| |
|
Occasional Papers: Vol:1 December 1998 No.1
|
Go
to Main Foreword
- Dr. Salehuddin Ahmed,
Managing Director Sources of Fund for MFIs :
Micro-Savings and Market Linkage - Mosharraf Hossain Khan
Programme Officers Role in Managing Microcredit Programe
: An Operational Guideline for Inspection and Decision Making - Md.
Shaikhul Islam Overlapping Problem in Microcredit
Operations - Md. Hasan Khaled An Analytical
Discussion on Performance Evaluation of Training by Quantifiable Target sand
Measures - Abdus samad Mallick Quality
in Training Management - Md. Mosleh Uddin Sadeque
| FOREWORD
PKSF staff
members, in spite of their very busy schedule of work, write short papers for
seminars workshops and for operational use. Since the authors cannot devote enough
time to write papers, these may not meet high academic standard in both form and
content, but these have great practical value because these are based on operational
experiences. Considering this, PKSF has decided to publish papers written by its
staff members occasionally in a publication titled "The Microcredit Review".
In the course of time, PKSF hopes to make it into a regular journal on microcredit
and open it to the contributors outside PKSF. PKSF would solicit advice and co-operation
in this respect from the readers and others concerned. Dr.
Salehuddin Ahmed Managing Director |

SOURCES
OF FUND FOR MFIs : MICRO-SAVINGS AND MARKET LINKAGE -
Mosharraf Hossain Khan
BACKGROUND
AND INTRODUCTION A
significant development in the Bangladesh rural finance sector in the last two
decades has been the prominence of NGOs in dispensing micro-credit for non-farm
activities. The Dheki Loan Scheme (Paddy Husking Program) launched by the Bangladesh
Bank in 1978 formed the basis for the subsequent prominent NGO intervention in
micro-credit- the Swanirvar Credit Program while the Grameen Bank Project launched
by the Bangladesh Bank simultaneously turned to be the world famous Grameen Bank.
Bangladesh is now probably known world-wide more for its innovative approach in
micro-credit than for any other count. The importance and focus Bangladesh received
during the Micro-Credit Summit held in U.S.A in 1997 has amply corroborated the
above statement. CHARACTERISTIC
FEATURES OF NGO INTERVENTION IN MICRO-CREDIT The
NGOs and the Grameen Bank have made commendable achievement in poverty alleviation
through creating income generating opportunities for the rural poor by providing
micro-credit with special focus on women. Their performances in creating employment
opportunity for the rural poor and alleviation of poverty are considered far better
than those of the formal banks on many counts; the characteristic features of
their micro-credit program being: collateral
free credit with simplified documentation and flexible terms and conditions; high
rate of recovery of credit ensured through close supervision of end-use; the recovery
percentage of the loans disbursed by these agencies ranges between 95% to 100%;
provision
of strict group exercise (viz. weekly meetings, savings mobilisation, repayment
of weekly instalments etc.) and awareness raising training on various aspects
of social discrimination, human development and sometimes on functional literacy
preceding and following credit; most
of the members/loanees (about 80-85%) are women; amount
of loan varies from Taka 2000 to Taka 10000; interest
ranges around 15% on flat rate (some with declining) basis - the effective being
almost double; finances
mostly non-farm instant Income Generating Activities (IGAs); target
to poor men or women owning less than 0.50 acre of cultivable land or having total
asset of the value of less than one acre of land in the locality; short
term loan repayable within 1 (one) year in weekly instalment; focus
on cohesive groups in contrast to bank's individual approach; the peer pressure-
the main theme of the group approach- acts as a driving force in ensuring timely
repayment of credit; credit
preceded by skill development training, where necessary, and followed by marketing
support to the entrepreneurs unlike the banks having no such forward & backward
linkage provisions; forced
savings by members with a view to generating own investible fund of the members
and gradually lessening dependence on credit; simultaneous
intervention in other areas like health, sanitation and community development
etc. to improve overall living condition of the group members. The
above is a generalised statement of widely common features of micro-credit program
run by the NGOs most commonly known as the Micro Finance Institutions (MFIs).
The norms/procedures and the area of intervention varies between MFIs depending
on the scale of operation and the approach ('Credit only' or 'Credit plus'). SOURCES
OF FUND FOR MFIs: The
major sources of fund for the MFIs comprise of the following : External
Donors grants Internal
Savings of members Sponsors
Equity and others (including
interest and service charge.) Loans
from national agencies The
NGO activities in this part of the globe mostly started with welfare and relief
oriented missionary objectives backed by external donors grant. Part of this grant
and/or surplus income has been being used as revolving loan fund for undertaking
income generating activities by the grassroots members. This fund still constitutes
the major portion of loanable fund of the MFIs. The sponsors' equity and ploughed
back earning also form significant part of the loanable fund. A recent publication
of Credit & Development Forum (CDF) a network of MFIs reveals the following
status of sources of fund for 351 MFIs as on 31.12.96 (Taka in million).
Member
savings
| : | 1656
| (20.41%) |
Loan
from PKSF & bank | : | 961
| (11.83%) |
Foreign donation | : | 3888
| (47.90%) |
Sponsors
Equity & ploughed back income | : | 1612
| (19.86%) |
Total
| : | 8117
| (100%). |
Meanwhile the emergence of the Palli Karma-Sahayak Foundation (PKSF) as second
tier institution to provide fund to the NGOs has added a new dimension to the
above issue. PKSF was created by the govt. as a non-profit organisation registered
under Companies Act in May, 1990. The objective of the organisation is to undertake
and promote various activities aimed at poverty alleviation. PKSF has, at present,
been working as an apex financing organisation for the NGOs (termed - Partner
Organisations) running micro-credit programme in rural areas. PKSF has a mandate
for undertaking wide ranging activities for poverty alleviation including capacity
building of it's Partner Organisations (POs). The performance of PKSF as on 31st
March 1998 in respect of NGO enrolment, loan disbursement and recovery is shown
in Annex -1. The POs of PKSF serving about one million beneficiaries are classified
into two categories based on their area coverage and focus/dimension of activities.
The large ones are under BIPOOL (Big Partner Organisations Operating in Large
areas) category and the small ones are under OOSA (Organisations Operating in
Small Areas) category. Out of the total 164 POs, 3 are under BIPOOL while the
rest 161 are under OOSA. PKSFs programme is spread over about 21000 villages
in 1728 Unions under 313 Thanas of 58 districts. The above coverage of PKSF is
however, meagre in comparison to the large scale demand of fund for poverty alleviation.
Considering the above
limited coverage by PKSF, gradual shrinkage of outside fund & difficulties
faced by the donors to fuel the increasing demand of fund of the MFIs, the savings
form the most important part of the loanable fund followed by credit from other
national agencies. The paper attempts to examine the issues concerning capital
accumulation through savings mobilisation and through linkage for funding from
the formal financial institutions. Part 1 of the paper would be dealing with savings
and Part 2 with the linkage issues.
PART-
1 : SAVINGS 1.1
CURRENT STATUS AND RATIONALE It
is commonly recognized that rapid economic development of an underdeveloped country
like Bangladesh requires a high rate of capital formation which in its turn requires
a high rate of domestic savings. Also, the savings is considered as one of the
important tools in ensuring long term sustainability of any micro-credit program
and it is from this consideration that savings form an integral part in the MFI
intervention in poverty alleviation. The
rural poor people of this country have age old history of savings in various forms.
The well known among such forms are the `MOOSTI CHAL' (a handful of rice set aside
at the time of cooking) or the petty savings by the kids in mud pots (`banks')
or cash savings of the elderly people in the holes made in the bamboo poles of
their thatched houses. A World Bank study in 1996 reveals the following potentials
of rural households to save: "There
is significant evidence showing that rural households in all income classes can
and do save non-trivial amounts. Survey results indicate that on average households
save over 22% of their incomes. Although not all households are able to save (27%
were deficit households), a large proportion of the population does so in various
forms. These alternative forms are often inefficient as they incur significant
transaction costs and risk capital losses. Over the past decade, the success of
MBIs (Member Based Institutions-the NGOs) in raising deposits from the assetless
households demonstrates the thrift that the poor are capable of. This potential
for deposit mobilization, however, remains largely unexploited." The
formal financial institutions of our country failed to tap large portion of these
savings due to their operational constraints and deficiencies in focus in the
rural areas. The institutional form of these small savings or what we now term
the micro-savings is a recent phenomenon owing it's emergence to NGO intervention
in the micro-finance Program. The above World Bank Study also reveals the following
state of financial services in terms of micro-savings available to the rural poor: "MBIs
(Member Based Institutions- the NGOs) require involuntary deposits from their
members, but do not accept non-member or voluntary deposits. PSIs (Public Sector
Institutions-the Banks) have not also focused sufficient efforts on this aspect
of financial intermediation. Survey results show that of the 82% of the sample
living close to a bank, only 37% had deposit accounts. This fell to 11% for households
living far from the bank. Over 88% of the depositors surveyed lived within one
mile of the bank. Total deposits of the bank branches is also strongly influenced
by their proximity to urban and business centers. Limited access is confirmed
by an analysis of transaction costs, of which time cost and conveyance are the
most significant components. The importance of access is also demonstrated by
the fact that less than half of the savings deposit holders and less than 30%
of term deposit holders were aware of the prevailing interest rates in their accounts."
The
NGO involvement in savings mobilization is, of course, not a one way traffic of
simple benevolent intervention only to help the rural poor in their own capital
accumulation. In most of the cases the NGOs started collecting savings from all
members to give credit facilities to some and solidify own existence meeting the
initial expenditures from the margin of interests till any donor commitment is
received. There are instances where the NGOs started collecting savings from the
members of public against promise to give them loans later on and ultimately vanished
from the area lock stalk and barrel defalcating all the petty savings of the poor
members. These mushroom institutions are popularly known as "Hai Hai Company"
(fake NGO) in colloquial terms. However, in honest view, the MFIs intervention
in savings collection is considered to be yielding, among others, the following
specific benefits: inculcating
gainful savings habit among poor members; savings
considered as 'old age security` and `cushion' against exigency; linking
the members with institutions; forming
capital base for the micro-savers as well as for the MFIs enhancing their capacities
towards sustainability of intervention; savings
acting as one of the cementing factors in maintaining group solidarity; savings
considered as a meaningful issue worth-discussing in group meetings; increased
contribution to overall national savings. 1.2
FORMS OF SAVINGS In
general terms, the savings fund of a Micro-finance Institution comprises of the
following: Involuntary
or forced savings from members Voluntary
savings from members Voluntary
savings from non-members Other
Charges/deductions at the time of loan disbursement.
1.2.1
The Involuntary savings comprise the bulk of the savings mobilized by the MFIs.
The method of collection of these savings, of course, is not uniform. In most
of the cases the members have to deposit a fixed amount (previously it was Taka
1-2 and now it is Taka 5-10) along with the weekly installments of loans. Sometimes
the amount may remain fixed within a samity and varying within the organization.
In most of the cases there is a lower threshold limit (Taka 2 or 5) but the upper
limit is open. Some of the MFIs collect the savings on monthly basis. The other
prominent form of involuntary savings is to attach the pro rata requirement of
savings with the quantum and frequency of loans. In this case the requirement
is expressed in terms of percentage e.g., 5% of loan asked for/sanctioned for
first time loan, 10% for second time loan and so on. 1.2.2
The voluntary form of savings mostly allows open access and flexible mode of transactions
where the members can deposit and withdraw any amount as if dealing with a bank.
