Sme

Chapter 1.0 Introduction: Rural Development Scheme (RDS) has started its journey in 1995 to meet up the investment needs of the rural poor. It is also to create opportunity for employment generation in the rural areas with a view to reducing poverty. After successful endeavour of RDS in the rural areas, the Bank has introduced Urban Poor Development Scheme (UPDS) since May 2012 to address the investment needs of the urban poor mostly live in urban slum areas. Now, RDS is being operated in 228 branches and UPDS in 24 branches, i.e in total 252 branches covering 64 districts, 490 Upazillas and 19,418 villages of the country along with 3 City Corporations like Dhaka, Sylhet & Chittagong. So far, Tk. 161,891.28 million has been disbursed under the Schemes since inception, outstanding of which is Tk. 24,476.99 as on 31 December 2016.

Islami Bank: Islami Bank is a financial institution which is guided and operated as per islamic Shariah. Interest is the main culprit of islami banking and always the prohibit interest in their everyday operations. As per OIC ''Islamibank is a financial institution whose rules,procedure & statutes expressly state its commitment to the principles of islamic shariah and to the banning of receipt and payment of interest in any one its operation.''

Islami Micro- Finance: To understand Islamic micro finance, we need a minimal understanding of the principles on which Islamic finance is based. Four principles which are derived from the Shari’ah laws (Islamic jurisprudence) and are seen by most scholars to form the core of modern Islamic finance are important also for the Islamic micro finance: * The prohibition of interest * Risk-sharing: lenders share in the profits and the losses of the business they fund. * Calculations of the time-value of money and sheds light on the wisdom behind banning riba. 1

* The prohibition of Gharar: ghrar means uncertainty or ambiguity created by the lack of information or control in an economic transaction. The concept of IM adheres to the principles of Islam and is a form of socially responsible investment. Investors who use their wealth for IM projects only involve themselves in halal projects which benefit the community at large. Such projects include zakat, which is charity based, or trade and industry projects to develop a country's economy. Islamic Micro Financial institution is at the central of economic growth and development of most societies today because of its key roles in developing human resources. It also makes significant contributions towards poverty alleviation and bridging the gap between the rich and the poor. The debates were mostly centered on interest charge, saying that if the interest was removed, there would be nothing to balance out demand and supply in the economies.

1.1 Limitation of the study: No study is free from limitations. This research work has also encountered some inevitable limitations. The limitations that were faced are as follows: 1)There is no micro finance scheme of others islamic banks in Bangladesh, so comparative position could not be analyzed. 2)Some essential data could not be gathered because of confidentiality concerns. 3)Many procedural matters were conducted directly in the operations by the top management level, which may also give sort of restrictions. 4)The respondents were mainly women and most of them were illiterate. They were conservative also. So it was hard to collect primary data properly as the research required. 5)This study is based on RDS of IBBL in Fultala SME Branch. The branch has invested about 2500 members and since this investment is only within 16 kilometres area around the bank. So it is hard to know the usefulness of this sort of investment to all the people under this scheme. 6)Due to the time limitation the numbers of respondents were taken only 50. The findings would be more accurate if the researcher could consider more respondents.

2

1.2 Background of the research Previous studies on the impact assessment of micro-credit programmes in Bangladesh have been narrow in their focus. PKSF (2005) studied the impact of micro-credit on the members of partner organizations of PKSF and found that absolute poverty was reduced by 9% during 1991 to 2000; moderate poverty declined by 5% during 2000 to 2004. Chowdhury and Bhuiya (2004) examined the impact of credit programme on the Bangladeshi borrowers under the BRAC projects and found positive impacts on human well-being, survival rate and schooling of children. Amin, Rai and Ropa (2003) conducted a study on the International Journal of Banking and Finance, Vol. 7, Iss. 1 [2010], Art. 7 on the effect micro-credit clients of Grameen Bank, BRAC and ASA. They observed that the micro-credit programme was more successful to reach the poor, but less successful to reach the vulnerable poor. Zaman (2001) assessed the impact of micro-credit on poverty alleviation and women empowerment. He found positive impact on income, decision making ability and in reducing gender disparity. Bangladesh Institute of Development Studies (BIDS) conducted impact study on the micro-credit borrowers under the partner organizations of PKSF. This study showed positive impact on the income of micro-credit participants in comparison to non-program participants (BIDS, 2001). Khandker (2000) assessed the impact of micro-credit on saving and found that microcredit increased voluntary saving, which was more pronounced in the cases of women than men. However, all of these studies simply assessed the impact of interest based micro-credit programmes which did not consider shari’ah (Islami rules and regulations) related lending in investment and none of them assessed moral and ethical development of the clients. This study will assess these aspects of micro-finance undertaken by the clients of rural development scheme functioning across the country. Unlike other micro-credit programmes, this scheme emphasized clients’ ethical and moral development activities in its micro-credit programme. Therefore, this study will assess a different type of micro-credit programme than the conventional ones, using modern econometric techniques. Another point is that the size of the rural households in Bangladesh is generally large 3

and they have a low level of literacy. Rural development is hampered due to lack of credits, lack of training, weak infrastructure and poor transport systems. The weak resource base coupled with a faster growing population is aggravating the poverty level of the country. Determination of the above factors which are most relevant in explaining poverty alleviation will have important implications for retaining micro_ finance policy. This will also help to locate appropriate clients for the RD-micro-finance. Therefore, the other objective is to examine the linkage between clients moral and ethical behavioral changes as well as their income and demographic and investment factors. Source: http://epublications.bond.edu.au/ijbf/vol7/iss1/7 Islamic micro-_ finance programme and its impact on rural poverty alleviation: 119-138 121

