Programme : Agenda
3 :
Microfinance in reducing poverty and vulnerability: its possible role in
empowering persons with disability
Presented by
UN ESCAP
Slide 1
Microfinance in reducing poverty and vulnerability:
its possible role in empowering persons with disability
Workshop on Community-based Rehabilitation (CBR) and
Poverty Alleviation of Persons with Disabilities
5 July 2005
UN ESCAP Secretariat
2
ORIGIN OF MICROFINANCE MOVEMENT IN BANGLADESH
- Began in Bangladesh with Grameen Project in 1976
- BRAC, ASA and PROSHIKA followed by incorporating “Grameen-model” of
group-based credit in their activities
- Hundreds of small NGOs followed Grameen-model
3
ORIGIN OF MICROFINANCE MOVEMENT IN BANGLADESH
- Today there are 1200 microfinance institutions (MFIs) in Bangladesh
- The “Big Four” (e.g., GB, BRAC, ASA, and PROSHIKA) account for 90
percent of micro-credit borrowers in Bangladesh
- Latest estimates (June 2004) suggest that there are 13.7 million MFI
members in Bangladesh
4
JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
STATIC MODEL
- Mid-70s to end 1980: a period of learning and horizontal expansion
- A few years went into developing the “basic model”
- Group of 5
5
JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
STATIC MODEL (cont’d)
- Ceiling on land as membership criterion
- A ceiling on the maximum amount lent
- Group savings
- Fixed installments spread over 50 weeks
- Traditional activities financed
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
STATIC MODEL (cont’d)
- Housing loan part of the package
- Standardized branches were added horizontally
- As end-1980s approached, horizontal expansion around branch-franchising
slowed down
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
DYNAMIC MODEL
- Shift from group responsibility to individual responsibility
- Greater managerial responsibility devolved to branch managers
- Greater accountability for performance
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
DYNAMIC MODEL (cont’d)
- Performance criterion established around an “index” of profitability
and social indicators
- A diversified product-range
- Diversified savings/withdrawal options
9
JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
DYNAMIC MODEL (cont’d)
- Loan repayment period made more flexible in line with the nature of
economic activity financed
- Individual loans ceiling removed
- Enterprise loans introduced
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
DYNAMIC MODEL (cont’d)
- Special interest-free loans introduced (e.g., loans to beggars)
- Scholarships for the children of members introduced
- Education Loans Fund
- Health Insurance Scheme introduced
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
DYNAMIC MODEL (cont’d)
- Pension scheme introduced
- Shift from donor-financing to bond-financing
- Savings ploughed back as loans
- Big 4 completely self-reliant for lending resources
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
IMPACT
- Mixed evidence on the impact for reducing income poverty
- Using WB survey data, one study shows a decline in income poverty
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
IMPACT (cont’d)
- Using the same data, another study shows no appreciable impact
- Difference lies in the methodology
- More recent studies conducted by BIDS show sharp decrease in income
poverty of the borrowers
- Macroeconomic effect uncertain
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JOURNEY FROM “STATIC MODEL” TO “DYNAMIC MODEL”
IMPACT (cont’d)
- Empowerment of women: debate continues
- Women are being empowered through access to finance at household level
- Women are acquiring more assets (e.g., housing loan etc.)
- But their attitude towards daughters’ education and marriage varies,
benefits appropriation
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MICROFINANCE AND PERSONS WITH DISABILITY: SOME CRITICAL ISSUES
- Distinguish social welfare support for economically inactive group from
productive support for economically active group
- Concessionary arrangements e.g. no or reduced interest
- Joint liability groups e.g. Associations of PWDs
- Assistance with procuring/sourcing inputs, marketing products
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MICROFINANCE AND PERSONS WITH DISABILITY: SOME CRITICAL ISSUES
- Modification to group collateral modality e.g. individual loans, have one PWD per group
- Explore use of ICT
- Balance between financial sustainability and social goals
- Further studies needed on microfinance methodologies for PWDs, and sharing
good practices
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