The inaccessibility and remoteness of the bank branches on the one hand and the
confidence reposed on and nearness of the MFIs alongwith their flexibility/simplicity
in transactions on the other is all the magic in drawing huge number of small
savers to the latter. Although the flexible and open access savings facilities
has been being tested as recent phenomenon by some of the MFIs in our country,
this approach has proved very effective in quick capital accumulation elsewhere
in the globe. One of the largest MFIs has recently extended this savings service
to non-members as well. 1.2.3
In addition to the above voluntary and forced savings, some MFIs collect
other charges from the members mostly at the time of disbursement of loans. These
are collected in the name of Insurance Fund, Welfare Fund, Group Solidarity Fund,
Emergency Fund etc. and charged in terms of percentage with quantum of loans.
Although these funds are not termed as savings but they are designated to be used
for welfare of the group as a whole. Some MFIs keep these funds separate from
savings while there are some others keeping these funds mixed with the savings. 1.3.
THE ISSUES It
is observed from above that the members of the MFIs have to save mandatorily on
weekly basis to ensure their eligibility for credit and other services from the
MFIs. A theoretical calculation would deduce that a MFI having 10000 members collect
minimum of Taka 50,000 @ Taka 5 per member per week. This would approximate to
Taka 0.2 million per month. Annex -2 shows the total amount of savings collected
by top 20 MFIs of the country with average per member savings. This is quite a
figure taken together but this is a meagre amount of taka 5 or taka 20 per month
or few hundred in total to an individual member who is ready to part with this
petty amount in exchange of the direly needed credit at an increasingly higher
amount vis-a-vis considering the high cost of fund from other sources. This perception
of savings among majority of the poor members have paved the way for exploitation
with and misuse of the micro-savings at grassroots level breeding some important
issues of concern. Harvesting on the members' perception of micro-savings as a
"cost of credit' or some form of 'levy', the MFIs do generally keep this
fund idle in the bank account or invest in micro-credit or other high income earning
investments. But are the micro-savers being paid legitimate dividend or are their
interests protected? These and some other issues which need to be resolved to
give impetus to savings mobilisation protecting the interest of the savers &
for setting some standards in dealing with the micro-savings are discussed detailing
various stages of savings mobilisation like collection, maintenance, access use
& payment of dividend etc. in following sections. 1.3.1
COLLECTION The
term collection has been used here perceiving the savings as a function of provider
of credit rather than the micro-savers. Different MFIs use different methods of
collection of savings the commonly used practices are : weekly
installments @ Taka 5-10 deposited in weekly meetings with the loan installments;
weekly savings installments
collected on monthly basis; uniform
installments deposited by all members irrespective of capacity; members
depositing variable amounts according to capacity with the minimum ceiling remaining
fixed and compulsory; new
members requiring higher amount of savings to equate with the balance of savings
of old members gradually; savings
collected as a proportion of loan applied for and expressed in percentage;
transfer ("purchase/sale")
of savings between new and `deserting' members; In
all the instances the savings are collected from the enrolled members of the MFIs
excepting, of course, a few instances where savings are collected from the non-members
as a recent phenomenon. Whatever
be the method of collection it should be transparent and at standardized rate
fixed recognizing the savings capability and investment requirement of the poor
members. Variable rates also breed scope for corruption/malpractice by unscrupulous
employees unless the MFI has a very strong accounting and monitoring system which
is lacking in most of the beginner MFIs. 1.3.2
MAINTENANCE AND SECURITY The
savings thus collected are usually kept in an interest bearing bank account .
The usual variations in methods are : savings
kept in the accounts opened separately in the names of groups and the accounts
are operated by the authorized representatives of the groups; savings
maintained in the names of groups but the transaction in the bank is to be done
with consent of the MFI; Group
savings are pooled together in central account in the name of MFI and the account
operated by the MFI authorized officials; Part
of group savings are pooled together in the name of MFI keeping a nominal amount
in the groups' accounts. There
is a big avenue of exploitation in the method of maintenance of savings. Savings
kept in individual groups account give a feeling of ownness to the groups and
it tends to enhance group solidarity and cohesiveness. But, under this procedure,
there is scope of irregular leakage due to weak management and monitoring base
of the groups. Also under this system, quite a substantial amount is eroded gradually
from the accounts by way of bank charges and conveyance etc. The central pooling
is, therefore, a welcome alternative to avoid erosion. But in the central pooling
system, there is apprehension of large scale mismanagement & diversion if
the MFIs' management capability & honesty is in question. There
are loopholes in maintenance of record of savings at MFI level also. In most of
the cases the MFI level record is limited to keeping group-wise record of savings.
The individual entries are said to be available in groups who are not capable
of keeping any such record. The Field workers collecting the savings use loose
`Top Sheets' or `Collection Sheets' to record weekly collections. Once these collections
are deposited and entered into ledgers of the institution, these loose sheets
lose their utility and as such get lost in the stack of papers gradually. It is,
therefore, next to impossible to retrieve and reconcile the records in times of
need by back-tracing few months, let alone a years transactions. The
question of security of the micro-savings on the other hand, arises from ambiguity
in legal and ownership structure of the MFIs. Since the MFIs are not registered
under Banking Companies Act or any other financial acts, their performances are
not subject to supervision of Central Bank of the country. On the other hand the
Government's registration document is mostly silent on the issue of savings and
credit dealing of the MFIs. The small savings of the micro-savers are, therefore,
at stake in case of defalcation or other way mismanagement by the MFIs. 1.3.3
ACCESS As
stated earlier, the access to savings had so far been restricted until recently
when some of the MFIs have introduced provision of voluntary savings with flexible
and open access facilities. But generally speaking, the position of access to
forced/mandatory savings is one or other of the following: members
are not allowed to withdraw savings until he/she leaves the group liquidating
his/her liability withdrawal
allowed for part of savings keeping certain percentage of loan liability withdrawal
allowed on condition of return within agreed time and with interest withdrawal
allowed to liquidate loan liability before quitting the group Access
to own savings of the members should be considered as a basic right. 'Collaterisation'
of savings by denying open access has bred the wrong perception of savings as
a 'levy' among the members. This perception has handicapped realization of full
potential of savings of the poor members. 1.3.4
USE The
savings kept in the groups' account usually remain idle in the bank while that
kept in the MFIs' account have variable use. The position in general is as follows
: Savings
considered as collateral to loan to the members and thus remaining idle in the
Savings Bank Accounts. Savings
remaining in savings account with automated provision of transfer to periodic
fixed deposit account keeping a minimum agreed balance in savings account. Savings
used to purchase land/building etc. for the MFI treating the amount as loan to
the MFI with condition of return on fixed terms. Savings
used in micro-credit Programme of MFI. Savings
used by MFI for high income earning investment activity other than micro-credit.
Savings used for business
purpose at MFI initiative. Savings
used for purchase of Savings bond /certificate etc. 1.3.5
PAYMENT OF DIVIDEND Whatever
may be the use of the savings and earning there - against, the return or dividend
to the micro-savers is a major grey area. The problem circumvents the following
: the
micro-savers consider their savings as a cost of borrowing and as such remain
indifferent to its use and return etc; use
of savings are not subject to any question or audit by any regulatory authority; some
MFIs claim having provision of payment of dividend in document by posting an amount
in the passbooks of the members; but these have no meaning to the illiterate members; in
case of payment of dividend in extreme case, the return is not proportionate to
the earning from the investment. 4
RECOMMENDATIONS Although
Bangladesh is considered a pioneering country in disseminating innovative ideas
in the field of micro-credit, there is still a lot to be done in the delivery
of micro-finance services as a whole protecting the interest of the poor. The
MFIs' intervention in savings mobilization is one of the areas where the following
actions may be taken to protect the interest of the micro-savers:
Access to own savings
of the members should be considered a fundamental right. It
should be mandatory on the part of MFIs to ensure keeping of individual records
of savings. Use
of savings for personal gain or for acquiring assets in any individual's name
of the MFI should be considered a punishable offense. The
beginner MFIs should restrict their intervention to fixed savings and gradually
shift towards open access and voluntary mode once they have developed capability
to keep individual records. Once
the MFI has developed capability to keep transparent accounts of savings at their
level, the savings can be made open and flexible. The
discussion on savings should be made a compulsory agenda in the group meetings
where the Field Worker would disclose the total updated savings of individual
members as well as of the group and the balance of group savings as appear in
the MFIs record should be written in the resolution. The
members should be given profit on savings calculated at the prevailing rate offered
by banks and the profit should be distributed in cash to each of the members in
a bigger rally at the end of the year. The
central regulatory or lending agency (i.e. Bangladesh Bank or PKSF etc.) may consider
extending insurance coverage to the these savings; this would enforce them to
oversee the area to protect their own interest. Taking
actions in the above line would enhance the confidence level of the micro-savers
as also would establish justice and equity, remove the scope of exploitation and
give a boost to the savings mobilization by the MFIs. Mentionably,
monitoring of savings of the POs is one of the core agenda of PKSF intervention
and it has already started implementing some of the above recommendations in concert
with the POs. In a workshop held at the Bangladesh Academy for Rural Development
(BARD), Comilla on February 22-24, 1998 and attended by representatives of 128
NGOs (POs) it was discussed and resolved that POs would follow a standard norm
in management of savings of their members. Some of the important recommendations
adopted to this end were as follows: With
a view to avoiding erosion of small savings on account of bank charges and other
incidental costs, the savings should be pooled together in a central account under
unified management of the PO. The
PO would maintain society and member - wise subsidiary ledger and all members
would be informed of their updated savings balance in the weekly meetings. The
mandatory savings can not be withdrawn instantly on demand; but the POs would
themselves formulate terms and conditions for the withdrawal of such savings in
case of dire need of the members. Voluntary
savings should be considered withdrawable and savings of deceased and deserted
members should be returned instantly after adjustment of liability. Part
of savings should be kept in bank account while some other part may be deployed
in liquid investment (e.g. fixed deposits, savings certificate etc.) and the remaining
part may be used as revolving loan fund. Savings
should not be used for any administrative purpose or for acquiring any fixed asset
for the PO. In
case of any need for using the savings for profitable long term investment, the
same can be done by transforming it into shares with the consent of the members. The
members should be paid dividends on their savings at the prevailing or higher
rate provided by the banks. PART
2: LINKAGE WITH FORMAL FINANCIAL INSTITUTIONS 2.1
BACKGROUND INFORMATION Although
the contribution of the rural branches of the Nationalised Commercial Banks (NCBs),
the Bangladesh Krishi Bank and the Rajshahi Krishi Unnayan Bank have been found
to be very instrumental in increasing food production and to develop the rural
economy through dispensing large amount of agricultural credit, their contribution
in dispensing credit for poverty alleviation has always been insignificant in
comparison to that of the NGOs in terms of coverage and outreach. On this backdrop,
the Bangladesh Bank issued instructions to all of the Public Sector Banks in early
nineties to establish linkage with the NGOs dispensing micro-credit and off-load
their surplus fund (at that time the banks had huge surplus liquidity) for poverty
alleviation activities of the MFIs. The
above instruction of the central bank, however, fetched limited success till date.
The often-cited reasons of this include: Attitudinal
problem of the Banks towards micro-credit. The
Banks inability to lend without collateral security. High-hidden
transaction costs' acting as deterrent for MFIs to approach the Banks. 2.2
ATTITUDINAL PROBLEMS The
formal financial institutions of this country, specially NCBs were inducted in
rural credit in 1973. After passage of long 25 years of rural financing, it is
obviously not wholly justified to say that these banks have a negative attitude
towards micro-credit. It is not out of place to mention here that these banks
have nurtured the Grameen Bank Project - the infant stage of the Grameen Bank.
