SRI LANKA: HATTON BANK OPENS NEW BRANCH FOR CASE STUDY

Hatton Bank's Assistant General Manager, Mr D. Muthukumarana, has announced the opening of a new branch at Kegalle, in the central region of Sri Lanka. The new branch is intended as the focal point of the Sri Lanka case study for Banking with the Poor.

Hatton Bank has more than forty branches, and is Sri Lanka's fourth-ranking private commercial bank. It already has a successful record of lending to microenterprises, but the prospect of a successful linkage with FTCCS (Federation of Thrift and Cooperative Credit Societies) has encouraged Hatton to move into Kegalle, where FTCCS is active.

FTCCS has a revolving credit fund for its poorest members, established with assistance from a Swiss NGO. Extra resources are needed to enable a sustainable level of operations to be achieved; a line of credit from Hatton offers the opportunity for growth. Responsibility for the case study rests with Mr Gamini Swarnapala (Hatton Bank) and Mr Ranjith Hettiarachchi (FTCCS), while Mr Muthukumarana and the Federation's President (Mr Kiriwandeniya) have overall responsibility for supervision. The case study team is negotiating an outline for the study with Co- Leader Ganesh B. Thapa.


HABIB BANK ESTABLISHES MICROENTERPRISE DIVISION: direct outcome of Manila workshop

Habib Bank is primarily an industrial financier, and facilitates about 60 percent of Pakistan's external trade. As a direct outcome of the attendance of Senior Executive Vice-President Anwar Samad at the Manila workshop, Habib has established a Microenterprise Division, marking a new venture for the bank, into relationships with Self Help Groups.

Project Co-Leader Ganesh B. Thapa cites Habib's initiative as a breakthrough for this major financial institution, with the potential to extend the reach of the banking system to previously untouched layers of Pakistani society.

Mr Anwar Samad has identified the Orangi Pilot Project, operating in a fringe urban community of Karachi, as an experienced NGO active in lending for community purposes and small enterprise. Mr S. Qamar Razi of Habib Bank is collaborating with a group including Dr Akhter Hameed Khan of the Orangi Project to conduct the case study, which will focus on loans to a group of weavers. Habib Bank has extended a line of credit to Orangi for this purpose and will provide banking services to the NGO.

Pakistan's NGO representative at the Manila workshop was Mr Shoaib Sultan Khan of the Aga Khan Rural Support Program (AKRSP). He has delegated responsibility for liaison with the case study team to Mr Khaleel A. Tetlay. Since the AKRSP operates in remote rural areas of Northern Pakistan, progress in setting up this portion of the case study has been slow. Ganesh Thapa is optimistic it will be possible to add a rural dimension to the project's documentation of Banking with the Poor in Pakistan.


INDONESIA: Rp 500 MILLION CREDIT LINE IN CASE STUDY

A credit line of Rp 500 million (more than US$250,000) has been extended by Bank Rakyat Indonesia to credit unions involved in the case study. The group of 58 credit unions, located in the Cibadak district of West Java, is affiliated with BK3I (the Coordinating Body of Indonesian Cooperative Credit Unions).

Bank Rakyat's credit line to NGOs in Cibadak reflects the strength of Indonesian government commitment to the linkage concept. Bank Rakyat, which is a state bank, is cooperating with the Central Bank (Bank Indonesia) and the German agency GTZ in a project designed to institutionalise linkages between banks (private and public) and NGOs in several provinces of Indonesia. The case study in Cibadak runs parallel to this activity.

Responsibility for the case study rests with Mrs Siti Sundari Nasution of Bank Rakyat, who attended the Manila workshop, and Mr Abdul Salam of Bank Indonesia's Small Enterprise Research and Development Division. Mr Pardjimin Nurzain, who represented BK3I in Manila, is now employed fulltime on the Bank Indonesia/GTZ project.

FDC Director, John Conroy, who has worked in Indonesia previously, will be responsible for liaison with the case study team. Dr Conroy says Indonesia, where the linkage concept has been developed over some time and widely applied, is in a different category from several other participating countries where the idea is relatively untested. The Foundation believes that publicising Indonesia's success in this area will benefit other countries where agencies are trying to achieve linkages.


TAYLOR AT BANGALORE STARTUP

Bill Taylor, initiator of Banking with the Poor, attended the official inauguration of a project case study in a Sangha (Self Help Group) at Mudugooli village, 80 km outside Bangalore (South India) in September.

At a later press conference chaired by Sri Ramesh Gelli, Chairman of Vysya Bank Ltd, media representatives were briefed on the project's approach to providing access to commercial credit for the poor. Mr Gelli referred to support from the Indian Central Bank and NABARD (see story, page 1) and to MYRADA's role in forming Self Help Groups for income generation and asset creation. The conference was also attended by NABARD's Deputy General manager (S.C. Wadhwa) and MYRADA Executive Director, Aloysius Fernandez.