4

Chapter 2 Literature Review 2.1 About Micro -Finance and evaluation of micro finance: The broader definition of micro finance includes not only micro credit but also other financial services, which can be offered to the poor. Micro finance is the provision of a broad range of financial services such as deposit, loans, payment services, money transfers, and insurance to poor and low9income households and, their micro enterprises. Interested economists found soon that not only small credits but also other services connected with lending could improve

economic

lives

of

the

poorest

(Bauer,

Chytilova

&

Morduch,2008).Most MFIs connect their credit services also with educational or savings programs or business trainings, retraining scheme or technical trainings, Logically, the investments can turn out to be more profitable when he people have access to training, which can enhance their skills. Historically, the goal of micro finance was the alleviation of poverty. For many years, micro finance had this primary social objective and so traditional MFIs consisted only of non-governmental organizations (NGO), specialized micro finance banks and public sector banks. Although the Micro finance sector has reached a maturity stage over the last three decades, but the capacity of operational level staffs has not enhanced to that extent (Hassan & Islam, 2008). Every market economy relies upon the financial intermediary function to transfer resources from savers to investors. In many developing countries such as Bangladesh, due to the complexity of commercial banks getting investment has led to non-conventional forms of lending (Ceaser and Epstein, 2000).

Micro finance gives access to financial and non-financial services to a very low income people in order o start their income generating activities. The individual investment and savings of the poor clients even though very small but have created a disciplined micro finance which has created financial products and services that collectively have enabled the low-income people to become clients of a banking intermediary. The characteristics of micro finance products can be stated as follow 5

a) Little amount of investment and savings. b) Short-term loan (usually up to the term of one year). c) Payment schedules attribute frequent instalments (or frequent deposits). d) Instalments made up from both principal and profit, which amortized in course of time e) Easy entrance to the micro-finance intermediary saves the time and money of the client f) The clients who pay on time become eligible for repeat investment with higher amount. g) No collateral is required contrary to formal banking practices. Instead of collateral, micro finance intermediaries use alternative methods, like the assessment of clients’ repayment potential by running cash follow analyses, which is based on the stream of cash flows, generated by the activities for which loans are taken. (Micro finance industry report: Bangladesh, 2009).

2.2 Evolution of micro-finance: The micro-finance trend in Bangladesh with the 1976 founding of Grameen Bank of Bangladesh(GB) which become the most prominent of the industry’s successes. The rapid expansion of GB has drawn a considerable amount of interest that is focused upon the success, problems, and prospects of this emerging organization (Wells,1998; Navajas and Schreiner,2000). The development of the micro finance sector in Bangladesh divides into four phases since the mid 1970’s. 1)Action research phase in the 1970’s. 2)Micro finance development phase in the 1980’s. 3)Expansion phase in the 1990’s. 4)Increased competition and formalization from 2000 onwards.

2.3 Difference between islami & conventional Micro-Finance: The mechanism of lending in IM differs from conventional micro finance due to the prohibition of interest. Unlike conventional micro finance, IM offers an interest-free way to give small loans to people who are poor and in need. IM gives the investor a chance to get involved in worthwhile projects which could essentially play a significant role in targeting poverty and alleviating it in 6

many countries around the world. IM primarily relies upon the provision of financial services to the poor or developing regions which are subject to certain conditions laid down by Islamic jurisprudence. It represents the merging of two growing sectors: micro finance and the Islamic finance industry. It has the potential to not only be the solution for an increased demand to help the poor but also to combine the Islamic socially responsible principles of caring for the less fortunate.

2.4 Difference between conventional and Islamic MFIs Indicators Source of fund

Conventional MFIs External, client’s savings

Islamic MFIs External, client’s savings, Zakat, awqaf

Financing

Interest-based

Financing the

Islamic modes of financing

Ultra poorest are left out

Ultra poor are targeted

Fund Transfer

In cash

In kind

Target Group

Women preferred

Any member of family

Poorest

Targeting objective Women empowerment

Family empowerment

Deduction at

Yes

No

Material

Material and spiritual

inception of contract Work incentive

Social development Secular

Religious

program

Source:

A.

Raquib

&

Mohammad.

(2004),

Islami

Banking:

Tattha*Proyog*Paddhati, Al-Amin Prokashan, Dhaka

7

Chapter 3 Objectives and Methodology of the research 3.1 Objectives: This study shows the real condition of poor people and the impact of micro finance provided by Islami Bank Bangladesh Ltd. The study is to congregate upon the ideas of micro-finance to increase performance of IBBL. The study provides a platform for Islamic micro-finance organizations to provide finance for the poor people. The Objectives of the study are based on findings and impact of Islamic micro-finance (RDS) performance since growing competency of micro credit organizations have developed in our country. It is important that Islamic micro-finance values differ from others. Specific objectives are: (1) Documentation of the performance of Islamic Micro finance through RDS & UPDS program of Islami Bank Bangladesh limited. (2) Assessing the impact of Micro Finance on Socio Economic Condition of RDS&UPDS clients. 3.2 Research Methodology The whole procedure of research methodology was conducted through following steps: The secondary data collected through Head Office of Islami Bank Bangladesh Limited as the performance data only preserved in Head Office Data center or only access by the Head Office executives. Other relevant data was collected from various websites and referred books.

3.2.1 Primary Sources: Face to face interview with RDS clients. There was a set of questionnaire. Face to face interview with the beneficiaries through questionnaire. 70 respondents were selected conveniently from RDS & UPDS clients. The population size was nearly 2800 from which only 70 sample were selected conveniently. 8

3.2.2 Secondary Sources: Annual Report of Islami Bank Bangladesh Ltd. Brochures of Islami Bank Bangladesh Ltd. Prospectus of Islami Bank Bangladesh ltd. Policies and guidelines of Islami Bank Bangladesh Ltd. Published or unpublished of personally collected data from officers Secondary information was gathered to facilitate and enrich the study from various published paper and documents available in website, and from personal visit to the study area. The data have been edited, accumulated and classified according to similarities and finally tabulated. In case of data analysis and interpretation: Graph, mean value/simple average, and percentage are considered. 3.2.3 Data Analysis The necessary data for prepare this report have been collected from both primary and secondary sources. The collected data was rechecked before using it. Since, this report contains primary and secondary data, the secondary data have been documented through tables, charts and graphs and the primary data given input in to the SPSS program and taken result through tabular and percentile format after and before change in the parameters.

