World Bank Documentdocuments.worldbank.org/curated/pt/357701468752087284/... · 2016-09-06 · L 1 8677 I._ CGAP Newsletter THE CONSULTATIVE GROUP TO ASSIST THE POOREST [A MICRO-FINANCE

L 1 8677I._

CGAP NewsletterTHE CONSULTATIVE GROUP TO ASSIST THE POOREST

[A MICRO-FINANCE PROGRAM]EAR READERS:

F The pioneering work begun by A BANK OF ONE'S OWN CHINA'S EMERGING MICRO-The pion7eering7 wor0k be,gun bY IAC IDSR

-Ela Bhatt SEWAFINANCE INDUSTRYGrameeni, BRI, anld BRAC has

- . ..is not simply a lack of funds, - Mike Goldberg, CGAP Secretariatinspired individuals and but vulnertbylit powverlessness, and Although China has one ofthe

organi zations around the world to dependency. Development finance insti- fastest-growving urban economies in thetutions that offer only traditional micro- world, more than 85 percent of the

invest in poor people's abilltv to help finance services are not as effective as population remains in rural areas. Rural

[ the mselves. Af ter^ roulgh/vf 20 yefnarfls institutions that also help borrowers production has been limited bv a lack ofovercome the psvchological burdens of access to reliable, affordable credit to

sinice these ilnnovator-s catalvzed an poverty. SEWA Sahakari Bank Ltd, or purchase inputs and to invest in small,mdi revisit the Asia region ~~SEWA Bank, based in Ahmedabad in off-farm, income-generating activiries.

industry, we W evisit the Asi regio stern India, has achieved financial China's mainstream rural financial insti-

- in1 this llell1slgtte7, to look at som7le sustainability by recognizing the need of tutions include more than 50,000 ruralpoor Indian xvomen in urban slums and credit cooperatives in villages and town-

neit' and cxistingq initiatives, rural areas for savings and the power that ships and thousands of branches of thecomes xvith managing their savings, Agricultural Bank of China in townships

resouirces', and challeniges to mnicro- individualkl and collectivek% and county seats. But these institutions

r finlanlce inl Asial. provide credit mainly to the government,From Trade Union to Bank to purchase staple crops, and to rural and

In India, 96 percent of women wvork- state collectives and large enterprises.ers are self-employed; that is, thev earn a The government-set ceiling on on-lend-living through their own small businesses ing interest rates historically has beenor through their oxvn labor. Self employed below the rate of inflation. The lack ofworkers typically have insecure employ- individual oxvnership of land limits a poorment, lowv incomes, and low productivitv. household's ability to offer collateral,They also lack access to mainstream making poor rural clients unattractive tomarkers and ownership of assets. conservative Chinese rural bankers. ForBypassed by the labor movement, a large these reasons, the informal credit marketnumber of self-employed wvomen union- is growing rapidly. Yet it remains local-ized in 1972. Their collective, called the ized, usurious, and too wveak to provide aSelf-Employed Women's Association real alternative for most rural households(SEWVA), was dedicated to strengthening and microenterprises.members' bargaining pow er to improve The stakes are high for micro-finance$c ; -_ _ = income, employment, and access to social in China. The potcntial markct can be

46 '.td i ~~~~~~security. The organization's goals Xvcrc measured in the tens of millions offull mploment measred i ters of households. For this reason, and given-

\ . ',§¢! > ^ tb~~fod secur itv, income securitv,, and social the govcrnment's commitmcnt tot$ @Gg ,;, ':. i securiv) anzi sel reliance, r the auto- national poverty alleviation by the vcar

' *nomyofindividuals and groups of 2000, micro-finance has attracted the

Is w'vomen to make personal decisions. attention of many donors and severalv 1l -~ ; In 1973, SEWA reached an agree- government agencies.

4; r ment Nvith state-ow ned commercial banksr oser asaninermediayforprviding Pilot Programs of Non-gov-l :<* ' 4 b ~~~~~~~~~~to serve as an intermediary for'providing PilotProgramsofNongov-

loans to self emploved Xvomen. Practical ernmental Organizations

d ificulti e faced by poor, illiterate Because micro-finance is relativelyWome in dealing xvith bank officials led new, to China, donors have supported

SEWA n ecmbers to form thecir own bank pilot operations to test the ability ofBangladeshi microentrepreneur and client ofBuro-Tangail (contintied oni page 4) (continued on page 5)

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STRENGTHENING ASIAN MFIS

-Joyita Mukherjee, CGAP Secretariat

Asia is home to 3 billion of the world's 5.7 billion people and roughlv 55

- ZY ,jaZDi ZZD:a D a laaaaaaZa a percent of the world's poor. As much as half of the world's poor live in four

a of O, -~ D-Di-D South Asian countries-India, Nepal, Pakistan, and Sri Lanka. Nearly 30 percent

dtinue=<=Dd DD^ fr~ge~4 D DD^ Dof the population in China and the Philippines lives on less than US$1 a dav.'Even in the "tiger" economies of Thailand, Malaysia, and Indonesia, the poor-

Dma'sD Emrn fAjD ' 'D ^ ' est 20 percent of the population shares only 5-8 percent of the nationalD ~ i~e~ D,,-Zlla D D = 'D DDD ^ income (World Development Report 1990 and 1995).

'Qin}DD ,,nZ pae D D D Millions of Asia's working poor create self-employment and the means for abetter life through micro-entrepreneurship. The visible frenzy in urban slums

2D3 St-,=', Asi- from Manila to Mumbai (Bombay) and in rural communities is evidence of the3 D a NDewl=>DlaDa O3gea'j PDFat DDDDD jDDD Daa 2 desire and ability of the poor to help themselves. Yet, this vibrant activity is

largely ignored by the formal financial sector. Social and cultural barriers inD Dxc ZDE7 iviem.ber 1 D~n~or S a,D DDD ,DD Asia particularly limit women microentrepreneurs' access to resources. During

D -D9D; D up-<<gD D ' D^ atDDeDDDDD DD^ ' 'DD' the last 20 years, public and private efforts to respond to the need of very poorentrepreneurs for financial services have shaped the micro-finance landscape in

S 11 Tea h~ovatie Ifl1~tUtOfl~Sthis vast continent and elsewvhere.

In Sat iadeslvt BRAG, ASA~ andf Some Asian micro-finance institutions have become international leaders,ro-Tanga~~~~~I achieving a scale of operations rarelyT found in other parts of the wortd.

12,=aD-Da 4D Dra~nin~ j9eu~es D j D D D-Bangladesh's Grameen bank and BRAC* count 2 million and 1.5 million poor15 CagDabllEaDaaDAPReDDaalD:7Daaaa0deD3:lDD awomen as their active loan clients respectively. Bank Rakyat Indonesia's Unit

S=rvey Desa system serves 2.5 million micro-loan clients and 12 million small savers.Thailand's Bank of Agriculture and Agricultural Cooperati-ves (BAAC) serves

= CO~TRLSUTOR& roughly 1 million micro-borrowers and 3.6 million micro-savers. Newcomerssuch as the Association for Social Advancement* in Bangladesh with half a mil-

Ele Sttatt li~~~~~on clients andt the People's Credit Funds in Vietnam with more than 200,000DSEWA ana aDA~'Polic i=i DDD' ' members/clients are other examples of upcoming giants in the field. Other

D de GoIdber97 -7 0 D D minstitutions -such as Cambodia's ACLEDA, Buro-Tangail* and ShaktiCGAPDSecreSta iat Foundation in Bangladesh, SEVA Bank* of India, AIMS lk,-tiar Malaysia, and

Soyita <Mukher'eeAction Aid's commune banks in Vietnam also show impressive performance.DDDDiDD Se. e ia ID i~t No particular institutional framework predominates among Asian MFIs.

