CHAPTER -1 Introduction 1. 1 Reason of doing the assignment Our course instructor Md. Robiul Islam announced to take an assignment instead of two quiz examination. Although this report is mainly for our academic purpose but we think that it will not increase our grade but also will be helpful in our practical lives. For this reason we have completed this report on micro-credit system of ASA. 1. 2 Scope of the study This assignment of preparing a report on the MCS of ASA will help in many sectors other than the academic sectors. Such as: For gathering knowledge about micro-credit system this whole work is very helpful • In our professional sector we can use this experience • The information of this report can be applied in our other courses • We can use this skill for financing various sectors in our practical life • In future it will be easy for us to start a micro-loan financing organization because we have acquired knowledge about micro-credit. 1. 3. Objectives of the Study The objective of the proposed study is to find the micro credit system of ASA.
The following are the objectives of the study: To know the overall function of ASA for the contribution of advancement of micro-credit system in the country • To learn about the consequences of micro-credit practices on the performance of ASA. • To develop knowledge about the systems approach to loan distribution pattern. • To get an idea about the selection of the beneficiary. • To acquire knowledge about the process of matching loan package with requirements of the clients. • To know about orientation process of new loan package. To analyze special motivational techniques to the clients for taking loan. • To know about the weakness, strength, opportunity and thread of the micro-credit of ASA. • To recommend necessary steps for overcoming such problems of ASA. 1. 4 Research Methodology THE POPULATION SAMPLED FOR THE STUDY WAS LIMITED TO THE ASA, ONE OF THE LEADING MICRO-FINANCE ORGANIZATIONS, WHERE I WAS ASSIGNED TO PERFORM THE STUDY. 1. 4. 1 AREA OF DATA COLLECTION: • VILLAGE-PITALGONG, THANA-RUPGONG, DISTRICT-NARAYANGONG • ASA CENTRAL OFFICE:
ASA TOWER, 23/3, KHILJI ROAD, SHYAMOLI MOHAMMEDPUR, DHAKA-1207, BANGLADESH, 1. 4. 2 SOURCES OF DATA COLLECTION: IN ORDER TO CONTRACT THE REPORT I HAVE COLLECTED NECESSARY INFORMATION FROM TWO SOURCES A) PRIMARY SOURCES OF INFORMATION B) SECONDARY SOURCES OF INFORMATION a) PRIMARY SOURCES OF INFORMATION: THE PRIMARY DATA WILL BE COLLECTED FROM THE FOLLOWING SOURCES: • FACE TO FACE CONVERSATION WITH THE RESPECTIVE CLIENTS OF ASA • ORAL INTERVIEW OF THE RESPONSIBLE OFFICERS RELEVANT DOCUMENTS STUDIES AS PROVIDERS BY EARLY RESEARCHERS • OBSERVATION OF THE WORK OF THE FIELD WORKERS OF ASA b) SECONDARY SOURCES OF INFORMATION: THE SECONDARY DATA WILL BE COLLECTED FROM THE FOLLOWING SOURCES: • ANNUAL REPORT OF ASA • A BRIEF ON MICRO CREDIT SYSTEM FOR CLIENTS OF ASA • VARIOUS DOCUMENTS OF THE ASA • EXTENSIVE LITERATURE SEARCH ON THE BASIS OF THIS DOCUMENT OF PUBLICATIONS. I HAVE ASSIGNED THESE REPORT AND DOCUMENT IN THE LIGHT OF ANALYTICAL REVIEW.
