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Analysis of Sustainability, Growth, and Development of a Leading Microfinance Institution in Bangladesh-Case Study on TMSS
Analysis of Sustainability, Growth, and Development of a Leading Microfinance Institution in Bangladesh-Case Study on TMSS
Exam Roll Number: 030056 Registration Number: 19246 4th year, 8th semester
Elaboration
InM-Institute of Microfinance TMSS-Thengamara Mahila Sabuj Sangha PKSF-Palli Karma Sahayak Foundation
Sampling Design 3 branches of TMSS for surveying members. Also covered liaison and head offices of TMSS along with other 3 branches for surveying the employees. Following table shows the convenience sampling which was covered for the study:
Determination of Sampling from 3 branches of TMSS in Dhaka district Particular s Head Office Liaison Office Name of the Branch of TMSS
Ashulia Employe es
Employees
Gazipur Sadar (BADP Project) 8 4
Members
Gazipur Sadar (BADP Project) 105 11
Members
Moucha k 1651 11
Zirabo
Zirabo
8 2
1331 10
Organogram of InM
Executive Director
Director
Deputy Director
Consultant
Assistant Director
Officer
Intern
Organogram of TMSS
General Body
Advisors (Finance) Advisors (Programs)
Executive Committee
Executive Director
Director (Finance & Admin) Director (Operations)
Deputy Director (Research & Monitoring) Assistant Director (Research and Monitoring)
Manager (Audit)
Audit Officer
Manager (Admin.)
P. M. / P. C. / M. Officer
Technical Office
Admin Officer/ Sr. Officer (Cash & store) Store Officer/ Asstt Admin Officer Store Keeper
Research Associate
Project Trainer
Tech. Support Staff FO
Branch Officer
Cashier
Data Collector
Field Officer
Service Staff
Service Staff
Service Staff
Service Staff
Brief Overview
Establishment date of PKSF-1990 Establishment date of InM-August 2006 Establishment date of TMSS-1964 Functioning date of TMSS-1980 Establishment date of ASA-1978
General Body is comprises of 15 members, including 7 (seven) members of the Governing Body.
Professor M.A. Baqui Khalily is the Executive Director of the Institute of Microfinance (InM). Dr. Wahiduddin Mahmud is the first chairman of InM. Professor Dr. Hosne-Ara Begum is the Executive Director of the Thengamar Mahila Sabuj Sangha (TMSS)
Methodology
This study was a descriptive research. There are 2 types of data- primary and secondary data. Primary sources of data were1. Personal observation; 2. Interaction with the beneficiaries of TMSS; and 3. Interview with the employees of the TMSS. Secondary Sources of data were1. Annual reports and financial documents of TMSS; 2. Published documents and reports from InM; and 3. Relevant information from websites.
Journey of TMSS
Establishment date of TMSS- 1964 Actively functioning from- 1980 The prompters of those societies were Fatema Bewa and Jomela Bewa. Prof Dr. Hosne-Ara Begum took the responsibility of TMSS as an executive director. She maintained a close co-ordination with the 14 para groups. She also formed 21members management committee from 225 women and rice was taken as deposit in her residence. Thus the journey of TMSS began...........
Management of TMSS
A 6 level organizational structure These are Para Group (PG), Village Organization (VO), Village Development Committee (VDC), Union Development Committee (UDC), Thana Development Committee (TDC) and District Development Committee (DDC). Management - participatory and democratic approach The General Body Members are the Chairperson of the Village Organization of TMSS.
Department
-Planning Research & Publication -Human Resource Development (HRD) -Finance & Accounts -Audit 1. Internal Audit 2. External Audit, and 3. Manpower of Audit
Threats (T) Transaction costs; standard; capacity; value chain governance; and business environment.
SI No.
Financial Service
Characteristic
Description
Credit
saving
Usually 12 months, occasionally less, sometimes greater like 3 years. Monthly or weekly usually fixed, equal amounts. Generally 45 installments a year. 2%-12.50%, average interest charge by PKSF is 7%. No physical collateral.