These Banks have also comparable success history in implementing number of donor
assisted projects aimed at poverty alleviation. Some of such major projects are: Agrani
Bank's Productive Employment Project (PEP). Janata
Bank's Small Farmers and Landless Labourers Development (SFDP) Project. Sonali
Bank's Rangpur Region Rural Development Project (RD-9). Sonali
Bank's Rural Poor Co-operative Project (RPCP). A
close examination of the performance of above projects in disbursement and recovery
of poverty alleviation credit, as shown in annex -3, would reveal that the projects
have achieved, if not outperformed, the same level of repayment as that of NGOs.
It belies the generalised statement and belief that the NCBs are not attuned to
disburse credit to the poor nor is their attitude favourable to such credit programme. 2.3
PROBLEMS OF COLLATERAL SECURITY This
is also another lame excuse put forward to avoid responsibility by the concerned
quarter. The formal banks of this country were inducted to dispense rural credit
in 1973. The rural credit programme of the banks got a big push in 1977 when the
Special Agricultural Credit Programme (SACP - widely known as Taka 100 crore SACP)
was launched throughout the country. One of the characteristic features of this
mass oriented SACP was that loans were to be disbursed without any collateral
security. Although it was a `push' for the banks in 1977, the banks have internalised
the programme and have been dispensing collateral free rural or agricultural loans,
Collateral free loan is no more a non-bankable proposition to the banks. To cite
a specific example, the Sonali Bank - the largest of NCBs, has a rural credit
portfolio of about Taka 24 billion (US $ 520 million) out of which about 80% has
been disbursed without any collateral security. So, the contention that the banks
charter do not permit disbursement of collateral free credit is not correct. 2.4
HIDDEN OR UNDERHAND TRANSACTION COST Corruption
is yet another `delicious' issue for discussion we enjoy everywhere every time.
The question of corruption emerges from financial discretion. "Power corrupts
and absolute power corrupts absolutely". But in the case under discussion,
no single officer is empowered (not even the Managing Director of the Bank) to
sanction loan to an NGO since there is no policy decision taken in this regard
by the Board of Directors of the Banks. Few sporadic cases of linkages have been
approved individually by the Board of Directors of the concerned Banks. In this
context it is simply inconceivable as to how the question of underhand dealing
could crop up without the power vested to any single hand! It is simply an unfortunate
generalisation of the corrupt practices prevailing elsewhere. 2.5
ISSUES The
above discussion boils down to the conclusion that we have generally been beating
about the bush while dealing with issue of linkages. An insider's view dictates
the following most important issues standing as stumbling block towards the linkage
programme : Lack
of Policy decision at banks. Lack
of Knowledge of Bankers about the NGO activities. Inaction
of collective body or networks of the NGOs. Legal
deficiencies of the NGOs. 2.5.1
POLICY DECISION As
stated earlier, the banks need a decision at policy level to embark upon or open
any new credit line. Once the decision is taken, it is enjoined upon the line
officials to implement and comply with decision. This did not happen in case of
linkages. The Bangladesh Banks instruction was half-hearted without any
aggressive follow up to force the officers to place the issue to the Board of
Directors and sort out a decision. 2.5.2
BANKERS' MISCONCEPTION There
is a wide spread misconception among sizeable section of the people including
the bankers that the NGOs are exploiting the poor people in the name of development
of their lot and as such `floating' an NGO is considered to be a good business
and pastime hunting place for the retired Government officials. This wrong notion
is being bolstered time and again by newspaper reports of the misdeed of the `Hai
Hai Companies (fake NGOs) on the one hand and failure of the NGO community as
a whole to make effective dent in changing the attitude of the bankers as a whole
on the other. 2.5.3
INACTION OF NETWORKING BODIES The
two networking bodies of the NGOs- the Association for Development Agencies in
Bangladesh (ADAB) and the Credit and Development Forum (CDF) should share some
responsibility for not being able to `drag' the banks in the field. They should,
by this time, have had some exploratory exercises as to why the banks are not
coming and how the much needed linkage could be made effective. Their roles have
so far been limited to holding perfunctory bi-lateral discussions and/or holding
futile workshops/seminars where the Banks participation is mostly far less than
expectation (both in respect of level of participation and representation) due
to lack of aggressive follow-up from the hosts. 2.5.4
LEGAL DEFICIENCIES This
is probably the crucial of the issues so far dealt with. It concerns all aspects
of intervention of MFIs including the capital mobilisation through savings accumulation
and establishment of linkages with formal financial institutions. Our discussion
would remain limited to linkage perspective. Any
lenders first and foremost consideration in his business is to ensure that
the other party with whom the transaction is made is a legal or jurist person
who can sue or be sued under the law of the land. Bankers are no exception to
follow and enforce this consideration. If the borrower is an institution the bankers
would also like to see that the borrower has a clear `borrowing clause' to raise
fund and is authorised to conduct the activities it proposes as per registration
document. The position of most of our MFIs registered under Voluntary Social Welfare
Agencies (Registration and Control) Ordinance 1961 are very weak in this respect.
The Ordinance defines the NGOs as under "Voluntary
Social Welfare Agency" means an organization, association or undertaking
established by persons of their own free will for the purpose of rendering welfare
services in any one or more of the fields mentioned in the schedule and depending
for its resources on public subscriptions, donations or Government Aid " The
Schedule referred above includes the following: I)
Child welfare. II)
Youth welfare. III)
Women's welfare. IV)
Welfare of the physically
and mentally handicapped. V)
Family planning. VI)
Recreational programme intended to keep people away from antisocial activities.
VII)
Social education, that is, education of adults aimed at developing sense of civic
responsibility. VIII)
Welfare and rehabilitation of released prisoners. IX)
Welfare of juvenile delinquents. X)
Welfare of the socially
handicapped. XI)
Welfare of the beggars and destitutes. XII)
Welfare and rehabilitation of patients. XIII)
Welfare of the aged and infirm. XIV)
Training in social work. XV)
Co-ordination of social welfare agencies". It
is obvious from the above that the current intervention of the NGOs (registered
under above ordinance) in savings - credit transaction does not fit comfortably
in any of the above fields. As such, any attempt to establish effective linkages
with the banks for sourcing of funds for the MFIs would be futile unless the above
legal deficiencies are removed with a firm regulatory framework. This, of course,
is a lengthy procedure. Till the legal issues are sorted out, the linkage can
still be activated through motivation of and bargaining with the banks for linkage
on a different model (than are currently in practice by a handful of MFIs) as
described below. 2.6
ALTERNATIVE MODEL OF LINKAGES: The
most widely perceived linkage between MFIs and the formal banks is that the banks
would make bulk lending to the MFIs who would make onward disbursement (retail)
to the grassroots members. The linkage between the BRDB sponsored two tier co-operatives
and the Sonali Bank may be termed as the oldest of this kind. The latest of such
linkages are ASA-Agrani, PAGE-Janata linkage. In both of the cases the MFIs had
to offer collateral security. Effecting large scale non-collaratised lending under
this model would necessitate addressing, among others, the legal issues described
above. The
alternative model proposed here is the one tested in GTZ -IFAD assisted Marginal
and Small Farms System Crop Intensification Project (MSFSCIP) in Kurigram. The
essence of this model is that the banks would lend directly to the grassroots
beneficiaries (thus obviating the question of legal status of the borrowers) with
collaboration of an intervening NGO performing the social mobilisation activities
(group formation, training, motivation etc.) against a share of interest (the
RDRS was the NGO under MSFSCIP). The
successful implementation of MSFSCIP & poverty alleviation projects by the
formal banks as described in section 2.2 dictates that it is not the Institution
only which accounts for better recovery, rather it is the area of intervention
and the type of clientele along with the mechanism of delivery and monitoring
which matters most to achieve better result. Since the banks have no constraint
of fund, the human capital input provided in the intervention of the donor assisted
projects described in section 2.2 may be arranged establishing effective linkages
with (following above model) the scores of NGOs rich in experience and lacking
in resources. One may raise here the question of cost of the intervention. This
can also be resolved by rationalisation of the rate of interest at grassroots
level. For instance, the NGOs are charging interest around 15% (on face value-
the effective being around 29%) for the poverty focused credit programme and various
studies on the issue have shown that it is not the rate of interest rather the
timely availability and adequacy of the credit which matter most to the beneficiaries.
Accepting this statement, the effective rate of interest at grassroots level may
be fixed at around 20%. Now, considering that the NCBs cost of fund should be
somewhere around 10%, they could charge interest @ 12% adding service charge @
8% for the intervening agency- the NGOs. The apportionment from the effective
20% could be as under : Bank
12% (10%cost coverage+2% margin) NGO
8% (Social mobilization charge) ------------------------------------------------------
Interest at grassroots level 20% This
linkage would add impetus to our efforts for poverty alleviation through formal
& permanent institutional intervention. Although this model proved successful
in MSFSCIP, it could attract little attention from the NGOs who prefer bulk funding
keeping the banks at bay and the banks are apathetic to linkages as ever for reasons
described above. 2.7
RECOMMENDATIONS Establishment
of effective linkage would call for immediate three pronged action as under:
Motivational and awareness
raising campaign among banks. Addressing
legal deficiencies of the MFIs. Promoting
the alternative model of linkages (Section 2.6). The
alternative model would not only help establishing direct linkage of grassroots
members with the formal institutions but would also open avenue for `graduated
members' to continue receiving credit service from the resourceful banks. CONCLUDING
REMARKS There
is no denying the fact that the current trend of donor dependant and grant tailored
intervention of the MFIs should be reversed for the sake of sustainability of
the programme. Savings is considered as one of the most important tools to that
direction followed by harnessing internal resources through linkages with banks
and other formal market sources. Various issues circumventing the above two tools
of attaining sustainability have been described above. It is expected that addressing
these issues would add impetus to our efforts to internal resource mobilisation
for implementing microfinance programme under a exploitation-free, transparent
and poor friendly legal environment. Annex-1 Summary
of Foundation's Loan Programme
| A.
