Like many other microcredit service provider DSK (Dushtha Shasthya Kendra) also has a vision that came out of social and economic mission of bringing financial service to the poor and the poorest so that they can come out of poverty. DSK at present is providing microcredit to 108,669 families through its 82 branches in 31 Upazila of 10 different Districts both in urban and rural areas. The Urban areas are in Dhaka, Khulna and Chittagong Metropolitan Cities and the rural areas are Jessore, Gazipur, Netrokona, Kishoregonj, Naryangonj, Narshindi and Sunamgonj district. Many researches on micro credit shows that the programs have effectively reduced poverty of people with skill to become self employed, however, not all the poor people have the skill of self-employment even though they need the service to come out of poverty. DSK is trying to develop need based MF products to meet the demand of most vulnerable poor who requires additional support to develop skill for self employment to come out of abject poverty. DSK has started micro credit through Grameen model replication in year 1992 in one of the Dhaka city slums, since than it has served 325,172 families and has disbursed Tk.5,256,790,823 as loan. Present outstanding loans are Tk. 638,689,751 and total saving deposit of Tk.283, 001,042 (as of June 2009), and have cumulative classified loans of Tk.52, 541,986. DSK has successfully created loan loss provision required for the classified loans as per standard requirements, which have been reserved as investments in several nationalized and private banks. Though started without any equity of its own its present equity is TK.89,938,251. During DSK’s decade of operation it has piloted a number of microcredit delivery methods to evolve an appropriate system to serve the poorest effectively; some of them are now being used at higher scale in different locations. DSK observed that credit alone can not solve problem of poverty, number of other activities such as risk fund (like insurance) for families earning members life and property (livestock, crop etc.); primary health care including water and sanitation services are essential to fight poverty.

Flexible Loan and savings

DSK started experimented flexible financial service named as DPS having support from PLAN-International, followed by CARE Bangladesh and lately from PKSF. The DPS project started in March 2001 and this donor driven experimental phase was over in 2007. Through these projects DSK has learned and adopted its own products. The experimental branches were having no groups, all landing was individual. The entire populations of the project areas were ranked in to economic classes and emphases on service delivery to hard core poor (HCP) were given. It was assume that the poorest clients are not worthy of credit thus in group system they are preferentially excluded or self excluded as the poorest need the savings based service not the credit. One of the assumptions was that even in the individual landing method MF products would be manageable and financially sustainable. Though DSK successfully engaged the HCP members in these projects but it could not maintain sufficient staff client ratio in terms of borrower and loan outstanding to cover the cost of operation. Almost all the seven branches of the project failed to reach OSS even after three to five years of operation. Finally DSK has abandoned the idea of individual MF service delivery method particularly to the poorest. However, DSK is providing loan and savings services to 5,498 HCP clients (as on June 09) the loan products having lower service charge suitable for the HCP project supported by PKSF and another 4,755 in DPS having modified group landing system. This method of group lending enables the poorest to have an access to the service because it does have reasonable flexibility to fit with the income cycle of the poorest. DSK has provided service to 50,498 families through these projects.

Financial Services for the Poorest (FSP)