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I HAVE NEED SOME STATISTICAL TOOLS, GRAPHICAL PRESENTATION AND TABLE TO MAKE THIS RESEARCH REPORT. THESE ARE GIVEN THE OVERALL PICTURE OF THE MICRO CREDIT SYSTEM OPERATED BY ASA. 1. 5. LIMITATIONS OF THE STUDY THIS REPORT IS OUR FIRST ASSIGNMENT OF OUR FINANCE COURSE CURRICULUM. WE THE STUDENTS OF FACULTY OF AGRI-BUSINESS MANAGEMENT JUST HAVE COMPLETED OUR 2ND YEAR. SO IN PERFORMING THIS REPORT OUR LACK OF PROPER KNOWLEDGE GREATLY INFLUENCED IN THIS PERFORMANCE. BESIDES ABOVE HAVE TO FACE SOME OTHER LIMITATIONS ARE: • LACK OF AVAILABILITY OF DATA IMPROPER COMBINATION AMONG VARIOUS DEPARTMENTS • TIME IS A LIMITATION THAT WOULD MOSTLY WITH STANDS A COMPREHENSIVE STUDY ON THE TOPIC SELECTED. • UP TO DATA INFORMATION WERE NOT AVAILABLE • UNWILLING TO GIVE INFORMATION MORE BECAUSE OF EXTRA HARASSMENT WITHOUT THEIR RESPONSIBILITY • BEING BUSY ALSO ANOTHER REASON OF NOT GIVING MORE INFORMATION • FINALLY THIS IS MY FIRST JOB EXPERIENCE TO MY KNOWLEDGE ESPECIALLY IN SUCH A RESEARCH STUDY IS LIMITED. CHAPTER – 2 LIETERATURE REVIEW
This paper broadly describes the whole system of micro-credit financing practice operated by ASA. ASA has emerged as one of the largest and most efficient Microfinance Institution (MFI) in the world and has been working relentlessly to assist the poor since its inception in 1978. The major drive behind ASA is to gradually eradicate poverty from society. During its early years, ASA undertook various development programs like awareness building for social action, training local birth attendants, capacity building of journalists, etc.
In the mid-80's it introduced new programs working in the sector of health and nutrition, education, sanitation, etc. It was at this stage that ASA introduced micro-credit as a pilot project. From its hands on experience in the field, and by evaluating the impact of development assistance, ASA realized that financial solvency, to a great extent, is what the poor need to bringing positive changes in their lives. In 1992, this paradigm shift led ASA to focus solely on microfinance as its tool in fighting poverty.
ASA wanted to evolve its operations to become self-reliant and move away from depending on donor funding and grants - ASA's Microfinance Model gradually transformed itself to become the globally renowned "ASA Cost–effective and Sustainable Microfinance Model. " Following this model, ASA became self-sustainable within a short p of time and the organization declared itself a "self-reliant MFI" in 2001. This model, that has been practiced and perfected in the field by ASA, has proved effective in making a branch self-reliant within 12 months.
Any MFI that adopts this model for operations becomes sustainable within the shortest possible time. It has been adopted by many MFIs around the world to get result within the shortest possible time. As of June 2008, ASA has successfully extended its outreach in Bangladesh through 3,324 branches and its 25,125 staff works relentlessly to serve more than 7. 13 million clients in 72,204 villages. In April 2006 ASA formulated its 10-years IT Roadmap - the first step of which called for automating its branch operations by December 2007.
With this target, a world-class software called “ASA Microfinance Management System” (AMMS) was developed by an in-house team of software developers and IT professionals within twelve months. A pilot deployment was done in 89 ASA district offices once AMMS was ready to a beta release. From the experience gathered by this pilot rollout the IT Team successfully deployed a full fledged branch automation system to 3200 of ASA's branches at one go. Starting in June 2007 this deployment was successfully completed by December 2007, covering the branches within just seven months.
Since 1993, ASA has been providing Technical Assistance (TA) to NGO-MFIs around the world as a microfinance consultant. Thus far, ASA has worked in more than 17 countries around the world, including: • Laos • Cambodia • Tajikistan • Jordan • Ethiopia • Myanmar • Afghanistan • Peru • Mauritius • Indonesia • Yemen • India • Pakistan • Sri Lanka • Nigeria • Philippines • Vietnam A considerable number of visitors and trainees also visit ASA every year with a view to acquiring knowledge about implementation of ASA activities.
In 2005 ASA has established CMI, a microfinance investment fund and makes equity investments in high potential and emerging MFIs in Asia and Africa. CMI's objective is to accelerate the growth of a number of MFIs by strengthening their financial resources and providing them with the ASA expertise needed to expand and optimize their operational efficiency. ASA has established ASA International (ASAI) (www. asa-international. com) to implement the ASA Model of Microfinance Operations in different countries around the world.
Experienced staff from ASA has been seconded to these institutions to train local staff and design policies and procedures. It is expected that each of these MFIs will, over time, emerge as the market leader in terms of efficiency and scale in each of these markets. This should stimulate competition and encourage other MFIs to reduce their operating expenses and thereby reduce the costs of borrowing for the clients. ASA cooperates with small local NGO-MFIs with the objective of making them self-reliant so that they can independently serve the poor in remote areas.
