Microfinance  program  in  BRAC—  the  largest  NGO  in  the  world  

YALI  CHEN            

 

IEPM  3110      International  Organizations  and  Economic  Development    

Professor:  Brian  L.  Heuser  

11/24/2013      

Yali Chen 1

Abstract BRAC is the world’s largest NGO and own the largest microfinance bank in Bangladesh. This article analyzes the Microfinance Program in BRAC from dimensions as follows: effectiveness, efficiency, transparency, accountability and finance. It also compares BRAC with other NGOs in Bangladesh such as Grameen Bank and ASA from project features and organization philosophies. In addition, it explains the relationship between BRAC and the government of Bangladesh. In the findings part, it illustrates some critics and problems of BRAC and the government, followed some suggestions. The conclusion shows that the emphasis of BRAC on human capital development and skill training are the most important reasons to let BRAC outstand itself and benefit millions poor people in Bangladesh. Key words: BRAC, NGO, Microfinance, Bangladesh

1 Introduction

1.1 Bangladesh overview

Bangladesh appeared as an independent and sovereign country in 1971 following a 9-month War

of Independence. The country owns the largest deltas of the world with a total area of 147,570

sq.km and a high population of 150 million people. More than 85% people live in rural areas and

more than 50% of population is women. Bangladesh has an agrarian economy that

accommodates the major rural labor force. 85% of the population live on agriculture and

contribute 40% of the total GDP. Annually GDP growth rate is 5.8% and per capita GNP is $375.

Over 45% of the population live below the poverty line, about 20% of rural households live in

extreme poverty (BBS, 2009). The biggest cause of rural poverty in Bangladesh is the erratic and

extreme climate. Many rural people live in areas that are vulnerable to annual flooding. Extreme

climate destroys crops, homes and livelihoods. The money to rebuild people’s homes and rebuy

livelihoods often push them into deeper poverty (Rural poverty in Bangladesh, 2007).

1.2 The typical environment for the emergence of microfinance

Bangladesh is crowded with 150 million people living in 56,000 square miles. It has been titled

as one of the “least developed” countries since the 20th century, while the Human Development

Yali Chen 2

Index ranked it 146 out of 187 countries. On the one hand, Bangladesh suffered from unstable

political rule, continuous famines, and extreme poverty. On the other hand, the spread of

interests of microfinance and Bangladesh’s unique record of innovative NGOs’ achievement

(World Bank, 2002) demonstrated a dynamic society with inclusive social entrepreneurship

(Holloway, 1998). The rise of NGOs and social entrepreneurships makes people wonder if there

was a typical environment, or there were political or cultural reasons for the emergence of

microfinance, that made Bangladesh become the fertile soil to help microfinance institutions

flourish.

One of the most effective catalysts is the government’s attitude. After independence, the

government of Bangladesh encouraged all kinds of assistance from philanthropic institutions

(Amin, 1997). However, no rules controlled the establishment of NGOs. A civil society leader

commented: “Political instability in the newly independent country hindered the NGO sector

from robust reporting and accountability ... Governments welcomed all sorts of foreign funds

without looking at their agendas. The droughts in 1974 pressured governments to become more

liberal towards NGO movements” (Crawford, 2004). Another reason for the emergence was that

donors preferred to work with NGOs instead of working with the government, because the

government of Bangladesh was corrupted, bureaucratic and inflexible (Haque, 2002). As well,

aid agencies, such as WB, IMF, IFC, ADB, World Food programme, acted as channels to fund

Bangladesh, pushed the government of Bangladesh to alleviate its control of NGOs, and

pressured the government to work with NGOs. During the 1980s, some NGOs decided to make

microfinance the most important project, and during the 1990s, many NGOs made the same

decision. At that time, most global institutions recognized NGOs to have played a greater role in

Yali Chen 3

Bangladesh (Kilby, 2006). In 1997, at the first international microfinance summit, the WB,

USAID, Inter-American Development Bank, UNDP, Citibank and other organizations decided to

give special fund for microfinance (Muhammad, 2009). Moreover, eliminating gender inequity

and guaranteeing women rights have long been cherished goals for NGOs, aid agencies, and

other development institutions in Bangladesh. Many studies have proved that microfinance

would improve women’s quality of life and social status. Zaman (1998) claims that “a small

amount of money works as a miracle in a cash-hungry society and significantly raises the

woman’s power in the family”. For the aforementioned reasons, one can understand why

microfinance appeared in Bangladesh after the Independence War, and why it thrives today.

2 (Bangladesh Rural Advancement Committee) BRAC and its

microfinance program

2.1 BRAC overview

In the book End of Poverty, Sachs descried a scene like this: “In 2003, my colleagues at

Columbia and I visited a village near Dhaka, there we met representatives from a village

association, which BRAC had helped to organize, in which women were engaged in small-scale

commercial activities—food processing and trade—within the village and on the roads between

the village and Dhaka itself. These women presented a picture of change every bit as dramatic as

that of the burgeoning apparel sector”. The organization Sachs mentioned, is the largest NGO in

Bangladesh, and it also ranked as the world biggest NGO in the Global Journal this year

(although BRAC criticized the ranking system afterward). BRAC was established by Sir Fazle

Hasan Abed in 1972 after the War of Independence. It originally aimed at helping refugees from

Yali Chen 4

India to resettle their family. In the next several decades, BRAC settles its mission from

“development imperatives” (1972-1990) to “institutional imperatives” (1990-2000) to “market

imperatives” (2000-now). It successfully overcame its early difficulties by combining two things

that were seldom mentioned together: operating an NGO like a business company and taking the

responsibility to solve the social environment of poverty. Nowadays, BRAC operates various

programs in all 64 districts in Bangladesh (Figure 1), from lending microfinance loans to

teaching rural people how to set up their own business. Even complaints from Bangladesh

intellectuals did not change Sir Fazle’s mind on commercialization. Prof. Mozaffar Ahmed, a

prestigious economist of Bangladesh, pointed out that charitable organizations should not engage

in commercial activities (Sidel, 2004).