Financial Services for the Poorest (FSP) a project lunched by PKSF who selected 20 Partner NGO (PNGO) to implement it. DSK as one of the PNGO implemented FSP at Durgapur, Netrokona. DSK started the DPS earlier than FSP having similar objective of reaching the hardcore poor. Though many elements of DPS were their, however, piloting did not follow exactly similar operating methods. DSK accepted many entailed conditions of donor partners (PKSF) that are different from DSK’s DPS products. In designing phase of FSP products, DSK could not include better income poor also to achieve sustainability at unit level (branch), as it was not as per products design of PKSF. All clients of FSP at the time of project period belonged to hard core poor (HCP). The business plan envisaged lending to 100% ultra poor members, to achieve OSS and subsequently FSS they suggested that scaling up loans will do. While in DPS lending to 100% HCP clients were not compulsory it was mandatory in FSP. FSP had 62% of the members from day-labor class and others are even below the day labor category in terms of income. DSK‘s learning from 12 years experiences in the Durgapur area was that, majority (98%) of the members become defaulters with average loan size of Tk.3, 972. In the initial three years of project period DSK followed the PKSF design and accumulated over due loan. After the project period DSK had stopped increasing loan size of the poorest group members automatically in every cycle. Instead of that it increased loan size of the members who successful utilized the loan in IGA. To attain sustainability DSK has amalgamated the HCP branch with normal branches to achieve OSS. Some branches located in flood prone poverty pockets could not achieve OSS even after 18 years of operation but others located in disaster free zone achieve FSS and still serving certain percent of HCP families leaving in the catchments area. In spite of that separate group of HCP are being maintained, loan and savings service are available along with reasonable flexibility to avoid exclusion. Loan recovery among is an issue often debated and judged mechanically forgetting the social commitments of MFIs. HCP clients are often victim of high recovery initiatives of MFI. DSK’s perception is that units serving the poorest clients should be treated separately and subsidy to those branches would be required. MFI serving HCP should have the capacity of achieving over all FSS rather than achieving it at unit level. Every MFI should carefully calculate their financial capacity without compromising the financial discipline of a sustainable institution.

Grameen II

In Netrokona area DSK had past due loans among poor members, which was Tk.6,066,332 as on June 2004, of that amount Tk.4,601,156 were over due for more then 100 weeks. Though DSK was successfully serving urban poor it failed to address poor people in remote area like Netrokona due to absence of flexibility in Grameen model. As the term “defaulter” was redefined by Prof. Yunus at that time, following the concept DSK as GB replicator wanted to adapt Grameen-II to continue difficult task of providing financial service in extreme poverty prone areas. DSK started learning the Grameen-II methodology, which was applied during 2003 to 2006. It was assumed that the flexibility along with possibility of receiving new loan in group methods enable members to regain their lost ability of income earning and overcome the difficulties. Having Grameen-II DSK signed contract with 915 members by adjusting an amount of Tk.1, 340,928 and collected in cash Tk.262, 240. Some members who did not have relationship with group for more than 8 years did stared fresh with rescheduled loans. Now in the process of learning by doing, DSK failed to adopt the method to meet the clients’ maximum satisfaction. The complexity in account keeping worked as one of the negative factors that de-motivated the field staffs, at the same time members also express unwillingness to join in to new contract being skeptical about receiving fresh loans. The defaulters with one NGO can easily join another to receive fresh loan without paying earlier dues was another stumbling block in perusing them to enter in to fresh contract. All these constrain gradually eroded the reestablished contacts with defaulter members and ultimately they became inactive. Finally method has been adapted in modified form.

Livestock Credit

The project started in the year 1996 and after phasing out of project period established the products that are being marketed profitably along with its livestock risk fund. A joint venture company of Grameen Fund and DSK offered group members normally interested to invest in small projects of poultry bird and milk cow rearing. Loan size and repayment system was designed to fit to the needs of the poor borrowers. In this project members borrowed on an average Tk.29, 095 with a range of Tk.10, 000 to 200,000/-. During its 12 years of existence it has served 18,531 clients all having livestock projects. At present there are 5,891 active members and it is running with a loan outstanding of TK.38, 098,517. The products are being marketed in other branches of DSK.

Micro Enterprise loan (ME)

NGO seeking to establish permanent MFI, dropout among the richer section of member who will often take the larger loan to expand or maintain the working capital of their business, or to finance asset acquisition dropout is not desirable. It is this larger loan on which the MFI will make most profit since the cost of administering the loan is almost same irrespective of its size. And crucially, it is these clients taking large loans that allow the MFI to finance the provision of smaller loans and other service to the poor and poorest clients. At he same time the product would enable entrepreneurs create wage labor, which would led to creation of employment for the poorest. The services now being offered by DSK has been tailored to meet the needs of the richer and self-confident potential poor entrepreneur clients. Since 2002 DSK has graduated 3409 members from its existing clients. Loan disbursed to them were Tk.541, 158,000 and outstanding loan as on June 2009 were Tk.109, 627,179.