In this stage the primary data have been edited, accumulated and classified according to similarities and finally tabulated. In case of data analysis only percentile result has been considered.

9

Chapter 4 Results and Discussion 4.1 Performance of RDS & UPDS at glance as on 31.12.2016

Sl.

Performance

Particular

RDS

01

Designated Branches

02

Number of employees under RDS & UPDS

03

UPDS

Total

228

24

252

2,458

115

2,573*

Members

970,750

28,390

999,140

04

Clients (members enjoying investment)

564,873

17,979

582,852

05

Disbursement during the year 2016

30,348.61

1,097.55

31,446.16

06

Cumulative disbursement since inception

158,731.40

3,159.88

161,891.28

07

Outstanding investment

23537.73

939.26

24,476.99

08

Amount of Overdue

98.34

13.04

111.38

09

% Overdue on total outstanding

0.42%

1.39%

0.46%

10

Savings

7,758.18

194.46

7,952.64

11

% of Savings on outstanding investment

33%

21%

32%

12

Classified investment

18.70

153.37

134.67

Figure Taka in million Table:1 Performance of RDS & UPDS at glance as on 31.12.2016 (source: IBBL information system) *including 44 APO as PO in charge

10

4.2 Target & Achievement under RDS & UPDS in the Year 2016 Figure Tk. In million Sl No.

Description

Position

Target for

2015

2016

Achievement in 2016

% of achievement

1

Members

947,305

999,411

999,140

100%

2

Clients

569,820

721,961

582,852

81%

3

Outstanding

20,798.82

23,000.00

24,476.99

106%

Table: 2 Target & Achievement-2016 (source: IBBL,Internal Information System) Area Coverage & Financial Inclusion Sl. Particular 2012

2013

Growth

2014

Growth

2015

Growth

2016

01 Branches 207

230

11%

244

6%

251

3%

252

836,227

14%

911,470

9%

947,305

4%

Villages 15,507 17,104

10%

18,086

6%

18,615

3%

02 Members

03

733,52 0

Gro wth 0 %

999,14

5

0

%

19,418

4 % *0.

04

Centres 24,883 26,887

8%

27,874

4%

28,822

3%

28,960

5 %

RDS 05

&

UPDS Employe

2,190

2,423

11%

2,511

4%

2,481

(1)%

2,573

es Table:3 (source:IBBL,Internal Information System) *132 New Field Officers have been posted to the branches at December 2016. Therefore, they could not be able to perform in the year 2016. 4.3 Member inclusion: Each of the members in a Centre represents a family. They are included in the RDS center by opening a savings account with Tk.10/-only. Thereafter, they 11

4 %

deposits Tk.30/-per week as a compulsory savings under RDS & Tk.50/-under UPDS attending in the Center Meeting held in a particular place of the locality as chosen by the members and conducted by the Field Officers. Member Position 1200000 1000000

Member

800000 600000

1085536 999140 947305 911470 836227 733520 617324 533536

Member Position

336000 400000 200000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Chart:1 Year wise member position(2009 to 2017 (source: IBBL,Internal Information System) 4.4 Savings Program under RDS & UPDS: The members under the Schemes deposit compulsory weekly savings at least Tk.30/-in RDS & Tk.50/-in UPDS per week. The members are also encouraged to open MSS (Pension Scheme Deposit) with minimum Tk.100/specially designed for the members of RDS & UPDS to develop their future financial strength gradually. Savings of the members was Tk.7,952.64 million as on 31.12.2016. Type of

5,974.73

12%

82% 1,154.66 48%

1,617.25 40%

1,977.91

22%

Total Savings 3,323.15 4,531.46 36% 5,727.15 26%

6,932.89 21%

7,952.64

15%

MSS

Total Investment % of savings on investment

h

2,895.05 3,750.86 30% 4,572.49 22% 428.09

780.60

2015

Growt

5,315.64 16%

h

2014

Growt

Growth

MSA

2013

Growt

2016

Deposit

2012

(Taka figure in million)

h

10,390.71 13,730.92 32% 17,379.97 27% 20,798.82 20%

32%

33%

---

33%

---

33%

---

24,476.9 9 32%

Table:4 Year Wise Savings Position(2012-2016) (source: IBBL,Internal Information System) 12

18%

---

Year-wise savings position in graph

Amount of Savings

Year Wise Savings Position

Savings Position

10000 8836.52 9000 7952.64 8000 6932.89 7000 5727.15 6000 4531.46 5000 3323.15 4000 2555.23 3000 1783.56 2000 950.56 1000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year

Chart:2 Year wise saving position. Source: IBBL,Internal Information System

4.5 Investment Program under RDS & UPDS: 4.5.1 Types of investment: There are 02 types of investment facilities are being provided to the beneficiaries under the schemes. These are: (a) Micro-investment (MI) (collateral-free investment maximum Tk.75,000/- provided to the RDS-UPDS members) and (b) Micro-enterprise Investment (MEI) (collateral based investment up to maximum Tk.500,000/- provided to the graduated microclients and local micro-entrepreneurs).

4.5.2 Quard-E-Hasana (profit-free loan) has also been extended to the eligible RDS & UPDS members for setting up tube-well, sanitary latrine and rehabilitation of disaster victim members. Hardcore poor of the project areas (other than RDS & UPDS members) are provided with the Quard-E-Hasana for self employment purpose.

13

4.5.3 Modes of Investment: Investments are provided to the clients under RDS & UPDS ensuring buying and selling as per Shariah approved modes of finance. Most of the investments are allowed under Bai-muajjal mode. Hire Purchase under Shirkatul Meelk (HPSM) and Musharaka modes of finance are also applied in the RDS & UPDS investment. Mode-wise investment position as on 31.12.2016 is shown below :

% on Sl No.