According to Gelli, "funds raised by way of members' admission, fines, small savings, [and] interest earned on the loans to the members are to be utilised for meeting the members' credit requirements. Repayment and other terms .... will be decided by the members themselves". Vysya bank is supplementing the capital resources available to the group at Mudugooli and providing technical assistance to ensure the sustainability of lending operations.

Bill Taylor later commented that after meeting the members of Sangha Mudugooli he is more than ever convinced of the value of the linkage mechanism between banks, NGOs and SHGs, and of the effectiveness of the MYRADA/Vysya connection.


VYSYA BREAKS NEW GROUND

In joining with the experienced NGO MYRADA for the Indian case study, dynamic private bank Vysya Ltd has entered a completely new field. While MYRADA is experienced in organising SHGs for the rural poor (with almost 1700 groups serving about 50,000 families in the southern states of Karnataka, Andhra Pradesh and Tamilnadu) Vysya Bank has been content to record rapid growth in a range of conventional banking activities until recently .

After committing to Banking with the Poor at the Manila workshop in May, Vysya and MYRADA executives convened a working group with Vysya's Mr. S.R. Rannorey as coordinator. Ms. Vidya Ramchandaran represents MYRADA. Especially significant is the nomination of Dr. V. Puhazhendi of NABARD (the state-owned National Bank for Agriculture and Rural Development). NABARD provides grant assistance and refinancing to commercial banks for lending to agriculture and the rural poor. It is also central to new policy measures announced by the Indian Reserve Bank in July, to facilitate SHG/bank linkages.

The working group is following terms of reference agreed at the Manila workshop. Bangarpet, an area about 80 km outside Bangalore in South India, is the field site for the case study. Vysya has a branch bank in Bangarpet, and MYRADA (which is serving 88 villages and 128 SHGs in the area) has a field office nearby.

Among these villages is Mudugooli, visited by Foundation Vice Chairman Bill Taylor in September. SHG members there are being encouraged to take up dairying, sheep rearing and weaving, together with non-farm activities, to generate income.


RB BANK LEADS IN NEPAL

Nepal was represented at the Manila workshop by the Rastrija Banijya Bank (RB Bank) and the National Federation of Savings and Credit Unions (NAFSCUN). Since Manila, RB Bank has taken the lead in preparing the case study, with NAFSCUN in an observer role.

Chairman of NAFSCUN Mr Bhoj Raj Ghimere has described the relatively early stage of development of credit unions in Nepal at present. According to project Co-Leader Ganesh B. Thapa, NAFSCUN is still relatively inexperienced in direct poverty alleviation through lending targeted at the very poor.

A team of RB Bank officers, headed by K.B. Tamang, Chief of its Priority Sector Landing department, has been asked to identify an NGO or Self-Help Group (SHG) with which to work in lending to the poor. This has not been easy because of the apparently limited development of an appropriate NGO framework in Nepal at present.

The RB Bank team has now identified an appropriate grassroots SHG in Gundu village of Bhaktapur district, 15 km from Kathmandu. With a branch located some 2 km from Gundu, RB Bank will be able to advise the SHG on credit management and take primary responsibility for transactions. With guidance from RB Bank's Deputy General Manager Mr Khem Baral, the RB team is making a strong effort to set up what will be a pioneering model for Banking with the Poor in Nepal.


BANGLADESH: JANATA BANK COMMITTED TO CASE STUDY

Latest information from Bangladesh study coordinator Mr S.M. Al-Husainy is that Janata Bank, a major nationalised commercial bank, has committed its resources to the country's case study.

Bangladesh commercial banks were represented at the Manila workshop by Mr M. Taheruddin, then General Manager of Sonali Bank. Now that Mr Taheruddin has been appointed Managing Director of Janata Bank, which has a domestic network of some 900 branches, he has demonstrated his commitment to Banking with the Poor by taking the case study with him to Janata.

The study will now involve a sample of Janata Bank branches which have credit operations with Swanirvar Bangladesh, the major NGO of which Mr Al-Husainy is national chairman. Swanirvar is linked with some 500 branches of commercial banks, providing credit for income and employment generation through small enterprise development. According to Mr Al-Husainy, a sample of the participating Janata Bank branches will be surveyed to examine their performance in relating to Swanirvar and its clients, who are among the poorest of the poor in Bangladesh.

Mr Al-Husainy has convened a high level advisory panel to support the study team. Members include Dr Mahboob Hussain, Director General of the Bangladesh Institute of Development Studies, and Professor M. Yunus, founder of the Grameen Bank.