PKSF - PO Level | |
Month : March `98 |
| Sl
| Items
|
| 1997-98
| Total
| | No
| |
Cumulative upto Last year
| Upto
Last Month | This
Month | End
of This Month | | |
1 |
No. of Partner Organisation (PO)
| 150
| 13
| 1
| 14
| 164
| | 2
| Loan
allocation (in million Tk.) | 2625.89
| 1064.70
| 335.00
| 1399.70
| 4025.59
| | 3
| Loan
disbursed (in million Tk.) | 1891.44
| 1176.30
| 296.80
| 1473.10
| 3364.54
| | 4
| Loan
recoverable (in million Tk.) | 685.76
| 254.73
| 41.21
| 295.94
| 981.70
| | 5
| Recovered
(in million Tk.) | 670.79
| 250.57
| 40.36
| 290.93
| 961.71
| | 6
| Overdue
loan (in million Tk.) | 15.30
| 19.35
| 0.96
| 20.31
| 20.30
| | 7
| Loan
outstanding (in million Tk.) | 1220.64
| 2146.38
| | 2402.83
| 2402.83
| | 8
| Rate
of recovery | | | |
98% | |
| 1
| Loan
disbursed (in million Tk.) | 5108.69
| 3738.82
| 490.12
| 4228.94
| 9337.63
| | 2
| Loan
Recovered (in million Tk.) | 3744.89
| 2421.69
| 338.88
| 2760.58
| 6505.47
| | 3
| Savings
Generated (in million Tk.) | 526.73
| 296.30
| 30.54
| 326.84
| 853.57
| | 4
| Rate
of Repayment | | | | |
99% | |
| 5
| Group
| Male
| 100338
| 148932
| 7651
| 156583
| 156583
| | |
Members |
Female |
862137 |
1356219 |
38012 |
1394231 |
1394231 | | | |
Total |
962475 |
1505151 |
45663 |
1550814 |
1550814 | |
6 |
Number of Loanees |
Male |
56576 |
97455 |
32610 |
130065 |
130065 | | | |
Female |
615543 |
971307 |
76190 |
1047497 |
1047497 | | | |
Total |
672119 |
1068762 |
108800 |
1177562 |
1177562 | Annex-2 Statement
on Savings Mobilisation by Top 20 NGOs as on 30.6.97
| Sl.
| Name
of NGO | Amount
of | No.
of | Per
Capita | | No.
| |
Savings |
Members |
Savings | | |
(in million Tk.) |
(in '000') |
(Taka) | |
1 |
BRAC* |
1470 |
1898 |
775 | |
2 |
ASA* |
545 |
663 |
823 | |
3 |
Swanirvar Bangladesh* |
130 |
680 |
191 | |
4 |
TMSS, Bogra* |
38 |
267 |
142 | |
5 |
SSS, Tangail* |
36 |
54 |
667 | |
6 |
RDRS* |
36 |
331 |
109 | |
7 |
ACTION AID |
30 |
17 |
1765 | |
8 |
Uttaran |
29 |
24 |
1208 | |
9 |
CODEC |
24 |
29 |
828 | |
10 |
Buro, Tangail |
20 |
41 |
488 | |
11 |
BEES |
20 |
36 |
556 | |
12 |
EDM |
20 |
42 |
476 | |
13 |
BAWPA |
20 |
46 |
435 | |
14 |
UDDIPAN* |
16 |
19 |
842 | |
15 |
Poor Development Programme (PDP) |
16 |
32 |
500 | |
16 |
MSS |
15 |
17 |
882 | |
17 |
Comilla Proshika |
13 |
28 |
464 | |
18 |
HEED Bangladesh* |
12 |
33 |
364 | |
19 |
RISDA Bangladesh |
11 |
24 |
458 | |
20 |
Hilful Fujul* |
11 |
4 |
2750 | Source:
CDF statistics: Volume 4, June 1997 *
Partner Organisation (PO) of Palli Karma-Sahayak Foundation (PKSF)
Annex-3
Performance
of credit component of four Poverty Alleviation Projects implemented by Formal
Financial Institutions (as
on 31st March, '98)
|
Sl. No.
| Name
of Project | Name
of Bank | No.
of Members enroled | Total
Savings accumulated (in million Tk.) |
Loans disbursed (in million Tk.)
| Repayment
of loans (%) |
Remarks |
| 1
| Rural
Poor Co-operative Project |
Sonali Bank |
258290 |
182.2 |
1714.9 |
99.36 | |
| 2
| Productive
Employment Project (RD-5) |
Agrani Bank |
133803 |
83.3 |
1056.7 |
99.82 |
| 3
| Rangpur
Region Rural Development Project (RD-9) |
Sonali Bank |
40077 |
98.1 |
363.5 |
96 |
| 4
| Small
Famers & Landless Labourers Development Project |
Janata Bank |
51037 |
62.0 |
353.7 |
93 |
(position as on 31.7.97)
| Source : Project MIS
Reports.
| Programme
Officers Role in Managing Microcredit Programme : An Operational Guideline for
Inspection and Decision Making |  |
Md. Shaikhul Islam | |
1.
INTRODUCTION : Operationally,
a programme officer of a Microcredit NGO (MC NGO) is primarily responsible for
the credit program of one or more than one branch. He/she has to visit each of
the branches to supervise and monitor the credit program several times a year
and necessarily each visit is extremely important. To make each inspection fruitful,
a programme officer must have clear idea about the purpose of his/her visit and
the techniques that he/she will have to follow during the inspection. It is important
to mention here that the top, senior and mid level management of MC NGOs generally
take operational decisions primarily on the basis of the comments and recommendations
given by programme officers. So, a programme officers role is pivotal in
bringing success or failure to microcredit programme of NGOs. 2.
OBJECTIVES OF VISIT The
objectives of branch visit are as follows : i)
To strengthen supervision and monitoring system. ii)
To find out the true picture of credit program conducted by the branches. iii)
To evaluate whether the branches are on the right track or not. vi)
To follow-up the implementation status of decisions. 3.
DESIRED FEATURES OF A PROGRAMME OFFICER : a)
Orientation of work : Managerial b)
Approach/Attitude to work : Positive/Proactive c)
Skill : A programme officer must have or needs to develop three types of skill.
These do - i) Technical
Skill : Detailed knowledge about the works that he/she has to apply. ii)
Interaction Skill : Capacity to work with the branch staff, communicate with the
colleagues and lead the branches towards desired goals of the NGO. iii)
Conceptual Skill : Inherent ability to diagnose problems and foresee the future
scenario. d)
Role : A programme officer generally performs
three types of role. These are a)
Interpersonal role : A programme officer has
to perform some interpersonal functions. For example, contact with donors, other
NGOs and government organizations. So personality of the programme officer is
important here. Basically there are two types of interpersonal role. a.1)
Leadership role : It needs dynamic type of personality. A programme officer
who is go-getter can easily motivate others. a.2)
Liaison role : A programme officer should have the ability to interact
with outsiders and insiders (colleagues) b)
Informational role : A programme officer has
to perform different informational role. This role necessitates handling information.
A programme officer acts like a monitor, a disseminator and a spokesperson. b.1)
Role as a monitor : Everyday a programme officer receives a lot of information
from different internal and external sources and he/she has to monitor all sorts
of information to help decision making and eventually he/she becomes the nerve
center of his/her organization. b.2)
Role as a Disseminator : A programme officer
also acts as a conduit to transmit information to the members of his/her organization.
A Programme officer should make verbal contacts with the concerned personnel to
ensure free flow of information regarding activities, strategies, future courses
of action etc. b.3)
Role as a spokesperson : A programme officer is also a spokesperson of
his organization when he/she talks to outsiders (donors, other NGOs and government
organizations). A programme officer needs to be an expert in the dynamics of credit
program, legal matters and strategic planning. He/she should have good communication
skill and convincing power. c)
Decision role : A programme officer does not take decision but assists in decision
making. He/she suggests/assists his organization to solve pressing and important
problems. He/she will communicate policy/operation decisions given by competent
authority of his/her organization to its branches and other concerned organizations. d)
Effectiveness : An effective programme officer is one
who maintains quality and quantity of his/her responsibilities and attains satisfaction
of his bosses and motivates his subordinates. 4.
PERSONAL BEHAVIOUR OF A PROGRAMME OFFICER. A
programme officers personal behaviour is important in managing his microcredit
NGO. It is wise for the programme officer to treat the branches of his organization
as autonomous organs. Therefore the programme officers approach to the branches
should be convincing and friendly. It must be remembered that the programme officer
should not act as boss/master while visiting branches. The programme officer is
to assist the branches in the implementation of credit programmes. The programme
officers are not directly responsible for implementation of microcredit programmes.
Basically following are the main areas in which a programme officer has to be
careful in their personal attitude/behaviour. TO
DEAL WITH THE BRANCH MANAGER : While
visiting a branch, a programme officer should respect the dignity of the branch
manager. The programme officer should not make any impulsive comment about the
staff or the programme. He/she should not be rude to the branch manager. The programme
officer should not reprimand the manager for the problems and irregularities in
front of his/her junior colleagues. It would be wise for the programme officer
to avoid personality clash with the manager. Any negative approach in the inspection
process might hinder the achievement of the goals of the organization. Therefore,
the programme officer has to be careful about dealing with the manager. TO
DEAL WITH THE SENIOR MANAGERS : Senior
Managers of a branch play the main role to sustain the performance of credit programme.
They are generally the link between the top and bottom level management. While
visiting a branch the programme officer mainly needs to work with Senior Managers.
The Chief Executive Officer also gets things done by the Senior Managers. The
programme officers cordial and friendly behaviour may be helpful to get
the real picture of the branch. TO
DEAL WITH THE ACCOUNTANTS : The
Programme Officer should not make the accountants panicky while checking the books
of accounts and other relevant papers. The accountants are the main persons who
know every financial transaction of a branch. So to obtain proper explanations
from the accountants the programme officer should show cordial behaviour to the
accountants. TO
DEAL WITH THE FIELD WORKERS : Field
workers are the bridges between the grass root levels and the branch. They are
the end receivers of all decisions for implementation. Field workers recommend
for lending money to the group members. They know pros and cons of the groups.
The programme officer should show amicable behaviour/attitude to the field workers.
The programme officer should not make any harsh or negative comments about the
field workers in front of the group members because it can undermine the
credibility and personality of the field workers in the eyes of the group members. 5.
INSPECTION TECHNIQUES 5.1
METHODOLOGIES OF INSPECTION A
programme officer has to spend two or three days in each branch inspection. To
make this inspection meaningful, the programme officer must have clear understanding
about the methodologies of inspection. Basically, an inspection considers the
following methodologies : a.
Work at the branch office level b.
Work at the branch field level A.
Work at the Branch Office Level : There
is no scope for checking books of accounts and financial statements at random
sampling basis. Rather, the programme officer will give emphasis on thorough checking. B.
Work at the Branch Field Level : The
programme officer can randomly choose at least 10% of the total groups. Here two
groups must be visited thoroughly. If there are defaulting groups (current, doubtful
and expired) then the programme officer must select at least two such groups for
his/her 100% inspection. 5.1.1
TYPES AND SOURCES OF INFORMATION NEEDED An
effective inspection needs a lot of information to assess and subsequently to
monitor branch credit program vis-a-vis the organization and for this purpose
the importance of undistorted information is extremely important. So a programme
officer has to be careful about the types and sources of information. The following
are the main types and sources of information that a programme officer needs during
his/her inspection. 5.1.1.1
ACCOUNTING INFORMATION SYSTEM: OFFICE WORK A.
Accounting System : *
Cash basis/Accrual basis *
Double Column B.
Books of Accounts and Documents of Books of Accounts *
Cash book *
General ledger *
Subsidiary ledger *
Vouchers (Debit, Credit, Journal, etc.)
* Cash
memo *
Bank deposit slip * Bank
statement *
Bank cheque * Cheque
requisition form * Cheque
register C. Authorized
Cheque signatories. 5.1.1.2
MANAGEMENT INFORMATION SYSTEM (MIS): OFFICE AND FIELD WORK It
is desired that the branches must acquire and manage information effectively.
Lack and inefficient use of information are responsible for almost every operational
and management problem. Therefore an efficient MIS is always required for the
optimum improvement in financial performance and operational efficiency. Branch
MIS Formats of Credit Program *
Collection sheet for loan & savings
*
Weekly & monthly report for loan & savings *
Loan application & agreement form *
Group members attendance report *
Report on categories of loan *
Loan and savings pass book *
Loan & savings cash flow statement (cumulative & for the month) *
Income & expenditure statement (cumulative
& for the month) etc. The
information related to all the above formats must move among field workers, Accountants,
Branch Managers, Co-ordinators, Directors and Executive Committee. The information
"systems" are inter-linked and take into account almost every person
in the branch and the organization. The programme officer should 'map' the basic
information systems by using different components of MIS which are given below.