S WiI1iaan Staub. and ThmaI;F Legal structures include formal commercial banks, rural banks, cooperativeAsian . 7-- - DE ^ institutions, credit unions, and non-governmental organizations. Likewise,

operational methodologies vary from Grameen-style solidarity groups, to indi-*GAP S eeretar_d avidual clients, to self-managed self-help groups. Institutions such as BRAC and

S y i0.<- <=. 04 az e- flwdd-tn Ahme4 BRI have gone beyond credit to offer insurance and other financial services.

==R=D -<-. -z s7 D D0 kDD D G0 D DDD GG GG Grameen and BRAC offer non-financial services, such as retail outlet facilitiesfor products of their poor clients.

Md Nlsaftqua Na - A common characteristic across countries in the region, is the presence ofMohamnied Azim Kossa 7 .---^ state-owvned institutions in micro-finance. Unfortunately, apart from BRI and

Zel I~~i'ossair~ anji BAAC, these institutions have been ineffective in reaching poor people wvithsustainable financial services. The regional rural banks of India, China's ruralcredit cooperatives, Vietnam's Bank for the Poor, and a dozen-odd agricultural

Lamiya Mdsrshed D DD DD DD D D D DtDDDDD D D development banks in other countries have failed to cover their costs andGrameen Trust recover loan repayments. A few of these governments are recasting the opera-

tions of state-owned institutions to mirror their more successful private sectorDavid ~~~ll$sosss ~~counterparts.

Asia holds great potential for micro-finance given the sheer number of poorTamar^D 0a SE.URtOcI D D u D< D g S C g ;who lack access to basic financial services, high population density, and rela-

CGAP Secretar7t tively stable macroeconomic and political situation. Yet, despite the number of

institutions active in micro-finance (an estimated 350 in the Philippines alone!)

G G IG^ DD 'In purchasing power parity terms.

a large part of the market remains untapped, and fewer than a handful of insti- N E W C GAPtutions have achieved or are projected to become self-sustainable in the next P U B LI CAT I0 TN Sfive years. Whv has a region xvith so much promise and some spectacular suc-I ~~~~~~~~~~J u Iy - D ec em b er 1 99 7cesses not generated a greater number of sustainable institutions? The behaviorof governments, donors, and MFIs may be at the core of this question.

Until recently, many Asian governments set interest rate ceilings for loans tothe poor. These ceilings were often too low for MFIs to cover operating costs, FOCUS NOTE 9much less generate profits. Even now, funds from government-owned wvholesale Anatomy of Deal: CGAP's Approach tointermediaries in India, Nepal, and Vietnam are lent with prescribed spreads Investing in Micro-finance. Brigitbetween the MFI's borrowing and lending rates that are too narrow to promote Helms.institutional sustainability. Moreover, the significant involvement of governmentagencies (such as public sector banks) in micro-finance may have crowded outprivate sector entrants and stifled innovation.

Another reason for the paucitv of sustainable MFIs in Asia is that donor FOCUS NOTE 10funding has been somewhat lopsided, wvith large sums of money available for State-owned Development Banks inon-lending, but only a trickle of funds to invest in institutional capacity. Few Micro-finance. Joyita Mukherjee.Asian institutions have funds to strengthen their equity base, invest in stafftraining, develop sound information systems, or procure appropriate officetechnologv. Consequently, many MFIs have been unable to scale up their FOCUS NOTE 11internal capacity to manage complex operations and serve more poor clients How CGAP Member Donors Fundeffectively. Micro-finance Institutions. Mohini

Finally, many organizations, particularlv in South Asia, provide micro-r : , .< . ~~~~~~~~~~~~~~~Malhotra and Anne-Marie Chidzero.

finance along with other services such as literacy, health education, and legalcounseling. Few, BRAC is a notable exception, see themselves as "bankers."Most view themselves as providing a stop-gap arrangement to meet theirclients' financial needs until the clients are able to interact wvith formal banks NEWSLETTER CONTRIBUTIONSdirectly. This view of the institution as a temporarv facilitator versus a perma- Please send contributions (betweennent intermediarv diminishes the drive necessarv to achieve scale and sustain-

600 and 700 words) to the addressabilitv. Practitioners operate their institutions as "projects" with a long-term listed under contact information ondependence on donor Lunds, and do not feel compelled to cover costs andearn profits. the last page. The selection of articles

Fortunately, changes are taking place on all fronts. Asian governments are for publication will be at the editors'becoming increasingly aware of creating an enabling environment for micro- discretion.finance, and donors are starting to include institution building in their supportto MFIs. Having realized the limitations of donor funding, many practitionersare seeking to build financially sustainable institutions. At the Bank Poor CGAP ONLINEregional workshop held in Malaysia in December 1996, representatives fromhundreds of Asian MFIs identified strong management and leadership skills, All CGAP publications and generalstaff training, improved management information systems, and rigorous information about CGAP can beinternal monitoring and evaluation as their top needs. accessed through the World Wide Web

In addition to these priorities, Cambodia, China, Lao PDR, Vietnam, and at: http://www.worldbank.org/html/other transitional economies will need special attention to overcome policy cgap/cgap.htmlhurdles. On the other end of the spectrum, regulatory authorities in countriesxvith a number of MFIs capturing voluntary savings, such as in Bangladesh,face the challenge of developing appropriate prudential rules and ensuringsound supervision. Donors wilt require further education on working in part-nership with sound MFIs to facilitate institutional growth and development.But the biggest challenge lies with Asian practitioners to develop their institu-tions with a vision of achieving permanence and scale in serving the poor.

*Featured in this issue

Joyita iltukherJee is a mlicro-finiance specialist with the CGAP Secretariat.

A Bank of One's Own Table 1: SEWA at a Glance

(continued from page 1)

in 1974. The bank's equity consists e -

exclusively of the money of poor self-17 96 1,4 198557 ,7employed wiomen, with no gra-nt from79140external donors. Through its perfor- 198 14,022 3, 1 31,556 54,192mance, the bank has demonstrated thatpoor women contribute to capital forma- 1985498 22,208 9 3,366 352,307 18,159

tion, contrary to the common percep-

tion of the poor as a "burden" (Table 1). 190-199 27,923 1,363,008 91 693 41,281

SEWA's Approach and Nomi alU.S.doliars

Services

Savings

Before making credit available, distinguish between consumption and business expansion and sustainabilitvSEWA Bank offers its members savings production loans, believing consump- WVith SEWA loans, many women haveservices. A secure place to deposit sav- tion loans to the very poor for food, added electricity and indoor plumbing toings is crucial in the Indian context, par- health, or housing contribute to the their homes, features that greatly enhanceticularly for poor women. When these maintenance of the borrower's key pro- productivity. Further, housing loans allowwomen acquire capital, it is not safe in ductive asset: labor. womiienl to build equity in an importanttheir homes, around their male family SEWVA's loans are generally repayable asset, rather than paying rent. To date,members, because women are often in 36 monthly installments with an SEWA has disbursed about US$1.4 mil-denied ownership of familial assets. With annual interest rate of 12-17.5 percent lion in housing loans to 6,000 women.SENVA's Bank, depositors can augment charged on the outstanding balance. Other benefits SEWA also has devel-savings at whatever rate they choose; Loans under Rs. 2,000 (US$55) require oped a savings-based work insurance planthey can use money saved as collateral at one guarantor, and those above require for members that protects them whenother lending institutions; and they are two. The maximum loan amount is Rs. employment is not steady or when theyfree to spend or invest their savings as 25,000 (US$694). Loans are made to are hospitalized. In addition, the bankthey see fit, including drawving on their individuals directly from SEWVA. But provides child care and legal aid.savings in times of disaster. Thus, the SEWA also helps the formation ofability to save imparts not only security groups in rural areas that capitalize and R e s u I t sbut also autonomy. manage their own funds and decide who

