BRAC Microfinance Program in Bangladesh and its International Replications

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• BRAC Microfinance Program in Bangladesh and its
  International Replications
• A BRAC Presentation
• July 9, 2007

Building Resources Across Communities
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  BRACs Vision

• Just, enlightened, healthy and democratic
  societies free from hunger, poverty,
  environmental degradation and all forms of
  exploitation based on sex, religion and
  ethnicity.

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Overview of BRAC

• - BRAC started in 1972 as a small relief and
  rehabilitation effort to support Bangladeshi
  refugees returning home after declaration of
  independence in December 1971. It then stood for
  Bangladesh Rural Assistance Committee.
• - By mid 70s, BRAC realized that more long term,
  sustained effort was needed for change the lives
  of the poor. The focus shifted from
  rehabilitation to development, and BRAC was
  renamed to stand for Bangladesh Rural Advancement
  Committee

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Overview of BRAC (Cont.)

• BRAC today provides microfinance to over 6
  million clients, offers primary education to over
  1.52 million students through its 52,168
  non-formal schools, and delivers essential health
  care to over 31 million people through a strong
  cadre of 68,000 health volunteers. It has
  full-time staff of over 42,000 in Bangladesh.
• - BRACs budget in year 2006 was USD 339 million,
  over 70 of which was self-financed.

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Overview of BRAC

• - BRAC is committed towards using its experience
  and expertise to work together to fight poverty
  around the world
• - BRAC aims to do so by empowering the poor so
  that they can build sustainable capacities to
  fight poverty
• - Today, BRAC stands for Building Resources
  Across Communities.

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BRACs Main Programs

• - BRAC Development Program (BDP)
• - BRAC Education Program (BEP)
• - Health, Nutrition Population Program (HNPP)
• - BRAC Training Division (BTD)
• - Research and Evaluation Division (RED)
• Support Programs and Enterprises
• Other related institutions BRAC University,
  BRAC Bank

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BRAC Development Programs

• - Microfinance
• - Employment and Income Generation ( e.g.
  poultry livestock, fisheries, social forestry)
• - Social Development, Human Rights Legal
  Services
• - Health
• - Education

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The BRAC Approach

• BRAC believes in holistic development approach
  and sees microfinance as a powerful entry point
  that emerges from
• v The social capital built by organizing the poor
  to form their own groups through which they
  engage with BRAC and other formal institutions.
• v The organizational/institutional capital that
  accrue in building its ability to manage large
  scale microfinance.
• v The network capital built through large scale
  outreach of microfinance constituting a network
  of producers and consumers throughout the
  country.

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Components of BRAC Microfinance Program

• Group Based Products
• Poverty Alleviation (MF 1)
• Employment and Livelihood for Adolescents (MF 1)
• Economic Development (MF 2)
• Individual Products
• Micro Enterprise Loans (MF 3)
• Women Entrepreneur Development Program (MF 3)
• Microfinance for the Extreme Poor
• Challenging the Frontiers of Poverty Reduction
  Targeting the Ultra Poor (CFPR-TUP)
• Income Generation for Vulnerable Group
  Development (IGVGD) Collaborating with the
  government and WFP

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BRAC Microfinance Services
Urban (20) Rural (80)
Better-off
Vulnerable Non-poor
Moderate Poor
Extreme Poor
Destitute

MF 3
MF 2
MF 1
IGVGD
CFPRP-TUP
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Group Dynamics and The Credit Ladder

• v Formation of Client Groups - Typically known as
  Village Organizations (VO)s
• v Capacity development, healthcare services and
  social awareness
• v Asset transfer, subsistence allowance for
  CFPR-TUP members
• v Input support for IGVGD members
• v Savings and credit activities
• v Graduation onto MF 2
• v Enterprise loans (Individual)

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Financial Services for MF Clients

• Credit
• v General Loan
• v Loan for income generating projects
• v Housing Loan
• v Enterprise Loan
• Savings
• Death Benefit

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Key Features of Loan Product

