Contribution of the Village Poor Women in the Success of Microfinance

Contribution of the Village Poor Women in the Success of Microfinance
A case analysis based on BRAC

Through its years of struggle against chronic deprivation, hunger and injustice, Bangladesh has been home to many innovations in tackling poverty ,BRAC, a development organization founded by Fazle Hasan Abed in February 1972 soon after the liberation of Bangladesh, has acted as both the initiator and catalyst for many such innovations and change. Its initial focus was on assisting the refugees returning from India to Bangladesh, a newly independent country. In 1973 we broadened our focus to long term sustainable poverty reduction.

Over the course of our evolution BRAC has established itself as pioneer in recognizing and tackling the different dimensions of poverty .Its unique, holistic approaches to poverty alleviation and empowerment of the poor encompasses a range of core programme in economic and social development, health ,education and human rights and legal services.

Today BRAC is the largest southern NGO and employees more than 100000 people, the majority of which are women and reaches more than 110 million people with its development interventions in Asia and Africa.

BRAC: an overview

BRAC, one of the world largest NGOs started as an almost entirely donor funded ,small scale relief and rehabilitation project initiated by Dr. Fazle Hasan Abed to help Bangladesh overcome the devastation and trauma resulting from the liberation war and focused on resulting refuges returning from India.

With its innovative approaches to development, following no rigid model, but continuously expanding and growing through experimental learning, BRAC today provides and protects livelihood of an estimated 110 million of the 150 million of Bangladesh .BRAC approaches poverty alleviation and empowerment of the poor through a holistic way. This method combines microfinance under its economic development program with health, education, social development, human rights, and legal services. From the time of its inception in 1972, BRAC recognized women as the primary caregivers who would ensure generational sustainability of their families and households. BRAC has therefore been committed particularly to the empowerment of women and educated of children.

BRAC economic development programme provides the foundation for all of BRAC’s development work and has so far organized 5.31 million poor, landless and disadvantaged people, mostly women, into 170277 village organizations (VOs). The VOs serve as forums where people can collectively address the principal structural impediments to their development path, receive awareness training, credit support, savings facilities and get the opportunities to mobilize economic and social power.

BRAC microfinance program strives to ensure economic and social sustainability of the poor by offering credit and assisting and encouraging them to save. So far BRACs microfinance program has disbursed BDT 208409 million with 98.52%recovery rate and requires no collateral. Member’s savings equals a total of BDT 10595 million with BRAC. BRAC finds it essential that its microfinance members are informed and aware enough to use their loans in an optimum way; that they are cognizant to the rights, maintain good health and hygienic and have the confidence to establish a means of income generation.

BRAC non formal primary education program, set up in 1985 also serves as a primary example of the organizations innovation and extensive coverage and has been replicated in about a dozen countries. It fulfills BRAC’s goal of poverty reduction through access to education for these traditionally outside formal schooling. BRAC develops its own education materials in line with the government curriculum with customized materials that target indigenous groups and others marginalized groups. The adolescent development program trains adolescent BRAC school graduates, both girls and boys, in vocational skills, health awareness including reproductive health and leadership.

Only 365 of the population in Bangladesh have access to primary health care services beyond childhood immunization and family planning. BRAC’s health, nutrition and Population program takes a broad approaches to the health needs of the poor by providing basic curative and preventive services to more than 97 million people trained as health workers and volunteers work to raise awareness among the rural poor of health issues and aim to reduces maternal and child mortality and vulnerability to common dieses. Services are offered to control infectious disease like tuberculosis acute respiratory infections diarrhea etc. BRAC has collaborated with the government to immunize children and pregnant women, leading to 80% immunization coverage of the population .the program also provides services to pregnant women for improving their health and nutrition status.

Throughout its operation, BRAC has always been encouraged its field stuff to maintain a responsive and adaptive approaches to program beneficiaries. BRAC’s coverage extends to 110 million of the 141 million inhabitants of Bangladesh and 69427 villages in the country’s 64 districts. BRAC continues to maintain a strong commitment to development at the grassroots level and stands by its belief that community partnerships and institution building go along way in sustainable development and the spreading and transferring of knowledge to future generations.

The organization has been a symbol of innovation and dynamism, ever ready to experiment with innovative ideas and has been called upon to assist a number of countries in crisis including Afghanistan, SriLanka, Tanzania, Uganda, southern Sudan and Pakistan. Recently it has taken initiative to expand its program to more than other ten countries of Asia and Africa.

BRAC Vision

BRAC vision is of a just, enlighten, healthy and demographic world free from hunger, poverty, environmental degradation and all forms of exploitation.