ASA provides these partner NGOs with technical support as well as loan funds on soft terms. Under this program, ASA has more than 30 partner NGO-MFIs all over the country. For fulfilling the goal of poverty alleviation ASA has introduced these above programs for being self-reliant and introduced, depending on these projects. THEORITICAL BACKGROUND Foundation Phase (1978-1984) ASA was founded in 1978 with the aim of helping the poor organize & empower themselves so that they might establish their political and social rights for a just society.
At that time ASA deliberately avoided lending arguing that loans would distract the rural poor from their fight for a just society. ASA defended the idea that political and social reform were needed before credit. Activists, like ASA's President Md. Shafiqual Haque Choudhury, who were already working for NGOs founded ASA with assistance of like minded development practitioners. They were dissatisfied with the approach of the then NGOs and wanted a more radical, people-centered approach. They decided to create an alternative by establishing a new NGO - ASA. ASA received formal registration from the government in 1979.
To reach its goal of empowering the poor, ASA stressed the need for building people’s organizations, or groups, through mobilizing landless rural poor. Different programs were undertaken including: • awareness building for social action • legal aid and awareness build-up program • training program • communication support service program • training for rural journalists During this time, the group members of ASA conducted a series of social actions to fight against social injustices, gain their rightful access to institutional / public resources, obtain just wages, enter into the local power structure and have access to land.
Although the general impact of the foundation phase was positive, the programs suffered from substantial limitations: • group members were not able to get a just wage for a long time since the local elite recruited low wage laborers from outside • impact of natural disaster and the huge inflows of aid obstructed the implementation of the social action programs, since the people began to prefer the economic way of solving their problems rather than through conflict • idea of apex organizations, built up from and representing groups of the poor, was not sustainable.
Being poor, members entered these bodies with the intention of having more facilities and fulfilling their self-interest In the light of these limitations, ASA adopted a revised approach to make the development efforts more effective. Reformative Phase (1985-1991) Since a demand for programs of economic activities was rising, ASA decided to introduce an integrated approach, which included social plus income generation.
But although the new approach gave special emphasis on economic activities, ASA stressed the importance of social development aspects. In this phase, empowerment was made through the improvement of health, nutrition, education, sanitation and by credit available to poor. The focus was shifted to women, who play an important role in the field of development.
Again, the reformative phase brought out positive changes in the livelihood of the rural poor, but some constraints were also identified: • many ASA members left the organization to join other organizations, which provided more appropriate products for their needs of credit for income generation purposes • development and implementation of integrated programs took a long time and the group members had a long waiting period to obtain credit • the absence of funds led to uneven distribution, which meant that a few members could obtain large amounts of credit while others got nothing As many ASA group members left ASA to join other NGOs who were providing credit for income generation, ASA decided to specialize itself in microfinance activities. Program Specialization Phase (1992- till date) The main reason for specialization was for ASA to reorient itself to cater to the needs of its members in an effective way. This took the form of providing credit plus programs that eventually led to ASA providing a full microfinance package. The main elements of ASA approach are: • savings and credit for income generation in a cost-effective manner • Member Security Fund (Mini Life Insurance) to shield member from unforeseen hardship The main objectives of this phase are: to alleviate poverty and improve the quality of life of the landless and the asset less rural poor by providing them with appropriate and affordable financial services • reduce the dependence of the poor on the local moneylenders • facilitate additional income earning at micro level for improving the economic status of the women • empower the landless and disadvantaged people In 2001, ASA became financially self-sufficient and does not accept any grants or donations from outside sources since then. CHAPTER - 3 ORGANIZATIONAL OVERVIEW ASA is a highly reputed organization of Bangladesh which operates in many countries all over the world. As it is a micro-credit financing institution it mainly invests by lending small amount of money to the muss people without mortgage. Through their micro-loan policy they have given access to the poor segment of the society to take loan and investing that loan flourish their lives. 1. Historical development of ASA:
Many micro-finance institutions (MFIs) around the world are willing to replicate ASA’s cost-effective and sustainable micro-finance model. Because ASA is working hard in the sector of micro-finance since its establishment in 1978. To give the access of micro-credit to the poor people of Asia and Africa, a global equity investment fund called "Catalyst Microfinance Investors" (CMI) was established in August 2005. On the other hand, people of certain countries are not well aware of the micro-finance programs and this lack of awareness is considered as a serious obstacle of proliferation of MFIs. To meet all of this challenges, ASA foundation (AF) was established in September 2006 registered as a 501(c)3 organization in the state of New York in 2007.
