BRACs Microfinance Canvas: Financial Services and Strategic Linkages

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BRACs Microfinance CanvasFinancial Services
and Strategic Linkages
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Micro Finance and Holistic Approach

• BRAC believes poor can able to change their lives
  if the proper socio economic structure or
  enabling environment exits
• The poor are diverse group with diverse
  livelihoods, needs and potentials which changes
  overtime due to lifecycle, new opportunities and
  external shocks
• This diverse and dynamic reality of poor peoples
  lives forms the canvass within which BRAC
  conceptualize and design its development
  programs, in which Microfinance is a core
  elements.

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Micro Finance and Holistic Approach

• BRAC wants to make credit available to the rural
  poor at a reasonable price
• BRAC believes in a credit plus approach

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Microfinance Canvas The Dominant View
Standard commercial bank loans and full range of
savings services
Interest bearing savings accounts for small
savers
Commercial microloans
Poverty progs for food and water, medicine,
nutrition, employment generation, training, etc.
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BRAC Microfinance Canvas

• If we map the various poverty categories onto
  BRAC Microfinance programs, we get the following
  picture.

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BRAC Micro Finance Canvas
Progoti
Unnoti
Dabi
IGVGD
CFPR/TUP
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Distinguished features

• Provide financial access to the different strata
  of the poor,
• Provide both backward and forward linkages to its
  members,
• Provide special health and education services to
  BRAC members and their families,
• Provide capacity development and awareness
  building training for the members,
• Provide human rights and legal services for the
  members and their families

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BRACs Experiences with Building Opportunity
Ladders from Safety Nets IGVGD and CFPR/TUP

• BRAC realizes it is very difficult to reach the
  extreme poor through conventional Micro finance
• BRAC instead of saying, Oh, too bad, these
  extreme poor need subsidized poverty alleviation
  program before they can become fit for our
  services and let others bother with that while we
  run our commercial financial services.

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BRACs Experiences with Building Opportunity
Ladders from Safety Nets IGVGD and CFPR/TUP

• The challenge for BRAC was thinking of ways of
  including the extreme poor within its program and
  to include them in a way
• that is cost-effective and yet goes beyond
  transfer.

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IGVGD Program Including those Left Out

• WFP provide a time bound food ration as
  Vulnerable Group Feeding (VGF) to the extreme
  poor living in vulnerable areas.
• BRAC in 1985 approach WFP to implement a new
  linkage and sustainable model for the VGF.
• The IGVGD program thus designed to link extreme
  poor vulnerable poor women to mainstream
  development activities.

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IGVGD Program Including those Left Out

• Under this initiative extreme poor are organized
  into groups and provided with skill training in
  various sectors where BRAC has expertise.
• They are also brought under BRAC health services
  and network
• During the time of food transfer a saving scheme
  was developed and later
• A small amount of credit provided to them so that
  the training they received could be more
  meaningfully used for a more secured livelihood

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IGVGD Program Including those Left Out

• The IGVGD program was focus on developing a
  systematic approach to take advantage of the
  windows of opportunity in the lives of the
  extreme poor while they received food transfer
  and short-term security.
• To provide support on solid ground once the food
  transfer period is over.

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IGVGD Program Including those Left Out

• An independent study by the WFP found that
  through this strategic linkages more than three
  quarters of those who receive the IGVGD card in
  every cycle ends up becoming the regular clients
  of BRAC Micro Finance program.

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CFPR/TUP Building More Solid Opportunity Ladders

• The IGVGD approach made BRAC even bolder in
  carrying out further experiments.
• We noticed that those who do not able to graduate
  from IGVGD to BRAC Microfinance were among the
  poorest and most vulnerable.
• The targeting was done by Upazila representative
  who sometime selected based on political and
  other motives.

