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Introduction:
Rural Development Scheme (RDS) has started its journey in 1995 to meet up
the investment needs of the rural poor. It is also to create opportunity for
employment generation in the rural areas with a view to reducing poverty.
After successful endeavour of RDS in the rural areas, the Bank has introduced
Urban Poor Development Scheme (UPDS) since May 2012 to address the
investment needs of the urban poor mostly live in urban slum areas. Now,
RDS is being operated in 228 branches and UPDS in 24 branches, i.e in total
252 branches covering 64 districts, 490 Upazillas and 19,418 villages of the
country along with 3 City Corporations like Dhaka, Sylhet & Chittagong. So
far, Tk. 161,891.28 million has been disbursed under the Schemes since
inception, outstanding of which is Tk. 24,476.99 as on 31 December 2016.
Islami Bank:
Islami Bank is a financial institution which is guided and operated as per
islamic Shariah. Interest is the main culprit of islami banking and always the
prohibit interest in their everyday operations.
As per OIC ''Islamibank is a financial institution whose rules,procedure &
statutes expressly state its commitment to the principles of islamic shariah and
to the banning of receipt and payment of interest in any one its operation.''
2
1.2 Background of the research
Previous studies on the impact assessment of micro-credit programmes in
Bangladesh have been narrow in their focus. PKSF (2005) studied the impact
of micro-credit on the members of partner organizations of PKSF and found
that absolute poverty was reduced by 9% during 1991 to 2000; moderate
poverty declined by 5% during 2000 to 2004. Chowdhury and Bhuiya (2004)
examined the impact of credit programme on the Bangladeshi borrowers under
the BRAC projects and found positive impacts on human well-being, survival
rate and schooling of children. Amin, Rai and Ropa (2003) conducted a study
on the International Journal of Banking and Finance, Vol. 7, Iss. 1 [2010], Art.
7 on the effect micro-credit clients of Grameen Bank, BRAC and ASA. They
observed that the micro-credit programme was more successful to reach the
poor, but less successful to reach the vulnerable poor. Zaman (2001) assessed
the impact of micro-credit on poverty alleviation and women empowerment.
He found positive impact on income, decision making ability and in reducing
gender disparity. Bangladesh Institute of Development Studies (BIDS)
conducted impact study on the micro-credit borrowers under the partner
organizations of PKSF. This study showed positive impact on the income of
micro-credit participants in comparison to non-program participants (BIDS,
2001). Khandker (2000) assessed the impact of micro-credit on saving and
found that microcredit increased voluntary saving, which was more
pronounced in the cases of women than men.
However, all of these studies simply assessed the impact of interest based
micro-credit programmes which did not consider shari’ah (Islami rules and
regulations) related lending in investment and none of them assessed moral
and ethical development of the clients. This study will assess these aspects of
micro-finance undertaken by the clients of rural development scheme
functioning across the country. Unlike other micro-credit programmes, this
scheme emphasized clients’ ethical and moral development activities in its
micro-credit programme.
Therefore, this study will assess a different type of micro-credit programme
than the conventional ones, using modern econometric techniques. Another
point is that the size of the rural households in Bangladesh is generally large
3
and they have a low level of literacy. Rural development is hampered due to
lack of credits, lack of training, weak infrastructure and poor transport
systems. The weak resource base coupled with a faster growing population is
aggravating the poverty level of the country. Determination of the above
factors which are most relevant in explaining poverty alleviation will have
important implications for retaining micro_ finance policy. This will also help
to locate appropriate clients for the RD-micro-finance. Therefore, the other
objective is to examine the linkage between clients moral and ethical
behavioral changes as well as their income and demographic and investment
factors.
Source: http://epublications.bond.edu.au/ijbf/vol7/iss1/7
Islamic micro-_ finance programme and its impact on rural poverty
alleviation: 119-138 121
4
Chapter 2
Literature Review
2.1 About Micro -Finance and evaluation of micro finance:
The broader definition of micro finance includes not only micro credit but also
other financial services, which can be offered to the poor. Micro finance is the
provision of a broad range of financial services such as deposit, loans,
payment services, money transfers, and insurance to poor and low9income
households and, their micro enterprises. Interested economists found soon that
not only small credits but also other services connected with lending could
improve economic lives of the poorest (Bauer, Chytilova &
Morduch,2008).Most MFIs connect their credit services also with educational
or savings programs or business trainings, retraining scheme or technical
trainings, Logically, the investments can turn out to be more profitable when
he people have access to training, which can enhance their skills. Historically,
the goal of micro finance was the alleviation of poverty. For many years,
micro finance had this primary social objective and so traditional MFIs
consisted only of non-governmental organizations (NGO), specialized micro
finance banks and public sector banks. Although the Micro finance sector has
reached a maturity stage over the last three decades, but the capacity of
operational level staffs has not enhanced to that extent (Hassan & Islam,
2008). Every market economy relies upon the financial intermediary function
to transfer resources from savers to investors. In many developing countries
such as Bangladesh, due to the complexity of commercial banks getting
investment has led to non-conventional forms of lending (Ceaser and Epstein,
2000).