5EV/sTA primarilyv offers savings to among them receives loans and at what SEWA has consistently expandedindividuals in urban areas and to groups interest rate. As of March 1997, there profits and membership for two decades.in rural areas. Savings groups comprise were 771 groups with 21,393 members Members now number 220,000. Data on10 to 50 members, whose deposits range that had collected roughly US$93,000 the bank's growth, repayment rate (95from 10 to 25 rupees (30 to 70 cents in in savings and had nearly US$75,000 in percent on average), and performanceU.S. dollars) per month. Because many loans outstanding. compared with both public and private

sector banks show that SEWA is success-rural women are unable to travel to the 5 up p o r t S er vice s fiil and sustainable. Several studies bybank, bank staff pick up deposits at the ctra eerhr ouettawomen's homes. Initially, the bank also SEWA Bank works closely with external researchers document thatuses borrowers' photos instead of signa- SEWA trade union, which provides EWA's members have obtamed employ-tures to verify ownership of their pass- other services to the bank's clientele to ment, increased income, improved theirbooks because manv SEWA clients maximize the usefulness of its savings diet and health, obtained child care,cannot read or write, and credit facilities. These other services improved their living conditions, and cre-

include: ated assets. But perhaps the clearest indi-Cre dit T cator that SEWA has achieved what it set

Training 5EV/A borrowvers are taught ott ocmsfo t ebr'ecaIn SEW/A bank, a borrower's credit- to wTite their names and read entries out to do comes from its members' excla-

worthiness is based on her financial made in their passbooks, to travel to and mation: "SEWA Bank, my mother!"behavior rather than on collateral or make deposits at the bank, and to followsecurity. After members demonstrate an bank procedures. Borrowers also receive This article is drawn from "Our Own:ability to save regularly, they become eli- technical assistance to identify market SEWA Bank," by Ela R. Bhatt, Chair ofgible for credit. Loan terms also accom- niches, source cost-effective inputs, and Self- Employed Women'sAssociationmodate the needs of poor women, who make more marketable products. Cooperative Bank of India. Ms. Bhatt isrequire modest amounts of money and Housing loans Because nearly all also a member of CGAP's Policy Advisory

ample time to pay back the money they poor, self-employed women work from Group.borrow. Moreover, the bank does not their homes, housing loans are key to

C h i n a 's E m e r g i n g ... replication in Sichuan and Shaanxi to financial statements, management infor-(continuedfrom page 1) reach 9,600 clients in five years. Pilot mation systems, interest rates, portfolio

micro-finance operations are also being quality measurement and management,various micro-finance methodologies conducted by the All-China Women's and development of attractive creditto reach poor rural households. For Federation, wvhich is using different products for pioneer MFIs.example, the Ford Foundation and the group-based approaches. In response to these needs, CGAPChinese Academy of Social Sciences set Although government institutions, has translated several technical materialsup an action research pilot based on the with their financial and technical into Chinese and is engaged in increas-Grameen Bank model in five northern resources, hold the potential for massive ing the exposure of senior governmentprovinces starting in 1993. The German micro-finance outreach, they are con- officials to international best practices intechnical cooperation agency GTZ and strained by policies and practical realities. micro-finance. Future capacity-buildingits local counterparts have taken a holistic These include the subsidized interest efforts mav focus on developing apoverty alleviation approach, including rate, a long tradition of targeted (and micro-finance training center that offersmicro-finance, to reach extremely poor subsidized) credit allocation, and the general and specialized courses in man-households in the southern provinces of amount of time required to reorient giant agement of sustainable micro-financeYunnan and Sichuan. In addition, govcrnment agencies. institutions. UNDP, Ford FoundatonAustralian Agency for InternationalDevelopment, the United NationsDevelopment Program (UNDP), ACanadian International DevelopmentAgency, the International Fund forAgricultural Development, and UNICEFare also supporting various initiatives topromote micro-finance development.-

These pilot efforts have proved thatmicro-finance is a valued service forlow-income households Y,vith income-generating activities, and that very high Wmrepayment rates can be achieved. Thepilot efforts have not yet showrien that mnicro-finance can be profitable, coveting allcosts and requiring no subsidies from thegovernment or donors in the long term.

Tuphre G piov e rnmeacht ' s

Micro-finance is an integral part of 1the National 8-7 Poverty AlleviationStrategy, intended to help 80 million Ethnic minority women from rural Guizhou Province in Southern ChinaChuinese move beyond a per capitaincome of YS10 (IUS$70) by the year2000. In the past three years, the guy- T fe mangemk Ahed the Chinese Academy of Social Sciences,emrnent has taken important steps to CGAP responded to donor and and LGPR all have expressed interest inimprove the outreach of services government interest in micro-finance in designing the curriculum of a micro-provided by rural financial institutions. China by co-sponsoting a micro-finance finance training center and idcontifying

Impressed by the ability of donor- conference with the Ford Foundation, micro-finance practitioners.supported pilots to reach the poor No and local chinese insutions in Reforming the legal and regulatorydirectiy, the People's Bank of China October 1996. This occasion provided framexork, to enable current micro-recently reorganized the country's rural the first opportunity to exchange lessons finance projects to evolve into sustain-credit cooperatives, providing greater learned by Chinese practitioners and gov- abl financl istitutions and buildfreedom to expand operationsvwith a einment policy makers, and to introduce the technical skills of micro-finance prac-business orientation and the leeway to international best practices in credit, titioners xilbe critical for the develop-test new products, clients, and delivery savings, financial management, and the mn fCiasMI.Wt uprapproaches. The government also formed formulation of financial sector policy. from policy makers and the internationalthe Agricultural Development Bank of Conference discussions revealed the micro-finance community, micro-financeChina, which is testing micro-finance need for a broad-based policy dialogue in Ch-ina can make a serious contribu-activities wvith the Leading Group on and information dissemination approach notobhruapvetalviinPoverty Reduction (LGPR), a national to assist the local micro-fina-nce industry, and financial sector deepening.government unit. With XVorld Bank sup- A CGAP-commnissioncd study revealedport, the LGPR has established coopera- several areas for training, including the Mike Goldhe;2q is a micro-finance special-tives to implement a Grameen Bank construction and interpretation of ist wpith the CGAP Secsvtariat.

