Consideration in the Placement and Outreach of Microfinance Organizations: The Case of ASA, BRAC, and PROSHIKA in Bangladesh

This policy brief found on pages 8 and 9 of this document undertakes a study of the service placement of three major non-government organizations (NGOs) in Bangladesh: the Association of Social Advancement (ASA), the Bangladesh Rural Advancement Committee (BRAC), and Proshika Manobik Unnayan Kendra (PROSHIKA).

The study follows the following methodology:

• Examines data from three hundred and ninety one thanas from all over Bangladesh;
• Looks at the existence of branches of these three MFIs and their client density;
• Maps indicators of poverty level and infrastructure to discern placement.

The study finds that all three NGOs came into being to deliver basic social services to impoverished populations and all three received funding from the government and donors.

The authors hypothesize that there are four expected determinants of branch placement and client coverage:

• Poverty targeting;
• Expected level of demand for credit services;
• Cost of supplying services;
• Perceived risk.

The study finds that:

• Although poverty was an important consideration, NGOs were more likely to establish branches in locations that had better transport and communication infrastructures;
• NGO services were geared more towards the poor who live in relatively well-developed areas;
• However, client density was better in distressed regions;
• There is tension between poverty targeting and ensuring adequate financial performance.

The brief concludes by recommending the following steps to resolve this tension:

• Innovative lending technologies, such as mobile banking;
• Incentives for NGOs and their managers to establish branches in remote regions.