BRAC mission

BRAC mission is to work with people whose lives are dominated by extreme poverty, illiteracy, disease and other disadvantages. With a holistic approach, it strives to bring about positive changes in the quality of life of people who are poor. It achieves its mission by;

Working with the poor especially women and children
Engaging in multifaceted development interventions
Striving to promote positive changes in quality of life
Working towards attaining socially, financially and environmentally sustainable programme
Actively promoting human rights, human dignity and gender equity.
Helping to shape national and global policies on poverty reduction and social progress
Fostering the development of human potential
Offering professional development opportunities to its staff
Encouraging commitment to the goals and values of the organization.

Values

Concern for people, especially the poor
Human dignity & Belief in human capacity
Gender equity
Fairness & Honesty and integrity
Discipline & Creativity and innovation
Participation
Accountability & Cost consciousness, Teamwork, Openness, Sharing information, Transparency.

BRAC Microfinance Program Components

Fazle Hasan Abed, the founder and chairman of BRAC, started rehabilitation program work in a village called Sulla to resettle war refugees immediately after the liberation war of Bangladesh. In doing so he discovered that the poor need micro credit in order to break free of poor the traps of the dalal or mohajans who lent money against collateral at high interest rate. Thus, with its first loan of BDT 10000 given to a group of poor fisherman at no interest, BRAC pioneered micro-credit in Bangladesh. As abed and his fellows in these activities lent different amounts of money to different individuals, they also discovered that most of the money lent was not repaid and the loan money was being consumed. That was given on group’s basis rather than individual’s basis and service charge and repayment schedule was imposed. This mechanism worked well.

Group Credit was given for different purposes such as agriculture, small business and housing. The process was on till 1975 when it was found that it led to conflicts within the groups since no one wanted to take the risk of responsibilities. This led to some changes in the lending areas. The individual would take the loan and bear full responsibilities of repaying the loan whether or not he made a profit. This method worked better than group credit.

After Sulla BRAC stepped into Manikgonj .Inspired by the success of its microfinance program, BRAC started thinking about what to do next to reach out to more people .As result microfinance program started to expand.

Before going to discuss details about the BRAC Microfinance programme service offerings we are going to discuss about what are differences between Microcredit and microfinance. Most of the NGO’s in Bangladesh mismatch of the two concepts according to the opinion of Director of BRAC Microfinance programme, Mr.Sabbir Ahmed Chowdury. But BRAC views these two concepts from different concepts.

Micro Credit:

Micro credit is a kind of small loan that is given under certain conditions to an individual or group by a bank or institution and that is repayable after a period of time. This is operated under a certain framework for a specific group of people .In case of individual lending, no collateral or guarantee of loan is required .In case of group lending ,a number of individuals can provide collateral or guarantee a loan through a group repayment pledge. The incentive to repay group lending is based on peer pressure – if one default, the others create pressure on repayment.

Microfinance:

It includes different kinds of loans (general loan, loan for IGAS etc), saving and insurance given to people at different levels .this process ensures maximum utilization of loans, given savings opportunities, insurance facilities (life insurances, livestock insurance). This means that microfinance is not only limited to credit but also includes others facilities. If we put the definition of microfinance in an equation:

Microfinance = credit + savings + other financial facilities.

DABI:

The goal of DABI (short for daridro bimochom which means alleviating poverty) is to cater to the moderate poor both in rural and urban slums. This program organizes landless groups and provides them with financial services and self-employment opportunities.

Dabi provides different schemes of financial services including collateral free loans and savings facilities to low income earners so that they can begin their own income generating businesses .As of December 2007, the total numbers of outstanding borrowers is 4550855 and BDT 42615 million has been disbursed for the year.

Members are selected according to the member selection criteria set by BRAC. The MF staff must follow this guideline as the sustainability of the program lies with members and their repayment pattern. Program organizers set out to meet prospective members keeping the criteria in mind. During the discussions, the Po notifies the prospect about the rules and regulation of the organization, set requirements for member and borrower selections, credit requirement, and finally savings and its importance. It’s during this time that the members are oriented about the small group leaders and VO member management committee. After a group of 15 women have agreed, the Programme organizer sets a time and date for all the prospects to come to the area office for the official formation of the village organization (DABI).

Women Entrepreneur Development Program:

BRAC also introduced the Women Entrepreneur Development Program (WEDP) in 2000solely for women entrepreneurs. The cumulative disbursement in WEDP up to December 2006 is BDT 1719.37 million among 22172 women. Through this program BRAC has addressed the financial needs of those entrepreneurs who nether does not belong to the target group of microfinance institutions nor have much access to commercial banks.