/ II MEMBER DONAustralia ASIAN DEVELOPMENT BANK OPERATIONS TO SUPPORT

MICRO-FINANCE

- William Staub and Nimal Fernando, Asian Development Bank

C a ana d a The Asian Development Bank (AsDB) has been supporting micro-

finance development in Asia since 1988. AsDB has supported 15 loanprojects worth US$300 million in Bangladesh, Indonesia, K(vrgyz

F n la,d Republic, Mongolia, Nepal, and the Philippines. The Bank has alsoprovided support for 29 technical assistance projects, amounting to US$19

Fr ance million. Six new loan projects and several technical assistance (grant)projects are in the pipeline for the Asia Region, and, in the medium term,

@ r rm a n y AsDB's support for micro-finance is expected to increase in volume and in

geographic coverage.Initially, AsDB's micro-finance assistance took the form of project

L financing. (Grants and soft loans made to countrv governments that arethen on-lent to MFIs.) Now, although project financing is still the pre-

h - Xt t e r ands; dominant vehicle for providing assistance, AsDB places greater emphasison policy reform and capacity building. The shift stems from the institu-

DJ s w a y tion's recognition that an enabling policy environment and strengthened

MFIs are requirements for a viable and sustainable micro-finance systemS X e d @ n capable of reaching more poor clients. Now, too, AsDB's micro-finance

0 projects pay more attention to savings mobilization, in response to evi-

dence showing that demand by the poor for mechanisms to support sav-

Unite K o m ings is as strong as demand for micro-credit. Poor people need to put theirsavings in safe, liquid, and attractive places. Savings deposits are also an

U ni td a t es important source of funds for lending to the poor. The need of the poorfor both savings and credit is causing the AsDB to view micro-finance as a

A f C a D v @ a @ a a P 'nt B a n niche within the financial services sector, and to refocus its assistance

accordingly.Although micro-finance is an effective way of helping the poor,

expanding micro-finance services-both in numbers of clients and breadthof services-is a challenge. AsDB is meeting this challenge by worling wvith

I n t e r A mn e,a r a a task force it formed to prepare an Institutional Action Plan on MicroD e v e a p me n t 7 a F Finance. The task force is looking at the bank's instruments of providing

assistance, its operational processes, its in-house capacity, and its trainingn t a e 7 a t o na Fu n d for programs and skill requirements to help the Bank understand how it can

A g ric t Dv l a p D @ I e i a Fe support micro-finance operations most effectivelv. The Institutional Action

Isntearna ~ t ionala I t a Labou Office Plan draws on insights obtained from a review of AsDB microenterpriseprojects and projects with micro-finance components that were approved

U nited Xi atians between 1988 and 1992. The findings of this review are included inca p i t a 1 velo p men t f ud Microenterprise Development: Not By Credit Alone, issued by the Bank in

June 1997. To obtain a copy of this review, please contact Mr. Kaji F. Jalal,UniXted a tions feresnaCe 6 Asian Development Bank Avenue, PO. Box 789, 1099 Manila,os Trade ad Devlpment Philippines, Tel: 623-623-444, Fax: 623-741-7961.

United Iia ti ns William Staub is Senior Social Development Specialist, Social DevelopmentiCvp-o st Proramm Division, and Nimal Fernando is Project Economist, Agriculture and Rural

Th e MbMrld ,Bas Development Division (West) at the Asian Development Bank.

0 R 6 r.EEE X0

CGAP FUND FACILITY::Since June 1997, the Investment Committee has approved the folowihgadditional funding. Total CGAP fund

commitmentstands at US$18.5 mil[ion -

hwestwenit - fountrylegion A mount (US$)

FundiN for iaRt0 -MRsWCFNA Internaiional Malawi, Uganda"(Technical Assistance hubs) Honduras, Nicaragua 1,260,000

K-Rep (Multipurpose Kenya 700,000

Cooperative Sodety)

Centre for Self-Help Nepal 5,300QDevelopment

Sub-total 1,965,300

Support to Prac3ttioner NetworkslMFI Capacity Buidingatalysfs Latin America 98,6:0

INDNET .ridia 50,000

,, :- ' Sub-tEotal . . .'- :- ;', - - . <. 148,600

Commitmernts urtil June 1997 16,375,797

- .T(3TAL : : . ; . - - - 0;18,489,697

LJ] P D A T E

In the previous issue of this Newsletter, we provided expected release dates for the Tools forPractitioners that the Secretariat is developing. VVe regret that the release of these tools has beendelayed. The new dates are as follows:

The appraisal document is available from theCGAP Secretariat (see last page for contact

Tools Expected release information). To order copies of the MISHandbook, Audit Handbook, or Business

Appraisal Format .................. January 1998 Planning Guidelines, please contact PACT

MIS Handbook .................. March 1998 Publications, 777 United Nations Plaza,Newv York, NY 10017 USA.

Audit Handbook .................... April 1998NeYokNY107UATel: 212. 697 6222; Fax: 212. 692 9748

Business Planning Guidelines ........ May 1998 E-mail: books(pactpub.orgWeb site: http://w,vw.pactpub.com

T H R E E I N N O VAT I V E lenged the conventional wisdom of the

I N S TI T UT IO N S I N 1970s and discovered that, with new

BANGLADESH: BRAC, ASA, lending methods, the rural poor repaidA N D B U R O - TA N G A I L loans on time. These new methodsA N D B U R 0 TA N GA I Lincluded the delivery of very small loans

C Bangladesh is a rural countrv at full-cost interest rates without collat-A characterized by dense population eral that were repayable in frequent

- 827 people per square kilome- installments. Further, organizing theter -and waterways that cover its poor into groups appeared quite effec-river delta landscape. With a GDP tive. The groups provided an additionalper capita of US$230 and 47 per- guarantee against default and offered acent of its citizens living in convenient mechanism through which

Bang lades h boasts one of absolute poverty,' it is one of the to disseminate knowledge on health,C world's poorest countries. But legal rights, sanitation, and other topics

the largest and most vibrant M Bangladesh also boasts one of the dcemed important to the clients.2 AndQ largest and most vibrant micro- finally, these institutions targeted

microfinance industries in finance industries in the world. women who lived in households that

The Grameen Bank, serving 2 million owned very little land. This method oft h e w o r I d . clients with credit and other services, is identifying clients proved to be a sim-

the best-known MFIl, but an estimated ple, yet effective way of ensuring that700 smaller institutions serve another 6 services reach the poor.million clients. The origins of this bur- Today, increasing competition isgeoning industry are presented below, pushing the frontier of Bangladesh'sfollowed by profiles of three leading micro-finance industry further toinstitutions other than Grameen - the expand and innovate on the originalBangladesh Rural Advancement blueprint. Institutions are placingCommittee (BRAC), the Association greater emphasis on more flexible sav-for Social Advancement (ASA), and ings options and new financial products.Buro-Tangail.

BRAC - Managing aLessons from Early Multi-Service MFIE x p e r i m e n t s Founded in l972, BRAC is a pio-

For the decade following neer institution that began as a smallBangladesh's independence in 1971, relief organization and has grown intodevelopment institutions focused on a multi-service NGO managing multi-addressing the inequities between the ple programs in health, education, andpowerful and the powerless. Yet many economic development. Among theseinstitutions discovered that the poor programs is micro-credit: the organiza-were more interested in expanding tion has one of the largest micro-their economic opportunities than in finance portfolios in the world, withdrawn-out political struggles. One road 1.5 million active clients and US$77to economic opportunity was the pro- million in loans outstanding as ofvision of credit. Credit was not new to December 1996.Bangladesh, but past attempts - first Although it relies on micro-financeby the British colonial authorities to as an important poverty-fighting tool,provide cheap credit to farmers, and BRAC does not believe credit alone islater by the national government to sufficient to overcome the vulnerabilityrevive an old cooperative scheme dur- of the very poor. This belief is reflecteding the 1960s -had failed to reach the in BRAC's two-phased approach topoor. micro-finance, which focuses first on

In the 1970s, several institutions, rural development and then on ruralsuch as Grameen Bank and BRAC, credit.began to experiment with new ways of * Rural Development Programproviding credit to the poor. They chal- (RDP). BRAC targets women of

' Defined by a minimum calorie intake, Credit and Development Statistics 1996.

Group size was critical, though, because efforts to work with entire communities were proving ineffective andoften excluded the poor.

