MICROCREDIT SYSTEM

View with images and charts “Evaluation of Financial Sector Reform Project & Performance Planning and Microcredit System” 1. Introduction 1.1 Background Since 1986, some of the young people under Somvag Union between five villages started this organization. After 1986, they started NGOs system fro govt. permission under help from PKSF (Palli Karma Sahayak Foundation). President order no 453, of 1991 and registration no D-01995, 29-1-1987.Its name fix up SOJAG (Somaj O Jati Gathan). SOJAGs main goal and vision honesty, upright, independency, peace, richness and, safety education etc. So as to accelerate the rate economic growth and employment generation.

1.2 Purpose of the Study This project evaluation is expected to assess: 1. Whether the planned end of the project outputs have been Achieved.

2. The degree to which the project has achieved it’s a restated purpose.

3. The sustain ability of the operational improvement in the non-governmental system and the policy reform efforts undertaken.

4. Lessons learned from the project as an input for future in micro-credit sector reform.

5. What’s the situation of the other organization we acquire general and practical knowledge acquire by the project analysis.

6. We also acquire the necessity for the micro-credit for the social welfare.

1.3 Necessity of the Study Micro-credit system provided technical assistance to improve PKSFs operations and address systematic problems in the financial system. For this purpose we should study to find out its effectiveness. Finding effectiveness will be helped for future decision making. By doing this, we should find out strength and weakness of the Micro-credit system.

1.4 Performance Period

The performance period includes 60 (5days multiply by 12 week) in the SOJAG Head Office and its branches beginning 1st week of December 2009.

1.5 Area of the Study We have gone to the various divisions of SOJAG head office and its branches based in Dhamri, Dhaka. SOJAG Training Institute.

1.6 Methodology In developing the appropriate methodology analysis includes the following:  A review of project reports and relevant project documents including the financial project paper, grant agreement, financial sector reform project (FSRP), semi-annual PSR reports, consultant reports and papers, annual magazine.  Interviews with SOJAG Interviewer by the Board decision.  Consultation with internal and external supervisors and many FSRP dealing officers in the different NGOs.  The impact evaluation has conducted in March 2009.  Sampling: We took random sampling that we asked questions to the loan officers who deal with Micro-credit system.  Sample size: 100% sample size client’s head office.

2. Organizational Overview 2.1 Historical Background of SOJAG SOJAG are Non-government Organization and it is successful organization. It was established on 25-3-1986, known as president Order No 453 of 1991 through repair the rural very poor family. Its authorized capital TK100000 lakh and its present capital near by TK30 crore and different project invested Tk 29 crore.

2.2 Branches and Operational Position of SOJAG SOJAG perform financial intermediationship with a network of 11 branches through collecting deposits, agriculture, fisheries, social forestry, education, micro-credit, foul weather, health management etc. But its main function has been helping the poorest family by the micro-credit deposit system. It can also help social welfare and public relationship consist.

2.3 Objectives of SOJAG The main objectives of the SOJAG are following :  To meet the banking needs of the general people of the rural side.

 To provide qualitative and diversified NGO service to the nation.  To earn profit .  To help the rural family .  To enforced the educational side .  To help to grow entrepreneurship .  To help the agriculture sector .

2.4 Function of SOJAG The main functions of SOJAG are as under:  To collect all types of deposits and to mobilize savings to the people.  To make advances, especially for productive activities and generally for other commercial and socio-economic needs .  To service to common people through the both rural and urban areas.  To introduce modern NGOs service in the country  To provide Agriculture and Domestic Animals Health loan.  To provide Educational and Micro-credit entrepreneurship program.

2.5 Summery of Services of SOJAG 2.5.1 Deposits service  Current Deposits.  Saving Deposits.  Short term Deposits.  Long term Deposits.

2.5.2 Lending Service  Short term Loan  Long term Loan  Domestic Animals Loan  Educational Loan  Micro-credit loan Program

 Rural Micro-credit loan Program  Mobility and Savings money  Agriculture Development program loan  Micro-credit Entrepreneurship program etc.

2.6

Management structure of SOJAG

The Board of Director of SOJAG consists are the Directors. This board is appointed by the Non Government system. Managing Director (MD) is the chief executive of the SOJAG.MD runs the administration of the bank through GMs and other senior executives (AGM and DGM).The higher level executives (GM and MD) are non government employees. Besides these organization maintains four types of staff and officers.