Economic Development Health

Education Community Empowerment

Human Rights and Legal Aid

Services

Disaster Management, Environment &Climate

Change

Agriculture &Food Security Water, Sanitation & Hygiene

Safe Migration Gender Justice & Diversity

Figure 1. Development Programmes in BRAC

Source: BRAC Annual Report, 2012

The annual expenditure of BRAC is increasing every year. In 2012, the annual budget is US$583

million. However, the donor contribution is decreasing at the same time, not because donors

unwillingness, but BRAC has achieved financial sustainability by combining poor economics

market activities with non-poor economics business activities (Mannan, 2010)

Yali Chen 5

Figure 2. Annual Expenditure

Source: BRAC Annual Report, 2012

Thus, BRAC is characterized as a “poverty enterprise” (Mannan, 2009) from three aspects: First,

BRAC successfully operates multi programs in one organization; second, it focuses on economic

development programme and has strong microfinance operations; third, it collects its profits

from microfinance program and social enterprises and transfer the money from these programs to

poverty alleviation programs (Mair and Marti, 2007).

2.2 The microfinance program in BRAC

Microfinance is one of the oldest programs in BRAC. Since it launched in 1974, it has covered

all 64 districts. It provides four stages as a ladder to help the vast majority of the population get

out of the poverty trap (Figure 3): first is to provide asset grants and soft loans from the

Targeting the Ultra Poor programme; second is to borrow microloans from the Dabi scheme;

1980   1985   1990   1995   2000   2005  Amount  (in  mil)   0.78   2.3   21.25   63.73   152   259  Donor  contribution   100%   97%   68.20%   54%   21%   24%  

0  

50  

100  

150  

200  

250  

300  

0%  

20%  

40%  

60%  

80%  

100%  

120%  

Annual  Expenditure  of  BRAC,  2012  

Yali Chen 6

third is to borrow microloans from the Progoti scheme; fourth is to borrow SME (Small and

medium enterprises) loans from mainstream banks (BRAC, 2012a).

Figure3. Four steps to get out of poverty trap

Source: BRAC Microfinance website http://microfinance.brac.net

Dabi loans, which range from $100-1,000, are only provided to women who are serving through

VOs. Those women repay the loans every week or month, usually during the regular VO

meetings. Most women use the loans to operate small business in poultry, livestock, fruits and

vegetable cultivation, handicrafts and rural trade. Progoti loans range from $1,000-10,000. Male

and female who already have small enterprises but are too small to apply for loans in regular

banks are qualified to apply for Progoti loans (BRAC, 2012a).

The microfinance program in BRAC maintains three principles: making micro credit reachable

to poor women, especially in rural areas; keeping the price of credit in an acceptable level;

encourage poor women in “income generating activities through credit provision”; promoting the

Asset  grants  and  soft  loans  from  Targeting  the  Ultra  Poor  programme

Microloans  from  microNinance  programme's  Dabi  scheme

Micro-­‐enterprise  loans  from  microNinance  programme's  Progoti  scheme

SME  loans  from  mainstream  banks

Yali Chen 7

level of income in rural areas and encouraging people to run self- sustaining credit activities

(BRAC, 2010).

In the last 11 years, BRAC microfinance program has spread worldwide, helped millions of

people, and keep bridging the gap between rural areas and the collapsed government in different

countries (Figure 4). The result is encouraging, however, it is hard to tell if BRAC will achieve

the same triumphantly overseas with the program in Bangladesh.

Borrower Cumulative Loan Disbursement ($ mil)

Afghanistan 16,271 21.85

Pakistan 63,954 58.8

Liberia 15,572 12

Sierra Leone 14,839 10.9

Southern Sudan 4,278 7

Sri Lanka 67,439 86

Tanzania 97,586 147.7

Uganda 101,146 124

Figure 4. BRAC Microfinance International

Source: BRAC Annul Report, 2012

Yali Chen 8

3 Analyze BRAC organization and Microfinance Program

3.1 Effectiveness

Sir Fazle Hasan Abed made the following statement in the 2012 BRAC Annual Report: “I am

pleased to say that the revenue generated by the enterprises, micro investment and financial

services reached BDT 28.8 billion (USD 369.5 million) in 2012…BRAC’s core microfinance

product, Dabi, has disbursed USD 1.3 billion in micro loans in 2012” (BRAC, 2012a).

The effectiveness of BRAC and its Microfinance Program is impressive (Figure 5). It has

covered all the 64 districts and 509 upazilas over Bangladesh, built 2,661 field office. 113

million people benefit from BRAC. Among all the programs operated by BRAC, Microfinance

Program is the most effective one (Figure 6). It has built up 269,175 Village Organizations (VO)

and helped 5.84 million VO members by lending Dabi or Progoti to them, and more than 85%

borrowers are from Dabi. The repayment rate is as high as 98.76%, which means poor people are

not untrustworthy.

