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									BRAC Microfinance Program in Bangladesh
    and its International Replications

            A BRAC Presentation
                    July 9, 2007

       Building Resources Across Communities
         BRAC’s Vision
  Just, enlightened, healthy and
  democratic societies free from
 hunger, poverty, environmental
   degradation and all forms of
exploitation based on sex, religion
           and ethnicity.
            Overview of BRAC
- BRAC started in 1972 as a small relief and
  rehabilitation effort to support Bangladeshi refugees
  returning home after declaration of independence in
  December 1971. It then stood for Bangladesh Rural
  Assistance Committee.

- By mid 70s, BRAC realized that more long term,
  sustained effort was needed for change the lives of the
  poor. The focus shifted from rehabilitation to
  development, and BRAC was renamed to stand for
  Bangladesh Rural Advancement Committee
             Overview of BRAC (Cont.)
-   BRAC today provides microfinance to over 6
    million clients, offers primary education to over
    1.52 million students through its 52,168 non-
    formal schools, and delivers essential health care
    to over 31 million people through a strong cadre
    of 68,000 health volunteers. It has full-time staff
    of over 42,000 in Bangladesh.

- BRAC’s budget in year 2006 was USD 339
  million, over 70% of which was self-financed.
          Overview of BRAC
- BRAC is committed towards using its
  experience and expertise to work together to
  fight poverty around the world
- BRAC aims to do so by empowering the poor
  so that they can build sustainable capacities to
  fight poverty

- Today, BRAC stands for Building Resources
  Across Communities.
          BRAC’s Main Programs
- BRAC Development Program (BDP)

- BRAC Education Program (BEP)

- Health, Nutrition & Population Program (HNPP)

- BRAC Training Division (BTD)

- Research and Evaluation Division (RED)

-   Support Programs and Enterprises

- Other   related institutions: BRAC University, BRAC Bank
   BRAC Development Programs

- Microfinance
- Employment and Income Generation ( e.g.
poultry & livestock, fisheries, social forestry)
- Social Development, Human Rights & Legal
- Health
- Education
              The BRAC Approach
   BRAC believes in holistic development approach and sees
   microfinance as a powerful entry point that emerges from:

√ The social capital built by organizing the poor to form their own
   groups through which they engage with BRAC and other formal

√ The organizational/institutional capital that accrue in building its
   ability to manage large scale microfinance.

√ The network capital built through large scale outreach of
   microfinance constituting a network of producers and consumers
   throughout the country.
Components of BRAC Microfinance Program
Group Based Products:
Poverty Alleviation (MF 1)
Employment and Livelihood for Adolescents (MF 1)
Economic Development (MF 2)
Individual Products:
Micro Enterprise Loans (MF 3)
Women Entrepreneur Development Program (MF 3)
Microfinance for the Extreme Poor:
 Challenging the Frontiers of Poverty Reduction –
 Targeting the Ultra Poor (CFPR-TUP)
 Income Generation for Vulnerable Group Development
 (IGVGD) – Collaborating with the government and WFP
     BRAC Microfinance Services
                      Urban (20%)    Rural (80%)

Vulnerable Non-poor                 MF 3
                                               MF 2
Moderate Poor
                                    MF 1

Extreme Poor                        IGVGD
Group Dynamics and The Credit Ladder
√ Formation of Client Groups - Typically
  known as Village Organizations (VO)s
√ Capacity development, healthcare services
  and social awareness
√ Asset transfer, subsistence allowance for
  CFPR-TUP members
√ Input support for IGVGD members
√ Savings and credit activities
√ Graduation onto MF 2
√ Enterprise loans (Individual)
Financial Services for MF Clients

    1.   Credit
         √ General Loan
         √ Loan for income generating projects
         √ Housing Loan
         √ Enterprise Loan

    2.   Savings
    3.   Death Benefit
 Key Features of Loan Product
- Micro Loans

√ Lending through group formation, namely Village Organizations (VO)
√ Loan Range: Tk.1,000 to 50,000 (US$15 to $700 )
√ Repayment through equal weekly installments

- Micro Enterprise Loans
√ Individual Lending between Tk 50,000 to Tk 300,000 (US$700 to $4,500)
√ Repayment through monthly installments
√ Service charge: 12.5% (Flat)
√ Emergency loans are also given at the time of disaster
    2. Savings Products