The secretarial office of AF is in New York, USA. 2. Source of fund of the organization: ASA’s work is funded with the support of generous donors. It is a non-profit organization and welcome funds from different sources which will be donated to various small and emerging MFIs around the world for their quick and sustainable development. Through a gradual process of reducing dependency on foreign funds, ASA has established itself as a financially self-reliant MFI and does not accept any grant or donation since 2001. ASA's total fund for providing microfinance services was BDT 2. 9 billion (USD 435 million) at the end of 2007. [pic] The sources for this fund were: • BDT 1. billion of ASA's own funds (including reserve fund) • BDT 400 million PKSF loan (this loan was taken earlier) • BDT 4,604 million member's savings • BDT 4,480 million member's security fund • BDT 117 million CORDAID loan • BDT 434 million loan insurance • BDT 769 million Debt Management Reserve (DMR), and • BDT 1,965 million from other sources such as staff security, provident fund, etc. 3. Functions of the organization: The foundation’s functions will be to identify donors that wish to support technical assistance in the micro-finance industry and oppose applications from developing MFIs seeking effective TA services. 4. Management of the institution:
With the view to selecting a sample size, multi-stage sampling of management until from the administrative division to members has been done. From all of the 6 administrative divisions of Bangladesh, 12 districts were taken by selecting 2 districts from each division. Then 4 ASA branches from each district were selected . among the branches, 2 were taken from rural and 2 from urban areas. 4 loan offers from each branch were taken. Ex:-4 * 4 = 192 loan officers were selected and 4 groups of each loan officers were taken. 3. 5 Vision, mission and objectives of ASA 3. 5. 1 Vision of ASA The vision of ASA is to establish a poverty free society. 3. 5. 2 Institutional Mission of ASA
The institutional mission of ASA is to support and strengthen the economy at the bottom of the socio-economic pyramid by facilitating access to financial services for the poor, marginalized and disadvantaged. 3. 5. 3 Objectives of ASA The overarching objectives of ASA are to alleviate poverty and improve the quality of lives of the landless and assetless rural poor by providing them with access to financial services. 3. 6 Origin of ASA At the end of Bangladesh’s War for Independence in 1971 the country went through a very complex social and political upheaval. The country needed major infrastructure reconstruction but the overall situation was not suitable for conducting nation building activities. Indeed, the country was faced with instability in the political, social, cultural and economic fields.
The main political constraints were frequent agitations, political unrest and numerous changes of governments, which were too inexperienced to keep the political situation stable. In such circumstances, policy formulation or planning for development was difficult. Moreover, the traditional bureaucratic administrative structure, which followed a top-down approach for development, was not connected with the actual socio-economic reality since the institutional structures could not reach the downtrodden people. With this as the backdrop, a new kind of organization emerged that focused most of its work in the development sector. Some of those national and international organizations, called NGOs (Non-Government Organizations), started different programs to help the poor to introduce positive changes in their lives.
Following the philosophy and the needs of the times, ASA was established in 1978 to materialize these goals through different kinds of development programs. 3. 7 Structure of the Organization ASA is structured in two distinct tiers: the central office and branch offices in the field. Bridging the central and branch offices are the District Offices 3. 7. 1 Head Office Composition: The President of ASA directs the personnel of different sections, which constitute the central office including: Human Resource Management (HRM), Operation, Finance & Management Information System (MIS) Section, Accounts Section, Audit Section, Research and Documentation Section and IT. 3. 7. 2 Branch Composition:
Each branch has one Branch Manager (BM), one Assistant Branch Manager (ABM) and 4 Loan Officers (LO) on average. 3. 7. 3 District Composition: Each district office has District Officials including the District Manager (DM). Assistant District Manager (ADM) and Regional Manager (RM) sit in the different geographically important branches. 3. 8 ASA –Sustainability ASA has been widely recognized one of the world's largest sustainable, cost-effective and fully grants free Micro Finance Institutions (MFI). Over the last 16 years, ASA has achieved highest Operational Self Sufficiency (OSS) and Financial Self Sufficiency (FSS) within a short period of time.