Districts 64

Upazilas 509

Field Office 2,661

Population Covered 113 mil

Figure 5. Coverage of BRAC

Source: BRAC Annual Report, 2012

Yali Chen 9

Village Organizations (VO) 279,175

VO members (in mil) 5.84

Total Borrowers (in mil) 4.19

Dabi Borrowers (in mil) 3.72

Progoti Borrowers 254,330

Cumulative Disbursement (in mil) TK 694,956

Outstanding Loan (in mil) TK 60,067

Repayment Rate 98.76%

Average Loan Size TK 18,579

Savings Deposits (in mil) TK 24,907

Cost per loan TK 1,716

Figure 6. Effectiveness of Microfinance Program

Source: BRAC Annual Report, 2012

BRAC’s effectiveness may be guaranteed by its capacity to teach, learn and practice. (Mortuza,

2006). However, the effectiveness and impact of Microfinance Program for the poor is still

highly questioned (Westover, 2008). Roodman and Morduch (2009) claim that after exploring

the microfinance for more than thirty years, people still cannot provide solid and precise

evidence to prove that microfinance has improved the quality of lives and eliminate poverty from

a measurable way. In fact, there is also research argues that microfinance has actually minimal

impact on poverty reduction (Morduch, 1998). From the BRAC website and media reports, we

can see countless moving stories about microfinance changing peoples lives. It is true that BRAC

Yali Chen 10

is a highly efficient organization. However, only using case study approach is not enough, more

stringent evaluations for the Microfinance Program are needed in the future.

Another criticism about the effectiveness is that microfinance cannot reach the extreme poor.

Nawaz (2004) conducted a research in Comilla district in Bangladesh, and found that

Microfinance Project did not reach two thirds of the rural residents, and in particular did not

reach the bottom layer of residents who suffered extreme poverty. The NOVIB (2011) report

pointed out “The existing saving and credit program is designed for the moderate poor as

because they have to repay loans on weekly basis”. Moreover, there is an argument that

microfinance cannot alleviate poverty- because it has higher interest than mainstream banks- that

will create another poverty trap for the poor unless they have other resources of income (Karim,

2008). Although BRAC announced in its 2012 Annual Report that Microfinance Program has

covered 1.3 million ultra-poor families, the effectiveness still needs to be improved and more

specific evaluations are needed.

3.2 Efficiency

BRAC impressed the world by the rapid growth of its expenditure, number of programs and

number of people can be reached. From 1973 until now, BRAC’s members and Village

Organizations have increased from 1,468 and 20 to 5.84 million and 79,175 (BRAC, 2012a). It

has rapidly organized teams, efficiently implemented programs and effectively gained funds.

Appendix-A shows the organogram of BRAC. There are 29 members in the general body and 10

members in the governing body. The present general body votes for the governing body, and the

governing members are usually distinguished professionals, activists and entrepreneurs of

Yali Chen 11

excellent repute. Governing body members enhance the efficiency and effectiveness of BRAC

by using diversified skills and experiences (BRAC, 2012a).

The BRAC Microfinance Program uses specific ways to improve its efficiency. A group usually

consists of 30-40 people, which is known as the Village Organizations (VOs). VO is an efficient

operational mechanism to launch and implement various tasks. To make VOs more efficient,

members are divided into smaller groups, which usually contain 5-7 members. Staffs from

BRAC meet VOs members once a week, approaching the issues as follows: Informed decision

making, borrowers’ rights and responsibilities, record keeping and reconciliation, over-

indebtedness preventing, sudden shocks and emergencies helping, complaints handling and

resolution, income generating activities (BRAC, 2012a).

Although BRAC has efficient management at different levels and it enjoys autonomy and

freedom to take quick response, some criticize that its organogram and functional divisions show

features of a bureaucratic organization (Khan, 2003; Ahmed, 2004). To some extent, it is

inevitable to act bureaucratically when an organization grows rapidly and includes so many

officers and members. However, BRAC should pay attention to this tendency and take some

actions about it.

3.3 Transparency

BRAC is highly transparent on its annual report, activity report, financial report and other reports.

Since 2001, BRAC has put all the reports on its website. BRAC’s Finance Division also

successfully competed with 175 applicants from 57 countries and won the prestigious

“Consultative Group to Assist the Poor” Award for three years. The CFO commented, “We were

Yali Chen 12

awarded it because we maintain a culture of honesty ... This definitely recognizes that we are on

track, and ... other organizations should have transparency and accountability in their operations”

(Ahmed and Hopper, 2012). In 2011, BRAC won awards from the Institute of Chartered

Accountants of Bangladesh and the South Asian Federation of Accountants for maintaining high

standards of reporting (BRAC, 2011).

However, there are some negative reports on BRAC’s transparency system. In 2008 issue of The

Guardian (UK), BRAC was accused of being “unethical” and “dishonest” by pushing hybrid rice

and maize seeds to farmers. Farida Akhter, the Ubining executive director criticized, “A group of

seed dealers and micro-credit based NGOs are active [in the introduction of hybrid seeds] and

are taking advantage of the natural calamities and disadvantaged condition of the farmers. These

activities are totally unethical”. More damningly, Nayakrishi Andolon and Ubinig also accuse

BRAC of linking access to microfinance loans with the purchase of a particular hybrid rice seed,

along with fertilizer and pesticide (Kelly, 2008).

