L                                                                                      1 8677
I._ 
CGAP Newsletter
THE CONSULTATIVE GROUP TO ASSIST THE POOREST
[A MICRO-FINANCE PROGRAM]
EAR READERS:
F  The pioneering work begun by                      A  BANK  OF ONE'S  OWN                    CHINA'S  EMERGING  MICRO-
The pion7eering7 wor0k be,gun bY                                                              IAC            IDSR
-Ela Bhatt SEWAFINANCE  INDUSTRY
Grameeni, BRI, anld BRAC has
- . ..is not simply a lack of funds,  - Mike Goldberg, CGAP Secretariat
inspired individuals and                          but  vulnertbylit  powverlessness, and       Although China has one ofthe
organi zations around the world to                dependency. Development finance insti-    fastest-growving urban economies in the
tutions that offer only traditional micro-  world, more than 85 percent of the
invest in poor people's abilltv to help          finance services are not as effective as   population remains in rural areas. Rural
[  the mselves. Af ter^ roulgh/vf 20 yefnarfls   institutions that also help borrowers      production has been limited bv a lack of
overcome the psvchological burdens of     access to reliable, affordable credit to
sinice these ilnnovator-s catalvzed an            poverty. SEWA Sahakari Bank Ltd, or       purchase inputs and to invest in small,
mdi  revisit the Asia region        ~~SEWA Bank, based in Ahmedabad in         off-farm, income-generating activiries.
industry, we                                      W       evisit the Asi  regio  stern India, has achieved financial  China's mainstream rural financial insti-
-  in1 this llell1slgtte7, to look at som7le     sustainability by recognizing the need of    tutions include more than 50,000 rural
poor Indian xvomen in urban slums and     credit cooperatives in villages and town-
neit' and cxistingq initiatives,                  rural areas for savings and the power that    ships and thousands of branches of the
comes xvith managing their savings,       Agricultural Bank of China in townships
resouirces', and challeniges to mnicro-          individualkl and collectivek%              and county seats. But these institutions
r finlanlce inl Asial.                                                                      provide credit mainly to the government,
From  Trade Union to Bank                 to purchase staple crops, and to rural and
In India, 96 percent of women wvork-    state collectives and large enterprises.
ers are self-employed; that is, thev earn a  The government-set ceiling on on-lend-
living through their own small businesses    ing interest rates historically has been
or through their oxvn labor. Self employed    below the rate of inflation. The lack of
workers typically have insecure employ-   individual oxvnership of land limits a poor
ment, lowv incomes, and low productivitv.    household's ability to offer collateral,
They also lack access to mainstream       making poor rural clients unattractive to
markers and ownership of assets.          conservative Chinese rural bankers. For
Bypassed by the labor movement, a large    these reasons, the informal credit market
number of self-employed wvomen union-    is growing rapidly. Yet it remains local-
ized in 1972. Their collective, called the  ized, usurious, and too wveak to provide a
Self-Employed Women's Association        real alternative for most rural households
(SEWVA), was dedicated to strengthening   and microenterprises.
members' bargaining pow er to improve        The stakes are high for micro-finance
$c                            ; - _  _   = income, employment, and access to social   in China. The potcntial markct can be
46 '.td i ~~~~~~security. The organization's goals Xvcrc            measured in the tens of millions of
full mploment measred i ters of households. For this reason, and given-
\ . ',§¢! >    ^        tb~~fod secur itv, income securitv,, and social    the govcrnment's commitmcnt to
t$   @Gg ,;,  ':. i     securiv) anzi sel reliance, r the auto-   national poverty alleviation by the vcar
'      *nomyofindividuals and groups of  2000, micro-finance has attracted the
Is             w'vomen to make personal decisions.        attention of many donors and several
v 1l -~  ;  In 1973, SEWA reached an agree-        government agencies.
4; r       ment Nvith state-ow ned commercial banks
r              oser  asaninermediayforprviding           Pilot Programs of Non-gov-
l    :<*                  '    4 b   ~~~~~~~~~~to serve as an intermediary for'providing PilotProgramsofNongov-
loans to self emploved Xvomen. Practical  ernmental Organizations
d ificulti e faced by poor, illiterate       Because micro-finance is relatively
Wome in dealing xvith bank officials led  new, to China, donors have supported
SEWA n ecmbers to form thecir own bank    pilot operations to test the ability of
Bangladeshi microentrepreneur and client of
Buro-Tangail                                                            (contintied oni page 4)                    (continued on page 5)



STRENGTHENING ASIAN MFIS
-Joyita Mukherjee, CGAP Secretariat
Asia is home to 3 billion of the world's 5.7 billion people and roughlv 55
- ZY    ,jaZDi ZZD:a D a laaaaaaZa a percent of the world's poor. As much as half of the world's poor live in four
a      of O, -~ D-Di-D                   South Asian countries-India, Nepal, Pakistan, and Sri Lanka. Nearly 30 percent
dtinue=<=Dd DD^ fr~ge~4     D             DD^ Dof the population in China and the Philippines lives on less than US$1 a dav.'
Even in the "tiger" economies of Thailand, Malaysia, and Indonesia, the poor-
Dma'sD Emrn  fAjD ' 'D ^ '            est 20 percent of the population shares only 5-8 percent of the national
D ~ i~e~ D,,-Zlla D   D = 'D DDD ^    income (World Development Report 1990 and 1995).
'Qin}DD ,,nZ pae    D    D D        Millions of Asia's working poor create self-employment and the means for a
better life through micro-entrepreneurship. The visible frenzy in urban slums
2D3 St-,=', Asi-   from Manila to Mumbai (Bombay) and in rural communities is evidence of the
3 D a  NDewl=>DlaDa   O3gea'j PDFat  DDDDD jDDD Daa 2 desire and ability of the poor to help themselves. Yet, this vibrant activity is
largely ignored by the formal financial sector. Social and cultural barriers in
D Dxc ZDE7  iviem.ber 1 D~n~or  S a,D DDD   ,DD Asia particularly limit women microentrepreneurs' access to resources. During
D  -D9D; D up-<<gD   D       ' D^ atDDeDDDDD   DD^ ' 'DD'   the last 20 years, public and private efforts to respond to the need of very poor
entrepreneurs for financial services have shaped the micro-finance landscape in
S 11  Tea h~ovatie Ifl1~tUtOfl~Sthis vast continent and elsewvhere.
In Sat iadeslvt BRAG, ASA~ andf             Some Asian micro-finance institutions have become international leaders,
ro-Tanga~~~~~I               achieving a scale of operations rarelyT found in other parts of the wortd.
12,=aD-Da 4D Dra~nin~ j9eu~es D      j              D  D  D-Bangladesh's Grameen bank and BRAC* count 2 million and 1.5 million poor
15 CagDabllEaDaaDAPReDDaalD:7Daaaa0deD3:lDD  awomen as their active loan clients respectively. Bank Rakyat Indonesia's Unit
S=rvey                      Desa system serves 2.5 million micro-loan clients and 12 million small savers.
Thailand's Bank of Agriculture and Agricultural Cooperati-ves (BAAC) serves
=    CO~TRLSUTOR&                                   roughly 1 million micro-borrowers and 3.6 million micro-savers. Newcomers
such as the Association for Social Advancement* in Bangladesh with half a mil-
Ele Sttatt                        li~~~~~on clients andt the People's Credit Funds in Vietnam with more than 200,000
DSEWA ana aDA~'Polic i=i   DDD'      ' members/clients are other examples of upcoming giants in the field. Other
D de GoIdber97    -7        0  D         D   minstitutions -such as Cambodia's ACLEDA, Buro-Tangail* and Shakti
CGAPDSecreSta iat                        Foundation in Bangladesh, SEVA Bank* of India, AIMS lk,-tiar Malaysia, and
Soyita <Mukher'eeAction Aid's commune banks in Vietnam also show impressive performance.
DDDDiDD Se. e ia  ID i~t                     No particular institutional framework predominates among Asian MFIs.
