i.e. Character, Capacity and Collateral is found satisfactory, the loan is recommended for approval. It takes on average of 10 days to process the loan since the time of submission of loan application by the client to SRSP through the loan resolution from the group.

12. Customer satisfaction: The indicator we follow in our programme is the ‘repeated clientele’. We believe our services bring the best of satisfaction to our target group, especially rural poor as most of them are our repeated customers who value the services in high terms.

13. Training: SRSP generate demand for credit through imparting skill enhancement trainings to individuals free of cost.

Supervision and monitoring system (financial and management)

MIS The organisation has developed and in-housed management information system which is backed by an excellent ‘loan tracking system’. All management and the rest concerned are regularly updated on the performance of microfinance programme of SRSP and gray areas are brought into the attention of Chief Executive and the Board of Directors on regular basis. A performance scoring system has been build up which ranks each individual involved in the delivery of microfinance services on the basis of various performance indicators.

Exceptions in practices/Flexibility 1. Qualifying to receive loan: A group has to be at least three months old to be in a position to recommend its members for loan disbursal by SRSP.

2. Savings options: Savings, though not mandatory however determine a group capacity to access the maximum loan from the organisation. A group can’t request for more than 10 times of its savings balance in the designated account. If it wishes, it has to increase its savings to the desired level.

3. Loan repayment schedule: All loans by the individuals are repayable in equal monthly instalments. Loan duration at maximum falls at 20 months presently.

4. Loan size for first time loan and for subsequent loans: For the first time borrowers, SRSP offers a loan amount of Rs. 10,000 however when a borrower develops a credit history with the organisation s/he may access the facility for a maximum of Rs. 20,000/- in the following years. Organisation is thinking of raising the ceiling to Rs. 50,000 provided we get clients who can demonstrate his/her repayment capacity based on his/her existing source of income and subsequent cash flows.

5. Loan pricing: A mark up of one percent per month is charged in case of Business loan, which unlike Emergency loan product entails a loan graduation. A fixed amount of Loan process fee of Rs. 900 in also charged to cover for stationary and part to of the mobility cost of the staff involved while carrying out the loan appraisal at the clients’ door step.

6. Restriction to receive more than one loan: There is restriction on receiving more than one loan by a single client in one point in time as we believe it encourages ‘refinancing’ which isn’t being considers a best practice in microfinance.

7. Other loan options: housing, sanitation, and consumptions: Believing that money is fungible, SRSP does not penalize clients if someone has used the loan amount for purchase of a badly needed HH asset, invested in his/her child education or spent the money on his/her own or her child or spouse health, as long as the client can demonstrate a repayment capacity to the organisation.

Impact measurement 1. Benchmark information: At the time of appraisal, SRSP collect information regarding the client and the H/H s/he is a part of.

2. Periodical tracking of benchmark information: At the time of repeat loan, the information that was initially acquired, are compared with the fresh one for an impact assessment of our financial inputs in that particular H/H.

3. Poverty assessment tools: SRSP uses poverty assessment tools, but not so frequently

4. Study to measure social impact: Studies are done, but not internally. Mostly, the donors commission such studies to gauge the impact of their intervention in their own manner.

Performance indicators (as of June 30, 2005) 1. Portfolio Quality: Cumulative Recovery Rate = 100%, Current Recovery Rate = 100%, Portfolio at Risk = Nil

2. Productivity and efficiency: Number of active borrower per credit officer = 100, Portfolio outstanding per credit officer= Rs. 700,000, Cost per unit of currency lent= 30paisa

3. Future Direction: Keeping in view the poverty depth which is also visible in urban areas, SRSP is presently practicing a pilot programme, which is aimed at the improving livelihood of poor women by providing them an easy access to microfinance services. The organisation believes that in addition to awareness creation on health and education, the provision of financial services address the issue of gender disparity more adequately.

Members’ Profile - Phillipines NEW RURAL BANK OF SAN LEONADO (NE), INC

ADDRESS NRBSL BLDG. MAHARLIKA HIGWAY, BARANGAY DIVERSION, SAN LEONARDO, NUEVA ECIJA, PHILIPPINES TELEPHONE NUMBER: (02) (44) 6043003 FAX NUMBER: (02) (44) 6043004 E-MAIL ADDRESS: [email protected] WEBSITE: www.nrbsl.com

KEY PERSON: ANDRES G. PANGANIBAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER TYPE OF ORGANISATION: RURAL BANK

VISION The New Rural Bank of San Leonardo envisions a province and a region where the microenterprising poor play the vital role for the delivery and receiving mechanism for the resources and benefits of development. Our vision is to be the leading provider of microfinance services and a strategic partner in the development of a competitive microfinancing operation.

