Palli Karma-Sahayak Foundation (PKSF) since its inception in May, 1990 has been working as an apex microfinance funding and capacity building organization for eradicating poverty by providing microcredit to the poor through its Partner Organizations (POs). PKSF, in English, means “Rural Employment Support Foundation”. However, PKSF has expanded its operation to urban areas also.

OPERATIONAL STRATEGY

The basic operational strategies of PKSF have been drawn from its objectives:

a) It does not directly lend money to the landless and the assetless people rather reaches its target groups through its POs, the delivery mechanism for reaching the poor.
b) It provides greater thrust to institutional development.
c) It favours no particular model, instead, innovations and different approaches based on experience are encouraged.

LEGAL STRUCTURE

Legally PKSF is a “company limited by guarantee” meaning “company not for profit” and is registered under the Companies Act of 1913/1994 with the Registrar of Joint Stock Companies. The legal structure of PKSF allows flexibility, authority and power to take programmes and implement them throughout the country and managing its affairs as an independent organization.

MANAGEMENT

PKSF has four divisions as follows: (a) Small and Medium POs’ Loan Operations Division; (b) Big POs’ Loan Operations Division; (c) Administration; and (d) Audit Division. Loan Operations Divisions are the programme divisions of PKSF which select POs, disburse and recover loan, monitor and evaluate programmes and provide on-site technical assistance and advisory services to POs. The internal audit division reports directly to the Managing Director.
PKSF has small research and training units to conduct research related to poverty alleviation and to impart training to the staff of POs. These units are under the Administration Division. Recently finance, which was under Administration Division, has been transferred to Big PO’s Loans Operations Division.
PKSF from its inception has been following a policy of recruiting officers with high academic standing. PKSF has programmes to train its officers and staff to increase their efficiency and skill.

FUNCTIONS

As an apex financing institution involved in long-term financing of organizations with microfinance services, PKSF puts utmost emphasis on attainment of both financial and institutional sustainability of these organizations. In order to achieve the objective of sustainability, PKSF performs the major functions expected of an apex organization. These include, among others:

1. Provision of microcredit funds to POs
2. Developing best practices for the microcredit sector
3. Institution/capacity building support to POs
4. Advocacy for appropriate policies and regulations useful for the microcredit sector

1. CREDIT PROGRAMME

PKSF provides loanable funds to its 199* POs – 3 big, 189 small and medium and 7 Pre-PKSF POs – under its mainstream credit programme as well as under some projects.
PKSF’s mainstream credit programme, now, includes four components viz. Rural Microcredit; Urban Microcredit; Microenterprise credit and Microcredit for the Hardcore Poor.
The projects under which credit funds are provided include (i) Participatory Livestock Development Project (PLDP); (ii) Integrated Food Assisted Development Project (IFADEP); (iii) Training, Employment and Income Generation Programme (TEIGP) of Jamuna Multipurpose Bridge Authority (JMBA); (iv) Southwest Flood Damage Rehabilitation Project (Socioeconomic Rehabilitation Fund) (v) Sundarbans Bio-diversity Conservation Project (SBCP); (vi) Financial Services for the Poorest (FSP) project; and “Microfinance and Technical Support Project” funded by the International Fund for Agricultural Development (IFAD) and the Government of Bangladesh.

General Features of PKSF Credit Programme:

a) PKSF provides loans to two categories of POs- Organizations Operating in Small Areas (OOSA) and Big Partner Organizations Operating in Large Areas (BIPOOL).
b) PKSF funds four categories of microcredit programmes of its POs under its mainstream credit programme; (i) Rural microcredit (ii) Urban microcredit, (iii) Microenterprise credit and (iv) Microcredit for the hardcore poor.
c) PKSF charges 4.5% service charge per year from its OOSA category POs and 7% service charge per year from its BIPOOL category POs.
d) Loans received by OOSA category POs from PKSF are repayable within a period of 3 years in 10 equal quarterly installments with a grace period of 6 months.
e) Loans received by BIPOOL category POs are payable in 4 years in 12 equal installments with a grace period of 12 months.

Rural Microcredit:

Rural Microcredit is still the dominant component among the four components of mainstream microcredit programme. The salient features of rural microcredit programme are outlined here:
a) POs provide loan to the landless and assetless.
b) Those residing in rural areas and owning less than 50 decimals of arable land or the value of whose total asset is not more than the value of one acre of land in the locality are considered as landless-assetless.
c) The landless and assetless are to be organized in groups comprising of not less than five members.
d) All members of a group must be the residents of the same village (area).
e) Group must be formed with like-minded people from the same economic strata of life having confidence and trust in each other.
f) POs charge interest rate from their beneficiaries depending on the field situation of the POs.
g) The repayment period for the poor, landless-assetless people (i.e. beneficiaries) to the POs is one year (52 weeks).
h) The administrative and related expenses in connection with undertaking the credit programmes of POs are met from the service charge received from beneficiaries.
Under rural microcredit programme PKSF as of June 2003 has disbursed Tk. 13015.60 million.

Urban Microcredit Programme:

PKSF appreciates the fact that urban microcredit is an area that needs attention although prefers to go cautiously with it.