Types client
At least 50 decimals of land in each household, who is owner of below Tk. 25,000
Other
Highly volatile and risk heavily dependent on portfolio management skills Non-dependent on government and cost recovery objective vs. profit maximizing
Decentralized, regulation insufficient external control and
Lending models Follows HEM model, peer based group lending model Remittances TMSS Charges 30 BDT for first 1000 BDT and 10 BDT for next 1000 BDT
Major Programs of TMSS -Human Development and Training Program -Education Program -Agriculture and Para Agriculture Program -Income Generating Activities (IGA) and Job Creation Program -Health and Nutrition Services -Disaster Management -Women, Children and Gender Development Program -Monga Mitigation Program (MMP)
-Flexible Savings
-Special Savings
Features of Loans (Generally 2 types) -General loan -Sectoral and micro-enterprise development program loan Types of Loan of TMSS (Several) -Sanitary Loan -Livestock Loan -Fish Cultivation Loan -Crop Loan -Housing Loan
Analysis of TMSS
Growth, Efficiency, Sustainability, and Productivity of TMSS and Its Overall Contribution in Bangladesh Table 01
Year 2002 2003 2.9362 2004 2.7317 2005 3.7409 2006 3.8268 2007 4.2285
Interpretation
Debt/Equity
From the analysis, it is obvious that from year 2002 to year 2007 debt/equity ratio of TMSS is increasing. D/E Ratio-Indicator Structure of Financial
4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2002 2003 2004 2005 2006 2007 YEAR
Analysis of TMSS
Table 02
Year Cost per Borrower of TMSS 2002 10.7 2003 7.9 2004 8.5 2005 10.3 2006 11.4 2007 12.6
Interpretation
Operating Expense/Average No. of Active Borrowers
14 12 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 YEAR Cost per Borrower of TMSS
Here, from the analysis, it is obvious that from year 2002 to year 2007, cost per borrower is increasing.
cost per borrower Ratio-Indicator of productivity
Analysis of TMSS
Table 03
Year Profit Margin of TMSS 2002 -0.0126 2003 0.3614 2004 0.3632 2005 0.1942 2006 0.136 2007 0.1633
Interpretation From year 2002 to year 2007 Profit Margin of TMSS is not performing satisfactory. After reaching the breakeven, TMSS gained 36.17% at year 2003 but profit margin continuously decline until year 2006.
0.4 0.3 0.2 0.1 0 -0.1 2002 2003 2004 2005 2006 2007 YEAR Profit Margin of TMSS
Analysis of TMSS
Table 04
Gazipur/Ashulia -High Interest Rate Opinion of Members Ashulia (Zirabo) Gazipur-Mouchak Total High 4 9 13 Moderate 6 2 8
Interpretation Here, among 21 respondent 13 respondents was claiming that interest rate is high like other MFIs. 8 respondents claiming that interest rate is moderate to them.
Analysis of TMSS
Table 05 Demand of Loan
No. of Members of BADP Project
Total
11
Interpretation Here, among 11 respondent of BADP Project of TMSS 7 was claiming that demand is not fully satisfied as their purpose of loan is for business.
Analysis of TMSS
Table 06
Satisfaction Level of Members (Ashulia and Gazipur-Mouchak Branch) Frequency Highly Satisfied 1
5% 37% 29% Highly Satisfied Low Satisfied Moderately Satisfied Satisfied 29% Satisfaction Level of Members (Ashulia and Gazipur-Mouchak Branch) Frequency
Low Satisfied
Moderately Satisfied Satisfied Total
6
6 8 21
Interpretation
Here, among 21 respondents 37% was claiming that they are satisfied and only 5% is highly satisfied.
Analysis of TMSS
Table 07
Members Long towards TMSS Branch Stay with TMSSYes/No No Comme nt Probabl y stay Term Commitment GazipurMouchak
Members Long Term Commitment towards TMSS
8 7 6 No. of 5 Members of 4 TMSS 3 2 1 0 8 7
Ashulia (Zirabo)
2 1
3 0
Yes
Total
7
10
8
11
Interpretation Here, most of the respondents are loyal and committed to TMSS.
Analysis of TMSS
Table 09
Table 11
TMSS 18691 ASA 72204
500 400 300 200 100 0 TMSS Name of MFIs ASA No. of Upazilla (in 2008)
80000 70000 60000 50000 40000 30000 20000 10000 0 TMSS Name of MFIs ASA
Interpretation Here, most of the no. of Upazillas and Villages are covered by ASA comparing with than that of TMSS.
Table 13
TMSS 47399 ASA 271,976
250000 200000 150000 100000 50000 0 TMSS Name of MFIs ASA Total Group
Branch Offices
Interpretation
Here, ASA covers 3303 branches which have total group of 271,976 those are larger than that of TMSS.
Table 15
ASA 5,877,440
7000000
No. of Borrowers
6000000 5000000 4000000 3000000 2000000 1000000 0 TMSS Name of MFIs ASA Borrowers
Members
Interpretation From the above analysis, comparing with ASA, TMSSs members and borrowers are low.
2002
-0.0022 0.0905
2003
0.0784 0.1194
2004
0.0733 0.0957
2005
0.0343 0.1071
2006
0.0251 0.0936
2007
0.0323 0.0451
ROA
Interpretation Above diagram is going to explain that financial performance on return on assets is satisfactory for ASA, thus the organization become more profitable than that of TMSS.
