Rehabilitation Micro Finance and Its Effects - BRAC - Case Study Example

Rehabilitation Micro Finance and its Effects: Study of BRAC 1. Introduction Micro Finance and rehabilitation organisations help in overcoming poverty, reducing environmental degradation, and countering discrimination of sex, age and religion and thus work for the common good of poverty ridden people. The financial independence of the organisation and sincerity of the leadership can help in achieving above mentioned goals successfully. A rehabilitation organisation working on the lines of microfinance is suitable for alleviating poverty and empowerment of women as well as men, financially and socially. In that aspect the organisations like BRAC have emerged as independent and as virtually self financed paradigm to achieve sustainable human development. Organisations like BRAC are empowering millions of people all over the world and BRAC itself is protecting and providing livelihood for 100 million people in poverty ridden Bangladesh. Being headquartered and established in Bangladesh, BRAC has been called upon to work in Afghanistan and Sri Lanka and already started working in some African countries. The essence of BARC’s policy is that it identified women as primary caregivers and recognised that they would ensure education for their children. This resulted in inter-generational sustainability of their families and households. Though women are important and successful customers for micro finance and poverty alleviation programs, it is not only that factor, which brought success to BRAC. The role of women can be discussed in the paper but along with it, the organisational capability shown by BRAC in making success educational, health and other social development programs and how it countered poverty by livelihood generation and protection. 1 2. Orientation Programs and Management BARC has successfully organised and monitored performance management of field level managerial personnel that evaluated the employee’s performance in a right manner. One should keep in view that the successful implementation and handling of poverty alleviation and disaster management is due to decentralisation of HRD in BRAC and this created employment opportunities too. One more unit initiated by BRAC and is crucial in achieving objectives of countering age, sex and gender discrimination is Gender, Justice and Diversity Unit. Efficient working of this unit has guaranteed gender friendly working and diversified the working initiatives and values. The diversification resulted in recruiting versatile individuals into different units and prioritising the female staff is an important aspect followed by different units in BRAC at every level. The opening of training centres at the places, where BRAC is implementing its programs resulted in awareness of the area for the personnel and even made the beneficiaries of the programs to be accustomed with the methods and discipline of the organisation. This enabled both beneficiaries and BRAC management to achieve targets regarding poverty alleviation and livelihood generation and protection with comfortable ease. 2 3. Impact of Micro Finance Activities of BRAC As Micro Finance refers to provision of financial services like loans, savings, insurance or transfer of services to low income households, the successful provision of these services can be seen in activities of BRAC in Bangladesh. Established in 1972, Bangladesh Rural Advancement Committee; BRAC has evolved itself from a mere rehabilitation organisation to multifaceted development organisation having micro finance as one of the issues of focus in helping rural poor. The essence of BRAC’s micro finance programs is realisation of poverty as a multi dimensional concept and the need of development programs for poor people involved. This resulted in implementing credit plus approach by the organisation. In this method BRAC gave loans to poor women and provided training to develop their skills. This made the rural women to use the loan amount in a productive way and to gain a substantial income by using the skills developed in training program. The training given to the women depends on the purpose for which the loan has been sanctioned. This is one of the reasons for the success of BRAC’s micro finance. The success came from realisation by BRAC that mere training and loan sanctioning is not enough to uplift the masses from utter poverty. Providing health care and social development activities for the people in the areas to whom the loans have been sanctioned increased calibre of the people. This in turn developed awareness in them. This resulted in financial development through micro finance and social development through health care and social development programs. The financial facilities provided and social development activities undertaken helped each other to achieve success in alleviating poverty along with empowerment of women. According to September 2003 census, above mentioned programs reached over four million village organisation members of whom 99.5 percent were women. One more aspect that showed its impact on successful implementation of the above programs is the impact assessment and monitoring system in BRAC. This system periodically assessed the impact of micro finance and social development activities and suggested changes and improvements to management. This resulted in timely correction of errors if any. The impact assessment and monitoring system of BRAC involves portfolio analysis, geographical and poverty outreach, indicator based monitoring, repayment, profitability, member participation, policy management issues, long term benefits and validating the internal work. This affected positively; the individuals who are part of the program and the groups as well. 3 4. Impact of Micro Finance on Individuals and Groups The implementation of micro finance programs include financial service provision and setting up of micro enterprises for empowerment of women. This considers individual as a part of a group and results in increase of income of groups thus resulting in increase of income of individual, which is a share of total income. 