A short version of :

“Managing Scaling Up Challenges

of a Program for the Poorest:
Case Study of BRAC’s IGVGD Program”
BY IMRAN MATIN

NB: All text put into brackets are direct quotes from Imran Matin’s article “ Managing scaling up
challenges of a program for the poorest: Case study of BRAC’s IGVD Program”. This piece of
writing is an attempt to give readers interested in microfinance issues, a shorter version of this
article in order to facilitate their reading.

Executive Summary

In this article, Matin exposes BRAC’s approach on microfinance. The core idea of this article
is that “carefully designed strategic linkages, which include grants with a central role for
microfinance can work for the poorest”1. The author takes the NGO BRAC as a case study
highlighting his view. BRAC’s approach is that “although the poorest do need subsidy-based
programs to supply their immediate food needs, microfinance can play a fundamental role in
constructing a long-term, sustainable foundation for improving food security and livelihoods”.
Further than implementing conventional microfinance programs, BRAC suggests that is it is
the creation of a strategic linkage between grant-based and market-based microfinance
programs that can open up new opportunities for the very poor.
Introduction.

What is BRAC?
BRAC was originally set up as a relief and rehabilitation committee in 1971 to address the
immediate needs of the refugees returning home after the nine-month war for independence.
Today it is one of the largest microfinance NGOs in the world, providing financial services to
over 3.5 million poor women throughout Bangladesh.

Two key ideas:

The distinctive features of BRAC is the belief that the word “poor” is a very wide concept that
includes a diverse group. This diversity is highlighted in Figure 1 which maps the different
profiles of poverty in Bangladesh.
The second core idea that BRAC defends is the belief that facing such a diversity it is
microfinance that will be the most efficient tool to alleviate poverty.

The focus of this paper:

This paper takes the implementation of the IGVGD program in 1985, as a proof of the fact
that the combination of “basic social service interventions (such as food aid), which are
based on grants, with promotional ones (such as training, savings, and credit)”.

IGVGD Program
Definition:
In 1985, BRAC went to the World Food Program (WFP), “which was providing time limited
food assistance to the extreme poor through its Vulnerable Group Feeding (VGF) initiative”,
to propose to pilot a new program. The IGVGD program is a partnership between a donor
(World Food Program), the government of Bangladesh (specifically the Ministry of Women’s
and Children’s Affairs, Directorate of Relief and Rehabilitation, and local government
representatives), and a development organization (BRAC). The main role of the various
important actors in the IGVGD program is shown in Table 4
The results were impressive:
- The income of women who participated in the pilot increased significantly.
- Around 80 percent of the women had also entered BRAC’s Rural Development
Program and gained access to its microcredit and social development services.

Table 4 Major Actors and Their Role in the IGVGD Program

Partners Main role

Ministry of Women and Children - IGVGD household selection

Affairs - Arrange funds for training
- Extend administrative support Monitoring
programme progress

Directorate of Relief and

- Allocating and distributing food aid
Rehabilitation
- Extending administrative support
World Food Programme - Provide food aid
- Arrange funds for training
- Monitoring the programme progress
- Research and Evaluation - Coordinate with
GoB and BRAC

PKSF and other banking institutions - Provide credit funds to IGVGD programme
BRAC - Development and implementation of the
programme which includes:
- Arrange income generating activities (IGA)
and social awareness training
- Provide credit and other sector support
- Savings management
- Follow, supervision and monitoring
- Mobilize donor funds for training
- Research and Evaluation
Target of the program: The poorest.
The IGVGD attracted members who have significant high levels of absolute landlessness,
and lacked winter clothing. 44 percent of households entering the IGVGD program in 1994
were headed by widowed, divorced, or abandoned women, i.e, a social category for which
poverty is likely to be persistent. (See Figure 2)

Table 1: BRAC’s Microfinance Programs

Program Target Group Term and Conditions Product Details

MELA Larger loans • Must have good • Loan size range US

provided to BRAC entrepreneurial skills $400–$4,000
and non-BRAC • Must not have any • 15 % flat interest
microentrepreneurs outstanding loans from rate
to scale up their BRAC or other • 12-, 18-, and 24--
enterprises microfinance institutions month loan products
• Must open a bank repayable in monthly
account to receive loan installments

Microfinan • Less than 50 deci- • Must be a member of • Loan size range US

ce mals* of land owned, BRAC VO $50–$350
live in slums, and • Must save • 15 % flat interest
earn a living by • Must not have a loan rate
manual labor with other NGOs • Loans repayable in
• Households headed weekly installments
by women and over a year
vulnerable poor
households (targeted
specifically through
IGVGD)
IGVGD • Households headed • Must be a VO member • Initial loan size
by women, who own • Must save about US $50
no more than 10 • Other conditions
decimals of land. similar to
• Women divorced, Microfinance
separated, or have a
disabled husband.