7
Chapter 3
Objectives and Methodology of the research
3.1 Objectives:
This study shows the real condition of poor people and the impact of micro
finance provided by Islami Bank Bangladesh Ltd. The study is to congregate
upon the ideas of micro-finance to increase performance of IBBL. The study
provides a platform for Islamic micro-finance organizations to provide finance
for the poor people.
The Objectives of the study are based on findings and impact of Islamic
micro-finance (RDS) performance since growing competency of micro credit
organizations have developed in our country. It is important that Islamic
micro-finance values differ from others.
Specific objectives are:
(1) Documentation of the performance of Islamic Micro finance through RDS
& UPDS program of Islami Bank Bangladesh limited.
(2) Assessing the impact of Micro Finance on Socio Economic Condition of
RDS&UPDS clients.
In this stage the primary data have been edited, accumulated and classified
according to similarities and finally tabulated. In case of data analysis only
percentile result has been considered.
9
Chapter 4
Results and Discussion
Performance
Sl. Particular
RDS UPDS Total
01 Designated Branches 228 24 252
10
4.2 Target & Achievement under RDS & UPDS in the Year 2016
Figure Tk. In million
Achievement
Sl Position Target for
Description in 2016 % of achievement
No. 2015 2016
11
deposits Tk.30/-per week as a compulsory savings under RDS & Tk.50/-under
UPDS attending in the Center Meeting held in a particular place of the locality
as chosen by the members and conducted by the Field Officers.
Member Position
1200000 1085536
999140
911470947305
1000000
836227
800000 733520
617324
Member
336000
400000
200000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
10000 8836.52
9000 7952.64
8000 6932.89
Amount of Savings
7000 5727.15
6000
4531.46
Savings Position 5000
4000 3323.15
2555.23
3000 1783.56
2000
950.56
1000
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
Year
13
4.5.3 Modes of Investment:
Investments are provided to the clients under RDS & UPDS ensuring buying
and selling as per Shariah approved modes of finance. Most of the investments
are allowed under Bai-muajjal mode. Hire Purchase under Shirkatul Meelk
(HPSM) and Musharaka modes of finance are also applied in the RDS &
UPDS investment. Mode-wise investment position as on 31.12.2016 is shown
below :
% on
No. of Outstanding total
Sl No. Particulars
clients (million taka) outstandi
ng
1 Bai-Muajjal 573,365 22096.17 90.28%
2 Musharaka 1,489 64.21 0.26%
Hire Purchase under
3 Shirkatul Meelk 7,998 2316.61 9.46%
(HPSM)
Total 582,852 24,476.99 100%
Table: 5 Mode wise outstanding
(Source: IBBL,Internal Information System)
4.5.4 Investment Clients:
Among the members of the schemes who are enjoying investment facilities at
a particular point of time are called clients. According to microfinance
practice 100% members do not availing investment at a time. It is a
continuous process. A portion of the members are always in waiting to take
investment decision by themselves. Last 5 years’ position of the clients is
shown below:
14
Sl. Particular 2012 2013 Growth 2014 Growth 2015 Growth 2016 Growth
506,50
01 MI Client 421,703 472,146 12% 501,559 6% 500,216 (1%) 1%
4
02 MEI Client 53,063 60,089 13% 57,985 (4%) 69,604 20% 76,348 10%
582,85
03 Total Client 474,766 532,235 12% 559,544 5% 569,820 2% 2%
2
% of MEI
04 clients on total 11% 11% - 10% - 12% - 13% -
clients
15
4.5.5 Year-wise Investment outstanding:
5(five) Years’ comparative position of growth in micro investment (MI) and
micro-enterprise investment (MEI) under the scheme is shown below:
Sl. Particular 2012 2013 Growth 2014 Growth 2015 Growth 2016 Growth
Outstanding 10,254.7 11,781.6 13,645.
01 6,036.74 7,956.89 32% 29% 15% 16%
(MI) 6 0 88
Outstanding 10,831.
