Sa-Dhan Newsletter Volume 5 Issue 1

Operational Costs of Delivering MicroFinance

taken through goals and procedures of the BUK's MF

offered by BUK to its members.

programme. After the training a group needs to pass a

Group Fund Savings:  Once the group is formed and is

group recognition test following which the group becomes

recognised, each BUK member has to save Rs 5 per week

eligible for savings and credit activities with BUK. The

in a group savings fund. These savings are compulsory and

groups are attached to a Centre, which consists of up to

any member with the consent of all other group members

eight groups of five members each. Meetings are held

can withdraw up to 50% of the group's compulsory savings

weekly, which the Centre Manager attends, and all the

balance as a Group Fund Loan. BUK does not pay any

financial transactions are undertaken only at the meetings.

interest on these savings and they are not withdrawable

Attendance at meetings is mandatory and the Centre

unless the member exits from the group.

penalises members for any unauthorised absence. The

groups receive loans in 2:2:1 ratio. All the members of the

Individual/Voluntary Savings: In addition to the group fund

group receive loans within eight weeks of its formation.

savings, members who wish to put aside extra money can

do so in the individual savings accounts. BUK does not

BUK has

been very successful in enforcing strict credit

pay any interest on these savings either. The main objective

discipline

with its clients. The BUK Centre Manager does

of having this individual/ voluntary savings is to provide

not leave

the village till all the dues from the clients are

a regular channel to keep the resources of the villagers

collected.

BUK has 0% Portfolio at Risk.

secure and enable them to utilise these according to their

needs.

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Savings products

BUK groups start regular weekly savings from the day of

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Loan products

formation, the amount being pre-decided by the manage-

BUK offers several loan products to its members. These

ment.  There are two savings products currently being

are detailed below

Interest rate, term and

Purpose

Product name

Quantum

repayment mode

Any income generating

Income  Generation

Cycle: Rs. 10,000 Cycles 2+:

Rate: 15% flat (28.1%

activity

Loan (IGL)

Prior cycle max plus Rs. 3,000

effective) Upfront fee:  1%

of amount Term:  50

weeks Repayment:  weekly

Rate: 15% flat (28.1% eff.)

Cycle maximum minus IGL

Same as above, Available

Mid-Term Loan (MTL)

Upfront fee:  1% of

amount borrowed

after Week 25 of IGL

(Introduced in Year

amount Term:  50 weeks

2002)

Repayment:  weekly

Rate: 0%Upfront fee:

nil

Rs. 500

Only pregnancies, funerals,

Emergency Loan (EL)

Term:  20 weeks

hospitalizations and other

Repayment:  bullet

emergencies

Rate:  0%

50% of accrued compulsory

Effectively a withdrawal of

Group Fund Loan (GFL)

Upfront fee:  nil

savings

savings

Term:  decided by group

Repayment:  decided by

group

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Accounting and Management Information Systems

BUK has excellent and accounting system and MIS. The systems are completely computerised and updated regularly. The

information in the accounting system and MIS is reconciled every month. The system provides for adequate tracking of

overdues in the portfolio and also aids in cash flow planning.

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Progress till date

Since its inception in June 1998, BUK has been operating in the flood-prone area of Chandan Nagar. The operations

have since then expanded well and now cover a large part of Gopalpur and Laxmipur districts through its nine branches.

The progress and performance of BUK over the years are summarised in the tables below.

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