Rural Financial Innovation: A Case of ASA1

by Mr. Md. Fayzer Rahman

Executive Vice President (Operation), ASA Bangladesh
Summary
Background:
Microfinance has emerged as an important tool for combating poverty across the world. It is evident
that microfinance institutions have been playing a vital role in mitigating curses of poverty. It is evident
that poor people have limited access to the formal commercial bank/institution due to highly
complicated delivery system and different formalities and due to these backdrop MFIs have emerged
with a view to provide hassle and collateral-free financial services to the poor people.
Emergence of ASA:
ASA was established in 1978 with a view to empower the oppressed through peoples organization,
mobilized for social action against exploitation and through legal aid to fight for poor peoples right. In
the 2nd phase of its operation in 1985, ASA included some developmental program like health,
nutrition, education and mini-irrigation project. ASA shifted its attention towards microfinance program
in 1992 with a view to operate this program in a cost effective, innovative and sustainable way to
reach financial inclusion.
Financial Products and Services:
ASA offers various types of loans, savings, insurance, and remittance services to its valued clients. At
present, ASA has 3,177 branches functioning throughout Bangladesh. Out of them 91% are located
in rural areas and these branches serve about 90% clients living in rural or village areas. The
financial products have been designed considering the clients demand, capacity and socio-economic
condition of the operational areas.
Loan Products:
ASAs loan product has been categorized into two major types considering the size of the loan. These
two types are primary loan and special loan. Although ASA provides agriculture loan, education
loan for clients children, solar energy loan and interest-free disaster loan, these loan products are
being treated as primary and special loan in view of their size and modalities.
Some innovations/flexibilities of ASAs loan products:

Loans are not disbursed based on group liability/group guarantee approach

Providing collateral-free loan. Loan size depends on clients capacity and viability of the scene.
Flexible loan duration 4 months, 6 months, 12 months, 18 months, 24 months and 30 months
per nature of scheme and choice of the clients
Mode of repayment- weekly, monthly and one time at the end of cycle, which are determined as
per nature of scheme and choice of the client
Disbursement of loan- 7 days after enrollment and for next or subsequent loan; same day after full
repayment of previous one
Loan installments are collected from door-step of the borrowers
Allowing partial or pause in repayment during emergency

Paper presented by Mr. Md. Fayzer Rahman,Executive Vice President (Operation), ASA Bangladesh, during the IFADAPRACA-BAAC FinPower Regional Forum-Consultation on Rural Finance Innovations and Emerging Issues held at the
Pathumwan Princess Hotel, Bangkok, on December14, 2011.

No penalty for late payment

Up front deduction is strictly prohibited
Attendance of the group meeting is not compulsory for the client

Savings Products:
ASA has designed its savings product considering clients protection and ensure easy access to their
deposition. ASA has introduced two types of savings for its organized members:. normal savings, and
lLong-term savings. The policies and features of those savings products are given below:
Normal Savings: Although this savings is obligatory for all members, members have easy access to
withdraw at door-step by keeping a very minimum amount. In case of any emergency the whole
amount can be withdrawn. It may be mentioned here that although amount of normal weekly savings
is Tk.102 but due to free access, members usually deposit more as voluntary savings.

Long-term Savings Policy: It is a contractual savings policy for 5 and 10 years and installments are
deposited on monthly basis, which attracts high interest rate closed to fixed deposit rate. ASA has
been operating this savings policy for the last 7 years and it is only for ASA organized members. In
terms of social impact, this savings policy is really helpful for the poor in rural areas. Some clients
have opened two to three accounts in the name of children with a view to bear the expenses of
education and importantly, bear the cost of female child marriage.
Insurance:
ASA has introduced two types of insurance policy for its organized members: members security fund
and loan insurance.
Members Security Fund: This is another innovation of ASAa insurance service and is quite
acceptable for the poor people, as weekly premium is Tk. 10 only. It is a unique microinsurance
service for the poor people and duration is eight years. This insurance covers 6 times of deposited
amounts in case of savers death and if nothing untoward happens, deposited amount with interest
are refunded at the end of maturity.
Loan Insurance:
This loan linkage insurance is considered as the best tool for client protection. This insurance gives
the poor a sense of security and allows them to free from loan burden. A female client has to pay the
insurance premium Tk.10 against per Tk. 1,000 received loan amount and for male client per
thousand Tk.5. Regarding benefit, outstanding loans are waived in case of clients or husband death,
but for male clients loan insurance, only cover the death of male client.
Remittance Service:
ASA directs foreign remittance service to the people living in the rural areas of Bangladesh. 700
branches of ASA located in different remote places of the country catering this service since 2008.
Social Services Provided by ASA:
Although ASA is a grant/donation- free organization and interest of loan is only source of income but
ASA has enormous dream to extend social services to the poor people. Some services are being
provided by ASA as grants are as follows-

1 Taka = USD 0.013 as on June 2011.

Primary Education Strengthening Program: ASA runs Primary Education Strengthening

Program for the students of the poor families. The main objectives of the program are
reducing drop out through enhanceing quality of education of the wards of the
underprevillaged families and incresing student enrollment at primary level.