UNNOTI

Considering the existing situation of the farmers where lack of capital results in unsatisfactory outcome level, BRAC has taken initiative vies for ago based production enterprises which in turn benefits small and marginal farmers. This initiative is known as UNNOTI (meaning g development).

The goal of UNNOTI is to provide financial services to meet specific needs of small and marginal farmers. Agriculture is the backbone of Bangladesh’s economy and to a large extent drives the livelihoods of the poor, either directly or indirectly. Crop diversification, growth in the non cop sector and maintaining high productivity are thus of great importance for food security, proper growth and livelihoods of the poor. Therefore there is a wide scope for intervention in agriculture and the introduction in agriculture and the introduction of new ideas and enterprises.

Through the UNNOTI program, BRAC provides support to the marginal farmers who own more than one acre of land, a group not being targeted by the mainstream microfinance programs. The marginal farmers don’t need a huge amount of money to support their projects; loan size ranges from BDT 10000-BDT50000.

PROGOTI

The Progoti or MELA program (meaning progress) was launched in 1996 in order to generate income and create new employment opportunities through enterprise development in the rural and semi urban areas of Bangladesh. The goal of the program is to provide credit facilities and technical assistance to new and existing small business and BRAC microfinance graduates whose access to formal financial institutions is limited in rural and semi urban areas of Bangladesh.

Since its inception, progoti has disbursed BDT25533 million among 343237 borrowers and as of Decembers 20007, the number of outstanding borrowers is 1113551.

Governance

Apart from the Chairperson of BRAC, the rest eight members of the governing body are non-executive. Distinguished individuals with high reputation in business and professions with pro-poor mindset have been elected to the Governing Body to bring their diverse skills and wise counsel in the governance of BRAC. In the year 2004, four meetings of the Governing Body and an Annual general Meeting of the general body were held. The audit committee also held four meeting in the year 2004.

BRAC also appointed its first ombudsperson on September 1, 2004 with a comprehensive mandate to investigate any incident of maladministration and misuse of power within BRAC. Clear-cut policy regarding authority of each level of staff has been laid down.

The staffs are empowered to take decisions at area, regional and programme level. Procedure manuals and policy documents contain organizational policies and procedures, which are open to all. The internal control of BRAC is dealt by Internal Audit, Monitoring and Financial monitoring section. 100% audits are conducted where irregularities are detected in the course of normal internal audit, which is on sample basis. The frequency of audit in each of the Area offices, Head offices and commercial projects is at least once a year but two or more are conducted at locations and programme that warrant a close watch.

In 2004, a system of continuous audit, whereby all financial transactions at BRAC Head Office are checked within a week, and risk based auditing has been introduced. Internal audit, during 2004, was conducted in 2,915 locations and 26 reviews undertaken. These reviews were discussed in review meetings and corrective measures were taken.

Quarterly reports are prepared on unsettled irregularities of the review meeting decisions and submitted to the audit committee. BRAC Inventory & Internal Financial Monitoring Section consists of 14 staff, periodically monitoring on inventory and internal financial control at BRAC Head Office and projects. The total number of inventory monitoring spots/areas was 68 and the figure for financial control was 13 in 2004.

Audit reports for all projects, along with FD-4 certified by the Auditors, were submitted to the NGO Affairs Bureau, Prime Minister’s Office. A total of 31 external auditing missions, from 6 audit firms, reported on different BRAC programmes in 2004. External Audit Groups include Ernst & Young, Malaysia Aziz Halim Anwar & Co; SF Ahmed & Co Ahmed Ahmed & Co; JR Chowdhury & Co SK Barua & Co BRAC has two Donors’ Consortia for the BRAC Education Programme and for the Challenging the Frontiers of Poverty Reduction programme. These two programmes account for a large part of total donor finance to BRAC.

The consortia conducted their own audits and external reviews and met twice in 2004 to discuss findings. The Consortia donors are the European Commission, Department for International Development (U.K), DGIS (the Netherlands), CIDA (Canada), NOVIB (the Netherlands), NORAD (Norway) and World Food Programme (WFP). BRAC Finance & Accounts Division has won the World Bank 2004 CGAP Financial Transparency Award.

Visions for the Future:

When the world is free from hunger and poverty, BRAC’s work will be done. Until then, it will strive to find practical and scalable approaches to eradicate poverty wherever it find. With one billion people in the world today still suffering from poverty, the task ahead is enormous. Even in countries which are making good progress on economic growth and many of the MDG goals, there are second generation development challenges that remain to be solved. These include- the need to provide quality education for all, reduce maternal and neonatal mortality; expand the frontiers of sustainable agriculture production; adapt to climate change and sustain and expand the gains made by the poor in a globalize economy .BRAC will be working actively and in close alliance with civil society, private sector, government and knowledge institutions, in addressing these challenges.