MISSION NRBSL ‘s mission is to strive to be more operationally viable and responsive to the needs of our clientele, to be an effective orchestrator and catalyst of progress and to serve as the mainstream financial institution for the micro-enterprise development of Nueva Ecija, the Central Luzon region and beyond.

YEARS IN OPERATION: 1994 TO PRESENT (11 YEARS) NUMBER OF PERSONNEL: 121 (AS OF JANUARY 15, 2005) LOCATION OR AREA/S OF OPERATION: NUEVA ECIJA, PAMPANGA, TARLAC, PAMPANGA, BULACAN, LA UNION, METRO MANILA TYPE OF CLIENTS/BENEFICIARIES: ENTERPRISING POOR AND COMMUNITY ENTREPRENEURS

CURRENT PROGRAMMES AND PROJECTS: LENDING PROGRAMMES: LIMA PARA PARA SA LAHAT 1 & 2; MICROSOLO; TULONG BAYAN; LAND REDEMPTION PROGRAMME; NEGOSYANTE NG BAYAN 1 & 2BUSINESS LABOR TRIPLE BENEFIT PROGRAMME

OTHER SERVICES OFFERED: DEPOSIT-TAKING AND OTHER BANKING SERVICES; TRAINING ON MICROFINANCE OPERATIONS, OTHERS.

FINANCIAL SOURCES: DEPOSITS FROM THE GENERAL PUBLIC; BILLS PAYABLE WITH ICCO; REDISCOUNTING LINES WITH BANGKO SENTRAL NG PILIPINAS, LAND BANK OF THE PHILIPPINES AND SMALL BUSINESS GUARANTEE & FINANCE CORP.

COALITION OR NETWORK MEMBERSHIP: RURAL BANKERS ASSOCIATION OF THE PHILIPINES (RBAP); CENTRAL LUZON CONFEDERATION OF RURAL BANKS (CCLRB), NUEVA ECIJA FEDERATION OF RURAL BANKS (NEFRB); MICROFINANCE COUNCIL OF THE PHILIPPINES, INC. (MCPI) AND CONSORTIUM FOR THE ADVANCEMENT AND DEVELOPMENT OF THE LOCAL ECONOMIES OF SAMAR (CANDLES).

History/values For the past ten years, the New Rural Bank of San Leonardo had laid the ground for microfinance to make a stake in the local economy. But the idea of organizing the poor and small borrowers essential to realize their strength and unity, instil discipline and solidarity among them is not enough to eradicate poverty in their midst. The fact remains, that despite having a small enterprise an enterprising poor is still weak and unstable. They are vulnerable to a variety of domestic problems not directly related to business operations but resulting to financial dislocations. NRBSL has learned, over a decade-long microfinance operation, that it is not enough to provide the enterprising poor access to credit, savings and investment services. Nor is it enough that they can afford the cost of services. A development perspective must be found to make other social services available and within their reach. But NRBSL has likewise realized that the responsibility to deliver social services is beyond a bank’s realm. It has become clear to NRBSL that MFI’s intervention must be confined to the provision of financial services. Its lack of expertise in other field outside finance makes it an ineffective vehicle in the delivery of such other services that the enterprising poor household needs. Already felt is the need for other sectors to get involved and address not only the poor’s entrepreneurial activities but also family matters and community development concerns as well. It is a different dimension of support and intervention that only organisations and agencies conceived for such purposes can deliver and implement. Access to health services, available infrastructures, capability building and technical assistance programmes, affordable consumer items, networking guides, and other social services are essential to push the enterprising poor out of poverty. Because behind borrowers’ delinquency is the dearth of such services. This is the context of microfinance within the framework of local economy development, where microfinance institutions support the microenterprises and the agricultural sector in complementation with other pillars of development, which include the local government units, civil society and migrant Filipino investments. It is this operationalisation of microfinance within the framework of developing local economies that could spur the eradication of poverty and affect a turnaround of a true and flourishing national economy. Under a framework of local economy development, microfinance technologies will be sharpened towards the transformation of the enterprising poor to become full-time, progressive and community based entrepreneurs. In the process, labour generation, increasing disposable incomes and production shall dynamically feed on each other in a spiral but sustainable manner. This is development from the bottom going up to the top. It is a development that NRBSL hopes to bring to as many areas in the country. It is a development that is micro-led. Micro-enterprises at the household level can expand towards the community, can be less dependent on the national government but can also rely on assistance of local government units, the civil society as well as remittances from overseas Filipinos. It is a development that impacts not only at the individual or family level but on the community and the nation as well.