PHILIPPINES: linkage will help borrowers to "graduate"

Successful borrowers will "graduate" from being clients of NGOs to become fully-fledged bank customers, if the Philippines case study succeeds in its objectives.

TSPI is an NGO with a good track record in nurturing small enterprises by providing successively larger loans. Its Executive Director, Mr Benjamin Montemayor, sees a linkage with Bank of the Philippine Islands - Family Bank (BPI) as offering his most enterprising clients a goal to work towards, as well as providing additional capital for lending to the poor.

BPI Vice-President Mr Ricardo Balbido Jr reports that the bank's line of credit to TSPI now stands at P750,000 and is about to be renewed for the second time. Government policies requiring banks to extend credit to small industry provide a further stimulus to experiments in micro-lending. If government would take the further step of accepting funds channelled through NGOs as satisfying the criteria of its small industry policies, the linkage concept would become more acceptable to banks.

TSPI has six "partner" NGOs through the Philippines which it has assisted to grow and mature. Two of these (KMBI in Valenzuela, suburban Manila, and the rural-based ASKI in Cabanatuan) which serve a typically poorer clientele with lower average loan-size, have also applied for a line of credit with BPI, and may therefore be included in the case study.

When John Conroy visited Manila he was impressed by the prospect that KMBI, TSPI, and Bank of the Philippine Islands could offer borrowers the chance of progressing from micro-loans to full commercial status over a period of some years, at the same time as they endeavour to extend credit to poorer sections of the community. He has encouraged the Philippine case study team to examine these possibilities in their report.


MALAYSIA: GRAMEEN STYLE - with a difference

The case study being prepared in Malaysia is a close copy of the Grameen Bank model, but with an important difference.

Amanah Ikhtiar Malaysia (AIM), is an NGO which bases its organisation and methods on Bangladesh's famous Grameen Bank. Senior management of AIM is in close contact with Grameen founder Prof M. Yunus. But in linking with Bank Islam Malaysia for the case study, AIM's Prof David Gibbons is going beyond the blueprint used by Grameen Bank, which has no such commercial linkages.

Gibbons, who has nominated AIM staff member Pn. Jameiyah to handle field operations for the study, feels that AIM needs to increase and diversify the sources of loan capital available to it. For Mr Ahmed Tajudin Abdul Rahman, senior General manager of Bank Islam, the project offers the opportunity for the bank to discharge a social obligation while maintaining its adherence to Islamic banking principles.

FDC Director John Conroy has met the Malaysian participants, both in Kuala Lumpur and at rural field sites. He believes the Malaysian case study is of particular interest. With relatively limited and well-documented pockets of poverty in Malaysia, it is realistic to timetable the extension of Grameen-type credit services to practically all the poor within a matter of years. Additionally, the excellent communications system in Malaysia, the availability of PCs, and the computer-literacy of AIM's field workers are combining to produce a model information system, valuable as a management tool for AIM's lending program.


PROJECT UPDATE

FDC Executive Director

The Governing Board of the Foundation for Development Cooperation has announced the appointment of John Conroy as Executive Director of FDC.

Dr Conroy has moved quickly to become aware of issues in the Banking with the Poor project, convening a meeting of its Steering Committee in August, and visiting case study sites in Southeast Asia (Malaysia, Philippines, Indonesia) in August and September.

Project Co-Leaders

Co-Leaders John Deans (Australian Bankers Association) and Ganesh B. Thapa (Nepal) attended a Steering Committee meeting in Brisbane in August with John Conroy and FDC Vice Chairman Bill Taylor. The committee reviewed progress in the formation of country case study teams, planned a schedule of field site visits, and prepared schedules for the monitoring and evaluation of case studies.

Mr John Deans completed his period of assignment to the project in September, and the Australian Bankers Association is currently arranging the secondment of an economist from Bank of New Zealand in Sydney, Ms Jennifer Chalmers, as a replacement for Mr Deans. She has also worked with the Reserve Bank of Australia and with community credit unions, as well as having completed graduate studies in development economics. The Foundation has communicated both to Mr Deans and the ABA its appreciation for his valuable contribution.

Mr Ganesh B. Thapa visited all South Asian field sites over the period August-September, and his impressions of the progress achieved in Pakistan, India, Bangladesh, Sri Lanka and Nepal are reflected in the reports in this Newsletter. More recently, in October, Vice Chairman Bill Taylor revisited the Sri Lanka and India field sites.

Future program of visits

All eight country case studies will be visited again during November-December 1991, by Ganesh Thapa, John Conroy and/or Jennifer Chalmers. With the deadline for a first draft of case studies set for end-February 1992, there will be time for a third round of field visits early in the New Year.

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