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CFPR/TUP Building More Solid Opportunity Ladders

• The VGD women failed to get the full benefit of
  the windows of opportunity provided by the food
  transfer. This is because
• One VGD card was often unofficially shared
  between two or more.
• Sometimes the VGD card was sold in advance to the
  dealer.
• BRAC felt the need for a program where it would
  have control over the process.

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CFPR/TUP Building More Solid Opportunity Ladders

• From January 2001 BRAC has started a new
  experimental program with these challenges in
  mind. This is called Challenging the Frontier of
  Poverty Reduction Targeting the Ultra Poor and
  targeting the social constraints.
• There are two broad strategies in this program
  one is pushing down and the other is pushing
  out.

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CFPR/TUP Building More Solid Opportunity Ladders

• First, the Program seeks to push down the reach
  of development programs through specific
  targeting of the ultra poor by using a careful
  targeting methodology that combines participatory
  approaches with simple survey based tool.
• Secondly, it seeks to push out the domain
  within which existing poverty alleviation
  programs operate, by addressing dimensions of
  poverty that many conventional approaches fail to
  address.

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CFPR/TUP Building More Solid Opportunity Ladders

• Specifically, this involves a shift away from the
  conventional service delivery mode of development
  programming to focusing on human capital, and the
  structures and processes that disempower the
  poor, especially women, and constraint their
  livelihood.
• It is an approach that puts social development,
  specifically a rights-based approach to health
  and socio-political empowerment, at the heart of
  the agenda.

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CFPR/TUP Building More Solid Opportunity Ladders

• The Program components of the pushing down
  front includes
• A special investment program in the from of
  grants of asset/capital in kind and stipend,
• Skills development training,
• A program of essential health care and
• Social development program
• Link them to mainstream development activities
  and become regular BRAC microfinance VOs member
  and thereby enable them develop new and better
  options for sustainable livelihood.

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Addressing New VulnerabilitiesRetrenched
state-owned enterprise workers

• Globalization opens up new opportunities as well
  as new risks.
• Those who lose out are the poor
• In Bangladesh there is no formal safety net
  exists for the poor who lost out due to
  uncertainties created by the global market
  forces.
• BRAC assist the state owned retrenched workers in
  becoming self-employed or re-entered in the job
  market.
• This is another example that widen rather than
  restricts the imagining of many different ways in
  which the possibilities of the institutional
  canvas of microfinance may be further harnessed.

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Serving New market Niches Progoti and Unnoti

• A lot of growth potentials exist in the missing
  middle that can be facilitated by direct
  financial provision.
• The Entrepreneurs in this segment of the market
  tend to be owner cum operators, self-starters and
  innovative.
• Yet they are unserved by both formal banks and
  microfinance institutions.

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Serving New market Niches Progoti and Unnoti

• The growth of such enterprise have both direct
  and indirect impact on poverty alleviation.
• They create more jobs and have both forward and
  backward linkages in the market.
• Good knowledge about this segment of the market
  is necessary.
• The are different segment in the market
  accordingly they need specialized service.

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Serving New market Niches Progoti

• BRAC with its strong local knowledge and
  extensive local net work it has in place it felt
  it could serve this middle missing.
• In 1996 BRAC started the Micro Enterprise Lending
  and Assistance (MELA).
• The aim of the program is to stimulate the growth
  of the small enterprise in semi-urban and rural
  areas.
• It provide larger loans to both VO and non VO
  members.

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Serving New market Niches Unnoti NCDP

• The farm sector also suffer from a strong missing
  middle syndrome.
• They are entrepreneurial in nature and need
  services that is different from microfinance.
• BRAC with its strong local knowledge and net
  works felt it could serve this sector.
• So in 2002 BRAC started Enterprise Development
  Program (EDP).
• In 2002 BRAC started Crop Diversification Program
  in the North-West region of the country.
  Organizing farmer and providing loan to high
  value crop.

