Micro Finance and Holistic Approach. BRAC believes poor can able to change their lives if the proper socio economic structure or enabling environment exitsThe poor are diverse group with diverse livelihoods, needs and potentials which changes overtime due to lifecycle, new opportunities and external shocksThis 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..
2. 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.
3. 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
4. Microfinance Canvas: The Dominant View
5. BRAC Microfinance Canvas If we map the various poverty categories onto BRAC Microfinance programs, we get the following picture.
6. BRAC Micro Finance Canvas
7. 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
8. BRAC’s 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’.
9. BRAC’s 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.
10. 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.
11. 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
12. 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.
13. 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.
14. 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.
15. 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.
16. 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’.
17. 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.
18. 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.
19. 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 VO’s member and thereby enable them develop new and better options for sustainable livelihood.
20. Addressing New Vulnerabilities: Retrenched 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.
21. 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.
22. 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.
23. 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.
24. 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.
25. Employment and Livelihood for Adolescent (ELA) BRAC started Adolescent
Development Program in 2000
with the following objectives. To
Life skills based education
So that they can improve their
quality of life and empower both
economically and socially
26. Livelihood training Horticulture and nursery
ICT including fax/photocopy
27. 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.
28. products of MF Program 28
29. products of MF Program 29
30. 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;
31. 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.
32. 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’.
33. Features of DABI
34. 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
35. Features of UNNOTI
36. 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
37. Characteristics of PROGOTI
42. 42 MIS: An Integral Part of Management In the 80’s, 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)
43. 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;
44. 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.
45. 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.
46. 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.
Shabbir A Chowdhury
May 14-15, 2009