They are: i) Staff ii) Sub-ordinate staff iii) Officers iv) Executives (AGM and DGM) General Managers has specific responsibility that is shown in the organogram. There are 15 divisions in the organizations. Each division is headed by a DGM. There are four zones in the country of the SOJAG. Most of the zones are headed by a DGM respectively. A few small zones are headed by an AGM. Most of the zones and divisions have a number of AGMs. 2.7 An Evaluation of the Organization and Management System According to the existing mixed organization structure of SOJAG the role of each management member and position within the organization relation to other management members and departments are under:  Management is being done by function, banking facilities. Departmentation by territory and by customers needs to better service and banking facilities.  The executive of a zone ensure guidelines to promote quality service. The branch managers are to report to the zonal heads.  The function of the Board of Directors to establish policy the executive management carries out the policy and implementation. The competent management always seeks the advice and counsel of Directors. The NGO should have congenial officers to posses unique personality.  The officers of this organization get power of different category. The powers have been applied incorrectly for lack of supervision, monitoring and information management system.  Divisional heads always work under direct supervision of General Manager. This situation is under for them to bring innovation in management system. Besides pressure group influences, lack of management knowledge of employees, political influences, lack of effective information system. Lack of incentive information is the important factor to affect the overall management system.

2.8 Various Divisions of the Head Office of SOJAG 2.8.1 SCD (Special Credit Division) This division provides loan for Paddy or corn, Breeding Cow loan etc.

2.8.2 Recovery Division All works related to recovery including interest remission are done by this division.

2.8.3 Law Division This division deals with legal aspects including loan cases.

2.8.4 Appeal Division This division considers appeal in respect of decision given by disciplinary division.

2.8.5 Audit and Inspection Division All audit and inspection functions are performed by the PKSF. 2.8.6 General Credit Division This division provides all types of loans excepting those given by Special Credit Division and rural Credit Division. There are various types of loans deals by this division. Some of them are Cash Credit (Hypothecation), Cash Credit (Pledge), and Trading Loans. The works of loan classification are also done by this division. The GCD also performs the following functions :  Policy making for GCD.  Follow-up and supervise and use of loans.  Evaluation and permission of loans.  Inspecting and monitoring different projects which are taken under various programs.  Making notes & minutes for problematic or progressive projects and presentation to the credit committee.  Planning and implementation of disbursement of recovery derives.  Making the goal and action plan for general credit.

2.8.7 RCD (Rural Credit Division)

Previously this division provided various rural credits like Crop, Fishery, Poultry, and Dairy etc. Then the RCDs functions are below:  Making policy about crop loan such as disbursement, recovery, interest rebate etc.  Making policy and create correspondence relationship with the branches about fish culture, agriculture, and irrigation equipment, cultivate banana, life stock, normal loan etc.  To support and to make policy about the non agriculture loan such as Rural Housing Finance, Poverty Elevation policy etc.  To evaluate and permit of agriculture project loans.  To evaluate and implement of the foreign aided projects.  Implement and follow-up the agriculture project loans.  To make the statistical position of the SOJAGs agricultural credit sector.

2.8.8 Personnel Division Recruitment, transfer / posting, training, promotion, retirement, leave and personnel related matters are the functions of personnel division.

2.8.9 Computer Division Various composing works, preparing various types of forms are done by computer division.

2.8.10 MIS (Management Information System) The division collects various information, keeps them and supplies information for decision making and action plan.

2.8.11 Reconciliation Division This division reconciles inter branch and head office branch transaction.

2.8.12 Central Account Division This division maintains fund of the organization including balance with Agrani Bank Treasury bills, other securities etc. This Division also maintains the account of head office, provides salaries of officers and staff and bills for various expenditure.

2.8.13 Public Relation Division This division publishes various publications and gives advertisements in different media.

2.8.14 Discipline Division This division takes disciplinary actions against staff and officers for misconduct in different areas .

2.8.15 SOJAG Training Institute Various training programs are arranged by SOJAG Training Institute. Such as:  Basic training on computer sector.  Micro-credit manual course.  Liquidity and fund course.  Recovery of Monitoring and Follow-up Workshop.  Executive management Workshop.  Loan Management Course.  Branch Management Course etc.  Step against Fraudulence and Cheating workshop.  Project finance Course.

Table – 2.1 Salient Features of SOJAG Authorized Capital

2005 23.3

2006 24.6

2007 27.4

2008 28.7

18.80

20.00

25.00

27.40

2.25

2.35

2.40

3.20

1.5

---------------

3.67

4.12

2.22

2.83

1.02

1.73

3.05

4.33

1.35

2.20

Paid up Capital Reserved Fund Loan From Govt.

Deposits Advances Investments Gross Income Gross Expenditure

------------- -----------1.2 2.00 .55 1.00 .38 .50 1.5 1.85 .7 .83

.8 Net Profit ( Loss )

2.13

165

185

42

48

123

137

3

4

9

11

1.02 125

Total Manpower

140 35

Officers

38 95

Staffs

102 3

Zonal Offices

3 6

Total Branches

1.70

7

Note: Deposits and Advances are excluding of Provision.

2003

2004

2005-(1.2)

2006-( 2.00)

2007-( 3.67)

2008-( 4.12)

Fig : 2.1 Deposits

200 6 2005 –(.55)

2006-( 1.00)

2007-(2.22)

2008-(2.83)

Fig: Advances 3. Pre – reform Situation In The NGO Sector After liberation of Bangladesh in December 1971, it inherited and undiversified and undeveloped financial system, which was overwhelmingly dominated by the NGOs system.

Out of historic necessity, the government in power (just after liberation), Nationalized and Different Financial Organization and Different Banks made them to achieve the economic objectives of the government. Even after the change government in 1975, this policy of supporting the economic objectives of government by the financial institution did not change.

Therefore, since 1972, the financial institutions of Bangladesh used to operate under a regime of rigid government control. The regulations covered fixation of interest rate on deposits and credits, direction of credit to public sector enterprises and priority sectors ,

directed expansion of difference branches, till 1982 all the financial institutions were kept under the ownership as well as regulatory control of the government. During the period, 1972 – 82, financial network of the government and non-government organization system increased very slowly.

The total number this organizations and banking sectors branches increased 14% annually during 1973-83. At the same time, population perbranch reduced remarkably 2639 to 2272. The urban rural proportion of branches, deposits and credit improved significantly in favor of rural areas during the period and thus satisfied the economic objectives of the government in regard to extending banking generous credit to public manufacturing enterprises. It is imperative that as the financial network of a country increases, the case of implementing prudential and information regulations is such more important than economic regulation for the matter of improving on the operations of financial market.

But this did not happen; rather economic regulations monopolized whole regulatory structure of Bangladesh Financial System. Consequently , financial institutions pursued a policy of rapid expansion (during 1972-82) to the priority areas in response to government and nongovernmental directives with little regard to loan quality. Sound credit analysis was replaced with socio-economic considerations. Many rural branches were opened without considering viability aspects. Lending rate specially for priority sectors were kept as such allowed level, which did not cover the risk, and actual cost factors.

As a result, huge proportion of the financial institution became overdue. Debt recovery performance was also poor due to inadequate laws for debt recovery and ineffective debt recovery efforts on the part of the financial institutions themselves. All these have been reflected through decline in the probability of the NGOs. The probability(defined by net profit deflated by balance sheet total) of NGOs fell down from 0.25% to 0.23% during 1973-74 to 1982-83. This deterioration of the operational efficiency of NGOs was surfaced in spite of their inappropriate according system(that is accrual system of income recognition).

Not only operational efficiency, level of customer services of the banks also deteriorated during the period mainly due to complete government monopolization of banking sector during 1972 -80 was thus mixed-success in achieving economic objectives of expanding financial network and providing easy credit to priority areas, but failure as far as ensuring prudential and information regulations, viability and customer services of the banks are concerned. Since 1983, the government of Bangladesh started taking decentralization and privatization measures are the financial sector.

Two out of six NCBs were decentralized and a numbers of Private Commercial Banks (PCBs) were allowed to operate by the government. In this time also supported many insurance company, and Non Government Organizations. They perform their own ability and capacity in different sector. As a result, post 1987 period though witnessed some improvement in the customer services in the rural side of NGOs. Yet their operational efficiency rather declined further, instead of improving, even after continuing to recognize their income of accrual basis (as per 1987 period). The period also witnessed unprecedented undue influence of the vested interest groups in the credit decision making process of the financial institutions both (nationalized and private)

resulting is not only misdirection of credit . Surprisingly, the financial institutions were not even required to report loan classification and provisioning and loan loses in their financial reports. NGOs sector are prudentially contribute their different projects and curriculums. So we can say real intermediaries capacity of the NGO system.

4.0 Financial Sector Reform Project (FSRP) Activities in SOJAG The FSRP was launched with the objectives of strengthening macro-credit forms, improving NGO supervision and increasing the operational efficiency of the NGO and SOJAG. With regard to operational efficiency of the selected organizations, major areas of FSRP’s work relate to upgrading the MIS and accounting system of the NGO, expansion of the use of computers, reviewing and revising the micro credit system and loan recovery system, developing procedures and standards for rewarding performance , strengthening loan classification procedures for loan pricing and determination of appropriate deposit rates, introducing more oriented organizations banking procedures etc.

The activities of FSRP in SOJAG. Starts with the fielding of an National Advisor in1998.The SOJAG organization assigned some officers to the FSRP unit to work as counter parts and liaise with the various departments of the SOJAG. Several work groups were set up to examine various areas of operations of the NGO sector.

The FSRP activities started in SOJAG 1997. The main aim is to increase the operational efficiency of the bank for making it viable in the competitive environment. FSRP has been assistingthe SOJAG organization the last 6 years mainly in the following areas:  Operations  Systems and  Human Resource.

4.1 Operations Areas In this areas some recommendation were made in the areas of  Recovery of classified loan  Incentive scheme  Loan procedures  Disposal of pledged goods for recovery of advances etc.

4.2 System development areas FSRP contributed several improved systems in some vital areas such as:  Management Information System (MIS)

 Performance Planning System (PPS)  Lending Risk Analysis (LRA)  New Loan System (NLS)  Computerization 4.2.1 Management Information System MIS statement (SOJAGs different performance report) was not previously existed in SOJAG. The FSRP introduced MIS statement for the organization is now being prepared on monthly basis from Jan.1997 based on statement of affairs. MIS report for zonal offices and branches are also being prepared from January 1998. The MIS statement seeks to provide vital information on financial performance as of specific period to the top management for timely and proper decision making with reasonable accuracy.

4.2.2 Performance Planning System (PPS) Prevailing Performance Budgeting System of SOJAG is mainly confined to preparation of target of deposits and profits only. But the attempt to follow-up and review of targets of the performance budget dose appear to be rigorous and regular. FSRP introduced PPS calls for setting goals with performance measures quantified. Head offices, zonal offices and branches fix up their goals for a year and try to achieve those goals during the year. For achieving the goals each of them are divided into action steps and responsibilities are assigned for each action steps to individual with specific date for accomplishment.

Achievement is reviewed on quarterly basis.

4.2.3 Lending Risk Analysis (LRA) The FSRP has developed a system of analyzing loan by capturing all relevant information in filling out LRA format. The LRA methodology helps evaluating risk involved with a loan proposal. It puts more emphasis on business risk rather than on conventional security risk.

The viability of a proposed loan / facility (new / renewal etc.) is examined in details and risk rating is done on various risk involved while considering such loan /facility. In SOJAG, loan /facility of TK.1 lacks and above is being evaluated on LRA format until now. SOJAG so far evaluated about 100 new / renewal loan cases on LRA format including review of approved old loans or advances. LRA methodology contributes towards making quality loans/ advances system. The NGO has up to now trained up /familiarized with about 11 officials / executives with this system.

4.2.4 New Loan System A new loan system has been introduced for all loan and advanced. FSRP designed card ledger contains all the existing pertinent information of the borrower’s account, such as, again of overdue, amount of principal and interest separately , classification status , date of time bared etc. This system did not contain so any vital information / data. In the SOJAG organization New Loan System are the one is clearance and next is demand load to the field manager for their own demand. This system also yearly basis and six month basis system.

4.2.5 Computerization In the SOJAG had previously only one Personal Computer; the FSRP has supplied 8 Personal Computer and 3 Mini Computer. This organization in the present time purchased more 3 PCs from its own fund.

4.3 Human Resource Development Area FSRP recognized from the very beginning that without efficient and skilled manpower, the bank wouldn’t be able to implement successfully the newly designed system. Number of personnel trained up with the FSRP system are about 149; this includes participants who attended course in more than standing English program to help develop English Language skill of the officials working in computer department and FSRP unit and micro-credit sector.

4.4 SOJAG FSRP unit: FSRP initiative in SOJAG has full backing of the Board of Directors and the management.

SOJAGs FSRP unit has at present a complement of three officials excluding one subject.

FSRP also introduced voluntary after hour learning and under DGM. Previously this unit had four officials working full time with a personal consultant. A General Manager acts as the Chief Coordinator for all FSRP related works. A full time Deputy General Manager reviewed the progress of work with the FSRP Advisor. The NGOs are steadily receiving the benefits of FSRP and it may be point out here that any reform to get its positive effect takes a reasonable time. The summing up points is:  Skills of a large number of officials have been upgraded.  Some new management tools are now available to the organization.  Computerization has received a boost.  NGO is now more conscious of cost of funds and yield of loans .

5.0 Performance planning System 5.1 Introduction Advantages of planning are obvious to all. In the field of business, planned performance is undoubtedly to be better than unplanned performance .The process of assessing the present and expected share of competitors is part of total planning process, and equips a unit for better performance.

Competition stimulates the need for internal and external analysis, the establishment of performance objectives and the strategies and plans to carry them out. Effective planning minimizes unproductive activities.

“Planning is selecting information and making assumptions regarding the future to formulate activities necessary to achieve organizational objectives.” Demands have been made on NGOs and Banks, particularly in the context of free Market Economy, to enter new fields and improve their performance.

As a result planning has now become an important activity for all organizations.

Performance planning is thus planning in quantifiable areas within a certain time span.

Normally, the period of one year is found convenient for performance planning in organizations.

So every organization have been preparing annual performance planning outlining goals to be reached in quantifiable areas like recovery, deposit, advance, costs, manpower training, profits etc.

As the size of an NGO become small but very hard. The difference NGOs faces different problems, competing one organization to other organizations demand and scare resources. It becomes increasingly to their target achieve is very difficult. They find out different question arises. Such as,  What is performance planning system?  What is the rationale of adoption of this new tool?  What factors have influenced its evolution and effectiveness?  What recommendation can made for proper implementation of Performance Planning System NGO sector of Bangladesh?

These measures include gradually allowing the financial institutions to fix up financial product prices according to market forces; raising loan classification of the financial institution; improving capital position; deregulating greater autonomy as self regulation by organization specially item of selecting their loan portfolio; strengthening PKSF’s role in the field of supervision of NGOs. These reform measures have been aimed at imposing financial discipline on the NGOs in the short run and making the NGOs operate increasingly on the basis of market forces so as to achieve operational efficiency in the long run.

To assist implementing above reform measure. FSRP consultants developed a number of new management and operational tools such as Performance Planning System, Management Information System, Lending Risk Analysis, Long term Loan System, New Loan System, and NGO Supervision Technique etc.

5.2 Background of Performance Planning System in NGOs A sound and efficient organizing system is the most important prerequisite for the saving investment process and thus economic growth process of a country. Bangladesh inherited in 1980 an undiversified and undeveloped financial system overwhelmingly dominated by

thedifference financial organizations. For this reasons, all the organizations and financial institution to achieve certain economic objective. Since achieving the predetermined objectives was the main goal, so the banking system had to operate under a regime of rigid PKSF regulations .

This rigid (PKSF) ownership and regulatory control contributed till 1983. The performance of SOJAG during 1987-1997 was commendable in respect of expanding financial network and providing credit to the socially desirable sectors but at the same time equally frustrating with regard to maintaining viability and customer service.

The raising loan classification and provisioning level of the financial institutions to national standard in phases; improving capital position ; deregulating greater autonomy as self regulation by NGO specially in term of selecting their loan portfolio; strengthening PKSFs role in the field of supervision of different NGOs .

Table – 5.1 Comparative Advantages of Performance Planning System & Performance Budgeting System in Different NGOs Name ASA

PPS * More specific understandable and time bound process.

PBS easily * Not specific.

* Targets are not set on priority * Goal targets are set on priority basis. basis in the light of banks business plan. * Accountability of individuals can not * The implementation of selected clearly defined. goals is more effective as accountability of individuals is clearly defined. * Regular review and follow-up of target * Regular review and follow-up of are not ensured. goal is ensured.

VARK

* Broad based essential to attain * Well planning optimum supporting role to efficiency. gear up the process.

acts

as

* Is the end result.

* A technique to attain the target.

* Source of an output.

* Analysis of output in cost benefit ratio.

* Promotes long term plan. * promotes budgeting process.

SSS

* More specific understandable and time bound process.

easily * Not specific.

* Targets are not set on priority * Goal targets are set on priority basis. basis in the light of banks business plan. *Accountability of individuals can not * The implementation of selected clearly define. goals is more effective as accountability of * Regular review and follow-up individuals are clearly defined. of target are not ensured. * Regular review and follow-up of goal is ensured.

SOJAG

* Half yearly monitoring system * Half yearly monitoring can not can be be performed. performed . * Goal targets are set on priority * No specified action plan. basis in the light of banks business * It does not simplicity. plan. * It does not help easy and clear * Well specified action plans. grading of employees. * Help easy and clear grading of the employees.

5.2.1 Current Barriers to Change Client NGO management is weak on setting priorities.

•

Set the wrong priorities.

•

Change priorities too frequently.

•

They do not manage effectively the things which they , do consider as priorities.

•

Responsibilities are unclearly defined.

•

Responsibilities are not assigned.

•

Performance is not monitored.

5.2.2 How the Planning System will overcome These Barriers Formalities the method of setting priorities.

•

Forces all managers to define their priorities (in writing) and justify them to their superior.

•

Reduce the need to change priorities by ensuring that they are better thought out of start with.

•

Improving the management of the priorities, which are selected.

•

Specifies (in writing) action to be taken.

•

Identifies individuals responsible for taking each action and sets measurable objectives to determine success.

•

Monitors performance of individuals in meeting objectives.

5.3 Performance Planning System: An Overview PPS is one of the new management and operational tools for improving the operational efficiency of PKSFs. It emphasizes on internal changes to the planning process to manage performance for achieving business goals, specifying action plan for changing the existing barriers, the PPS concentrates on formalizing the method of setting priorities and to improve the management priorities, which are selected (Chapter-1, PPS Manual, 1992). The components of PPS may be seen in the following chart:

PPS Components

Goal Statement

Action Plan

Progress Monitoring

Fig: Components of PPS 5.3.1 Goal Setting and Action Plan Goal setting and action planning at management levels generate different

important advantages as follows: (1) Define each manager’s highest priority results.

(2) Quantify what specific results are expected and when.

(3) Set realistic plans and timetables for achieving stated goals.

(4) Encourage regular follow-up and corrective action.

(5) Ensure better results.

All level of NGO management may draw benefits from goal setting; lower level management gets benefit from having a clear set of expectations from higher level management, as well as a clear path for managing the branches.

Higher management also drives benefits from having a simple and concentrate tool for monitoring and assessing the performance of the several branches under their control .

Employees working in the branches are benefited from knowing the priorities of the organization and having a basis for focusing their work.

Finally the NGO is benefited from the aggregated effect of goal oriented management at each level of management. It may be mentioned here that goal oriented management can ensure a significant change in the work culture of an NGO. Managers should assume the proper responsibilities of a lender and should plan and manage effectively. It can create pressure on the branches to perform efficiently and forces application of new techniques to achieve goal of the organization.

This is why the goal setting and action planning can be an important tool for a program to change the working environment. When goal setting and action planning will become a part of the regular management style of an organization, there would be a significant aspect of culture change. It is output related which might build a result oriented work culture in the organization.

5.3.2 Goal Setting and Action Plan Process Goal setting and action plan performance planning system may be summarized as follows: i) Establish the organization’s overall objectives; define the organizational unique role in the NGO. ii) Conduct a situation analysis; identify the organization’s Strengths, Weakness, Opportunities and Threats analysis in relation to its intended role in the organization. iii) List the department key success factors; identify what the branches must do extremely well to meet overall objectives, and any essential improvements that it must make. iv) Establish the organizations performance process; identify the objective criteria for measuring how well the key success factors and the overall objectives are being met. v) Set the goals; set quality standard goals for performance measures tenable it to achieve to highest-priority results. Each goal is written in such a way that it will be clear

whether or not the goal has been met. It must be measurable, quantified, time scale specified and unambiguous.

The department heads of the head office should include junior / lower level management in the goal setting and action planning process. The departmental heads or the managers may need the input. But more important that departmental heads or managers need to build commitment to the plan among the persons who will implement it .

5.3.3 Benefits of Writing Goal Statement Formalizes the method of setting priorities • Forces of managers to define their priorities (in writing), and justify them to their superior.

• Reduce the need to change priorities by ensuring that they are better thought out to start with.

Helps: That all parts of the organization are pulling in the same direction.

• • •

Allows managers to check that the goals of their subordinates are consistent with each other .

Gives subordinates a better understanding of how their efforts fit into the overall Organizational goals. Permits the monitoring of progress and results.

Ensure that supervisor is informed in a timely manner on the activities of their subordinates. Eliminates year-ended surprises and manipulation of results.

5.3.4 Benefits of Writing Action Plans  Identifies any resource requirements.  Checks whether the goal is realistic.  Identifies potential problems or roadblocks.  Prevents any unnecessary and time wasting actions.

Facilities communication between managers and subordinates.  States in writing what is to be done.  Identify person responsible for each step.  Specifies a due date for each step.  Ensure understanding of why the action is being done.

Permit monitoring of progress and results.  Allows feedback to the supervisor.

 Gives encouragement to the subordinates.  Ensure results are achieved.

5.3.5 Monitoring Progress Without formal monitoring goals and action plans established at the beginning of the year tend to be ignored as the year progress. Formal monitoring can focus its attention sharply on its real priorities and help it to meet goals and improve its employees and operations.

In PPS goals and action plans are prepared at the beginning year. As the year starts, department heads organize and allocate their resources for executing the action plans and achieving goals. As the year progress, departmental heads or managers will conduct their full range of managerial tasks, but focus particularly on ensuring that the persons responsible for executing the task in the action plans are doing so according to the time table and that interim performance milestones are being met. Employees may need supports, ideas and additional resources.

5.3.6 Benefits of Monitoring Progress Improves managerial effectiveness.  Forces managers to concentrate on the things which are important.  Produces a sense of urgency.  Helps managers improve, by showing what they do well and what they do badly.

Improves managerial control  Ensure that discussions between managers and subordinates are focused on results and how to achieve them.  Ensures timely communication to assure quick adaptation to changing circumstances.

5.3.7 Limitations of Performance Planning System The limitations of PPS are as following: 1. Top managers assume that they can delegate the planning functions completely to a planner.

2. To managers are so engrossed in current problems that they do not spend enough time on planning, and the process becomes discredited among managers and staff.

3. Top managers fail to develop company goals suitable as a basis for formulating plans.

4. Major line personnel fail to assume the necessary involvement in the planning process.

5. Managers fail to use plans as the standard for measuring managerial performance.

6. Managers fail to create a climate in the organization, which is congenial and not resistant to planning.

7. Managers assume that comprehensive business planning is separate from the entire management process.

8. The planning system is made so formal that it flexibility, looseness, and simplicity, and as a result, creativity is restrained.

5.3.8 Implementation Problems of Performance Planning in NGO The problems of PPS are as following: i) Shortage of manpower. ii) Lack of trained manpower. iii) Inadequate logistic support. iv) Lack of coordination among different departments. v) Lack of proper communication at different levels. vii) Lack of mechanism. viii) Lack of suitable MIS. 5.3.9 Suggestions for Proper Implementation of PPS i) Training of PPS should be imparted to the employees. ii) Monitoring should be strengthened. iii) MIS should be developed. iv) Preparing action plan. v) Mechanizations in more areas or branches.

5.4 Conclusions Proper implementation of PPS requires developing and maintaining high quality leadership. It is necessary to stimulate the capable managers which have potentialities and to remove those who are incapable. Rewards on good performance can be powerful weapon for motivating human resource to achieving priority results.

6.0 Management Information System (MIS) and Computerization The inputs from the project for computerization and MIS for the NGOs within the FSRP have been provided through an uncertain and delayed schedule of implementation.

All of the NGOs organization have benefited through the project inputs in hardware, advisory services, training and system design, but the expected outputs have not been achieved as originally designed.

6.1 Utilization of MIS The summarized information on asset and liability management and comparative yields on key financial indicators has been prepared by the organization on a monthly basis since it was introduced and submitted to Director / Ministry of Finance. The one page report is handy and useful in measuring the monthly profit position of the bank at a glance. Monthly MIS reports for branches have been initiated throughout Bangladesh. It was at a late stage of FSRP programs in 1995.

6.2 Impact

The impact on Bangladesh’s financial system is considered to be positive with the introduction of computerization along with MIS, LRA, PPS and NLS and these provided management with timely information for critical assessments and decisions for action. The level of achievement in this regard varies among the NGOs. The intended level of output has not been fully achieved even in the best Scenario, Banking system. This result from the deficiency in maintaining The planned schedule of providing inputs in hardware , advisory services and training arising from a variety of factors. In the end, all planned inputs have been supplied.

6.3 MIS limitation However, a MIS even with limitations in terms of its purpose and scope, an important element in the FSRP implementation. The design of the system, including processing and reports, deals with income, expenses and contributions data from the branch level to the head office. These are quite useful when done properly and timely. The final output is a one-page collection of overall MIS indicators and ratios. But this limited MIS report is rarely used in making decisions as found in management responses. The current MIS is a first step in the process of developing a framework towards an overall MIS. Future assistance should address the board MIS goals define above.

6.4 MIS in SOJAG The FSRP activities started in SOJAG in March 1992. The main goal was to increase the operational efficiency of the organization for making it viable in a competitive environment. The project introduced a one-page MIS report, the Organization’s Performance Statement, for the organization; it is now being prepared since Jan 1995.

7. Conclusions NGO in Bangladesh during the pre-reform period, 1972-82 was characterized by the complete non-government ownership and excessive government interference, absence of prudential and information regulation and inadequate legal support for debt recovery, which ultimately resulted in the declining profitability of the banking system. The decentralization and privatization of the commercial banks, without broad-basing the prudential and informational regulatory framework, could not improve the situation, rather further eroded credit discipline and operational efficiency and thus the real intermediative efficiency of the banking system. Under the above circumstances, Financial Sector Reform Project (FSRP) has been launched 1989-90. A number of prudential reform measures have been introduced and economic regulations have been reduced since then. Legal framework of organizing has also changed, though not substantially, after 1989-90.

The reasons of ineffectiveness of Financial Sector Reform Project are: i) Absence of effective manpower planning, no definite criteria for loan officers, branch managers, zonal heads and divisional heads. ii) Lack of awareness of orientation. iii) Poor quality officers. iv) Improper attitude of money officers.

v) Lack of effective training. vi) Insufficient modern amenities like computer, ATM etc.

8.0 Recommendation In view of above mentioned finding and conclusions, now we put forward our recommendations: i) Financial discipline has been thought to be brought back only by enforcing credit discipline. No doubt, this (credit discipline) is the most important precondition for achieving financial discipline, but not all. ii) The whole NGO system should be adequately and uniformly covered under the reform program for the overall financial development system. iii) It is expected that at the time of regarding economic regulations, the prudential and information regulations be broad based and made enforceable. iv) The political commitment and appropriate regulatory and legal base would jointly constitute, what many authors say, “enabling environment” for financial development.

Managerial or technical competency and enabling environment would go hand in achieving reform objectives. v) Dependence on the bank credit should be reduced by introducing other forms of lending such as leasing, security market operation etc.

Bibliography 9.0 Bibliography Ahmed, Mozahid, Performance of PKSF – A Note on the Current Trends.

Journals of the PKSF Vol-87-89 December 2003- June 2006.

Annual Report of SOJAG. Ahmed Reza, Liakot, Fahmida, Performance Planning System in Grammen Bank, Bank Parikrama, Vol-XXII-1, March 2009 Different Circulars of SOJAG. Advertisement of SOJAG Abu, Sahid Financial Sector Reform in SOJAG. Management Information System Manual, FSRP TA & PKSF, Dhaka Dec.2008

Sujit, Nurullah, Motin, Faruki, Research Report on Credit Risk Ex-Post Analysis, 2009.

List of Common Abbreviation ADB AGM BIOM BKB BSRS CC DGM DPS FSRP GDP GM HO LC LRA MD MIS NCB NLS PO PPS RCD SO SPO SWOT

: : : : : : : : : : : : : : : : : : : : : : : :

Asian Development Bank Assistant General Manager Bangladesh Institute of Organization Management Bangladesh Krishi Bank Bangladesh Shilpa Rin Sangstha Cash Credit Deputy General Manager Deposit Pension Scheme Financial Sector Reform Project Gross Domestic Product General Manager Head Office Letter of Credit Lending Risks Analysis Managing Director Management Information System Nationalized Commercial Bank New Loan System Principal Officer Performance Planning System Rural Credit Division Senior Officer Senior Principal Officer Strength Weakness, Opportunity, and Threat