Particulars

No. of

Outstanding

total

clients

(million taka)

outstandi ng

1

Bai-Muajjal

573,365

22096.17

90.28%

2

Musharaka

1,489

64.21

0.26%

7,998

2316.61

9.46%

582,852

24,476.99

100%

Hire Purchase under 3

Shirkatul

Meelk

(HPSM) Total

Table: 5 Mode wise outstanding (Source: IBBL,Internal Information System) 4.5.4 Investment Clients: Among the members of the schemes who are enjoying investment facilities at a particular point of time are called clients. According to microfinance practice 100% members do not availing investment at a time. It is a continuous process. A portion of the members are always in waiting to take investment decision by themselves. Last 5 years’ position of the clients is shown below:

14

Sl. Particular

2012

2013 Growth 2014 Growth

01 MI Client

421,703 472,146 12% 501,559

02 MEI Client

53,063 60,089

Growth

500,216 (1%)

57,985 (4%)

69,604

20%

03 Total Client 474,766 532,235 12% 559,544 5%

569,820

2%

12%

-

%

of

13%

6%

2015

2016

Growth

506,50 4 76,348 582,85 2

1%

10%

2%

MEI

04 clients on total 11%

11%

-

10%

-

13%

-

clients Table: 6 Year wise position of clients (2012 – 2016) (source: IBBL,Internal Information System) Year-wise position of clients in chart

Chart: 3 Year wise position of clients (2009 – 2017) (source: IBBL,Internal Information System

15

4.5.5 Year-wise Investment outstanding: 5(five) Years’ comparative position of growth in micro investment (MI) and micro-enterprise investment (MEI) under the scheme is shown below: Sl. Particular 01

02

03

2012

Outstanding (MI) Outstanding (MEI) Total

2013 Growth 2014 Growth 2015 Growth

6,036.74 7,956.89 32%

6

29%

11,781.6 0

15%

4,353.97 5,774.03 33% 7,125.20 23% 9,017.21 27% 10,390.7 13,730.9

Outstanding

10,254.7

1

% MEI in total 04 42% investment

2 42%

32%

--

17,379.9 7 41%

27%

20,798.8

--

2

20%

43%

--

2016 Growth 13,645. 88 10,831. 11

18

99

%

44%

--

Table: 7 Year wise investment outstanding (2012 -2016) (source: IBBL,Internal Information System) Year-wise investment outstanding in graph

Year wise investment position 30000 24476.99

Outstanding amount

20798.81 20000

17379.96

MI MEI Total

13730.92

15000

10390.71 10000 3966.3 5000 2899.52 0 2009

2010

5136.52

2011

2012

2013

2014

2015

20%

24,476.

(Taka figure in million)

25000

16%

2016

Year

Chart-4: Year wise investment position (2009 – 2017) (source: IBBL,Internal Information System)

16

4.5.6 Sector-wise Investment: Investments under the Schemes are extended especially in the agriculture sector. However, a significant investment has also been extended in different income generating off-farm activities, rural housing & transport. It is viewed that 34% investment was extended in different sub-sectors of agriculture, 20% in rural housing, 5% in rural transport and 42% in different off-farm activities.

Sector wise investment under RDS has manifested in the following table (Fig. Taka in million) Sector-wise performance as on 31.12.2016 Sl.

Particulars

Number of clients

Share

Outstandi ng

Share

1

Crop

121,013

21%

3,607.02

15%

2

Live stock

79,234

14%

2,617.66

11%

3

Fisheries (Pisciculture)

19,186

3%

940.68

4%

4

Rural Transport

30,084

5%

1,104.07

4%

5

Rural Housing

62,247

11%

4,931.75

20%

6

Off-Farm Activities Agricultural Tools

246,534

42%

10,393.53

42%

24,554

4%

882.28

4%

582,852

100%

24,476.99

100%

7

Total

Table: 8 Sector Wise investment 2016 (source: IBBL,Internal Information System)

17

Sector-wise investment in graph as on 31.12.2016

Chart-5 Sector Wise investment (source: IBBL,Internal Information System) 4.5.7 Size-wise Investment: It is depicted that 34% of the clients are availing initial ceiling of Micro Investment i,e Tk.20,000/- . Size-wise investment clients and outstanding investment there against are shown in the following table: Fig. Taka in million Sl.

Range

Client

Share

Outstanding

Share

1

1 – 20,000

199,445

34%

2,447.70

10%

2

20,001 – 30,000

112,576

19%

2,202.92

9%

3

30,001 – 50,000

128,852

22%

4,161.09

17%

4

50,001 -100,000

101,516

17%

6,608.79

27%

5

100,001 – 200,000

27,809

5%

3,916.32

16%

6

200,001 – 300,000

4,818

1%

1,713.39

7%

7

300,001 – 400,000

3,402

1%

1,223.85

5%

8

400,001 - Above

4,434

1%

2,202.93

9%

100%

24,476.99

100%

Total

582,852

Table:9 Size Wise Investment2016(source:IBBL,Internal Information System) 18

4.6 Recovery of investment: Recovery trend during last 5 years has shown in the following table: Sl.

Particular

2012

2013

2014

2015

2016

01

Overdue under MI

24.03

29.31

62.77

72.79

73.12

02

Overdue under MEI

5.39

11.40

26.37

36.75

38.26

29.42

40.70

89.13

109.54

111.38

04 Outstanding of MI

6,036.74

7,956.89

10,254.76

11,781.60

13,645.88

05 Outstanding of MEI

4,353.97

5,774.03

7,125.20

9,017.21

10,831.11

06 Total outstanding

10,390.71 13,730.92

17,379.97

20,798.82

24,476.99

03 Total overdue

07 % of overdue in MI

0.40%

0.37%

0.61%

0.62%

0.54%

08 % of overdue in MEI

0.12%

0.20%

0.37%

0.41%

0.35%

09

0.28%

0.30%

0.51%

0.53%

0.46%

99.72%

99.70%

99.49%

99.47%

99.54%

% of total overdue

10 Rate of recovery

(Fig. Taka in millions) Table:10 Recovery of investment 2012 -2016 (source: IBBL,Internal Information System)

4.7 Year-wise Performance of Field Officers: Figure Taka in million Sl 1.

2.