Selection of Partner Organizations

PKSF has started lending to enlisted Small, Medium and Large POs that meet the following additional eligibility criteria under the Urban Microcredit Programme:

(i) A good track record in microcredit operations.
(ii) POs must have a policy on urban microcredit approved by its Executive Committee.
(iii) A minimum of two years experience in urban microcredit operations with outstanding loans of not less than Tk. 0.5 million.
(iii) A loan recovery rate of 98% or above.
(iv) Adequate skilled staff, a Management Information System and a specific separate cell for urban microcredit operations.

Selection of Borrowers

(i) Target members for urban microcredit should be people with no asset residing in urban or semi-urban areas with a monthly income of between Tk. 4000 - 5000.
(ii) A resident of the locality for a minimum of three years
(iii) A Member should have a permanent/ temporary business in the locality, sound business expertise and a good track record in handling the previous loans. Members should have adequate knowledge about his/her business.
(iv) Preference for the membership extended to women; and
(v) The target member should not be a member of any other microfinance institutions and should not be receiving microcredit from any other institution.
Under urban microcredit programme PKSF as of June 2003 has disbursed Tk. 617.30 million.

Microenterprise Credit:

The progressive and experienced microcredit (MC) borrowers need larger amount of credit to augment and diversify their existing income generating activities (IGA's). To meet the need PKSF has started providing funds to its POs for microenterprise lending.
This credit programme is helping progressive/ graduate microcredit borrowers who have entrepreneurial capacity to scale-up their activities. Although some of these borrowers are already operating microenterprises, they are mobilizing resources from expensive sources including ‘moneylenders.’ The microenterprise lending will also ensure borrowers’ access to funds and sustainability. Some of the reasons for targeting the progressive borrowers and using the existing lending mechanism are the following: (i) microenterprise borrowers are unlikely to be supported by the commercial banks as they are unable to provide collateral for loans and the loan size is relatively small (US $1,000-2,000); (ii) lending to the progressive borrowers takes advantage of the long-term relationship that POs already have with these borrowers which provide them with the knowledge of the borrowers’ entrepreneurial ability and history of their creditworthiness; and (iii) microenterprise lending will create employment for the hardcore poor at local level. It has been felt that careful appraisal, supervision and monitoring methods should be enforced for microenterprise lending.

Selection of Partner Organizations

PKSF shall lend to POs that meet the following additional eligibility criteria under the Microenterprise Lending Programme:
(i) a minimum of 5 years experience in managing a microcredit programme in accordance with performance standards set by PKSF;
(ii) a minimum of Taka 2 million in capital (including foreign grants, surplus etc.) in the microcredit programme;
(iii) debt-capital ratio that does not exceed 5:1; and
(iv) skilled manpower to administer credit programmes for microenterprise borrowers.

Selection of Borrowers

(i) Microenterprise borrowers with a minimum positive track record of 3 years in loan repayment shall be selected from the graduate/enterprising participants of the PO’s microcredit programmes
(ii) There must be scope to expand their Income Generating Activities (IGAs) to full time employment creating enterprises in the context of the corresponding market situation.
(iii) Their equity participation should be at least 20% of total investment in the expanded IGAs.
Under microenterprise credit programme PKSF as of June 2003 has disbursed Tk. 125.86 million.

Microcredit for the Hardcore Poor:

Research and evaluation studies conducted on microcredit have found that the hardcore poor do not generally benefit from the current microcredit system in Bangladesh. There is evidence that although around a quarter of microcredit programme members are hardcore poor (defined as households with less than 1800 Kilo calories per person per day, which constitutes around 25% of Bangladesh's population and 50% of the total number of poor), these households do not share in the income growth that the better off poor enjoy through microcredit. Moreover, even within this 'hardcore’ poor group there is a 'bottom layer’ (the 'ultra hardcore poor' comprising the bottom 5?10% of the population) who do not even joins, let alone benefit, from such programmes. Hence the 'hardcore poor' component of this project seeks to finance the microcredit component of programmes which are tailored so that the hardcore and ultra hardcore poor can join and benefit from such programmes.
The main constraints/barriers that prevent the hardcore poor from either joining or benefiting from the current microcredit system in Bangladesh are: (a) the lack of multiple income earning sources and hence difficulty in regularly repaying a loan installment; (b) acute seasonal shortfalls in income, especially in more depressed regions and therefore, seasonal difficulties in loan repayment; (c) lack of a grace period before the beginning of loan repayment; (d) weekly savings requirement; (e) other group members screening out a perceived ‘higher?risk’ member; (f) adverse household demographics; and (g) a higher incidence of illness. In this context the innovations required to address the needs of the hardcore poor can be grouped into three categories: changes to the current microcredit delivery system, diversified financial services, and complementing microfinance with non?financial interventions.
The main changes that would be introduced to the current microcredit delivery system include smaller loan sizes, making installment repayment amounts more flexible (e.g. encouraging lump sum payments post-harvest and encouraging flexibility during lean seasons), changing the installment repayment grace period, keeping them more in line with the loan?financed investment, relaxing the regular savings requirement, experimenting with bi?monthly meetings and 'doorstep delivery' system, and providing consumption and seasonal loans when required.
Providing diversified financial services is also critical. Experimentation with different savings products and flexible methods of deposit collection and withdrawal needs to be encouraged. Furthermore, experimentation with health, livestock and life insurance products are important to reduce the vulnerability of the hardcore poor to risks. Major experiments have been undertaken in Bangladesh where microfinance linkages to safety?net programmes ensure that the hardcore poor also accumulate savings, receive credit, and gain the confidence to "graduate" into becoming members of regular MFI programmes in order to make their income gains sustainable.

