Micro-credit operations need streamlining

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Shahiduzzman Khan
The non-government organisations (NGOs) are not doing justice to micro-credit operations. As envisioned by its founder, Nobel Laureate Mohammad Yunus, micro-credit was designed to help the ultra-poor come out of poverty trap and get self-employed with dignity. But the question remains: Is micro-credit serving the purpose of the real poor?
According to a report published in a daily this week, the desired objectives of the programme are not being fulfilled by the lending organisations. Job opportunities are not being created. The hapless poor are increasingly landing themselves in a vicious circle of poverty. Micro-credit lenders do not take into consideration the people's ability of inability to work. They are to blame for contributing to unending poverty through loans of meagre amounts. The apparent philosophy of the NGOs is just to keep people alive for using them in micro-credit business.
The underlying problem, according to many observers and researchers, was not being addressed to keep poverty alive. Non-solution of agrarian problem has led to other problems, reflecting various syndromes of poverty. In this age of globalisation and individualism, the problem of nation-states is also, unfortunately though, not being befittingly addressed. There is a need for redefining the activities of NGOs in eradicating poverty.
Micro-credit Regulatory Authority (MRA), which regulates the activities of the NGOs, is also not yet properly equipped to deal with hundreds of unlicensed micro-finance institutions (MFIs). Even the authority has nothing to do with thousands of NGOs registered under different bodies offering micro-financing services.
No NGO is otherwise allowed to engage itself in micro-financing without having licences from MRA under a law that came into effect on August 27, 2006. Such a condition is very often being violated. There is no mechanism with the MRA to detect NGOs engaged in micro-financing without licences. The MRA is also entitled to prepare detail rules relating to the operations of micro-credits, guideline for internal and external audits of accounts, collection of deposits and use of profits of the NGOs. But it is impossible to carry out all these activities with the MRA's existing capacity. The authority has started sensitising government agencies and people by advertising in the media after some MFIs recently disappeared with money deposited with them.
According to reports, many NGOs disappeared with around Tk 50 million after swindling poor villagers in northern districts. Some 30 fake NGOs operating in remote villages in Natore, Rajshahi and neighbouring districts swindled about 0.1 million poor people who trusted them to get weekly dividends. On the morning of February 29, villagers of Naldanga thana of Natore found that all the officials of Freedom Unnayan Sangstha had vanished overnight with nearly Tk 25 million collected from about 0.2 million members. Another NGO, Provati Grameen Unnayan Sangstha, vanished in a similar fashion with about Tk 10 million.
The MRA has sent letters to deputy commissioners (DCs) of all districts asking them to keep vigilance on the illegal MFIs operating in their respective districts. They have requested the DCs to sit with the registered NGOs once in every month. The regulatory authority is so ill-equipped that it can hardly regulate and monitor thousands of MFIs operating in remote villages.
On the issue of unlicensed micro-financing, there is a provision that the NGOs will require to pay fine up to a maximum Tk 0.5 million or one year in jail or the both if they are found guilty. After enactment of the law in August 2006, the MRA sought applications from MFIs for licences. According to the MRA secretariat, some 4,236 NGOs applied for certificates until the deadline of February 2007. There are, as the statistics shows, some 49,000 NGOs registered under the Social Welfare Department, about 10,000 under the Cooperative and Joint Stock Companies and about more 2,000 under the NGO Affairs Bureau. Yet thousands of other NGOs refrained themselves from applying for licences.
Bangladesh is home to 65 million poverty-stricken people who live below the international poverty line and cannot afford to wait for the promised benefits of national economic growth to trickle down to their level. In the early 1980s, a programme to give poor, mostly landless people a new chance through small loans was started by the Grameen Bank, one of Bangladesh's largest non-governmental organisations (NGOs), which has also gained its status as a specialised bank. Today, Bangladesh's micro-credit programme is the largest in the world, and the government has made micro-credit a significant component of its poverty reduction strategy for halving the number of people living in poverty in the country by the year 2015.
The disadvantaged people in Bangladesh, like elsewhere in the world, are easily trapped in a cycle of poverty. Those without land and little access to education or income face tougher obstacles in finding adequate employment opportunities, bringing up healthy families, and weathering economic downturns. Women, lacking in social position and legal rights and traditionally earning less than half the wage rate of men, are particularly vulnerable. Markets exist throughout the country for enterprises such as poultry farming, milk production, petty trade, shop keeping, cow fattening, pottery, and small hotels, but without start-up money, it is nearly impossible for the poor people to establish small business ventures to capitalise on the demand.
Against this backdrop, there is no denying of the vital need for continuing micro-credit programme throughout the country while addressing effectively the concerns that are expressed by different quarters on some valid grounds about malfunctioning of some of the NGOs. The millions of people in the country are in dire need of subsistence only. They need micro-credit for their survival. The programme can be diversified, but cannot be stopped putting the blame on some lending institutions. But arrangements will have to be streamlined for curbing fraud and forgery on the part of the 'errand' NGOs in the countryside.