3.

4.

Particulars No. of Officials under RDS & UPDS Average

No.

of

Member per FO Average No. of client per FO Average per FO

outstanding

2012

2013

2014

2015

2016

2,174

2,422

2,511

2,484

2,529

337

345

363

381

395

218

220

233

229

230

4.78

5.67

6.92

8.37

9.68

Table11: Year wise performance of officer 2012-2016 (source: IBBL,Internal Information System)

19

4.8 Size wise investment achieved by the Field Officer: Size wise performance of Field Officers up to December-2016 is furnished below: Sl.

Range of Investment

No. of Officials Investment Outs.

01

15.00 million & above

141

2,447.70

02

12.00 million to below 15.00 million

351

4,650.63

03

10.00 million to below 12.00 million

673

7,343.10

04

8.00 million to below 10.00 million

809

7,098.33

05

5.00 million to below 8.00 million

402

2,692.47

07

Below 5.00 million

153

244.76

2,529

24,476.99

Total:

Remarks

(Fig. Taka in Million) Table:12 Investment achieved by officers (source:IBBL,Internal Information System)

4.9 Musharaka Investment: To diversify investment mode, Musharaka investment was introduced under the scheme in 2008. Investment position against the mode up to December 2016 is shown below: Figure Tk. In million Sl.

Particulars

2013

2014 Growth 2015 Growth

2016

Growth

01 No. of Branches

88

88

--

87

--

114

31%

02 No. of existing clients

217

425

96%

520

22%

833

60%

03 Cumulative disbursement

59.95

77.42

29%

97.45

26%

201.97

107%

04 Investment outstanding

12.28

20.76

69%

23.84

15%

64.21

169%

--

0.11%

--

0.26%

--

05 % in total investment

0.09%

0.12 %

Table:13 Musharaka investment (source:IBBL,Internal Information System)

4.9.1 Quard-E-Hasana: Quard-E-Hasana (Loan without profit) is provided to the RDS & UPDS members for setting up Tube well up to Tk.10,000/-, Sanitary Latrine up to Tk.6,000/-. Quard-E- Hasana is also provided to the members in difficulties 20

due to sudden accident, natural disaster, severe illness etc. up to Tk.10,000/-. Disbursed of Quard against rehabilitation of the members in the Year 2016 was nil. Other than RDS & UPDS member, the ultra poor people of the working areas are provided with Quard-E-Hasana up to Tk.5,000/-. All of the Quards are given for 01 (one) year duration only.

Position of quard disbursed in the year 2016 is stated below: Figure Tk. in million Number of Sl

Particulars

Unit/Beneficiarie

Amount disbursed

s 1

Quard for Tube-well

6,299

50.99

2

Quard for Sanitary Latrine

3,068

16.25

--

--

3,702

17.82

13,069

85.06

3 4

Quard

for

rehabilitation

of

Clients Quard for the Ultra Poor Total

RDS

Table: 14 Position of quard disbursed in the year 2016 is stated below

4.9.2 Graduation from Micro Investment clients to Micro Enterprise Investment Clients: Under the Schemes Micro Investment (MI) clients are nurtured to develop financially. Apart from investment, they are provided with capacity building training, counselling and other nonfinancial services. We assess the graduated clients considering the following criteria: 1. The clients who have availed Micro Investment above 0.50 lac; the highest ceiling of investment under RDS and transferred to MEIS. 2. Clients who have availed maximum ceiling of MEIS and already transferred to mainstream by availing Commercial Investment under SME.

21

Table:15 Graduated cumulative clients up to December 2016 is mentioned below: Sl.

Number of

Particulars

No.

clients

Graduated clients who availed Micro Investment above 1

0.50 lac; the highest ceiling of MI and transferred to

128,090

MEIS from MI after availing maximum ceiling under RDS.

2

Clients who have availed maximum ceiling of MEIS

5,315

and already transferred to mainstream. Total

133,405

Table:15 Graduation of clients (Source:IBBL,Internal Information System) 4.9.3 Non-financial Services (welfare) under the Schemes: Poverty alleviation needs a combination of financial and non-financial services together. So, different non-financial services have extended under the Schemes from the year 2012 in the areas of (1) Education, (2) Training, (3) Health, (4) Relief & Rehabilitation and (5) Environment. Non-financial Services or welfare activities under RDS & UPDS is accomplished as per yearly budgetary allocation for the purpose approved by the competent authority. Performance of Welfare Activities at a glance as on 31.12.2016 (Fig. Taka in million) Sl. No.

Description

Jan’2016 to Dec’2016

Since inception to 2016

Beneficiaries

Amount

Beneficiaries

Amount

1

Education Program

48,221

75.47

175,730

254.83

2

Training Program

211,018

28.34

633,240

84.82

3

Health Program

50,191

38.70

189,706

148.79

3,379

33.66

15,361

101.14

690,246

25.90

5,607,824

106.21

1,003,055

202.07

6,621,861

695.79

4 5

Relief

&

Rehabilitation

Program Environment Program Grand Total

Table:16 Performance of Welfare Activities 22

Program-wise description is stated hereunder: 4.9.4 Education Program: Under Education Program, there are three types of activities like (1) Scholarship (for the children of the beneficiaries secured GPA-5 in the SSC & HSC examinations), (2) Academic Award (to the meritorious children of the members from class I to class IX) and (3) Establishment of Pre-primary School, Furqania Maqtab & Adult Education Centre in the project areas. Performance under Education Program from January 2016 to December 2016 Activities