4 Economic Independence: Increase of income levels of women led to the greater levels of economic independence. The networks and markets they accessed gave them experience and resulted in personal development and financial improvement. This resulted in social development of families of the women individuals, who are part of micro finance groups. This even enhanced the perceptions of women about the contribution to household income and family welfare. In other words the contribution led to family welfare due to the experience gained in accessing the networks and this is an evidence for individual development as well as development as a group. 5 The study of the programs implemented by BRAC enables one to explore the qualitative changes associated with women’s empowerment. This depends on the factors that influenced the different levels of household’s success. The close kinship ties and involvement in the management of village organisation, higher levels of training and enjoyment of special loan privileges resulted in success of majority of groups. The correct implementation of programs related to micro finance groups resulted in increase of positive self perceptions of women and this resulted in enhancement of self confidence. An observation regarding the groups of BRAC revealed that the conflicts between the groups of a particular village that are not competitive resulted in failure of activities and programs. Some of the reasons observed for failure of the groups’ activities are use of inappropriate technology, high speed of project identification that is not in pace with the individuals’ calibres of the groups and donors’ pressure. Though this is only in minor cases of BRAC, one can know that the success depends on coordination of technology and activities, training and estimating the calibre of the group regarding the activity assigned to it. The type of failures mentioned above though observed in minority instances, resulted in in-depth study of its programs by BRAC and reduced future failures. One of the problems observed is regarding attribution. 6 In BRAC the problem of attribution has been dealt with control groups. This requires and enables a comparison between two areas one targeted by intervention with the one that has no intervention. Regarding this type of assessment, BRAC selected a control group from villages with no program and the villages supported by BRAC. In 1996, when the well being of both villages has been compared and it has been found that getting a true comparison is a tough problem. This is due to the fact that the individual households who are part of control group, though having same land holding, age, sex and occupation differences posed problems for a correct comparison and accurate assessment of the compared values and development. However it has been observed that the BRAC members living below poverty line are 37 percent less than those of Non- BRAC members. The asset values, savings, are also twice as high for BRAC members than non BRAC members. In addition to these, health, social indicators like usage of sanitary latrine, total non food expenditure has been high for BRAC members when compared with non BRAC members after 3 years of efficient implementation of BRAC programs. This leads to a conclusion that the correct implementation of micro finance programs combined with social development activities are successful in uplifting rural masses from the level of below poverty line.7 The essence of microfinance is going beyond the aspect of giving individuals the access to the capital. The micro finance programs that helped to protect, diversify and increase the sources of income and assets of groups involved, made micro finance system a platform for social change. The change is due to providing entrepreneurial ideas for poor individuals by making them as a group and giving access to capital and a direction to spend in a productive manner. This enabled them to generate income for themselves and contribute to their families. This enabled them to lead a life that is poverty free. This is due to access to the capital and a direction to spend it in a productive way, but this is not only the aspect that can bring change in poverty ridden lives, though it is true in majority of cases. It has been observed that in some cases, the access to capital is missing and in some other cases, the access of capital is overshadowed by non financial factors that again contributed to poverty. The success of activities in Bangladesh lies in recognising the above fact. This prompted BRAC to take up social developmental activities to health care programs. This enabled the individuals to overcome the problems of overshadowing the access to capital and made them to think about the entrepreneurship, though they don’t know the term. The next stage is offering credit and banking services in order to enable them to deal with a larger network. In this way, the poverty alleviation programs in Bangladesh, that are successful, used micro finance as a tool that worked in tandem with multiple empowerment approaches. This resulted in leverage for micro finance in the field and social development services increased simultaneously resulting in lifting individuals out of poverty. The role of women is observed to be more in the above mentioned activities. 