Aarong, a chain of retail shops thatmarkets the products of BRAC's

Executive Director clients; cold-storage facilities for agri-cultural produce; and a publishing

I I l l I I company. The first two divisions pro-Director - Director - Director -Rural D rector- - .Director- AarongF| Other Diretors] | vide marketing links for the rural poor,Health Non-Formal Development Monitoring . Bra R i and Divisions and all three generate revenues. Inand Primary Program and Rural Internal Printers ShopsPopulation Education Credit Program Audit 1996 these thrce arms yielded

Cold US$16.8 million in net profitsMicro-financeNon-financialStorageMicro-Tinance Non-financial . Facilities for BRAC to use at its own discretion.

Services Services BRAC's management structure,,For Profit Units ! accounting systems, and emphasis on

accountability have produced impres-sive results. For example, in micro-

BRAC Organizational Chart finance operations (micro-finance

activities of RDP and RCP combined),households that own minimal land ment programs. Its non-formal primary operational self-sufficiency is 158 per-and rely primarily on wage labor for education program runs 34,000 locally cent, and the proportion of administra-income. These "landless laborers" are based schools, and a parallel health tive expenses to average outstandingwidely recognized in Bangladesh as division provides a range of health ser- loan portfolio is 9.7 percent, very lowthe most vulnerable group of the vices. Though not the focus of this for an MFI (see Table 1 on Page 11).poor. Each RDP branch office mobi- article, these programs have received This strong performan-ce has allowedlizes the women from the poorest acclaim of their own. BRAC to apply for a license to create ahouseholds of a community to join Despite its immense size and array bank that can absorb RCP units and bevillage organizations of about 40 of programs, BRAC has avoided the added as another profitable arm of themembers that meet weeldy. Initially, pitfalls common to multi-service orga- BRAC holding company.RDP provides "functional education" nizations. It has done so by separating To learn more about BRAC or tothat teaches numeracy and literacy the management and costs of each of request a field visit, contact:and makes members more aware of the different arms, thus building BRAC Centretheir rights. RDP also offers training accountability. For example, the staff 75 Mohakhali Dhaka 1212,in income-generating activities such and accounts involved in micro-finance Bangladeshas poultry rearing and silk produc- are distinct from those for other activi- E-mail: [email protected] ortion; many of these activities are new ties. This separation allows BRAC to [email protected]

to the rural areas -and have been . ...track with high accuracy the perfor- Fax: (880-2) 883 542 or 883 614pilot-tested by a special unit within mance of micro-finance operations,BRAC. After a period of training and separate from other aspects of RDP AS A - The Ef i en c y of th e

education, usually one year, credit is and RCP. (The forthcoming CGAP S e I f - R e a n t M o d e lmade available to BRAC's clients. Occasional Paper #2 on "CostFirst-time loans are small, usually. Allocation and Micro-finance" detailsSor ho s siunder one several meta-US$25, but subsequent loans gradu- methods for allocating costs in MFIs F ou ed with th obectiof m 1978.ally increase. Members are also uand uses BRA as a case study.i) iong theo t h ve the of mobliz-required to save regularly, although ng Moreover, stattf are not expected to nocthe poor o achl eve their own eco-

BRAG is experimenting with volun- mse eea ehia kls ahr oi n oiljsie S lwitary savings options. master several technical sldlls; rather, adapted its approach and in the mid-

Rural Credit Program (RCP). finance professionals manage credit 1980s operated projects common toAfter four vears in one location, and teachers run the many NGOs. In 1991, staff and leader-RDP ends and all non-financial schools. BRAC's headquarters in ship took a more drastic step and trans-services cease. RDP's loan portfolio Dhaka acts as a holdig company formed ASA into a specializedand clients are transferred to a small- coordinating the operations of its vari- micro-financc institution. Its goal iser RCP office. An RCP office acts as ous divisions. simple: to become the most efficient

a bank and provides savings and loan Although the various arms of and self-reliant micro-finance institu-BRAC operate independentlv and tion possible

services wvithin its service area on a .financially self-sustaining basis. . ......... under different directors, they are ASA incorporates many of the

BRAC has applied for a license to BRACsesigned to complement one another. practices common to micro-credit instart a bank that can absorb RCP BRAG's philosophy is that its health, Bangladesh. Its clients, 99 percent ofbranches and solidify their financial- education, training, and finance inter- whom are women, are organized intoposition. ventions deepen its overall impact. A groups of 20 to 25 that meet weeklyIn addition to RDP and RCP, good example of the benefits of coordi- and are required to save. Initial loans

BRAC operates several other develop- nation within the BRAC holding com- are small, beginning at US$70 andpany are its for-profit divisions: growing slowly with each loan cycle.

TABLE 1: PROFILES OF THREE BANGLADESHI MFISspoon, chair, desk, cupboard, and

or ~~chalkboard. Strict budgets are in place_i trot n to limit recurrent costs such as electrici-

ty. These specifications may, appear

excessive, but thec. sinplify the life ofDsvhome $3 ,3field unit staff and keep costs to a mini-

itmum. Mature field units typically serve98 8 4 31 _t 5 1,440 clients, signfring a high client-

t Ascii> reto-staff ratio and impressive outreach.e 9 9 2 The liASts middle-level and head-office

management are small for the same rea-

_t r Creche Sex ac sons. Ten to 12 field un its are moni-tored by one roning regional manager,

A SAis exermnting Borro individual and expan0 ing operations. 12are4whose office is a motorcycle. Becauseaoansandvoluntary Bavince pbut these attention ispaidtocost-savings.AS'this individual is based at ancentrally

yet. At meretings gareu members also nield units m adelocated field unit, the organizationreceive "developmentaecucation," co- ognzr, h c sla ofcr,ad qavoids the costs of a regional office.

ering ar/eassuch 19% 2ocial an and one unt manaer. Oprationl guid- halfa millMoreonver, the head office in Dhaka is

small, waith only 62 staff. This stream-ASA's staff, offices,sand methodolo- organizers 10455 0ne 298k, a 1 rulethat lined organizational structure means

gy are desgne tominmizcotad gvesstafainentveosenthat 98 percent of ASA's staff ar based2izecn.c phstmatrea saves /on ceiling in thefield-ASAuremainsctrue t i erorti-

s s ker 2 rawer <7 18 20 ~~~~~~~~~~~~gins as a rurally based institution.

The reporting and managementoperations maulavialei ngih fas hihaeomllntinformation systems are designed with

iP~~~ 'to ½ - < 7% 61% ~~~~~~~~the same attention to detail and effi-

equaP ~~~~~~~~~~~~~~~~~~~~ciency. Field-unit staff arc trained to~~~~~~Par ~~~~~~~~~~~~~~~~record all transactions as credits or

and ' BengaliYfrom - S prrovides detailed each - esk. A start-up bu4 get for afield debits on a coded chart of accounts.guidelines for opening new branches unit includes specificationsThe list of transactions is sent eivery

$ Management nil 24bwmitec ~~~~~~~~month to the head office, where tra-ns-<71? soniieltosts 2 eralA it C a 9 81 7' / actions are entered into the computer-

2 ~~~~~ized central accounting system thatci ~~~~~~~~~~~~~~~~~~~~generates fina-ncial statements for ASA

0 ~~an a Sc .$nfficience -~~ 158% 109% <-~2 as a whole and for each field unit.M - epsea/ Th~~~~~~~~~~~~~~~ese statements are quickly sent back

4xer ~~e Its sat lid> 9 7% 16.0% 17 ~~~to regional managers and field units so

_________________________________________ ~that all levels of management are able- - - <~~~~~~~~~~~~~' ~~to track performance. This system

~cy-~ ra 'icdtpe/pcrarog exenses ost o capsdrastically reduces time spent on

2 >2 - -- >7 >2' <t7'< - ' - ~~~~~~accounting and removes the need for1< 2'~~~~~~ 4 ~~~~§,2; ~~~ expensive computer systems at the field

