Microfinance Engagements of the 'Graduated' TUP Members

This study assesses the developmental impact on women beneficiaries of Bangladesh Rural Advancement Committee's (BRAC) microfinance program, 'Challenging the Frontiers of Poverty Reduction/ Targeting the Ultra Poor' (CFPR/TUP) in 2002, the details of which are as under:

• Aim: to assist the poorest segment of the population to build up an asset base that would enable them to participate in microfinance activities.
• Phases:
  • A 'grant phase' of 18 months;
  • A 'graduation phase', where the ultra poor women form groups and are offered small amounts of credit.

  
  The study explores:

  • Ultra poor women's engagement in microcredit;
  • The quality of participation in credit, including loan usage and repayment management;
  • Informal market participation;
  • Semi-formal savings.

  
  The study finds that:

  • Microfinance for the poorest may take longer to achieve sustainability;
  • Income diversification is important for sustained microfinance engagement;
  • Shocks can cause discomfort of repayment and dropout from credit activity;
  • Engagement of ultra-poor households in microfinance increases with improved quality of living;
  • Flexibility in deposit and withdrawal are more important issues than earning interest for the micro-savers;
  • Their engagement in semi-formal microfinance does not reduce involvement in informal financial markets;
  • Along with credit, accumulating savings is very important to ultra-poor households.

  
  The paper concludes by recommending:

  • A recognition of the importance of savings;
  • Innovations in the area of appropriate savings products.