Selection of Partner Organizations

PKSF lends to enlisted Small, Medium and Large POs that meet the following additional eligibility criteria under the Hardcore Poor Credit Programme:
(i) Operate in comparatively poorer areas;
(ii) Activities are economically viable for the Hardcore Poor and manageable by the Hardcore Poor; and
(iii) Separate Cell with trained staff to run the Hardcore Poor Credit Programme with an effective organizational network, appropriate training arrangements for the ‘hardcore’ poor and a MIS;

Selection of Borrowers

The selection of the hardcore borrowers will follow the criteria of rural microcredit borrowers. The following additional characteristics of the potential borrowers should also be ascertained:
(i) Unemployed with no assets and source of income.
(ii) Female head of the family with many children.
(iii) Dependent on temporary job.
(iv) No homestead and works as home help. The participants of other similar programmes, including the income generating programmes, which mobilize the hardcore poor under the Vulnerable Group Development (VGD) providing food aid from the World Food Programme (WFP) and other programmes for Hardcore Poor in fisheries and social forestry, will also qualify as borrowers.
As of June 2003, PKSF has disbursed an amount of TK 446.18 million to POs under the hardcore microcredit programme.

Progress of Credit Programme:

As of December 31, 2003 PKSF provided microcredit fund to 199 POs. Starting with only 0.006 million beneficiaries in 1990-91, PKSF credit programme in 2002-2003 covered 4.17 million beneficiaries (Figure–1), the average annual growth rate during the period being 72.52%. 89.16% of PKSF beneficiaries are female.

Figure 1: Number of Borrowers of PKSF (In Million)

Figure 2: Annual Loan Disbursement of PKSF (Tk. in Million)

Figure 3: Annual Loan Recovery of PKSF (Tk. in Million)

Credit Disbursement under Special Projects:

In 2002-2003 PKSF also provided loans to the rural poor through its POs under four special projects – (a) Participatory Livestock Development Project (PLDP) funded by the Asian Development Bank; (b) Integrated Food Assisted Development Project (IFADEP) funded by the European Commission; (c) Training, Employment and Income Generation Programme (TEIGP) of Jamuna Multipurpose Bridge Authority (JMBA);


Figure 4: Percentage of Direct and Revolving Loan Since Inception.

(d) Southwest Flood Damage Rehabilitation Project (Socioeconomic Rehabilitation Fund); and (e) Financial Services for the Poorest (FSP). In FY 2002-2003, total amount of loan disbursed under the five projects was Tk. 215.95 million. At the end of FY 2002-2003, cumulative amount disbursed under the five projects was Tk. 756.60 million.

Activities under Pre-PKSF Programme:

Loan disbursement along with initial training package has been completed for 7 Pre-PKSF POs up to December, 2003. Details of the Pre-PKSF activities completed up to December, 2003 are as follows:
· Three workshops on “Good Governance and Institutionalization of Micro Finance Institutions” for the Executive Committee members of Proyas Monobik Unnayan Society, Access Toward Livelihood and Welfare Obsession (ALWO), and Society for Voluntary Activities (SOVA) were been conducted on April 8, 2003; July 22, 2003; and October 8, 2003 respectively.
· Three Pre-PKSF Partner Organizations have become Partner Organizations of PKSF. The POs are:

· An amount of Tk. 50,000/- has been disbursed for each of Proyas Monobik Unnayan Society, Access Toward Livelihood and Welfare Obsession (ALWO), and Society for Voluntary Activities (SOVA), Ashrai, Socio Economic Development Action Programme (SEDAP) and Community Development Center of Bangladesh (CDCB) as per the policy of Pre-PKSF Programme.
The training activities under the programme are reported in page 23.

2. DEVELOPING BEST PRACTICES FOR MICROCREDIT SECTOR
PKSF has prepared a number of policy guidelines and standards for its POs and for the microcredit sector involving the practitioners of PKSF, POs and others concerned. PKSF reviews its policies and programmes continuously and adjusts them to meet the changing requirements. PKSF has a programme to develop standards in further areas. Major policy guidelines and standards prepared by PKSF are:

1) Statement of Policy: Guidelines for selection of POs and borrowers for Rural, Urban and Hardcore poor and Microenterprise;
2) Guideline for Accountants;
3) Policy for Loan Classification and Debt Management Reserve;
4) Guideline for Designing Internal Control System for POs of PKSF;
5) Guidelines for Management of Savings;
6) Guidelines for Management of Service Charge Earnings;
7) Guidelines for Avoiding Overlapping;
8) Management Information System (MIS);
9) Guidelines for Performance Standards and Categorization of POs;
10) Financial Ratio Analysis;
11) Policy for the Utilization of Disaster Management Fund;
12) Guidelines for Indicators for Early Warning System;
13) Business Plan for POs;
14) Guideline for Management Audit of POs by PKSF;
15) Guideline for Internal Audit of POs by PKSF;
16) Audit TOR for External Auditor of PKSF for Auditing PKSF;
17) Audit TOR for External Auditor of PKSF for Auditing its POs;
18) Audit TOR for Auditors appointed by POs;
19) Policy for Loans for Institutional Development.
20) PKSF Microcredit Programme Funding Policy for Indigenous Ethnic Minorities.