ASA cost effective model also proven itself in different countries in Asia and Africa. ASA branches have proved its capacity to reach a break even point within a year. ASA has maintained high self sufficiency from the beginning of operations and it continue to date. [pic] ASA has been rated to have the highest OSS and FSS compare with Global MFIs and Asian Largest FIs. 3. 8. 1 How does ASA achieve these numbers? By having: • Lean structure • Faster recruitment and costless informal training • Simplification and Standardization • Less over head cost and standard costs structure • Maximum utilizations of fund • Guided operation based on Manual • Cost control steps • Innovative management 3. 8. Highest productivity and portfolio quality (data as of June 2008) |# |Indicators |Results | |1 |Staffs ratio: head office versus / field |1:106 | | |(total staffs 27142 and head office 257 only ) | | |2 |Rate of recovery |99. 48% | |3 |Portfolio at risk > 30 days |5. 17% | |4 |Portfolio in arrears |2. 90% | |5 |Cost per money lent |0. 46 | |6 |Cost per loan made |$5. 80 | |7 |Loan loss ratio |0. 20% | |8 |Reserve ratio |2. 97% | |9 |Average clients per loan officer |461 | |10 |Average borrower per staff |206 |11 |Average member per branch |2,146 | |12 |Average outstanding loan per Loan Officer |$31,382 | |13 |Operational Self-Sustainability |179. 14% | |14 |Financial Self-Sustainability |122. 41% | 3. 8. 3 How does an ASA Branch break-even so quickly? ASA’s microfinance model, known as the 'ASA Sustainable and Cost-effective Microfinance Model' is different from other models and has already been proven as one of the best in the world.
This model is simple as well as cost-effective. This cost effective method, from Branch Office to the Central Office ensures ASA’s dedication towards its mission for reducing poverty. Each Branch is managed by a Branch Manager (BM), One Assistant Branch Manager (ABM), 4 Loan Officers (LO) and a Peon who are responsible to conduct all activities of the branch smoothly. On an average a mature ASA branch caters to around 2,000 group members and every new branch demands Bangladeshi Taka 6 (six) million (USD 88,000) to start its activities. Once a branch starts operations, it takes (9-12) months for it to break even and become self-sustainable: [pic] The key assumptions in this model are: there are 4 Loan Officers per branch, each with a 500 client target achieving a total of 2,000 clients within a year for the branch • each client receives BDT 10,000 (USD 147) as their initial loan • Loan loss Provisioning is at 0. 5% • Service Charge (interest rate) is 12. 5% flat, calculated for a 45 installment loan spread over 12 months • each member deposits BDT 20 per week as savings and pays BDT 20 as membership fees when joining ASA 3. 9 ASA’s Position in Bangladesh ASA benchmarks itself against its peer NGO MFIs in Bangladesh on a continual basis - this is both to reorient itself to better serve it clients and to keep itself relevant in the Bangladesh development context.
