N_ Chowdhury - Innov.. - Global Microcredit Summit 2011

Microcredit for Inclusion-An Innovation for IndustralizedCountriesNazrul I ChowdhuryAdvisor, Microcredit ProjectFoundation ICO

General Program of Microcredit in Spain(2002-2007)EuropeanInvestmentFund (EIF)ICO(Instituto deCréditoOficial)SavingsBank/Banks Lack of mutual trust andhuman relation Clients were not closelyintegrated with theProgramNGO/Foundation/S.A.ONGOEmployees/VolunteersClients/Beneficiaries

Loan Disbursement at Generalprogram of MicrocreditYearTotal loandisbursementAverageloan sizeAverageInvestmentPer business% ofadditionalfund P/B2002-200315,119,672 18,782 30,84064%2004 4,712,646 20,140 27,92739%2005-20064,159,294 19,436 30,89759%

Objectives of the project:• Provide collateral free financial and nonfinancialsupport to the poorest of thepoor• Mitigate social and financial exclusions• Fostering inherent capability of the poorto generate new entrepreneurs• Promoting one to one human relationsamong and with the beneficiaries inorder to develop mutual trust

Exclusivity of the project• Based on mutual trust and human relation instead ofcollateral and legal instruments• Based on potential of a person instead of materialpossessions of a person• Maximization of welfare is the priority rather thanmaximization of profit• We go to the door steps of excluded poor instead oftheir coming to us• We create entrepreneur rather than look for anentrepreneur• We provide Need based social services rather thanmerely finance• Tailor-made “group mechanism” is the panacea forvalue creation and strengthening social and financialinclusion

Program Mechanism• Target People• Loan product• Pricing• Non- financial services-biweekly counselling meeting-demand driven social programs-need based formal and informal training• Operational mechanism-collaborating with social assistance organizations-operations based on “group mechanism”

Why Group?Traditional financial system based on thefollowing believes:• The poor and collateral less people are nottheir customer.• The poor are risky and not credit worthy.• The small loans are expensive toadministrate, so it is not profit worthy.For those poor, group based microcredit is thebest way to give them access to finance

Function of Group:• Group is a participatory decision makingprocess• Group is a social hub• Group is the vehicle of social andfinancial inclusions• Group is the clue of trust• Group is the source of social capital

Recommendations and lessons learnedMoral aspects of microcredit:Microcredit should be collateral freeMicrocredit should focus on poorest ofthe poorI should have some social mandateMicrocredit shouldn’t focus on profitmaximizationDeveloping mutual trust and humanrelation with clients, is the key of successFinancial aspect of microcredit:Sustainability

Thank you so muchFor your kind attentionContact:nazrulgb@yahoo.commicrocreditos.fico@ico.es