3. INSTITUTION / CAPACITY BUILDING SUPPORT TO POS
Institutional development of PKSF and its POs holds great importance especially from the point of view of sustainability of the microcredit programme. Institutional development has implications on a number of areas such as programme outreach, loan absorption capacity of the POs, supervision and monitoring, financial management and control, personnel policy including human resource development (HRD), sustainability of microcredit programme, etc. The institutional development components include the following
:
Training
Training activities aim at developing the capacity of PKSF officials as well as POs credit personnel. PKSF’s training wing conducts highly customized training courses at PKSF training centre. The other courses are outsourced to training institutes belonging to both public and private sectors of the country following the training plan incorporated in the yearly training calendar.

Training Modules
Training programme implemented by PKSF is operation based rather than theoretical that covers a wide range of subjects. PKSF has developed 22 training modules out of which 7 are for PKSF staff and 15 for POs staff. The modules have been prepared based on a Training Need Assessment (TNA).

Training Modules for POs Staff

Training Modules for POs Staff

PKSF also conducts training on the spot (need based) for the POs staff.

On-site Technical Assistance

PKSF officers, during their regular intensive field visits for on-site monitoring of the POs’ programmes, provide the POs advice on different aspects of management and operations of their microcredit programmes. This on-site technical assistance has been found very effective in improving the efficiency of POs’ programmes.

Training for External Organizations

PKSF also conducts training for domestic and foreign organizations, which are not POs of PKSF but have microcredit activities.
Progress Under Training Programme
(As of December 2003)

POs Staff Training:

* 276 field workers of 143 POs were trained on "Group Dynamics, Savings & Microcredit Management” covering 1425 trainee days.
* 78 accountants of 78 POs were trained on "Accounts keeping” covering 234 trainee days.
* 40 accountants of 40 POs were trained on “Financial Management” covering 120 trainee days.
* 105 accountants of 62 POs were trained on “Accounts and Financial Management” covering 396 trainee days.
* 202 mid-level officers from 154 POs were trained on "Saving and Microcredit Management” covering 734 trainee days.
* 16 mid-level officers from 16 POs were trained on "Implementation of Microenterprise Programme” covering 48 trainee days.
* Under the spot training programme 51 field workers of 2 POs were trained on "Group Dynamics, Savings & Microcredit Management” covering 154 trainee days.
* Under the spot training programme 45 Accountants of 2 POs were trained on "Accounts Keeping on Accrual Basis” covering 90 trainee days.
* Under the spot training programme 78 mid-level officers from 3 POs were trained on "Microcredit Management” covering 209 trainee days.
* 68 mid level officers from 39 POs were trained on “PO MIS Software Isntallation” covering 242 trainee days.
* 65 mid level officers from 49 POs were trained on “Basic Computer Application” covering 396 trainee days.
* Under the FSP (Financial Services for the Poorest) project’s training programme:
* 20 Supervisor-cum-Trainers from 20 POs were trained on “Project Implementation & Field Supervision” covering 120 trainee days.
* 20 mid level officers from 20 POs were trained on “Management Information System” covering 40 trainee days.
* 19 accountant-cum-computer operators were trained on “Accounts & Financial Management” covering 38 trainee days.

Study Visit to POs

* PKSF organized two study visit/experience-sharing programmes for 10 POs in April and September, 2003. A total of 9 officials, including chief executives and chief credit coordinators, from 5 POs visited Integrated Development Foundation (IDF), Chittagong during April 26-28, 2003. A total of 10 officials, including chief executives and chief credit coordinators, from 5 POs visited Thengamara Mohila Sabuj Sangha (TMSS), Bogra during July 15-16, 2003.

Training for Pre-PKSF POs:
* Three training courses on “Savings and Credit Management” had been carried out for the staff of Pre-PKSF POs during January 27-29, April 16-17, and August 12-13, 2003. A total of 44 participants from 3 Pre-PKSF POs attended the training courses.
* Three Workshops on “Good Governance and Institutionalisation of Microfinance” were conducted for 21 management staff of 3 Pre-PKSF POs in 2003.

Training for Non-PO Staff:

National Organizations’ Staff
* PKSF conducted a five-day long training programme on "Accounting and Management Information System" for the Upazila coordinators of Smallholder Agriculture Improvement Project (SAIP) of the Department of Agricultural Extension (DAE), GOB from January 18-21, 2003. A total of 27 participants attended the course. The training course was held at the training center of PKSF in PKSF Bhaban, Agargaon. The main objective of the training course was to enhance the professional knowledge of the participants.

* PKSF conducted a five-day long training programme on “Basic Accounting and Microcredit Management” for 19 accountants from 9 NGOs under Smallholder Agriculture Improvement Project (SAIP) during June 7-11, 2003. The training course was held at the training center of PKSF in PKSF Bhaban, Agargaon. The main objective of the training course was to improve the knowledge and skills of the NGO staff under SAIP.