According to the Annual Microfinance Statistics of Bangladesh (Volume-19, December 2006) published by the Credit and Development Forum (CDF) there are 611 NGO MFIs in Bangladesh (including ASA). ASA's standing in the sector is as follows: | |611 NGO MFIs |ASA |% | |Members |16 million |5. 16 million |32% | |Cumulative Loan Disbursement |US$ 8,171 million |US$ 2,593 million |32% | |Loan Outstanding |US$ 1,076 million |US$ 309 million |28% |
As can be seen from the statistics above: • ASA's clients account for 32% of the borrowers in the NGO MFI sector • ASA accounts for 32% of ALL loans given out by the NGO MFIs • ASA accounts for 28% of the portfolio outstanding in the microfinance sector in Bangladesh ASA Branches throughout the Country up to December 2007 [pic] ASA Branch Listing CHAPTER – 4 INVESTMENT PROCEDURE As an innovative institution ASA has multidimensional investments, all of which were developed based on the needs of its clients. The micro loan products include: • Small Loans for female clients • Small Loans for male clients • Small Business Loans • Small Entrepreneur Loans (SEL) Supplementary Loans and Business Development Services (BDS) • Loans for Hardcore Poor • Short Term Loans • IT Loans • Agri-business Loans • Education Loans • Monga (famine) Loans • Interest Free, Flood and Rehabilitation Loans 4. 1 Micro-credit investment packages: i. Small Loan for Female Clients; accounts for 78% of total portfolio |Eligible Criteria |Initial Maximum Loan Size |Interest rate |Loan Term |Repayment Mode |Incremental increase| | | | | | |of loan size | |Economically active poor to|BDT 10,000-20,000 or US$ 150-300 |12. % (flat) |45 weeks |Weekly |BDT 4,000 or US$ 60 | |undertake or strengthen |depending on the economic | | |(37 equal weekly |(maximum) in each | |income generating |potential of area and client’s | | |installments) |loan cycle | |activities |capacity as well | | | | | ii. Hardcore Poor Loan; accounting 1% of total portfolio |Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase | | |Loan Size | | | |of loan size | |A flexible loan product for |BDT 5,000 or US$ |12. % (flat) |Flexible; 4, 6 |Flexible; Monthly, |BDT 2,000 or US$ 30 | |hardcore/ultra poor to match their |75 | |or 12 months |quarterly and |(maximum); annual | |irregular pattern of income | | | |half-yearly | | |generating activities | | | |installments or at a | | | | | | |time | | iii. Small Business loan; accounts for 12% of total portfolio |Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase | | |Loan Size | | | |of loan size | |A loan product for informal or formal |BDT 50,000 or US$ |12. % (flat) |One Year |Flexible; Weekly or |BDT 7,000 or US$ 100 | |micro enterprises to promote |735 | | |Monthly |(maximum); in each | |production/enhance business activity and| | | | |loan cycle | |employment generation | | | | | | iv. Small Entrepreneur Lending (SEL); accounts for 6. 5% of total portfolio |Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product for informal or formal|BDT 400,000 or US$|12. % (flat) |12/18/24 months |Monthly |Not fixed; depends | |small/micro enterprises to promote |5,900 | | | |on projects | |production/enhance business activity | | | | | | |and employment generation. This | | | | | | |product also caters to Information | | | | | | |Technology related activities | | | | | | v. Agri-business Loan; account to 1. 5% of total portfolio Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product for supporting |BDT 400,000 or US$|12. 5% (flat) |12/18/24 months |Monthly |Not fixed; depends | |agribusiness related activities |5,900 | | | |on projects | vi. Small Loan for Male Client (Spouse or Family Head of Female Client) |Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase | | |Loan Size | | | |of loan size | |A special loan product designed for the |BDT 4,000 or US$ |12. % (flat) |One Year |Monthly (12 equal |BDT 1,000 or US$ 15 | |spouse or family head of ASA’s female |60 | | |monthly installments)|(maximum); annual | |client to cater to the need for | | | | | | |strengthening supplementary/main income | | | | | | |generating activities of the family by | | | | | | |injecting some working capital. It also | | | | | | |intends to support rural households for | | | | | | |their agricultural activities during | | | | | | |seasons | | | | | | vii. Business Development Loan (part of BDS) Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | | | | | | | | |Defaulters who lost projects due to |BDT 5,000 or US$ |12. 5% (flat) |One Year |Flexible; Weekly or |Not fixed; depends | |factors beyond their control and have |75 | | |Monthly |on progress and | |willingness to pay. Mainly to cater to | | | | |capacity | |the need of small and small business | | | | | | |loan clients’ | | | | | | viii. Rehabilitation Loan Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product for clients’ affected |BDT 1,000 or US$ |Interest free |12 months |Flexible; Weekly or |NA | |by natural disasters e. g. , flood, |15 | | |Monthly | | |cyclone etc | | | | | | ix. Short Term Loan Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product of short duration for |BDT 100,000 or US$|12. 