Grameen Trust—Replicating Grameencredit Worldwide, Cost Effectively H. I. Latifee

Microcredit Summit Campaign Report 2003 highlights significant progress in reaching its goal of accessing the world’s poorest families with microcredit, particularly the women of these households. Nevertheless, the report laments the fact that sustainable microfinance aimed at poverty alleviation is still not a matter of priority concern to the World Bank, the UNDP or other funding agencies. Nor is it something that carries any strong conviction with these agencies? The question that is frequently raised is, when will the donors be finally convinced that the poor can be reached cost effectively through microfinance institutions? While donor agencies and multilateral organisations have shown some interest in financing microcredit programs in the third world, there is still the preference for the more conventional project based approach that relies on costly technical assistance, particularly consultancy inputs from the developed countries and its academia. Donors have been reluctant to fund global, regional or national wholesale institutions like Grameen Trust, CASHPOR, that can more efficiently link up with grassroots institutions, implement and supervise the microcredit programs in the developing countries.

It is in this context that the Grameen Trust experience needs to be assessed. The Trust has struggled to raise endowment funds from private foundations, individuals, bilateral aid agencies, multilateral organisations like the World Bank and UNDP. Till the end of 2003, the Trust has provided $ 17.8 million to program initiators in 35 countries, for piloting and scaling up microcredit activities that followed the Grameen Bank approach. A total of 121 projects have either been already implemented or are under implementation, worldwide. These funds along with resources, leveraged from other sources, in turn have spawned into hundreds of thousands of loans for beneficiaries amounting to US$ 602 million, which means that each dollar obtained by Grameen Trust (GT) through donor sources, has revolved many times in the hands of borrowers, yielding additional income and generating new employment opportunities for the very poor and their families.

Grameen Trust has now completed its thirteenth year of operation as a not for profit institution providing financial and technical support to microcredit organizations. GT organises international dialogue programs for prospective microfinance practitioners, offering financial support, training, monitoring, evaluation, and audit services, to its partner organizations.

Piloting Through Dialogue Programs, Fast Tracking through BOT Approach

How did the Trust succeed within such a short time, in reaching out and supporting so many microcredit program initiatives around the world? GT has followed two approaches. The more common approach has been through the international dialogue programs, which have been organised fairly regularly, every year. More recently, GT has developed a fast track approach to facilitate replication through a “build operate & transfer” model. Since 1991, GT has provided assistance to 117 organizations in 32 countries and have either completed or are in the process of implementing four “build, operate and transfer” (BOT) projects in Afghanistan, Myanmar, Kosovo and Turkey.

The GB replication fast tracked through BOT has been successfully completed in Myanmar and its management has already been transferred to local authorities. The Kosovo project is also based on a fast track BOT approach and local staff has been trained up to assume full responsibility for its management.

The dialogue programs began in 1989, to facilitate intense exposure to Grameen experience for policymakers and NGO leaders alike. Participants in these dialogues are generally potential replicators or chief executives of institutions which are interested in learning more about microcredit, the Grameen Bank approach and the possibility of obtaining financial and technical support from GT in initiating pilot microcredit programs in their respective countries.

The Grameen Dialogue Program is a critical first step to provide support to future replicators. The program acquaints the participants with the concepts, methodology and operational tools of Grameen Bank. It provides a first hand opportunity to look at the impact of microfinance on the lives of poor people. But most important of all, at the end of the Dialogue, many participants feel encouraged to develop their own action plans to initiate a pilot project. The objective is to try out the Grameen type microcredit in their own country. Technical and financial support usually in the form of a small seed capital that amounts to US$ 50,000 or even less from GT, becomes very important in initiating a replication project.

Support Through GT Seed Capital and Scaling up funds

Seed capital funding is a critical catalyst for microfinance institutions. As the experience shows it is the most difficult resource to secure during their start-up phase. GT supports these organisations to secure capital needed for initial lending and operational costs. GT’s selection process for seed funding is extremely rigorous and all partner organisations are required to leverage the funds received from GT, in order to seek additional funding from other donor sources.

Scaling up funds are generally provided to projects that have successfully achieved their initial objectives during the seed capital phase. They have increased their outreach, moved towards operational self sufficiency, developed professional staff, increased the amount of outstanding loans and maintained a high repayment rate. GT would then provide additional support to the organisation for scaling up its operations and further expand its services to larger members of poor people. The support is generally provided to a single branch of the project, rather than the whole project itself. This is done to show a comparison between branches, so that the project as a whole can compare strengths and weaknesses to move towards greater sustainability and become quickly a viable microcredit provider to the poor.

