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Nepali SACCOS Sahara Team Moved by the Amazing Performance of Bangladeshi MFIs

The Centre for Self-help Development (CSD) organized a study/exposure visit to Bangladesh from March 19-26, 2023. The visit team consisted of nine Board Members and one staff member of Sahara SACCOS and one staff of CSD as coordinator. The team visited three well known MFIs of Bangladesh, Grameen Bank, Integrated Development Foundation (IDF) and ASA.

The Grameen Bank, which was initially launched as Grameen Bank project in 1976 and established as the Bank on October 2, 1983 by an ordinance of the Government of Bangladesh. The team visited the head office of Grameen Bank and met Mr. Golam Morshed Mohammed, Faculty Chief, International Program Department. As per the data of January 2023, loan outstanding is $ 1534 million, deposit is $ 2390 million and recovery rate is 97.14%. Grameen Bank has currently 2,568 branches catering 8,1678 villages, 135,155 centers, 1,458,869 groups and  10.30 million members. Grameen Bank has smart fund management system in place where it manages working capital through members’ savings, and through public deposits. The branch offices provide loan to its members and the surplus amount is sent to the head office of Grameen Bank. The Bank invests the surplus amount in Government Bonds and Grameen Mutual Fund which is also enlisted in Dhaka Stock Exchange. As per the data of January 2023, deposits as percentage of outstanding loan is 156 and deposits and own resources as percentage of outstanding loans is 176. Similarly, number of branches with more deposits than outstanding loans is 1958. The self-sustainability in fund is particularly helpful for Grameen Bank in turbulent times when there is liquidity shortage in the market. Similarly, when members are unable to pay their installment and the bank has made a provisioning of 50%, it has mandate based on the assessment of particular individual member to provide flexi loan to the members where the loan schedule is readjusted so that the member has the capacity to pay back the installment. This loan detour facility was introduced after the advent of Grameen II model. The team also visited Pachchorshibchor Branch of Grameen Bank in Madaripur District. As per the data of January, 2023 it currently has 7 staff, 54 centres, 4300 members, 2781 borrowers, Tk 74.5 million loan outstanding, Tk 72.2 million saving and 99% recovery rate. The interest rate is 20% p.a (declining balance). The profit of the branch in the last fiscal year was Tk 4.3 million. The excellent recovery rate is due to rigorous credit appraisal process as well as gradual increase in loan size of its members. The team also visited one of the centres, Goalkanda Buma of Grameen Bank. There are currently 60 members in the center. All the centres of Grameen Bank has weekly meetings. One of the members Ms. Shefali Roy has been the member of Grameen Bank for the last 15 years. Initially she took a loan of Tk 500 and currently she is taking a loan of Tk 100,000. As mentioned it is due to the gradual increase in loan size and rigorous credit appraisal technique the recovery rate of Grameen Bank is excellent even in these turbulent times when we have to cope with the menace of COVID-19 pandemic.

Likewise IDF was established in December 1992 as an NGO to undertake and implement various programs meant for improving the living standard of the poor and deprived segment of the society poor through microfinance as well as credit plus activities. One of the specialties of IDF is its credit plus program catering to the socio-economic transformation of its members.

One of the highlight of the visit was Enrich (Samriddhi) program of Satkanya Union of Chittagong Division which was run by IDF in collaboration with Pali Karma Sahayak Fund (PKSF), specialized government institution for poverty alleviation supporting various programs for employment generation. Currently 5500 households are enrolled in the program. The health service is provided by 2 health officers and 11 health visitors through 9 health centres. The health visitor visit the households from 9 am to 12 pm. The health visitors provide necessary interventions for beneficiary groups in areas like malnutrition (e.g stunting), anemia (particularly for pregnant women) , diabetics (particularly for elderly) and other necessary health services. Other services include telemedicine, health camp and eye camp for cataract patient. The consultancy fee and medical costs are free. Other services are providing Tk 500 per month for elder citizens above 60 years, Tk 2000 per month for disabled people and Tk 1 lakh for beggars (paid in installments). It also has youth programs where online training is provided to 500 youths and after 2 to 3 months physical meeting is conducted. Similarly, there are 40 education centres in the union where classes are conducted from 3 pm to 5 pm for students who are studying in nursery to Class 2. The alternative education is also provided to school dropouts and other regular students as tuition. The teachers who provide service free of charge are given training at regular interval.

The team also had the opportunity to visit IDF Health Program in Chittagong. Dr. Mukta Kanun is one of the two doctors providing health service from the center. The Chittagong Division had 4 health centres, 4 medical officers and 65 paramedics. Any borrower who has taken a loan of Tk 25,000 or more is issued a health card which costs Tk 152. The entire family member will be eligible for free medicine and diagnostic services available in the centre.  For others who have not been issued a health card, the consultation fee is Tk 50 for paramedics and Tk 200 for doctors.