3.4 Finance

As the world’s largest NGO, BRAC serves more than 110 million people every year; however, it

doesn't receive the largest amount of charitable donations. From Sir Fazle’s attitude, BRAC

cannot rely on donations, because they can be unreliable and even fickle. BRAC gains 80% of its

annual budget by operating social enterprises, from printing presses to feed mills. The revenues

have allowed BRAC to develop, test and replicate some of the most innovative antipoverty

programs in the world. BRAC’s first enterprise is a printing press that is related to its education

programs. The printing press made $17,400 in profits in its first year running. By 2007, the

printing press has generated $340,000 in profits (Jonker, 2009). In 2012, Microfinance and

Social Enterprises keep providing more than 60% of the revenue expenditure of BRAC (Figure

Yali Chen 13

7), followed by Education program. This result clearly shows that BRAC has a strong ability to

support its operation through Microfinance, Social Enterprises and Education Programs instead

of relying on donations. This cycle is also a virtuous cycle that will keep rolling in the future.

Figure 7. Revenue Expenditure

Source: BRAC Annual Report, 2012

To help with the project financial activities, BRAC Microfinance Program has its own principles:

keeping the projects resources safe, accountability to the usage of funds, making sure that

budgets are recorded correctly to keep transparent status, maintaining documents consistently so

that comparisons can be made, making standard documentation guides to internationally

accepted accounting standards and principles. (Islam and Fakir, 2012).

60 BRAC Report 2012 BRAC Report 2012 61

2012: Total US$ 449m

Contribution of BRAC to Government Exchequer

Revenue Expenditure

2011: Total US$ 395m

NOTES� Social Enterprises include Income Generating Projects and Program Support Enterprises� Other includes the following: House Property, Gender, Justice and Diversity, Community Empowerment Program, Human Rights and Legal Services

Policy Advocacy and other development projects

4%

11%

6%

12%

30%

33%

3%

1%

3%

9%

7%

11%

31%

34%

4%

1%

2012 2011

Income Year BDT USD BDT USD

Income Tax deduction at source by third parties 91,410,591 1,171,931 53,732,054 736,056 Tax deduction at source from third parties 85,301,237 1,093,606 65,433,712 896,352 Income Tax deduction at source from Staff salary 30,960,238 396,926 16,674,102 228,412 VAT collection from customers 415,245,894 5,323,665 359,819,472 4,929,034 Import Duty paid 3,083,795 39,536 3,583,198 49,085

Total 626,001,755 8,025,664 499,242,538 6,838,939

Yali Chen 14

Besides the revenue expenditure, BRAC has received limited external support (less than 30%)

from around 50 different donor agencies since its found. In both 2011 and 2012, DFID was the

biggest donors to BRAC, followed by AusAID (Figure 8).

Figure 8. Grant Composition

Source: BRAC Annual Report, 2012

The accounting report of BRAC Microfinance Program is highly transparent, accountable and

efficient (Appendix-2: Balance sheet and Statement of income and expenditure). However, there

are some criticisms about the financial accounting system: The field based development

expertise cannot match the modern financial need anymore; the project should put more

emphasis on long-term commitment and sustainability in order to support the accountability of

the program; the cost effectiveness has not been uniformed in every outlet (Islam and Fakir,

2012).

60 BRAC Report 2012 BRAC Report 2012 61

Grant Composition

Grants 2012: Total US$ 194m Grants 2011: Total US$ 186m

Annual Expenditure

in Million USD

2012

583 572

495460

535

2011 2010 2009 2008

17%

3%1%2%

5%

6%

7%

13%

46%

28%

1%2%1%7%

7%

11%

43%

Yali Chen 15

4 BRAC and other Micro Finance Institutions (MFIs)

BRAC is the largest NGO in Bangladesh, however, it is not the first one to launch microfinance

project in the Bangladesh history, Grameen Bank is. In several decades, a unique innovation of

credit delivery system has emerged. According to NGO Affairs Bureau, about 2,116 NGOs are

operating microfinance programs in Bangladesh (Assessment of Micro-credit program in

Bangladesh, 2010). Three of the biggest MFIs in Bangladesh are: Grameen Bank (GB), BRAC

and ASA. They have different missions, mechanisms and services with each other, and the

Figure 9. Features of Grameen Bank, BRAC and ASA

Source: Amin and Sheikh, 2011

Program features

Grameen Bank BRAC ASA

Membership criteria

Minimum landholding of half acre of land; only one member allowed per household

Maximum landholding of half acre of land; minimum one member work for wages per household; only one member allowed per household

Maximum landholding of half an acre of land; minimum one member work for wages per household; only one member allowed per household

Group features

Men and women in different groups; 5 people per group; 5 to 8 groups form a center; meetings hold weekly

Solidarity groups contain men and women’s groups; 30-40 members form a Village Organizations (VOs); divided into smaller groups; meet weekly or monthly

Men and women in different groups; 20 people form village organizations; meet weekly

Credit delivery mechanism

50 week installment loan; 20% interest for general loan; 8% for housing loan; maximum loan is Tk. 10,000

50 week installment loan; 20% interest for production loan; maximum loan is Tk. 10,000

46 week installment loan; 15% interest for general loan; maximum loan is Tk. 700,000

Social Development

Minimal skills based training; training duration 15-30 days; review conduct at center meetings

Substantial skills based training; training duration 3-6 months; review conduct at center meetings

Minimal skills based training; review conduct at center meetings

Yali Chen 16

relationships among them are also complex. Figure 9 shows the features of GB,

BRAC and ASA. The core feature for Grameen Bank is working as five-member groups. The

core feature for BRAC is organized as Village Organizations (VOs), so that members can learn

practical rules, report progress and discuss problems. ASA operate groups similar to Grameen

Bank.