CFPR/TUP • No more than 10 • Must not be members • Distribution of

decimals of land of any government or income earning
• No adult earning NGO development assets
member program • Subsistence
• No productive • Must have at least one allowance for a
assets adult woman who is specified period
• School-age children physically able • Employment and
working Adult women enterprise develop-
in manual labor ment training and
technical support
• Essential health
care

Impacts.

- Economics indicators:
The 1994 WFP survey found that, on average, incomes of IGVGD clients rose significantly,
material assets (ownership of homestead plots, land, beds, and blankets) increased, and the
percentage of households engaged in begging dropped dramatically.

- Increase of the number of MFI members:

Another performance indicator, which examined how successful the IGVGD program is at
“graduating” very poor households to regular microfinance programs, provided evidence of
improvement. At the beginning of the program, only 15 percent of the IGVGD participants
were MFI clients. By the program end in 1996, this had increased to 28 percent, and by 2000
had reached 66 percent. “Although access to microfinance increased across Bangladesh
during the late 1990s, a 440 percent increase in MFI membership for such a cohort of very
low-income, very low-asset people represents massive improvement in the numbers of the
poor gaining access to financial services”.
* A decimal is 1/100 of an acre.

Table 2: IGVGD Economic Impacts

Variables Time
1994 1996 1999
(pre-program) (end of program) (3 years after program)
Monthly Income (Taka) 75 717 415
Percentage of 7 64 31
households earning
more than TK300 per
month
Percentage of 73 87 na
households with
homestead land
Percentage of 94 72 na
functionally landless
households
Percentage of 58 60 64
households with beds
Percentage of 14 na na
households with
blankets
Percentage of 18 2 0
households begging
Source: Adapted from Hashemi et al. (2001, p. 9)

Table 3: IGVGD Social Impacts

Food Aid + First Loan
Food Aid +
Savings +
Savings
Training
% Attending most VO1 meetings 2 19 83

% Attending Gram Shobha 2 17 40

meetings2

% Reporting positive difference 38 55 83

due to meeting participation

% Reporting that they wanted to 42 53 82

start an IGA after training

% Reporting greater levels of 62 78 91

confidence
% Reporting that they aspired to 6 16 25
be a VO leader

% Reporting that life now is 24 32 54

better
1 The Village Organization (VO) is the gateway of BRAC’s development programs. About
30 BRAC members from a village form a VO.
2 The Gram Shobhas are monthly meetings on specific issues, where both the women
members and their spouses attend. These provide a fairly regular forum in which VO
members are exposed to and discuss various social and economic problems, and
potential solutions.
Why it worked? Driving factors.

Commitment and Political Economy for Change

The first driving factor that can explain the success of the IGVGD program is the
fundamental new thinking that BRAC introduced in its program. Traditionally, programs
targeting the poorest categories are relief programs. Their focus is food security. It is this
type of program that the Bangladesh government had been implementing so far, mainly
aiming at targeting vulnerable women. This program was called the Vulnerable Group
Feeding (VGF) program. Of course, one has to admit that these needs are crucial to the
survival of people in situation of extreme poverty. However, BRAC’s thinking wanted to
challenge the frontiers of such types of programs by defending the fact that “a more strategic
approach” that linked these vulnerable women not only to food aid based program but also to
development activities, would bring more significant results. “The IGVGD approach,
therefore, grew out of BRAC’s determination to leverage the existing commitment of the
government of Bangladesh towards the most vulnerable women of rural Bangladesh”.

Institutional Innovation
In 1987, the government of Bangladesh and WFP adopted the Vulnerable Group
Development, or VGD, program. They also agreed with BRAC to expand the pilot scheme
into the IGVGD program. If it had been so decided at that time, the pattern of the IGVGD was
purposely let very flexible in order to introduce any changes that might be required to render
the program more effective. For example, in 1989, realizing that the biggest problem women
were facing, was the lack of capital, it was decided to provide them loans as soon as they
completed the training instead of waiting longer. This led up to the introduction of microcredit
and to the implementation of a three step approach program: food grant, skills training, and
microcredit. See figure 3

Challenges Faced and Solutions found.