NRBSL Microfinance Methodology – The Growth Tree

Consistent with the Local Economy Development Model, NRBSL has concentrated on its traditional role of providing banking services, in particular, to the emerging entrepreneurs bound to become small and medium enterprises. That is why NRBSL has packaged its products and services as both purposeful and directional to provide a logical perspective to its clients.

NRBSL Growth Tree Business Labor Triple Benefit Program

Negosyante ng Bayan 2 Community Entrepreneur 2

Negosyante ng Bayan 1 Community Entrepreneur 1

Lima Para Sa Lahat Microsolo 1 and 2 (Five for All)

Products and services Loan products: NRBSL’s microfinance loan products are designed in such a way that continuum of services is available to the client as they aspire to graduate from enterprising poor onto the next level of being community entrepreneur and beyond. NRBSL believes that the emergence of full-time community entrepreneurs or small and medium enterprises is the strategic leap in the development of local economies. Once a decent number of SMEs is reached, this could spur development through job creations and increased disposable income. The following are among the microfinance products of the NRBSL in the sequential fashion: 1. Lima Para sa Lahat (1): Two to five persons who are eligible for loans are grouped together. They must be neighbours. Survivors of closed LPSL2 centre may form a group provided they have at least two years of good performance as centre members. Group members assign a group name for easy character reference and act as co-makers to each other. A leader is elected to remit payment to NRBSL or its designated depository bank to save on transaction cost. Loans can be had from P2, 000 to P5, 000 with no collateral and payable every week. Individual members must already be engaged in some form of income-generating activity. As group members go through several cycles, loan amount per individual can be ranged up to P30, 000. 2. Lima Para sa Lahat (2): Groups of women composed of 3 to 5 per group with income-generating activities may organize themselves into a centre with a total number of 15 up to 55. Prospective members observe centre-building process from means testing, project inventories, value formation trainings, documentation and release. The loan sizes vary from P3, 000 to P30,000 depending on the financial capacity based on business operations, performance, deposit build-up and other considerations. Membership and loan application undergo the endorsement and confirmation of all centre members who meet every week at a designated time and place for loan payment collection and discussion of mattes concerning them. A centre chief and treasurer are elected and required to undergo a 2-day live-in training as a prerequisite to loan release. The centre treasurer remits the payment to NRBSL office or to a designated depository bank. A copy of the deposit slip is submitted to the NRBSL. Once a member defaults, the immediate members in the same group cover the payment due. If the group-mates are no longer capable, then the entire centre becomes responsible. 3. Microsolo: Promoted in densely populated city proper and town centres with a good number of commercial establishments situated in the public market facilities and its periphery. Loans ranging from P3,000.00 to P100,000 may be availed under this programme. Once all the forms are accomplished per approved loan package following credit approval, the proceeds of the loan shall be delivered and disbursed by the Branch Manager to the business site of the client. Loan collection and deposit taking are responsibilities of the Technical Officer and is done on a daily basis. The Technical Officer will follow an adjusted working hours to suit the conduct of business in the market place. 4. Negosyante ng Bayan 1: The NNB1 can borrow more than P30,000 even without collateral for as long as he/she has proven track record of paying loans and the business is growing. They maybe individuals who graduated out of the Lima Para sa Lahat programme and want a bigger slice of loans that they can pay on their own. A CE client can borrow up to P200, 000. Indicators that an enterprising poor has become a community entrepreneur are as follows: -Increased volume of business transactions -Separation of business site from the household -Hiring of business/household labour -Formal registration 5. Negosyante ng Bayan 2: After years of business operation, the community entrepreneur (NNB1) must be able to acquire and invest in fixed assets. Thus, NNB2 can borrow more than P200, 000 up to P1M secured by real estate properties and/or chattels. Still, business growth and good repayment performance are the primary basis for the loan exposure and upgrade in their standing. It is not necessary though that NNB2 must start from LPSL levels, community entrepreneurs with proven business record, qualified per standards set by NRBSL and with collateral to submit may become NNB2. 6. Business Labour Triple Benefit Programme: Classified, as BLTB clients are those with relatively advanced business operations marked by proper recording and bookkeeping; employment generation; production, packaging and delivery systems and other details of formal business operations. Under this programme, NRBSL lends to the business proponent, opens a salary loan window for his/her labourers to allow their respective enterprising spouses start an IGA and later caters to these spouses by organizing themselves as LPSL groups or centres. The lending programme comes into full circle with BLTB. One may qualify to become BLTB client subject to the following: -Labour must come from the community where the business is based -Target market of the products is primarily the local community -Proponent must allow labourers to get salary loan from NRBSL to enable their respective enterprising spouses start an IGA and later organized themselves as LPSL groups or centres. Deposit Products: Regular Savings, Minimum initial deposit of only P200, Competitive interest based on prevailing market rates, and Interest earning daily balance of P200, computed daily and credited quarterly 1. Big Time Savings: No withholding tax, Net of 10% p.a. interest rate, and 5 year placement 2. Gintong Palay Savings: High-yielding savings deposit account, Ideal investment opportunity, Minimum initial deposit of P1, 000. 3. Regular Time Deposit: Minimum initial deposit of P1, 000, Interest based on prevailing market rates