-r 0 49% untess~otlKrise specifIed 2 ½ <7- unit level. ASA's reporting system was

2~~~~~~~~~~~~~ ~~~~~also the first in Bnldstotrack theprofessional banking measure of port-

ASA is experimenting with individual and expanding operations. Carefful folio quality-portfolio at risk.loans and voluntary savings, but these attention is paid to cost-sav,ings. ASA's efficiency and franchise-styleare not significant parts of the portfoho For example, front-line offices are field units a-re yielding impressiveyet. At meetings, group members also field units made up of four community results. The organization has grownreceive "development education," coy- organizers, who act as loan officers, and quicldy since 1991 to serve more thanering areas such as social awareness and one unit manager. Operational guide- half a million active clients, wAith a loanpolitical tights. lines specil5' that the four community portfolio of US$22 million. (The insti-

ASA's staff, offices, and methodolo- organizers share one desk, a rule that tution expects to reach 1.2 milliongv are designed to minimize cost and gi-ves staff an incenti-ve to spend less active clients by 2000.) ASA's opera-maximize efficiency. A comprehensive time at their desk and saves on ceiling tional self-sufficiency wvas 109 percentoperations manual available in English fans, which are normallyT installed above and its administrative expenses as aand Bengali from ASA provides detailed each desk. A start-up budget for a field share of average outstanding loan port-guidelines for opening new branches unit includes specifications for every folio stood at 16 percent in 1996.

Both figures reflect ASA's efficient savings options. Clients may withdravw To learn more about Buro-Tangail oroperations, and are expected to these funds before the five-year term is to request a field visit, contact:improve further as the institution complete, but only accrue interest at 18/IRA, Pisci Culture Housing Societymatures. the lower savings rate. Ring Road Shaymoli

ASA is maling concerted efforts to Buro's founders believe their sav- Dhaka 1207, Bangladeshdisseminate its financial technology, ings services offer greater access and E-mail: [email protected] operational strategies. Its operat- convenience, which suit the unpre- Fax: (880-2) 912 5492ing manual is available in English, it is dictabilitv of the lives of the poor. Butalways open to field visits, and its staff these flexible instruments come at a rurther Readingsprovide technical assistance interna- price: they put pressure on Buro'stionally. management and accounting systems ASA Manual. 4th Edition.

To learn more about ASA or to for ongoing staff training and maxi- September 1995. Dhaka:request a field visit, contact: mum liquidity. To remain financially 23/3, Block-B, Khiljir oadv

23/3, Block-B, Khiljir Road solvent, the institution must make Mohammedpur, Dhaka 1207.Mohammedpur, Dhaka 1207, loans (to earn revenue) in the face of Fax: (880-2) 811 175.

Bangladesh increasing competition. As a result, Credit and Development ForutmE-mail: [email protected] Buro is introducing new loan prod- (CDF) Statistics: Microfinance

Fax: (880-2) 811 175 ucts. For example, pre-payment facili- Statistics of NGOsin Baingladesh.ties allow borrowers to repay loans in Volume 3. December 1996. Dhaka:

B u r o - T a n g a iI - I n n o v a t cl r o f advance of the pre-determined sched- Credit and Development Forum,N e w F i n a n c i a i S e r v i c e s ule, and new supplemental loans per- House No. 3/10, Block-D,

Buro-Tangail was founded in 1989 mit clients to access new loans more Lalmatia, Dhaka 1207.to provide micro-finance services to quickly. Additionally, for its most Fax: (880-2) 911 2340.the rur-al district of Tangail. By established customers, Buro provides Lovell, Catherine H. BreakCinBangladeshi standards, Buro's 12,684 lines of credit that are larger and more StrategCy 1992. Eumarian Press:clients and US$728,856 outstanding flexible than standard loans. West Hartford, Connecticut.loan portfolio in December 1996 Although some of Buro's services Rutherford, Stuart. ASA: Tequalify it as a medium-sized MFI. But are experimental and have been intro- Biography of an NGO. August 1995.Buro's strategy has been to invest in duced on a limited basis, Buro-Tangail Dhaka: BRAC Printers.developing new financial services. Its intends to reach 100,000 active clients Rutherford, Stuart and Hossain,continuing efforts to determine how by 2001 and become a financially self- Iftekhar. BURO-TangailPs NVewto deliver more flexible savings and sustaining institution. Even with its Products. Prelimzinary Operationraloan services to the poor represent present outreach, howTever, Buro is Research. May 1997. Dhaka:an important learning opportunity for showing success at mobilizing increas- BURO-Tangail, 18/KA Pisciother MFIs. ing voluntary savings from the public- Culture Housing Society, Ring

Buro establishes groups of poor roughly US$300,000 by the end of Road, Shaymoli, Dhaka 1207.women that hold weeldy meetings. 1996. Fax (880-2) 912 5492.However, the organization emphasizes The growth, competition, and Srillie, Ian. Words d Deds:0 ~~~~~~~BRAC at 25. 1997. Dhaka: BRACsavings over credit. Most of Buro's innovation in Bangladesh's micro- Centre, 356 Mohak7haki C/A,clients are not borrowvers. As of June finance industry hold great promise Dhaka 1212. Fax: (880-2) 883 542.1997, Buro had txwo times as many sav- for the poor and lessons for otherings accounts (40,830) as loans MFIs. Depositors' confidence in this Wright, Graham; Hossain,Mosharrof; and Rutherford, Stuart.(19,692). Recognizing two client pref- sector must be preserved by ensuring "Savigs: Flexible Financial Serviceserences -more flexible loan terms and that their savings are not lost because for the Poor." In W7ho Needs Credit?structure, and more savings options- of fraud and mismanagement. Such an Porerty and Finiance in Bangladesh,Buro's founders have tried to shape occurrence would be dangerous for all edited by Geoffrey D. Wood andtheir products accordingly. MFIs and their clients. As more Iffath A. Sharif. 1997. Dhaka:

Unlike many MFIs, Buro places Bangladeshi MFIs take in voluntary University Press Lirmited; London:Zied Books.

few restrictions on savings accounts. deposits from the public, establishing aSavers can deposit or withdraw their regulatory framework flexible enoughsavings at any time, as long as they do to allow for innovative approaches and Gregoiry Chen, Research Analyst at thenot have a loan outstanding. Buro disciplined enough to ensure financial CGAP Secretar,iat, prepared this articleintends to remove even this restriction soundness is increasingly important. wvith the help of Salehuddin Ahmed andin 1998. The organization has also Supervisory capacity to enforce regula- S.N. ICair 7v of BRAC, Ml7d. Shafiqualintroduced time dcposits that require tions effectively is also critical to Haque Cho'dhurv and Mobammedclients to make weeklv deposits of up ensure that Bangladeshi MFIs serve Hossain an oM AoSA, ard Zakinrto USSA that mature after five years greater numbers of poor clients. BuHo Tandagail.and earn a higher return than other

TRAINING RESOURCES The 71` conducts tailored seminarsI N A S I A at BRI headquarters in Jakarta, supple-

mented bv trips to Unit Desas withc The Secretariat has received many clienteles that meet visitors' particular

requests for information on train- interests. During seminars and field vis-C ing resources for MFI practition- its, participants exchange their experi-

ers. The following are profiles of ence and views with BRI and IVP staff.c three well-known institutions in Visitors may choose package programs