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Employment and Livelihood for Adolescent (ELA)

• BRAC started Adolescent
• Development Program in 2000
• with the following objectives. To
• Provide
• Life skills based education
• Livelihood Training
• Micro credit
• Savings facilities
• So that they can improve their
• quality of life and empower both
• economically and socially

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Livelihood training

• Horticulture and nursery
• Block printing
• Livestock rearing
• Photography
• ICT including fax/photocopy
• Beauty parlour
• Vegetable gardening
• Hatchery

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Components of MF Program

• There are 3 Components of the Mainstream MF
  Program. They are
• Dabi Micro Lending to the Poor
• Unnoti Agro-business Development
• Progoti Small Enterprise Development.

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products of MF Program
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products of MF Program
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Terms Conditions of a Loan

• Loans are given for individual activities
• No collateral is needed
• Old Age Security Savings deposit of 5 of
  the loan amount
• 15 flat interest rate

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Terms Conditions of a Loan

• After two VO meetings the loan
• disbursement procedure takes place
• A member is eligible to take loan after two
• weeks of her enrollment in the VO
• Loans are repayable through weekly
  installments.

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DABI Micro Lending to the Poor

• Caters to the moderate poor in both rural and
  urban areas,
• Organizes landless groups (Village
  Organizations) and provides them with financial
  services and self-employment opportunities,
• Provides collateral free loans, savings
  facilities, and members death benefit.

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Features of DABI
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UNNOTI Agro-business Lending

• Caters to the small and marginal farmers, who do
  not have the capacity to start their own income
  generation activities,
• Forms Village Organizations so that members can
  exchange views and share their knowledge.
• Particular type of work Agriculture, Poultry
  Livestock Rearing, Aquaculture

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Features of UNNOTI
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PROGOTI Micro-Enterprise Lending

• The aim of the program is to stimulate the growth
  of small enterprises in semi-urban and rural
  areas which are not served by formal banks and
  microfinance institutions.
• The Program tends to motivates small/medium
  entrepreneurs in the rural and urban areas to
  perform better, thus creating job opportunities.
• The Entrepreneurs in this segment of the market
  tend to be owner cum operators, self-starters and
  innovative

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Characteristics of PROGOTI
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PROGRAM INFRASTRUCTURE
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MIS An Integral Part of Management

• In the 80s, BRAC felt the need of investing in a
  strong management information system (MIS) to
  meet the challenges of rapid expansion
• At present 100 of field offices are automated.
• BRAC is currently using two different types of
  software, one of which collects information on
  members and other tracks accounts
• (Front end visual basic.net and back SQL Server)

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Major Impact of MF Program

• BRAC member households owned 50 higher net
  worth than non BRAC members
• Nearly 10 of members graduated from being
  landless to different landholding groups
• Members had 2 times more savings than non-BRAC
  members
• Higher per capita calorie consumption
• Higher food and non-food expenditure, including
  higher ratio of non-food to total expenditure

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Major Impact of MF Program

• Nearly 60 of the members are directly involved
  in income generation activities
• More than 80 of the loans are being used for
  productive investment, asset purchase, and for
  housing
• BRAC members are significantly better off in
  terms of the value of their dwelling places and
  per capita floor space of utilization.

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Conclusion

• The first example demonstrate our experiences of
  building opportunity ladders for the extreme
  poor, those who tend to be left out from
  conventional microfinance programs.
• The idea here is to
• Design subsidies in ways that provide a window of
  opportunity for the extreme poor.
• Strengthen the initiatives of the extreme poor so
  that they can build the capacities to benefit
  from microfinance and other mainstream
  development programs.

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Conclusion

• The second one is an example of using
  microfinance combined with other interventions to
  provide a new chance for building new livelihoods
  for people facing sudden vulnerabilities.
• The third examples illustrates how BRAC uses the
  knowledge embodied in its institutional networks
  to provide financial services to new market
  segments.

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• Thank You
• Shabbir A Chowdhury
• Director, Microfinance
• BRAC
• Email shabbir.ac_at_brac.net
• Web. www.brac.net
• May 14-15, 2009