4. Demand Deposit: Encashment over the counter at issuing branch, Manila clearing thru Land Bank of the Philippines 5.Retirement Plans: An appropriate plan that suits your desired lifestyle, when you retire “sa pagtanda sosyal, hindi kawawa”

Members’ Profile – Sri Lanka Sarvodaya Economic Enterprise Development Services (Guarantee) Limited (SEEDS)

Address: “Arthadharma Kendraya”, 45 Rawatawatte Road, Moratuwa Sri Lanka Telephone: 011 5 55808,1Fax: 011 2 655122, Email: [email protected], Website: www.seeds.lk

Key Persons Shakila Wijewardena – CEO/Managing Director, Emil Anthony – Deputy Managing Director/Director Banking

Type of organisation SEEDS provides credit facilities to the rural communities of Sri Lanka

Legal status Registered under Companies Act No. 17 of 1982. Limited by Guarantee

History Sarvodaya Economic Enterprise Development Services (SEEDS) has been in operation since 1986. It began as a pilot project from advice given by international consultants. Sarvodaya is the parent organisation that began in the late 1950s as a voluntary movement committed to the elevation of poor and marginal communities. Sarvodaya members would form into groups which would eventually be called Sarvodaya Shramadana Societies (SSS) SEEDS is considered to be the economic arm of its parent organisation, with the aim to help eradicate poverty by promoting economic empowerment of rural people and working with them towards creating a sustainable livelihood. SEEDS facilitates Sarvodaya members to pursue their income earning activities more successfully, through making capital available at fair rates of interest and providing training, information, advice and product marketing support towards improving their business and technical skills. SEEDS has called this its credit plus service and they are provided by three integrated divisions, banking, training and enterprise development. In late 1998 SEEDS converted to a separate legal body registered under the Companies’ Act as a company limited by guarantee. This allows it to raise finance and contract as a legal entity. As a result a Board of Directors was appointed, which was made up of commercial banking industry and developmental field professionals. SEEDS has been operating for just under twenty years and it has over 3500 SSS which operate in over 25 districts. Through the years SEEDS has been given financial donor support from various international organisations that have allowed it to grow and expand throughout Sri Lanka.

Vision We, at SEEDS, are envisioned by a society of awakening individuals, families and communities encompassing an awakening nation, where as the human mind is being healed, so is human society and the environment. We hold to the Sarvodaya concept of a full-engagement, no-poverty society and subscribe to the Guiding Principles laid down by our Founder, Dr A T Ariyaratne of the Sarvodaya Movement, to transform SEEDS into an alternative development institution. -SEEDS engages in activities that sustain socio-cultural values in society. -SEEDS develops the society as a whole, not a “rich few”. -SEEDS encourages economic activities that will not impact adversely on the environment.

Mission To eradicate poverty by promoting economic empowerment for a sustainable livelihood.