Asia that offer training to ranging from one or tvo days to moreenhance outreach, control delin- than a week, with the number and spe-quency, and improve financial cialized content (modules) of seminarsanalysis and reporting. Two of depending on length of stav. Modules

the three institutions profiled serve include:mainly Grameen Bank replicators, but General Introduction to the Unitnon-Grameen style MFIs can also ben- Banking System. The introduction coy-efit from their services. Grameen Trust ers the principles outlined above andand the International Visitor Program other basics.of the Bank Rakyat Indonesia offer Product. This module details thetheir services to MFIs outside of Asia. history, design, pricing, and implemen-

tation of credit, savings, and otherBank Rakyat Indonesia's products.international Visitor's Organization, Management,P r o g r a m Staffing, and Siupervision. The simple,

Interactive learning is nothing new transparent, four- person structure ofto coordinators of the International the Unit Desas is discussed. The mod-Visitor Program of the Bank Rakyat ule also covers the use of managementIndonesia (BRI). BRI, a leading micro- information systems; the managementfinance institution profitably reaching audit; and staffing issues such assmall borrowers and savers on a large recruitment, salary, performance incen-scale, invites policy makers and micro- tives, and promotion.finance practitioners from all over the The visitor program operatesglobe to see firsthand the worlings of through revenue earned from visitorthe bank's 3,600 rural offices or Unit fees. An administrative fee of US$500Desas. The program confers on partici- for a group of 10 persons or US$1,000

T he program confers on pants something even better and hard- for a group of 11-20 persons iser to come by than funding: know-how charged. It covers the training pro-

participants something even to help meet the enormous unmet gram, lunch during work days, anddemand for credit and savings in the local ground transportation. Hotel

better a n d h a r d e r to c om e by developing world and thereby stimu- accommodation and airfare are extra.late broad-based economic growth. Visitors do not have to meet any eligi-

than funding: know-how to The visitor program began infor- bility criteria or complete formal appli-mally in the 1990s and since 1996 has cation process, but, because of high

h e i p m e e t t h e en o r mo u s received support from the United demand, interested parties often are

States Agencv for International placed on a waiting list. For moreu n ml e t d e m a n d f o r c r e d it a n d Development. The Unit Desas are information, contact International

s a v i n g s. self-sustaining and have reached mil- Visitor Program Director, Tel.: 62-21 -lions of small rural borrowers since 5751026, 2511645; Fax: 62-21-1984. Seeing these units in action and 2511644, 2510313, 2510314, e-miiail:reviewing their performance can help BRIUNITWibm.net.dispel myths surrounding lending tothepoor:(1)thatthepoorcannot Grameen Trust Training and

save, and (2) that they cannot repay W o r k s h o p sbank loans on schedule. The most Grameen Trust (GT) is a non-prof-important aspect of the Unit Desas is it, non-governmental organization settheir adherence to the BRI's manage- up in 1989 primarily to promote andment principles, which balance sustain- support poverty-focused credit and sav-ability with service to underserved ings programs in other parts of thecustomers. world that follow the Grameen Bani

approach. GT provides seed capital for

organizations initiating a credit pro- Branch Managers and Areagram for the poorest. For projects that Managers 'Training. The smallesthave completed successfully their seed administrative unit of GB is the branch,phase, further support is available for which typically services 2,000 poororganizations to expand their outreach clients. On average, 10 branches areand achieve financial viability. Grameen supervised by one area office. For orga-Trust also provides a range of training nizations following a similar structure,programs designed to facilitate the GT offers specialized courses fordevelopment of these organizations branch and area managers; courses runinto sustainable institutions serving the for one month and two months respec-poor. Since 1991, the Grameen Trust, tively. The training program requiresworking closely with Grameen Bank participants to live in an established(GB), has provided seed and scaling-up branch or area office and, in a relativelyfunds to 66 replication projects in 26 new one. The field component is com-countries, and training and technical plemented by one week of classroomassistance to many more organizations. training at the GB Training Institute.

International Dialogue Programs. The course covers budget manage-These are two-week programs orga- ment, accounting, control measures,nized jointly by GT and GB and held staff relations, and analysis of thefour times a year. Intended for those strengths and weaknesses of the loaninterested in setting up Grameen-tvpe program.projects, the programs immerse partici- Training for Trainers. This is a one-pants in the Grameen milieu through month course for supervisory staffdirect exposure to field operations at a responsible for building staff capacityGrameen Bank branch for six days. in replicating organizations.Representatives of Grameen Bank and Computer Training. A month-longestablished Grameen replication pro- training program on Internationaljects share the experiences of adopting Grameen Banker, version 2.0, a micro-the Grameen system in widely varying loan monitoring and branch account-contexts, and assist participants in ing softwvare developed by GT, isdesigning credit programs. National organized once a year for micro-creditdialogue programs are also organized practitioners. Participants are trained infor potential replicators in Bangladesh installing and commissioning the soft-that are planning to start credit pro- ware, wvhich covers 75 percent of thegrams in offshore islands, urban slums, work of a branch, and in tracing andhill tracts, and tribal areas. Grameen rectifying data errors. Trainees receiveTrust also sponsors Exposure Dialog the softvare and manuals on diskette.Programs in other countries, such as Workshops. To help build manage-one planned in Bolivia for 1998 in col- ment and staff capacity and developlaboration with Pro Mujer and strategies for overcoming commonGrameen Foundation. problems faced by credit programs, Si n c e 1 9 9 1, h e G r a n e en

Staff Traininpg Program. The expe- workshops are organized on the fol-rience of GB has demonstrated the lowing topics: (1) cost-effective target- Trust h as 5 to vi d e d seed a n dimportance of rigorous staff training. ing; (2) modeling for institutionalStaff from replicating organizations viability of branches; (3) financial sc a n g - u p f u n d s to 6 6receive training at Grameen, generally management; (4) credit discipline; r e p Eicat i o n p r o j ects in 26for one month. Their training involves (5) reporting; (6) planning, monitor-direct exposure to the philosophy and ing, aind evaluation; (7) strategies for c o u n tries, an d t r a in ing a n dmethodology of GB at the field level, dealing with repayment problems; andand emphasizes self-teaching and learn- (8) internal audit for credit programs. tech n ica assista n ce tc m anying by doing. Trainees are expected to Workshops are frequently hosted inengage in intensive dialog with other collaboration with partner organiza- o o r e o rg a n z at i o ns s.field officers and clients. Typically, tions in other countries. To comple-trainees divide their time between a ment the workshops, GT hasnew branch of GB and an older one to developed manuals, training guides,become familiar with problems that and materials, many of which are nowarise and ways to anticipate and deal available in English, Spanish, French,with them. The program is offered yearround. (contintued o1 next page)

Chinese, Vietnamese, Hindi, and workshops are being developed andTagalog. offered in the Philippines; but wvill be

Training and workshops are open available to member and affiliated GBRsto all micro-credit practitioners. in other countries in the near future.Selection is based on a written applica- In partnership with CGAP, CASH-tion and a competitive review process. POR has launched a Capacity-BuildingFor more information on training costs Program (CBP) that builds on the orga-and arrangements, please contact the nization's current activities: regional andTrust arrangemens plen caddress: national workshops on "nuts and bolts"Trust at the following adrs:topics, on-site technical assistance, per-Grameen Trust, Grameen Bank formance audits, quarterly and annualBhaban, Mirpur 2, Dhaka 1216, monitoring, and information dissemina-Bangladesh (Tel: 880-2-806-319; tion. The topics covered are: 1) Cost-Fax: 880-2-806-319; E-mail: effective Targeting, 2) credit discipline,

CASHPOR draws on its own [email protected]). 3) basic financial management, 4)Planning Branch Financial Viability, 5)

staff and on experts from The Capacity-Building Annual Planning, Monitoring andProgram of CASHPOR Inc. Evaluation and 6) Internal & External

affiliates, believing that CASHPOR-theNetworkfor Audit.

