Microfinance Multiplied

Fazle Hasan Abed is founder and president of BRAC, a multi-sectoral NGO based in Bangladesh. Abed is widely recognized for his holistic approach to development and his vision of financial services as part of a broader range of development services. BRAC is a major Bangladeshi innovator, known for its leadership in a multitude of development sectors and ability to self-finance. BRAC offers a very wide range of services to over 110 million people, including microfinance, primary education, legal aid, health services, market development activities, a SME bank, and a university.

Microfinance Multiplied: Health Volunteers BRAC trains one member from each of its village microfinance groups to be a health volunteer. 68,000 health volunteers have been trained to date. Volunteers treat basic and common illnesses and sell essential non-prescription medicines at competitive retail rates. They buy medicine from BRAC, which sources directly from pharmaceutical companies at bulk discount rates. Volunteers promote health awareness, encourage pregnant women to seek prenatal care, and help mothers immunize their children. The volunteers do not receive a salary. Instead, BRAC health staff train them upfront and provide monthly refreshers and support. Volunteers are given a small revolving interest-free loan fund from which they can buy the medicine to sell. Health volunteers are members of BRAC's microfinance groups. This is critical to the model because it ensures that the volunteer is someone who is known and trusted, and it gives the volunteer a group identity and peer support.

1. You describe BRAC as not just "microfinance-plus" but "microfinance multiplied." What do you mean by this? How does BRAC go beyond microfinance-plus?

At the heart of BRAC’s approach to development is organizing the poor. Organizing the poor into microfinance groups builds community and enables them to address the constraints they face. BRAC’s "multiplied" approach leverages the power within these groups to develop a sustainable, social entrepreneurial approach to deliver essential services to the poor. BRAC helps the group build essential linkages that integrate members into the society and market while ensuring they receive fair treatment, prices and practices. BRAC has used this approach in many areas such as health, agriculture, poultry and livestock, and legal education.

In health, a microfinance plus approach could range from simple measures such as using the group meetings to deliver health education, to linking up microfinance clients to a health facility on preferential terms, to providing services directly. We believe the problem is the lack of a well-functioning, pro-poor health system at the village level. So we set out to create a new system rather than implement unsustainable, stop-gap projects.

2. We often hear about BRAC's ability to scale. What allows BRAC to reach so many people so quickly, even in those markets

BRAC Afghanistan (as of April 2008)
# Years operating	6
# Provinces covered	23 (out of 34)
# Local staff	3,600 (1,553 women)
# Village groups	10,870
# Active clients	178,797 (41% of total MISFA outreach)
# Active borrowers	141,698
Portfolio outstanding	USD27,251,612
Average loan size	USD479
Total savings	USD5,907,525

where other organizations have been unable?

BRAC analyzes a problem from a national perspective and searches for solutions from the grassroots. It pilots models to test effectiveness but always with a focus on establishing the management structure needed to go to scale. There is a big focus on not getting trapped in a pilot syndrome. We learn to solve the problems of scaling up through the process of scaling up itself. Learning and adjusting are not things we stop doing after a pilot, but are a central part of a continuous process of refinement and adaptation.

For international operations, the process is jumpstarted by a handful of implementation experts from BRAC Bangladesh, who mentor a cadre of fresh local staff through formal and on-the-job training. A Dhaka-based management team analyzes performance and has teleconferences with country management monthly in addition to quarterly face-to-face management meetings.

3. BRAC has been able to run a number of value chain projects that have blossomed into stand-alone businesses such as poultry, dairy, and iodized salt? How did these projects emerge? And how do you see them evolving in the future?

These projects emerged to address value-chain bottlenecks for the enterprises of the poor. BRAC set up poultry hatcheries to ensure timely supply of quality, disease-free, day-old chicks as inputs for rural micro poultry rearers. At the time the project started, a reliable supply of day-old chicks was not available because the sole supplier was the government’s poultry and livestock department. Similarly, BRAC set up poultry feed mills in response to the shortage of quality poultry feed, and started maize seed production when quality inputs for the poultry feed were not available.

Photo credit: Saiful Omi Haq/CounterPhoto

BRAC also set up a dairy project to facilitate better prices for milk for rural, small-holder livestock rearers. The project collects milk directly from small-holder cattle rearers in rural areas through a network of chilling plants, and transports the milk to a central pasteurization plant. By aggregating the goods of many small producers and conducting quality control, we are able to get the rearers a better price for their goods.

The original landscape in which many of these enterprises were set up has changed dramatically. The private sector has entered the poultry and poultry feed markets in a major way. For these enterprises, BRAC will increasingly use a more, but not wholly, commercial approach moving forward.

New enterprises will be needed to develop frontier markets. One example is bull stations to produce high-breed livestock semen that our livestock artificial insemination workers can take to the small-holder livestock rearers to improve breed and yield over time.

4. How are these social enterprises managed in relation to the microcredit department since they hire many microcredit clients?

The concept behind these social enterprises is to strengthen the livelihoods of microcredit clients, but operationally they are separate and they serve the whole community.

For instance, BRAC dairy project collects milk from anyone within the operating area of the chilling plant. The project may use BRAC microfinance group meetings to publicize the plant. BRAC microfinance program staff may encourage livestock investment in these areas by promoting livestock loans and BRAC’s Livestock Artificial Insemination (AI). In turn, the AI program may focus on training more AI workers in these areas. Each program will take into account the other program’s activities in its operating area to take advantage of opportunities. However, these social enterprises are managed and accounted for separately. Importantly, BRAC clients also perceive these activities as separate.

5. How has BRAC needed to adjust and adapt to be successful in new markets like Africa and Afghanistan? How has your model changed?

Our experience has been that the core of our model is quite robust and only requires small adjustments.

Photo credit: BRAC Afghanistan

In Afghanistan, we had to start with community infrastructure projects rather than microfinance to gain acceptance and understand community dynamics. We set up tailoring training centers to get women out of their homes and into group settings. This form of training already had community acceptance. Organizing women into microcredit groups began as a follow-on service to tailoring centers and quickly gained acceptance. Since we were targeting women for microcredit clientele, we recruited women credit officers - a principle we are replicating in our programs in Africa.

In Africa, we start a group with 20-25 members, compared to 30-35 in Bangladesh. Our branches in Africa are smaller, typically covering a 3-4 kilometer radius rather than a 7-8 kilometer radius as in Bangladesh. Trading activities are more common among our African clients, so we responded to their demand for shorter duration loans. As the women themselves are more directly involved in business compared to Bangladesh, we focus more on the income generation aspects of health volunteers.

6. Is post-conflict microfinance different from regular microfinance? How do you approach post-conflict areas?

In post-conflict settings, population clustering tends to happen around urban centers. Expanding microfinance in rural areas of these countries needs to be coupled with a strong agricultural component. In addition to capital constraints, skills gaps prevent the poor from benefiting from a range of livelihood opportunities, especially in urban areas. A focus on market-responsive skills development is also important. Value chains in post-conflict countries tend to be fragile and expensive, and act as major constraints to the growth of enterprises and uptake of new technologies by the poor. All these constraints restrict microfinance and require a holistic, integrated, and entrepreneurial response.