S WiI1iaan Staub. and ThmaI;F                   Legal structures include formal commercial banks, rural banks, cooperative
Asian  .   7--           -    DE ^ institutions, credit unions, and non-governmental organizations. Likewise,
operational methodologies vary from Grameen-style solidarity groups, to indi-
*GAP S eeretar_d avidual clients, to self-managed self-help groups. Institutions such as BRAC and
S y i0.<- <=. 04 az e-  flwdd-tn Ahme4         BRI have gone beyond credit to offer insurance and other financial services.
==R=D -<-. -z  s7 D  D0 kDD D G0 D   DDD GG GG Grameen and BRAC offer non-financial services, such as retail outlet facilities
for products of their poor clients.
Md  Nlsaftqua Na  - A common characteristic across countries in the region, is the presence of
Mohamnied Azim Kossa 7 .---^                   state-owvned institutions in micro-finance. Unfortunately, apart from BRI and
Zel  I~~i'ossair~ anji             BAAC, these institutions have been ineffective in reaching poor people wvith
sustainable financial services. The regional rural banks of India, China's rural
credit cooperatives, Vietnam's Bank for the Poor, and a dozen-odd agricultural
Lamiya Mdsrshed D DD DD DD D   D  D DtDDDDD      D D development banks in other countries have failed to cover their costs and
Grameen Trust                            recover loan repayments. A few of these governments are recasting the opera-
tions of state-owned institutions to mirror their more successful private sector
David ~~~ll$sosss ~~counterparts.
Asia holds great potential for micro-finance given the sheer number of poor
Tamar^D 0a SE.URtOcI           D                  D u D< D g S C g  ;who lack access to basic financial services, high population density, and rela-
CGAP Secretar7t                          tively stable macroeconomic and political situation. Yet, despite the number of
institutions active in micro-finance (an estimated 350 in the Philippines alone!)
G G   IG^ DD    'In purchasing power parity terms.



a large part of the market remains untapped, and fewer than a handful of insti-  N E W  C GAP
tutions have achieved or are projected to become self-sustainable in the next  P U B LI CAT I0 TN S
five years. Whv has a region xvith so much promise and some spectacular suc-
I                                               ~~~~~~~~~~J u Iy - D ec em b er 1 99 7
cesses not generated a greater number of sustainable institutions? The behavior
of governments, donors, and MFIs may be at the core of this question.
Until recently, many Asian governments set interest rate ceilings for loans to
the poor. These ceilings were often too low for MFIs to cover operating costs,  FOCUS NOTE 9
much less generate profits. Even now, funds from government-owned wvholesale   Anatomy of Deal: CGAP's Approach to
intermediaries in India, Nepal, and Vietnam are lent with prescribed spreads   Investing in Micro-finance. Brigit
between the MFI's borrowing and lending rates that are too narrow to promote   Helms.
institutional sustainability. Moreover, the significant involvement of government
agencies (such as public sector banks) in micro-finance may have crowded out
private sector entrants and stifled innovation.
Another reason for the paucitv of sustainable MFIs in Asia is that donor    FOCUS NOTE 10
funding has been somewhat lopsided, wvith large sums of money available for    State-owned Development Banks in
on-lending, but only a trickle of funds to invest in institutional capacity. Few  Micro-finance. Joyita Mukherjee.
Asian institutions have funds to strengthen their equity base, invest in staff
training, develop sound information systems, or procure appropriate office
technologv. Consequently, many MFIs have been unable to scale up their         FOCUS NOTE 11
internal capacity to manage complex operations and serve more poor clients     How CGAP Member Donors Fund
effectively.                                                                   Micro-finance Institutions. Mohini
Finally, many organizations, particularlv in South Asia, provide micro-
r   :   ,          .<                  .                   ~~~~~~~~~~~~~~~Malhotra and Anne-Marie Chidzero.
finance along with other services such as literacy, health education, and legal
counseling. Few, BRAC is a notable exception, see themselves as "bankers."
Most view themselves as providing a stop-gap arrangement to meet their
clients' financial needs until the clients are able to interact wvith formal banks  NEWSLETTER CONTRIBUTIONS
directly. This view of the institution as a temporarv facilitator versus a perma-
Please send contributions (between
nent intermediarv diminishes the drive necessarv to achieve scale and sustain-
600 and 700 words) to the address
abilitv. Practitioners operate their institutions as "projects" with a long-term  listed under contact information on
dependence on donor Lunds, and do not feel compelled to cover costs and
earn profits.                                                                  the last page. The selection of articles
Fortunately, changes are taking place on all fronts. Asian governments are  for publication will be at the editors'
becoming increasingly aware of creating an enabling environment for micro-     discretion.
finance, and donors are starting to include institution building in their support
to MFIs. Having realized the limitations of donor funding, many practitioners
are seeking to build financially sustainable institutions. At the Bank Poor    CGAP ONLINE
regional workshop held in Malaysia in December 1996, representatives from
hundreds of Asian MFIs identified strong management and leadership skills,     All CGAP publications and general
staff training, improved management information systems, and rigorous          information about CGAP can be
internal monitoring and evaluation as their top needs.                         accessed through the World Wide Web
In addition to these priorities, Cambodia, China, Lao PDR, Vietnam, and     at: http://www.worldbank.org/html/
other transitional economies will need special attention to overcome policy    cgap/cgap.html
hurdles. On the other end of the spectrum, regulatory authorities in countries
xvith a number of MFIs capturing voluntary savings, such as in Bangladesh,
face the challenge of developing appropriate prudential rules and ensuring
sound supervision. Donors wilt require further education on working in part-
nership with sound MFIs to facilitate institutional growth and development.
But the biggest challenge lies with Asian practitioners to develop their institu-
tions with a vision of achieving permanence and scale in serving the poor.
*Featured in this issue
Joyita iltukherJee is a mlicro-finiance specialist with the CGAP Secretariat.



A Bank of One's Own                                          Table  1: SEWA  at a Glance
(continued from page 1)
in 1974. The bank's equity consists e    - 
exclusively of the money of poor self-17   96           1,4         198557                                   ,7
employed wiomen, with no gra-nt from79140
external donors. Through its perfor-          198       14,022      3,             1          31,556       54,192
mance, the bank has demonstrated that
poor women contribute to capital forma-  1985498        22,208      9             3,366       352,307      18,159
tion, contrary to the common percep-
tion of the poor as a "burden"  (Table 1).  190-199     27,923     1,363,008      91          693          41,281
SEWA's Approach and                       Nomi alU.S.doliars
Services
Savings
Before making credit available,      distinguish between consumption and    business expansion and sustainabilitv
SEWA Bank offers its members savings    production loans, believing consump-   WVith SEWA loans, many women have
services. A secure place to deposit sav-  tion loans to the very poor for food,  added electricity and indoor plumbing to
ings is crucial in the Indian context, par-    health, or housing contribute to the  their homes, features that greatly enhance
ticularly for poor women. When these    maintenance of the borrower's key pro-    productivity. Further, housing loans allow
women acquire capital, it is not safe in  ductive asset: labor.                womiienl to build equity in an important
their homes, around their male family      SEWVA's loans are generally repayable   asset, rather than paying rent. To date,
members, because women are often        in 36 monthly installments with an      SEWA has disbursed about US$1.4 mil-
denied ownership of familial assets. With    annual interest rate of 12-17.5 percent  lion in housing loans to 6,000 women.
