ASA Bangladesh Essay Example for Free

ASA Bangladesh EssayASA stands for Association for friendly Advancement, which is a non-governmental organization aiming at helping poor people to get knocked out(p) of poverty. Bangladesh earned its emancipation in 1971, but because of the war, the whole country needed to be reconstructed. The unstable and bureaucratic political musical arrangement slowed down the speed of economic development. In the meantime, or so sm exclusively non-governmental organizations stepped into Bangladesh to help the local people redo their life in antithetical respects.The official ASA website shows that the organization was founded in 1978 with its goal of empowering the poor. In the beginning phase, ASA started some computer programs such as training program, communication support service program and legal aid and sensation build-up program. The results of the programs, however, were below expectations. There were several limitations in developing ASA. For example, the employers had di fficulty to get paid the forge of the programs was not consistent with the local situation the natural disaster happened at that time. all(a) these factors forced the managers to hammer a practical solution. ASA began to favor women as clients and addressed social concerns, such as education, sanitation and health. Since 1992, ASA has launched superfluous programs in savings, credit and trade protection fund argonas (emergency bestows or insurance), which be still the main financial professi aces at ASA.Main Services of ASA The annual report of the year 2011 states that the main services of ASA include loans, savings, insurance, a practiced Assistance (TA) program and ASAs sister concern Hope for the Poorest (HP). The new program introduced is the Primary fostering Strengthening Program. The following product descriptions are based on the ASA official website. 1. LoansASA provides two kinds of loansprimary loans and special(a) loans. Primary loans aim at providing financia l support for poor people, who can get a utmost first loan from $105 to $265 based on their specific situations. Special loans are designed for enterprises or entrepreneurs with the initial maximum amount from $662 to $6500. Both kinds of loans carry a maximum of 27% interest and hebdomadary or monthly allowancement. For primary loans, the payback period is normally up to one year (4, 6 or 12 months) for special loans, the duration is from 1 to 2.5 years (12, 18, 24 or 30 months). 2. nest eggWith respect to a savings account, people extradite three choices mandatory savings, voluntary savings and semipermanent savings. Mandatory savings are especially for clients who have loans at ASA with a deposit rate of at least BDT 10. As an additional choice, the mandatory savings clients are able to choose voluntary savings with any deposit rate greater than BDT 10. Both savings accounts earn interest monthly with 6% annual rate of return. The savers are allowed to withdraw the cash anyt ime but they have to keep the balances no cut back than 5% of the loan amount.Long-term savings are suitable for everybody. The savers do not need to have loans or any other relationship with ASA. The deposit rate for this account can be Tk. 50 to Tk. 500 per month (specifically Tk. 50, Tk. 100, Tk. 200, Tk. 300, Tk. 400 or Tk. 500). For a 5-year account, the interest rate is 9% annually for a 10-year account, the interest rate is 12% annually. If clients need to withdraw prior to maturity, they will receive the money at a lower rate of return. 3. InsuranceThe insurance products include loan insurance and life insurance. All loan borrowers are mandatorily enrolled in these two insurance programs. The subvention of loan insurance is BDT 5 for a loanee or BDT 10 for a loanee and his/her spouse per thousand loan disbursement. Clients have to pay the premium in the lead disbursement. The life insurance program requires BDT 10 as premium for eight years. The premium is included in the loan installment. 4. ASA University BangladeshThe university provides higher education with an affordable tuition payment. Meanwhile, the managerial level of the university tries their dress hat to offer advanced facilities and figured faculties for the students. They combine theoretical and practical learning and the university deserves credit for the high function rate. 5. WASH program and TA programWASH stands for water, sanitation and hygiene. This program aims at improving the check into of sanitation in very poor places. TA, technical assistance, publicizes staff to different countries and areas to help people who are in difficult financial situations to improve ASAs reputation.Avoiding Adverse Selection and Moral Hazard Researchers deal that ASA does not have a series of complicated criteria for getting loans. The borrowers should have income lower than $50 a month and must attend one group run across a week for 4 weeks prescribed