5% (flat) |3 months |Flexible; Monthly or at a|NA | |clients’ having business activities in|1,470 | | |time | | |need during seasons | | | | | | x. Scarcity Loan Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product for clients’ in |BDT 3,000 or US$ |12. 5% (flat) |3 months |Flexible; Monthly or at a|NA | |scarcity during lean season; Loan can |45 | | |time | | |be used for both asset building before| | | | | | |the lean season and consumption during| | | | | | |the lean season | | | | | | xi. Education Loan Eligible Criteria |Initial Maximum |Interest rate |Loan Term |Repayment Mode |Incremental increase| | |Loan Size | | | |of loan size | |A loan product to support clients’ |BDT 3,000 or US$ |10% (flat) |One Year |Weekly |NA | |children studying in 8th grade and |45 | | | | | |above | | | | | | 4. 2 Investment information updates: Cumulative disbursement for all these loan products from ASA's inception up to December 2007 is around US$ 3,600 million. Up to June 2009 ASA's cumulative Loan disbursement has been TK. 345,161 million (US$ 5,002 million) while loan outstanding (principal) is TK. 23,687 million (US$ 343 million) among almost 4,573,222 borrowers. At the end of 2008 ASA's Operational Self Sufficiency (OSS) was 143. 61%, Financial Self-sufficiency (FSS) 114. 3% and rate of loan recovery 99. 59%. ASA maintains savings programs and member’s security funds (Mini Life Insurance) with the view to helping the poor absorb unexpected shocks of calamities/disasters. Members are allowed to withdraw their savings whenever they require and interest is provided on their deposits. As of December 2007, the savings balance (savings and security deposits) of ASA's clients was around US$ 131 million. ASA also provides its clients with one time donation for medical treatment of serious ailments and surgical procedures - including cancer, acid burns, cardiac operations, backbone surgery, brain surgery, kidney damage, cesarean delivery, etc.
Client do not need to deposit money to receive this assistance all of ASA's clients are automatically eligible for this. The budget of this assistance program in 2008 is around US$ 700,000. 4. 3 Sub-organizations of investment 4. 3. 1 Catalyst Microfinance Investors (CMI): Catalyst Microfinance Investors (CMI) (www. catalyst-microfinance. com) was established by ASA and Sequoia, a Dutch corporate finance and private equity firm, in 2005. CMI is a microfinance investment fund and makes equity investments in high potential and emerging MFIs in Asia and Africa. By the end of December 2007 CMI had raised a total funding commitment of $ 125 million.
Investors behind CMI include high net-worth individuals, microfinance funds and institutional investors - such as banks and pension funds. CMI already has provided loan and made equity investments to a number of MFIs in Sri Lanka, the Philippines, Nigeria and Ghana. 4. 3. 2 ASA International (ASAI): ASA has established ASA International (ASAI) (www. asa-international. com) to implement the ASA Model of Microfinance Operations in different countries around the world. ASAI is primarily funded by CMI and is supported by a number of debt providers in individual countries. ASAI has established greenfield operations in: India, Nigeria, Pakistan, Philippines, Sri Lanka and Ghana.
ASAI operations in each of these countries will follow the highly efficient ASA model - adjusted to meet local condition and unique needs of the people there. 4. 3. 3 Partners: ASA has NGO-MFIs all over the country. This channel created by ASA has also made it possible for partner NGO-MFIs to access soft loan funds from donor and other funding organizations. It is due to ASA's earnest efforts that CORDAID Netherlands has been extending financial support to 12 partner NGO-MFIs. CORDAID has already approved an amount of 1. 16 million Euros for the year 2005-08 as soft loans for the partner NGOs to implement microfinance programs. ASA took the responsibility to channel this loan fund to NGO MFIs and ensured its proper utilization by providing these partners with technical assistance.
All of these partners NGO-MFIs are building their capability to access funds from PKSF (the apex microfinance wholesale funding institution in the country) and from local commercial banks. 4. 3. 4 ASAUB Though as a micro-credit institution ASA’s main investments are on micro-loan products, but another investment project is The ASA University of Bangladesh. The University started its academic activities in May 2007 after getting approval from the Government of Bangladesh and the University Grants Commission (UGC). Till December 2007, some 1300 students have been enrolled and are attending classes. 4. 4 Micro-credit activities of ASA 4. 4. 1 Branch activity
ASA is a decentralized institution, each branch acts as its own cost and profit center, which encourages efficient use of resources. Responsibility lies on the branch to achieve the most it can at the least cost possible. A daily revenue stream in the form of loan repayments from clients allow each branch to disburse loans, buy materials, etc. The branches have the freedom to carry out all these activities as long as these conform to ASA's Operations Manual. This manual is one of the most important facilitators for efficiency in ASA. Each branch has one Branch Manager (BM), one Assistant Branch Manager (ABM) and 4 Loan Officers (LO) on average.
