Micro-credit as the saviour in poverty reduction
Saturday, 17 April 2010
Mahbub Saeef
Bangladesh has recently made a significant stride towards reducing poverty and improving its ranking on the Human Development Index. Since 1990s the country has made good progress towards posting a 1.0 percent drop in the proportion of people living below the poverty line every year. Attaching the highest priority to reducing poverty, the successive governments' uphill struggle has resulted in a sharp decline in poverty from 56.6 percent in 1991.
Simultaneously, on the Human Development Index (HDI), Bangladesh now ranks
146th (UNDP's Human Development Report, 2009). Between 1990 and 2007 Bangladesh's HDI rose by 1.96 percent annually from 0.359 to 0.543. The steadily improved development indicators have firmly placed the country in the lower echelon of medium human development. With its huge 160 million population, predominantly rural, about 73 per cent, Bangladesh has already met one of the eight MDGs - gender parity in primary and secondary education - and is well on track to meet most of the others.
PKSF initiates a new development paradigm through microcredit revolution: One significant contributor to the development of the resilient Bangladesh economy amid the global crisis has been the widespread propagation of microcredit. Initially launched as reversing conventional banking practice by removing the need for collateral, Bangladesh's pioneering microcredit revolution is helping overall upgradation of the lives of the poorer section of people. In course of time, microcredit, spanning over three decades of operation, has already emerged as an effective means to eradicate poverty by providing millions of rural people with credit and other financial supports, so that they can explore employment opportunities, implement various income generating activities and scale up their small enterprises.
For years, a huge number of poor people in Bangladesh have been bearing the brunt of economic vulnerability, especially by facing a double whammy- as price hike reduces their purchasing power and financial crisis cuts their employment opportunities. These disadvantageous people, without land or asset and with little to no education, have to face tougher obstacles to finding adequate employment to weather economic downturn and are gradually pushed below the poverty line. So they desperately need support and protection from the government against their vulnerability, requiring the government to administer long-term and coordinated interventions to have an effective dent in the poverty situation of the country.
In this context, Palli Karma Shahayak Foundation (PKSF) was established by the Government of the People's Republic of Bangladesh in 1990 as an apex body to spearhead its various poverty alleviation programmes, by means of providing the poor with microcredit. And since its inception, PKSF, a 'not for profit' organisation, has become the purveyor of a new economic sovereignty and the architect of neoliberalism within a modernist developmental discourse of poor people's empowerment.
PKSF provides credit without any collateral to the poor in rural Bangladesh who have been kept outside the conventional banking on the ground that they are 'not creditworthy' and accordingly it has already created a banking system based on mutual trust, accountability, participation, and creativity. As of December 2009, PKSF has disbursed a sum of Tk 49,879 crore (US$ 7156.24 million) to about 1 crore (10 million) beneficiaries through its 227 Partner Organizations (POs) with a record credit recovery rate of over 98 percent. PKSF's POs include cooperatives, voluntary agencies, and non-government, semi-government and government organisations.
Besides providing fund for microcredit, PKSF also provides capacity-building support for development professionals so that they can manage the institutional development process and the human resources efficiently in undertaking their programmes effectively. This mentoring effort of PKSF helps POs' personnel in overcoming the challenges of successful microcredit operation and contributing to rural infrastructure development by aiding in increasing literacy rate and providing access to essential healthcare, sanitation and safe drinking water and eventually eliminating social inequalities.
Now, after two decades of operation, PKSF can certainly deserve the pride for its vast microcredit operations in Bangladesh with its transparent loan disbursement process.
Diversification of PKSF's microcredit programmes: In the journey along the road of transforming dismal poverty into prosperity, PKSF has initiated a new development paradigm. As the poor's isolation from the market system unleashes poverty, PKSF's microcredit programmes are expanded to diversified sectors like agriculture, livestock and fisheries, targeting to bring the poor into the mainstream of economy. PKSF has paid particular attention to agriculture and the rural non-farm sector as the two main drivers of increased productivity.
PKSF's flagship programmes focus on microcredit for rural and urban ultra poor, microenterprise and agricultural sector development through its Rural Microcredit (RMC), Urban Microcredit (UMC), Microenterprise Lending (MEL), Ultra Poor Programme (UPP), Seasonal Loan and Agricultural Sector Microfinance Programmes. It also has special projects and loan programmes dealing with participatory livestock development, microfinance support for marginal and small farmers, rural infrastructure development, enterprise development, socio-economic rehabilitation for SIDR victims and Monga-hit people, ensuring food security for vulnerable group, expanding safety net for the poorest, disaster management and supporting innovation and new technology for employment creation through Participatory Livestock Development Project (PLDP II), Microfinance for Technical Support (MFTS) and Microfinance for Marginal and Small Farmers (MFMSFP), Integrated Food Assisted Development Project (IFADP), Socio-economic Rehabilitation Loan Programme (SRLP), Financial Services for the Poorest (FSP), Rural Electrification Development Project (REDP), Finance for Enterprise Development and Employment Creation (FEDEC), Microfinance Support Intervention for Food Security for Vulnerable Group Development (FSVGD) and Ultra Poor Beneficiaries Project, Programmed Initiatives for Monga Eradication (PRIME), Learning and Innovation Fund to Test New Ideas (LIFT), Rehabilitation of SIDR-affected Coastal Fishery, Small Business & Livestock Enterprises (RESCUE), Special Assistance for Housing of SIDR-affected borrowers (SAHOS), Livelihood Restoration Program (LRP), Disaster Management Fund (DMF) etc. These programmes, being implemented by PKSF's POs, have reached almost all parts of the country and by using PKSF's financial support as revolving funds, POs and MFIs have reached out to over 10 million poor beneficiaries- over one third of the total microcredit borrowers in Bangladesh.