Number

Beneficiary

Amount

a. Scholarship

--

1,073

25.38

b. Academic Award

--

28,743

24.81

c. Pre-primary School

353

9,234

15.06

d. Maqtab

346

9,171

10.22

699

48,221

75.47

Total

(Fig. Taka in million) Table: 17 Performance under education program(source:IBBL,Internal Information System) 4.9.5 Training Program: There are three types of training activities under the Program like (a) Skill Development Training (b) Self-employment Training and (c) Centre Leaders’ Training. Activities under Training Program during the year 2016 at a glance are shown in the following table: (Fig. Taka in million) Activities

Number of

Beneficiary

Amount

92

21,570

9.52

3,560

188,970

16.74

-

478

2.08

3,652

211,018

28.34

programs a. Center Leader Training Program b. Skill Development Training c. Self-employment Training Total

Table:18 Training Program(source:IBBL,Internal Information System)

23

4.9.6 Health Program: Under Health Program, there are four types of activities like (1) Conducting medical camps {general, eye & circumcision (Khatna camp)}, (2) Medical Assistance and (3) Assistance to Mother & Newborn Babies. Activities under Health Program during the year 2016 at a glance are shown in the following table:

(Fig. Taka in million) No. of

Beneficia

programs

ry

a. Medical Camp

142

23,016

4.27

b. Eye Camp

50

4,991

1.37

c. Circumcision (Khatna) Camp

28

659

0.81

d. Medical Assistance

-

1,826

12.55

e. Welcome Gift for the Newborn

-

19,699

19.70

220

50,191

38.70

Activities

Amount

Babies Total

Table:19 Health program(source:IBBL,Internal Information System)

4.9.7 Relief & Rehabilitation Program: Under the program, 3 types of assistance are being provided to the poor and distressed members like (a) Financial assistance to the distressed client, (b) Relief & Donations and (c) Quard for Rehabilitation. Activities under Relief & Rehabilitation Program during the year 2016 at a glance are shown in the following table: (Fig. Taka in million) Activities

Benefi ciary

Amount

a. Financial Assistance for distressed clients

1,541

22.36

b. Financial Assistance for Sons’ & Daughters’ Marriage

1,156

8.82

c. Financial Assistance for Burial/Funeral Expenses

578

1.45

d. Disaster Relief Assistance (Fire, Cyclone, Flood etc.)

104

1.04

3,379

33.67

Sub-Total

Table:20 Activities under Relief & Rehabilitation Program (source:IBBL,Internal Information System) 24

4.9.8 Environment: The Bank has been observing Plantation Program during the rainy season almost every year since 2003. Each of the RDS members have provided with one sapling free of cost and encouraged to implant two others by their own. Since 2003, the Bank has distributed about 6,621,861 saplings. This year we have distributed 690,246 saplings among the RDS members and different educational institutions in the working areas with the cost of Tk. 25.90 million. 4.10 Comparative position of RDS with other major MFIs: Data Source: “Bangladesh Microfinance Statistics-2016” latest publication of Credit & Development Forum (CDF) published on August 2016. Leading 07(seven) Micro Finance Institutions (MFIs) along with national aggregation as of December 2016: No. of Sl.

Investme

Name of Year of No. of Employee Membe MFI

Estab. Branch (In Micro

r

Client

Credit) 1

RDS

1995

252

2573

1976

2,568

21,651

3 TMSS

1980

622

5,193

4 ASA

1992

2,932

24,125

1990

804

6,089

1974

2,083

18,031

1976

220

1,812

2

5

(IBBL) Grameen Bank

BURO BD

6 BRAC

7

PROSHI KA

nt

Rate of

(mill.

recovery

Taka) 999140 582852 24476.99 99.47% 8,806,7 6,856,4 79 842,401

48 717,81 9

96,422.30 99.88%

15,641.42 97.82%

6,902,0 5,898,4 109,652.8 24

66

1,305,3 873,50 78

0

6

23,256.42 97.68%

5,377,9 5,298,6 113,106.4 51 986,570

51 714,66 6

98.73%

4

98.72%

2,012.16 94.32%

25

Others 8 (504

-

9,155

63,419

MFIs) 9

10

National

-

position RDS

Position

among 7 MFIs

18,635

142,801

6th

6th

11,06 3,871

8,66 4,69

140,938

-

.94

5

36,232, 29,594, 521,829.3 279

065

6

6th

7th

5th

98.56% 2nd

Table:21 Comparative position of MFI To understand the role of Islami micro-finance in poverty alleviation, interviews/survey was conducted and the data are represented in tabular forms and analyzed.

4.11 Data analysis of primary data collected from various respondents. Age Distribution Frequency

Percent

Valid Percent Cumulative Percent

18 or below

1

1.4

1.4

1.4

19 to 25

6

8.6

8.6

10.0

26 to 32

16

22.9

22.9

32.9

Valid 33 to 39

27

38.6

38.6

71.4

40 to 46

14

20.0

20.0

91.4

47 to 51

6

8.6

8.6

100.0

Total

70

100.0

100.0

The research result shows that most of the respondents are within the level of 33 to 39 years of old and 26 to 32 years of old who are mature enough to take any decision or use fund positively.

26

Level of Education Frequency

Percent

Valid Percent Cumulative Percent

Valid

ssc or below

54

77.1

77.1

77.1

hsc

11

15.7

15.7

92.9

graduate

1

1.4

1.4

94.3

post

4

5.7

5.7

100.0

70

100.0

100.0

graduate Total

Most of the clients of RDS are less literate or SSC level or below SSC who are deprived from other loans and advances provided by Banks and Financial institutions. RDS program work with those deprived people. Amount of Taking Loan Frequency Percent

Valid Percent Cumulative Percent

5000 to 15000

13

18.6

18.6

18.6

15000 to 30000

15

21.4

21.4

40.0

30000 to 50000

18

25.7

25.7

65.7

Valid 50000 to 70000

16

22.9

22.9

88.6

70000 to 100000

6

8.6

8.6

97.1

above 100000

2

2.9

2.9

100.0

Total

70

100.0

100.0

Most of the loan taken by the RDS clients are within the range of 15000 to 70000 and the loan starts from minimum amount tk.5000.