Seasonal Loan for the Farmers

Farmers particularly the marginal and small farmers were out of the MFI services because of its weekly collection system. DSK has develop product suitable for the farmers and started marketing it since 2004 and at present it has 5400 clients and disburse Tk.121,612,500, outstanding loans as on June 2009 were Tk.17,458,217. Demand for these products are gradually increasing, however DSK is now facing fund crisis to meet the demand as it can revolve in same rate thus large sum of capital money is required.

Dignity Loan

Objective of this product was to enable asset less or root less people who depends mainly on bagging to come out of that profession. DSK as partner of Grameen Trust started this project on December 2007. Since than DSK has provided loan to 145 baggers, has planned to offer the service to another 1200 people in the FY 2009-10. These types of members are not included in normal groups but attested with local group and loans are interest free. If they save regularly and repay loan as pre schedule they are included in regular group enabling them to borrow sufficient amount as loan to pursue income generation activities come out of the profession of begging.

Service Charges (SC)

Servicing traditional microfinance clients are expensive because loan sizes are small and the number of people required to service clients. Though it was carried out with a goal and motivation, but competitions deterred it from charging higher service charges and absorb losses. A key consideration was whether the institution is mission-driven, rather than profit-driven. DSK as non-profit charge just enough to cover its expenses and build the portfolio. DSK in some piloting started with very high SC, which was gradually reduced, these reductions were the result of the management’s decision when it was making more than enough to meet its growth needs. When DSK started replicating GB model in the year 1992 it use to charge 20% in declining ratio thus effective rate was 10.2% flat, but later on it realized that others are charging 15% flat. DSK's executive committee was always sensitive about high SC and was not willing to increase the SC. In the beginning having some support from donor DSK continued for some time providing loan at rate which were below to major market players such as BRAC and ASA. From the beginning DSK was committed to provide primary health care (PHC) services, which were normally subsidized having donor support. As the fund flow became scarce it was decided that DSK would charge 15% flat and 2.5% would be utilized for the health care service. If we look in to SC of DSK and how it has evolved over the period it would be clear that SC's are dynamic it should not remain static in free competitive market. In Bangladesh often the government and donors interfered. Politically motivated government interventions distorted the market, in a situation like that it is difficult for financial institutes to evolve the best products for all kinds of poor clients. At present DSK had number of rates of service changes starting from zero to eighteen percent depending on cost of capital as well as availability of subsidy both from internal and external sources. DSK provide subsidy to its losing branches serving the poorest clients from the income of its surplus branches.

Integrated Primary Health Care

DSK believes that all poor people and especially extreme poor need to be more than micro credit clients and NGO needs to be more than just MFI, to promote poor out of vicious circle of poverty. DSK started its social development venture especially by addressing the health problems of the slum dwellers particularly the women and children, in the beginning. The objectives of the health program are to decrease maternal and child mortality, reduce vulnerability to common disease, and control infectious disease such as acute respiratory infections, and diarrhea through limited curative care and awareness rising. Financing health care service is on of the major problems of Bangladesh. DSK from the beginning tried to develop a primary health care delivery system, which in the long run should be able to sustain with support from community and the government. To achieve the goal DSK has experimented Primary Health Care (PHC) model both in rural and urban context by blending the services with micro credit and by collaborating with other service providers especially GoB. At present DSK is expanding its own experience of health care financing through different branches in Chittagonj, Khulna , Dhaka City and Gazipur Kishoregonj ,Netrokona districts in rural area. Main features of this system are that DSK charges 15% flat rate for its financial service of which 2.5% goes to meet partial cost of the PHC service.

