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| Volume 3, Issue 1: April 2005 | ||||
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In This Issue Plenary Session: Creating National and Regional Autonomous Microcredit Funds Workshop Session: Transformation of Microfinance Operations from NGO to a Regulated MFI Register now for Latin America/Caribbean Microcredit Summit Meeting of Councils Archived Issues
Vol 3 Iss 1 April '05 E-News Information |
Plenary Session: Creating National and Regional Autonomous Microcredit FundsQuestions and Answers for Plenary PanelistsQuestion 1: I have a question for Dr. Ahmed. If a government and an MFI in a country want to create an autonomous fund, what are some of the biggest mistakes they should avoid? Dr. Salehuddin Ahmed: The biggest mistake they should avoid, if the government gives funds, is to keep the government away from the management of funds. That is, get the government funds but not the government's hand. PKSF…is not donor driven. In fact, we got funds after five years of our operation. So the government gave the funds but we told the government to keep away. Let it be managed by an independent board, by a professional body…. Question 2: Another question for Mr. Nasser. In Yemen and Jordan, I'm wondering whether banks for the poor have the same kind of autonomy that PKSF has in Bangladesh, for example, [where] the government does not have the majority seats of the board and the government does not select the managing director. Nasser Al-Kahtani: As I mentioned in my presentation, the government is needed to start and we want to keep them away a little bit. We agree that the government should have nothing to do with the chairmanship, the leadership, and even the government-named people should not be from within the government, but from outside the government. The country itself should nominate someone who has a good experience in microfinance, for example from NGOs or MFIs or so on. And at least, we give them one [seat on the board, but] they are not going to be the majority and the majority will be the donors and the private sector. Question 3: Another question to Dr. Ahmed, has PKSF been subjected to any external evaluation? What was the outcome of this evaluation? Another question, isn't giving loans at very low interest rates simply not sustainable? Dr. Salehuddin Ahmed: PKSF has been subjected to several [independent] evaluations. In fact, our impact evaluation has been done on different occasions by think tanks. We gave complete freedom to the think tanks and they have seen that there are many positive aspects and a few weaknesses. Besides that, World Bank has given us $250 million dollar in two loans….Now, they assess PKSF's accounting principles and everything. In fact, they talked with the grassroots people about PKSF operations and about the approach of PKSF officials. This may not true for banks in Bangladesh. When they give a loan to the client, they keep something inside their drawer. PKSF is one organization which does not indulge in this kind of thing. So, in terms of its management, PKSF is under scrutiny and there has been no irregularity in it. Now, secondly, about the rate of interest. We get loans at a subsidized rate, at a maximum rate of 1.5 percent and we give it at 4.5 to 7 percent. And PKSF is sustainable because it is very cost effective. PKSF is cost effective because we have very small staff and unlike other financial institutions, where five persons do one job, in PKSF one person does the job. Our monitoring system is very strong. In fact, you will be surprised that out of our service charge we have transferred about $40 million to our credit fund, because PKSF cannot take any dividend, any profit. Our money going to the MFIs, they charge a little bit higher. They usually charge 10 and 15 percent. So there is a margin of about, eight to nine percent. From this, meeting all their expenses, these MFIs are generating some surplus. In fact, many of our MFIs have created a lot of surplus funds with which they carry out some social development activities as well as increase their outreach. So, I think they are sustainable. ….There is no MFI that can be sustainable in one or two years. In our calculation, it needs about seven to ten years to reach sustainability…. Return to Plenary Session: |