Day 1

 

 

Session 1:

Inauguration of the Regional Training

 

Facilitator: Mr. Achmad Rofi’ie

 

The inaugural session of the course started at 9 a.m. after arrival of the honourable Ambassador of the Republic of Indonesia. In the inaugural occasion, the following distinguished guests made their valuable opening remarks.

 

Welcoming remarks by Mr. Muyeed Chowdhury, Executive Director of BRAC

 

Opening his speech, Mr. Muyeed Chowdhury, Executive Director of BRAC, welcomed the distinguished guests, participants and other attendees in the inaugural session. He appreciated the NAM CSSTC to take such a novel initiative and choosing Bangladesh, especially BRAC, to organize the training course. He wished pleasant stay of all participants and the organizer in Bangladesh, while a devastating and horrible war is running in Iraq.  He mentioned that Bangladesh is the birthplace of microfinance, and the concept now reached to all most every country in the world, which is considered as a powerful tool for poverty alleviation. He said that every country that attending in this course possesses unique experiences on microfinance, so they all together can learn many new ideas, many new concepts how to make the microfinance more effective in the way to fighting poverty. He reminds the audience about new challenges in microfinance in the coming days and the importance of developing human resources to face such challenges. He appreciated again the organizer of the training for taking initiatives for the human resource development. He mentioned that he was present in a meeting of NAM CSSTC in Bandung of Indonesia and was pleased to see their vision, mission and commitment to support the organizations working at the grassroots level for eradicating poverty. He mentioned that Mr. Fazle Hasan Abed, the Chairman of BRAC, Mr. Mohammed Yunus, Director of Grameen Bank are the pioneers of development activities, especially the microfinance activities in the world. Indonesia also took part with them to spread the process of development worldwide to serve poor and the poorest and now there are many small and large NGOs in Indonesia, which are working dedicatedly for the poor and the poorest and developing new tools and technologies in this regard. He recognizes that there are many limitations in the products and services of microfinance programme. He invited participants to think creatively how to develop more innovative tools to serve the poorest and create better impact on their livelihoods. He further thanked the organizer for the initiative, and welcomed them on increased collaboration and cooperation wherever needed. He wished success of the course and good stay of the participants during entire period of the course. He reminded that today is the independence day of Bangladesh and the event inspiring us for progress and prosperity.

 

Opening remarks by Mr. Rachadi Iskandar, Director of Administration and Finance of NAM CSSTC

 

He welcomed all participants and distinguished guests for their time and spoke about the importance of the training that it will increase and broaden the experience of participants about the microfinance issues and concerns in South and Central Asia. He mentioned that it is 3rd Regional Training Course, following the 2 courses held in Jakarta, Indonesia, and Pretoria, South Africa. He highlighted the background of the creation of the NAM CSSTC. He mentioned that after Second World War, in 1955, the countries who were in the non-aligned movement came forward to form an institution to exchange and share the experiences and technologies among the countries, from where the concept of NAM CSSTC is originally emerged. After a long process NAM CSSTC was formed in 1961 and started its activities with an objective to share development and technological experiences among the non-aligned countries. The headquaters of NAM CSSTC is in Jakarta, Indonesia.

 

 

Closing session note by Mr. Achmad Rofi’ie, Director of Programme of NAM CSSTC

 

Mr. Achmad Rofi’ie, the coordinator of the programme also welcomed the distinguished guests, participants and all other invites attended the inaugural session. He also reinforced the objective of NAM CSSTC for increased collaboration among the countries in the non-aligned movement for sharing and exchanging experiences and technologies related to development for poverty alleviation. He emphasized on the capacity building and human resource development of NGOs in the frontier of global changes and challenges. He acknowledged the cooperation of Bangladesh people, especially BRAC, for their supports in organizing the course. He hoped that the course will not only enrich the experience and skills of the participants but also bring the countries closer to each other which in future can develop a greater movement in the way to fighting poverty. He wished the training will be successful and the participants will enjoy and learn from the course. He finally concluded his opening remark inviting audience to watch a video clip on the NAM CSSTC.