8 5. Role of Women as Micro Finance Customers The persons (mostly women) operating in informal sector generating income from a range of activities constitute the customers of microfinance institution. The economic units in which the so called customers operate are known as Micro and Small Enterprises. The micro enterprises have less than 10 workers and small enterprises have 11 to 50 workers. This means that the micro finance institutions constitute groups less than 10 or groups having members in the range of 11 to 50. The individuals in the group depend on the enterprise for a quarter to three quarters of household needs and this cannot support complete needs of the family and in many cases this amount to family’s savings. The goal is to increase the income in the initial stage and in the later stage the group may or may not grow into an enterprise that yields all the needed income for household of individuals of the group. For this reason most of the customers of the micro finance are women as men in the family work on a higher income sources to support family. 9 6. Women as Successful Microfinance Customers Women being micro and small entrepreneurs have become a key target group for microfinance programs. As poverty has been considered a pre condition to get access to micro finance, the women from the families lying below poverty line have come and are coming to fore to get access to microfinance accepting the conditions. The reason for accepting the conditions is to get an extra income for their families and to develop socially. In the countries like Bangladesh, men are considered to be main source of income and they find less time to spend on the activities of micro entrepreneurship. This aspect also made women who find enough time to spend on the training and micro entrepreneurial activities organised by institutions like BRAC to become customers for the micro finance. As they are working under continuous monitoring by funding institution in informal sector, majority of them have turned successful. Micro finance has been introduced at a period that is witnessing the speedy growth of informal sector that is encompassing employment situations. These differ from those of formal sector to which men are used up to. As majority of women are new to entrepreneurship, they are ready to be compatible for training and monitoring activities of financial organisations. One more reason for women being successful customers of micro finance is that 80 percent of work force in informal sector that comprises women in poor countries like Bangladesh and other African Countries. The increase in number of women in urban as well as rural labour force also is a major contributor for women being successful customers for micro finance as the microfinance organisations are targeting the labour force for their activities. As women concentrate on temporary and lower level jobs than men, the decline in the wages of formal sector drove women to be customers of microfinance working in informal sector. The discriminations in property ownership and employment also made women to access microfinance and the success of activities regarding organisations like BRAC made them successful customers. Even in informal sector that involve physical work, women are discriminated with lower wages and this factor also contributed a lot to make women to turn towards micro entrepreneurial activities of microfinance BRAC. Prior to introduction of microfinance, women lack credit facilities and microfinance has filled that gap. This attracted women of lower wages into micro entrepreneurial activities. As the above mentioned facts are the factors that attracted women to microfinance the sustainable access and then success of micro entrepreneurial activities have led women to be successful customers of BRAC. The organisations like BRAC have decentralised loan delivery and management systems through intermediary institutions. These intermediary institutions include the parallel banking system also. As micro finance activities include the activities regarding enhancement of health, improving nutritional and educational status of household members, women being interested in these activities have performed successfully. This enhanced their self confidence and resulted in being independent producers and providers of cash resources of household economy. These facts are assumptions before the success of micro finance activities and have been concluded as true after women emerged as successful customers of microfinance. The fact that women are more conflict solving personalities rather than conflict creating ones, when compared to men, enabled them to use and sustain credit resources available by micro finance. 