The map should provide the programme officer with enough data to access the organizational
capacity to manage its information. MIS
MAPPING FRAMEWORK
| Position
| Report
| Decision
| Supervision
| | Executive
Committee | | | |
| Chief
Executive | | | |
| Co-ordinator
| | | |
| Branch
Manager | | | |
| Accounts/Field
workers | | | |
Source: Inter
American Development Bank (Technical Guide) The
MIS MAP indicates who is responsible for specific output, what indicators &
reports are used to measure the organizational performance and how overall progress
is monitored. Once the map is complete, the programme officer can evaluate whether
the mechanisms in place are adequate or not. 5.1.1.3
TARGET GROUP INFORMATION : FIELD AND OFFICE WORK a.
Books of accounts/MIS: *
Loan pass book *
Loan and saving pass book *
Resolution book * Savings
register *
Attendance register etc. *
Membership card with photograph b.
Group dynamics *
Regular group meeting *
Awareness of group members regarding loan and
other development issues. *
Group cohesiveness *
Peer group pressure *
Attitude towards the organization/branches *
Weekly/monthly savings collection c.
Clientele *
Total number of Groups (male and female)
* Total
number of members (male and female) *
Cumulative loanee (male and female) *
Current loanee (male and female) *
No. of loans made *
Membership card 5.1.1.4
ORGANIZATIONAL INFORMATION: OFFICE WORK *
Constitution *
Organogram *
General Body * Executive
Committee * Chief
Executive 5.1.1.5
RESOURCE MOBILIZATION: OFFICE WORK *
Donation/Grant *
Borrowing *
Group Savings 5.1.1.6
WORKING AREA INFORMATION: OFFICE WORK *
District * Thana
* Union
* Village 5.1.1.7
HISTORICAL PERFORMANCE OF THE ORGANIZATION (SUBJECTIVE): OFFICE WORK 5.1.1.8
FINANCIAL INFORMATION: OFFICE WORK *
Financial statements and analysis of financial
statements *
Balance sheet * Cash
flow statement * Income
and expenditure statement *
Profit and loss statement *
Ratio analysis etc. 5.1.1.9
CREDIT POLICY INFORMATION (CONSISTENT WITH THE ORGANIZATIONS GUIDELINES)
: OFFICE WORK *
Definition Of target group members *
Lending method *
Duration of loan *
Instalment *
weekly *
monthly *
Loan conditions *
Categories of loan *
Service charge calculation method 5.1.1.10
INFORMATION RELATED TO ORGANIZATIONS INCENTIVE STRUCTURE: OFFICE AND FIELD
WORK a. Internal
factors *
Main focus of the organization *
Trained, motivated & professional staff. b.
External factors *
Relationship of the organization
with other organizations (e.g. banks, insurance company etc.) *
Relationship of the organization/branch with
other Govt. regulatory agencies (e.g. Local Administration, NGO Bureau, Social
Welfare etc.) *
Relationship of the organization/branch with
its donors/lenders. 5.1.1.11
INFORMATION OBTAINING PERIOD *
Cumulative (since inception) for
quantitative information *
For the month/from current visit to its previous
visit (quantitative) *
Historical trend (quantitative) 5.1.1.12
INFORMATION RELATED TO THE ORGANIZATIONS/ BRANCHS OPERATIONAL EFFICIENCY *
Field worker : Group member
*
Field worker : Current loanee member *
Field worker : Outstanding loan *
Supervisor/Branch manager : Field worker
*
Work plan of Field worker/Supervisors/Branch
manager 5.1.1.13
INFORMATION RELATED TO DEMAND OF FUND BY THE BRANCH AND FROM THE ORGANIZATION
: OFFICE AND FIELD WORK The
programme officer will assess branch loan demand in accordance with its position
in the branch categories if any. 5.3
PROCEDURAL CHECKING OF DIFFERENT SOURCES OF INFORMATION : OFFICE WORK Basically
there are thirteen types of information with all their sub categories that are
to be checked procedurally from all their sources. The programme officer has to
check AIS, MIS & all other related papers cautiously and will ensure correctness.
In this step the programme officer needs to apply his/her accounting/financial
knowledge and mathematical reasoning ability. 5.4
CROSS-CHECKING & VERIFYING INFORMATION FROM DIFFERENT SOURCES AND PREPARATION
OF FINANCIAL STATEMENTS: OFFICE AND FIELD WORK After
finishing procedural checking the programme officer has to cross check the information
obtained from different sources. The purposes of this cross-checking are : 1.
To establish relationship among different types
and sources of information for comparison. 2.
To correct any sorts of minor mistakes among different sources (e.g. clerical
mistakes) After cross
checking the information, the programme officer can proceed to prepare financial
statements like receipt & payment statement, income & expenditure statement
etc. 5.5
LISTING AND FORMATION OF CHECKLISTS ON THE BASIS OF INDICATORS: OFFICE
WORK The next step is
to prepare checklists on the basis of the indicators that will be found correct.
In this step, the programme officer has to pay his/her careful attention
to each of the indicators and checklists. If the programme officer misses any
indicators then he/she will have to start from the beginning. The basic checklists
are provided in annex 1. Generally, the programme officer will go through
the checklists carefully and tick on the status and give his/her comments and
then can take preparations for entering into the decision making process. 6.
DECISION MAKING PROCESSES The
purpose of inspection is to assist in decision making and implementing the decisions.
Through inspection programme officer assesses whether the branches are on the
right track or not. The programme officer should give emphasis on assisting the
management to take right decisions. Any minor loopholes in decision making might
endanger the whole programme. For example, if the programme officer does not look
into the low attendance rate of the group members in group meeting (<80%) and
subsequently recommend to sanction loan in favour of the concerned branch and
if the management sanctions the loan on the basis of the programme officers
recommendations then it will be a wrong decision. Because, low attendance rate
of the group members in the group meeting indicates that the supervision &
monitoring of the branch is not up to the mark, group members are not well aware
of the purpose of meeting. Decision making process can be best described by the
following figure -
| Logical
analysis of the checklist indicators |
® | Assumption | ®
| Critical
reasoning of the assumptions | | | | | | ¯
| | Recommendations | ¬
| Feasibility
of comments | ¬
| Comments |
Figure:
Decision making processes 6.1
LOGICAL ANALYSIS OF THE CHECKLIST INDICATORS: To
minimize the huge task during an inspection the status of the checklist indicators
are classified simply into 3 categories as follows : a.
OK b.
Moderately OK c.
Not OK. The programme
officer will just tick on the status and can find irregularities. 6.2
ASSUMPTION SETTING Next
step for the programme officer is to set assumptions on the basis of the findings
of logical analysis. This step is very important indeed because a correct assumption
can enhance the diagnosis process to find out the exact position of the branch. 6.3
CRITICAL REASONING OF THE ASSUMPTIONS : This
step will help to identify the reasons behind the assumptions. 6.4
FEASIBILITY OF COMMENTS : In
this step, the programme officer can discuss his/her assumptions with the management
of the organization or with his/her supervisors to find out the most feasible
explanations for specific comments. 6.5
COMMENTS : When
the programme officer feels confident that his/her findings are correct, then
he/she will give his/her specific comments. 6.6
RECOMMENDATIONS : The
programme officer will suggest the necessary measures. 7.
AN EXAMPLE OF DECISION MAKING PROCESS If
the programme officer identifies (after correcting clerical mistakes) a big difference
(> Tk.10,000) between the realized service charge amount and the realized principal
amount posted in the General Ledger, then the programme officer will proceed according
to the following ways - a.
Status of logical analysis : Not OK b.
Assumption : Service charge account
is not correct c.
Critical Reasoning :Why the account is not found correct? POSSIBLE
REASONS : a)
Accounts and financial statements are not examined and analyzed properly by the
persons responsible i.e. MIS framework is not properly inter-linked. b)
If the amount of service charge is found less in comparison with the realized
principal amount, then the branch possibly - *
Adjusted the principal amount from the service
charge, or *
The service charge amount has been transferred
to another heads of accounts, or *
The service charge is overdue.
c)
If the service charge is found more in comparison with the realized principal
amount then the branch possibly - i)
Amalgamated another heads of account with the
service charge head, or ii)
There is advance service charge realization. d)
Feasibility of Comment : The
programme officer can present his/her findings to the branch manager and discuss
the issue with him. If he fails to give any proper explanation, then. e)
Comments : i)
Service charge account is not ok. ii)
MIS framework is not properly inter-linked
and the management of the branch is not much careful. f)
Recommendations : i)
The branch should be more careful about maintaining
books of accounts and preparation and analysis of financial statements. ii)
The branch should be more careful about inter-linking of MIS framework and the
management should ensure it. CONCLUSION
: It is hoped that
the guideline presented in this paper will be helpful to programme officers for
day to day inspection and monitoring of microcredit programme.
Annex
1
| LOGICAL
ANALYSIS OF CHECKLIST INDICATORS : A BASIC GUIDELINE |
| Checklist
| Indicators
| Logical
Analysis | Status
| |
Accounting System |
Cash/Accrual Basis |
If it is found |
OK | |
|
If its is not found |
NOT OK | |
Double |
If it is found |
OK | |
Column |
If it is not found |
Not OK | |
Books of accounts and documents
of books of accounts |
Cash book General Ledger,
Subsidiary ledgers Vouchers |
If it is posted properly and found
authentic and correct |
OK | |
|
If minor irregularities |
Moderately OK |
| and
Cash memos etc. | If
found basic problem |
Not OK | |
Bank cheque |
If signed by the authorized and
proper signatories (not relatives) and no advance signature in the blank cheques
| OK
| |
|
If signed by the authorized and
proper signatories (not relatives) and no advance signature in the blank cheques.
| Moderately
OK | |
|
If the cheque signatories are relatives,
not authorized and found they have signed cheques |
Not OK | |
Deposit Slip |
If the received amount properly
deposited in the bank in that day with the same amount. |
OK | |
|
with minor flows |
Moderately OK |
|
|
if not |
Not OK | |
Bank Statement |
If found proper (daily transaction
related to cash book and same amount) |
OK | |
|
If found with minor irregularities
| Moderately
OK | |
|
If not |
Not OK | |
MIS Formats |
If all MIS formats found authentic
and correct | OK
| | Found
with minor irregularities |
Moderately OK |
| If
not | Not
OK | | MIS
framework | Position,
reporting decision, supervision |
If inter-link found then
| OK
|
| |
|
|
|
| If
partially found (e.g. 2 stages report found) |
Moderately OK |
| If
not | Not
OK | |
Group members information
| Identification
of group members as per attendance register and in the group meeting |
If well identified (direct)
| OK
| |
|
If ¾ members not identified directly
(indirect) | Moderately
OK | |
|
If existence of one member is found
fake | Not
OK | | Identification
of loanees as per loan agreement form and CS |
If found (direct) |
OK | |
|
If found (indirectly ¾ members)
| Moderately
OK | |
|
If existence of one loanee found
fake | Not
OK | | Group
resolution for loan |
If resolution found proper before
loan application | OK
| |
|
If found before application but
not fully correct resolution (e.g. absence of loan category) |
Moderately OK |
|
|
If not found |
Not OK | |
Group members attendance rate in
the group meeting |
95-100% |
OK | |
|
90-95% |
Moderately OK |
|
|
< 90% |
Not OK | |
Saving record as per |
If the amount found same among the
sources | OK
| | Saving
pass book | If
found minor differences |
Moderately OK |
| Saving
Register | If
big differences | Not
OK | | Loan
outstanding as per |
If found same |
OK | |
LPB, CS & SL |
If not found same but minor differences
| Moderately
OK | |
|
If big differences |
Not OK | |
Group Dynamics |
Regular group meeting |
If found at least continuously six
month (in each week) |
OK | |
|
|
If found one meeting not held in
six months | Moderately
OK | |
|
If found meeting not held >2
| Not
OK | | Awareness
of the group members |
If the loanee members know one anothers
name, loan and savings amount, loan scheme, different development issues.
