1972-1980
In 1972, RDRS began providing financial support to anyone with a visible need in north-west Bangladesh. In the aftermath of a destructive war and fierce famine, we gave grants to communities and households to improve or replace existing but inadequate infrastructure, from homes to health clinics. Money was also give for purchasing of tools – for everything from farming to sewing – to restart agricultural and non-farming industries by family breadwinners and local businessmen. Within a decade, however, the distribution of grants, exacerbating the villagers’ sense of dependency, was phased out by RDRS by the end of the decade.

1980-1991
During the 1980s, RDRS used a savings-and-loans scheme to distribute funds, a system which proved itself more efficient and better suited to meet the demands of donors, the moral code of RDRS and the needs of the villagers. In the period savings-and-loans were on offer to individuals and Groups, much was achieved by families and their wider communities which would otherwise have been out of reach. The provision of funds was geared to ensuring job-creation and creating confidence; it gave specific support to women and those at the lower levels of society, rather than male heads-of-households and larger farmers. We also utilised financial resources to support our Group-based development programme among the poorest, thereby assisting them to change their educational, health and social circumstances. The loans allowed villagers to take up new ideas and technologies introduced by RDRS, imported from other NGOs or developed within the organisation, such as its simple but effective bamboo twin-treadle pump which revolutionised agriculture in the north-west before spreading across the country and abroad.

However, the savings-and-loans system had its limitations and in the late-80s RDRS began to search for ways to improve on the goals and delivery of its financial and social assistance. The answer it reached brought together the best of RDRS Group-based development with the micro-credit initiative then spreading among Bangladesh NGOs. Resources were even more concentrated towards women, the landless and small farmers. Through the Groups and, later, Federations, RDRS found it could give the Members and their families greater responsibilities, more training and raise ambitions. Financially, Group Members not only had access to more funds but also acquired new skills in managing money, including learning the very important and earlier-overlooked hows-and-whys of repaying loans. By now, we were able to consider longer-term uses for its funds and resources.

1991-2004
The present micro-finance programme was established in 1991 but has undergone a number of small and large modifications since then as RDRS has learnt from its own and others’ experiences. In particular, RDRS found that that acting as money-lender and debt-collector clashed with its other developmental roles and objectives – for example, in raising health and educational standards, improving the lot of women, introducing new ideas on care of the environment. After years of struggling, RDRS decided to separate its micro-finance work, workers and responsibilities from its development arm, thereby relieving the strain within the organisation and clarifying matters for its clients.

2004-present
In 2004, a complete overhaul of the MFP was carried out which gave RDRS 100 MF Branch Offices in 38 upazilas (sub-districts) and a client-base of over 300,000 households in some 18,000 village-based Groups. In terms of staff and client numbers, volume of portfolio and area covered, the RDRS Micro-finance Programme is the tenth largest among Bangladesh NGOs and, we believe, one of the most successful, economically efficient and socially relevant.

Membership Criteria:

Programme Participants

Our Target Group:
As with all other services supplied by RDRS, the MFP targets its resources towards communities of the rural poor, with women, the landless, marginal and small farmers, tribal groups and the hard-core poor (beggars, sex-workers, etc) making up the target group. The MFP offers these individuals and communities an integrated package of financial and extension services devised specifically to create improvements in their physical environment, raise their living standards and provide them with the skills to establish and expand appropriate and sustainable income-generating activities.

Group Composition and Numbers:
The MF Groups are either all female or all male and composed of 15-35 adult representatives from neighbouring households in poor villages. As of August 2005, there were 342,673 Group Members (69% women) and 20,087 Groups under the Programme.

Group Construction:
Once MF Groups have been formed, the Members receive an introductory 4 weeks of relevant training from RDRS staff to ensure they are capable of managing their finances and utilising the loans for sustainable ventures. During this time, Groups develop a sense of communal responsibility for decision-making (for example, who can apply for what) and for ensuring individuals can and do meet their repayment targets. Thereafter, Members, individually or collectively, are eligible to apply through the Group for loans, small amounts in the early stages but building-up to larger sums for those who repay promptly.

Specialised Services:

Assisting the Hard-Core Poor:
In 2004, RDRS brought the hard-core (or ultra-) poor into its comprehensive development and MF Programmes, reaching out to those who, in earlier times, had been deemed unable to benefit from any kind of development provision, whether social, physical or economic. The term, “hard-core poor”, refers to the most needy and socially excluded in society: beggars and prostitutes; households headed by children, women or old men; and, any other individuals or groups out-of-reach of Government and NGO support services because of their itinerant and irregular lifestyles.