saving Tk. 10 per week. After that, they are able to get a loan (Ahmmed, n.d.). The same paper is also presented in the work of Sheikh and Amin (2011), which indicates that ASA follows a very similar model to Grameen chamfers. They send supervisors to inspect borrowers personal credit linees and hold mandatory weekly meetings for borrowers to share experience and to take suggestions from others. ASA also collects repayments in that meeting and keeps track of the group functionings (p.356) From the product attitude, ASA secures their loans to some extent. All borrowers have to be in the savings program and leave at least 5% of the loan amount in the account. The loan insurance enhances this security as well. All these methods keep the understructure from getting a high default rate. In fact, it turns out that borrowers are willing to pay back the loans on time.Special Points about ASA In the microfinance world in Bangladesh, ASA is famous for its innovative ideas, namely high efficiency and low costs. At ASA, sta ff use a different accounting method which is easy to master, so they do not need to have an comptroller in the office. Secondly, every branch has freedom of preparing its own target and is allowed to deposit or withdraw money whenever it needs to. Thirdly, the set-up engenders less hierarchy. The regional managers are also the supervisors credit officers have the authority to grant loans. As compared to Grameen Bank, ASA minimizes its staff numbers and cuts layers as much as it can. Lastly, ASA does not have any training program, incomplete training center nor trainers. Work routines are standardized and simplified so that new recruits need only if a few days of supervised work experience in a branch before being sending off to another one to start work.1Challenges ASA Faces 1. Interest Rate of settle Microfinance differs from common banking. MFIs should be allowed to charge a higher interest rate to at least overfly the costs of processing the loans. However, in Asia, the big gest potential market, governments control the interest rates in some extent. This pattern interfere the development of Microfinance. 2ASA, as a main MFI in India, has the same difficulty in its business as well.2. The Weakness of the Insurance Bangladesh is an undeveloped country with many problems that are hard to solve, such as a high unemployment rate, lack of health insurance, gender discrimination and liabilities to floods. Though ASA forces all members to get enrolled in the insurance program, it does not guarantee to collect the premium from every member on time. Nearly all members have the difficulty of balancing their payments and normal life expenses.3. Entering into the Poorest Areas Sarder and Nabi (n.d.), who work at headquarter of Bangladesh Bank, claimed that MFIs/NGOs could not pass able effectively to reach among the people of economically backward regions of the country. As a result, MFIs showed poor performance to reduce poverty in economically poor areas. Beca use of the special features of MFI, it is not realistic to develop its business in the very poor place without any government assistance. Keeping the balance is already a challenge for ASA if there is no financial support from local governments, ASA, and other MFIs, cannot enter into these places without budget concerns. distinguishable features of Grameen Bank, BRAC and ASA First, though all three institutions require borrowers to have a definite amount of landholding, the specific criteria are different. By Grameen Bank, the member needs to have at least half an acre landholding the other two institution have a looser clause of landholding, which is maximum half an acre. In order to insure the borrowers repayment ability, BRAC and ASA lend money only to people whose families have at least one family member earning wages. Second, from the perspective of group size, Grameen Bank has the smallest one, which includes only 5 members.ASAs group is 4 times larger than Grameen Banks. And BRAC has the largest group members30 to 40 people per group. Third, each of these institutions asks the members to save weekly. Grameen Bank and ASA both require 10 Taka a week, while BRAC requires for 20 Taka per week. Fourth, Grameen Bank and BRAC have the same credit delivery mechanism, which is 50 weeks for one loan cycle with 20% interest rate and maximum loan size of Tk. 10,000. ASA, however, has a shorter loan cycle which is 46 weeks with 15% interest rate and the maximum loan size of Tk. 5000 to TK. 7000. ImplicationsThe successful experience of ASA shows that microfinance needs both variety product designs and effective guarantee methods for repayments. ASA provides different loans or saving programs for different borrowers, which helps the institution to reach as many potential clients as it can. Meanwhile, the insurance policies prevent a certain default rate. This design brings out the best in each other.