Inadequate coverage.
During the scaling-up phase, the program spread to areas with poor infrastructure and weak
communications where BRAC had never held microfinance programs before. “This made
organizing training, providing credit, and managing savings for VGD women difficult at best.
Follow up and monitoring was also less than optimal, which led to repayment irregularities
and eventual dropout of VGD members”.
In order to overcome this challenge, new branch offices were settled in areas where BRAC
had never worked in so far, in order to faster follow ups and management of MFIs members.
Furthermore, several steps were also taken to streamline the internal management system of
the IGVGD program.

Time framework limited by procedural matters.

The current VGD cycle was reduced from it original 2-year cycle in 1996, to 18 months,
thinking that the by reducing the time frame, more people could be helped at the same time
with the same amount of loans granted. In fact the reduced time framework, hampered the
effectiveness. The reduced cycle was further affected by administrative delays in the
beginning of the program.
“The life of the program lost 3–4 months to finalizing the VGD beneficiaries and getting the
contract between the government of Bangladesh and BRAC signed. Almost another two
months passed before the government circular to the local officials was issued—without
which BRAC could not start its work on the development package”.
The result of such delay, is that BRAC only had one year to implement its program. Another
factor that worried BRAC is that the loan granting program was now desynchronized with the
food relief one. Hence, BRAC was very much aware that the period when VGD beneficiaries
could benefit the most from a loan was when they had the food security offered by the VGD
card.

Lack of common understanding.

A lack of understanding about the main purpose of the IGVGD program between the various
partners was a major challenge, explains Matin. Indeed, the IGVGD program has a strong
developmental focus in contrast to the earlier VGF program, which is a relief program. “What
this fundamental change in focus meant in terms of program design and approach was not
adequately discussed with the most important partners—the local government officials. This
gap led to major difficulties for BRAC as the implementer of the developmental component of
the program”.

The example of “returning savings” summarizes very well the lack of comprehension
between actors. Common wisdom tends to consider savings as pure financial products.
There are much more than that: “they embody an important part of the process for VGD
members who are moving from living hand-to-mouth to planning for the future”. Beneficiaries
become central actors of the development program rather that pure recipients. Returning
saving is an act of engagement as well as an act of empowerment. This is why savings
constitutes such an important place in development programs. “Abed aptly captured the
whole idea behind savings as a developmental concept when he said: “In Bangla, we have a
very apt word for planning, porikolpona, meaning “arranging imagination.” Regular savings,
however meager, is a very powerful mechanism that gets the poor to arrange their
imaginations for tomorrow and beyond. It also is important for building relationship between
the savings institution and the people it serves.”7 However, the other partners of IGVGD did
not (and do not) readily understand the larger role of savings in development.
In order to overcome such a lack of understanding from the different parties involved in the
program, BRAC strove to communicate to the traditional actors (i.e, the government of
Bangladesh and its local representatives) about the need to have a common understanding
of the objectives and program activities. To support this, BRAC initiated regular workshops,
which led to a progressive more daring attitude from local officials, taking initiatives and .
strengthening their monitoring of the program.

Table 5 Key Challenges, Consequences, and Steps Taken

Challenges Consequences Steps Taken

Inadequate Area Office • Poor follow up • Branch offices set up to
coverage • Training program cover areas far from the
hampered Area Office
• Credit disbursement • Separate sessions
hampered dedicated to IGVGD
issues in all BRAC
management meetings
• IGVGD monitors
deployed
• Workshops held in the
thanas to coordinate and
get better support from
local government
• Infrastructure of focal
Ministry increased in
thanas
Time for Implementing • Credit not be given to • From the 2003 cycle,
Development Package all during the food aid the VGD cycle increased
Limited by Procedural cycle to 24 months.
Matters • Adequate time not
available to provide
technical support and
supervision for sustain-
able graduation
Lack of Common • Pressure for savings • Workshops in thanas
Understanding return with local government
• Poor motivation officials
• Drop out • Closer dialogues among
the partners
• Field level exposure
Case study: Poultry Sector Development and IGVGD

- Short introduction:
BRAC wanted to find appropriate products for the VGD women, that had the following
characteristics: large-scale potential, relatively easy to market with existing skills, home
based, and could generate quick cash flow. Poultry seemed to satisfy all of these conditions.