* PKSF conducted a five-day long training programme on “Microcredit Management and Monitoring” for 15 different level officials of the Community Development Center (CODEC), Chittagong during July 19-23, 2003. The training course was held at the training center of PKSF Bhaban, Agargaon and the Audit office of PKSF at Rangpur. The main objective of the training course was to enhance knowledge and skill on microcredit management, programme design, monitoring and supervision of the participants.

* PKSF and Integrated Development Foundation (IDF), a PO of PKSF in Chittagong, jointly organized a four-day long training course on “Group Dynamics, Savings and Microcredit Management” for 27 officers from nine NGOs under NGO Coalition, Rangamati during August 14-17, 2003. The training course was held at the training center of IDF, Rangamati. The main objective of the training course was to enhance the knowledge and skills on microcredit management of the member-NGOs of the NGO Coalition which work in different parts of Chittagong Hill Tracts.
Foreign Organizations’ Staff

* PKSF conducted a ten-day long training programme on "Auditing, Monitoring and Supervision of Microcredit Programme" for three officials of the Rural Microfinance Development Center Ltd. (RMDC), Nepal during February 23 - March 6, 2003. The training course was held at the training center of PKSF in PKSF Bhaban, Agargaon and the Audit office of PKSF in Rangpur. The main objective of the training was to enhance the knowledge and skills of RMDC officials for auditing and supervision of partner MFIs of RMDC.

Study Visit at PKSF

PKSF attracts many organizations and personalities from different countries, who often visit PKSF to share PKSF experiences.

* A 14-member team from India was on a study visit at PKSF from February 22-27, 2003. It was a joint visit of the National Bank for Agriculture and Rural Development (NABARD), Regional Rural Banks and Grameen Banks, India. The team was led by Mr. S. K. Mitra, Executive Director, NABARD. The other members from NABARD were Mr. D. K. Dhanrajani, DGM; Mr. L. L. Raval, AGM; Mr. D. D. Mishra, AGM; Mr. Bhaskar Sen, AGM; Mr. V Jayaram, AGM; Mr. J. N. Deshpande, AGM. The team also included MR. M. I. Dholakia, Chairman, Jamnagar Rajkot Grameen Bank; Mr. Ashfaq Ahmed, Chairman, Manjira Grameen Bank; Mr. Paul Francis, Area Manager, North Malabar Grameen Bank; Mr. Virender Singh Shehrawat, Senior Manager, Regional Rural Bank; Mr. V. B. Kulkarni, Senior Manager, Yavatmal Grameen Bank; Mr. K. M. Misra, Chairman, Etah Grameen Bank; Dr. S. P. Singh, Chairman, Shahjahanpur Kshetriya Grameen Bank. The objective of their visit was to learn from PKSF experiences in the promotion of microfinance in India. During the visit they saw activities of Thengamara Mohila Sabuj Sangha (TMSS), ASA, and Society for Social Service (SSS) - POs of PKSF at Bogra and Tangail districts. They highly appreciated the activities and performance of PKSF and its POs.

* A four-member team comprised of members of the Governing Body of Rural Microfinance Development Center (RMDC) Limited, an apex Microfinance organization of Nepal, visited PKSF during September 21-25, 2003. The members of the team included Mr. Bir Bikram Rayamajhi, Mr. Gopal Kafle, Mr. Binaq Kumar Shrestha and Mr. Tulashi Ram Gautam. The objective of their visit was to learn from PKSF experience which will help promotion of microfinance in Nepal. The team visited two POs of PKSF, TMSS at Bogra and SSS at Tangail, to observe microcredit operations at the field level. They highly appreciated the activities and performance of PKSF and its POs.

In Country Training for PKSF Officials:

Ø Mr. Abdul Latif, Deputy Manager attended a training course on “Higher course on Training of Trainers” during May 26-29, 2003 organized by Bangladesh Society for Training and Development.
Ø Aziz Halim Anwar & Co. organized two courses on “Accounts Keeping” for 30 different level officers of PKSF during June 8-11, 2003 and July 14-17, 2003.
Ø PKSF organized a training course on “Equipment Maintenance” for its five different level staff on June 25, 2003 and July 12 & 7, 2003.
Ø Ms. Farhana Nabi, Officer, attended a training course on “Office Management” during August 3-25, 2003 organized by Regional Public Administration Training Center, Dhaka.
Ø Ms. Rumana Shahanz, Assistant Grade-I, attended a training course on “File and Record Keeping” during July 22-31, 2003.
Ø Mr. Masud Parvez, Office Staff Grade–II, attended a training course on “Staff Development Training” during September 6-10, 2003.

Overseas Visit by PKSF Management Staff:

* Dr. Salehuddin Ahmed, Managing Director, PKSF attended an international symposium on "Initiation of the South Asia Citizen’s Social Charter" during February 25-27, 2003 in Colombo, Sri Lanka. The symposium was jointly organized by South Asia Center for Policy Studies (SACEPS) and United Nations Department of Economic and Social Affairs (UN-DESA).

* Dr. M. A. Hakim, General Manager (Administration), PKSF extended advisory services to Rural Microfinance Development Center Ltd. (RMDC), Nepal during March 3-9, 2003. established in 1998 RMDC is an apex microfinance organization in Nepal. Dr. M. A. Hakim studied RMDC’s policies, strategies, operating procedures and activities and gave recommendations to help RMDC to move in the right direction in future.