SENVA's Bank, depositors can augment    charged on the outstanding balance.        Other benefits SEWA also has devel-
savings at whatever rate they choose;   Loans under Rs. 2,000 (US$55) require    oped a savings-based work insurance plan
they can use money saved as collateral at    one guarantor, and those above require    for members that protects them when
other lending institutions; and they are  two. The maximum loan amount is Rs.    employment is not steady or when they
free to spend or invest their savings as  25,000 (US$694). Loans are made to    are hospitalized. In addition, the bank
they see fit, including drawving on their  individuals directly from SEWVA. But  provides child care and legal aid.
savings in times of disaster. Thus, the  SEWA also helps the formation of
ability to save imparts not only security  groups in rural areas that capitalize and  R e s u I t s
but also autonomy.                      manage their own funds and decide who
5EV/sTA primarilyv offers savings to  among them receives loans and at what     SEWA has consistently expanded
individuals in urban areas and to groups  interest rate. As of March 1997, there  profits and membership for two decades.
in rural areas. Savings groups comprise  were 771 groups with 21,393 members    Members now number 220,000. Data on
10 to 50 members, whose deposits range    that had collected roughly US$93,000  the bank's growth, repayment rate (95
from 10 to 25 rupees (30 to 70 cents in    in savings and had nearly US$75,000 in    percent on average), and performance
U.S. dollars) per month. Because many  loans outstanding.                       compared with both public and private
sector banks show that SEWA is success-
rural women are unable to travel to the    5 up p o r t S er vice s             fiil and sustainable. Several studies by
bank, bank staff pick up deposits at the                                        ctra eerhr  ouetta
women's homes. Initially, the bank also    SEWA Bank works closely with         external researchers document that
uses borrowers' photos instead of signa-  SEWA trade union, which provides       EWA's members have obtamed employ-
tures to verify ownership of their pass-  other services to the bank's clientele to  ment, increased income, improved their
books because manv SEWA clients         maximize the usefulness of its savings  diet and health, obtained child care,
cannot read or write,                   and credit facilities. These other services    improved their living conditions, and cre-
include:                               ated assets. But perhaps the clearest indi-
Cre dit                                 T                                   cator that SEWA has achieved what it set
Training 5EV/A borrowvers are taught    ott  ocmsfo  t  ebr'eca
In SEW/A bank, a borrower's credit-    to wTite their names and read entries  out to do comes from its members' excla-
worthiness is based on her financial    made in their passbooks, to travel to and    mation: "SEWA Bank, my mother!"
behavior rather than on collateral or   make deposits at the bank, and to follow
security. After members demonstrate an  bank procedures. Borrowers also receive    This article is drawn from "Our Own:
ability to save regularly, they become eli-    technical assistance to identify market  SEWA Bank," by Ela R. Bhatt, Chair of
gible for credit. Loan terms also accom-  niches, source cost-effective inputs, and  Self- Employed Women'sAssociation
modate the needs of poor women, who     make more marketable products.          Cooperative Bank of India. Ms. Bhatt is
require modest amounts of money and        Housing loans Because nearly all    also a member of CGAP's Policy Advisory
ample time to pay back the money they   poor, self-employed women work from     Group.
borrow. Moreover, the bank does not     their homes, housing loans are key to



C h i n a 's E m e r g i n g ...            replication in Sichuan and Shaanxi to        financial statements, management infor-
(continuedfrom page 1)                      reach 9,600 clients in five years. Pilot     mation systems, interest rates, portfolio
micro-finance operations are also being      quality measurement and management,
various micro-finance methodologies         conducted by the All-China Women's           and development of attractive credit
to reach poor rural households. For         Federation, wvhich is using different        products for pioneer MFIs.
example, the Ford Foundation and the        group-based approaches.                          In response to these needs, CGAP
Chinese Academy of Social Sciences set         Although government institutions,         has translated several technical materials
up an action research pilot based on the    with their financial and technical           into Chinese and is engaged in increas-
Grameen Bank model in five northern         resources, hold the potential for massive    ing the exposure of senior government
provinces starting in 1993. The German      micro-finance outreach, they are con-        officials to international best practices in
technical cooperation agency GTZ and        strained by policies and practical realities.  micro-finance. Future capacity-building
its local counterparts have taken a holistic    These include the subsidized interest    efforts mav focus on developing a
poverty alleviation approach, including     rate, a long tradition of targeted (and      micro-finance training center that offers
micro-finance, to reach extremely poor      subsidized) credit allocation, and the       general and specialized courses in man-
households in the southern provinces of     amount of time required to reorient giant    agement of sustainable micro-finance
Yunnan and Sichuan. In addition,            govcrnment agencies.                         institutions. UNDP, Ford Foundaton
Australian Agency for International
Development, the United Nations
Development Program (UNDP),                                    A
Canadian International Development
Agency, the International Fund for
Agricultural Development, and UNICEF
are also supporting various initiatives to
promote micro-finance development.-
These pilot efforts have proved that
micro-finance is a valued service for
low-income households Y,vith income-
generating activities, and that very high                                                           Wm
repayment rates can be achieved. The
pilot efforts have not yet showrien that mnicro-
finance can be profitable, coveting all
costs and requiring no subsidies from the
government or donors in the long term.
Tuphre G piov e rnmeacht ' s
Micro-finance is an integral part of             1
the National 8-7 Poverty Alleviation
Strategy, intended to help 80 million       Ethnic minority women from rural Guizhou Province in Southern China
Chuinese move beyond a per capita
income of YS10 (IUS$70) by the year
2000. In the past three years, the guy-     T       fe        mangemk Ahed               the Chinese Academy of Social Sciences,
emrnent has taken important steps to            CGAP responded to donor and              and LGPR all have expressed interest in
improve the outreach of services            government interest in micro-finance in      designing the curriculum of a micro-
provided by rural financial institutions.   China by co-sponsoting a micro-finance      finance training center and idcontifying
Impressed by the ability of donor-      conference with the Ford Foundation,         micro-finance practitioners.
supported pilots to reach the poor          No    and local chinese insutions in             Reforming the legal and regulatory
directiy, the People's Bank of China        October 1996. This occasion provided         framexork, to enable current micro-
recently reorganized the country's rural    the first opportunity to exchange lessons    finance projects to evolve into sustain-
credit cooperatives, providing greater      learned by Chinese practitioners and gov-    abl financl  istitutions  and build
freedom to expand operationsvwith a         einment policy makers, and to introduce      the technical skills of micro-finance prac-
business orientation and the leeway to      international best practices in credit,      titioners xilbe critical for the develop-
test new products, clients, and delivery    savings, financial management, and the       mn  fCiasMI.Wt  upr
approaches. The government also formed    formulation of financial sector policy.        from policy makers and the international
the Agricultural Development Bank of            Conference discussions revealed the      micro-finance community, micro-finance
China, which is testing micro-finance       need for a broad-based policy dialogue       in Ch-ina can make a serious contribu-
activities wvith the Leading Group on       and information dissemination approach       notobhruapvetalviin
Poverty Reduction (LGPR), a national        to assist the local micro-fina-nce industry,  and financial sector deepening.
government unit. With XVorld Bank sup-      A CGAP-commnissioncd study revealed
port, the LGPR has established coopera-     several areas for training, including the    Mike Goldhe;2q is a micro-finance special-
tives to implement a Grameen Bank           construction and interpretation of           ist wpith the CGAP Secsvtariat.



/            II  MEMBER  DON
Australia    ASIAN DEVELOPMENT BANK OPERATIONS TO SUPPORT
MICRO-FINANCE
- William Staub and Nimal Fernando, Asian Development Bank
C a ana d a    The Asian Development Bank (AsDB) has been supporting micro-
finance development in Asia since 1988. AsDB has supported 15 loan
projects worth US$300 million in Bangladesh, Indonesia, K(vrgyz
F n     la,d   Republic, Mongolia, Nepal, and the Philippines. The Bank has also
provided support for 29 technical assistance projects, amounting to US$19
Fr ance   million. Six new loan projects and several technical assistance (grant)
projects are in the pipeline for the Asia Region, and, in the medium term,
@ r rm a n y   AsDB's support for micro-finance is expected to increase in volume and in
geographic coverage.
Initially, AsDB's micro-finance assistance took the form of project
L   financing. (Grants and soft loans made to countrv governments that are
then on-lent to MFIs.) Now, although project financing is still the pre-
h - Xt t e r ands;  dominant vehicle for providing assistance, AsDB places greater emphasis
on policy reform and capacity building. The shift stems from the institu-
DJ  s w a y   tion's recognition that an enabling policy environment and strengthened
MFIs are requirements for a viable and sustainable micro-finance system
S X e d @ n   capable of reaching more poor clients. Now, too, AsDB's micro-finance
0   projects pay more attention to savings mobilization, in response to evi-
dence showing that demand by the poor for mechanisms to support sav-
Unite   K         o m   ings is as strong as demand for micro-credit. Poor people need to put their
savings in safe, liquid, and attractive places. Savings deposits are also an
U ni td a  t es   important source of funds for lending to the poor. The need of the poor
for both savings and credit is causing the AsDB to view micro-finance as a
A f  C a  D  v @     a @   a a P  'nt B a n  niche within the financial services sector, and to refocus its assistance
accordingly.
