BEES initiated Micro-finance Program since 1975 in collaboration with Bangladesh Krishi Bank. The aim of this program was to alleviate poverty through facilitating the poor to get access to resources and thereby empowering them. Usually the formal banking system deprives the poor people from the facilities to borrow, save or invest money in productive activities. Moreover, the formal banking sector requires collateral for certain services. Under this Program, BEES stands as guarantor and facilitates the poor people to avail credit at reasonable terms and conditions without collateral. Therefore, they can utilize the credit in income generating activities. This process activates a self-sustained credit services to allow the poor people become economically self-reliant. With Krishi Bank transferring into RAKUB, in the Rajshahi division, the previous agreement failed and BEES was pushed into running its own credit program.

Objectives

To be beside the landless, marginal farmers and the poorest of the poor who earn their living by selling manual labor and women group members with the necessary financial support to prepare them for economic emancipation, and to alleviate poverty of the country involving the poor people in the development process.

The target beneficiaries of BEES Micro-finance Program are:

Y       Landless poor people focusing women

Y       People who own less than half an acre of land

Y       People who earn their living by selling manual labor, and:

Y       The hard core poor, who live below poverty line.

The Micro-finance program of BEES offers four types of services to it group members. These are:

i.                     Credit

ii.                   Savings

iii.                  Insurance

iv.                  Credit Plus Services

i. Credit

The BEES provides credit to its group members to initiate different income generating activities. Members must have some saving with BEES for being eligible for getting loans and loans are given to individuals without any collateral. Credit operations are carried out through a Revolving Loan Fund (RLF). This RLF consists of donors’ fund, members’ savings and BEES’s own fund. Loan realized are credited to and form a part of RLF for extending further credit. It is to be mentioned that 1% loan reserve is kept to cover the risk of bad debts. Frequent borrowing and payments allow the borrowers to take higher loans. In RDP, a Regional Office is supposed to become self-sustained in its credit operations at the end of its fifth year of operation.

Key Features of Loans:

@    Loan range: Tk. 3000-10,000

@    Interest rate: 15% flat

@    Repayment mechanism: equal weekly installments

@    Loan products: general loan, sectoral program loan, micro-enterprise development program loan.

The general loan can be taken for employment and income-generating activities while sectoral program loan can be taken for micro-enterprise development such as poultry, livestock, agriculture and small shop business and/or trade. The loan size usually varies from one thousand to ten thousand taka and is payable by weekly installment. BEES is considering to lower its interest rate to 12.50% in 2004.

ii. Savings

An important part of credit operation is the collection of savings from the group members. RDP’s experience shows that the regular savings of a group indicates better discipline in a group’s credit operation and management. From the members’ point of view, ‘savings’ represents an opportunity to save an amount and earn profit for that, which they cannot avail from any regular financial institution. Savings opportunities with BEES provide members with fund for consumption, children’s education and other investment. It also provides security for old age and serves as a contingency fund during natural disasters when income level fluctuates.

iii. Insurance

All the borrowers of BEES are eligible for insurance service. BEES introduced insurance policy to ensure safe scheme for the borrowers as well as higher repayment rates. The insurance policy covers the risk of the unwanted death of any borrower. If the deceased has any extra outstanding, the amount can be adjusted from the insured money.

Key Features of Insurance:

@    All the borrowers of BEES are eligible for BEES’s insurance service.

@    The members having loans with BEES are equally eligible for BEES’s insurance service.

@    Tk. 0.50 is taken as premium charge from the members. BEES pays the insurance money to the nominee from the interest of its credit program.

@    BEES’s insurance service provides a capital some of Tk. 5000 to the nominee of the deceased.

iv. Credit Plus Services

A common trend of micro-credit programs in Bangladesh is to provide economic support to the target beneficiaries to enhance their economical condition only. As a result of that different Income Generating Activities (IGAs) are suggested to undertake by the beneficiaries through disbursement of donor funds. Unfortunately most of the micro credit programs do not critically analyze the socio-cultural and sustainability aspects. Many organizations are now promoting micro-credit as a tool for economic development for the target beneficiaries. Therefore, economic upliftment as well as self-employment generation are being observed among different communities. But, unfortunately these are not positively influencing different social factors. As a consequence, sustainable changes in the life of targeted beneficiaries are not being observed.

It is true that credit is one of the essential inputs for increasing the economic status of the poor if it can be integrated with the development process. Otherwise, micro finance may reach to the saturation point and may slide back due to ignorance, lack of diversified skill, less health concerns and other reasons.