Grameen Bank and BRAC hold different philosophies on helping the poor with microfinance.

Grameen Bank thinks that the priority need of poor people is to get credit and expend self-

employment opportunities, while BRAC thinks that poor people need loans as well as substantial

skills. This difference can explain why BRAC operates 3-6 month training for members of VOs.

Another difference between Grameen Bank and BRAC is that Grameen Bank only lends money

to individuals, while BRAC also lends to small companies (this type of loan is called Progoti).

Sir Fazle’s aim at changing the social needs but requires more on development. When people

become educated and skilled, more forms of business enterprises will be set up and more jobs

will be created. As time went by, Grameen Bank and BRAC have learned from each other.

Nowadays, Gtameen Bank focuses more on providing training and improving social

development and BRAC provides credits together with skills training (Amin and Sheikh, 2011).

5 BRAC and the government of Bangladesh

In 1990 the government established the Palli Karma Sahayak Foundation (PKSF) and the NGO

affairs Bureau of Bangladesh (NGOAB) to regulate NGOs by asking them to submit budgets and

reports. In 2006, the government of Bangladesh passed the “Microcredit Regulatory Authority

Act 2006” and established the Microcredit Regulation Authority (MRA) to regulate the

Yali Chen 17

accountability and transparency of the microfinance activities of NGO-MFIs (Ahmed, 2012).

MFIs thought that the government interfered too much and it indeed limited the interest rate to a

maximum flat rate of 15% or an effective rate of 30% in 2009. However, there are more than

20,000 NGOs in Bangladesh. It is difficult for the government to monitor the activities of all

NGOs. At the same time, the government is also providing microfinance programs to the poor

without any collateral and free of interest, but the performance is not as good as those MFIs who

charge an interest as high as 25%. The reason may lie in the fact that the government only lends

maximum Tk. 5000 per person and other MFIs can lend more, and unlike some MFIs, the

operational and administrative fee is much higher (Hamidi, 2001).

On the one side, the government of Bangladesh tries to interfere MFIs’ operation. On the other

side, MFIs are developing so fast that they have been accused of “displacing government” and

acting as a substitute for governmental social services (Wright, 2012). Since BRAC have

released itself from receiving funds from the government, it set foot into various commercial

activities. Although BRAC has not identified itself with any related political party, its operation

involves closely with polities, managing elite relationships and a public image (Hulme and

Moore, 2007).

In some other cases, MFIs are collaborating with the government at various levels, partly

because of governmental incapacity and resources constraints, and partly because of donor

advocacy and patronage (Siddiquee and Faroqi, 2009). BRAC is now the government’s biggest

partner in Bangladesh. Besides microfinance program, the cooperative programs have expanded

to healthcare, non-formal education, disaster management and so on. The collaboration between

Yali Chen 18

the government and BRAC has relocated the power balance. BRAC benefits from the support of

the government and can easily get green lights for its programs. The government of Bangladesh

also benefits from the accountability of BRAC, but it also feels more difficult to control and

regulate BRAC, since they have partnership (Haque, 2004).

Thus some critics argue that MFIs act as “intermediaries between the donors and their

beneficiaries thus undermining the role of the government”. MFIs such as BRAC are described

as “parallel governments” since they have built up another regime outside the governmental

structure with little public and governmental accountability (Nuruzzaman, 1996; Kelly, 2008).

Other critics are of the view that when private bodies respond to their interest and are thinking

about shareholders and beneficiaries while the government still remains responsible to citizens

through institutions and mechanisms, it is ambiguous to what extent MFIs are accountable.

Although BRAC keeps reporting to the government and donors, the effectiveness of tools is

highly doubtable (Siddiquee and Faroqi, 2009).

6 Findings and recommendations

By analyzing the data, reports and papers, it can be summarized that Microfinance Program of

BRAC plays a significant role to eliminate poverty and it has high efficiency, effectiveness,

transparency and accountability. In deed, many consider BRAC to have the best evaluation

approach of all NGOs in the world (Jonker, 2009). However, BRAC is not an individual in a

world of its own. There are also some problems, dilemmas and limitations for both BRAC and

the government of Bangladesh. To minimize these problems, following can be suggested.

Yali Chen 19

Suggestions for BRAC:

1. BRAC still cannot reach all the people in extreme poverty. That means Microfinance

Program will never truly eliminate the poverty in Bangladesh until it covers all the poor in

the bottom. BRAC should generate a sustainable operation system to help the poor to better

their situation sustainably.

2. For now, Microfinance Program mainly focuses on providing service to women. In order to

broaden its target customers and range of service, BRAC should take men customers into

consideration.

3. High interest makes some poor people who do not have other resources of income or those

who lose their property by accidents back into poverty trap and even worse. Microfinance

Program should do more research on the interest, and if necessary, adjust the interest into a

proper level.

4. BRAC is acting like a “parallel government” although it makes report and is regulated by the

government. BRAC should improve its public and governmental accountability by helping

the government strengthen the functionality.

Suggestions for the government of Bangladesh

1. The reason to the failure of policies in Bangladesh is that the government is not efficient and

sometimes even corrupted among the Bangladesh bureaucracy. A bureaucratic reform is

needed along with the policy reform.