Values Meeting Basic Needs – SEEDS upholds the concept that people have a fundamental right to the basic human needs of food, clothing and shelter and has geared its activities towards the economic emancipation of the poor through innovative and dynamic initiatives. Participation and Inclusion – SEEDS includes each and every stakeholder in the development process. Participation in the process is where the people themselves make their own decisions regarding their future, which creates a sense of ownership of the programme. Inclusion creates a space for the whole community, irrespective of race, religion or social strata, to be involved in the transformation of society. Capacity Enhancement and self reliance – SEEDS is engaged in developing leadership skills, entrepreneurial capacities, market linkages, etc., since such capacity building in the field of community and enterprise will strengthen self reliance, enabling the micro or small businessman or woman to face the vagaries of a rapidly changing market place. Ethics based on a Value System – SEEDS articulates a concern for the poor and a concern for the environment. It upholds a commitment and a social responsibility to promote an entrepreneurial culture, which embodies these concerns.

Governance SEEDS is governed by a board of directors comprising 13 directors from various professional fields such as commercial banking, law, technology, medicine, accountancy, gender, management and enterprise development. The Board meets on a quarterly basis to review, discuss and/or approve progress reports, Statement of Accounts, background papers, board papers appointments of senior management and appointment of Auditors. The audited financial statements are given to the Board each year for approval.

Organisational set-up SEEDS is managed through its Head office and through 25 district offices located throughout Sri Lanka. SEEDS comprise 3 divisions and Central, banking (including IT and Solar), training and enterprise development.

Staffing In total SEEDS has 774 staff of which 137 are from Head Office and the remaining 637 are in the field. Location Number of Staff Men Women Total Central Administration 20 9 29 Head Office & Regional Banking Division 26 18 44 Enterprise Services Division 24 11 35 Training Division 15 14 29 District Offices Banking Division 368 184 552 Enterprise Services Division 32 7 39 Training Division 37 9 46 Total 522 252 774 Percentage 67.4] 32.6]

Coverage: Geographic as well as clients SEEDS has over 3,500 SSS in 25 districts. Total cumulative membership is over 670,000

Implementing Strategy 1. Focused Area: Aim is to provide credit facilities to rural communities. SEEDS delivery mechanism involves working with a network of over 3,500 legally constituted societies. These societies are formed and managed by the people and as their capacity develops, SEEDS decentralizes an increasing amount of its activities to them.

2. Target client: SEEDS does not target the poor which can further marginalize them within society, but works with the community as a whole and focuses their efforts on the inclusion of all segments of society. Participation of the community and grass roots level organisation is fundamental to the part SEEDS plays in achieving balanced development.

3. Outreach Building: SEEDS’ membership is mostly rural communities with some urban communities as well. Majority of membership is women (69% as at 31 March 2005). There are over 3,500 SSS village societies. There are more than 850 village finance centres situated all around Sri Lanka. There are 25 district offices and 2 sub offices. SEEDS works through Sarvodaya Shramadana Societies (SSS) to reach its client base. SEEDS objective is to establish a people’s village bank and enterprise infrastructure through people’s participation. However before a SSS can turn into a village bank it must graduate through five stages. The diagram below depicts the 5-stage graduation process.

“Towards Village

“GRAMA SWARAJYA”

Village Bank

Stage 5 Creating a formal Board of Directors in place of Society Office bearers

Stage 4 Enhancing the elementary financial administration skills of society members

Stage 3 Strengthening the management capabilities of Society office bearers by providing training towards institutional development

Stage 2 Increasing savings and credit

Stage 1 Increasing the number of members to cover at least 35% of the village community

Financial services delivery: SEEDS finances society members and non-members. Members being associated with SSS and non-members being not. Directly SEEDS funds SSS and through this members receive loans. Alternatively non-members receive funds directly from SEEDS’ district offices but only for Type c loans funded through special funds

Products and Services: 1. Financial Products: SEEDS offers three major loan types, A type, B type and C type loans. (See Operational aspects for more details) 2. Non Financial Products: SEEDS is made up of three divisions, namely training, enterprise development and banking. The ESD division officer goes to the village and assesses the needs of SEEDS' clients. Training division provides training for the identified needs and then banking division provides loan facilities.