| OK
| |
|
If they know but minor irregularities
| Moderately
OK |
| |
|
If they do not know each others
name, purpose of loan, etc. | Not
OK | | Group
bondage | If
the relationship among the members are good |
OK | |
|
Though good but minor irregularities/problem
| Moderately
OK | |
|
If the relationship is not good
| Not
OK | | Peer
group pressure | If
any default loanee member compelled to repay his/her overdue loan by the group
members pressure then |
OK | |
|
If other members of the group continuously
insisting the default loanee members to repay the money |
Moderately OK |
|
|
If the above two situations are
not found | Not
OK | | Group
members attitude towards the branch |
If Positive |
OK | |
|
If Mixed (>90% Positive)
| Moderately
OK | |
|
If Negative (> 80%) |
Not OK | |
Savings collection : Rate of saving
x group members | If
savings collection proper and regular |
OK | |
|
If proper but off and on irregular
| Moderately
OK | |
|
If not proper and highly irregular
| Not
OK | |
Organizational Information
| Constitution
| After
any change if the constitution is approved properly by the registration (Validity
date not expired) authority |
OK | |
|
Waiting for approval |
Moderately OK |
|
|
Duration expired but not sent to
the authority for approval |
Not OK | |
Organogram |
If the organization has organogram
and it is followed properly |
OK | |
|
If the orgainzation has organogram
but it is not followed |
Moderately OK |
|
|
If the organization has no organogram
| Not
OK | | General
body | If
formed by the locally respectable persons, Validity date not expired and formed
as per the rules mentioned in the constitution and meetings held properly and
gives overall policy guidelines and no relative members |
OK | |
|
Formed by the locally respectable
persons, validity date expired, waiting for the approval of the registration
| Moderately
OK |
| |
|
authority and body formed as per
the constitution and meetings held regularly |
|
|
|
If not the above |
Not OK | |
Executive committee |
If the EC is formed by the Locally
respectable persons Gives
policy guidelines Well
aware of the goals of the organization Validity
date of the EC is not expired Formed
as per the constitution No
relative members in the EC |
OK | |
|
If conditions 1, 2, 3 and 5 are
OK but 4 and 6 are not OK |
Moderately OK |
|
|
If 1, 2, 3, 4, 5 and 6 are not OK
| Not
OK | | Chief
Executive | If
it is revealed by his/her works that he/she has the expertise to run an organization
smoothly and sincerely and honestly |
OK | |
|
If not that much expert but sincere
and honest | Moderately
OK | |
|
If none of the above |
Not OK | |
Other Sources of fund |
Donations/Grants |
If covers at least 3 years administrative
expenses | OK
| |
|
If it covers at lest 2 years expenses
| Moderately
OK | |
|
If not cover any administrative
expenses | Not
OK | | Borrowing
purpose | If
the amount is borrowed for IGAs |
OK | |
|
If borrowed both for IGAs and non
IGAs purpose | Moderately
OK | |
|
If only for non IGA Purpose
| Not
OK | | Savings
| If
the organization thinks savings as an alternative source of fund, gives interest
to the borrowers, proper savings management system, invested properly and no capital
expenditure | OK
| |
|
If minor irregularities but no capital
expenditure | Moderately
OK | |
|
If does not have proper savings
management system, No interest given to the group members and capital expenditure.
| Not
OK | |
Working Area |
District |
As per the constitution and agreements
with donors/providers of funds and approved by the EC |
OK | |
|
As per the agreement with Donors
but constitutional and not approved by the EC but will be approved soon.
| Moderately
OK |
|
|
|
If does not follow the above
| Not
OK | | Thanas,
Unions & Villages |
If follows as per constitution,
EC approved and as per agreement with donors |
OK | |
|
If as per the agreements with donors
constitutional but not approved by the EC |
Moderately OK |
|
|
If does not follow the above
| Not
OK | |
Loan Information |
Loan disbursement |
If loan disbursement found same
with proper documentation and same among all sources |
OK | |
|
If found same but some loan sanctioning
signatures are not found due to simple mistakes |
Moderately OK |
|
|
If loan disbursements are not found
same and documentation is not correct, and branch fails to correct clerical mistakes
| Not
OK | | Loan
realization (Principal) |
If found same among different sources
| OK
| | |
If found minor differences among
sources | Moderately
OK | |
|
If found big differences among sources
after branch fails to correct clerical mistakes |
Not OK | |
Service charge realization
| If
found same among different sources compared with recovered amount |
OK | |
|
If found minor differences but the
realized amount is correct as per the principal recovery posted in the General
Ledger. | Moderately
OK | |
|
If found big differences (> 10,000/-)
among sources in comparison with the outstanding loan. |
Not OK | |
Loan Outstanding |
If found same among different sources
in comparison with disbursement and repayment schedules. |
OK | |
|
If found minor difference (<
10,000/-) among sources in comparison with outstanding loan. |
Moderately OK |
|
|
If found big differences among sources
and capital deficit |
Not OK | |
Head office related information
| Principal
fund received from head office and subsequent disbursements |
If found that after receiving each
principal instalments from head office, subsequent disbursement had been completed
within the shortest possible time |
OK |
|
|
|
|
|
|
|
If found that loan disbursements
after receiving each principal instalment from head office have been delayed for
less than 21 days from the date of receiving money found at POs Bank A/C
| Moderately
OK | |
|
If found loan disbursement is not
proper as per the principal instalment released from head office |
Not OK | |
Repayment of head office (principal
and service charge) |
If up to date as of any specific
date that has been due |
OK | |
|
If it is in Transit |
Moderately OK |
|
|
If it crosses 7 days to reach head
office | Not
OK | |
Auditing |
Head office loan outstanding to
the branch | If
no capital expenditure and at least 30% reserve service charge |
OK | |
|
If no capital expenditure but small
surplus (<15%) | Moderately
OK | |
|
If capital expenditure |
Not OK | |
External audit (Chartered accountant
firm) | It
external audit system exists and takes subsequent measures quickly to correct
audit objections | OK
| |
|
If external audit system exists
but unnecessarily takes considerable time to correct audit objections |
Moderately OK |
|
|
If external audit system does not
exist. | Not
OK | | Internal
Audit | If
the branch has internal audit system of CP and takes corrective measures quickly
after audit objections |
OK | |
|
If the branch has internal audit
system of CP and usually takes considerable time to correct audit objection
| Moderately
OK | |
|
If the branch does not have internal
audit system | Not
OK | | Head
office audit | If
the branch gives explanations and take quick corrective measures after head office
audit objections | OK
| |
|
If the branch takes considerable
time to correct the audit objections of head office |
Moderately OK |
|
|
If the branch does not correct head
office audit objections |
Not OK | |
Bank related and cash in hand
| Daily
banking | If
the branch do banking on daily basis |
OK | |
|
If the branch does not have daily
banking due to valid reasons. |
Moderately OK |
|
|
If the branch does not have daily
banking system | Not
OK |
|
|
Transaction through bank
| If
all transactions of the branch are completed through bank |
OK | |
|
If, generally through bank but off
and on through cash |
Moderately OK |
|
|
If the branch does not transact
through bank and only in cash |
Not OK | |
Deposit of realized amount
| If
the realized amount deposited in the bank exactly in the same figure |
OK | |
|
If the realized amount, off and
on, is not deposited in the bank exactly in same figure due to valid reasons
| Moderately
OK | |
|
If the realized amount, off and
on, is not deposited in the bank exactly in same figure over a considerable period
| Not
OK | | Cheque
signatory | If
cheque signatories are properly authorized by the EC, sign properly, and are not
relatives | OK
| |
|
If cheque signatories are properly
authorized, are not relatives but sign blank cheques taking due approval from
the EC and have valid reasons. |
Moderately OK |
|
|
If cheque signatories are not properly
authorized by the EC, signatories are relatives |
Not OK | |
Cash in hand |
If no cash in hand at the end of
daily balance | OK
| |
|
If cash remain in hand which will
be deposited and adjusted next day (except petty cash) |
Moderately OK |
|
|
If huge cash in hand through a considerable
period | Not
OK | | Recovery
| If
99-100% | OK
| |
|
If 98-99% |
Moderately OK |
|
|
If < 98% |
Not OK | |
Loan classification and bad debt
management | Current
loan | If
it is identified properly and is due to Eid and other unavoidable holidays, and
the PO is hesitant to take necessary actions |
OK | |
|
If it is identified properly but
not due to Eid and other unavoidable holidays, and the PO is hesitant to take
necessary actions | Moderately
OK | |
|
If it is not identified properly
and not due to the Eid & other holidays. |
Not OK |
|
|
Doubtful loan |
If it identified properly and has
50% reserve fund for provisioning of loan loss |
OK | |
|
If it is identified properly but
not 50% reserve fund for provisioning of loan loss |
Moderately OK |
|
|
If it is not identified properly
and not 50% reserve fund for provisioning of loan loss |
Not OK | |
Expired loan |
If it is identified properly and
has 100% reserve fund for provisioning of loss |
OK | |
|
If it is identified properly but
not 100% reserve fund for provisioning of loan loss |
Moderately OK |
|
|
If it is identified properly and
not 100% reserve fund for provisioning of loan loss |
Not OK | |
Reasons of overdue |
If it is well judged that the overdue
occurred due to natural, Eid and other unavoidable holidays |
OK | |
If it has happened due to rational
loan demand, overlapping, death and other physical casualties of the loanee members
which compelled them to default |
Moderately OK |
| If
it has happened due to lack of supervision and monitoring misappropriation and
unplanned expansion | Not
OK | | Financial
statement | Receipt
and payment statements | If
found OK after analysis | OK
| |
|
If found receipt and payment side
same but not satisfied after analysis |
Moderately OK |
|
|
If found fundamental problem
| Not
OK | | Operational
efficiency | Field
worker (FW) : Group member | 1:
250 | OK
| |
|
1: 200 |
Moderately OK |
|
|
1: 200
|
Not OK | |
FW : loanee member, FW
: Loan outstanding FW
: Supevisor/BM | If
it gives surplus revenue throughout the year |
OK | |
|
If break even |
Moderately OK |
|
|
If deficit |
Not OK | |
If found correct and follow
| OK
| | There
are irregularities but minor | Moderately
OK | | If
not found | Not
OK |
| Loan
demand of branch to head office | Group
members, loan demand to branch | After
analysing all indicators found positive signal |
OK | |
|
After analyzing all indicators found
Mixed signal | Moderate
OK | |
|
After analyzing all indicators found
negative signal | Not
OK | | Organizations
incentive structure | Internal
factors | If
it is found that credit is the main focus of the organization and staff are trained,
motivated, professional and satisfied with the organization. |
OK | |
|
If it is found that credit is one
of the main focuses for development activities of the organization and staff are
trained, professional, moderately motivated, satisfied but have some grievances
regarding their salaries and benefits |
Moderate OK |
|
|
If staff not found trained, motivated
and professional | Not
OK | | External
factors | If
the organization coordinates with other organizations, community people, donors,
lenders and local administration etc. strongly |
OK | |
|
if coordination is workable
| Moderate
OK | |
|
If no coordination |
Not OK |
| OVERLAPPING
PROBLEM IN MICROCREDIT OPERATIONS |  |
| - Md.