2. The government of Bangladesh should develop effective mechanism to regulate MFIs

properly and help those MFIs work better instead of operating the microfinance program

directly.

Yali Chen 20

3. Nowadays, the microfinance enterprise in Bangladesh lacks financial infrastructure.

Financial infrastructure includes legal, information and regulatory and supervisory system for

micro financial market. The government should pay more attention to building financial

infrastructure that supports, strengthens and ensures the sustainability of MFIs (Harvie, 2003).

4. Bangladesh suffers the longest rainy season in the world. Every time the flood sweeps over

70 percent of the total land, destroying crops, buildings, livestock and people. The

government of Bangladesh should take actions before and after the flood. The relevant

government agencies should give priority to the fiduciary arrangements with respect to

procurement and financial management (Alam, 2004).

7 Conclusion

“Bangladesh has managed to place its foot on the first rung of the ladder of development, and has

achieved economic growth and improvements of health and education partly through its own

heroic efforts, partly through the ingenuity of NGOs like BRAC and Grameen Bank” (Sachs,

2005). This article analyzes the Microfinance Program in BRAC from dimensions as follows:

effectiveness, efficiency, transparency, accountability and finance. It also compares BRAC with

other NGOs in Bangladesh such as Grameen Bank and ASA from project features and

organization philosophies. Moreover, it explains the relationship between BRAC and the

government of Bangladesh. In the findings part, it illustrates some critics and problems of BRAC

and the government, followed by some suggestions. This article shows that the emphasis of

BRAC on human capital development and skill training are the most important reasons to let

BRAC outstand itself and show to the world that Bangladesh is not a hopeless country, but a

country full of hope and worthy of attention, care and development assistance.

Yali Chen 21

8 Reference

Ahmed, Z. U., Hopper, T., & Wickramasinghe, D. (2012). Hegemony and accountability in BRAC–the

largest hybrid NGO in the world.

Amin, M. R., Majumder, M. T. H., & Tuhin, M. K. W. (2011). Impacts of micro-finance program on the poor:

A comparative study between Grameen bank and ASA in some selected areas of

Bangladesh. Journal of Economics and Sustainable Development, 2(3), 38-54.

Amin, R. (1997). Development Strategies and Socio-Demographic Impact of Non-Governmental

Organizations: Evidence from Rural Bangladesh. University Press.

Assessment of Micro-Credit Program in Bangladesh. (2010), Retrieved from

www.docstoc.com/.../Assessment-of-Micro-Credit-Programme-in-Bangladesh.

BRAC (2009a). BRAC at a glance 2009. Retrieved November 25, 2013, from

http://www.brac.net/index.php?nid=16

BRAC (2009b). BRAC's governance. Retrieved November 25, 2013, from

http://www.brac.net/index.php?nid=12

BRAC (2012a). BRAC Annual Report 2012. Retrieved November 25, 2013, from

http://www.brac.net/sites/default/files/BRAC-Annual-Report-2012.pdf

BRAC (2012b). BRAC At a glance 2012. Retrieved November 25, 2013, from

http://www.brac.net/sites/default/files/BRAC-at-a-glance-december-2012.pdf

Crawford, L. (2004). Charities Under Accountability’s Microscope. Financial Times.

Duvendack, M., Palmer-Jones, R., Copestake, J. G., Hooper, L., Loke, Y., & Rao, N. (2011). What is the

evidence of the impact of microfinance on the well-being of poor people?.

Edwards, M., & Hulme, D. (1995). NGO performance and accountability: introduction and overview. Non-

Governmental Organisations: Performance and Accountability. Beyond the Magic Bullet. Earthscan

Publications Friedman, S. & Mottiar, S.(2004). Rewarding Engagement.

Yali Chen 22

Hamidi, M. S. A. (2013). Should government of the peoples republic of Bangladesh directly operate Micro

Credit?.

Haq, M., Skully, M., & Pathan, S. (2010). Efficiency of microfinance institutions: a data envelopment

analysis. Asia-Pacific Financial Markets,17(1), 63-97.

Haque, M. S. (2002). The changing balance of power between the government and NGOs in

Bangladesh. International Political Science Review, 23(4), 411-435.

Haque, M. S. (2004). Governance based on partnership with NGOs: implications for development and

empowerment in rural Bangladesh.International Review of Administrative Sciences, 70(2), 271-290.

Holloway, R. (1998). Supporting citizens' initiatives: Bangladesh's NGOs and society. London:

Intermediate Technology Publications.

Hulme, D., & Moore, K. (2006). Why has Microfinance been a policy success in Bangladesh (and

beyond)?. Economic and social research council (ESRC). Global poverty research group (GPRG).

Islam, M. A., Khatun, M. A., Hossain, D., & Alom, J. (2013). Micro-credit programmes of different

NGOs/MFIs: A comparative study. Journal of the Bangladesh Agricultural University, 10(2), 297-302.

Islam, M. R., & Sharmin, K. (2011). Social exclusion in non-government organizations ‘(NGOs ‘)

development activities in Bangladesh. Sociology Mind,1(2), 36-44.

Jonker, K. (2009). In the Black with BRAC. Stanford Social Innovation Review, 74-9.

Karim, L. (2008). Demystifying Micro-Credit The Grameen Bank, NGOs, and Neoliberalism in

Bangladesh. Cultural Dynamics, 20(1), 5-29.

Kelly, A. (2008). Growing discontent. The Guardian, 20 Feb.

Kilby, P. (2006). Accountability for empowerment: Dilemmas facing non-governmental

organizations. World Development, 34(6), 951-963.