02 4,353.97 5,774.03 33% 7,125.20 23% 9,017.21 27% 20%
(MEI) 11
Total 10,390.7 13,730.9 17,379.9 20,798.8 24,476. 18
03 32% 27% 20%
Outstanding 1 2 7 2 99 %
% MEI in total
04 42% 42% -- 41% -- 43% -- 44% --
investment
(Taka figure in million)
Table: 7 Year wise investment outstanding (2012 -2016)
(source: IBBL,Internal Information System)
Year-wise investment outstanding in graph
30000
24476.99
25000
20798.81
Outstanding amount
20000 17379.96
MI
15000 13730.92 MEI
10390.71 Total
10000
5136.52
5000 3966.3
2899.52
0
2009 2010 2011 2012 2013 2014 2015 2016
Year
16
4.5.6 Sector-wise Investment:
Investments under the Schemes are extended especially in the agriculture
sector. However, a significant investment has also been extended in different
income generating off-farm activities, rural housing & transport. It is viewed
that 34% investment was extended in different sub-sectors of agriculture,
20% in rural housing, 5% in rural transport and 42% in different off-farm
activities.
Sector wise investment under RDS has manifested in the following table
(Fig. Taka in million)
17
Sector-wise investment in graph as on 31.12.2016
19
4.8 Size wise investment achieved by the Field Officer:
Size wise performance of Field Officers up to December-2016 is furnished
below:
4.9.1 Quard-E-Hasana:
Quard-E-Hasana (Loan without profit) is provided to the RDS & UPDS
members for setting up Tube well up to Tk.10,000/-, Sanitary Latrine up to
Tk.6,000/-. Quard-E- Hasana is also provided to the members in difficulties
20
due to sudden accident, natural disaster, severe illness etc. up to Tk.10,000/-.
Disbursed of Quard against rehabilitation of the members in the Year 2016
was nil. Other than RDS & UPDS member, the ultra poor people of the
working areas are provided with Quard-E-Hasana up to Tk.5,000/-. All of the
Quards are given for 01 (one) year duration only.
21
Table:15 Graduated cumulative clients up to December 2016 is mentioned
below:
Sl. Number of
Particulars
No. clients
Graduated clients who availed Micro Investment above
0.50 lac; the highest ceiling of MI and transferred to
1 128,090
MEIS from MI after availing maximum ceiling under
RDS.
Clients who have availed maximum ceiling of MEIS
2 5,315
and already transferred to mainstream.
Total 133,405
Table:15 Graduation of clients (Source:IBBL,Internal Information System)
4.9.3 Non-financial Services (welfare) under the Schemes:
Poverty alleviation needs a combination of financial and non-financial
services together. So, different non-financial services have extended under the
Schemes from the year 2012 in the areas of (1) Education, (2) Training, (3)
Health, (4) Relief & Rehabilitation and (5) Environment.
Non-financial Services or welfare activities under RDS & UPDS is
accomplished as per yearly budgetary allocation for the purpose approved by
the competent authority.
Performance of Welfare Activities at a glance as on 31.12.2016
(Fig. Taka in million)
Jan’2016 to Dec’2016 Since inception to 2016
Sl. No. Description
Beneficiaries Amount Beneficiaries Amount
1 Education Program 48,221 75.47 175,730 254.83
2 Training Program 211,018 28.34 633,240 84.82
3 Health Program 50,191 38.70 189,706 148.79
Relief & Rehabilitation
4 3,379 33.66 15,361 101.14
Program
5 Environment Program 690,246 25.90 5,607,824 106.21
Grand Total 1,003,055 202.07 6,621,861 695.79
Table:16 Performance of Welfare Activities
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Program-wise description is stated hereunder:
4.9.4 Education Program:
Under Education Program, there are three types of activities like (1)
Scholarship (for the children of the beneficiaries secured GPA-5 in the SSC &
HSC examinations), (2) Academic Award (to the meritorious children of the
members from class I to class IX) and (3) Establishment of Pre-primary
School, Furqania Maqtab & Adult Education Centre in the project areas.
Performance under Education Program from January 2016 to December
2016
23
4.9.6 Health Program:
Under Health Program, there are four types of activities like (1) Conducting
medical camps {general, eye & circumcision (Khatna camp)}, (2) Medical
Assistance and (3) Assistance to Mother & Newborn Babies. Activities under
Health Program during the year 2016 at a glance are shown in the following
table: (Fig. Taka in million)
No. of Beneficia
Activities Amount
programs ry
a. Medical Camp 142 23,016 4.27
b. Eye Camp 50 4,991 1.37
c. Circumcision (Khatna) Camp 28 659 0.81
d. Medical Assistance - 1,826 12.55
e. Welcome Gift for the Newborn - 19,699 19.70
Babies
Total 220 50,191 38.70
Table:19 Health program(source:IBBL,Internal Information System)
24
4.9.8 Environment:
The Bank has been observing Plantation Program during the rainy season
almost every year since 2003. Each of the RDS members have provided with
one sapling free of cost and encouraged to implant two others by their own.