Although micro-finance is an effective way of helping the poor,
expanding micro-finance services-both in numbers of clients and breadth
of services-is a challenge. AsDB is meeting this challenge by worling wvith
I n t e r A mn e,a r   a    a task force it formed to prepare an Institutional Action Plan on Micro
D e v e a p me n t 7 a     F Finance. The task force is looking at the bank's instruments of providing
assistance, its operational processes, its in-house capacity, and its training
n t a e 7 a t   o na  Fu n d for     programs and skill requirements to help the Bank understand how it can
A g ric   t      Dv  l a  p D  @   I e i a Fe  support micro-finance operations most effectivelv. The Institutional Action
Isntearna ~ t ionala I t a Labou   Office   Plan draws on insights obtained from a review of AsDB microenterprise
projects and projects with micro-finance components that were approved
U nited Xi atians   between 1988 and 1992. The findings of this review are included in
ca  p i t  a 1     velo p men t f ud   Microenterprise Development: Not By Credit Alone, issued by the Bank in
June 1997. To obtain a copy of this review, please contact Mr. Kaji F. Jalal,
UniXted    a        tions   feresnaCe     6 Asian Development Bank Avenue, PO. Box 789, 1099 Manila,
os  Trade ad Devlpment   Philippines, Tel: 623-623-444, Fax: 623-741-7961.
United Iia ti  ns   William Staub is Senior Social Development Specialist, Social Development
iCvp-o  st Proramm  Division, and Nimal Fernando is Project Economist, Agriculture and Rural
Th e MbMrld  ,Bas       Development Division (West) at the Asian Development Bank.



0  R                                          6   r.EEE X0
CGAP FUND FACILITY::
Since June 1997, the Investment Committee has approved the folowihgadditional funding. Total CGAP fund
commitmentstands at US$18.5 mil[ion   -
hwestwenit                      -      fountrylegion                     A mount (US$)
FundiN for  iaRt0     - MRs
WCFNA Internaiional                 Malawi, Uganda"
(Technical Assistance hubs)         Honduras, Nicaragua                  1,260,000
K-Rep (Multipurpose                 Kenya                                700,000
Cooperative Sodety)
Centre for Self-Help                Nepal                                5,300Q
Development
Sub-total                                                                           1,965,300
Support to Prac3ttioner NetworkslMFI Capacity Buiding
atalysfs                            Latin America                       98,6:0
INDNET               .ridia                                              50,000
,, :- ' Sub-tEotal                             .                                       . .'- :- ;', - - . <. 148,600
Commitmernts urtil June 1997                                             16,375,797
- .  T(3TAL       :           :                 .       ;       . -    - -      0;18,489,697
LJ]  P   D   A   T   E
In the previous issue of this Newsletter, we provided expected release dates for the Tools for
Practitioners that the Secretariat is developing. VVe regret that the release of these tools has been
delayed. The new dates are as follows:
The appraisal document is available from the
CGAP Secretariat (see last page for contact
Tools                              Expected release       information). To order copies of the MIS
Handbook, Audit Handbook, or Business
Appraisal Format .................. January 1998           Planning Guidelines, please contact PACT
MIS Handbook  .................. March 1998               Publications, 777 United Nations Plaza,
Newv York, NY 10017 USA.
Audit Handbook .................... April 1998NeYokNY107UA
Tel: 212. 697 6222; Fax: 212. 692 9748
Business Planning Guidelines ........ May 1998                    E-mail: books(pactpub.org
Web site: http://w,vw.pactpub.com



T H R E E I N N O VAT I V E             lenged the conventional wisdom of the
I N S TI T UT IO N S I N                1970s and discovered that, with new
BANGLADESH: BRAC, ASA,                  lending methods, the rural poor repaid
A N D B U R O - TA N G A I L            loans on time. These new methods
A N D B U R 0  TA N GA I Lincluded the delivery of very small loans
C   Bangladesh is a rural countrv       at full-cost interest rates without collat-
A   characterized by dense population    eral that were repayable in frequent
- 827 people per square kilome-    installments. Further, organizing the
ter -and waterways that cover its   poor into groups appeared quite effec-
river delta landscape. With a GDP    tive. The groups provided an additional
per capita of US$230 and 47 per-   guarantee against default and offered a
cent of its citizens living in     convenient mechanism through which
Bang lades h boasts one of                   absolute poverty,' it is one of the    to disseminate knowledge on health,
C   world's poorest countries. But     legal rights, sanitation, and other topics
the largest and most vibrant            M   Bangladesh also boasts one of the    dcemed important to the clients.2 And
Q   largest and most vibrant micro-    finally, these institutions targeted
microfinance industries in                   finance industries in the world.   women who lived in households that
The Grameen Bank, serving 2 million     owned very little land. This method of
t h e w o r I d .                       clients with credit and other services, is   identifying clients proved to be a sim-
the best-known MFIl, but an estimated    ple, yet effective way of ensuring that
700 smaller institutions serve another 6   services reach the poor.
million clients. The origins of this bur-  Today, increasing competition is
geoning industry are presented below,    pushing the frontier of Bangladesh's
followed by profiles of three leading   micro-finance industry further to
institutions other than Grameen - the    expand and innovate on the original
Bangladesh Rural Advancement            blueprint. Institutions are placing
Committee (BRAC), the Association       greater emphasis on more flexible sav-
for Social Advancement (ASA), and       ings options and new financial products.
Buro-Tangail.
BRAC - Managing a
Lessons from  Early                     Multi-Service  MFI
E x p e r i m e n t s                      Founded in l972, BRAC is a pio-
For the decade following            neer institution that began as a small
Bangladesh's independence in 1971,      relief organization and has grown into
development institutions focused on     a multi-service NGO managing multi-
addressing the inequities between the   ple programs in health, education, and
powerful and the powerless. Yet many    economic development. Among these
institutions discovered that the poor   programs is micro-credit: the organiza-
were more interested in expanding       tion has one of the largest micro-
their economic opportunities than in   finance portfolios in the world, with
drawn-out political struggles. One road    1.5 million active clients and US$77
to economic opportunity was the pro-    million in loans outstanding as of
vision of credit. Credit was not new to  December 1996.
Bangladesh, but past attempts - first      Although it relies on micro-finance
by the British colonial authorities to  as an important poverty-fighting tool,
provide cheap credit to farmers, and    BRAC does not believe credit alone is
later by the national government to     sufficient to overcome the vulnerability
revive an old cooperative scheme dur-   of the very poor. This belief is reflected
ing the 1960s -had failed to reach the    in BRAC's two-phased approach to
poor.                                   micro-finance, which focuses first on
In the 1970s, several institutions,  rural development and then on rural
such as Grameen Bank and BRAC,          credit.
began to experiment with new ways of    * Rural Development Program
providing credit to the poor. They chal-  (RDP). BRAC targets women of
' Defined by a minimum calorie intake, Credit and Development Statistics 1996.
Group size was critical, though, because efforts to work with entire communities were proving ineffective and
often excluded the poor.



Aarong, a chain of retail shops that
markets the products of BRAC's
Executive Director                                     clients; cold-storage facilities for agri-
cultural produce; and a publishing
I          I             l           l           I                     I             company. The first two divisions pro-
Director -    Director -  Director -Rural  D rector- - .Director-   AarongF| Other Diretors] | vide marketing links for the rural poor,
Health    Non-Formal    Development    Monitoring . Bra     R    i  and Divisions       and all three generate revenues. In
and       Primary      Program and Rural  Internal  Printers    Shops
Population   Education  Credit Program  Audit                                           1996 these thrce arms yielded
Cold                          US$16.8 million in net profits
Micro-financeNon-financialStorage
Micro-Tinance  Non-financial  .       Facilities                    for BRAC to use at its own discretion.