Percentage Value
50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% 2002 2003 2004 2005 2006 2007 Ye a r
Interpretation Here ASAs ROE is also larger percentage than that of TMSS. TMSSs financial performance declined in the year 2006 but it is again improving from year 2007.
US $ (In Million)
400 300 200 100 0 2002 2003 2004 2005 2006 2007 YEAR
Loan outstanding (in million) of ASA Loan outstanding (in million) of TMSS
Interpretation Here loan outstanding is also rising for ASA and TMSSs loan outstanding is rising very slowly.
Percentage Value
0.05 0.04 0.03 0.02 0.01 0 2002 2003 2004 2005 2006 2007 YEAR
Portfolio at risk
Interpretation Here ASAs portfolio risk is comparatively larger than that of TMSS.
Operational Self Sufficiency (OSS) Ratio of ASA Operational Self Sufficiency (OSS) Ratio of TMSS
Interpretation
Although TMSS able to increase its OSS in the year 2006, it is declined from year 2007. ASAs OSS is also declined but its OSS much larger for soundness of its sustainability. TMSS is improving loan loss provision over the year.
2002
0.0042 0.0012
2003
0.0037 0.0007
2004
0.002 0.001
2005
0.0043 0.0014
2006
0.0043 0.0023
2007
0.0055 0.0027
Percentage Value
0.008 0.006 0.004 0.002 0 2002 2003 2004 2005 2006 2007 YEAR
Interpretation
Both MFIs Loan Loss Provision (LLP) are improving.
2002
0.2562 0.3873
2003
0.2541 0.5083
2004
0.268 0.5773
2005
0.2109 0.5366
2006
0.2072 0.5521
2007
0.1913 0.6948
Equity/Asset
Interpretation
ASAs equity/asset base is also larger than TMSS. ASAs performing assets also generate profit for the organization.
Borrowers per Staff member of TMSS 180 160 140 120 100 80 60 40 20 0 2002 2003 2004 2005 2006 2007 YEAR
Borrowers/Staff Members
Interpretation
Above diagram indicated that productivity of TMSS is decreasing over the year. Borrowers per Staff member - Indicator of Productivity
Year 2008 3500000000 3000000000 2500000000 2000000000 1500000000 1000000000 500000000 0 Saving Outstanding Loan Outstanding Savings and Loan Outstanding of TMSS Year 2008
2927920273
Interpretation In year 2008, loan outstanding is much better than savings of TMSS. Saving interest charge is only 6 % where as loan service charge is 12.5%. As default rate is approximately 02 to 04 % thats why risk is not highly associated with it.
Major Findings
Bangladesh Agribusiness Development Project (BADP) - 105 beneficiaries (or members). Only one female and rest of them are male. 64 members are borrower of BADP Project. Group based lending model flexible here. Members of BADP Project are satisfied regarding TMSS services and overall performances but their demand regarding loan is unfulfilled. If there is any negative profit arises then income from diversified field are distributed to cover the loss for short period of time. Most of the members in these regions are women and middle class family members. They were taken loan for house and business purposes. TMSS continuously improving its efficiency, although sometimes productivity is declined due to sudden circumstances like natural disaster, etc.
most of the offices are not well structured and decorated properly.
Recommendations
-Capacity gap can be minimized through policy development, proper utilization of donor fund and government fund, and searching for additional local fund; -To make commercially sustainable to the TMSS, its structural change along with Information Communication Technology (ICT) orientation must be needed;
-Continuous feed back from members must be upgraded to know the members satisfaction and commitment with the organization;
-A surplus of revenue must not be divided among founders and members of TMSS executives.
Recommendations- Continued
--TMSS must have to build a strong market linkage like subcontracting linkages between large enterprises ; Linkages provide enterprises with access to the combined economic, political and market advantages of larger businesses; --TMSS members also active voluntarily for developing TMSS to sustain in the long run; --TMSS also ensure good governance in all aspect into the organization; --Institutional constraints may arise directly or indirectly from a perceived lack of either government or private sector support for TMSS; --Whether employees or members are loyal and committed to the TMSS must be properly monitored. --TMSS must have to focus both male and female members for reducing poverty from the society
Recommendations- Continued
--Macro-level factors like -Enterprise regulation,
-Levels of inflation,
-Infrastructure development or changes in property legislation may be -More significant in influencing the income levels and vulnerability of poor people. In these cases, TMSS can create more stable income generation activities for the hard core poor and for poor people; --Upgrading is critical to TMSSs competitiveness and must be a continuous process. Access to knowledge and resources needed for upgrading often comes initially through vertical or horizontal linkages; --Small MFIs can follow the success policy of TMSS and minimizing threats and challenges.
Conclusion
Market is not clearly structured for MFIs. Sustainability is ensured when TMSS able to ensure soundness into its working environment, business policies and procedures, and transparency and able to bring changes and innovation along with the time.
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