Introducing savings services into ASA, a microcredit institution
This article describes the experience of the successful Bangladeshi microcredit institution, ASA, in introducing savings accounts. Aiming to increase its access to capital, and to provide a greater range of financial products to its clients, from 1997 ASA launched open-access savings accounts, a contractual savings accounts and a term deposit account. ASA soon found that its overall savings balances increased, but no more than would have been expected if only its original compulsory savings account had remained. Although deposits increased rapidly, so did withdrawals, leaving ASA without the expected additional capital, and with the additional costs of extra transactions. Capital could be mobilized more cheaply elsewhere. In spite of the advantages to clients (particularly women) of being able to save small amounts secretly, ASA decided in the interests of institutional sustainability to drop the new accounts. This article goes on to compare a situation where savings products have taken off: BRI, Indonesia. It is suggested that most of ASA's clients have little to spare once they have re-paid their loans to make any additional savings. The near saturation of the market for microcredit in Bangladesh means that many poor people are becoming over-indebted, and this is likely to mean higher levels of defaults for all MFIs in future.
Dimensions and dynamics of microfinance membership overlap – a micro study from Bangladesh
The microfinance market of Bangladesh is getting rapidly crowded. In certain areas there is also quite high incidence of households taking loans from a number of microfinance providers. Why is this happening? How does it affect the providers? What should be done? These are some of the questions that this paper begins to address based on data collected from BRAC's operations in Tangail. We find that a number of crises often gives rise to an urgent need for lump sums of cash, and this is why households often need access to several loan sources. Though repayment irregularity is found to be on the increase, somehow it is being managed from turning into a major default problem, suggesting a level of in-built resilience of the system. This needs further research. In terms of what should be done, we chalk a broad agenda consisting of better information-sharing mechanisms and developing better risk-responsive financial products. In this sense, the phenomenon of multiple microfinance membership is as much an opportunity as it is a challenge.
The very poor who participate in microfinance institutions and those who never have
There is general consensus that the very poor have not been adequately reached by existing microfinance institutions, but there is very little research evidence to support this. Using a dataset emerging from a new BRAC programme targeted at the very poor, those among the very poor who manage to participate in microfinance institutions are compared with those who never have. The article shows that the ultra poor who participate in MFIs are better off than those who never participated, and that they also borrow more from informal sources. The intensity of microcredit borrowing is lower among the very poor who participate in MFIs compared to MFI participants coming from other poverty groups.Given that reaching the very poor remains an important challenge for the global microfinance industry, a better understanding of the overall financial market participation of the very poor is important for guiding policy and practice.
Changes in extreme poverty in Bangladesh (2000–2015): trend, dynamics, and implications for research and interventions
Headcount extreme poverty in Bangladesh has been declining since 2000, but how has the profile and income distribution of the poorest changed and what do these mean for intervention design and directions for innovations? Using national and BRAC datasets, we find important changes among the extreme poor over time including their income distribution, which has become more dispersed with a stronger positive skew. The overall economic progress seems to be lifting all boats. However, most of the extreme poor remain trapped in chronic poverty. Long-term escape out of extreme poverty, even for well-designed and well-executed programmes such as BRAC’s Targeting the Ultra Poor (TUP) programme, remains modest, though the overall impact is extremely positive. We suggest a few directions for future design to accelerate progress. This will require a bolder knowledge partnership between researchers working on rigorous evidence using experimental methods and behavioural insights, and practitioners.