The team also visited one of the centers of Integrated Development Foundation (IDF) in Uttar Chadgaun, Chittagong. The name of the center was Laxmi Acharya Badi. The highest loan provided to the borrower was Tk 4 lakh. The interest rate  was 24% p.a (declining balance). Average loan has 46 installments and after 23 installments the member is eligible for top-up loan. The turn around time (TAT) is 7 days. The branch has 84 centres, 1281 members, 1074 borrowers, saving amount is Tk 13,000,000, loan outstanding is Tk 40,600,000 and the recovery rate is 98%.

Likewise, ASA was established in 1978 as an NGO to undertake and implement various programs meant for improving the living standard of the poor through their socio-economic to as carry out microfinance as well as credit plus activities to the poor and deprived segment of the society. One of the highlight of the visit was its specialized loan providing at 18% (declining balance).The loan officer uses smartphone to enter financial data of each member and real time data  on amortization, total savings and other financial information are generated. The data is used to verify financial status entered in the Pass Book of each individual member.

In the branch office of ASA Mr. Sudip Baruwa, Senior Branch Manager of ASA , Bandarban, Cox’s Bazaar of Chittagong Division said that as of February 2023 the loan disbursement is Tk 393.96 billion, loan outstanding is Tk 250.89 billion and there are 3073 branches, 7.3 million members and 6.46 million loans. He said that up to Tk 99000 is categorized as primary loan and from Tk 99000 to 300000 the loan is categorized as specialized loan and any other above Tk 3000000 is provided only for graduate members. The interest rate is 24% (declining balance rate) but for specialized loan the interest rate is 18% (declining balance). The specialized loan is provided in areas like cross breeding of cows, mushroom cultivation, vermin compost and sea weeds farming.  There is weekly meeting but the mode of payment is weekly as well as monthly. ASA also has stipend program like scholarship program for 1 member in each branch, health program including physiotherapy in Lal Para Jilonga and health centre in Sotta Maheshkhali. For the health program ASA has recruited 2 physiotherapist, 1 doctor and 5 nurses. One of the key aspect of ASA is although there is group formation process in the center it does not have group liability. It believes that one good member must not be punished for bad loan of another member. Similarly, since it is an NGO all the surplus profit it has generated is used in credit plus and other programs that benefit its members.

The team also visited the one of the Centres of ASA in Lal Para Jilonga in Chittagong Division. The name of the center was Moitri. There were 30 members out of which 28 were borrowers. The highest loan was Tk 150,000 taken by Ms Paki Morji Aktar.  The interest rate was 24% (declining balance). There is no group guarantee in ASA. There are center chief, secretary and cashier. The members submit their Pass Book along with the loan installment to the loan officer. The loan officer enters the amount and other relevant data in the apps of his/her smartphone. The apps calculates the current amortization amount as well as the saving balance of the member. This is also verified through the Pass Book. The repayment rate of the centre is 100% and loan outstanding is Tk 2 milliion.

The team also had interaction with Mr. Zahirul Alam, Executive Director of IDF. He said that Nepal was the best practiced microfinance in the world after Bangladesh. Currently there are some problems in Nepal and that they can be managed with right policy, strategy and good management practice. He also said that Bangladesh had similar problem in the past due to overlapping. When the problem was at its peak the overlapping rate was near 25%. Similarly on merger and acquisition, he said, “Unlike in Nepal where Central Bank is committed to reduce the number of MFIs, in Bangladesh it may be very difficult to manage because apart from microfinance we are also involved in credit plus at a massive scale.” One of the visiting team member, Mr. Upendra Olee, Board Member of Sahara SACCOs said, “I had visited Bangladesh 10 years back and the microfinance practice is even better now with expansion of its credit plus program. Similarly, the health care service of IDF had expanded.” Similarly another visiting team member, Mr Dinesh Niroula, Deputy Director of Sahara SACCOs said, “The MFIs in Bangladesh has expanded its credit plus program and I can see that the standard of living of the members has greatly increased compared to the time of the visit earlier.”  Mr. Laxmi Acharya, Board member of Sahara SACCOs said, “The credit plus programs are focused in rural areas are impactful”. Mr. Sopan Bista, Assistant Director of CSD, said, “Various struggle committees as well as some key personalities in Nepal are spewing menace of microfinance. If Bangladeshi microfinance can provide technical support in developing impact assessment tools like Progress out of Poverty Index (PPI), we can show the true picture of Nepalese MFIs and its contribution in the socio-economic transformation of its members. The microfinance can garner some goodwill which is currently lacking in Nepal”. There are lessons for Nepalese MFIs where the repayment rate in Bangladesh MFIs are near 100% which is right after the advent of COVID-19. This is due to rigorous credit appraisal technique, gradual increase in loan size and promotion of credit plus programs to provide various services to the clients as well as encourage entrepreneurship.

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