Financial services 1. Micro Insurance – SEEDS has recently established a strategic partnership with cooperative insurance company. Currently we are at the development stage and finalising business plan. SEEDS intends on piloting in Kalutara, Colombo and Gampaha for 6 months. Assuming positive results are achieved it will be expanded to all other districts that SEEDS cover. 2. Pawning Programme – SEEDS is in the process of implementing a pawning service. Currently six SSS are being piloted in the Ratnapura District. The service will provide loan facilities for exchange of pawning articles (rings, necklace, bangles etc). The loan will be given at 75% of article value at low interest rate of 18% p.a (when compared to banks and other pawning centres) repayable in one year. Note: Please refer to operational aspects for types of loans disbursed by SEEDS

Non-financial services: Within SEEDS banking provides the financial services while the training and enterprise development divisions provide non-financial services. 1. Training Division: The training division believes that in order to build a successful village based institution it is necessary to provide people access to training to develop their skills to manage the operation. By developing people’s skills, in parallel with providing the resources and support to start a village savings and credit operations, the impact can be assured and sustained. Formalized training is conducted on leadership, management, bookkeeping and accounting loan appraisal, financial management and entrepreneurship development training other relevant skills at society, district and national levels. 2. Enterprise Development: The enterprise development division was created as it was felt that credit and entrepreneurship training was not leading to successful enterprise development. This division looks at expanding the types of enterprises especially looking at non-traditional activities and introducing new and appropriate technology to improve enterprises. It attempts to focus on enterprise awareness, technical skills training and appropriate technology and combining this with counselling and business appraisal and facilitating links for supply and marketing.

Operational aspects 1. Eligibility criteria: Before a village society can obtain a loan from SEEDS it must satisfy both the organisational and financial criteria set by SEEDS. The organisational criteria are: -Regular conduct of meetings -Membership Growth -Trained Office Bearers -Trained Society Manager -Availability of a Village Development Plan -Submission of annual accounts and other monitoring -Documents to Registrar of Societies, before due date The financial criteria are: -Portfolio at Risk (60 days) – below 10% -Recovery rate above 90% -No “Insider” Loans overdue for more than 90 days -Total Cost / Interest Income = 0.9 -Loans to Savings 3:1 -Return on Total Assets (at least 2% from 2nd year) -Completion of Society annual audit 2. Loan use: Loan Type Description A Given for self-employment for low-income groups. When loan clients successfully repay 3 loan cycles and undergone competency based training courses in Enterprise Development and Business Management they are entitled to the maximum of Rs 50,0000 to expand their self-employment businesses. B To meet basic human needs in order to improve the quality of life such as housing, utilities, transport, consumer durables etc. B – Solar These loans can be granted to members and non-members to purchase solar home systems in areas not connected to the national grid. C Is issued for new employment opportunities through successful rural enterprises. Purchase of fixed assets and/ or for partial financing of the working capital. Theses loans are available to Sarvodaya society membership and non-membership. Collateral is required.

As at 31 March 2005 the following sector breakdowns were identified:

Solar Home Cultivation Livestock Trade Industries Services Systems Others Total 215,508,295 69,294,521 340,323,416 253,581,730 172,710,274 554,255,469 262,170,700 1,867,844,405

3. Interest rate: SEEDS charges interest rates according to our loan products. They are; Loan Product Funding Interest rate A type loan SEEDS 24% National Development Trust Fund (NDTF) 24% ISURU 20% B type Loans- Non Solar - 22% B type loans – Solar - 10% C type loans Dasuna 14.5% SEEDS 21% 4. Loan size:

Type of Description Loan A Loans of up to Rs 10,000 are given for self-employment for low-income groups. When loan clients successfully repay 3 loan cycles and undergone competency based training courses in Enterprise Development and Business Management that Rs 10,000 they are entitled to the maximum of Rs 50,000 to expand their self employment units into small businesses. B Loans of up to Rs. 40,000 to meet basic human needs in order to improve the quality of life such as housing, utilities, transport, consumer durables etc. B – Solar There are also type b loans, ranging from Rs. 40,000 up to a maximum of 77,000 repayable within 4 years. These loans can be granted to members and non-members to purchase solar home systems in areas not connected to the national grid. C Loans up to Rs. 1,000,000 are issued for purchase of fixed assets and/ or for partial financing of the working capital. Theses loans are available to Sarvodaya society membership and non- membership. Collateral is required.

