Sa-Dhan Newsletter Volume 5 Issue 1

Operational Costs of Delivering MicroFinance

A Tryst With Costs

Ragini Bajaj Chaudhury looks at how Banwasi Utthan Kendra

maintains high portfolio quality and low operating costs ratio

1

Introduction

All the field level activities, including surveys, selection of

villages and members, projection meetings, follow-up

Banwasi Utthan Kendra (BUK) was registered in the year

meetings formation of centres, group implementation of the

1998 ­ by Dr Narendranath Dhar Chowdhury ­ under the

banking programmes, recruitment and training of the staff

Societies' Registration Act. Mr Dhar Chowdhury is a UK

and other development activities are undertaken by the

citizen of Indian origin, whose interest in development had

Branch Manager. The branch acts as a strategic business

led him to work with NGOs in West Bengal as a Rhodes

unit for operational purposes. The operational policies and

scholar. He gained some valuable experience in develop-

guidelines laid down by HO are strictly implemented by

ment and decided to promote BUK with the intention of

Branch Managers. Generally, the office of the Branch

initiating a microfinance (MF) programme based on the

Manager is supported by an Accountant, a Cashier and Field

Grameen model, besides working in other interventions in

Officers called Centre Coordinators. A Centre Coordinator

education and technology.

typically manages 8-12 centres, each of which comprises

35-40 clients.

BUK started its MF operations in the Chandan Nagar taluka

of Gopalpur district in June 1998.  The operations have

A Centre Manager has to co-ordinate all the activities at

since expanded well and now cover a large part of Gopalpur

the village level ­ formation of groups in villages, training

and Laxmipur districts. Though BUK started its activities

of groups, conducting centre meetings, appraising loan

with MF, it is now also partly involved in other development

applications, disbursing loans, verifying loan utilisation,

activities related to education and organic farming. How-

ensuring timely loan repayment, and any other village-based

ever, the primary focus of the programme continues to be

activities. The branches function as the monitoring centre

MF.

and ensure the adherence to guidelines and procedures on

all operational aspects laid down by the HO.

The MF operations of BUK are focussed on providing poor

village women speedy and affordable access to credit using

The HO staff and senior field staff such as District Managers

the Grameen Bank model. To this end it has been involved

and Branch Managers of the organisation are recruited from

in the promotion of women's groups since the beginning

reputed professional institutions and have considerable

of the programme. These groups are encouraged to save

experience. The field staff, including Centre Managers, are

and are then provided with loans by BUK for income-

graduates from local universities and are familiar with the

generating activities, consumption purposes and for emer-

local context.

gency needs.

3

Sources of Funds

BUK started working through one branch in the Chandan

Nagar taluka of Gopalpur district in 1998. In June 2000,

For its operations, BUK has obtained loan funds from the

BUK received significant grant funds to expand its opera-

Grameen Foundation, Union Bank, SIDBI, FWWB, and HDFC

tions to four branches in Gopalpur. BUK has expanded its

Bank. Grameen Foundation and Union Bank have been

network since then to nine branches serving 286 villages

regular lenders to BUK and have provided loans based on

with membership of 22,217 clients, 680 centres, 4,950

the operational requirements and demand of BUK. Repay-

groups and 20,190 active loan clients. The total loan

ment to the lenders has been timely. BUK has also raised

amount outstanding is Rs 511.7 lakh.  The organisation

a significant amount of grant funds for its operations from

has a total of 80 staff devoted to mF operations. Of these,

domestic and foreign sources. The grants funds have helped

69 are field staff and 11 are stationed at the BUK office.

BUK in setting up adequate infrastructure for its operations.

Some of the grants from international donors have been

2

Organisation Structure

received specifically for increasing its outreach by increas-

ing number of branches through which BUK operates.

BUK's operations are managed by its founder and Chief

Executive, Mr Dhar Chowdhury.  At the head office, the

4

Microfinance Practices

Chief Executive is assisted by a Chief Financial Officer and

a Chief Operations Officer. An Operations Director, a

BUK follows the peer-lending model developed by the

Technology Director, a Finance Manager, an HR Manager,

Grameen Bank of Bangladesh. BUK has set the criteria for

three internal auditors and various other functional heads

choosing the villages for operations, and selecting house-

support the senior management at the head office. The HO

holds within a village. Five members join together to form

delegates responsibilities to area offices under Assistant

a group and start saving. This group then receives intensive

Area Managers who manage three to five branches each.

training from the BUK staff.  At this stage the group is

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