Services    Services                                                    BRAC's management structure,
,For Profit Units   !               accounting systems, and emphasis on
accountability have produced impres-
sive results. For example, in micro-
BRAC Organizational Chart                                                                   finance operations (micro-finance
activities of RDP and RCP combined),
households that own minimal land           ment programs. Its non-formal primary    operational self-sufficiency is 158 per-
and rely primarily on wage labor for       education program runs 34,000 locally          cent, and the proportion of administra-
income. These "landless laborers" are    based schools, and a parallel health             tive expenses to average outstanding
widely recognized in Bangladesh as         division provides a range of health ser-       loan portfolio is 9.7 percent, very low
the most vulnerable group of the           vices. Though not the focus of this           for an MFI (see Table 1 on Page 11).
poor. Each RDP branch office mobi-         article, these programs have received          This strong performan-ce has allowed
lizes the women from the poorest           acclaim of their own.                          BRAC to apply for a license to create a
households of a community to join              Despite its immense size and array         bank that can absorb RCP units and be
village organizations of about 40          of programs, BRAC has avoided the              added as another profitable arm of the
members that meet weeldy. Initially,       pitfalls common to multi-service orga-         BRAC holding company.
RDP provides "functional education"    nizations. It has done so by separating               To learn more about BRAC or to
that teaches numeracy and literacy         the management and costs of each of           request a field visit, contact:
and makes members more aware of            the different arms, thus building                           BRAC Centre
their rights. RDP also offers training     accountability. For example, the staff               75 Mohakhali Dhaka 1212,
in income-generating activities such       and accounts involved in micro-finance                        Bangladesh
as poultry rearing and silk produc-        are distinct from those for other activi-        E-mail: general@brac.bdmail.net or
tion; many of these activities are new     ties. This separation allows BRAC to                  brac@drik.bgd.toolnet.org
to the rural areas -and have been    .     ...track with high accuracy the perfor-          Fax: (880-2) 883 542 or 883 614
pilot-tested by a special unit within      mance of micro-finance operations,
BRAC. After a period of training and       separate from other aspects of RDP            AS A - The  Ef i en c y of th e
education, usually one year, credit is     and RCP. (The forthcoming CGAP                  S e I f - R e   a n t M o d e l
made available to BRAC's clients.          Occasional Paper #2 on "Cost
First-time loans are small, usually.       Allocation and Micro-finance" detailsSor ho s siunder    one several meta-
US$25, but subsequent loans gradu-         methods for allocating costs in MFIs           F ou ed with th obectiof m  1978.
ally increase. Members are also           uand uses BRA   as a                            case study.i) iong theo   t h ve the  of mobliz-
required to save regularly, although                                                      ng Moreover, stattf are not expected to  nocthe poor o  achl eve their own eco-
BRAG is experimenting with volun-          mse  eea  ehia  kls  ahr                        oi  n   oiljsie   S    lwi
tary savings options.                      master several technical sldlls; rather,       adapted its approach and in the mid-
Rural Credit Program  (RCP).               finance professionals manage credit            1980s operated projects common to
After four vears in one location,                       and teachers run the              many NGOs. In 1991, staff and leader-
RDP ends and all non-financial             schools. BRAC's headquarters in               ship took a more drastic step and trans-
services cease. RDP's loan portfolio       Dhaka acts as a holdig company                 formed ASA into a specialized
and clients are transferred to a small-    coordinating the operations of its vari-       micro-financc institution. Its goal is
er RCP office. An RCP office acts as    ous divisions.                                    simple: to become the most efficient
a bank and provides savings and loan           Although the various arms of              and self-reliant micro-finance institu-
BRAC operate independentlv and                tion possible
services wvithin its service area on a                                                                 .
financially self-sustaining basis.    .    ......... under different directors, they are     ASA incorporates many of the
BRAC has applied for a license to          BRACsesigned to complement one  another.      practices common to micro-credit in
start a bank that can absorb RCP           BRAG's philosophy is that its health,          Bangladesh. Its clients, 99 percent of
branches and solidify their financial-     education, training, and finance inter-       whom are women, are organized into
position.                                  ventions deepen its overall impact. A          groups of 20 to 25 that meet weekly
In addition to RDP and RCP,               good example of the benefits of coordi-    and are required to save. Initial loans
BRAC operates several other develop-          nation within the BRAC holding com-            are small, beginning at US$70 and
pany are its for-profit divisions:            growing slowly with each loan cycle.



TABLE 1: PROFILES OF THREE BANGLADESHI MFIS
spoon, chair, desk, cupboard, and
or        ~~chalkboard. Strict budgets are in place
_i trot                                               n              to limit recurrent costs such as electrici-
ty. These specifications may, appear
excessive, but thec. sinplify the life of
Dsvhome                     $3                         ,3field unit staff and keep costs to a mini-
itmum. Mature field units typically serve
98    8 4   31 _t 5                           1,440 clients, signfring a high client-
t Ascii>          reto-staff ratio and impressive outreach.
e  9  9                          2                                          The liASts middle-level and head-office
management are small for the same rea-
_t  r   Creche Sex ac                                                                  sons. Ten to 12 field un its are moni-
tored by one roning regional manager,
A SAis exermnting Borro    individual    and expan0 ing operations. 12are4whose office is a motorcycle. Because
aoansandvoluntary Bavince pbut these  attention ispaidtocost-savings.AS'this individual is based at ancentrally
yet. At meretings gareu  members also nield units m adelocated field unit, the organization
receive "developmentaecucation," co-      ognzr,  h   c  sla  ofcr,ad                   qavoids the costs of a regional office.
ering ar/eassuch                                       19% 2ocial an   and one unt manaer. Oprationl guid-  halfa millMoreonver, the head office in Dhaka is
small, waith only 62 staff. This stream-
ASA's staff, offices,sand methodolo-    organizers  10455 0ne        298k, a 1 rulethat lined organizational structure means
gy are desgne  tominmizcotad gvesstafainentveosenthat 98 percent of ASA's staff ar based
2izecn.c phstmatrea   saves  /on ceiling                      in thefield-ASAuremainsctrue t i erorti-
s  s  ker  2 rawer  <7  18           20                         ~~~~~~~~~~~~gins as a rurally based institution.
The reporting and management
operations maulavialei ngih fas hihaeomllntinformation systems are designed with
iP~~~ 'to   ½  -    <         7%           61% ~~~~~~~~the same attention to detail and effi-
equaP                                                         ~~~~~~~~~~~~~~~~~~~~ciency. Field-unit staff arc trained to
~~~~~~Par ~~~~~~~~~~~~~~~~record all transactions as credits or
and ' BengaliYfrom - S  prrovides detailed    each - esk. A start-up bu4 get for afield debits on a coded chart of accounts.
guidelines for opening new branches     unit includes specificationsThe list of transactions is sent eivery
$    Management nil 24bwmitec                                   ~~~~~~~~month to the head office, where tra-ns-
<71? soniieltosts 2 eralA  it    C a  9  81  7'       /            actions are entered into the computer-
2               ~~~~~ized central accounting system that
ci                                                            ~~~~~~~~~~~~~~~~~~~~generates fina-ncial statements for ASA
0 ~~an a Sc .$nfficience  -~~  158%  109%      <-~2              as a whole and for each field unit.