Mahmuda, I., Baskaran, A., & Pancholi, J. (2010). Financing Social Innovation: The Case of Micro

Financing of BRAC’s CFPR Programme in Bangladesh.

Mair, J., & Marti, I.( 2007). Entrepreneurship for Social Impact: Encouraging Market Access in Rural

Bangladesh. Corporate Governance, 7(4), 493-501.

Mannan, M. (2009). BRAC: Anatomy of a Poverty Enterprise. Nonprofit Management and Leadership,

20(2), 219-233.

Yali Chen 23

Mannan, M. (2010). Enslaving Development: An Anthropological Enquiry into the World of NGO, PhD

Thesis, Durham University, http://etheses.dur.ac.uk/340/.

Mazumder, M. S. U., & Wencong, L. (2013). Micro-Credit and Poverty Reduction: A Case of

Bangladesh. Prague Economic Papers, 2013(3), 403-417.

Mortuza, G. (2006). Fazle Hassan Abed and BRAC (in Bangla), Dhaka: Mawla Brothers.

Muhammad, A. (2009). Grameen and Microcredit: A tale of corporate success. Economic & Political

Weekly, 44(35), 35-42.

Rahman, M. W., Luo, J., Ahmed, S., & Xiaolin, W. (2012). The Synthesis of Grameen Bank, BRAC and

ASA Microfinance Approaches in Bangladesh.World Applied Sciences Journal, 20(7), 1055-1062.

Sachs, J. (2005). The end of poverty: How we can make it happen in our lifetime. Penguin UK.

Siddiquee, N. A., & Faroqi, M. G. (2009). Holding the giants to account? constraints on NGO

accountability in Bangladesh. Asian Journal of Political Science, 17(3), 243-264.

Sidel, M. (2004). Courts, states, markets and the nonprofit sector: judiciaries and the struggle for capital

in comparative perspective. Tulane Law Review, 1651-1668.

Westover, J. (2008). The record of microfinance: The effectiveness/ineffectiveness of microfinance

programs as a means of alleviating poverty. Electronic Journal of Sociology, 12(1).

World Bank. (2002). Bangladesh: Financial Accountability for Good Governance. The World Bank.

doi:10.1596/0-8213-5137-0

Wright, G.W. (2012). NGOs and Western hegemony: Causes for concern and ideas for change.

Development in Practice, 22 (1), 123-134.

Zaman, H. (1999). Assessing the poverty and vulnerability impact of micro-credit in Bangladesh: A case

study of BRAC.

 

 

 

9 Appendix-A

46 BRAC Report 2012 BRAC Report 2012 47#3"$

�0SHBOPH

SBN

Yali Chen 25

10 Appendix-B

62

BR

AC

Rep

ort

2012

BR

AC

Rep

ort

2012

6

3

2

01

2

2

01

1

Ta

ka

U

S $

Ta

ka

U

S $

AS

SE

TS

Cash

in h

and

and

at b

anks

1

6,0

49

,45

3,0

79

2

05

,76

2,2

19

1

0,7

26

,19

7,1

31

1

46

,93

4,2

07

A

dva

nce,

dep

osi

ts a

nd

pre

paym

ents

2

,22

2,1

30

,86

0

28

,48

8,8

57

2

,25

7,5

80

,90

7

30

,92

5,7

66

In

vento

ries

3,0

54

,10

5,9

58

3

9,1

55

,20

5

3,1

09

,68

2,7

89

4

2,5

98

,39

4

Gra

nts

and

accounts

receiv

ab

le

1,3

09

,45

1,9

32

1

6,7

87

,84

5

1,5

22

,04

3,6

94

2

0,8

49

,91

4

-ICROÙNANCEÖLOANSÖ

Ö��������������ÖÖ

Ö�����������ÖÖ

Ö��������������ÖÖ

Ö�����������Ö

Moto

rcyc

le lo

ans

60

2,6

63

,39

8

7,7

26

,45

4

74

3,5

62

,01

7

10

,18

5,7

81

In

vest

ments

in s

ecurit

ies

and

oth

ers

2

32

,10

0,0

00

2

,97

5,6

41

2

35

,00

0,0

00

3

,21

9,1

78

In

vest

ments

in r

ela

ted

und

ertaki

ngs

8,0

98

,69

7,1

20

1

03

,82

9,4

50

7

,39

9,8

08

,73

1

10

1,3

67

,24

3

Pro

perty,

pla

nt and

eq

uip

ment

9,9

16

,89

9,8

37

1

27

,13

9,7

42

7

,83

8,6

16

,60

0

10

7,3

78

,31

0

TO

TA

L A

SS

ET

S

97

,78

2,5

07

,40

4

1,2

53

,62

1,8

90

8

2,2

31

,53

7,9

84

1

,12

6,4

59

,42

4

LIA

BIL

ITIE

S A

ND

NE

T A

SS

ET

S

L

iab

iliti

es:

Lia

bilitie

s fo

r exp

ense

s and

mate

rials

4

,78

8,8

34

,42

6

61

,39

5,3

13

4

,04

6,6

95

,19

3

55

,43

4,1

81

B

ank

ove

rdra

fts

5,0

06

,63

6,2

22

6

4,1

87

,64

4

5,1

20

,90

7,3

32

7

0,1

49

,41

6

Term

loans

12

,94

0,7

46

,14

6

16

5,9

07

,00

2

11

,16

5,6

23

,56

8

15

2,9

53

,74

8

Mem

bers

’ savi

ngs

dep

osi

ts

24

,90

7,2

81

,66

3

31

9,3

24

,12

4

22

,36

4,3

67

,26

9

30

6,3

61

,19

5

Gra

nts

receiv

ed

in a

dva

nce a

ccount

8,6

97

,91

8,9

04

1

11

,51

1,7

81

5

,76

2,8

59

,15

6

78

,94

3,2

76

D

efe

rred

incom

e

25

0,8

95

,45

2

3,2

16

,60

8

21

6,9

57

,53

2

2,9

72

,02

1

Oth

er

long term

liab

ilitie

s 8

,21

6,3

92

,56

5

10

5,3

38

,36

6

6,3

74

,46

5,0

05

8

7,3

21

,43

8

Pro

visi

on for

taxa

tion

84

0,9

41

,03

0

10

,78

1,2

95

6

40

,94

1,0

30

8

,78

0,0

14

T

ota

l L

iab

iliti

es

65

,64

9,6

46

,40

8

84

1,6

62

,13

2

55

,69

2,8

16

,08

5

76

2,9

15

,28

8

Ne

t A

sse

ts:

C

ap

ital

fund

-

unre

stric

ted

3

1,2

00

,44

6,9

39

4

00

,00

5,7

30

2

5,6

79

,80

5,2

12

3

51

,77

8,1

54

-t

em

pora

rily

rest

ricte

d

93

2,4

14

,05

7

11

,95

4,0

26

8

58

,91

6,6

87

1

1,7

65

,98

2

3

2,1

32

,86

0,9

96

4

11

,95

9,7

56

2

6,5

38

,72

1,8

99

3

63

,54

4,1

36

T

OTA

L L

IAB

ILIT

IES

AN

D N

ET

AS

SE

TS

9

7,7

82

,50

7,4

04

1

,25

3,6

21

,89

0

82

,23

1,5

37

,98

4

1,1

26

,45

9,4

24

E

xchange r

ate

: 1

US

$ =

Tk.

78

(2

01

1:

1 U

S $

= T

k.7

3)

BA

LA

NC

E S

HE

ET

CO

NV

ER

TE

D T

O U

SD

as

at D

ecem

ber

31

, 2

01

2(N

OT P

AR

T O

F A

UD

ITE

D F

INA

NC

IAL S

TATE

ME

NTS

)

 

62 BRAC Report 2012 BRAC Report 2012 63

Statement of Income and Expenditure Converted to USDfor the year ended December 31, 2012

(NOT PART OF AUDITED FINANCIAL STATEMENTS)

2012 2011 Taka US $ Taka US $Income Donor grants 11,852,318,277 151,952,798 10,046,780,917 137,627,136 Revenue from: - Income Generating Projects 7,861,356,580 100,786,623 7,342,675,873 100,584,601 - Program Support Enterprises 4,124,249,679 52,874,996 3,372,806,327 46,202,826 3ERVICEÖCHARGESÖONÖMICROÙNANCEÖLOANSÖÖ Ö��������������ÖÖ Ö�����������ÖÖ Ö��������������ÖÖ Ö�����������Ö)NTERESTÖONÖBANKÖACCOUNTSÖANDÖÙXEDÖDEPOSITSÖ Ö�������������ÖÖ Ö����������ÖÖ Ö�����������ÖÖ Ö���������ÖInvestment income 126,946,311 1,627,517 545,994,809 7,479,381 Other income 550,365,696 7,055,970 518,711,087 7,105,631 Income from House Property 100,720,809 1,291,292 90,861,598 1,244,679 Total income 40,669,347,564 521,401,892 34,135,573,083 467,610,590 Expenditure Income Generating Projects 6,988,350,392 89,594,236 6,353,877,329 87,039,415 Program Support Enterprises 3,638,907,643 46,652,662 3,157,743,553 43,256,761 House Property 93,188,884 1,194,729 80,197,303 1,098,593 Education Programme 4,277,356,983 54,837,910 3,434,005,024 47,041,165 Ultra Poor Programme 2,045,763,985 26,227,743 2,137,337,116 29,278,591 Community Empowerment Programme 217,227,040 2,784,962 161,300,304 2,209,593 Human Rights and Legal Services 195,539,238 2,506,913 136,546,758 1,870,504 Policy Adcocacy 39,777,955 509,974 31,822,364 435,923 Health Programme 3,710,271,278 47,567,580 2,741,737,287 37,558,045 Water, Sanitation and Hygienic Programme 1,339,321,154 17,170,784 829,577,150 11,364,071 Gender, Justice and Diversity Programme 138,151,582 1,771,174 99,839,611 1,367,666 Micro Finance Programme 11,714,555,867 150,186,614 10,497,901,219 143,806,866 Agriculture and Food Security 264,294,222 3,388,387 475,991,318 6,520,429 Other Development Projects 340,826,334 4,369,568 372,260,236 5,099,455 Grants - - 306,040,276 4,192,333 Total expenditure 35,003,532,557 448,763,238 30,816,176,848 422,139,409 Surplus of income over expenditure before taxation 5,665,815,007 72,638,654 3,319,396,235 45,471,181 Taxation (200,000,000) (2,564,103) (150,000,000) (2,054,795) Net surplus for the year 5,465,815,007 70,074,551 3,169,396,235 43,416,387 Exchange rate: 1 US $ = Tk.78 (2011: 1 US $ = Tk.73)