MICROCAPITAL STORY: Bangladesh Rural Advancement Committee (BRAC) and MasterCard Foundation Establish $19.6m Microfinance Program in Uganda

On November 18, the MasterCard Foundation, a private foundation in Toronto, Canada, and the Bangladesh Rural Advancement Committee (BRAC), a Bangladeshi microfinance institution (MFI), targeted two million Ugandans with a USD 19.6 microfinance program.  The need for deeper, more mature microfinance markets in Uganda is strong, implies a recent Business Wire story.  The government made expanding financial services for the rural poor a “top priority” in a country where more than 37 percent of the population live on less than a dollar a day and 62 percent do not have access to financial services.

As published on the MasterCard Foundation’s website, the new program will include the following components:

  1. BRAC Branch Expansion:  BRAC will expand its operations in Uganda from 34 microfinance offices to 85.  
  2. Savings Services:  The Bank of Uganda regulates savings institutions in Uganda, and it mandates that microfinance providers operate for at least three years before applying to become a deposit-taking institution.  While BRAC does not yet meet the three-year minimum, the MFI hopes to consult with local experts to evaluate the feasibility of its transformation into a deposit-taking institution.
  3. Livelihood Support:  BRAC will provide loans, training, and technical support to workers in the agricultural sector, which supplies about 80 percent of total jobs in Uganda.
  4. Adolescent Girls:  In 2007, BRAC initiated a pilot program to provide safe places for adolescent girls to learn vocational, financial, and general life management skills.  BRAC hopes to expand the pilot to reach thousands of more girls between the ages of 13 and 19.
  5. Primary Education:  The program will expand primary education in Northern Uganda for older children who have been unable to attend school because of violent conflict in the area.  Eighty percent of these children are girls.
  6. Training:  The program will expand resources in BRAC’s training center, which provides classroom courses in microfinance, human resources, staff training, and other technical subjects. 

BRAC claims its new partnership program will “for the first time demonstrate the full potential of [its] microfinance approach to reduce poverty and improve livelihoods in Africa.”  BRAC hopes to learn insights that will inform its microlending practices for other African nations.  Says BRAC Founder and Chairperson Fazle Abed: “What we learn in Uganda, including how to provide savings to poor women and their communities, will help us rapidly scale up our operations to provide services to millions of people throughout Africa.”

BRAC refers to its field methodology as “microfinance multiplied,” which at its core is composed of several Village Organizations (VOs)—associations of poor women formed to receive financial services and social support.  Typical VOs organize between 20 and 45 people and meet weekly with a BRAC loan officer who supplies loan origination and repayment services.   Over time, BRAC hopes, these VOs become the distribution channels not only for loans but also for livelihood services and technical assistance to whole communities. 

Based in Dhaka, Bangladesh, the Bangladesh Rural Advancement Committee (BRAC) was founded in 1972 as a relief agency but has since grown to serve the rural poor as a bank, a technological institute, and a university.  Today, the organization operates various microfinance and poverty alleviation programs in over nine countries across Asia and Africa, with an estimated reach of over 110 million people.   Total assets of BRAC in 2007 amounted to USD 619 million and its debt/equity ratio was 384.22 percent.  According to BRAC’s 2007 Annual Report (p. 7), its Ugandan microfinance program has formed over 1,730 village organizations with 48,000 members.  Over USD 8.3 million have been dispersed in loans, and BRAC claims (p. 7) a 100 percent repayment rate.  BRAC also underscores (p. 7) the training of 200 community health promoters and the opening of 122 learning centres serving about 4,000 internally displaced people.   The MIX Market, the microfinance information clearinghouse, rated BRAC four out of five stars in terms of its information transparency.  The organization has won several awards, including: the Conrad N. Hilton Humanitarian Prize in 2008, the Gates Award for Global Health in 2004, and the CGAP Financial Transparency Award in 2005 and 2006. For more information on BRAC, please see the Microcapital stories referenced in the “Additional Resources” section.

The Mastercard Foundation is an independent, private foundation started in 2006 in Toronto, Canada.  The foundation seeks to “make the economy work for everybody by advancing effective and innovative programs in the areas of microfinance and youth education.”  The foundation’s 2007 financial statement claims USD 2.4 billion in total assets (p.3), of which USD 36 million are “portfolio investments.”  The 2006 and 2007 tax returns for the company are available from the Canada Revenue Agency.

Additional Resources:

Bangladesh Rural Advancement Committee (BRAC)

BRAC: 2007 Annual Report

Business Wire: “The MasterCard Foundation and BRAC Expand Microfinance Services in Uganda

The Financial Express: “BRAC’s $19.6m joint venture targets poor in Uganda

The MasterCard Foundation

The MasterCard Foundation: 2007 Financial Statement

The MasterCard Foundation: Press Release: “$19.6 million program will benefit approximately 2 million people with innovative approach to microfinance

The MasterCard Foundation: Uganda Program

The MasterCard Foundation: Microfinance Multiplied

Microcapital Story: “BRAC Receives US$  1.5 million Hilton Humanitarian Prize

Microcapital Story: “Citibank Grants USD 23.8 Thousand to Brac Tanzania

The MIX Market: BRAC

 

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  1. […] In 2008 the MasterCard Foundation committed USD 19.6 million to BRAC to facilitate the opening of 51 branches in Uganda at the outset of the “microfinance multiplied” program as was covered in the following MicroCapital story: https://www.microcapital.org/microcapital-story-bangladesh-rural-advancement-committee-brac-and-maste… […]

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