Therefore, the Executive Director, BEES introduced an innovative approach “Credit plus Services” under micro-finance program. He believes that parallel to financial support, people need to widen their periphery of knowledge and skill and; fulfill social requirements as well. This approach promotes nurturing of human qualities and; valuing social norms and cultures. BEES has introduced this approach since last three years and a good number of beneficiaries are brought under these facilities on pilot basis.

Micro-credit implementation alone without any other program component does not necessarily helps social development, changes in human attitudes, behavior, knowledge and practices. BEES provides “Credit plus Services”, which are linked with other essential services in a participatory manner. Under the program BEES has introduced basic health & nutrition, education, agriculture & social forestry, poultry and livestock program along with IGAs to the potential beneficiaries, which have direct impact on their welfare. In order to reinforce the program, training and other support inputs are also given to the beneficiaries. Monitoring is carried out regularly to observe the effectiveness of the approach. The “Credit plus Services” has been well received by the beneficiaries. Considering the demand of these facilities, BEES has a plan to expand this approach among all the target beneficiaries.

In general, the available services under this approach through BEES are:

General and Reproductive Health Services

Antenatal care, Post-natal care, safe delivery, family planning counseling, adolescent health counseling, and referral services for STD/RTI and HIV/AIDS, free diagnosis, prescription, counseling and medicine supply to the poorest and referral services.

Training 

Modern agricultural technology transfer, seed production and storing technology, fruits and vegetable production technology, small poultry firming and cattle rearing & fattening, rice-fish production technology, agro-forest nursery management, PHC, MCH-FP, adolescent health, food & nutrition, group formation and leadership development, group dynamism and other skill development training and monitoring.

Input Delivery Services

Distribution of seed, seedlings and saplings, fertilizers, fencing, supervision and follow-up, etc. The target beneficiaries receive these and other related services through group meetings and; static and satellite clinics established by BEES making them “Human Capital” in production.

The appropriate Financial Services for this group of people are different from traditional micro-finance, and those are:

q       Initial loan ceiling very small;

q       Loans coupled with grant for capacity building, consumption smothering and other life cycle requirement;

q       Flexible repayment installments/period;

q       Flexible rules for group exercise;

q       Flexible savings system;

q       Built-in insurance system;

q       Training for IGA-beneficiaries and for staff of the institutions;

q       Direct food subsidy to improve nutrition and health status of the target population;

q       Rehabilitation during disaster period;

q       Developing community based infrastructure, which will have direct impact on welfare of the extreme poor.

Achievement

Formation of new groups of the micro-finance program under the RDP during this reporting period was 589 groups in July 2008-June 2009. Again achievement in this area was also found much poor considering the annual target of 685 groups. The coverage implies 86% achievement against the target. On the other hand, BEES was supposed to cover 6464 groups under the on-going programs, but a total of 6368 groups were brought under the coverage, which marks about 98.51% achievement. Fund (RLF) constraint was the main reason of less achievement. Due to the fund crisis programs’ staff could not form more new groups.

A total of Taka 848.23 million was disbursed in 2008-2009 against a target of 1463.49 million, which is 58% of the annual target. Till the end of the reporting period, a total of Taka 3889.95 million was disbursed under the micro finance program.

Over Tk. 769.97 million was outstanding up to the closing of the reporting year and the overdue was Tk. 72.96 million only. The overdue/outstanding ratio stands at 14.16% only. On the other hand, in regard to recovery status of the disbursed loan, the data shows better performance and over 98% of the disbursed loan of the total was recovered during the reporting period.     

During the reference period a total of Tk. 276.74 million was recovered. Again amounting to Taka 109 million was found to be deposited by the clients as savings fund against the target of Taka 158 million which indicates 69% achievement against the target. It can be concluded that the performance regarding loan recovery and savings collection were satisfactory. 

Other planned works under the micro-finance program, such as auditing of the program activities by the internal auditors, annual auditing by the external audit firm and monitoring and supervision of the activities were found completing satisfactorily through out the year by the BEES.

It needs to be mentioned here that, during the reporting period BEES experienced serious fund crisis due to not having required amount of Revolving Loan Fund (RFL) to disburse loan to the new groups after covering the existing (old) groups. As a consequence, achievement in formation of new groups was lower than the target.

Impact Assessment of Financial Services for the Poorest (FSP) Project

Microfinance Brochure

Information up-to March 2010

No. of Credit Component: