Cost Efficient, Sustainable and Fast Growing Microfinance

 

Elements of Effective and Fast Scaling up of ASA’s Program

May 17th, 2008
 

Effective Organizational Management

Fast scaling up is best understood as meeting unique challenges of effective organizational management that characterizes fast expanding programs. These relates to:

A. Ensuring effective decision making by an ever expanding work force. The following features of ASA policies ensure effective decision making in the face of its fast expansion:

  • Minimize decision errors through minimal decision making load on new and less experienced employees by the reliance on simplified and standardized service procedures;
  • Simplified administrative and accounting approval and decision making process;
  • Unambiguous indicator-based performance review;
  • Quick and close-to-field problem solving;
  • Responsive, not participatory decision making.

B. Managing organizational and staff learning. ASA employs the following four policies to bring this about:

  • Minimize information carrying and analysis load;
  • Limited needs of complex group/institutional development skills;
  • Guided decision making based on a manual;
  • Officer presence in the field

C. Management of resource acquisition. Two of ASA policies are crucial in this regard, namely

  • Strategic viability and positioning on the basis of cost-efficiency and not on novelty;
  • Tapping existing non-political institutional resources.

D. Management of organizational development. Developing organizational capability in the form of technology, systems and culture, constitute a great challenge in a fast expanding organization. ASA adopted a multi-pronged approach to organizational development that reduced demands of complex organizational development process. The followings are the outline in this regard.

  • Absence of complex group development;
  • Start simple and grow elaborate;
  • Market competitive staff incentive policy;
  • Insulating staff from social pressures.

ASA program policies can be seen as responses to effectively manage the above four demands of effective organizational management. These policies, thus, constitute a managerial agenda for scaling up in fast expanding programs.

Key Strategies for Rapid Growth

MOST IMPORTANT FACTORS

KEY ACTIONS TAKEN IN EACH

Decentralized and simplified staff recruitment procedures and short duration on-the-job staff training.

  • Staff recruitment process is decentralized at field level.
  • Staff selection process focuses on mediocre qualifications but potential for rigorous fieldwork. No written examination are taken for hiring rather hiring undergo through group interview by judging physical fitness, presentation, quick and appropriate response, attentiveness etc.
  • Newly recruited staffs are undergoing a 9-days on-the-job training at the field office. Each new staff is assigned with an old lion officer for hands-on experience.

Guided operation based on written working manual

  • All sorts of administrative and program policies are documented in details in a working manual, which is kept at each field office.
  • All approvals as per this manual are deemed as given requiring no reference to or permission from the higher authority.
  • Complete division of work among all ASA staff level.

Cost effective and decentralized operation/ management system.

  • Field office structure and expenditure is structured and standardized with a cost ceiling for all sorts of expenditure.
  • Delegation of administrative and program related decision-making power to the field office.
  • Filed office used as an office cum residence and is equipped with minimum, simple furniture and collective use of all utilities and facilities.
  • Simplified and self-maintain accounts and MIS system without provision for an accountant and MIS personnel.
  • No separate office setup and secretarial staff for mid level supervisor.
  • Quick loan disbursement and fund transfer from surplus to deficit areas by field level staff due to decentralization

Targeting optimum number of clients per loan officer and supervisor.

  • Number of clients per loan officer is fixed based on financial viability of the operation and working area.
  • Number of loan officer per supervisor is also set accordingly.
  • All working days in a week is used for field work.


Breakthrough Strategies to Growth and Cost Reduction at Different Stages


-- START-UP ACHIEVING SUSTAINABILITY MAJOR REACH
Breakthrough Strategies
  • Single focus program, which concentrates on providing financial services. ASA operation does not mix with other non-financial services.
  • Establishing branch as a centre for providing financial services with very simple and small structure. Small and simple branch structure allows filed offices to locate close to clients' homes.
  • Simplified and easy non-conventional record keeping, accounting and MIS systems without provision for an accountant and MIS personnel.
  • Cost effective and decentralize operation with reduced overhead and administrative cost.
  • Fast formation of groups of eligible clients and fast provision of loan. Maximum utilization of loan fund through daily loan disbursement and immediate transfer of excess funds to other branches or central office.
  • Increase of clients and loan portfolio per loan officer.
  • An ASA branch becomes financially viable with in 9 to 12 months of operation.
  • Fast expansion of ASA program. Within 7 years of its micro-credit operation, ASA reached a million clients.
  • Cost per unit of money lent constituted a very cost effective micro-credit operation in the world.


Managing Growth of MFIs: ASA Bangladesh - single-minded growth (PDF|680KB)

-- by Stuart Rutherford with Graham A.N. Wright and S.K. Sinha