Institutional development

DSK at present have more than 1500 staffs working in different non financial relief and development work for the poor, of them total 771 staffs are directly involved in micro credit operation. Unlike other DSK has decentralized management with well developed Organogram indicating chain of command. Beside Executive Director (ED) separate position of Chief Executive Officer (CEO) for credit has been created who is directly responsible to Executive Committee. Separate human resource management unit under the leadership of CEO has been established to support the micro finance program. DSK try to follow a competitive salary and benefit package for its staffs. DSK have standard service rule and procedure for its staff members. Staff management is guided by the rules and procedures as set out in the guidelines. The current guidelines provide direction and indications about management function of the credit service providing team. To support human resource development a separate cell has been established to train staffs of micro finance. DSK is trying to develop a team based and participatory approach of management that seeks to focus on an organization’s effort on achieving results. Central Management Team (CMT), Area Managers Team and Manger and staffs team are the three different teams active in different tier. These teams play vital decisive role in decision making that are necessary to achieve results. The result based management system which focuses on the needs of beneficiaries based on appropriate analysis, monitoring using result information and management decision. Its management increases its knowledge through lessons learned and tries to identify and overcome the risks. New semi automated MIS and monitoring system for new products are in the process of development goal is to achieve 100% automation.

Equity & Fund

DSK’s fund raising tactics were pursued to generate revenue that it can control itself and that, ideally, was free from reliance on the whims of grant makers and funding agencies. DSK has received small amount of grant and soft loan. The present equity of Tk.89, 938,251, has been formed by own income and grant. Tk.76, 378,813 (85%) came from net income and the rest (15%) are grants that were earned as operating grants for experimenting innovative ideas. DSK's current asst consist of 14% equity, 46% loan and 40% savings. The loans include 1% from DSK's other funds such as security funds. Current outstanding of borrowed amount from different loan giving agencies are Tk.288, 439,136. (as on June 09). DSK did not receive much donor support in term of grant or soft term loan that forced it to borrow more money from commercial Banks at much higher rate of interest (12%) to keep the operation running. DSK has earned a net income of Tk.138, 872,623 and out of it Tk. 48,934,372 has been invested as reserve for the loan loss provision (as on June 09) and it is gradually increasing. Total Tk.78, 516,117 invested as FDR in commercial banks that provides competitive interest. In the current financial year DSK had disbursed Tk.113, 720,537 as loan to its member from its own fund.

Risk Funds

Poor people can experience great financial disruption when unexpected events befall them, because their resources are so limited. If a breadwinner is injured or falls ill, there is not only the loss of income and labor, but the prospect that without cash in advance there will be no treatment at all. If a breadwinner dies, not only must funeral expenses be paid, but continued cash for basic needs and education of the family is required. A poor person’s property may be limited to a few animals or crops and a modest shelter, but the destruction of any of these may be a great blow to the family’s economy. Even small sums insured can ensure some protection and peace of mind (and dignity) for a poor person. From the point of view of insurers, however, small sums insured mean small premiums and low profit margins. Thus micro insurance has to be well-administered, cost-efficient, and delivered on a large scale if it is to benefit the poor, and those who provide the micro insurance are virtually do not exist in Bangladesh. To fill the gaps MFIs in Bangladesh are taking the responsibility of risk coverage to protect the property of clients and its own capitals. Major success of these risk funds of DSK were the utilization of fund to cover 100% treatment cost of sick livestock animals and birds along with coverage of loss due to death. Total costs incurred during the period to cover deaths of animals and poultry birds were 1,113,196. To cover treatment costs of the insured livestock's were Tk.2, 122,959; in spite of all these cost DSK did accumulated fund. A surplus of Tk.6, 850,256 (as on June 2009) has been created in live stock risk fund after covering all costs, which include the cost of medicine and the cost of veterinary surgeons service. Contributions to risk fund were 5% of the borrowed amount at the beginning, which has been reduced to 2% without reducing any facility. Beside livestock death of income earning members are also covered by another risk fund accumulated by member's contribution the fund generated were sufficient to cover loan weaver of the borrower and return of contribution money. Members get the contributions refunded after completion of three successful loan cycles. Total 6-15% of the collected contribution amounts are refunded at branch level. During 2008-09 financial years DSK has accumulated Tk. 36,856,539 surplus risk fund or life insurance fund. The fund has increase from last years Tk.34,275,380 in spite of total refund or adjustment of Tk.3,229,844. DSK cover the loan adjustments that are normally required in case of death of members or the income earning person of the family as well refunds all contributions after completion of three years borrowing without default loan.