Description of the Project:

BRAC economic development programme provides the foundation for all of BRACs development work and has so far organized 5.31 million poor, landless and disadvantaged people , mostly women, into 170277 village organizations (VOs). The VOs serve as forums where people can collectively address the principal structural impediments to their development path, receive awareness training, credit support, savings facilities and get the opportunities to mobilize economic and social power.

BRAC microfinance program strives to ensure economic and social sustainability of the poor by offering credit and assisting and encouraging them to save. So far BRAC microfinance program has disbursed BDT 208409 million with 98.52%recovery rate and requires no collateral. Member’s savings equals a total of BDT 10595 million with BRAC. BRAC finds it essential that its microfinance members are informed and aware enough to use their loans in an optimum way; that they are cognizant to their rights, maintain good health and hygienic and have the confidence to establish a means of income generation.

As a successful development financial institute (DFI) BRAC has organized so many village poor women across the countries and they have trained them to be efficient as small entrepreneur .after the training they have been given economic support as form of micro credit so that they engage themselves in the productive sector .over the year it has succeed through continuous effort to alleviate poverty .during this struggle and fight against poverty and the process of empowerment of the women financially ,mentally and physically BRAC and its millions of members have been working together to reach the final destination of poverty , hunger and all sorts of exploitation free Bangladesh.

In line with the success of BRAC Microfinance ,the village poor women also has been working secretly without conscious knowledge .we are sometimes aware of it and even sometimes we don’t care about it saying that if we don’t give this and this how they could succeed.

Objective o f the Project:

We can divide our overall objectives into two separate parts.

General Objective:

To broaden my basic knowledge by learning practically from the organizational structure thought the direct involvement of these jobs
To learn more about the DFI operations in the field level and corporate level

Specific Objective:

To find out the overall contribution of BRAC Microfinance programme to struggle and fight against poverty alleviation and empowerment of the poor women.
To locate the specific contribution of village poor women in line with the success of microfinance
To identify the role of savings, loan recovery performance ,women’s mentality and loan utilization of poor women in the success of BRAC Microfinance
To recommend some valuable information that are gained from the member so that they can take corrective actions for the further betterment of organization
To find out customer-organization relationship

Methodology:

Data is one of the most important parts based on which we can make relations and justification and reliability of our measurement. I both collected qualitative and quantitative data for my internship project. The measurement of the qualitative data was the observation through directly to get an abstract idea. These data were used to make a decision weather she has been able to survive from the poverty line or not. According to me, the qualitative data means the courage, confident and economic and financial freedom of women to take decision in the context of family and society i.e. empowerment of the women. The quantitative data is refers as these data which are countable like her present monthly income ,land and other property that she has gained through the engagement of BRAC .

We were relying on both primary and secondary data to get an accurate and clear idea, most of the primary were collected from our filed visit to BRAC operations areas .More data were collected from the field visit and direct interview of beneficiaries and staffs and officers of BRAC and the rest data were collected from different BRAC publications, BRAC website, PKSF website and NGO Bureau website and others reliable sources

I used the sample size of about 147 borrowers and no borrowers as sample. These non borrowers were taken because they have been influencing women borrowers because they are either the family members or husband of the borrowers.

Moreover I also took equal number of men and women i.e. 36 men and 36 women to justify their mentally .In this context I used only the members and I selected 12 members from three regions like Mymensingh, Dhaka and Barisal

BRAC’s Contribution to the Success of its Microfinance Program:

BRAC’s microfinance programme has focused specially on women. The reason for rural women being placed in a vulnerable position in the community is their continuous state of helplessness, both economically and socially. Employment opportunities are very limited for them. Female members of the households lack health care services, receive less nutrition and are less educated than their male counterparts. Also the growing number of female headed households as results of death of the bread earner, divorce, desertion and male migration, has left women at the helm of the households. With all these factors in mind, BRAC focuses mainly on rural women giving priority to their needs, bringing about meaningful transformation in their lives by making small loans available to them for income generating activities.