M  -    epsea/                                                   Th~~~~~~~~~~~~~~~ese statements are quickly sent back
4xer ~~e Its    sat lid>  9 7%     16.0%         17  ~~~to regional managers and field units so
_________________________________________ ~that all levels of management are able
-  - -  <~~~~~~~~~~~~~' ~~to track performance. This system
~cy-~  ra  'icdtpe/pcrarog exenses  ost o capsdrastically reduces time spent on
2  >2 -   -->7   >2' <t7'<  -                   '      -        ~~~~~~accounting and removes the need for
1<    2'~~~~~~                      4  ~~~~§,2; ~~~     expensive computer systems at the field
-r 0     49%  untess~otlKrise specifIed 2       ½   <7-        unit level. ASA's reporting system was
2~~~~~~~~~~~~~ ~~~~~also the first in Bnldstotrack the
professional banking measure of port-
ASA is experimenting with individual         and expanding operations. Carefful           folio quality-portfolio at risk.
loans and voluntary savings, but these       attention is paid to cost-sav,ings.             ASA's efficiency and franchise-style
are not significant parts of the portfoho       For example, front-line offices are      field units a-re yielding impressive
yet. At meetings, group members also        field units made up of four community         results. The organization has grown
receive "development education," coy-    organizers, who act as loan officers, and    quicldy since 1991 to serve more than
ering areas such as social awareness and     one unit manager. Operational guide-         half a million active clients, wAith a loan
political tights.                            lines specil5' that the four community       portfolio of US$22 million. (The insti-
ASA's staff, offices, and methodolo-    organizers share one desk, a rule that        tution expects to reach 1.2 million
gv are designed to minimize cost and         gi-ves staff an incenti-ve to spend less     active clients by 2000.) ASA's opera-
maximize efficiency. A comprehensive         time at their desk and saves on ceiling      tional self-sufficiency wvas 109 percent
operations manual available in English       fans, which are normallyT installed above    and its administrative expenses as a
and Bengali from ASA provides detailed    each desk. A start-up budget for a field        share of average outstanding loan port-
guidelines for opening new branches          unit includes specifications for every       folio stood at 16 percent in 1996.



Both figures reflect ASA's efficient    savings options. Clients may withdravw    To learn more about Buro-Tangail or
operations, and are expected to         these funds before the five-year term is   to request a field visit, contact:
improve further as the institution      complete, but only accrue interest at    18/IRA, Pisci Culture Housing Society
matures.                                the lower savings rate.                          Ring Road Shaymoli
ASA is maling concerted efforts to      Buro's founders believe their sav-          Dhaka 1207, Bangladesh
disseminate its financial technology,  ings services offer greater access and         E-mail: burot@bdmail.net
and operational strategies. Its operat-  convenience, which suit the unpre-             Fax: (880-2) 912 5492
ing manual is available in English, it is  dictabilitv of the lives of the poor. But
always open to field visits, and its staff    these flexible instruments come at a  rurther Readings
provide technical assistance interna-   price: they put pressure on Buro's
tionally.                               management and accounting systems            ASA Manual. 4th Edition.
To learn more about ASA or to       for ongoing staff training and maxi-       September 1995. Dhaka:
request a field visit, contact:         mum liquidity. To remain financially      23/3, Block-B, Khiljir oadv
23/3, Block-B, Khiljir Road        solvent, the institution must make        Mohammedpur, Dhaka 1207.
Mohammedpur, Dhaka 1207,            loans (to earn revenue) in the face of    Fax: (880-2) 811 175.
Bangladesh                 increasing competition. As a result,          Credit and Development Forutm
E-mail: asa@drik.bgd.toolnet.org     Buro is introducing new loan prod-         (CDF) Statistics: Microfinance
Fax: (880-2) 811 175            ucts. For example, pre-payment facili-    Statistics of NGOsin Baingladesh.
ties allow borrowers to repay loans in   Volume 3. December 1996. Dhaka:
B u r o - T a n g a iI - I n n o v a t cl r o f  advance of the pre-determined sched-  Credit and Development Forum,
N e w  F i n a n c i a i S e r v i c e s  ule, and new supplemental loans per-    House No. 3/10, Block-D,
Buro-Tangail was founded in 1989     mit clients to access new loans more      Lalmatia, Dhaka 1207.
to provide micro-finance services to    quickly. Additionally, for its most       Fax: (880-2) 911 2340.
the rur-al district of Tangail. By      established customers, Buro provides         Lovell, Catherine H. BreakCin
Bangladeshi standards, Buro's 12,684   lines of credit that are larger and more   StrategCy  1992. Eumarian Press:
clients and US$728,856 outstanding      flexible than standard loans.             West Hartford, Connecticut.
loan portfolio in December 1996            Although some of Buro's services          Rutherford, Stuart. ASA: Te
qualify it as a medium-sized MFI. But   are experimental and have been intro-     Biography of an NGO. August 1995.
Buro's strategy has been to invest in   duced on a limited basis, Buro-Tangail    Dhaka: BRAC Printers.
developing new financial services. Its  intends to reach 100,000 active clients      Rutherford, Stuart and Hossain,
continuing efforts to determine how     by 2001 and become a financially self-    Iftekhar. BURO-TangailPs NVew
to deliver more flexible savings and    sustaining institution. Even with its     Products. Prelimzinary Operationra
loan services to the poor represent     present outreach, howTever, Buro is       Research. May 1997. Dhaka:
an important learning opportunity for   showing success at mobilizing increas-    BURO-Tangail, 18/KA Pisci
other MFIs.                             ing voluntary savings from the public-    Culture Housing Society, Ring
Buro establishes groups of poor      roughly US$300,000 by the end of          Road, Shaymoli, Dhaka 1207.
women that hold weeldy meetings.        1996.                                     Fax (880-2) 912 5492.
However, the organization emphasizes       The growth, competition, and              Srillie, Ian. Words d Deds:
0                       ~~~~~~~BRAC at 25. 1997. Dhaka: BRAC
savings over credit. Most of Buro's     innovation in Bangladesh's micro-         Centre, 356 Mohak7haki C/A,
clients are not borrowvers. As of June  finance industry hold great promise       Dhaka 1212. Fax: (880-2) 883 542.
1997, Buro had txwo times as many sav-    for the poor and lessons for other
ings accounts (40,830) as loans         MFIs. Depositors' confidence in this         Wright, Graham; Hossain,
Mosharrof; and Rutherford, Stuart.
(19,692). Recognizing two client pref-    sector must be preserved by ensuring    "Savigs: Flexible Financial Services
erences -more flexible loan terms and   that their savings are not lost because   for the Poor." In W7ho Needs Credit?
structure, and more savings options-    of fraud and mismanagement. Such an       Porerty and Finiance in Bangladesh,
Buro's founders have tried to shape     occurrence would be dangerous for all     edited by Geoffrey D. Wood and
their products accordingly.             MFIs and their clients. As more           Iffath A. Sharif. 1997. Dhaka:
Unlike many MFIs, Buro places        Bangladeshi MFIs take in voluntary        University Press Lirmited; London:
Zied Books.
few restrictions on savings accounts.   deposits from the public, establishing a
Savers can deposit or withdraw their    regulatory framework flexible enough
savings at any time, as long as they do  to allow for innovative approaches and  Gregoiry Chen, Research Analyst at the
not have a loan outstanding. Buro       disciplined enough to ensure financial   CGAP Secretar,iat, prepared this article
intends to remove even this restriction  soundness is increasingly important.   wvith the help of Salehuddin Ahmed and
in 1998. The organization has also      Supervisory capacity to enforce regula-    S.N. ICair 7v of BRAC, Ml7d. Shafiqual
introduced time dcposits that require   tions effectively is also critical to   Haque Cho'dhurv and Mobammed
clients to make weeklv deposits of up   ensure that Bangladeshi MFIs serve         Hossain an oM AoSA, ard Zakinr
to USSA that mature after five years    greater numbers of poor clients.        BuHo  Tandagail.
and earn a higher return than other



TRAINING RESOURCES                        The  71` conducts tailored seminars
I N A S I A                            at BRI headquarters in Jakarta, supple-
mented bv trips to Unit Desas with
c   The Secretariat has received many    clienteles that meet visitors' particular
requests for information on train-   interests. During seminars and field vis-
C   ing resources for MFI practition-    its, participants exchange their experi-
ers. The following are profiles of    ence and views with BRI and IVP staff.
c   three well-known institutions in  Visitors may choose package programs
Asia that offer training to       ranging from one or tvo days to more
enhance outreach, control delin-    than a week, with the number and spe-
quency, and improve financial     cialized content (modules) of seminars
analysis and reporting. Two of    depending on length of stav. Modules
the three institutions profiled serve  include:
mainly Grameen Bank replicators, but       General Introduction to the Unit
non-Grameen style MFIs can also ben-    Banking System. The introduction coy-
efit from their services. Grameen Trust   ers the principles outlined above and
and the International Visitor Program  other basics.