27

Taking loan from any other MFI Frequency Percent Valid Percent Cumulative Percent yes

10

14.3

14.3

14.3

Valid No

60

85.7

85.7

100.0

70

100.0

100.0

Total

Most of the clients are satisfied with the loans and services provided by the RDS program and they don’t take loan from any other Micro Finance Institutions in Bangladesh. Purpose of Taking Loan Frequency Percent Valid Percent Cumulative Percent Animal

19

27.1

27.1

27.1

18

25.7

25.7

52.9

11

15.7

15.7

68.6

House Building

19

27.1

27.1

95.7

others

3

4.3

4.3

100.0

Total

70

100.0

100.0

Husbandry Fish Culture Valid Trading Business

The research shows that most of the first loans taken by the clients are for housing purpose and after fulfilling their basic needs they go for further earning to increase their income and standards of living. Secondly most of the loans are for animal husbandry business as it is done with small capital and withi the housing area so it is perfectly suitable for them.

28

Comparative position of RDS client after and before: Before Joining

After

RDS

Joining RDS

Area of Comparison No Schooling

42(60%)

6(8.60%)

Govt. Primary/Secondary

28(40%)

64(91.4%)

No Recreation

28(40%)

1(1.4%)

Mobile

20(28.6%)

22(31.4%)

TV or Radio

22(31.4%)

45(64.30%)

Cinema Hall

0

2(2.9%)

No Land

29(41.4%)

8(11.4%)

Up to 15

39(55.7%)

45(64.3%)

16-30

2(2.9%)

4(18.6%)

31-45

0(0%)

4(5.7%)

Above 45

0(0%)

0(0%)

Up to 20000

16(22.90%)

13(18.6%)

Approx Annual

20001-40000

24(34.3%)

19(27.10%)

Expenditure (BDT)

40001-60000

11(15.7%)

20(28.6%)

60001-80000

19(27.10%)

18(25.7%)

Above 80000

0

0(0%)

Not Aware

34(48.6%)

0(0%)

Aware

36(51.4%)

41(58.6%)

Fully Aware

0

29(41.4%)

Nil

9(12.%)

0(0%)

Homestead

Up to 5

54(77.1%)

45(64.3%)

(Decimals)

6 to 10

6(8.60%)

21(30.0%)

Above 11

1(1.40%)

4(5.70%)

Normal Food

56(80%)

0(0%)

Medium Food

14(20%)

66(94.30%)

Rich Food

0

4(5.7%)

Clothing

0 - 2000

28(40%)

0(0%)

(Yearly

2001 - 4000

41(58.6%)

37(52.9%)

Expenditure)পোশাক ব্যায়।

More than 4000

1(1.40%)

33(47.10%)

Health &

Fakir/Kabiraj

17(24.3%)

0(0%)

Medical

Quack Doctor

41(58.6%)

9(12.9%)

Facilities

MBBS or Expert

12(17.10%)

61(87.10%0

Source of

Public Tube-well

53(75.7%)

7(10.0%)

Drinking

Personal Tube-well

16(22.90%)

62(88.60%)

water

Pond

1(1.40%)

1(1.40%)

Schooling of Children

Recreation Facilites

Own Cultivable Land (Decimals)

Citizen Rights

Fooding Standard

water/Nearby

source 29

Nature of

Sanitary Latrine

38(54.30%)

68(97.10%)

Latrine

Unsanitary Latrine

32(45.7%)

2(2.90%)

The comparative situation in the socio economic condition of RDS &UPDS clients after and before taking loan have been shown here. The data have been collected from 70 respondents of khulna Sub urban area who are the member of Micro Finance program of IBBL. Then we input the data in the SPSS software and we have found the above result. The result shows that after taking loan and being member of RDS they have improved their socio economic condition in most of the parameter. The RDS program affected positively in their socio economic conditions which meet up the second objective of this research.

RDS differ from other MFI Frequency

Percent

yes

61

87.1

No

9

12.9

Total

70

100.0

Missing

Most of the respondents think that RDS & UPDS are different from other micro finance organization that is it is not as like as other conversational MFI in Bangladesh.

Charge Rate of Return Frequency

Percent

Valid Percent Cumulative Percent

yes

15

21.4

21.4

21.4

Valid No

55

78.6

78.6

100.0

70

100.0

100.0

Total

A little portion of the respondents think that RDS & UPDS charge high rate on their investment and maximum people think that applicable rate of return is not too high for them and it is reasonable rate of return.

30

Necessity of Modification Frequency yes Valid no Total

Percent

Valid Percent Cumulative Percent

29

41.4

41.4

41.4

41

58.6

58.6

100.0

70

100.0

100.0

From the above result we see that almost 40% of the beneficiaries think that ,some changes need for existing Micro Finance Program of Islami Bank Bangladesh Limited. And rest 60% think that, no change needed for this program that is it is running well.

31

Chapter 5 Conclusion

Only RDS & UPDS program of IBBL have been considered to evaluate or assess the performance of Islamic micro finance specially of islami bank banglades limited as no other mentionable established micro finance organization are available in our country. We have also tried to assess the performance through various indicator of primary respondent and also compare with secondary data,we collected from various reliable sources. By analyzing the primary and secondary data we have concluded that the performance of Islamic Micro Finance of Islami Bank Bangladesh limited is numerically and descriptively excellent and pioneer in micro finance arena of Banladesh. We see most of the first loan taken from RDS and UPDS are for basic needs like House Building, Business goods etc and next the tried to enhance their income through effective business. Most of the respondents expressed their happiness with Islamic Micro finance as because Islamic micro finance system is conducive for the clients and they are not crucial as like as other conventional Micro Finance. Moreover, they extend their helping hand to the sufferer through various humanitarian program and products. Most of the clients socio economic conditions have improved after getting loan from RDS and UPDS. Schooling of children, recreation facilities, cultivable land, citizen rights, fooding, clothing, hygiene etc have changed positively for almost hundred percent clients. There are lots of training program are arranged every year to train the clients about how to increase business efficiency. Above all this Islamic Micro Finance not only improve the socio economic condition of some people of the society but also it contributes a lot in the national economy through increasing income and employment of the deprived people of the society

32

Reference: A.