5. Loan duration: Type of Loan Repayment Period A 1-2 years B 1-2 Years B – Solar 1-4 Years C 1-5 years

6. Approval time: Average approval time is up to one month.

7. Repayment terms: Repayment is due on a monthly basis regardless of loan types. Weekly repayment is difficult due to the size of SEEDS’ outreach. Some loans given for cultivation are collected on a seasonal basis depending on harvest.

8. Savings: SEEDS encourages a savings culture in order to build up a capital base of SSS. At the fourth stage (See financial services delivery diagram above) the SSS is required to deposit around 50% of its savings with SEEDS’ district offices. The district office will again distribute some of the funds as loans and then the remaining is given to SEEDS head office to invest in various investment tools.

9. Compulsory Savings: Borrowers are obliged to save under the Loan Security and Loan Risk schemes. a. Loan Security Fund - 10% of the loan is deposited by the borrower in a loan security fund, which is refunded after the loan is fully repaid. b. Loan Risk Fund – The premium is 2.5% of the approved loan (usually for 2 years). This is a non-refundable deposit which is used to settle any outstanding loan balances in case of death or permanent / partial disability of a borrower.

10. Voluntary Savings: This includes several long-term children’s savings schemes such as Pancha and Singithi Rekawarna and fixed-term deposits such as the Millennium Scheme (Shasra Wasana) and others. No deposits are collected from the public. While each Society maintains a liquidity reserve to meet client needs, the surplus over its requirements is deposited in the respective District Offices. Client needs are met through short-term, savings-based loans for consumption and emergency purposes.

11. Other financial products: SEEDS is piloting a Pawning scheme for the society members and Micro Insurance Project for our clients.

12. Lending method: SEEDS lends to both groups and individuals. Type A and Type B loans are leant to groups while type C loans are given to individuals.

13. Customer satisfaction: There are several methods by which SEEDS has optimised customer satisfaction. Through the credit plus approach adopted by SEEDS, rural communities receive credit along with training and enterprise development services which will assist in sustaining and creating market opportunities for micro enterprises. SEEDS works at the grass root level and identifies potential customers whereas many other MFIs wait for the customer to go to the bank, As a result of SEEDS being under the Sarvodaya social mobilization activities SEEDS is not just seen as delivering credit facilities but providing a whole host of activities such as religious and health activities. Furthermore, many of SEEDS’ clients are rural poor, who are not confident with commercial banking practices. Therefore SEEDS attempts to empower the rural poor through informal group gatherings, educating them and making facilities available such that they are able to reach their potential.

14. Training: We offer the credit plus approach to our clients, through three integrated divisions, banking, training and enterprise development to provide these services.

Supervision and monitoring MIS: Financial management is computerized at the head office level at which point it is entered into the MIS system. Many of the district offices also use computers to report monthly to head office. The MIS system is used to produce quarterly reports for the Board and for senior management for decision-making purposes. District and regional level reports as well as overall performance reports are also produced.

AIS/FIS: Financial Performance measures used Operational Self-sufficiency Return on Assets Return on Equity Monitor liquidity, capital base and profitability situation

Internal control: The most important control mechanism used by SEEDS is the repayment rate and Portfolio at risk for 30, 60 and 90 days. These figures are given at district level and used to assess the risks faced by SEEDS.

Growth/Trend: SEEDS’ portfolio has increased by 20% last year at the same time interest income has increased due to a larger loan portfolio amount outstanding. Women loan clients are increasing, it has increased from 61% to 69 %. C type loans have been experiencing 20% growth during the past two years and expect that this will increase further in the coming years. Our membership has been experiencing 15% growth in past 2 years and expects this trend to continue in the future. Expect 10% growth to continue in staff volume as well. Profitability has also steadily increased.

Future Direction: SEEDS is seeking to obtain a license as a specialized bank from the central bank of Sri Lanka to collect savings from non-members, and develop our accounting and financial system to improve timeliness, accountability and financial creditability. Apart from that, SEEDS seeks to -Establish sub offices in certain districts where there is a large volume of clients -Expanding our outreach to cover every district in Sri Lanka -A new focus on gender – implementing a savings product for women.

Currently SEEDS is in 2nd year of its four-year strategic plan that will end in 2008 when a new plan will be developed and implemented. Currently SEEDS is rehabilitating Tsunami affected areas. There are a lot of assistance and loan programmes under this sector. New products include expanding micro insurance and pawning centres. Long-term goal for SEEDS is to reduce the number of marginalized rural communities found in Sri Lanka.