 

A group photo was then taken including all participants and guests, which will be distributed to all participants, as committed by the organizer of the course.

 

 

 

Session 2:

Getting Acquainted

 

Facilitator: Mr. Shabbir Ahmed Chowdhury

 

After the inaugural session, all the participants and facilitators went to the conference room of the Hotel Sheraton, where training sessions will be held for the remaining days. Training session was then started after distributing training logistics to all participants. At the beginning of the session, the course coordinator welcomed the participants again and expected to make the course successful with their active participation.

 

Next, he requested the participants to introduce themselves giving name, country, and the organization. All participants introduced themselves. Also they were requested to write their self-portrait in a sheet of paper and display it in the specified place in front of the training room. The name, organization, working place and country of the participants were as provided below:

 

1.              H S Srikantamurthy, Myrada, Bellary, Karnataka, India

2.              Md. Harun-Or-Rashid, Grameen Bank, Mirpur, Dhaka, Bangladesh

3.              Letho, Bhutan Development Finance Corporation, Thimphu, Bhutan

4.              Foruzan, BRAC, Parwan, Chirkar, Afganistan

5.              Abdul Khaleque, Uddipan, Pirojpur, Bangladesh

6.              Md. Ibrahim Biswas, BRAC, Mohakhali, Dhaka, Bangladesh

7.              Md. Zakir Hossain, TMSS, Bogra, Bangladesh

8.              Madaminov, Ministry of Economic, Uzbekistan

9.              Saleha Sadat, BRAC, Poli Sukhta, Afganistan

10.          Kapila Nanda Mondal, Vivekananda Sevakendra –O- Sishu Uddyan, West Bengal

11.          Bhupendra Batsa Lamsal, IIDS, Nawalparasi, Nepal

12.          Aminullah Khair Andish, AREA, Afganistan

13.          Narayan Bhattarai, Agricultural Development Bank, Kathmandu, Nepal

14.          Aishaih Ikram, Ministry of Planning and National Development, Maldives

15.          Israr Mohammad Khan, AHR NCRD & MA, Islamabad, Pakistan

16.          Muna Nepal, Institute for Integrated Development Studies, Kathmandu, Nepal

17.          Harry Lckamse, SEEDS, Colombo, Sri Lanka

18.          M. Latif Malik, NRSP, Khushab, Pakistan

19.          Md. Abdus Samad, ASA, Shayamoli, Dhaka, Bangladesh

20.          Madhurantika Moulick, Facilitator, Kolkata, India

21.          Md. Manirul Islam, BURO Tangail, Tangail, Bangladesh

22.          Somasiri Liyanwala, Samurdhi, Sri Lanka

23.          Emrul Hasan, Plan International, Dhanmondi, Dhaka, Bangladesh

24.          Sharda Naidoo, Johansberg, South Africa

25.          Mohamed Nazirwan, BRI, Jakarta, Indonesia

26.          Shabbir Ahmed Chowdhury, BRAC, Mohakhali, Dhaka, Bangladesh

27.          Md. Harun-Or-Rashid, PMTC, Banani, Dhaka, Bangladesh

 

Training schedule was then reviewed and discussed with the participants and necessary other instructions were provided to the participants regarding hotel, ticketing, transport, laundry, shopping, health service and medicine, and contact persons from the organizer of the course.

 

 

Session 3:

The Context of Microfinance in South Asia

 

Facilitator: Shabbir Ahmed Chowdhury

 

The facilitator started the session asking participants to see a PP presentation on the context of the MF programme in South Asia. While presenting the paper, he encouraged participants to ask questions. He also provided relevant examples in favour of presentation. The major issues he presented under the context of MF programme in South Asia were as recorded below:

 

What is Microfinance?

 

The term microfinance refers to financial services-offered to the poor.

Microfinance members are typically self-employed, low-income poor women and men in both urban and rural areas.