Hasan Khaled | |
INTRODUCTION
A
common phenomenon that has emerged as a significant impediment to the smooth functioning
of Microcredit Operations3 (MCOs) is that of overlapping. Unhealthy
competition among microfinance institutions4 (MFIs) in luring one anothers
beneficiaries has been retarding the pace of development of MCOs. This
paper sheds light on the adverse effects of overlapping in the microcredit industry
in the light of the current situation prevailing in the country and offers a guideline
for Palli Karma-Sahayak Foundation (PKSF) to combat the overlapping problems faced
by its partner organisations (P0s). THE
NATURE OF OVERLAPPING Overlapping
occurs when the same beneficiary receives credit and other economic facilities
from more than one source. In fact it may occur when the MFIs expand their operations
horizontally or geographically. Overlapping can take different forms as follows
: Overlapping among different adjacent
branches within the same organisation. Overlapping
among groups within the same organisation. Overlapping
among organisations working in the same operational area. Rapid
growth of MFIs over the past decade can be said to be the single major reason
of overlapping in the country. Mushroom growth of MFIs in the neighboring district
towns in and around greater Dhaka has pushed the problem of overlapping in Dhaka
region almost to the extent of a crisis situation. Khulna, Rangpur, Dinajpur and
Bogra are also following the footsteps of Dhaka and the situation is worsening
day by day. Added to the problem of overlapping, there is a closely related problem
of multiple membership i.e. membership in one or more MFIs from a single household. EMPIRICAL
EVIDENCE OF OVERLAPPING IN MC0s The
problem of overlapping has been observed by the author of this paper and his colleagues
during their field visits. The findings from a recent study on PKSF MES by the
Bangladesh Institution of Development Studies (BIDS) depicted the extent of multiple
membership and overlapping in MCOs. The study shows that 11% of the participant-households
have two or more members from the same household in the same NGO5.
Majority of these households has one male and one female member with the same
NGO, followed by cases with two or more females. Cases of two or more male membership
with the same organisation are rather insignificant. Out of 8165 households surveyed,
only 39 were found to have two or more male members associated with NGO programmes.
An overwhelming majority of the surveyed households, however, had single female
member. While multiple
membership in a single household may or may not belong to a single NGO, BIDS findings
on participation of a single member in more than one NGO were rather phenomenal.
Sixteen percent of the households surveyed were found to participate in multiple
NGO activities. Of the households with single male membership, 4% were enrolled
with multiple NG0s while 13% of the households with a single female membership
were associated with multiple NGOs. Among households with one male and one female
membership 58% were involved in multiple NG0s. Needless
to say, the problem of overlapping is intense which, if not put to a hold immediately,
would put the entire MC0s of the country into serious trouble. EFFECTS
OF OVERLAPPING The
adverse effects of overlapping can be described from both the borrowers and the
lenders side. Borrowers
: It has been observed in most cases that a single
MFI could not fulfil the 1oan requirement of its borrowers. As a result, the borrowers
are compelled to borrow loan from other nearest MFIs. But the accumulated loans
become bigger than the borrowers requirement. Borrowers who take loans from the
MFIs have to start periodic repayment within a few weeks of the receipt of the
loans. They hardly have enough return from their investment to make such repayment.
Under the circumstances when members receive loans from multiple sources, the
burden of making bigger instalments payment becomes even harder, which in many
cases result in default. Thus the downtrodden mass of the country, who have proven
to be good repayers of loans come under the grip of a much loathed default culture.
There is another finding that is to cheat the MFIs. Some mischievous members borrow
loans from different MFIs by providing false information. One must not forget
the proverb when lending that Man is a good borrower but a bad paymaster. Lenders
: As already mentioned, the unbriddled growth of
MFIs in the district towns have contributed significantly to the problem of overlapping
in the micro lending operations of the country. Many of these MFIs operate from
the district towns because these places have physical infrastructure facilities
to make donor movement convenient. Moreover, these MFIs are rather reluctant to
operate in the remotest parts of the country owing to the shortage of fund to
cover the unpredictable risk of microcredit management and insufficient infrastructure
facilities to make donor movement convenient. The end result is that the NGOs
engage in an unhealthy competition for enticing one anothers members within
a stipulated territory to join their respective organisations. This happens even
to the extent that these members are encouraged to default their loans with their
previous lenders. Besides these, some target oriented MFIs attract the rural people
with false promises. In this way they take borrowers from other MFIs with a view
to fulfilling their target. According
to a research paper published by the Association for Social Advancement (ASA),
unhealthy competition among the micro financing institutions (MFIs) working within
the same operating territory influences the creation of default. More than 80%
of the respondents who were surveyed agreed to this view. This report corroborates
the negative effects of overlapping mentioned above. STEPS
TO REDUCE OVERLAPPING The
following measures may be taken to deal with the problem of overlapping Co-operation
among MFIs which are working in the same areas ; Adequate
MIS is required to sort out overlappers ; MFIs
which are working in the same areas may arrange weekly meeting on the same date
and at the same time ; Voters identity
card and computerised data base system can play vital role to reduce overlapping. THE
ROLE OF PKSF IN CURBING OVERLAPPING Palli
Karma-Sahayak Foundation (PKSF) in its short spell of eight years has established
itself as the apex financier of the MFIs engaged in MCOs across Bangladesh. As
of 30 June 1998, PKSF has extended credit facilities to the extent of Tk. 367.75
crore through its 170 partner organisations (P0s) covering 21,000 villages of
1728 unions under 313 thanas in 58 districts of the country. Conceivably,
it is not in the hands of PKSF alone to contain the spread of overlapping. Utmost
co-operation among NGOs is essential prerequisite for solving the problem of overlapping.
It is worth mentioning here that overlapping cannot be completely eliminated from
the system considering the fact that an overwhelming majority of the country's
120 million people come under the umbrella of landless, assetless poor. However,
PKSF can play a very noteworthy role in curbing the problem through the formulation
of appropriate policies and implementing the polices in this regard. Along this
line, the PKSF issued a circular to all its partner organizations (POs)
the PKSF supported NGOs - making it mandatory for each of their members to have
identity cards along with two copies of photograph. The decision was made to identify
fictitious borrowers as well as to detect overlappers through mutual verification
of ID cards by the P0s. PKSF allows its POs to expand their operations but at
the same time advises them to avoid any overlapping while expanding operations.
To avoid overlapping all loan proposals made to PKSF are required to include the
names of the existing MFIs, active POs of PKSF and new applicants to PKSF in the
operating areas of the POs. RECOMMENDATIONS: In
light of the above discussions PKSF may take the following measures to curb Overlapping. PKSF
should be highly careful while selecting new P0s from MFI intensive areas. It
should place emphasis on the vertical expansion of its P0s located in the MFI
intensive areas. PKSF should give priority
to those MFIs or new applicants who are interested to extend their MCOs among
the hardcore poor who have so for been left out. Last
but not the least, PKSF should make it a policy to reject new applicants that
have a large magnitude of overlapping problem. LITERATURE
CITED Palli Karma
Sahayak Foundation (PKSF). 1998. Annual Report 1996-97.
Palli Karma Sahayak Foundation (PKSF). 1998. PKSF Newsletter, Vol. III, No.-2.
Bangladesh Institute of Development Studies
(BIDS). 1998. Monitoring and Evaluation of Micro Credit programme-Findings From
the BIDS-Study on PKSF-MES. Issue No. - 1.ASA
1997, Causes of Default in Micro Credit A Publication of Association for
Social Advancement (ASA), Dhaka. Rahman
Atiur, Md. Abdur Razzaque, Mirza Md. Shafiqur Rahman, Syed Naimul Wadood, Mohammed
Abu Eusuf, Shamsul Haque Mondal. 1998. On Reaching the Hard Core Poor : Redefining
the NGO Strategy. Bangladesh Institute of Development Studies (BIDS). Dhaka.
| AN
ANALYTICAL DISCUSSION ON PERFORMANCE EVALUATION OF TRAINING BY QUANTIFIABLE TARGETS
AND MEASURES |  |
| - Abdus
Samad Mallick | | The
general philosophy which underpins the quotation The Ability to Establish
Quantifiable Objectives and Targets and Measures of Performance is Basic to the
Evaluation of Training is that training should be evaluated. The words training
and evaluation have broad definitions and it is necessary to consider
these definitions before describing techniques for evaluating training with a
view to establishing quantifiable objectives and targets and measures of performance
of training. There is no generally accepted definition of the word training. It
has been defined in this way: The systematic development of the knowledge/skill/attitude
pattern required by an individual in order to perform adequately a given task
or job. In the
context of training, the assessment of the total value of a training system,
training course or programme in social as well as financial terms is called evaluation.
Evaluation differs from validation in that it attempts to measure the overall
cost-benefits of the course or programme and not just the achievement of the laid
down objectives. The Term is also used in the general judgmental sense of the
continuous monitoring of a programme or of the training function as a whole.
Cost benefit analysis implies that the benefits of the training output must be
converted to financial benefits, but often this is not possible. The total value
of the programme in social terms is simply not something that one could ever evaluate
economically. Evaluation
should include the value placed on the programme by the participants as well as
by the organisation and it should not be restricted to behavioural objectives.
It is better to take evaluation as a general term to cover the whole area. In
this respect, Goldstain (1980) offers a broad definition, Evaluation is
the systematic collection of descriptive and judgmental information necessary
to make effective training decisions related to the selection, adoption, value
and modification of various instructional activities. The importance of
evaluation in the training process is constantly emphasised. Trainers are frequently
reminded by various authorities that they should investigate the effects of their
training programmes. In any evaluation exercise the key question is from whose
standpoint the evaluation to be made, and by what criteria? At least four main
parties are involved in the transactions or training. (1)
the trainees themselves (2) The trainees
employers (3) The agency which is funding and
(4) the training institution that is actually
providing the course of study and training. Objectives
: It has
to be recognized that individuals as well as organisations have some objectives,
based on their experience, knowledge, attitude, behavior, home background, outside
interest etc. These objectives can be quantified with a view to evaluating training
course. Participants also have objectives which are more powerful motivators than
those of the organisation. The evaluation should show the extent to which organisational
and individual objectives have been met by the programmes. It may be helpful if
the trainer thinks in terms of objectives at three levels. Ultimate
objectives :
The particular defects or defeats in the organisation that he is hoping to eradicate. Intermediate
objectives :
The changes in employees work behaviour that will be necessary if the ultimate
objective is to be attained. Immediate
objectives :
The new knowledge, skills or attitudes that the employees must acquire before
they will be capable of changing their behaviour in the required way. It may be
pointed out that these three levels of objectives are not always of equal relevance.
These levels of objectives are really used in a broader sense. As far as possible
training objectives should be framed in a manner which will facilitate measurement.
