The Profitability of BRAC-financed Projects: A Study of Seven Microenterprises in Matlab
1995, Zaman, H., Rahman, S., Hussain, S. & Rana, M. 

What project activities yield the greatest profit and why?

The paper suggests that the Bangladesh Rural Advancement Committee's (BRAC) twin objectives of employment and income generation, as part of its poverty alleviation strategy, crucially hinge upon the success of its microcredit programs. Although weekly repayments may originate from a variety of sources, the intended channel is via the profits made on individual microenterprises.

The paper explores the profit rates made by members once they have made investments in projects financed by BRAC loans and focuses on seven microenterprises, using a sample of seventy households. The projects investigated are paddy cultivation, potato cultivation, goat rearing, bull fattening, grocery shop, net making and poultry.

Findings reveal that:

• Potato cultivation and poultry made the most substantial contribution to household income;
• Grocery shops fell into the intermediate category although in terms of accounting profits they topped the list - this is because their economic profit was considerably lower than their accounting profit due to the considerable amount of time the loanee spends on the activity;
• Goat rearing and paddy cultivation were found not to be significant contributors to household income, making marginal amount of profit;
• Bull fattening was found to be a loss making activity.

Further it analyzes the impact of training. The amount made by those with relevant skill training was compared with average rates for those not trained, but this difference proved not to be significant. It concludes that:

• The reason behind the different results from the two agricultural crops was due to productivity;
• Poultry average profits are higher but so is the risk involved due to potential illness outbreaks;
• Goat rearing profitability is constrained by higher mortality rates;
• Bull fattening returns accrue only in the long term especially since BRAC loan ceiling only permits the purchase of young bulls.

The paper recommends that BRAC should strive to ensure the timely delivery of inputs, particularly vaccination and marketing, as they are essential for the success of the project.

[Adapted from authors]

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Publisher(s):
BRAC

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