Bangladesh

Case Studies SafeSave Ashrai: A Savings-Led Model for Fighting Poverty and Discrimination BURO, Tangail ASA GRAMEEN II

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Case Studies

SafeSave

"Helping Mickles Make Muckles: Designing Suitable Swaps for the Poor", 2004
By Stuart Rutherford

This paper builds on SafeSave experience in offering a variety of different services to satisfy clients' need for financial intermediation and aims to shed some light on how the banking sector in Indian can expand rapidly to serve the poor on a massive scale. He concentrates on product design, since he believes products are sometimes taken for granted but the 'right product' should be developed based on a deep understanding of clients' needs.

The main conclusions of this paper are:

• Understanding basic personal financial intermediation is the basis to promote good products for the poor. Thus, services must be tailored to enable and encourage pay-ins.

• Products that are relevant for the poor must take very small and variable sums and very frequently.

• Withdrawals should also be allowed to happen when needed, thus before, during or after a series of pay-ins.

• Products must be as convenient and cheap as possible, with on the spot easy transactions, with clear and written rules.

Savings and Loan Account by SafeSave in Bangladesh
Summarized from: "A Review of Commitment Savings Products in Developing Countries', 2003
By: Nava, Ashraf, Nathalie Gons, Dean S. Karlan, and Wesley Yin

SafeSave is a cooperative serving approximately 6,800 clients in urban Bangladesh. Central to SafeSaves's Savings and Loan Account is a daily door-to-door collection from clients. From the perspective of savings, the frequent visits by deposit collectors can facilitate clients to commit to saving more today. In particular daily deposit collection provides discipline without the obligation and compulsion that goes with the established fixed installment model.

A Critical Review of Savings Services in Africa and Elsewhere, Case study of SafeSave,
pages 35, 35.
By Graham A.N. Wright
Case study of SafeSave is taken from Rutherford, 1999.

The objective of this paper is to review why and how poor people save cash, and how MicroFinance Institutions (MFIs) might assist, while still retaining the MFIs' focus on profitable operations and ultimately on sustainability.

SafeSave is a financial service scheme for the poor which meets their circumstances and needs as understood by this author over twenty years of research and practice. It allows for the fact that the poor can save and want to save - but can save only in small (but variable sized) amounts and can't save each and every day. It allows for the fact that the poor need to turn those savings into usefully large lump sums at both short and long-term notice, and sometimes without notice. It recognises that to help them do this it must allow them - on a daily basis - all three of the 'basic personal financial intermediation' functions:

• the chance to save and withdraw

• the chance to take an advance against future savings

• the opportunity to store up savings for long-term needs

SafeSave

Safe Save provides doorstep flexible financial services to about 10,000 residents of slum areas in Dhaka, . Although Safe Save's average account balance is just US$ 20 and its average deposit amount is US$ 0.35, its operational sustainability is about 110%. Two one-page cases:

• look at the keys to Safe Save's cost recovery and
• describes how SafeSave's product features meet the demand of the poor and the management challenges posed by these features

This case study can be found in Savings Operations for the Poor: An Operational Guide, edited by Madeline Hirschland, forthcoming from Kumarian Press (1294 Blue Hills Avenue, Bloomfield, CT 06002).

Ashrai

Ashrai: A Savings-Led Model for Fighting Poverty and Discrimination
By Brett Matthews and Dr. Ahsan Ali, 2002.

Ashrai began its field work ten years ago by replicating Grameen Bank, but rapidly learned from its clients that they needed savings at least at much as loans, flexible loan repayment schedules structured around seasonal cash flow, and an easing of the requirement that loans be for productive purposes. Ashrai takes an innovative approach based on intensive capacity building to help clients build small, informal financial intermediaries. Savings mobilization, institution-building, and education/literacy interventions work together to support the efforts of some of the world s poorest people to build a base of economic power and self-respect.

BURO, Tangail

BURO, Tangail's Approach to Product Development - A Case Study from Bangladesh, 2001
By Graham A.N. Wright and Mosharrof Hossain

BURO, Tangail s experience suggests that an effective pilot-test that analyses systems, costing and pricing, training. etc., including client focused market research, will provide invaluable information about all the changes that the MFI will need to make in order to roll-out the product effectively. BURO, Tangail has developed an impressive array of financial services. BURO, Tangail is commited to high quality and client-responsive financial services delivered on a sustainable basis. It has established a simple system of market research embedded in its operations and procedures as well as the system of controlled pilot-testing.

BURO, Tangail, Bangladesh: Reaching the Poor with Savings and Credit, 2000
By Geetha Nagarajan

This paper investigates the BURO's fight to improve sustainability while serving its relatively poor clients. BURO in Tangail (BT) faces particular challenges related to the additional expense of offering deposit services. BURO has developed six types of loans and three savings products and the distinct features of the products include flexibility and variety, and unbundling of loans from savings products. The paper makes conclusions about efficiency, staff productivity, product experimentation, liquidity management, and profitability.

Diversification of Microfinancial Services: The Case of BURO, Tangail, 2000
By Dewan A. H. Alamgir

In this paper, the author focuses on features of a microfinance institution that separates the Bangladesh Unemployed Rehabilitation Organization (BURO), Tangail from other microfinance institutions (MFIs). The author provides a brief overview of MFIs in Bangladesh followed by a description of structure, mode of operation and management of microfinance program of BURO, Tangail. Since 1996 it has been posting profits without donor grants. However, it is still accepting grants to use it as leverage against future borrowing. The author concludes with recommendations such as shifting to urban areas, and rationalizing interest rates to enhance profitability.