 

How Microfinance Emerged?

 

 

  • Microfinance emerged as an economic development approach to benefit the low-income poor women and men.

 

  • Microfinance emerges as a response to the failure of the state to deliver financial services to the poor.
  • It emerges to establish access of the poor to microfinance.
  • It emerges as an alternative developmental tool for poverty alleviation and empowerment of the poor.

 

 

 

What are the different Microfinance Activities?

 

  • Small loan
  • Informal appraisal of borrowers and investment
  • Peer pressure
  • Minimum compulsory savings
  • Group guarantee
  • Simple loan disbursement procedure
  • Minimum time needed for loan disbursement
  • Door step service

 

What are the Financial Services?

 

  • Savings and credit
  • Insurance
  • Pensions
  • Marriage
  • Education, etc.

 

What is the goal of Microfinance?

 

  • The goal of microfinance is to alleviate poverty and empower the poor.
  • Many confuse it with banking. This is not true. It is a development tool.
  • In addition to financial intermediation many MFI provide social intermediation which includes- group formation, social development, etc.
  • Thus the definition of MF includes both social and financial intermediation.

 

Growth Stages of NGO Sector

 

David Korten describes the development of NGO sector in the following stages:

 

 

Stage I: First Generation -Relief and Welfare

 

NGOs in this stage involve in direct delivery of services to meet the immediate needs.

 

Stage II: Second Generation -Small-scale, self-reliant local development

 

NGOs in the stage involves in developing the capacities of the people to better meet their needs through self-reliant local action

 

Stage III: Third Generation -Sustainable system development

 

NGOs in this stage are involved in policy changes. Focus are on creating a policy and institutional settings that facilitate, rather than constraining, just, sustainable development action

 

Stage IV: Fourth Generation-People’s Movement

 

NGOs in this stage focus on social movement and Global changes

 

Approaches of Microfinance

 

  1. In Bangladesh BRAC, GB, ASA, and other MFIs has demonstrated to the World that from subsidy to long-term sustainable action of poverty alleviation of the poor through microfinance.
  2. The need to achieve financial sustainability has led to the current financial system and approach to MF.
  3. The approach is characterized by:

·        Continuous subsidy undermines development.

·        Poor people can pay interest

·        The goal of sustainability (cost recovery and eventually profit) is the key not only to the institutional performance of credit but also to make the lending institute more focused and efficient.

  1. Small loan size, MFIs achieve a scale efficient enough to become sustainable.
Small Group Work on Understanding the Country Context

The facilitator divided the participants into 5 small groups.

Group 1: Maldives and Sri Lanka

Group 2: Pakistan, Bhutan, and Nepal

Group 3: India

Group 4: Afghanistan

Group 5: Bangladesh

The groups were asked to analyse and present their country context in the large group through preparing a flip chart. Facilitator instructed participants to analyse their country context according to the following four questions:

1.      Who are the suppliers of financial services? What role does the Government and donors’ play?

2.      How do existing financial sector policies affect the provision of financial services, which includes, interest rate policy, government mandate for sect oral credit?

3.      The existing financial sector regulation and are the MFIs are subject to these regulation?

4.      What economic and social policies affect the provision of financial services?

Participants worked for half an hour in the small groups and analysed their country context and prepared a flip chart paper, which they presented then in the plenary.

 

Aspects to be reviewed and analysed to understand the context

 

After plenary on country context, the facilitator further elaborated the discussion reinforcing the following points:

 

It is also important to understand the context in which the microfinance providers operate. These are:

 

  1. The financial system including all the existing saving and financial opportunities, and their mode of operation and behaviour
  2. The financial market the demand and supply of financial services.
  3. The providers of the financial intermediation- formal, semi-formal and informal sector
  4. Existing microfinance providers
  5. The effect of government program on private providers
  6. Effect of microfinance providers on supply
  7. The role the donor plays
  8. Financial sector policy and legal enforcement

 

Challenges of Microfinance Programme

 

The Key Challenges of MF Program are:

 

 

  1. Regulations of Micro Finance Program
  2. Overlapping and Competition
  3. Capitalization
  4. Hardcore Poor

 

 

 

l Regulation of Microfinance Program

 

  1. Microfinanace industry has changed its character.
  2. Today’s MF not only provide credit but also savings, insurance and other services
  3. MFIs are now self regulated
  4. When savings mobilization are taking place in a large scale from Public it requires accountability, transparency and security
  5. In the absence of any regulation the industry may face problem by
  6. MFIs with dishonest intentions.