Providing Medical Facilities: This is another form of insurance service without taking any
premium. ASA allocates fund for the medical facilities for its clients on yearly basis
considering the nature of diseases like cancer, heart diseases, brain tumor, kidney damage
etc. Members of ASA who are suffering from these diseases are eligible for receiving health
assistance as grant from ASA. Health grants are provided subject to nature of diseases and
treatment cost.

Disaster aid: Members are provided interest-free loan to face various kinds of natural
disasters viz, flood, drought, cyclone, water logging, tornado and near-famine situation. This
credit plays an assistance role to recover from disaster losses.

ASAs Intervention in Deepening Rural Financial Inclusion:

Financial inclusion may be defined as the process of ensuring access to financial services and timely
and adequate credit where needed by the vulnerable groups such as weaker sections and low
income groups at an affordable cost.

Operating loan in the remotest areas by setting up branch where no commercial bank
exists: With a view to provide financial services in the remotest areas, ASA has set up some
branches where there is no commercial bank and any other financial institutions exist. ASA
has to face lot of challenges for extending financial services in those areas like providing extra
allowances to the staff of those branches that are mostly located in coastal, hilly and flood
affected areas where law and order situation is some how relaxed, which caused
snatching/robbery and organization has to compensate a huge amount of money for such
incidents. In some cases loans are disbursed to the meeting place to avoid the harassment of
the clients as communications of those areas are disrupted or in bad shape.

Opening outpost/mini branch: There are some places in island, coastal and hilly areas,
where it is difficult to get required number of clients for opening a branch. Where financial
services are purely lacking, ASA is committed to deliver its financial services to those areas by
setting up out-post with the deployment of two to three staff members.

Providing assistance to some MFIs in rural areas through the partnership approach: In
order to cover rural poor under financial services in a large scale, ASA extends its support to
the local and small NGOs/MFIs both financial and technical through the partnership approach.

Some reforms to meet the challenges of financial inclusion are:

- Abandoning of group liability approach
- Lending model group as well as individual
- Flexible loan duration
- Shorter period for disbursing loan
- Flexible repayment - weekly, monthly and one time at the end of maturity
- Easy access of savings
ASA facing challenges to provide financial services to the poor people:
-

Over indebtedness and multiple borrowing

Interest rate capped by the MRA would be the caused of financial loss
High operating cost to provide financial services to the remotest areas
Natural disaster like flood, cyclone, tornado etc. affects the operation almost every year

Innovations of ASAs Management:

Innovations of ASAs Management, which lead to achieve a greater outreach and operating
microfinance program in a sustainable and cost effective way:
Management plays the key role behind the success and failure of any organization. An organization
may run sick or even die for lack of proper management. On the contrary, an organization can
develop tremendously and achieve expected goal due to efficient and innovative management.
Following are the features of ASAs innovative management

Dynamic leadership; which indicates - Quick and timely response, does not impose any
decision, rather there is a practice to explore and accept new ideas through participatory
process, does not hesitate to undertake a new program if it seems viable.
Decentralization of authority: ASA has delegated some important authority in the field level
such as signatories of bank account are delegated to the branch staff; all loans are approved
by the branch/field staffs; loan officer are recruited by the field level supervisory staff; and
administrative sanctions are imposed by the field level authority as per instruction of operation
manual.
Staff recruitment process: ASA follows non-conventional staff recruitment process, which
helps ASA to saves huge cost and time and enable the organization to achieve greater
outreach.
Each one teach one approach of training: ASA arranges training for the newly recruited
staff following learning by doing process, and this training process helps ASA to saves huge
cost and time.
Self-explanatory working manual: With a view to operating and implementing ASAs
microfinance program, ASA has developed and produced a self-explanatory working manual.
It covers entire policies and procedures, role and activities of different section and staff,
forms/formats of different sections, administrative section etc.
Branch office without accountant and cashier: There is no accountant, cashier and office
Assistant at ASA branch office due to innovative accounting system. Accounting and record
keeping system has been developed in such a way that Loan officer and Branch manager can
maintain their day-to-day accounts related activities by themselves easily.
Simple and small cost-effective branch structure: Branch office is the center of all field
level activities. The branch offices are furnished with minimum and simple furniture and
composed of 4 to 5 loan officers, a branch manager and a peon cum cook with no security
personnel.
Simple and least hierarchical organization: ASAs simple organizational set-up is
represented by its two tiers/layer office structure, i.e. head office and branch office. Although
there are two layer- region and district in between head office and branch, but these are
supervisory and monitoring layer. Region and district office is attached with branch office with
no extra staff other than Regional Manager and District Manager.
Achieving self-sufficiency of a branch office: The branch offices of ASA are the basic
operational unit for providing microfinance services. A branch office attains self-sufficiency
within 12 month of starting its operation due to ASAs innovative approach in designing
product, unified cost ceiling structure and innovative initiatives of management.

International Recognition
-

UNDP ranked ASA as best technical service provider among 66 institutions during 1994.
USA based famous financial magazine Forbes has selected ASA as the worlds top Microfinance
Institution in 2007.
In 2005, ASA was adjudged as the best Microfinance Institution in world in the survey of
Washingto- based research organization Microfinance Information Exchange (MIX).
In the year 2008, the Financial Times (London) and International Finance Corporation (IFC) have
jointly decorated ASA with the award Banking at the Bottom of the Pyramid.