of the Bank Rakyat Indonesia offer        Product. This module details the
their services to MFIs outside of Asia.  history, design, pricing, and implemen-
tation of credit, savings, and other
Bank  Rakyat Indonesia's               products.
international Visitor's                   Organization, Management,
P r o g r a m                          Staffing, and Siupervision. The simple,
Interactive learning is nothing new  transparent, four- person structure of
to coordinators of the International   the Unit Desas is discussed. The mod-
Visitor Program of the Bank Rakyat     ule also covers the use of management
Indonesia (BRI). BRI, a leading micro-   information systems; the management
finance institution profitably reaching  audit; and staffing issues such as
small borrowers and savers on a large  recruitment, salary, performance incen-
scale, invites policy makers and micro-    tives, and promotion.
finance practitioners from all over the   The visitor program operates
globe to see firsthand the worlings of    through revenue earned from visitor
the bank's 3,600 rural offices or Unit    fees. An administrative fee of US$500
Desas. The program confers on partici-   for a group of 10 persons or US$1,000
T he program  confers on               pants something even better and hard-    for a group of 11-20 persons is
er to come by than funding: know-how    charged. It covers the training pro-
participants something even            to help meet the enormous unmet        gram, lunch during work days, and
demand for credit and savings in the   local ground transportation. Hotel
better a n d h a r d e r to c om e by    developing world and thereby stimu-  accommodation and airfare are extra.
late broad-based economic growth.      Visitors do not have to meet any eligi-
than funding: know-how to                 The visitor program began infor-     bility criteria or complete formal appli-
mally in the 1990s and since 1996 has    cation process, but, because of high
h e i p m e e t t h e en o r mo u s    received support from the United       demand, interested parties often are
States Agencv for International        placed on a waiting list. For more
u n ml e t d e m a n d f o r c r e d it a n d  Development. The Unit Desas are  information, contact International
s a v i n g s.                         self-sustaining and have reached mil-  Visitor Program Director, Tel.: 62-21 -
lions of small rural borrowers since   5751026, 2511645; Fax: 62-21-
1984. Seeing these units in action and  2511644, 2510313, 2510314, e-miiail:
reviewing their performance can help   BRIUNITWibm.net.
dispel myths surrounding lending to
thepoor:(1)thatthepoorcannot           Grameen  Trust Training  and
save, and (2) that they cannot repay   W o r k s h o p s
bank loans on schedule. The most          Grameen Trust (GT) is a non-prof-
important aspect of the Unit Desas is    it, non-governmental organization set
their adherence to the BRI's manage-   up in 1989 primarily to promote and
ment principles, which balance sustain-    support poverty-focused credit and sav-
ability with service to underserved    ings programs in other parts of the
customers.                             world that follow the Grameen Bani
approach. GT provides seed capital for



organizations initiating a credit pro-       Branch Managers and Area
gram for the poorest. For projects that    Managers 'Training. The smallest
have completed successfully their seed   administrative unit of GB is the branch,
phase, further support is available for  which typically services 2,000 poor
organizations to expand their outreach   clients. On average, 10 branches are
and achieve financial viability. Grameen    supervised by one area office. For orga-
Trust also provides a range of training  nizations following a similar structure,
programs designed to facilitate the      GT offers specialized courses for
development of these organizations       branch and area managers; courses run
into sustainable institutions serving the    for one month and two months respec-
poor. Since 1991, the Grameen Trust,    tively. The training program requires
working closely with Grameen Bank        participants to live in an established
(GB), has provided seed and scaling-up    branch or area office and, in a relatively
funds to 66 replication projects in 26   new one. The field component is com-
countries, and training and technical    plemented by one week of classroom
assistance to many more organizations.   training at the GB Training Institute.
International Dialogue Programs.      The course covers budget manage-
These are two-week programs orga-        ment, accounting, control measures,
nized jointly by GT and GB and held      staff relations, and analysis of the
four times a year. Intended for those    strengths and weaknesses of the loan
interested in setting up Grameen-tvpe    program.
projects, the programs immerse partici-      Training for Trainers. This is a one-
pants in the Grameen milieu through      month course for supervisory staff
direct exposure to field operations at a  responsible for building staff capacity
Grameen Bank branch for six days.        in replicating organizations.
Representatives of Grameen Bank and          Computer Training. A month-long
established Grameen replication pro-     training program on International
jects share the experiences of adopting   Grameen Banker, version 2.0, a micro-
the Grameen system in widely varying     loan monitoring and branch account-
contexts, and assist participants in     ing softwvare developed by GT, is
designing credit programs. National      organized once a year for micro-credit
dialogue programs are also organized     practitioners. Participants are trained in
for potential replicators in Bangladesh  installing and commissioning the soft-
that are planning to start credit pro-   ware, wvhich covers 75 percent of the
grams in offshore islands, urban slums,    work of a branch, and in tracing and
hill tracts, and tribal areas. Grameen   rectifying data errors. Trainees receive
Trust also sponsors Exposure Dialog      the softvare and manuals on diskette.
Programs in other countries, such as         Workshops. To help build manage-
one planned in Bolivia for 1998 in col-    ment and staff capacity and develop
laboration with Pro Mujer and            strategies for overcoming common
Grameen Foundation.                      problems faced by credit programs,        Si n c e 1 9 9 1,  h e G r a n e en
Staff Traininpg Program. The expe-    workshops are organized on the fol-
rience of GB has demonstrated the        lowing topics: (1) cost-effective target-    Trust h as 5  to vi d e d seed a n d
importance of rigorous staff training.   ing; (2) modeling for institutional
Staff from replicating organizations     viability of branches; (3) financial      sc a  n g - u p f u n d s to 6 6
receive training at Grameen, generally   management; (4) credit discipline;        r e p Eicat i o n p r o j ects in 26
for one month. Their training involves    (5) reporting; (6) planning, monitor-
direct exposure to the philosophy and    ing, aind evaluation; (7) strategies for  c o u n tries, an d t r a in ing a n d
methodology of GB at the field level,    dealing with repayment problems; and
and emphasizes self-teaching and learn-    (8) internal audit for credit programs.  tech n ica  assista n ce tc m any
ing by doing. Trainees are expected to   Workshops are frequently hosted in
engage in intensive dialog with other    collaboration with partner organiza-        o o r e o rg a n z at i o ns s.
field officers and clients. Typically,   tions in other countries. To comple-
trainees divide their time between a     ment the workshops, GT has
new branch of GB and an older one to     developed manuals, training guides,
become familiar with problems that       and materials, many of which are now
arise and ways to anticipate and deal    available in English, Spanish, French,
with them. The program is offered year
round.                                                      (contintued o1 next page)



Chinese, Vietnamese, Hindi, and          workshops are being developed and
Tagalog.                                 offered in the Philippines; but wvill be
Training and workshops are open      available to member and affiliated GBRs
to all micro-credit practitioners.      in other countries in the near future.
Selection is based on a written applica-    In partnership with CGAP, CASH-
tion and a competitive review process.   POR has launched a Capacity-Building
For more information on training costs    Program (CBP) that builds on the orga-
and arrangements, please contact the     nization's current activities: regional and
Trust arrangemens plen  caddress:        national workshops on "nuts and bolts"
Trust at the following adrs:topics, on-site technical assistance, per-
Grameen Trust, Grameen Bank              formance audits, quarterly and annual
Bhaban, Mirpur 2, Dhaka 1216,            monitoring, and information dissemina-
Bangladesh (Tel: 880-2-806-319;          tion. The topics covered are: 1) Cost-
Fax: 880-2-806-319; E-mail:              effective Targeting, 2) credit discipline,
CASHPOR draws on its own                 gtrust@grarneen.net).                    3) basic financial management, 4)
Planning Branch Financial Viability, 5)
staff and on experts from                The Capacity-Building                    Annual Planning, Monitoring and
Program  of CASHPOR Inc.                 Evaluation and 6) Internal & External
affiliates, believing that                  CASHPOR-theNetworkfor                 Audit.