 

 

l Overlapping and Competition

 

  1. Today’s MF environment has completely changed
  2. Currently there are 800 MFIs in Bangladesh
  3. The target customers of all of these MFIs are same
  4. Today’s MF customers are much more aware on interest rate and various services provided by these MFIs
  5. In many cases the services are focused more to accessible areas and to moderate poor

 

  1. Consequently there is a tendency of MFI to compete with each other’s borrowers
  2. This competition give scope for a single borrower to have multiple membership and access to different MFIs
  3. This create more loan default and high delinquency

 

 

l Capitalization

 

  1. MF constantly need capital because of the way it is growing
  2. That is why MFI require saving mobilization, commercial funding, donors support, soft loan to fulfil the need of new additional capital
  3. But because of lack of rules and regulation saving mobilization become difficult and commercial bank are reluctant to provide loan to MFIs
  4. Revolving loan fund is shrinking
  5. Capitalization of microfinance program is a real challenge for the future

 

l Hardcore Poor

 

  1. The present structure of microfinance program does not provide opportunity to serve the hardcore poor
  2. Because of strict discipline and a strict repayment policy are impediment for hardcore poor to become MFI member
  3. They need subsidized soft loan
  4. The dilemma is sustainability and serving the hardcore poor

 

Challenges At National/ Regional Level

 

 

·          Absence of adequate good training institutions

·          Growth of microfinance is not being supported by the growth of human resources

·          Lack of strong governance & structure of MFI

·          Grant funds are shrinking

 

·          Lack of healthy competition among MFIs

·          MFI are getting more commercialised that is excessive influence of commercialisation

·          Poverty focus is by passed by commercial and profit focus

·          Grant fund are squeezing and getting limited

 

 

·          The global actors have changed their grant and subsidy policy

·          Dearth of effort for identifying and implementing the best practices

·          Need to expand the outreach

·          Innovation in service is needed

·          Operate more effectively and efficiently

·          Funding for the future

·          Developing an enabling environment

·          Apex Body

 

 

 

 

Session 4:

Microfinance Financial Services for the Poor

 

Facilitator: Mr. Mohamad Nazirwan

 

The facilitator started the session with a game; asked participants to name the 23rd alphabet of English language. One participant told it very quickly and he awarded with a small prize.

 

Facilitator asked participants to give the name basic elements in MF. In response participants mentioned the following three basic elements:

 

  • Services

 

  • Products

·        Providers

  • Clients

 

Financial Intermediary

 

Facilitator then explained the concept of financial intermediary showing PP Slides. Suppliers and intermediary is similar. Intermediary classification: Formal, Semi-formal and informal. He showed a framework on t financial intermediary, which was shown below:

 

  Any individual or institution that mediates between the source of funds (savers) and the users of funds (borrowers)

  Funds transfer from surplus side to shortage end (supply and demand)

  Transfer price (transaction cost) between both parties

 

Suppliers of Financial Intermediaries

 

 

Facilitator next explained the suppliers of financial services showing the following framework through PP slide.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Microfinance Approach

 

Showing PP slides and giving relevant examples, the facilitator then explained the major two approaches in microfinance programming.

 

  • Minimalist:

Provides micro-credit, savings, Insurance services only

 

  • Integrated approach:

Provides Micro-credit, Savings, Insurance services as well as Business Development Services, Health programs, Trainings, etc.