BRAC’s differs from other microfinance institutions in its realization that poverty is a multidimensional concept and development needs for different categories of the poor are not homogeneous. BRAC’s commitment to this reality is marked in two ways, first, BRAC has always opted for the credit plus approach where loans are given to poor women in the form of skill training, non formal primary education for children of BRAC members, health care, social development services and the creation of grassroots organizations for the poor .second in order to reach the diversified groups of the poor, BRAC applies different approaches for facilitating their access to financial resources in the form of microfinance services. To date the programme has reached over four million village members, of whom 99.5 % are women .Results now show that the moderate poor, as well as vulnerable households are the principal users of microfinance .Compared to extreme poor households they are more likely to join in NGO, more like to take a loan, more like to have a larger loan and more likely to develop a profitable micro-eEnterprise with their loan. There are several reasons why the extreme poor households are less likely to join or once joining, less able to make effective use of loans. Perhaps the most common factor is households need an existing source of regular income .Repayment conditions typically require payment on weekly basis as soon as the loan is taken and in many cases, before any income has been generated by the investment of the loan. For households without such as assured repayment source, taking loan is simply to risky.

Very often, NGO staff or other borrowers will discourage such poor households from joining the programme .It is the members of this extreme poor group that are particularly disadvantaged using conventional microfinance instruments and its for this group that are particularly disadvantaged using conventional microfinance instruments and it is for this group that new modes of intervention are needed . This is a new frontier in the poverty reduction challenge.

BRAC Development Programme (BDP) Ultra poor:

The BDP Ultra poor consists of members of BRAC’s VO-based microfinance schemes who are unable to take full advantage of the credit plus facilities and inputs provided by BRAC due to lack of confidence and inadequate technical knowhow .through their participation in the TUP programme ,BRAC strives to enhance the capacity of these women so that they can set up and operate enterprises to generate regular income in order to achieve this ,the TUP programme applies an integrated support package in addition to the credit facilities that are offered to these women under the microfinance programme. The package includes a wide range of training programmes including basic skill development training and monthly refreshers. These training courses re tailored to the specific needs of the participants’ .In addition under the TUP programme, The BDP members also receive essential health care services and social development support.

Women’s Contribution to the Success of Microfinance:

In line with the success of BRAC Microfinance programme across the communities, engagement of BRAC members with BRAC has really surprising contribution .They have multiple significant & hidden contributions which basically work as a driving force towards the success of microfinance programme. I have found many important facts through my field visit and life time experiences as a son of BRAC microfinance programme members or borrowers. The surprising as well as the remarkable contributions of village poor women towards the success of BRAC microfinance is as follows.

The Village Organization — Heart of BRAC Operations:

BRAC’s micro finance programme has focused specially on women. More than 98% of the BDP members are women .BRAC focuses on institution building to bring the rural poor people into the mainstream of development. BRAC believes that a common platform created a need by the poor themselves is crucial prerequisite whereby the poor can make themselves count in the development process. We know that Bangladesh is a high level of poverty accompanied by low productivity activities. Because they cannot provide collateral and typical deal in small denominations of money, the poor are denied access to the formal banking system and are thus deprived of the facilities to borrow, save and invest in productive activities. In addition, moneylenders from their informal credit markets charge very high interest rates restricting poor people’s access to credit earnings. Making credit available, especially to the rural poor is therefore, considered as an essential strategy in reducing income poverty. BRAC started it operations with an ultimate aim to

Make credit available to poor women, especially in rural areas.
Provide credit at a reasonable price
Involve poor women in income generating activities through credit provision
Promote the economic development of the country by increasing the income level of the rural poor
Operate self sustaining credit activities.

The most important parts of the BRAC Microfinance program is the Village Organization .If any women wishes to access all the facilities provide by the BRAC Microfinance programme it is bound to be the member of the VO member .Without being member of the VO ,no women is allowed to access into facilities provide by the BRAC Microfinance programme.

The VO is the nucleus of BRAC’s poverty alleviation efforts .It is the gateway trough which BRAC introduces its services to meets members but more importantly it is the gateway through which the disadvantaged people enter into a more empowered, healthier and economically sound future. The VO is heart of BRAC’s credit programme approach.

The village organization is an association of poor, landless people come together with the help of BRAC to improve their socio-economic position .The main goal of the VO is to strengthen the capacity of the poor for sustainable development and enable the poor to participate in the national development process, the VO is also the link between rural people and BRAC the VO plays a central role and is often a starting point for all these strategies.

BRAC uses the VO as means to implement its credit services to its members. Before BRAC opens a new area offices it staff conducts a door to door survey to identify the target population of the area. Generally the target area ranges within a 5-6 Km radius of area offices .Members receive an orientation course at the time of VO formation and each VO is subdivided into small groups comprising five members with a leader. The VOs have a management committee consisting of an elected chairperson; a secretary, a cashier and a leader of the small group normally there are forty members in a VO .once a VO have 20members activities may start.

The VO is set up to develop a well disciplined organization of the rural poor with particular emphasis on women’s participation and development the capacity of the poor for sustainable development. The VO through which the rural poor are enabled to participate in the national development process When a VO is formed the members select a president and a treasurer.