BRAC observed that the various linkages that made the poultry sector viable was absent,
especially for the poor living in rural areas. Poultry raising was not considered a business for
the poor. The most important challenges were to control poultry mortality, to improve the
quality of the breed to increase yield. A local bird lays only 60 eggs a year. The government
was very supportive when BRAC began to work on relieving these bottlenecks, because
demand would increase all over Bangladesh.

- Implementation process.
BRAC used its local presence and grassroots knowledge to create a cadre of poultry workers
from the VGD women. They were trained in basic poultry diseases and provided medicine
and vaccination services for a modest charge. BRAC facilitated the networking of these
poultry workers with the government’s local poultry and livestock infrastructure. Today BRAC
has more than 40,000 such poultry workers working throughout rural Bangladesh.

- Challenges faced:
BRAC started by buying day-old chick from government-run poultry farms, but the
transportation costs of day-old chicks were very high, and there were often delays in the
delivery. “In 1996, BRAC modernized its small poultry farm. Today, BRAC has six such
poultry farms which supply over 1 million day-old chicks every month”.
Ensuring quality feed was another challenge. Because the main ingredient for poultry
feed was not produced un Bangladesh, BRAC had to import it, which was very costly.
Therefore, BRAC decided to set up a joint venture with an Australian seed company. “Today,
BRAC’s Maize Seed Production Program produces 400 tons of hybrid maize seeds, which in
turn produces an annual maize crop of 100,000 tons”.

Lessons, learned, and Taking the Challenge Further: BRAC’s New

Program for the Ultra Poor

Despite the great results of IGVGC, the poorest did not benefit from the program. This is due
to the fact that the local government representatives targeted the program implementation
more according to political motives than efficiency motives. Also, sometimes, the women
failed to benefit from the food assistance. Sometimes, women had to buy the card by bribing
government officials. All in all, BRAC learnt that more control over the program would have
brought better results.

“In January 2002, BRAC started a new experimental program with these challenges in mind,
called “Challenging the Frontiers of Poverty Reduction: Targeting the Ultra Poor,” or TUP, for
short.” The first two years of the program were the pilot phase, during which 5,000 ultra-poor
households were selected each year. In 2004, the program will be scaled up, and 10,000
more ultra poor will participate. In the remaining two years (2005 and 2006) of this
experimental program, 25,000 ultra-poor women will be targeted.

The whole idea behind TUP is to enable the ultra poor develop new and better options for
sustainable livelihoods. This requires a combination of approaches, some promotional, such
as asset grants and skills training; and some protective, such as stipends and healthcare
services. It also requires addressing constraints at various levels, household and the wider
environments of institutions, structures, and policies.

The results from the pilot phase suggest that the targeting of the TUP has been successful.
Comparison with the general IGVGD membership profile suggests that TUP is targeting
people more poor than VGD members. About 40 percent are moving toward the standards of
households targeted by microfinance institutions. Although predictions are premature, about
75 percent have some prospect for sustaining these improvements into the future.

Table 6 Key Differences between VGD and TUP Members

Variables TUP VGD

Average owning land 2.13 4.72
% of households owning
93 87
no cultivable land
% of households not
owning the land they live 54 43
on
% of households reporting
outstanding loan from any 2.13 36
source
% of households reporting
they eat at least two 2.13 61
meals a day
% of households reporting
deteriorating economic
44 35
conditions over the last
year

Conclusion

BRAC’s unconventional thinking.

The IGVGD program worked because it was a carefully planned cooperation between
different actors. It used the period of security provided by the food aid program led by the
Bangladesh government to develop the skills and confidence of the poorest, and finally
provide them with credit to build on.
The TUP program is based on the experience of IGVGD— and defends the idea that even
the people who are consider too poor to benefit from IGVGD, should not be ignored as an
eventual target group for microfinance.

As Matin states it, “BRAC’s experiences suggest that carefully designed strategic linkages
that combine grants with a central role for microfinance can work for the poorest. The
poorest are, can, and must be central to microfinance programs. Yet, ironically, mainstream
microfinance discourse still does not consider them to be an area of concern or relevance for
microfinance.

Annexe:

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