BRAC has four types of saving products:
√ Weekly personal savings for the VO
√ Compulsory savings deposit for VO
√ Monthly savings deposits
√ Term deposits
         3. Death Benefit

Death Benefit policy for BRAC Microfinance
group members:

√ Any poor village woman when she
  becomes a group member is eligible to get
  this benefit
√ The group member does not need to pay
  any premium for this
   BRAC Micro Finance Program in Bangladesh:
              At-A-Glance (May- 2007)
Inception of Micro Finance Program : 1974
Districts Covered                       : 64 out of 64
Total No. of Branch Offices                : 3028
Total No. of Village Organizations         : 206,820
Total Number of Members                    : 6.2 million
Outstanding Borrowers           : 5.3 million
Outstanding Loan Amount         : US$ 438.14 million
Members’ Savings Balance        : US$ 163.71 million
Loan Recovery Rate              : 99%
Cost per Unit of Dollar Lent    : US$ 0.10
            Credit Delivery Model
√ BRAC uses Village Organization (VO) as a platform for
  launching and implementing its various activities

√ VO is an association of poor, landless people that come
  together with the assistance of BRAC and try to improve
  their socio-economic position

√ Credit decisions are taken in weekly VO meetings

√ BRAC considers three things before considering a loan
- Capacity of utilizing the loan money
- Types of business
- Profitability of the business
       Loan Application, Processing and
          Disbursement Procedure
                     Loan Processing
Loan Proposal        - The accountant       Disbursement
- Loan is proposed   checks and verifies
in a weekly VO       savings and credit
                     records of the         At the branch
                     applicant by using a   office, the
- Formal Loan        computer               accountant
proposal is                                 disburses the
                     - Loan proposal is
prepared by the      forwarded to the       loan after the
respective program   manager at the same    manager
organizer (PO)       office                 interviews the
                     - Verified and
                     approved by the
    Installments and Savings Collection,
  Documentation and Reporting Procedure
  Collection          and Record              Reporting
                        Keeping             - Daily back-ups
-Savings and loan
installments are     -PO compiles and       are kept at the
collected in         submits the            branch office
weekly VO            collection sheets to   - Reports are sent
meetings             the accountant         to the branch and
                                            regional office on
- PO makes           -The accountant        weekly basis
entries in the       gives computer
                                            - Diskettes are sent
collection sheet     posting                to the Head office
and updates the      - Computer print-      at the end of the
passbook, which is   outs are generated     month
kept by the          for the managers       - Data is entered
members              while required         into the central
                                            MIS system
  International Initiatives of BRAC
- In late 2001, after the fall of Taliban
  regime, the new Afghan Government
  invited BRAC to work in Afghanistan.
- BRAC Afghanistan was set up in 2002
  and today works in 24 out of 34 provinces
  in Afghanistan in the major fields of
  microfinance, health and education
- In 2005, BRAC responded to the Tsunami
  victims in Sri Lanka with relief and
  livelihood reconstruction support.
BRAC International Initiatives

- With the aim of attaining the MDGs by working
  together with governments, civil society
  organizations in Africa, BRAC started its
  operations in Uganda and Tanzania in second
  half of 2006. BRAC also initiated microfinance
  program in Southern Sudan in early 2007.

- In late 2006, replications of TUP program
  through partnership in Haiti and in India (West
  Bengal) were launched.
  BRAC Micro Finance Program in Afghanistan:
          At-A-Glance (May- 2007)

Micro Finance Program Launched         : 2002
Provinces Covered                      : 22 out of 34
Total No. of Branch Offices            : 203
Total No. of Village Organizations : 10,332
Total Number of Members                : 176,594
Outstanding Borrowers                  : 143,651
Outstanding Loan Amount         : US$ 69,169,612
Members’ Savings Balance        : US$ 5,266,444
Loan Recovery Rate              : 94.93%
    BRAC Micro Finance Program in Uganda:
       At-A-Glance (December - 2006)

Micro Finance Program Launched         : 2006
Districts Covered                      :8
Total No. of Branch Offices            : 10
Total No. of Village Organizations     : 460
Total Number of Members          : 11,912
Outstanding Borrowers            : 5,808
Outstanding Loan Amount          : US$ 540,748
Loan Recovery Rate               : 100%
   BRAC Micro Finance Program in Tanzania:
          At-A-Glance (May- 2007)

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

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

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