Raquib

&

Mohammad.

(2004),

Islami

Banking:

Tattha*Proyog*Paddhati, Al-Amin Prokashan, Dhaka. BIDS (2001), Final Report on BIDS Study on PKSF’s Monitoring and Evaluation System (MES), October, Bangladesh Institute of Development Studies, Dhaka. Bagsiraj, M. I, (2009) “Financial and Economic Crisis: An Alternative Indian Approach”, Radiance Viewsweekly, Vol. XLVI No. 38, 2009-01-04 Bateman, Milford, (2010) “Why doesn’t Microfinance work? – The Destructive Rise of Local Neoliberalism” Benihani, Shams, (2012) “Poverty Reduction: Scaling up the local innovations for transitional changes” Chowdhury, A.M.R. and Bhuiya, A. (2004), “The wider impacts of BRAC poverty alleviation programme in Bangladesh”,Journal of International Development,Vol.16No.3,pp.369-86. Chapra, Umer, (2009), “The Global Financial Crisis: Can Islamic Finance Help?” Chen, G. (2013), “Comparing Branchless Banking in Bangladesh and Pakistan”, CGAP Fernando,J.L.(2006), Introduction to Microfinance: Perils and Prospects, Routledge, NewYork, NY. Giish,M.and

Mehta,P.(2003),“Crop

diversification:

an

empirical

analysis onKangra Farms of Himachal Pradesh,India”,Asia-Pacific Journal of Rural Development, Vol.13No.2. Hannan S.A( 2002), Islami Orthaniti:Darshan O Karmakaushal (Islami Economics:Philoshophy & Strategy) Al-Amin Prokashon,Dhaka. Khandaker, S.R.(2000),“Savings,informalborrowing,andmicrofinance”,TheQuarterl y

Journal of the Bangladesh Institute of Development Studies,

Vol.26Nos2/3, pp.49-78.

33

Khandaker, S.R.(2003),Micro-finance and Poverty: Evidence Using Panel Data from Bangladesh, Khaled, Mohammed. (2011, July 7). “Islamic Microfinance Challenge: A Summary” CGAP Latif,M.A.(2001),“Microcredit and savings of rural households in Bangladesh”, The Quarterly Journal of the Bangladesh Institute of Development Studies,Vol.27No.1,pp.51-71. Mahmood,T.(2006),“Effectiveness

of

microcredit

for

poverty

alleviation under agricultural intensification projects in Bangladesh”, PhD thesis, School of Graduate Studies, University Putra Malaysia, Mahmud,K.T.(2006),“Impact of credit on income and employment of women members of Savar Thana under world vision project”, MS thesis, Bangabandhu

Sheikh Mujibur Rahman Agricultural

University,Gazipur. Mannan, M.A (2007) Islami Bank Babostha, Central Shariah Board for Islamic Banks of Bangladesh,Dhaka. Consultant Limited, Dhaka Rahman, M. M, (2010), “Islamic Microfinance program and its impact on rural poverty alleviation, International Journal and Finance” Zaman, H. (2001),“Assessing the poverty and vulnerability impact of micro-credit in Bangladesh: a case study of BRAC”, World Bank Policy Research Working Paper No.2445, World Bank, Washington, DC. http://epublications.bond.edu.au/ijbf/vol7/iss1/7 Islamic micro-_ finance programme and its impact on rural poverty alleviation: 119-138 121 http://www.islamibankbd.com (accessed 3rd July, 2017). https://en.wikipedia.org/wiki/Poverty_in_Bangladesh#Rural_and_urb an_poverty https://en.wikipedia.org/wiki/Islamic_banking_and_finance

34

Appendix Questionnaire

Age (Years): □ 18 or below

□ 19 to 25

□ 26 to 32

□ 33 to 39

□ 40 to 46 □ 47 to 51

□ 52 to 58 □ Above 59 Education Level: □ S.S.C or below □ H.S.C □ Graduate

3.How

much

did

you

take

□ Post Graduate

□ Others

loan5000-15000□15000-30000□30000-

50000□50000-70000□70000-100000 Have you taken any loan from any other micro finance institution If yes then which MFI? For which purpose did you take loan Below You need to approximate the changes that have come to your socioeconomic condition before and after borrowing from RDS: Area of Comparison

Before

After

Joining RDS

Joining RDS

No Schooling Schooling of Children

Govt. Primary/Secodary No Recreation

Recreation Facilites

Mobile TV or Radio Cinema Hall

Own Cultivable Land (Decimals)

No Land Up to 15 16-30 31-45 Above 45 Up to 20000

Approx Annual

20001-40000

Expenditure (BDT)

40001-60000 60001-80000 Above 80000

Citizen Rights

Not Aware Aware Fully Aware 35

Nil Homestead

Up to 5

(Decimals)

6 to 10 Above 11 Normal Food

Fooding Standard

Medium Food Rich Food

Clothing

0 - 2000

(Yearly

2001 - 4000

Expenditure

More than 4000

Health &

Fakir/Kabiraj

Medical

Quack Doctor

Facilities

MBBS or Expert

Source of

Public Tube-well

Drinking

Personal Tube-well

water

Pond

water/Nearby

source Nature of

Sanitary Latrine

Latrine

Unsanitary Latrine

15.Do you see any difference of RDS from other micro credit schemes? 16.Does the RDS charge over profit/interest? 17.Do you think that RDS of IBBL need any modification

36