Moving the Mountains: Savings as a Human Right in Bangladesh, 1999
By Graham Wright

Savings have raised to the top of the MicroFinance community's agenda. Previously MicroFinance Institutions (MFIs) viewed savings as a less important service than credit, and typically extracted savings from clients through compulsory systems. There was a prevalent and powerful perception that "the poor cannot save," thus compulsory savings systems often required members to deposit small token amounts each week and levied more substantial amounts at source from loans.

the world, suggests that the poor not only want to save but are saving in a wide variety of ways. What has been lacking until very recently among most MFIs in Bangladesh are the facilities to allow the poor to save in a way that helps them to meet their current needs and opportunities, as well as to save for the future. The large MFIs have instead concentrated on providing credit facilities at the lowest sustainable interest rates, and on capturing compulsory savings in order to do so.

ASA

ASA is an efficient, profitable microcredit NGO that serves over 2.2 million borrowers in groups in their communities. When it comes to internal controls, few MFIs are as vigilant as ASA, whose management is passionate about simplicity, standardization, internal controls and routine auditing. In 1997, ASA decided to improve its services to borrowers by augmenting its mandatory savings with voluntary savings services. Four one-page cases describe:

• the challenges ASA encountered when it made this transition

• the means by which ASA provides 360,000 of its borrowers with a completely voluntary savings service at their doorstep - with an average balance of US$ 8 - and still turns a profit

• the chief strategies ASA uses to manage the risks of fraud and mismanagement; and

• the tools by which ASA was able to effectively manage the liquidity crisis it encountered after it allowed its borrowers access to their previously inaccessible savings.

This case study can be found in Savings Operations for the Poor: An Operational Guide, edited by Madeline Hirschland, forthcoming from Kumarian Press (1294 Blue Hills Avenue, Bloomfield, CT 06002).

Evolution of Savings Products at ASA (742 KB, PDF), 2003, p.25
By Mostaq Ahmmed

The Association for Social Advancement (ASA) was established in 1978 to serve rural populations in Bangladesh, and more particularly women, who are the worst sufferers and victims of social injustices. ASA currently has over 2.2 million members, forming different groups with special emphasis on saving practice, and 8,000 employees engaged in disbursing and collecting loans and savings deposits. ASA offers a wide range of services to its clients - including micro credit, small business credit, regular weekly savings, voluntary savings and life insurance - and follows a simple, standardized, low-cost system of organization, management, savings and credit operations.

ASA's Culture, Competition and Choice: Introducing Savings Services into a MicroCredit Institution, 2001
By Graham A.N. Wright, Robert Peck Christen and Imran Matin

The Association for Social Advancement (ASA) in Bangladesh provides financial services to 1.5 million poor people, and is one of the best-managed, large-scale, sustainable, microfinance providers anywhere in the world. ASA operated a credit delivery and recovery system based on a modified version of the Grameen Bank's group-based lending methodology, stripped down to an elegantly simple (if somewhat inflexible) system that allowed management to control the flows of money precisely and exactly. Why did ASA make the decision to introduce more open access savings services when most of the other large microcredit institutions in Bangladesh remained unwilling to do so? In the words of Healey (1999), providing high quality savings services was seen as providing an excellent way to "access relatively cheap capital, increase outreach, increase lending, maintain portfolio quality, increase productivity, and reduce poverty and vulnerability." This perception is common amongst MFIs today.

"Serving Small Rural Depositors: Proximity, Innovations and Trade-offs (104 KB, PDF)", 2003
By Madeline Hirschland

This paper examines how four organizations deliver convenient, financially sustainable deposit services: the Bangladeshi NGO ASA that provides 360,000 depositors with a voluntary service; the Nepali cooperative VYCCU that provides two services specifically for members who live far from its office; the CVECAs, a network of over fifty village banks in the Malian Sahel; and over 2000 Kupfuma Inshungu groups in rural Zimbabwe that provide a contractual product to about two-thirds of the women in their villages. The paper culls from these cases a menu of delivery options and staffing strategies that make these systems sustainable. Finally, after assessing the strengths and challenges of these delivery options, the paper highlights the trade-offs inherent in making deposit services convenient for small rural depositors.

Also read: "Voluntary Savings Services: A Closer Look," by Madeline Hirschland

Grameen II

GRAMEEN II: At the end of 2003
By Stuart Rutherford

This research paper looks into Grameen at the level of the local branch after the design and implementation of the new Grameen methodology (Grameen II). The author takes particular interest in understanding what Grameen II means for its members, clients and local staff as well as for microfinance practice in Bangladesh and worldwide. This is a preliminary report, since the research project will continue until the end of 2005.

Based on the study of the balance sheets of three branches, the author has found that branch performance during and after conversion to Grameen II compare as follows:

• Savings deposits have grown remarkably and that growth is strongest in member-owned GPS accounts and in the new public deposits. One of the three branches tripled its savings portfolio in a three-year period.

• The loan portfolio in the three branches has not changed significantly over the 3 year period of analysis.

• Profitability results are mixed.

• Quality portfolio is believed to be improving significantly. From a ratio of 12% and 21% of doubtful loans to total outstanding loans in 2001 to 8% and 6% by June 2003 in Torgoan and Chikundi branches, respectively. The authors warn that it is too early to attribute these improvements to the changes that Grameen II introduced.