ASA AT A GLANCE (as on June 2011)

1. Total number of branch offices:
2. Total number of district covered:
3. Total number of Staff:
4. Total number of active members (In million):
5. Cumulative savings deposit (Million in USD):
6. Cumulative savings withdrawn and return/adjust (Million in USD)
7. Total amount of savings balance including long-term savings (Million in USD)
8. Total amount of members security fund balance (Million in USD):
9. Total number of active clients (In million):
10. Total amount of loan outstanding-principal (Million in USD):
11. Cumulative loan disbursement (Million in USD)
12. PAR
13. Operational self-sufficiency (OSS) June11
14. Financial self-sufficiency (FSS) June11

3,177
64
21,795
5.10
783.83
622.73
161.10
55.26
4.52
608.08
6,193.71
3.37%
182.48%
118.32%

Future Challenges:
ASAs pledge to go on supplying a high-quality and client friendly financial services to its millions of
poor group members will continue with the same level of importance as it was before. And also to
continue put efforts to improve its range and quality.

About ASA
History: Mr. Shafiqual Haque Choudhury is the main Designer, Founder and President of ASA. It is
Mr. Choudhury who took strong initiative in order to establishing ASA in 1978 with a view to helping
the poor by empowering themselves to fight for ensuring political and social rights. Subsequently,
ASA revised its programs and adopted new approach to make the development efforts more effective
and speedy. In 1991, ASA launched a new era in the field of model of microfinance, which was
different from the existing and conventional ones.
Governing Body: The organization has a general body that looks after and gives necessary
guidance and advices as and when required through a governing body consists of seven members,
which is elected the general body. Governing body members are elected from the civil society and
representatives of the ASA borrowers.
Legal entity: ASA is registered under the Ministry of Social Welfare, NGO Affairs Bureau and also
Joint Stock Company of the Peoples Republic of Bangladesh. ASA obtained licence from Microcredit
Regulatory Authority (MRA).
ASA got the top ranked MFI status in the world by the famous USA based magazine Forbes in 2007.
The Financial Times, London and International Finance Corporation (IFC) jointly awarded ASA with
the "FT Sustainable Banking Award" in 2008.
Vision: The vision of ASA is to establish a poverty-free society.
Institutional Mission: The enterprise mission of ASA is to support and strengthen the economy at
the bottom of the socio-economic pyramid by facilitating access to financial services for the poor,
marginalized and disadvantaged people.

Geographical area of operation: ASA operation has concentrated mainly in Bangladesh and also
other eight Afro-Asian countries.
Major Components: Major component includes microcredit, microsavings and microinsurance.
Besides, ASA has been directing education, scholarship, health, sanitation, solar-energy, remittance,
training and partnership programs with NGOs.
Strength: Cost efficiency, innovation, decentralized administration, simplified and easy accounting
and record keeping and a streamlined MIS and monitoring system.
Organizational structure: ASA has two tiers of administration. One is central level management and
other one is field or branch level management. District offices are playing as a bridging role between
the two tiers of the organization.
ASA International: ASA offering its innovative financial services in eight other Asian and African
countries in collaboration with Catalyst Microfinance Institution (CMI) under the banner of ASA
International.
ASA-University Bangladesh (ASAUB): ASAUB began its educational activities in Bangladesh since
2007 with a view to offering higher education among the boys and girls at reasonable fees. The son
and daughters of the ASA clients are being offered a special waiver for higher study. Over 5,000
students are enrolled in this renowned private University.
Hope for the Poorest (HP): An associate organization of ASA-Bangladesh with a view to serving the
vulnerable, poorest people, especially climate victims of the country. The major objectives of the HP
is to assist the underprivileged especially the poorest segment of the people in respect of health,
education, safe drinking water, basic sanitation, etc.

About the Author

Md. Fayzer Rahman, Executive Vice President (Operation) of ASA, was born in 1957 Northern part of
Bangladesh. He holds an M.A in Social Science from the University of Rajshahi, Bangladesh. He has
over three decades of experience with National and International NGOs in home and aboard. Mr.
Rahman has an excellent understanding and vision about the growth and development in the field of
microfinance.
He received DANIDA Fellowship on Overseas General Management Course form Denmark in 1994.
Mr. Rahman served UNICEF under its Child Development Project for 7 years. Afterwards, he joined
ASA as a Senior Associate Coordinator in 1987 and played vital role in implementing ASAs innovative
as well as flexible microfinance Program. Presently, he has been working as an Executive Vice
President (Operation) of ASA. During his long term association with ASA, Mr. Rahman provided
consultancy services in India, Ethiopia, Yemen, Peru, Mauritius, the Philippines and Vietnam especially
in the field of microfinance and also in conducting feasibility study and attended a good number of
national and international workshops/seminars as well.
Mr. Rahman has a good knowledge in respect of basic computerization. He has excellent
communication skills in written and spoken English as well as in his native Bengali.