* Dr. Salehuddin Ahmed, Managing Director, PKSF visited Rome, Italy during April 1-6, 2003 as the head of a four member high-level government delegation to negotiate loans under the proposed "Microfinance and Technical Support Project" with IFAD. The seven-year long project, to be started in July 2003, aims at enhancing livestock and other income generating activities of members of PKSF’s POs of some selected regions and will involve a total cost of US $ 20.17 million.

* Dr. Salehuddin Ahmed, Managing Director, PKSF attended an international workshop on “Microfinance in Poverty Reduction and the Challenges for MFIs in Vietnam” on May 21-24, 2003 held in Hanoi, Vietnam. The workshop was organized by the Capital Aid Fund for Employment of the Poor, Vietnam.

* Ms. Parveen Mahmud, FCA, DMD, PKSF attended the 20th session of the International Working Group of the Experts on International Standards of Accounting and Reporting (ISAR), UNCTAD held at Geneva, Switzerland from September 29 to October 1, 2003. She also attended the Corporate Social Responsibility (CSR) workshop on October 2, 2003 organized by UNCTAD - DITE and presented the paper “Scope of CSR in the developing countries.”

* A five-member team from PKSF undertook a study visit to South Africa from September 26 to October 5, 2003. The team members were Ms. Sarah Jasmin, Manager (Training), Mr. Zahir Uddin Ahmed, Deputy Manager (Operations); Mr. Tapan Kumar Shil, Assistant Manager (Audit) from PKSF; Mr. Lokman Hakim, Executive Director, Page Development Center, Comilla; and Mr. Khondoker Alamgir Hossain, Gram Unnayan Karma, Bogra. The objective of their visit was to explore the South African experience of poverty alleviation through microcredit programme.

Workshops/Seminars:

PKSF regularly organizes workshops/seminars on various pertinent issues to strengthen microcredit operations of its POs.

Workshops for Developing People Interested in Microcredit Profession
PKSF organized a series of workshops titled “Training for Individuals Who are Interested to Work in Microcredit Sector”. The workshops were held in 6 batches on 18, 24, 28 & 31 May 2003 and 04 & 07 June 2003. A total of 389 persons, mostly unemployed, attended the course. PKSF has published a booklet containing a list of the youths who participated in the training course. The booklet has been distributed among the PKSF POs to help them recruit good professionals. Thus, PKSF has contributed to creating employment opportunities for the educated youth.

Exchange of Views between PKSF and its POs Held

PKSF organized three regional meetings to exchange views with its POs on various issues regarding PKSF funded on-going microcredit programmes run by the POs. The meetings took place on 11, 18 and 24 August, 2003 respectively in Rural Development Academy (RDA), Bogra; Bangladesh Academy for Rural Development (BARD), Comilla and CARITAS, Khulna premises.
A total of 235 persons, including chief executives and credit coordinators from 127 POs, attended the regional meetings. From PKSF Dr. Salehuddin Ahmed, Managing Director; Mr. Md. Mosharraf Hossain Khan, Deputy Managing Director (OOSA); Ms. Parveen Mahmud, Deputy Managing Director (BIPOOL); Dr. M. A. Hakim, General Manager (Administration); Mr. Md. Shah Alam Mridha, Deputy General Manager (Audit); Mr. S. M. Shamsul Arifeen, Assistant Manager (Training); Mr. Dipen Kumar Saha, Assistant Manager (Operations) and Mr. Abul Kalam Azad (Officer) attended the meetings.
Various issues such as good governance and accountability, regulatory framework, institutional capacity building, training and human resource development, establishing standards/norms for the microcredit industry etc. were discussed in these meetings. Beside this problems faced by POs in the implementation of microcredit programme were also discussed. The Managing Director, PKSF assured all participants that PKSF would take appropriate measures to mitigate the problems within its means. He also suggested POs to undertake necessary steps to institutionalize and consolidate their microcredit programmes. Meanwhile, PKSF prepared an Action Matrix based on the findings of these meetings indicating the responsibilities of both PKSF and POs. The Action Matrix was circulated among POs and PKSF officials for action.

