Grameen took 27 years to reach 2.5 million members – and then doubled that in the full establishment of Grameen II. Even in Bangladesh’s fiercely competitive environment Grameen continues to grow at a remarkable rate attracting around 140,000 new members each month – a staggering 1.7 million new members every year. In the three years to December 2005, Grameen’s deposit base tripled and its loans outstanding doubled. In the same period the bank has introduced a more conservative provisioning policy and built up a formidable loan provision for its troubled housing loan portfolio. At the same time the quality of the loan portfolio has significantly improved, as did profitability. Drop-outs are returning, and even some old defaulters are repaying and re-joining. Market-led Grameen II is yielding very encouraging results. Grameen customers are using the Grameen II products in a wide variety of ways, to meet the diversity of needs and challenges that face them. This note describes the effects of the new Grameen II efforts on the overall Grameen Bank system and on how clients are responding and provides reflections on what these efforts may mean for Grameen and the microfinance industry in the near future.
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Issues in Mobile Banking 1: Implementation Choices
This note examines some of the key strategic issues for financial institutions considering implementing mobile banking. It suggests the aspiring MFIs to assess the market potential and devise entry strategies according to the vision of the organisation. The note also mentions that mobile banking can be a supplement or substitute to the existing product or services, depending upon the goals of operators either for reducing transaction costs or attracting new customers or for revenue. The note also suggests forging strategic operational alliances, if need be (and in between telecom and finance companies). It further advises the MFIs wishing to enter into this market to develop compatible hardware and appropriate software in addition to financial modelling for providing these kinds of services.
Lessons from MicroSave’s Action Research Programme (2005)
This note documents the lessons learned in 2005 under the Action Research Programme of MicroSave. Focusing on strategy, the note discusses strategic alignment between an institution, its staff, management and stakeholders, shared vision, strategic marketing, improving governance and risk management process for its success. It also stresses the role played by branding which is not merely designing a logo, but it requires linkages with organisational strategy. The note also emphasises various processes in savings and lending operations including staff incentive scheme for savings, loan portfolio audit and pilot testing. It further discusses importance of communication, institutional culture for customer oriented service and feedback loop to improve efficiency. This note concludes with a focus on e-banking and performance management of the staff to deliver effective and efficient services.
Uses and users of MFI loans in Bangladesh
The author’s study of the ‘financial diaries’ methodology provided unusual and valuable insights into how MFI loans are actually used and why. This is because they tracked the day-to-day activities of 53 village households over two or three years in great detail, helping them to construct ‘diaries’ of their financial lives. Unlike questionnaire-based surveys, and unlike rival ways of using case-studies, which depend on recall by the interviewees, this method allowed observation in real-time as people struggled to decide what to use their loans for, and then dealt with the consequences of their choices. This Grameen II note covers the methodology used in collecting ‘financial diary’ information from clients and provides the results of the study as well, focusing on how clients used the funds and for what purpose.
The Art and Science of Pricing Financial Services
This note discusses the pricing concerns from customers’ perspective and the difficulty in understanding the costs associated with the financial services. It highlights three main factors for pricing a product—costs, competition and value. It also underlines the importance of transparency in developing a business and the ways to improve it by ensuring that staff members know the products and services well. The note also points out the role played by regulators in reporting the price of a product and voluntary disclosure of actual pricing to customers by the MFIs. It further considers the factors in pricing loans, savings and e-banking products by the MFIs. Conclusively, it recommends building and developing capacities to perform pricing.
Staff Incentive Schemes for Deposit Mobilisation
This note discusses in details about designing the staff incentive schemes for deposit taking microfinance institutions. It highlights the importance of being friendly and having good interpersonal skills in mobilising deposits. It suggests designing group based staff incentive scheme for deposit mobilisation as it is often difficult to discern exactly what (and who) caused the customer to entrust the institution with his or her funds and provides a simple formula for it. It also stresses to factor in more weights, if there are different schemes, and/or management thinks of refining the existing schemes. It further recommends distributing the branch bonus pool according to the base salaries.