Each LO is responsible for overseeing between 18 and 24 groups comprising of 360 - 550 members. Depending on the number of LOs working in a branch, each branch can have between 72 and 120 groups totaling between 1,440 to 2,750 members. Branch Offices do not have accountants or cashiers. LOs are responsible for maintaining daily accounts and rotate to perform the job of cashier. Branch Accounting and transactional accounts are maintained by the Branch Manager. All activities of ASA branches can be done and approved by the branch office itself, as long as it conforms to the ceilings identified by the working manual, which changes each year to keep up with all relevant variables.
Each branch prepares its own annual work plan with fiscal targets and cash flow projection. After money comes in from daily collections (savings, insurance premiums and loan installments; at approximately noon each day), the branch calculates how much it needs for daily accounts or expenditures and then deposits the rest in the bank. The bank acts as a "security guard", because ASA branches do not have its own security. When a branch needs more money – for example when collection is not enough – it draws money from its bank account. If the branch cannot cover all its payments from its own receipts, it can then request money from headquarters.
Money may also come from other branches in the district, depending on which has surplus. Thus, funds are distributed evenly through the entire ASA structure. 4. 4. 2 District activity Each district has a team of Regional Managers (RMs) headed by a District Manager (DM). The RM looks after 8-10 branches on average and a district with more than 60 branch offices has an additional district manager. The district manager, additional district manager and regional manager operate from a branch in their own jurisdiction located in district town/city with extra space to accommodate them; there is no separate secretariat for DM. A district consists of 20-114 branches.
The district office is in a centrally located branch of the district town/city with an extra desk for each of the District Officials including the District Manager (DM). Assistant District Manager (ADM) and Regional Manager (RM) sit in the different geographically important branches. RMs, ADMs and DMs always supervise and monitor all the field level activities. They move from branch to branch on a motorcycle provided by ASA. 4. 4. 3 Head Office activity The President of ASA directs the personnel of different sections, which constitute the central office including: Human Resource Management (HRM), Operation, Finance & Management Information System (MIS) Section, Accounts Section, Audit Section, Research and Documentation Section and IT. CHAPTER - 5 Findings of the study
From this study we could much information • Interest rate of small loan packages provided by ASA is too high for the payback ability of the borrowers. • ASA counts the Pay Back Period (PBP) from the day the loan is taken. The client has to pay the 1st installment at the day of loan taking. So, they actually cannot utilize the loan fully. • ASA authority is too much strict about the payment of loan. Their officers take hard to harder initiative to get back the repayment amount including the interest rate. • ASA is giving the opportunity to the poor people to get loan without security and prosper in life by investing that loan. ASA is helping the poverty reduction. As the micro-loan system of ASA emphasizes mainly on women, it has great effect on women empowerment. Recommendations • ASA should reduce their rate of interest. When deciding interest rate they should take into consideration the ability of the borrower. • The administration should be careful and honest so that there would not be any hidden cost. • Before granting loan to any client the officer should have detail information about his/her payback ability. • Before lending money the ASA officers should analyze the profitability of the project where the loan will be invested. • They should be flexible to the poor borrowers on the issue of the repayment of loan.
CONCLUSION ASA is committed to alleviate poverty of the poor segment of society through providing financial assistance to them. All out efforts are given to extend services through different kinds of credit, savings and insurance programs. The ASA Sustainable Micro-finance Model has achieved worldwide reputation for its cost-efficient, fast expanding and effective management skill. ASA offers credit,savings and insurances for its clients. At present, more than 6. 6 million members have registered their name with ASA and they are provided with financial assistance. They invest the loan money in different Income Generating Activities run by themselves.
Initially, they use the profit to repay the installments. A small part of the profit is also used to buy necessary things for the family. After the payment of installments they get opportunity to use the profit for themselves. A large number of them have become self-reliant gradually through running the income generation activities. So after all these assessments we can say that, ASA programs have a very positive impact on the lives of people. BIBLIOGRAPHY 1. Student handout provided by ASA 2. Student information form provided by ASA 3. Prior research report. 4. Brochures of ASA 5. [email protected] org. bd 6. www. google. com. 7. annual report of ASA of 2009 THE END
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