Microcredit in Bangladesh Melissa Johnson ♦ Colleen Hill ♦ Rebecca Moore Laura Mulvey ♦ Misty Funk ♦ Jill Mueller Millennium Development Goals
People’s Republic of Bangladesh
Population – 150 million
7 th Largest population in the world
Has one of the highest population densities in the world
57,000 sq. mi. about the size of Iowa
82% Muslim, 13% Hindu, 5% Buddhist, Christian & Other
Prone to droughts & cyclones as well as flooding during monsoon season
Mural at Dhaka University, in honor of students and faculty who fought and died for liberation
Formerly East Bengal then East Pakistan
Gained independence from Pakistan in Liberation War of 1971
Result of continued struggle to retain Bangla language
Current Prime Minister Sheikh Hasina Wajed of Awami League
2009 Swearing-In Ceremony of Sheihk Hasina
New Bangladeshi Travel Logo and Slogan
Avg. temperature in February - 70°F
Longest stretch of uninterrupted sea beach in the world at Cox’s Bazaar
Major industries – jute, cotton textiles, food processing & steel
Most wide spread arsenic pollution of water in the world
Between 20 and 60 million people exposed to arsenic above EPA regulatory limit
Poverty has fallen over 20% since early 1990’s
Extreme poverty has declined but disparity has increased
Population living on $1/day about 40% (9% decrease since 2000)
Microcredit (mI-[*]Kro'kre-dit); noun; programs extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families.
Loans are “micro” or very small in size for target users, for income generation and enterprise development, but also for community use (health/education) etc. terms and conditions
Most terms and conditions for microcredit loans are flexible and easy to understand, and tailored to the local conditions of the community.
In Bangladesh, we observed three varying models: two NGO’s and one for-profit enterprise
Source : The Virtual Library on Microcredit, Grameen Bank website
Millennium Development Goals
Eradicate extreme poverty and hunger
48% of the poorest households with access to microcredit loans rose above the poverty line (World Bank).
5% of the Grameen Bank’s clients graduated out of poverty each year by participating in microfinance programs and, households were able to sustain these gains over time ( Shahidur Khandker, economist for World Bank ).
Microcredit accounted for 40% of the entire reduction of moderate poverty in rural Bangladesh and that microcredit’s spillover effects among non-participants reduced poverty among this group by some 1% annually for moderate poverty and 1.3% annually for extreme poverty ( Shahidur Khandker).
Forbes magazine ranked ASA #1 in a comparison of “641 microcredit providers across the globe.” Considerations included scale, efficiency, risk and returns. (The Top 50 Micro-Finance Institutions, prepared by the Microfinance Information Exchange, Forbes Magazine, December 20, 2007.)
ASA – Brief History
ASA was founded in 1978 by Md. Shafiqual Haque Chouhury.
Target: “Reduce poverty from society gradually”
Early services: Programs in health, education, social action, journalism, etc.
Transition: From 1978 to 2000, ASA gradually reduced the scope of its field to focus almost exclusively on microfinance.
In 2001, ASA launched the “ASA Cost-Effective and Sustainable Microfinance Model”
ASA Small Loan Program for Women
Small loans to women account for 78% of ASA’s loan portfolio
Loans are provided for investment in income-generating activities
Loans are collateral-free
No group liability; must be co-signed by a male relative
Interest: 12.5% (ASA); 23% (Spiegel online)
ASA Key Indicators of Success, December 2008
More than 7 million members, nearly 6 million borrowers
3,300 branches serving 72,000 villages
27,000 ASA staff
Almost $400,000,000 loaned
Rate of recovery: 99%
ASA Bottom line
Emphasizes self-sufficiency and cost reduction
Operates branches using funds culled from branch collections
Involves no donors or foundation funds
Is well-recognized for its business-model approach to microfinance (i.e., efficiency, expansion, and management)
the BRAC philosophy & approach
micro-credit in an NGO model accountable to government and donors
Holistic approach to poverty alleviation through social and economic programs
Human rights and legal services
1st tier: economically active poor, targeted towards women