• - Micro Loans
• v Lending through group formation, namely
  Village Organizations (VO)
• v Loan Range Tk.1,000 to 50,000 (US15 to 700 )
• v Repayment through equal weekly installments
• - Micro Enterprise Loans
• v Individual Lending between Tk 50,000 to Tk
  300,000 (US700 to 4,500)
• v Repayment through monthly installments
• v Service charge 12.5 (Flat)
• v Emergency loans are also given at the time of
  disaster

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2. Savings Products

• BRAC has four types of saving products
• v Weekly personal savings for the VO
  members
• v Compulsory savings deposit for VO members
• v Monthly savings deposits
• v Term deposits

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3. Death Benefit

• Death Benefit policy for BRAC Microfinance group
  members
• v Any poor village woman when she becomes a group
  member is eligible to get this benefit
• v The group member does not need to pay any
  premium for this

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BRAC Micro Finance Program in Bangladesh
At-A-Glance (May- 2007)

• Inception of Micro Finance Program 1974
• Districts Covered 64 out of 64
• Total No. of Branch Offices 3028
• Total No. of Village Organizations
  206,820
• Total Number of Members 6.2 million
• Outstanding Borrowers 5.3 million
• Outstanding Loan Amount US 438.14 million
• Members Savings Balance US 163.71 million
• Loan Recovery Rate 99
• Cost per Unit of Dollar Lent US 0.10

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Credit Delivery Model

• v BRAC uses Village Organization (VO) as a
  platform for launching and implementing its
  various activities
• v VO is an association of poor, landless people
  that come together with the assistance of BRAC
  and try to improve their socio-economic position
•  
• v Credit decisions are taken in weekly VO
  meetings
•  
• v BRAC considers three things before considering
  a loan application
•  
• - Capacity of utilizing the loan money
• - Types of business
• - Profitability of the business

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Loan Application, Processing and Disbursement
Procedure
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Installments and Savings Collection,
Documentation and Reporting Procedure
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International Initiatives of BRAC

• - In late 2001, after the fall of Taliban
  regime, the new Afghan Government invited BRAC to
  work in Afghanistan.
• - BRAC Afghanistan was set up in 2002 and today
  works in 24 out of 34 provinces in Afghanistan in
  the major fields of microfinance, health and
  education
• - In 2005, BRAC responded to the Tsunami
  victims in Sri Lanka with relief and livelihood
  reconstruction support.

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BRAC International Initiatives

• - With the aim of attaining the MDGs by working
  together with governments, civil society
  organizations in Africa, BRAC started its
  operations in Uganda and Tanzania in second half
  of 2006. BRAC also initiated microfinance program
  in Southern Sudan in early 2007.
• - In late 2006, replications of TUP program
  through partnership in Haiti and in India (West
  Bengal) were launched.

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BRAC Micro Finance Program in Afghanistan
At-A-Glance (May- 2007)

• Micro Finance Program Launched 2002
• Provinces Covered 22 out of 34
• Total No. of Branch Offices 203
• Total No. of Village Organizations 10,332
• Total Number of Members 176,594
• Outstanding Borrowers 143,651
• Outstanding Loan Amount US 69,169,612
• Members Savings Balance US 5,266,444
• Loan Recovery Rate 94.93

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BRAC Micro Finance Program in Uganda
At-A-Glance (December - 2006)

• Micro Finance Program Launched 2006
• Districts Covered 8
• Total No. of Branch Offices 10
• Total No. of Village Organizations 460
• Total Number of Members 11,912
• Outstanding Borrowers 5,808
• Outstanding Loan Amount US 540,748
• Loan Recovery Rate 100

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BRAC Micro Finance Program in Tanzania
At-A-Glance (May- 2007)

• Micro Finance Program Launched 2006
• Districts Covered 5
• Total No. of Branch Offices 10
• Total No. of Village Organizations 307
• Total Number of Members 8,033
• Outstanding Borrowers 5,131
• Outstanding Loan Amount US 558,419
• Loan Recovery Rate 100

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Some Challenges

• - Understanding the local context
• - Different regulatory structures
• - Inadequate banking network
• - Gaining trust of local institutions and people
• - Cultural differences and management of national
  staff
• - Competition and competitors response to BRAC
  intervention
• - Ensuring continuous flow of funding, high cost
  of fund and the issue of self-sufficiency and
  sustainability

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Thank You