 

Role of Microfinance

 

Facilitator also explained the role of microfinance programme showing the following diagram.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Facilitator emphasized the microfinance has been proved worldwide as a powerful tool for poverty alleviation and it has developed customized products and services appropriate to the different types of poor living in our society.

 

He explained the role of microfinance linking the poverty pyramid with the enterprise pyramid. While he explaining the concept, he answered different questions came from the participating citing various examples.

 

Poverty Alleviation Tool box

 

Next, the poverty alleviation toolbox discussed with the participants in a participatory manner, through which he explained the concept of the importance of designing appropriate financial products correspondence to the different classes of poor.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


In this stage of discussion, he brought the following questions discussion by the participants:

 

  • Which approach of poverty alleviation is correct?
  • Welfare approach or institutional development?

 

From the discussion it revealed that institutional development approach has been proved effective and appropriate for poverty alleviation. He mentioned that for extreme poor and displaced households, there should have different set of programme, which is a subsidized programme.

 

Then he divided the participants into four small groups and asked them to review the framework and to see where are they and which group they are serving with what MF products and approaches.

 

The Simple Economics of Microfinance

 

Explained the concept by showing PP slides.

  • Provides the needs of capital
  • Offers productive saving options
  • Opportunity to expand & diversify enterprises
  • Helps to reduce risk & life cycle productivity
  • Much lower cost than informal lenders
  • Helps increase household income

Microfinance Framework: Income Generation

 

 

Facilitator also explained the framework showing PP slide and giving various examples.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Nazirwan (2001)

 
 

 


Clients Profile

 

Facilitator also discussed the profile of the microfinance clients showing PP slides.

  • Low educational Levels
  • Small volume of operation
  • Rudimentary equipment
  • Few employees, unpaid family members
  • Mixed up between family & business
  • Multiple income generation activities

 

 

Profiles of Micro entrepreneurs

 

He also discussed the profiles of the micro-entrepreneurs showing PP slides.

  • ­Basic or none business records
  • ­No marketable collateral
  • ­Limited access to formal sources of credit
  • ­Active participation in informal sources of credit
  • ­Large families

 

What is Credit?

 

Explained by showing the PP slides.

 

  • Borrowed funds with specified terms & conditions for repayment

 

What are the purposes of Credit?

 

Explained by showing PP slides.

 

  • Productive activities
  • Asset engagement
  • Special occasions

 

 

Types of enterprises to be financed

 

  • The type of activity of micro enterprise

- Start up

- Existing business

  • Level of business development

- Unstable

- Growing

- Stable

  • Type of business activity

- Production

- Agriculture  

 

Principles

 

Fit to the preferences of the clients:

 

ï Short loan terms, suitable with income pattern

ï Relatively unrestricted uses

ï Very small loan, meet the daily needs

ï Customer friendly approach 

 

Streamline operations to reduce unit costs

 

 

ã Standardize the lending process

ã Simple

ã Decentralized

ã Local oriented

 

Motivate clients to repay loans

ð Joint liability groups

ð Incentives

ð Continue access

Cost recovery

í Sustainable interest rate & fees

í Transaction costs

 

 

 

Lending Technology

 

 

·         Individual Lending

·         Group Based Lending

 

 

Individual Lending methodology

 

è Character based (creditworthiness & willingness)

è Document and asset based

è Loan approval is based on available evidence

è Through recommendation of respected persons

è Require a credit history

è    Loan analysis with at least 3 C’s of Credit: Character, Capacity and Collateral

è    Commonly use to serve micro-entrepreneurs &  active working poor

è    Usually for business expansion

è    Have some collateral to offer

è    Market interest rate

è    Repayment are made in monthly instalment of principal & interest

è    Terms for the loan usually up to 24 months

è     

 

 

Group-Based Lending

 

ð      Involves the formation of groups of people

ð      Adopted from ROSCA

ð      Peer pressure as a substitute for collateral

ð      Reduce institutional transaction cost

ð      Sometimes accompanied with training programs

 