Since 2003, the Bank has distributed about 6,621,861 saplings. This year we
have distributed 690,246 saplings among the RDS members and different
educational institutions in the working areas with the cost of Tk. 25.90
million.
25
Others 8,66
11,06 140,938
8 (504 - 9,155 63,419 4,69 -
3,871 .94
MFIs) 5
National 36,232, 29,594, 521,829.3
9 - 18,635 142,801 98.56%
position 279 065 6
RDS Position
10 6th 6th 6th 7th 5th 2nd
among 7 MFIs
Table:21 Comparative position of MFI
To understand the role of Islami micro-finance in poverty alleviation,
interviews/survey was conducted and the data are represented in tabular forms
and analyzed.
Age Distribution
Frequency Percent Valid Percent Cumulative
Percent
18 or below 1 1.4 1.4 1.4
19 to 25 6 8.6 8.6 10.0
26 to 32 16 22.9 22.9 32.9
Valid 33 to 39 27 38.6 38.6 71.4
40 to 46 14 20.0 20.0 91.4
47 to 51 6 8.6 8.6 100.0
Total 70 100.0 100.0
The research result shows that most of the respondents are within the level of
33 to 39 years of old and 26 to 32 years of old who are mature enough to take
any decision or use fund positively.
26
Level of Education
Frequency Percent Valid Percent Cumulative
Percent
ssc or below 54 77.1 77.1 77.1
hsc 11 15.7 15.7 92.9
graduate 1 1.4 1.4 94.3
Valid
post 4 5.7 5.7 100.0
graduate
Total 70 100.0 100.0
Most of the clients of RDS are less literate or SSC level or below SSC who are
deprived from other loans and advances provided by Banks and Financial
institutions. RDS program work with those deprived people.
Most of the loan taken by the RDS clients are within the range of 15000 to
70000 and the loan starts from minimum amount tk.5000.
27
Taking loan from any other MFI
Frequency Percent Valid Percent Cumulative Percent
yes 10 14.3 14.3 14.3
Valid No 60 85.7 85.7 100.0
Total 70 100.0 100.0
Most of the clients are satisfied with the loans and services provided by the
RDS program and they don’t take loan from any other Micro Finance
Institutions in Bangladesh.
The research shows that most of the first loans taken by the clients are for
housing purpose and after fulfilling their basic needs they go for further
earning to increase their income and standards of living. Secondly most of the
loans are for animal husbandry business as it is done with small capital and
withi the housing area so it is perfectly suitable for them.
28
Comparative position of RDS client after and before:
Before Joining After
Area of Comparison
RDS Joining RDS
No Schooling 42(60%) 6(8.60%)
Schooling of Children
Govt. Primary/Secondary 28(40%) 64(91.4%)
No Recreation 28(40%) 1(1.4%)
Recreation Facilites Mobile 20(28.6%) 22(31.4%)
TV or Radio 22(31.4%) 45(64.30%)
Cinema Hall 0 2(2.9%)
No Land 29(41.4%) 8(11.4%)
Own Cultivable
Up to 15 39(55.7%) 45(64.3%)
Land
16-30 2(2.9%) 4(18.6%)
(Decimals)
31-45 0(0%) 4(5.7%)
Above 45 0(0%) 0(0%)
Up to 20000 16(22.90%) 13(18.6%)
Approx Annual 20001-40000 24(34.3%) 19(27.10%)
Expenditure (BDT) 40001-60000 11(15.7%) 20(28.6%)
60001-80000 19(27.10%) 18(25.7%)
Above 80000 0 0(0%)
Not Aware 34(48.6%) 0(0%)
Citizen Rights
Aware 36(51.4%) 41(58.6%)
Fully Aware 0 29(41.4%)
Nil 9(12.%) 0(0%)
Homestead Up to 5 54(77.1%) 45(64.3%)
(Decimals) 6 to 10 6(8.60%) 21(30.0%)
Above 11 1(1.40%) 4(5.70%)
Normal Food 56(80%) 0(0%)
Fooding
Medium Food 14(20%) 66(94.30%)
Standard
Rich Food 0 4(5.7%)
29
Nature of Sanitary Latrine 38(54.30%) 68(97.10%)
Latrine Unsanitary Latrine 32(45.7%) 2(2.90%)
Most of the respondents think that RDS & UPDS are different from other
micro finance organization that is it is not as like as other conversational MFI
in Bangladesh.