Credit and Savings for the Hard-core Bacling-up the worshops areI ate r a I lea r n i n g a m o ng Poor in Asia-Pacific-is a non-profit, net- CASHPOR's other technical services:

work organization of 18 institutions Quarterly Monitoting & Evaluation,pra c t it i o n e r s i s t h e m ost modeled after the Bangladesh-based Surprise Financial & Work Progress

Grameen Bank, known as Grameen Bank Audits, Timely Technical Assistance Visitsreplicators (GBRs), and Grameen Bank. and regular Information Dissemination

m et h o d o I o g y. CASHPOR's membership extends to through Creditfor the Poor,nine Asian countries: Bangladesh, China CASHPOR's quarterly newsletter, and

.X3 India, Indonesia, Malaysia, Nepal, Papua other publications. Under the CBP thereNew Guinea, Philippines, and Vietnam. will be 36 Surprise Audit and TechnicalCASHPOR provides technical assistance Assistance visits to member and affiliatedto its affiliates and establishes additional GBRs throughout the Region, by CASH-GBRs where needed. POR Resource Persons to ensure that

Many of CASHPOR's member GBRs workshop tools are applied on thehave grown to reach substantial numbers ground.of poor households; but still require CASHPOR draws on its own staffadditional management skills to reach and on experts from affiliates to delivertruly large numbers and institutional the assistance described above, believingfinancial sustainabilitv. that lateral learning among practitioners

To meet its members' needs, CASH- is the most effective training methodolo-POR is developing additional xvorkshops gv. However, -when the required humanin its Intermediate Management resources are not available within theDevelopment Workshop Series. Central Network, CASHPOR reaches outside forin this endeavor is the dissemination of appropriate resource persons.CGAP's new management tools: the Membership in CASHPOR Inc. is byAppraisal Format, the Business Plan, the invitation of the Board that carefullyManagement Information System and scrutinizes GBRs to ensure that they arethe Guidelines on Financial Reporting, serious about reaching large numbers ofExternal Audits and Institutional poor households in a financially sustain-Financial Analysis. Through these able wav. For more information aboutIntermediate Series workshops CASH- CASHPOR, please contact its PresidentPOR is assisting its member GBRs to (Dr. Cecilia D. Del Castillo) in Bacoldovercomic weaknesses in accounting, City, Philippines; Fax: 63-34-433-0228financial management and analysis. Other or e-mail: [email protected] ortopics that wvill be covered by its Executive Trustee (David S. Gibbons)Intermediate Series workshops are: in Seremban, Malaysia; Fax:60-6-764-1) Cost-effective Personnel Policies, 2307 or e-mail: [email protected]) Developing New Financial Productsthrough Market Research, 3) Planning This article was prepa red b y AllisonInstitutional Financial Sustainabilitv, Tarmaunn. The part on Grameen Trutst4) Repayment Crises and Rehabilitation was written b Lamiya Morshed ofStrategies, 5) Cost-effective Impact Grameen Bank Replication Proogram,Evaluation Studies and 6) Governance Granmeen Trust. Professor David Gibbonsand Regulation. Initially these provided input on CASHPOR.

CGAP READER SURVEY how much (or little) readers value the

-Tamara Bullock, CGAP Secretar[at documents. Forty-five percent ofrespondents -were willing to pay (56

In 1997, the CGAP Secretariat percent of MFIs replied yes), 37undertook a survev to gauge interest in percent were not sure, and only 18our publications and to solicit ideas percent said thev were unwilling tofrom our readers on what topics you pay. Because a great deal of staffwanted to see covered. More than time and effort go into the prepara-1,000 questionnaires were distributed \ i. tion, translation, and disseminationby mail, and the survey was also posted of CGAP's publications, we are reas-on the CGAP Web site. Of the survey sured to see thev are valuable to you.forms mailed, roughly 25 percent of Finally, we did receive some helpfulour readers responded. Responses F Africa/Middle East Latin America feedback about presentation-forcame in from throughout the vorld C t Europa and A Other example, that the color of the ink iscame in from throughout the world Central Asiaand from people wvith varied back- too light for copying and that thegrounds wvithin the micro-finance Figure 2. Regional Distribution of Survey Nexvsletter format is at times confus-community (see Figures 1 and 2). Respondents ing. We will try to minimize these

difficulties in the future.

- Focus Notes 4 (on regulation and Thank you again for taling thesupervision) and 7 (on governance time to participate in this reader stir-of MFls) were voted most vev. We will strive to bring you moreinteresting. interesting and relevant information

| Many complained about the chop- about micro-finance.

piness in the lavout of the Nexvs-letter. WVe hope that issue 4 (released CA BP llock is Office Assistant at teiafter the survey) and this issue have CGAPScretariat.

13% addressed that concern. Issue 3 wasjudged most interesting of the first l Ithree issues; we hope subsequent s a rn p I Co mn e n t s

1S MFIs * Pvt. Sec/Foundations i w c tC Donors NGOs (non-MFIs) issucs Nvill continue to improve. I I

Academia Govt. - Suggestions on future topics include "The expetiences of otherOf Commercial Banks l ndependent IvMFIs confirm that xve are on the* Other case studies, impact studies, savings tight track, and this builds our

Figure 1. Professional Affiliation of Survey m an,ene predpleand confidence." -PractitionerRespondents MFR Iranagement We are pleased to

say that a number of requests will befeatured in forthcoming issues. For "Market interest rates have

Many thanks to our respondents! example, forthcoming from the been applied to [our] recently

Your ansxvers gave us valuable insights Occasional Paper series are cost allo- approved projects." -

on hoxw best to serve the needs of cation for multi-service MFIs, with a Government officialthose in the field of micro-finance. case study of BRAC; and a study of

savings mobilization by four MFIs. "The Occasional Paper onK E Y 5 U R V E Y R E S U LT 5: a Conflicting comments that the pub- interest rates was a very practical

* 92 percent of respondents said they lications are too technical or not document that can be internalizedfound the publications useful and technical enough prompt us to and used as a training tool.had learned something from them. explain the type and purpose of Excellent paper!" -

Manv (about 53 percent) have CGAP's publications. To serve our Consulting firmdirectly applied lessons learned from wide range of readers, we have threeour publications in their individual products: the biannual Nexvsleter, " "Our staff finds CGAP publi-institutions, practices, and class- featuring practitioner activities ands| cations translated into French veryrooms. perspectives; the Focus Notes series, interesting, very applicable to our

* The Occasional Paper on interest synthesizig key literature in the project." - Practitionerrates was bv far the most appreciated field; an d the Occasional Papers,

publication. Many of our MFI read- dealingt with technical topics. "...pubhcations are wel pre-ers said they had used the paper to C Although CGAP does not intend to setd h vollucames are wel pessreview or determine the interest rates start charging for its publications, sented. The volumes are less-for their institutions, the survey question on "willingness cfraghteming easy to read."-l

to pay" was intended to determine

NEWSLETTER CREDITS

Editors Joyita Mukherjee

Jennifer Isern

Copy Editor Allison Tarmann

Production Charlene Mui

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CONTACT INFORMATION

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Tel: 202. 473 9594, Fax: 202. 522 3744

E-mail: [email protected]

World Wide Web: http://www.worldbank.org/ html/cgap/cgap.html

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THE CONSULTATIVE GROUP TO ASSIST THE POOREST

[A MICRO-FINANCE PROGRASi]

e w s e i @ r t t e