They hold VO meetings every week. Women begin to save with BRAC as soon as they become members and they can request for loans by the 4th week. Group member must show the ability to deposit savings on regular meetings and once this has been established loan will be disbursed to individuals. While the individual is ultimately responsible for the repayment of the loan, group pressure ensures that loan is repaid on time.

BRAC microfinance staff meets VOs once a week to discuss and facilities credit operations. Any women specially the poor women who want to take loan from BRAC Microfinance have to be a member, different poverty group has different terms and conditions .by fulfilling these terms and conditions any women can be the member of the VO of BRAC microfinance programme .As of December 2007, BRAC’s Microfinance program has mobilized 10 million members into village organizations and has disbursed over billion amongst them .The members combined savings stood at US$ 198 million.

From the microfinance programme at glance we find that the microfinance programme already has covered all 64 districts of Bangladesh with its Village organization.

These VO mainly work as the nerve centre for BRAC microfinance program as well as is often a starting point for all these strategies what we have discussed above .the member of the VO’s help the BRAC staff when any members fail to repay loan .In case of any default loan of a group members the other members work as a pressure group for the staff or for BRAC.

This pressure given by the VO member or committee plays a very vital rule to increase repayment rate. Over the year we have found that when any member become fail to repay loan then Vo members take proper initiative and found out proper arbitrage system which basically goes in favor of BRAC .In case of collection of defaults loan the attempt of BRAC staffs fails more but the attempt taken by BRAC VO members bring more successful results than BRAC staffs.

Moreover the Vo is a extra spirit for BRAC .If we look at the micro finance programme at a glance we see that BRAC microfinance programme has more than llO million members/borrowers (i.e. customers) .We can call these borrowers as customers or well wisher’s of the BRAC .If we have common knowledge on customer service relationship or marketing related basic knowledge then we can easily realize how much these borrowers are important for the success of BRAC microfinance .We know that a loyal customer acts as a loyal advertisement medium .Their positive word of mouths communication spread the reputation across her communities and it creates the brand image and reputation. Over the year ,these members of the VO has been playing as a advertisement medium and therefore BRAC has become a common and loyal households Brand across the families of Bangladesh .Due to their loyal response or engagement with BRAC ,BRAC staff and their operations across the communities has been smooth and fluent. Basically in line with the success of microfinance, BRAC has widely recognized not only Bangladesh but also many parts of the Afro-Asian countries.

Savings: The catalyst of Revolving fund

BRAC microfinance programme has to disburse a huge amount of loan to its members annually. Therefore capital financing is one of the most crucial part of its credit operations.

Every year it has to manage /collect a huge capital from different sources. This credit operations are carried out through a revolving loan fund (RLF).This RLF consists of retaining earnings, donor’s funds, VO members savings Joan from banks and PK.SF .loan realized are credited to and from a part of the RLF for extending further credit .This process of lending, recovery and further lending ensures that the credit facilities are eventually available to all VO members .A 2% loan loss reserve is kept in order to cover the risk of default loans. Frequent borrowing and payment allow the borrowers to take high risk.

An important part of BRAC credit operation is the collection of savings. Experience shows that the regular savings of VO members indicates a better discipline in VO credit operations. From the member’s point of view, savings represents an opportunity to earn interest which they cannot enjoy from the formal market or regular financial institutions.

Savings opportunities with BRAC provide members with funds for consumption, children’s education and other investments. It also provides security for old age and serves as a contingency fund during natural disasters.

In December 2007, BRAC’s total microfinance loan fund was US$534.46million.group members savings totaled US$ 138.63million,retained earnings US$ 97.57million, loan from PKSF US$ 255.81 million and grants from donors US$24.07 million.

Most remarkable is the considerable decrees of donor contribution and loans from PKSF. If we observe we see that the increase of savings into the financing of revolving fund are rapidly increasing. But we also found that in 2005 and 2006 the contribution of % of savings has decreased a little but not at large extent .This was not happened due to decline in the contribution of members of these two years. To rapidly expand just in these two years take more loan from Banks. There triumphs were to expand to attract more members and to collect more savings. We know that BRAC has more than 10 million members and therefore they save more than thousands million dollars every year as the name of own and compulsory savings.

The overall contribution in the financing of revolving fund was decline in 200 7 2006 because of their huge expansion of operation in 2006, as the overall BRAC local or area offices were doubled in 2007 to 2867 to 1383. It increased due to meet the financing of capital they just borrow money from commercial banks and retained earnings .But we cannot say based on the 20% decrease in the total source of financing of capital ,the savings contribution were decreased. Though the 20 % of financing to RFL were decline by the Members savings but the overall savings were increased to $198 million from $158million.