Working with the hard-core poor, RDRS accepted that financial support to them has to be flexible in terms of anticipated savings and repayments and less demanding of returns. Our MF service to the hard-core poor, therefore, has been designed to fit their practical needs for loan repayments with, for example, the service charge rate being held down at 9%. Under this service, we are targeting 50,000 families in 2005 with 25,000 already involved in Group activities, including Group Members’ savings of Tk 2,992,600 and loan disbursement of Tk 5 crore [PLEASE PUT IN CORRECT AMOUNT – IN FIGURES, AS CRORE MEANS NOTHING TO INTERNATIONAL READERS].

Micro-enterprise Loans for Group Members:
For those who have proved successful in running a business, a new loan product, the micro-enterprise loan, was introduced in 2004. This loan product will allow borrowers to build-up viable enterprises, generate additional employment opportunities and widen the market for locally-grown agricultural and off-farm products. The loan ceiling, at Tk 100,000 is consequently higher.

Multilateral Projects:
In partnership with the Asian Development Bank (ADB), the Government of Bangladesh, Department of Agriculture Extension (DAE) and the Polli Karma Sahayak Foundation (PKSF), RDRS also has two other projects in its MF Programme, the North-west Crop Diversification Project (NCDP) and the Participatory Livestock Development Project-2 (PLDP-2).

NCDP:
This project is funded by ADB and implemented jointly with the DAE with the objective of boosting agricultural production, developing fair-price marketing channels and alleviating poverty by creating employment opportunities in rural communities. The Programme works with marginal (farms up to 1.5 acres) and small (up to 3 acres) farmer Groups, providing skills training and the credit necessary for the production of high-value seasonal or perennial crops. As we are working here with the more affluent and business-minded poor, the rate of interest is set at a flat 14% per annum; by August 2005, we had organised 33,219 farmers and distributed Tk 5 CRORE [PUT IN FIGURES] in loans; to date, we have received 100% of repayments on time.

Financial Management

The Workers:
The Loan Officer is the Group’s contact with RDRS’ Micro-finance Programme. She, or he, works in the villages, attending weekly meetings to collect savings, loan repayments, collection sheets and Passbooks. It is the Loan Officer who fills in the Loan Application Form for and with the Group at their meetings. The Loan Officer will also give advice, ensure the Group Members receive the necessary training and be the first person to deal with any problems that might arise within the Group. The actual disbursement of loans and supervision of the recovery and savings process is undertaken by the Branch Manager at the Branch Office. The Branch Office is a recent innovation, devised in part to reduce the borrowing costs but also, in a user-friendly move, to bring the MFP out of the distant towns to the customers’ doorsteps.

The Lending System:
Four weeks after Group formation, members become eligible for loans, first putting their case to the rest of the Group at one of their regular weekly meetings. If their idea is accepted, a Loan Application Form is then completed by the Loan Officer and then passed onto the Branch Office for processing. It is at this stage that a Loan Guarantee Form is signed by the Member’s spouse, which RDRS uses instead of collateral. The loan is disbursed only at the RDRS branch office and only with every Group Member present to sign the relevant documents.

Loan Ceiling:
The maximum amount Group Members can borrow in the first instance is Tk 3,000-6,000; for further loans the ceiling rises to Tk 8,000, Tk 11,000 and Tk 19,000 (about 300 US$). For micro-enterprises, the ceiling is Tk. 20,000-100,000. Second and subsequent loans can only be applied for once the earlier loan is fully repaid.

Loan Costs and Repayment:
In our Programme, we do not charge interest but instead add on an annual service charge, which is the same for all loans; at present the standard rate stands at 12.5%. In normal circumstances, the total amount (borrowed plus service charge) is repayable in 46 equal weekly instalments within 12 months, the first repayment falling due 15 days from the date of loan disbursement. But for some new loan products, there are different regulations.

For example, with the high-valued crop production loan for marginal and small farmers, repayment is due at monthly intervals beginning 2 months from the date of loan disbursement with 4 equal instalments for a 6-month loan or 10 monthly instalments for a 12-month loan. There is also a higher service charge of 14% per annum. In contrast, borrowers eligible for a loan under the hard-core poor category need only pay a 9% service charge and repayment dates and amounts are more flexible.

Savings and Loans up to June, 2005:
As of June 2005, the net savings balance stands at Tk 235.27m; some Tk 397.60m was disbursed, Tk 355.01m recovered and Tk 44.04m realized as service charges; and, finally, the loan outstanding stood at Tk 612.18m.