Retreat 2003

PKSF organized a two-day long retreat at BRAC Centre for Development Management (BCDM), Rajendrapur on August 28-29, 2003. The retreat was arranged to review the achievements of PKSF and discuss a host of issues to consolidate PKSF and its POs’ microcredit programmes. The issues discussed were challenges ahead of PKSF, issues raised in regional meetings, PKSF’s field observations, proposed vision and strategy paper of PKSF, etc. A total of 93 PKSF officers and support staff attended the retreat. Dr. Salehuddin Ahmed, Managing Director; Mr. Mosharraf Hossain Khan, Deputy Managing Director (Operations); Ms. Parveen Mahmud, Deputy Managing Director (Operations); Dr. M. A. Hakim, General Manager (Administration) were also present in the retreat.
The inaugural-cum-opening session of the retreat took place at PKSF auditorium and was inaugurated by Dr. Salehuddin Ahmed, Managing Director. This session was presided over by Mr. Mosharraf Hossain Khan. Dr. Salehuddin Ahmed, in his brief speech, raised various issues and challenges like further enhancing net disbursement, effectiveness of PKSF training activity, work culture, uniformity in PKSF advice given to POs, etc. and suggested participants to actively participate in the discussions. He hoped that the retreat would help find effective solutions and enrich officers’ conception about PKSF activities. The chairperson of the inaugural session, Mr. Mosharraf Hossain Khan, expressed his views on important issues regarding the operation of PKSF microcredit programme and invited opinion from the participants on those issues. The issues he raised were interpersonal relationships among officials, relationship between PKSF and POs, business plan, overlapping, savings management, risk coverage of PKSF funds, etc. Mr. M. Hasan Khaled, AGM; Mr. Akond Md. Rafiqul Islam, AGM; Ms. Jebun Nahar, Manager (CC); and Mr. Md. Mashiar Rahman, AGM presented papers on achievements of PKSF credit programme, microenterprise, projects and institutional development programme respectively. After the presentation of the papers, officers actively participated in the discussion and expressed their opinion on various issues.
The participants went to the BCDM as the inaugural session ended and attended a colorful cultural programme in the evening after dinner. The cultural programme was organized by PKSF officials.
The second session, titled “Field Observations & Issues Raised in Three Regional Meetings”, was chaired by Ms. Parveen Mahmud, Deputy Managing Director (Ops). Dr. Jasim Uddin, DGM presented the outcome of the regional meetings. A long discussion took place afterward and participants made various comments and offered suggestions.
The third session, titled “Presentation of the PKSF Vision and Strategy Paper (draft)”, was presided over by Dr. M. A. Hakim, General Manager (Admin). In this session Mr. A. Q. M. Golam Mawla, AGM, presented a summary of the draft Vision and Strategy Paper prepared by Dr. Ahmed Kamal and Dr. Hossain Zillur Rahman, two independent consultants. The paper was discussed thoroughly in the session.
Dr. Salehuddin Ahmed presided over the closing session. Mr. Golam Touhid, DGM, presented a summary of the discussions made in the retreat. Dr. Ahmed suggested to prepare an Action Matrix based on the findings of the retreat and advised all to implement the matrix.

Workshop on Implementation of Financial Services for the Poorest (FSP) Project in the First Year: Problems, Solutions and Opportunities

After completing the first year of project implementation, PKSF organized a workshop which was held on 20 October 2003 at PKSF Bhaban. A total of 64 participants took part in the workshop, which includes all supervisors and concern officers of PKSF; Executive Directors and Supervisor-Cum-Trainers of the implementing POs; representative from the World Bank, Dhaka Office and BRAC. Dr. Salehuddin Ahmed, Managing Director, PKSF, inaugurated the workshop. Mr. Md. Mosharraf Hossain Khan, Deputy Managing Director and Dr. M. A. Hakim, General Manager (Administration) also attended the workshop. In his address, Dr. Salehuddin Ahmed requested POs for adapting diversified strategies appropriate for the poorest beneficiaries so that it can be in line with the poverty alleviation efforts as outlined in Poverty Reduction Strategy Paper (PRSP) for Bangladesh.
The objective of the workshop was to share experiences among the partners, analyze the problems raised while implementation and work out the solutions. The participants gave emphasize on the integration strategy of social development programmes with regular savings and credit activities and some administrative issues.
Dr. Helal Uddin Ahmed, Project Coordinator, FSP presented the theme paper of the workshop, which was followed by an open discussion. The participants were divided in four groups and discussed the problems and probable solution regarding achievement of the target in loan disbursement, selection of appropriate trade for skill development training, take up social development activities for the hardcore poor and set up future action plan for achieving overall project target.