BRAC realized that cost/sourcing of capital through the process of savings deposit of VO members are less expensive than that of cost/sourcing of capital from other commercial and non commercial sources .That’s why in 2007 BRAC doubled its VO area offices to reach more village women to serve and to attract more savings deposit.

From the above records we found the important of savings in line with the success of Microfinance.

The most crucial questions about the savings are that why savings is important for the organization or over all operation for BRAC.

Savings helps the BRAC in the following ways:

It maintains the Microfinance liquidity balance
It assures a less cost of capital sourcing
Decreased pressure from Donors

Liquidity is one of the most vital parts and parcel of a financial institutions whether it is a DFO-Development financial organization or commercial banks .As a DFO, BRAC has to deal with financial transactions and therefore it is required huge liquid capital to meet the loan demand and demand of savings withdrawals .As VO members basically come to BRAC to get loan. When they demand loan, BRAC has to fulfill the demand .Again VO savings deposit is the asset of respective members. That’s why when they demand it to withdraw; it is allowed to withdraw .BRAC basically maintain these two types of demand from their client through the savings deposits of members .This helps BRAC at great extends.

More over its less costly to sourcing capital .We know that all over Bangladesh and abroad there’s no organization who will give you 5% interest bearing capital. But BRAC is getting capital from its members at a rate of 5% whereas sourcing capital from anywhere in Bangladesh is almost 9-15%.

Loan utilization & loan recovery performance rate:

BRAC and other NGOs claim that they are 100% successful in terms of loan recovery performance rate .In case of BRAC, its loan recovery rate over 99.54 % according to the annual report 2007. If we want to measure the successful organization based on the loan recovery rate then we can say that BRAC is the successful organization which is giving loan to its members and managing these loan with very successfully.

According to the microfinance manager to Kalapara Branch , Mr.Abdur Rahim “BRAC microfinance programe loan recovery performance rate is now rapidly increasing and its close to 100% because more borrowers are aware of using the loan from where they get more benefit, but 10-15 years ago they would use loan in such area which was less profitable.

Therefore they couldn’t able to repay the loan properly as well they would become default.” He also added that “when I first joined at BRAC in 1997at Barisal then in this area loan recovery performance rate was average 80% but now it is more than 95 %.This is because in the past I saw that more people would take loan for cow raring or for productive uses but used it in the unproductive sector .But now people use loan more efficiently in productive sector because they know what are more profitable and how to invest money.

I used a total number of 147 respondents from the different locations to find out the field of loan utilization and how these loan utilization help to loan recovery performance rate.

Proper utilization of loan to the proper field has a positive relationship to the higher repayment rate .If people can use their loan properly it helps them to repay loan at a frequent good manner because the proper utilization of loan help them to earn much more money to repay the loan without hassles. I used both men and women to collect data what they thought about loan utilization and therefore loan repayment .Anyone can raise a question why we are using both men and women .This is because traditionally in the rural area most of our households use or invest money through joint decision. But there are some women who used money by their own decision as they have no male family members. That’s why I used both men and women to find out what are proper and profitable field of loan utilization that help them to repay the loan without any hassles.

Just to find out proper loan utilization and its impact on loan repayment rate, we collected data from the following areas and the following numbers;

BRAC offers loans to its borrowers for different sectors or fields. They gives loans for livestock’s (cattle and goats raring ,poultry firms),agriculture and vegetables cultivation (irrigation, tiller ,hybrid crops and vegetables),fisheries and fish business ,small business like grocery shops and handicrafts business ), land lease and purchase.

Proper utilization of loan help borrowers to gain more money to repay the loan .If the borrowers can earn more money then can easily repay and they never face any problems regarding installment .but if they can’t use loan properly then they have to face many problems to collect installment money .In the long run if they find that there is no others options they become defaulters and finally it directly affects in the loan recovery performance rate .If loan recovery performance tare increase then organization can use the money else where and it helps in line with the profit of organization .If more borrowers defaults frequently due to unproductive use of loan then organization have to make more loan loss provision and organizational decision making fluency can may be hampered greatly. More borrowers use their loan to cattle rearing agriculture and vegetables cultivation because they thought that using money in these sectors are profitable than that of others .It gives them immediate profits that’s why they can repay the loan without hassles .according to BRAC staffs and borrowers when they used loan in these sector they didn’t feel any problems .but they had to face problem if they use in unproductive sectors because they are getting immediate profit or money to repay loan .as they are poor and in many case their solvency don’t support to repay loan properly .so finally we see that proper utilization of loan and high loan recovery performance are inversely correlated.