 

Village Banking

 

 

ä      A group of 30 to 50 forms a village bank

ä      There is a support institution that lend to the village bank

ä      The amount of the loan depends on the amount of savings it mobilize

ä      The village bank lend to individual bank members

ä      Borrowers repay the village bank in regular instalment

ä      The village bank repays to the support institution at the of the loan term

 

Group of Groups

 

è    Relies on social pressure to reduce credit risk

è    A self-selected group is linked with other groups from their village to form a center

è    Initially there is a training for prospective borrowers

è    The group members make a small deposit

è    If any member defaults, the whole group become ineligible to receive subsequent loans

 

­Solidarity Group

 

 

  • Micro entrepreneurs form a group to guarantee each other’s loan
  • ­Group member must have on going business
  • ­The group is responsible to select its members & leaders
  • ­The default of one member causes the other member to lose access to repeat loans

Advantages

 

  • Economies of Scale
  • Economies of Scope
  • Mitigated Information
  • Improved loan collection
  • Cost & risk are transferred to clients
  • Reduced moral hazard risks: group member and peer pressure

 

Disadvantages

 

  • Less effective in heterogeneous communities
  • Difficult to enforce contracts
  • Generate higher desertion
  • Costly and time consuming
  • Risk of generalized repayment problems
  • Potential for corruption                        
  • Limited flexibility of loan product
  • Not meet client’s need
  • Cost & risks are transferred to client
  • Potential free riders

 

 

 

 

Savings in kinds

·         Cash

·         Grain

·         Animals

·         Gold

·         Land

 

 

Reason for Savings

·         Consumption

·         Investment

·         Social & religious purposes

·         Retirement

·         Seasonal variation in cash flow

 

 

Colleting Savings

 

  • Compulsory Saving
  • Voluntary Saving

 

 

 

Requirements
  • Appropriate legal & regulatory framework to protect depositors
  • Flexible & diversity of saving products
  • Easy access (institution & conditions) 
  • Secure & convenient
  • Positive return
  • Incentives

 

 

Video show on BRI microfinance activities

 

After presenting and discussing the above described issues related to microfinance, the facilitator invited the participants to watch an video clip on microfinance activities of BRI.

 

 

Session 5:

Experience Sharing on Grameen Bank

 

Resource Person: Mr. Dipal Barua, Director Administration, Grameen Bank

 

Mr. Dipal Barua told the history of GB, which started in Jubra gram near Chittagong University under Hathazary Thana of Chittagong district. GN is now working in 41,000 villages.  It started with 42 poorest borrowers 1976, now the coverage is 2.5 million in 2003 through 516,257 groups. Showing PP slides he explained the microfinance program and other aspects related that. He also explained the core principles and working mechanism of Grameen Bank and recent changes in their microfinance programme. His total presentation was according to the following structure:

 

·        Main features of Grameen generalised system

·        Basic Loan: Grameen Micro-credit Highway

·        Provisioning and Write-off Policy in GGS

·        Poor Always Pay Back

·        Micro enterprise

·        Five star branches

·        Housing Loans

·        Higher education loan

·        Scholarship program of GB

·        Data Management Center

·        Under standing Impact: Ten Indicators

  • The result of Union Parishad
  • Women participation and Economic Potentialities
  • Long term vision

 

As the participants received handout on the presentation on Grameen Bank, the description for each contents mentioned above are not recorded here. Therefore, participants are requested to see the handout on Grameen Bank when they need to know information on each of the above-mentioned broad content.

 

Session 6:

Checkout for the day

 

Facilitator: Mr. Shabbir Ahmed Chowdhury

 

Before closure of the day, the course coordinator asked the participants to checkout by commenting how the day was to him. In response, the participants mentioned the following remarks:

 

  • The day was good
  • Lots of information
  • I felt tired physically
  • Some sessions were good
  • Less participatory
  • More time required for each session
  • It is the first day, hope training will be more participatory in coming days.