Launching Workshop on Microfinance and Technical Support (MFTS) Project

The launching workshop on Microfinance and Technical Support (MFTS) Project was held at PSKF Bhaban from 22 to 23 November 2003. MFTS Project is one of such many innovative interventions to provide support for involvement of the poor members in small-scale livestock enterprises. The IFAD supported US $20 million project will be implemented through 26 POs in 97 Upazila/sub-district of 13 districts for a period of seven years starting from 2003 benefiting about 2.76 households out of which 25% would be the hard-core poor not reached by normal microcredit programme.
Mr. Zakir Ahmed Khan, Secretary, Finance Division, Ministry of Finance, Government of Bangladesh, attended the inaugural session of the workshop as Chief Guest. Dr. Salehuddin Ahmed, Managing Director, PKSF, was present in the workshop. Mr. Nigel Brett, Country Portfolio Manager, International Fund for Agricultural Development (IFAD) and Mr. Edward Mallorie, Economist, IFAD, also attended the workshop as Special Guest. The workshop was presided by Mr. Mosharraf Hossain Khan, Deputy Managing Director (OOSA), PKSF. Chief Executives and Credit Coordinators of the POs under MFTS project participated in the two-day long launching workshop. All officers of PKSF were present in the workshop.
The Chief Guest, Mr. Zakir Ahmed Khan, Secretary, Finance Division, Ministry of Finance, Government of Bangladesh, in his address appreciated PKSF for launching the project. He hoped that this project would help substantiate the pro-poor economic growth. He recalled significant partnership with PKSF of GOB and hopeful about furthering this relationship.
Dr. Salehuddin Ahmed, Managing Director, PKSF, highlighted the objectives and goal of the project in his address. Pointing to different objectives and modalities of microcredit programme, he mentioned that only microcredit is not enough to alleviate poverty significantly. People should be equipped with other services along with microcredit so that economic growth can be sustained. Significance of MFTS project is that it will combine credit with livestock support for the moderate and hard-core poor. He hoped that the project will install capacity for the beneficiaries and the POs as well and this will create enormous potential for livestock sector of the country.
A total six papers were discussed in the first working session. These papers are (i) Introduction on and Implementation Strategies of MFTS Project, by Ms. Jebun Nahar, Project Coordinator, MFTS Project, PKSF; (ii) Experience of Livestock Project implemented in Bangladesh, by Dr. Kazi Abdul Fattah, Livestock Coordinator, MFTS Project, PKSF; (iii) Presentation on Monitoring and Evaluation, by Mr. Edward Mallorie, Economist, IFAD, (iv) Prospects and apprehended constraints in MFTS Project in view of PLDP experiences, by Mr. Md. Musharrof Hossain, Project Coordinator, PLDP, PKSF, (v) Training support and other inputs in the MFTS Project , by Mr. Md. Younus Ali, Training Officer, MFTS Project, Mr. S. M. Rajiur Rahman, Training Officer, MFTS Project, (vi) Presentation of Annual Work Plan and Budget (2003-2004), by Dr. Kazi Abdul Fattah, Livestock Coordinator, MFTS Project. In the second working session there was a presentation by UNOPS. Group discussions on various issues regarding implementation of MFTS project were held thereafter. The participants from POs and staff of PKSF took part in these group discussions. It is expected that the group recommendations will help in smooth operation of the project.
Loan for Institutional Development of POs
PKSF is implementing a loan programme for its POs’ capacity enhancement since 1997. PKSF gives highly subsidized loan (at 1% service charge rate) to its POs to buy computers, motorcycles, bicycles, engine boats, and photocopiers. The recovery rate of ID loan is almost 98.31%. The status of ID loan disbursement is presented as under:

PKSF also provides soft-loan (at 1% service charge rate) to construct office-cum-training centres of its POs.

Research Programme

Despite shortage of sufficient number of qualified staff in the research cell, PKSF undertook the following operation-oriented research:

a) Determining Appropriate Loan Loss Provision Policy
b) Drop-out from Microcredit Programme, Causes and Remedial Measures
c) Profitability Analysis of Micro-enterprise
d) Current Interest Rates and Financial Sustainability of PKSF”s Partner Organizations
e) Effect of Microcredit Loan Increases on Some Selected Socio-economic Conditions of Borrowers.
Draft reports on the research studies ‘a’ to ‘d’ have been prepared. The fieldwork on ‘e’ is progressing.

4. ADVOCACY FOR APPROPRIATE POLICIES AND REGULATIONS OF THE MICROCREDIT SECTOR:

PKSF lobbies with the Government and other relevant organizations for appropriate policies and regulation in the microcredit sector. The Government has constituted a committee to prepare a regulatory framework for the country’s microcredit sector. PKSF is an important member of this committee and making contribution to help the Government prepare a microfinance friendly regulatory framework.

OTHER AREAS OF CONTRIBUTION

Besides the above, PKSF is also making contribution in the following areas:

a) Computerization of POs MIS and Accounts System: PKSF has developed a software for PO MIS using Oracle 8i and Developer 2000. The software is being implemented in POs. PKSF has also developed software for POs’ Accounts which is being implemented in POs.

b) Credit Bureau Database: PKSF has taken up a project to set up a Credit Bureau Database at PKSF. The database will have information up to the borrowers level of all microcredit organizations of the country including PKSF POs and Grameen Bank. The data will be kept at a dis-aggregated level like union/village, which may be used to identify areas in terms of intensity of microcredit programme coverage.

c) Disaster Coping Strategy: PKSF has provided Tk. 10 million to its POs as grant for the creation of a Disaster Management Fund (DMF) by each PO. Each PO contributes a portion of their service charge earnings to this fund following DMF policy developed by PKSF. This fund is to be used for strengthening the disaster coping ability of microcredit clients through interest free loans following DMF policy guideline of PKSF.

d) PKSF and Gender Equality: PKSF since its very inception recognized the fact that without the active participation of women who constitute 50% of the country's population, microcredit programme would not be able to achieve its objectives. So, PKSF encouraged its partners to target their microcredit programmes to include mainly the women. Today, more than 90% of the beneficiaries of microcredit programmes of its partners are women. PKSF is, thus, playing an important role in empowerment of women.

e) GO-NGO Partnership: PKSF has very successfully established and developed GO-NGO collaboration in the field of poverty alleviation through the provision of microcredit. This successful model of GO-NGO collaboration can be followed in other relevant sectors also.

FINANCIAL SUSTAINABILITY OF PKSF

PKSF’s operating income has increased steadily over the years (Table-1). As PKSF has expanded its operations, its operating expense has also increased over the years. In 2002-2003, operating income constituted 86.24% of the total expenditure indicating PKSF’s financial sustainability.

Table-1: Operating Income and Total Expenditure of PKSF (1991-92 to 2001-2002)