Women mentality and Loan Recovery Performance Rate:

Positive women mentalities are one of the secret catalysts in the approach of microfinance success. Women mentality and loan recovery performance rate are positively correlated. We have found that if women would show negative mentality like the men then it would hard for any NGO to be succeeded. They have proved that in case of loan repayment they are much more ahead of men. This relationship also helps in the success of Microfinance programme.

Overall positive mentality to repay the loan regularly helps to higher yields in case of loan recovery performance .This mentality is basically referred in this concerned how much people are ready to repay the installment with a regular good manner. This mentally also includes to both men and women mentally .Because in case of borrowing loan from NGO ,though all NGOs give loan to women and more than 95-98% members are women. But in case of decision making regarding how and what purposes they will use these loans, joint decision have been taken most of the case .In this concerned both women and men mentally are an important factor .Besides these now a days more NGOs are offering loan for men borrowers which is known as enterprise loan and in this case only men members are taking sole decision making steps to use loan and repay the loan.

This is the true concepts but we are looking something different from the traditional thinking. To justify the mentally between men and women, we took 12 men and 12 women separately from each three region and as a whole we took 36 women from 3 regions and 36 men from the same 3 regions.

These women were selected based on the following criteria;

Widow and there’s no male member to influence her decision to utilize loan.
Independent women who takes households regarding decision freely
Has been involved with BRAC for more than 5 years
At least read and write clearly.

These men were selected as the following basis;

Only men who has taken loan as a enterprise borrowers
Who has taken loan on his name
Who takes decision independently in case of business ,borrowing loan and repayment
Has been involved with BRAC for more than 2 years
At least read and write clearly.

Considering these criteria we asked them the following first two questions to find out or to justify their independent mentalities regarding loan repayment .we gave them options of choosing multiple answers .The questions and respondents and their overall percentage.

Results and Discussion:

The above analysis done by me relates village poor women’s struggles, heart and soul attempts with a view to survive economically .They try heart and soul and this attempts involve themselves to get economic support from different microfinance organization. BRAC is one of these organizations which has been working with these women since its inception in 1974 as a micro credit organization. At the begging its loan recovery rate was so low because of proper monitoring and lacks of the village organization .The most important cause was that at the beginning more men were involved as a credit borrowers.

According to a research done by “ Hossain & Chowdury (1991)” “ Men are more indiscipline than women in terms of loan repayment .They showed that where women has repaid the loan in spite of having various problems like inefficient management and fraudulence of officers but men showed different unacceptable reasons. They were also condemned the men for default the loan in VO because they took loan by the name of women members.” Although this reports and past and present records claimed that women are more discipline, more sensitive and loyal to organization as well as their mentalities are positive than that of men. They are more careful and they can use the small loan more efficiently than that of men .This is because women in our societies are less empowered in terms of financial decision and therefore when they get small money to use they can use it more properly.

Another research done by “ Ahmed ” (1991)showed “The microfinance programme under RDP were operated in 110 locations at the time of 1990.The membership was about .5 million and 60% of the members were the village women .He also found by evaluated the overall programme that the average loan recovery performance was 83.6 %.whereas women and men loan recovery performance rate ratio was 87.4%:76.1 %.This indicated that women are more ahead of men in case of loan repayment as well as loan utilization.

Moreover this report found that during that season 60% members of the VO was women and the rest were men. Most of the men took loan in the medium and short term basis but the women only took the loan as short term basis .The overall loan recovery performance from the short terms were better than that of medium and long term. The women were also more progressive in terms of repayment of short terms loan

Although our report we found that women are the secret factor for the success of microfinance .BRAC as an organizer of these poor women gives them training, economic support and mental and legal support whereas these poor women get the loan and use it properly and repay the loan in a good manner regularly .BRAC,s different support is helping to build tolerable behavior 1 and therefore these women are contributing through their repayment of loan regularly .

In these context we say that “BRAC -Village women ’’has 40:60 contribution in line with the success of microfinance .Only giving loan and training of women couldn’t be as the most important driving force for the repayment of loan or the success of microfinance. The power of utilization of loan in the proper sector or profitable sector and hard works to getting the benefit could be remarkable for the success of microfinance.

Conclusion

The motives of this report were to find out a burning question whether is there any contributions for the success of microfinance from the part of women or poor people. I tried a lot to find out this important answer that has been evaluated throughout my papers.

This report is disseminating a good message for all these who were indifferent about this matter or who thought that there is no such great contribution in the success of microfinance.

I hope that this report will help a lot. I would like to invite the prominent researchers to work on this field.