It is easy to say, but much harder to achieve in this way. Nevertheless, objectives
are useful tools in the design, implementation and evaluation of training. The
characteristics of useful objectives are: Performance
: An
objective always says what a learner is expected to be able to do. Conditions
: An objective always describes the important conditions
(if any) under which the performance is to occur. Criterion
: Wherever
possible, an objective describes the criterion of acceptable performance by describing
how well the learner must perform in order to be considered acceptable. Other
characteristics could be included in objectives as well, such as a description
of the trainees for which the objectives are intended or a description of the
training procedure by which the objectives will be accomplished. It would also
be possible to insist that objectives follow some rigid form or format, but we
are not looking for objectives that are of a particular size and shape. We are
looking for objectives that are clear, that say what we want to say about our
training. For example, the objectives of PKSF training of newly recruits ought
to be: to develop a sense of commitment
to public service and PKSF among the probationers. to
enhance analytical and decision making skills of the probationers. to
broaden theoretical and practical knowledge base of the probationers for engendering
a general and broad perception about poverty alleviation and development.
to familiarise the probationers with the
conduct, etiquette and the norms of administration and to develop a positive attitude
towards partner organisations and beneficiaries to
create conditions conducive to the fuller development of the character and personality
of the probationers. to habituate the probationers
to hard physical and mental exercises. to
encourage effective interpersonal relationships among members of various services
for lasting impact in their future service career.
Targets :
The evaluation inherent in the performance
review system is centered on targeting results. If a target is not properly formulated
in the first place it is unlikely that the results can be measured and so the
process will fail. Some people try to equate targets with aims or goals, but neither
of these expressions meets the case in terms of the precision required of a target.
Since in our evaluation we seek to establish whether or not a target has been
met, we can only do that if it is precise and therefore measurable. A general
definition of aim, goal and target will give a clear distinction among them. Aim
: The
general direction in which the job is pointed. Goal
: Expanded
aim¾ more specific and detailed. Target
: Precise, unambiguous and based on performance,
including conditions. For
example : If a target is easily quantifiable it
is much easier to decide whether or not it has been met, as exemplified below:
(i)
If a salesmans target requires him to sell a given number of products in
a given time, it will be obvious whether he has met it or not. It is important
to establish what factors may have prevented him from reaching his target. Some
may be completely outside his control say, changes in the law affecting credit
agreements or failure of the factory to deliver the goods on time, although he
may have a limited influence in the later. (ii)
Example in the case of a field service engineers job. To respond within X hours
to every customers complaint received, evaluate it and rectify faults in accordance
with the product service manual and return to customer within Y hours in at least
80% of jobs. Effectiveness of work to be such that no rework for the same fault
is necessary. So the target is quantifiable and it specifies a response time,
conditions laid down in the service manual, a turn around time and the number
of completed jobs satisfying these requirements as a percentage of the total.
The standard of work to be achieved is measured by the need for rework for each
fault. Measures
of performance : In
view of the above aspects, it is clear that effective transferability from training
to job demands that the training itself is directly work related. The participants
are capable of converting theory to practice in their jobs and the measurements
are in the job rather than in the training. Strategies
for evaluation may be classified into a few basic types. Of these, five seem to
be particularly relevant to training events, in order to clarify the assumptions
and what measurement procedures will be appropriate for them.
The Systems Approach :
Here, the training is considered to be a sub-system
within the overall organisation system. The evaluation of training is carried
out for management planning, policy development and accounting purposes. It implies
efficient contribution to organisational goals.
The Goal Based Approach :
In this sort of evaluation, goals are set and the evaluation process is an attempt
to discover to what extent they have been achieved. Trainees are offered detailed
objectives as goals, and evaluation is in terms of the number of objectives attained
by individuals or by the group. The objectives were based upon performances derived
from job analysis and therefore there is no problem of transfer of training. For
example: -- training of armed forces. Goal
Free Evaluation : In this system, the achievements
of the programme are considered to be those identified by the participants themselves,
that is, whether it met some of their needs. It is then possible to pick up unintended
effects as well as those expected by the programme organisers. Goal free methods
are worth considering when it is necessary to evaluate management training events
where reasons for attending vary widely and where the participants go back to
a variety of jobs. The
professional Review Approach : Most of the professional
training is based upon syllabi recommended by the `Academic Affairs Committees
of the appropriate professional bodies. This is what we call the professional
review approach. Organisations might attempt to use a professional review for
internal and external courses. They would need to consider the relevance of the
syllabus to organisational requirements as well as the breadth of coverage and
quality of the programme. The
Quasi Legal Approach : In this approach, a panel
is set up and witnesses are called to testify and submit evidence. Great care
is taken to hear a wide range of evidence-opinions, values and beliefs from the
organisers of the programme and the users right through to those who will say,
`we cant afford it without any real idea of what the programme is
doing. It may be carried out by weighing the evidence for and against and what
it actually contributes to the effectiveness of the organisation. One
thing should have become clear from the consideration of the various approaches
described above that evaluation is never the absolute truth. The systems and goal
based approaches aim to collect `hard facts which are objective and others
which are subjective in their method of collecting information but attempt to
get at a wider `truth. We ought to establish whether the training has done
some thing to develop knowledge or to help people acquire the skills, attitudes
required by the definition of training. Knowledge
: All jobs require the incumbent to have
some knowledge and most jobs can be described by the sort of knowledge required
at three levels. Knowing a range of
simple facts, recalling lists, stating simple rules. Knowing
the range of procedures, how to do thing, how to order sets of actions. In
a particular situation, recognising the key features, and therefore, being able
to select the most appropriate procedure. The
traditional way of assessing knowledge is by the use of essay type of questions.
This method of assessing is quite inappropriate in training. So, training to the
desired level and testing at that level may be taken into consideration. If training
is seen as an increase in knowledge, then the first stage evaluation should be
to measure pre-training and post training knowledge so that the gain due to training
can be estimated. When the testing is done with the same test a gain ratio can
be calculated:
Post test score Pre test score Gain
Ratio = ----------------------------------------------- x 100
Possible score Pre test score This
gain ratio is a useful measure of knowledge. Skills
: As with
knowledge, it is helpful to look at different levels of skills, decide what levels
are required for satisfactory job performance and then train to that standard.
Skill should usually be tested by practical tests which fall into two main types
: The trainee
is set a task and the work is inspected at the end of the test period. The
trainee is set a task as above, but he is marked throughout the test on the methods
used as well as the end result. So, practical testing of skills, whether by examining
the products or the process is only reliable if a detailed marking guide is used.
Attitudes :
This is a very confused area in which to attempt evaluation because many trainees
are actually trying to change attitudes but calling it skills training. An attitude
is a pre-disposition or tendency to behave in certain ways whereas skill is an
ability to do something well. Attitudes are usually inferred from what people
do or say but changing an attitude is not sufficient to change what they do or
say. People behave in ways which they believe to be appropriate to the situation
in which they find themselves. Evaluation
is usually in terms of whether the participants perceive a change subjectively
which may be self reported. Often this is informal, an end of event discussion
and statement of what one participant has learned. A formal approach can be achieved
by a technique known as the semantic differential. In this method each participant
is asked to rate selected concepts covered by the course, such as `participative
management against a series of bi-polar scales. In order to assess attitude
change it is necessary to use the scale before the course and then at some time
(say 3 months) afterwards. The information collected can be used to assess individual
change or group change. It
is possible to follow up changes in attitude but very hard to get actual results.
It is assumed that changes in attitude are linked to changes in behaviour. It
is better to enlist the help of (employing) managers using pre-post questionnaires
to rate how frequently the participants show the desired behaviour. So this is
measured pre/post by managers as well as participants to ensure a reasonable level
of transfer of learning and to get at behaviour as well as attitude change. Throughout
this discussion, training has been considered as a process of change which helps
people to learn how to become more effective at work. The bottom line for training
and development is the results achieved by the training product which are measurable
for the time and funds invested. Now it is clear that the ability to establish
quantifiable objectives and targets and measures of performance is basic to the
evaluation of training. References
: Glossary of Training Terms - 1969
Goldstain 1980 Bramley
- 1986 WARP, BIRD and RACKHAM 1970
MAGER 1975 Robinson
1986 BPATC, Annual Report 1984 -
85
| QUALITY IN
TRAINING MANAGEMENT |  |
| - Md.
Mosleh Uddin Sadeque | |
Many people in different
organizations around the world believe that training of people is easy. They are
right. The only problem is that managers forget to apply some of the basic training
principles and consequently end up with perpetual low performance of the very
people they are supposed to manage. Many managers have apparently not yet learned
that their employees are working far below their capacity. There is a huge waste
of intellectual resources in many organizations. It is undesirable for the people
concerned, for the organization, and for the society. Every
organization either financial or non-financial is established with a set of mandates
which it strives to achieve by undertaking various kinds of activities. While
formulating training programme of an organization for carrying out inter-related
but multiple functions, quality factors like internal priority, job demand, management
directives, capability experience, perception, national priority, administrative
decision, clientele demand etc. need to be taken into consideration. Aggressive
quality and performance goals require strong training plans and practices to ensure
that employees maximum potential is utilized. A financial institution must demonstrate
that its training plans are driven by the quality goals outlined in the strategic
business plan. The process of empowering employees requires organizations to have
effective training programmes. However, training should not be approached on hit
and miss basis. Management practitioners anxious to make their presence
known to its staff, may be prone to suggest training as the panacea for all organizational
ills and as a quick sure fire solutions to a given problem. This is the main setback
of training in different organizations. Trainers
are increasingly being asked to help their organizations benefit from quality
revolution (Cocheu. 1989). The total quality management perspective represents
a tremendous opportunity to redefine the training strategy. To apply the total
quality management approach training must be defined in the context of the total
system of individual and organizational performance. The
quality training management especially in a financial institution can be divided
into five interdependent processes as follows : a)
LEARNING GOALS : The
goal formulation occurs at macro level. A specific goal should be predetermined
based on the needs of the individual staff as related to his job. This will lead
to the fulfillment of critical value-adding (CVA) processes having four key steps
as follows : Set up goals for added value
Establish learning goals during and after CVA.
Ascertaining the variation in achievement of
CVA standards. Feedback and problem solving
with key stake-holders. b)
TRAINING PLANS AND STRATEGIES : The
training plan and strategy specify how training resources to be deployed with
whom and what schedule. Determining training strategy is most appropriate as the
image of training program is unclear, diffused, disturbed or misunderstood. Today
many organizations are focusing on production and total quality management as
a way of competing. Training managers must understand such shift and practices. c)
LEARNING TRANSACTIONS : The
process includes doing everything to ensure that trainees learn what they are
supposed to learn in the most effective and efficient manner possible. The effectiveness
of training will depend not only on the relevance of training needs identified,
but also on the mutual reinforcement between training and multiple methods of
training. A training manager must have the quality in designing training programme
using multiple techniques of training. d)
LEARNING INTO ADDED VALUE : For
transforming learning into added value to the organization, learning must be long-lasting
and be applied to the workplace to enhance organizational performance. The commitment
to continuous improvement is essential to the training quality management approach. e)
MEASURING TRAINING QUALITY : When
a training course is designed and implemented, the training quality can be measured
using the following well known formula :
PT1 PT2 Training quality (TQ) = ----------------
x 100
AP PT2 where
PT1 = Post test performance PT2
= Pretest performance AP = Attributed
performance at work PT1
and PT2 would have to be derived from training class and AP need to
be derived from workplace. A
total quality management approach to training is not a cook-book approach that
can be applied in the same way. Training managers must know what the various training
techniques are and aim of training should be to inspire action rather to fill
with knowledge. All the
processes described earlier should be met in an acceptable manner as it requires
skills in analysis, synthesis, creation and communication. Action to develop institutional
capability to build, improve and maintain the organization is indispensable because
the culture and structure of each organization are different and the needs and
opportunities, particularly, in financial institutions are constantly changing.
The purpose of training is to enable people to become more effective at their
jobs by helping them to learn more quickly and effectively through managing the
total quality of training. LITERATURE
CITED Cocheu, T.1989.
Training for Quality Improvement.Training and Development Journal 43; (11), 56-62 |