7. Complementary Services by MFIs The evidence regarding performance of microfinance suggests that poor people need and continue to use the informal services. As the people utilising the services and credit facilities are from below poverty line, the introduction of complementary services by micro finance organisations enable the customers to utilise the resources prudently. This has been observed in the analysis of informal, private sector and formal sector arrangements being central part of assessment. The complementary services like access to savings along with access to credit enable women to save a part of their income. The increase of contribution of micro finance to poverty reduction, empowerment and other development goals resulted in enhancement of success of women entrepreneurs. Some microfinance institutes introduced insurance services along with savings schemes. This enabled women to cope with unforeseen circumstances. The difference between complementary services offered by micro finance organisations depend upon the environment they operate. As a result they may change from country to country. In the initial stage of microfinance; the 1990s there has been pressure from donors to separate the micro finance activities from complementary services. The marginal impact of training programs and high costs incurred in complementary services are among the causes for that pressure. As in the time being, when training programs and other complementary services helped in success of micro finance enterprises, the donors reduced pressure regarding complementary services. In case of BRAC in Bangladesh and in CODEC a number of programs have been introduced in an experimental mode to find the ways to deliver complementary services to make micro finance customers successful in their activities.10 To enable micro finance organisations and grameena banks like BRAC, the administrations need to invest for improvement of complementary services like health, education and insurance care and services. This aspect finds support from all circles as micro finance is allowing millions of households in developing and poor countries to begin or reinforce activities that make participants micro entrepreneurs. This proposal arises from the fact that even in the wake of success of numerous micro finance institutions; many rural households still lack access to financial services. If they access they are not aware enough or capable enough to utilise them in a productive way. As micro finance institutions are not financially sustainable, the funds from government and donors should help them in providing complementary services. In another way, administrations may concentrate on providing complementary services at the places intervened by micro finance institutions. This provision makes a solid foundation to avoid management failures in micro finance institutions as they will be relieved of the burden of monitoring and providing complementary services. The provision of funding for complementary services in areas intervened by micro finance institutions amounts to promoting them by administration. As complementary services involve non productive expenditure, provision of them is compatible to administration and is difficult for micro finance institutions. The funding for complementary services and providing them will create a favourable environment for micro finance institutions to make their micro entrepreneurial activities a success. The aspect of state funding or cooperation in providing complementary services decrease pressure of donors on micro finance institutions in providing those services. This is due to powers of the government on different sectors of the society in the form of legitimate coercion to implement welfare programs like complementary services. 11 References 1. News Brief, 2007, Window on BRAC, BRAC, edition information not available, Retrieved on 10th January from http://www.brac.net/downloads_files/BRAC%20News%20Brief%20Issue%20202.pdf 2. BRAC, 2007, About us, BRAC, edition information not available, Retrieved on 10th January from http://www.brac.net/about.htm 3. Halder, S., 2004. The BRAC Microfinance Approach and its Impact at Individual, Household, and Beyond Household Levels: A Synthesis, The Micro Finance Gateway, edition information not available, Retrieved on 9th January from http://microfinancegateway.com/files/21852_BRAC_paper_2_BRAC_Microfinance_Approach_and_its_Impact.pdf 4. Linda Mayoux, 1997, The Magic Ingredient? Microfinance & Women's Empowerment, gdrc.org, edition information not available, Retrieved on January 9th from http://www.gdrc.org/icm/wind/magic.html 5. Roche, Chris 1999. Impact assessment for development agencies: Learning to value change, pp:150-154, Oxford, UK: Oxfam, edition information not available, Retrieved on 9th January from http://www.microfinancegateway.org/section/resourcecenters/impactassessment/developing/developingtools/casestudies/ 6. Roche, Chris. 1999. Impact assessment for development agencies: learning to value change, pp. 79-86, Oxfam Publishing, Edition informaiton not available, Retrieved on 9th January from http://www.microfinancegateway.org/section/resourcecenters/impactassessment/developing/methodologicalissues/control_groups/dealing 7. Marge Magner, 2007, Microfi nance: A Platform for Social Change, Grameen Foundation Public Series, Edition information not available, Retrieved on 9th January from http://www.scojofoundation.org/docs/FINAL_Marge_Magner_white_paper-FINAL.pdf 8. GDRC, 2000, Integrating a Gender Perspective in Microfinance in ACP Countries, gdrc.org, edition information not available, Retrieved on 9th January from http://www.gdrc.org/icm/wind/binns-2.html 9. http://www.gdrc.org/icm/wind/uis-wind.html 10. Renewing India, 2007, Micro Finance, Renewing India, Edition information not available, Retrieved on 10th January from http://www.renewingindia.org/finmicro.html 11. Cécile Lapenu, 2000, The role of the State in Promoting Micro Finance Institutions, IFPRI, edition information not available, Retrieved on 10th September from http://www.ifpri.org/divs/fcnd/dp/papers/fcndp89.pdf Read More