Providing Technical Support – Training, Monitoring & Audit

GT has designed and developed need based training, management workshops & internship programs, on different aspects of Grameencredit to help raise the capacity of the professional staff belonging to partner organizations. The programs focus on the philosophy and methodology of Grameen Bank, as well as the practical challenges faced by replicators on the ground. Some of the training and workshop programs have been organised for Grameen’s global network partners, in their own countries or at regional levels.

In addition, GT has organised both off site and on site monitoring, regularly evaluating monthly and quarterly reports. The Trust has now a developed database for monitoring the performance of its partner projects. GT compares and consolidates these reports and examines and analyses data for MIS. GT updates its reporting formats on a regular basis, keeping in line with new developments in the industry.

As a part of its monitoring process, GT has also conducted audit visits to partner organisations to ensure more efficient operations. GT stresses the importance of both internal and external audit, highlighting the need for transparency and adequate internal financial controls. Audit visits have helped to analyze GBRP financial statements and loan utilization of funds received by the project.

Conclusions

How effective has been the GT strategy in developing microcredit industry for alleviation of poverty? This is best attested by the rapid growth of leading microcredit institutions in different countries including Bolivia, Bosnia, China, India, Indonesia, Kosovo, Kyrghyzstan, Myanmar, Nepal, Nigeria, Pakistan, Philippines, Tanzania, Uganda, and Vietnam. Some of the microcredit institutiions in these countries have now become well known for their excellent performance in terms of outreach, portfolio quality and sustainability. They could not probably have reached this stage without the critical support that they had received from GT at the outset. GT’s BOT model has been found very effective in building the capacity for rapid program expansion and institutional sustainability.

Grameen Trust now faces the formidable challenge in raising additional resources to meet the growing demand of funds from start-up partners and for their scaling up. Both GT and its partners are struggling to secure funds that seem to have dried up, inspite of the general acceptance of microcredit as a cost-effective weapon to fight poverty. More resources for poverty focused microcredit programs will mean more rapid poverty reduction in different parts of the world. How to meet this resource crunch, should be a matter of urgent concern at the forthcoming Dhaka Summit.

To achieve the Summit Campaign goal of reaching 100 million of the world’s poorest families and to help materialize the Millenium Development Goals of halving the proportion of people living on less than a dollar day by 2015, it is very important that funding issues of microfinance programs be urgently solved. The valuable experience of Grameen Trust in promoting and expanding microcredit programs can only be relevant, if donors and others really commit themselves to give microfinance its due role to help the poor to overcome their poverty.

BOT—A Practical Way for Expanding on a Fast Track !

Grameen Trust has developed a fast track approach towards replication of Grameencredit. Through its “build, operate and transfer” model, Grameen Trust brings microcredit to the poorest of the poor in post-conflict communities or in other places that need strong microcredit interventions for poverty reduction. These are also the places considered most difficult by others.

Successfully Completed in Myanmar

In 1997, Grameen Trust was selected by UNDP/UNOPS Asia Office, to create and maintain the Sustainable Livelihood Through Micro-Credit for the Poor project in Myanmar. The project began in August 1997, in the Delta Zone of Myanmar. After five years of building microfinance at a grassroots level through the build, operate and transfer model, Grameen Trust successfully completed its Grameen Bank Replication Project in Myanmar. It is now being managed by local staff who were trained by GB managers.

GT established 10 branches in the three townships of Delta Zone. A total of 683 villages were covered by the project, by September, 2003, reaching 35,840 women borrowers. A total of US$ 3.76 million was disbursed through these loans and total loan outstanding was US$ 964,480 (at the end of September, 2003). Repayment rate has remained an astounding 100% .

GT has also built up the capacity of its local staff to manage the project. It recruited 116 staff (60% were women) and trained them at project site in Myanmar and also at Grameen Bank, Bangladesh. The project has attained 139% operational self-sufficiency and staff productivity has reached 90% according to Grameen Bank standards (400 members per staff).

The Kosovo Story — Rebuilding A War Torn Economy

Grameen Trust initiated the Kosovo Grameen Missione Arcobaleno Microcredit Fund with financing provided by Missione Arcobaleno, which was a citizens’ fund, raised in Italy. It was created specifically to assist the people of Kosovo after the war in 1998. Grameen Trust received US $ 4.83 million to establish a microcredit program, directly implemented by Grameen Trust, to help rebuild economic activities of the poor people of Kosovo.

In June 2000, Grameen Turst began field activities with core staff, seconded from Grameen Bank. In the first year, two branches in Peje and Pristina were established. In the second year, two more branches were established in Gjilan and Prizren.

The project enjoyed considerable success in 2003. As of November , 2003, through its four branches, the project disbursed Euro 9.63 million to 6,160 borrowers and had an outstanding balance of Euro 2.91 million. The project’s repayment rate was close to 100%. It has Euro 1,68,229 as member savings.