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Microfinace Program

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Micro Finance

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Introduction

RDRS Bangladesh started its microfinance (MF) program in 1991 to create employment opportunities and provide income-generating support to poor and disadvantaged people. The program puts particular emphasis on women and the minority segment of the society. Initially, the program started in eight districts under Rangpur Division; now gradually covered 27 districts. RDRS Microfinance strives to make financial and other related services (savings, credit, insurance, skill development training etc.) accessible to the poor and disadvantaged with a view to increase their income and employment opportunities for them with special emphasis on women, physically disabled and minorities.


Goal of the program

The overall Goal of Microfinance program is to increase the income and employment opportunities of the poor with special emphasis on women.


Main Objective of the program

The main objectives of this program are to make the poor people economically self-reliant, increase their household income and create employment opportunities. Some other objectives are as follows-

  • Enhanced geographical area with a view to provide more financial services to the people.

  • Ensured saving mobilization to program participants.

  • Created sustainable employment opportunities of the program participants; specially women borrower.

  • Developed entrepreneurship through ME program.

  • Attained Operational Self Sufficiency (OSS) and operate Microfinance program in a sustainable way.

  • Increased capacity building of MF staff to run the program in an efficient way and also enhance the capability the borrower in the different fields.


Geographical Coverage

As of September 2022, Microfinance Program is being implemented through 278 branches in 134 upazilas of 27 districts of 7 divisions of the country.


Financial Products and Services

RDRS offers client-friendly diversified financial products and services, i.e. micro-loans, micro- entrepreneurs loans, agricultural loans, water and sanitation loan, diversified savings like voluntary savings, monthly small deposit scheme (MSDS), double benefit savings deposits (DBSS) and access to member loan security fund to cover the risk of the borrowers. Financial products are developed to meet the needs of various customers and to assist them to enjoy better living conditions. The methods are very easy, and quick and minimum documentation is required.


Categories of Loan

Principally, loan products are designed in main two categories based on loan size and rate of interest.

 

Micro Loan: The loan is intended for rural and urban poor households to finance their economic and non-economic activities. The microloan aimed to build a strong capital base. This loan is called a ‘Udayan loan’ and the loan ceiling varies from BDT 10,000 to 1,00,000 and gradually increased maximum 5,00,000 .  Women are given priority for this microloan. Agriculture loan is also disbursed under microloan.

Micro Entrepreneur loan: The micro-entrepreneur (ME) loan is mainly a graduated micro loan and is considered an individual loan. This micro-entrepreneur loan is called ‘Unnati Loan’. ME loans significantly contribute to creating self-employment and wage employment opportunities. Furthermore, the inclusion of missing middle borrowers into financial inclusion has become of utmost importance. RDRS ME loan ranges from BDT 1,01,000 to 5,00,000 and gradually increased maximum 30,00,000. Collateral is required for the big-size loan. Youths and women entrepreneurs are priorities for this loan. The rate of interest also varies on loan size from 20% to 24%.

 

Agriculture loan: From the inception of the microfinance program, RDRS has given special attention to the agriculture sector in the northern part of Bangladesh, i.e. Rangpur division. RDRS is implementing many agriculture projects in collaboration with PKSF, such as Shufolon, LIFT, KGF etc. to support the agriculture credit. Besides, in collaboration with commercial banks agriculture loan is also provided to the farmers. Technical support is also provided to the farmers. Bangladesh Bank also finances to RDRS agriculture credit and conducts field-level monitoring. RDRS is implementing a project titled ‘Small and Marginal Sized Farmers Agricultural Productivity Improvement and Diversification Financing Project (SMAP)’ with the supported by Bangladesh Bank. Out of total loan, around 70% loans are disbursed on agriculture sector.

Non-IGA Credit: Considering the social impact and health and well-being of the clients, RDRS is being implemented some non-IGA credit project such as- Water Credit (Supported by Water.org), BD Rural Wash, Sanitation Development, Asset Creation, Livelihood Increasing (Supported by PKSF), Consumer Loan (Financed by RDRS).


Savings Program

RDRS offers four types of savings products - Compulsory, Voluntary, Monthly Savings Deposit Scheme (MSDS) and Double Benefit Savings Scheme (DBSS).

Compulsory Savings: Microfinance clients must save a minimum of 200 Taka per month. They will enjoy a return of 6% interest per annum against their savings.

Voluntary Savings: Through voluntary savings, members can save any amount of money after depositing compulsory savings. They will enjoy a return of 6% per annum against their savings.

Monthly Savings Deposit Scheme (MSDS): A Monthly Savings Deposit Scheme (MSDS) is a product where Members can invest monthly starting from BDT 100 to BDT 10,000 for tenure of 3 years or 5 years with 7 percent and 7.5 percent interest rates respectively.

Double Benefit Savings Scheme (DBSS): This is a fixed-term deposit product where members can invest a bulk amount of money with a specific plan. The plans start with a minimum investment of Tk 10,000 and a maximum of Tk 10, 00,000.


Revolving Loan Fund (RLF)

The Revolving Loan Fund (RLF) is one of the most important elements to carry out the microfinance operation. RDRS RLF consists of different sources of loans like Member’s Savings, PKSF, Commercial Bank, Capital Fund etc. RDRS RLF is given below as of September 2022.