Credit and Savings for the Hard-core        Bacling-up the worshops are
I ate r a I lea r n i n g a m o ng       Poor in Asia-Pacific-is a non-profit, net-  CASHPOR's other technical services:
work organization of 18 institutions     Quarterly Monitoting & Evaluation,
pra c t it i o n e r s i s t h e m ost   modeled after the Bangladesh-based       Surprise Financial & Work Progress
Grameen Bank, known as Grameen Bank    Audits, Timely Technical Assistance Visits
replicators (GBRs), and Grameen Bank.    and regular Information Dissemination
m et h o d o I o g y.                    CASHPOR's membership extends to         through Creditfor the Poor,
nine Asian countries: Bangladesh, China  CASHPOR's quarterly newsletter, and
.X3                                                India, Indonesia, Malaysia, Nepal, Papua    other publications. Under the CBP there
New Guinea, Philippines, and Vietnam.    will be 36 Surprise Audit and Technical
CASHPOR provides technical assistance    Assistance visits to member and affiliated
to its affiliates and establishes additional  GBRs throughout the Region, by CASH-
GBRs where needed.                       POR Resource Persons to ensure that
Many of CASHPOR's member GBRs    workshop tools are applied on the
have grown to reach substantial numbers    ground.
of poor households; but still require       CASHPOR draws on its own staff
additional management skills to reach    and on experts from affiliates to deliver
truly large numbers and institutional    the assistance described above, believing
financial sustainabilitv.               that lateral learning among practitioners
To meet its members' needs, CASH-    is the most effective training methodolo-
POR is developing additional xvorkshops    gv. However, -when the required human
in its Intermediate Management          resources are not available within the
Development Workshop Series. Central     Network, CASHPOR reaches outside for
in this endeavor is the dissemination of  appropriate resource persons.
CGAP's new management tools: the            Membership in CASHPOR Inc. is by
Appraisal Format, the Business Plan, the  invitation of the Board that carefully
Management Information System and        scrutinizes GBRs to ensure that they are
the Guidelines on Financial Reporting,   serious about reaching large numbers of
External Audits and Institutional        poor households in a financially sustain-
Financial Analysis. Through these        able wav. For more information about
Intermediate Series workshops CASH-      CASHPOR, please contact its President
POR is assisting its member GBRs to      (Dr. Cecilia D. Del Castillo) in Bacold
overcomic weaknesses in accounting,     City, Philippines; Fax: 63-34-433-0228
financial management and analysis. Other   or e-mail: pdnwtf@mail.bsure.com.ph or
topics that wvill be covered by         its Executive Trustee (David S. Gibbons)
Intermediate Series workshops are:       in Seremban, Malaysia; Fax:60-6-764-
1) Cost-effective Personnel Policies,    2307 or e-mail: gibbons@pc.jaring.my.
2) Developing New Financial Products
through Market Research, 3) Planning     This article was prepa red b y Allison
Institutional Financial Sustainabilitv,  Tarmaunn. The part on Grameen Trutst
4) Repayment Crises and Rehabilitation   was written b Lamiya Morshed of
Strategies, 5) Cost-effective Impact     Grameen Bank Replication Proogram,
Evaluation Studies and 6) Governance     Granmeen Trust. Professor David Gibbons
and Regulation. Initially these          provided input on CASHPOR.



CGAP READER SURVEY                                                                       how much (or little) readers value the
-Tamara Bullock, CGAP Secretar[at                                                        documents. Forty-five percent of
respondents -were willing to pay (56
In 1997, the CGAP Secretariat                                                         percent of MFIs replied yes), 37
undertook a survev to gauge interest in                                                  percent were not sure, and only 18
our publications and to solicit ideas                                                    percent said thev were unwilling to
from our readers on what topics you                                                      pay. Because a great deal of staff
wanted to see covered. More than                                                         time and effort go into the prepara-
1,000 questionnaires were distributed              \       i.                            tion, translation, and dissemination
by mail, and the survey was also posted                                                  of CGAP's publications, we are reas-
on the CGAP Web site. Of the survey                                                      sured to see thev are valuable to you.
forms mailed, roughly 25 percent of                                                      Finally, we did receive some helpful
our readers responded. Responses               F Africa/Middle East      Latin America   feedback about presentation-for
came in from throughout the vorld                C t Europa and A    Other                example, that the color of the ink is
came in from throughout the world    Central Asia
and from people wvith varied back-                                                       too light for copying and that the
grounds wvithin the micro-finance            Figure 2. Regional Distribution of Survey    Nexvsletter format is at times confus-
community (see Figures 1 and 2).             Respondents                                 ing. We will try to minimize these
difficulties in the future.
- Focus Notes 4 (on regulation and             Thank you again for taling the
supervision) and 7 (on governance        time to participate in this reader stir-
of MFls) were voted most                 vev. We will strive to bring you more
interesting.                             interesting and relevant information
|  Many complained about the chop-         about micro-finance.
piness in the lavout of the Nexvs-
letter. WVe hope that issue 4 (released  CA        BP llock is Office Assistant at tei
after the survey) and this issue have    CGAPScretariat.
13%                          addressed that concern. Issue 3 was
judged most interesting of the first                l  I
three issues; we hope subsequent            s a rn p I  Co mn e n t s
1S MFIs           * Pvt. Sec/Foundations    i       w   c        t
C Donors             NGOs (non-MFIs)        issucs Nvill continue to improve. I                         I
Academia          Govt. -                 Suggestions on future topics include            "The expetiences of other
Of Commercial Banks    l  ndependent                                                     IvMFIs confirm that xve are on the
* Other                                     case studies, impact studies, savings        tight track, and this builds our
Figure 1. Professional Affiliation of Survey    m an,ene predpleand                        confidence." -Practitioner
Respondents                                   MFR Iranagement We are pleased to
say that a number of requests will be
featured in forthcoming issues. For             "Market interest rates have
Many thanks to our respondents!           example, forthcoming from the                been applied to [our] recently
Your ansxvers gave us valuable insights       Occasional Paper series are cost allo-       approved projects." -
on hoxw best to serve the needs of            cation for multi-service MFIs, with a       Government official
those in the field of micro-finance.          case study of BRAC; and a study of
savings mobilization by four MFIs.              "The Occasional Paper on
K E Y  5 U R V E Y  R E S U LT 5:           a Conflicting comments that the pub-          interest rates was a very practical
* 92 percent of respondents said they        lications are too technical or not           document that can be internalized
found the publications useful and           technical enough prompt us to               and used as a training tool.
had learned something from them.            explain the type and purpose of              Excellent paper!" -
Manv (about 53 percent) have                CGAP's publications. To serve our           Consulting firm
directly applied lessons learned from       wide range of readers, we have three
our publications in their individual        products: the biannual Nexvsleter,              " "Our staff finds CGAP publi-
institutions, practices, and class-         featuring  practitioner activities ands|  cations translated into French very
rooms.                                      perspectives; the Focus Notes series,       interesting, very applicable to our
* The Occasional Paper on interest           synthesizig key literature in the            project." - Practitioner
rates was bv far the most appreciated      field; an d the Occasional Papers,
publication. Many of our MFI read-          dealingt with technical topics.                 "...pubhcations are wel pre-
ers said they had used the paper to       C Although CGAP does not intend to            setd   h  vollucames are wel pess
review or determine the interest rates      start charging for its publications,        sented. The volumes are less-
for their institutions,                    the survey question on "willingness         cfraghteming easy to read."-l
to pay" was intended to determine



NEWSLETTER CREDITS
Editors      Joyita Mukherjee
Jennifer Isern
Copy Editor  Allison Tarmann
Production    Charlene Mui
This newsletter is printed on recycled paper
using vegetable-based inks, by The MATTIE Corporation,
16000 Trade Zone Avenue, Bldg. 101,
Upper Marlboro, MD 20772
CONTACT INFORMATION
The CGAP Secretariat, The World Bank,
1818 H Street, NW, Washington, DC 20433
Tel: 202. 473 9594, Fax: 202. 522 3744
E-mail: CProject@Worldbank.org
World Wide Web: http://www.worldbank.org/ html/cgap/cgap.html
i~~~~            P
THE CONSULTATIVE GROUP TO ASSIST THE POOREST
[A MICRO-FINANCE PROGRASi]
e w s  e i  @                           r t t e