A little portion of the respondents think that RDS & UPDS charge high rate on
their investment and maximum people think that applicable rate of return is
not too high for them and it is reasonable rate of return.
30
Necessity of Modification
Frequency Percent Valid Percent Cumulative Percent
yes 29 41.4 41.4 41.4
Valid no 41 58.6 58.6 100.0
Total 70 100.0 100.0
From the above result we see that almost 40% of the beneficiaries think that
,some changes need for existing Micro Finance Program of Islami Bank
Bangladesh Limited. And rest 60% think that, no change needed for this
program that is it is running well.
31
Chapter 5
Conclusion
Only RDS & UPDS program of IBBL have been considered to evaluate or
assess the performance of Islamic micro finance specially of islami bank
banglades limited as no other mentionable established micro finance
organization are available in our country. We have also tried to assess the
performance through various indicator of primary respondent and also
compare with secondary data,we collected from various reliable sources. By
analyzing the primary and secondary data we have concluded that the
performance of Islamic Micro Finance of Islami Bank Bangladesh limited is
numerically and descriptively excellent and pioneer in micro finance arena of
Banladesh. We see most of the first loan taken from RDS and UPDS are for
basic needs like House Building, Business goods etc and next the tried to
enhance their income through effective business. Most of the respondents
expressed their happiness with Islamic Micro finance as because Islamic micro
finance system is conducive for the clients and they are not crucial as like as
other conventional Micro Finance. Moreover, they extend their helping hand
to the sufferer through various humanitarian program and products. Most of
the clients socio economic conditions have improved after getting loan from
RDS and UPDS. Schooling of children, recreation facilities, cultivable land,
citizen rights, fooding, clothing, hygiene etc have changed positively for
almost hundred percent clients. There are lots of training program are arranged
every year to train the clients about how to increase business efficiency.
Above all this Islamic Micro Finance not only improve the socio economic
condition of some people of the society but also it contributes a lot in the
national economy through increasing income and employment of the deprived
people of the society
32
Reference:
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BIDS (2001), Final Report on BIDS Study on PKSF’s Monitoring and
Evaluation System (MES), October, Bangladesh Institute of
Development Studies, Dhaka.
Bagsiraj, M. I, (2009) “Financial and Economic Crisis: An
Alternative Indian Approach”, Radiance Viewsweekly, Vol. XLVI
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Bateman, Milford, (2010) “Why doesn’t Microfinance work? – The
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Chowdhury, A.M.R. and Bhuiya, A. (2004), “The wider impacts of
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Khandaker, S.R.(2003),Micro-finance and Poverty: Evidence Using
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http://epublications.bond.edu.au/ijbf/vol7/iss1/7
Islamic micro-_ finance programme and its impact on rural poverty
alleviation: 119-138 121
http://www.islamibankbd.com (accessed 3rd July, 2017).
https://en.wikipedia.org/wiki/Poverty_in_Bangladesh#Rural_and_urb
an_poverty
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34
Appendix
Questionnaire
Have you taken any loan from any other micro finance institution
If yes then which MFI?
Below You need to approximate the changes that have come to your socio-
economic condition before and after borrowing from RDS:
Before After
Area of Comparison
Joining RDS Joining RDS
No Schooling
Schooling of Children
Govt. Primary/Secodary
No Recreation
Recreation Facilites Mobile
TV or Radio
Cinema Hall
No Land
Own Cultivable
Up to 15
Land
16-30
(Decimals)
31-45
Above 45
Up to 20000
Approx Annual 20001-40000
Expenditure (BDT) 40001-60000
60001-80000
Above 80000
Not Aware
Citizen Rights
Aware
Fully Aware
35
Nil
Homestead Up to 5
(Decimals) 6 to 10
Above 11
Normal Food
Fooding
Medium Food
Standard
Rich Food
Clothing 0 - 2000
(Yearly 2001 - 4000
Expenditure More than 4000
Health & Fakir/Kabiraj
Medical Quack Doctor
Facilities MBBS or Expert
Source of Public Tube-well
Drinking Personal Tube-well
water Pond water/Nearby
source
Nature of Sanitary Latrine
Latrine Unsanitary Latrine
15.Do you see any difference of RDS from other micro credit schemes?
36