 

Source of Fund

Amount (BDT in Million)

%

Member Savings (Excluding FDR)

3,572.79

31%

Loan with PKSF

1,167.21

10%

Loan with Commercial Bank

4,113.86

35%

RDRS Capital Fund

2,811.48

24%


Microfinance Digitization

a) Mobile App: RDRS microfinance program initiated a digital collection using the mobile app in September 2021. The app will facilitate digitization for the transaction and ease the record-keeping process, providing real-time status tracking and instant messaging to borrowers. The mobile app will also reduce paperwork in branch offices and allow staff sufficient time for checking and verification of loans.

b) Agreement with EcoDev Solutions:

RDRS agreed with an Indian IT Analytics company – EcoDev Solutions to assess its ME borrower's readiness to pay and the affordability of the loan as a part of KYC through its solution called mpower-u. The mpower-u solution mainly deals with the appropriate behaviour competence of an entrepreneur. The mpower-u - multi-stack comprehensive BI solutions that diagnose, recommend and track & monitor borrowers’ performance using models of Behavioural Economics and Psychology powered with ML/ AI algorithms.


Projects under Microfinance Program as of September 2022

S.#

Project Name

Donor/Partner

Working Area (District)

01

Small and Marginal Sized Farmers Agricultural Productivity Improvement & Diversification Financing Project (SMAP)

Bangladesh Bank-JICA

RDRS working areas

02

Enhancing Resources & Increasing Capacities of Poor Households towards Elimination of Poverty (ENRICH)

PKSF

Panchagarh and Kurigram

03

Adolescent Program

PKSF

Rangpur, Lalmonirhat, Thakurgaon, Moulovibazar

04

Kuwait Goodwill Fund for promotion of Food Security in Islamic Countries Program (KGF)

PKSF-Kuwait Govt.

Thakurgaon

05

Skills for Employment Investment Program (SEIP)

PKSF

RDRS working areas

06

Leaning and Innovation Fund to Test new Ideas (LIFT)

PKSF

Kurigram

07

Bangladesh Rural Water, Sanitation and Hygiene for Human Capital Development Project (BD Rural Wash)

PKSF

Kurigram, Lalmonirhat, Nilphamari, Gaibandha, Hobigonj, Moulovibazar, Sherpur

08

Recovery and Advancement of Informal Sector Employment (RAISE)

PKSF

Rangpur, Gaibandha, Kurigram, Lalmonirhat, Nilphamari, , Panchagarh, Thakurgaon, Dinajpur

09

Microenterprise Development Project-Additional Financing (MDP-AF)

PKSF-ADB

RDRS working areas

10

Poverty alleviation through Implementation of Integrated Agricultural Activities (Integrated Agriculture)

PKSF

RDRS working areas

11

Water and Sanitation for Rural Poor of Northern Bangladesh (Water Credit)

Water.org

RDRS working areas


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RDRS Scholarship Program

RDRS is being conducted scholarship program by its own fund. A number of 15 students have been selected and they are given monthly 4,000 taka for higher education and Tk 3,000 for diploma course for completing their higher education and Diploma course. The Scholarship money is being given quarterly basis.


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Celebrating MUJIB100

To celebrate the Birth Centenary of the Father of nation, Bangabandhu Sheikh Mujibur Rahman, RDRS Microfinance program arranged a special documentary projection event at Rangpur Office and circulated it through Radio Chilmari.

RDRS has set up Mujib Corner its Torben V. Petersen library in Rangpur premises. The Mujib Corner was inaugurated by Md. Foshiullah, Executive Vice Chairman of Microcredit Regulatory Authority.


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PKSF Managing Director visited RDRS activities

Managing Director of Palli Karma-Sahayak Foundation (PKSF), Dr. Nomita Halder, NDC visited RDRS MF activities in Rangpur and Kurigram districts during 20-21 March 2022. She travelled to Manush Marar Char in Kurigram district and attended two group meetings, visited health care and nutrition centre, and attended a Federation meeting. She also met RDRS staff at Rangpur office and shared her views and experience that inspired RDRS undertaking some projects like,

Agriculture value chain, Integrated Agriculture Project and SEIP project. Mr. Jashim Uddin, AMD, Dr. Sharif Ahmed Chowdhury, GM, program and two other PKSF officials accompanied her.


Current portfolio status of Microfinance program as of September 2022

Sl#

Particulars

September 2022

June 2022

Change

                                                                                                                            Basic Information

1

Branch

278

278

0

2

MFO/Loan Officer

1,581

1,544

37

3

Total MF Staff

2,867

2,898

-31

4

Member

429,877

419,494

10,383

5

Borrowers

346,162

340,694

5,468

6

Savings Balance (Million BDT)

3,952.69

3,762.78

189.91

7

Loan Outstanding (Principal) (Million BDT)

11,665.34

11,193.97

471.37

                                                                                                                                 Ratio Analysis,

8

Operational Self Sufficiency (OSS)

143%

121%

22%

9

On-time Recovery (OTR)

96.35%

96.81%

-0.46%

10

Portfolio At Risk (PAR)

11.62%

11.83%

-0.21%

11

Yield on Portfolio

20.86%

22.34%

-1.48%

12

Savings Loan Ratio

34%

34%

0%

13

Borrower Member Ratio

81%

81%

0%