In development rhetoric, microcredit is the extension of small loans to the poor for income-generating projects and has been eulogized as a magic means of poverty alleviation. But to PKSF, microcredit is not merely a matter of extension of credit; rather it has a unique set of social objectives aimed towards building sustainable social capital, as opposed to consumption only. PKSF thrives to free the people from the shackles of poverty and to serve as a catalyst in the overall improvement of their socio-economic conditions with the help of its innovative and successful poverty alleviation programmes. Already PKSF has made considerable progress in improving the chronic poverty situation in Bangladesh by increasing economic growth, implementing social safety-net programmes for the poor and augmenting investment in sectors like education, health and nutrition to have an effective dent in the poverty situation.
PKSF reckons that without expanding grass-roots people's access to financial services and creating employment opportunities for them, any headway with poverty reduction cannot be made possible. So PKSF has laid top priorities on construction of labour-intensive infrastructures for strengthening self-employment opportunities through microcredit programmes and developing Micro, Small and Medium Enterprises (MSME) which can vitally contribute to the economy by ensuring local value addition and producing exportable surpluses. And hence PKSF attempts to revamp the rural economy by creating an enabling environment for flourishing both agro-based and non-farm MSMEs. Thus PKSF is proceeding with its enshrining promise to march along the government's charter of change.
Microcredit is not the panacea for poverty eradication, but microcredit has proven itself as one of the most effective tools for poverty alleviation by now. Today, Bangladesh's microcredit programme is the largest in the world, and the government has been considering microcredit as a significant component of its plan for halving the number of people living in poverty in Bangladesh by the year 2015. Despite a wide range of development programmes, including the trail-blazing microcredit scheme that leaves a significant impact on the lives of millions of Bangladeshis, millions more have yet to be reached. With this pressing challenge of chronic poverty, PKSF is agile to spread its microcredit programmes in the far-flung areas of the country. Not that it has turned each poor man solvent, but the coverage of the poor is rising and PKSF is optimistic to overcome the key challenges for eradicating poverty substantially within one generation.
Mahbub Saeef is a communication specialist.
Bangladesh has recently made a significant stride towards reducing poverty and improving its ranking on the Human Development Index. Since 1990s the country has made good progress towards posting a 1.0 percent drop in the proportion of people living below the poverty line every year. Attaching the highest priority to reducing poverty, the successive governments' uphill struggle has resulted in a sharp decline in poverty from 56.6 percent in 1991.
Simultaneously, on the Human Development Index (HDI), Bangladesh now ranks
146th (UNDP's Human Development Report, 2009). Between 1990 and 2007 Bangladesh's HDI rose by 1.96 percent annually from 0.359 to 0.543. The steadily improved development indicators have firmly placed the country in the lower echelon of medium human development. With its huge 160 million population, predominantly rural, about 73 per cent, Bangladesh has already met one of the eight MDGs - gender parity in primary and secondary education - and is well on track to meet most of the others.
PKSF initiates a new development paradigm through microcredit revolution: One significant contributor to the development of the resilient Bangladesh economy amid the global crisis has been the widespread propagation of microcredit. Initially launched as reversing conventional banking practice by removing the need for collateral, Bangladesh's pioneering microcredit revolution is helping overall upgradation of the lives of the poorer section of people. In course of time, microcredit, spanning over three decades of operation, has already emerged as an effective means to eradicate poverty by providing millions of rural people with credit and other financial supports, so that they can explore employment opportunities, implement various income generating activities and scale up their small enterprises.
For years, a huge number of poor people in Bangladesh have been bearing the brunt of economic vulnerability, especially by facing a double whammy- as price hike reduces their purchasing power and financial crisis cuts their employment opportunities. These disadvantageous people, without land or asset and with little to no education, have to face tougher obstacles to finding adequate employment to weather economic downturn and are gradually pushed below the poverty line. So they desperately need support and protection from the government against their vulnerability, requiring the government to administer long-term and coordinated interventions to have an effective dent in the poverty situation of the country.
In this context, Palli Karma Shahayak Foundation (PKSF) was established by the Government of the People's Republic of Bangladesh in 1990 as an apex body to spearhead its various poverty alleviation programmes, by means of providing the poor with microcredit. And since its inception, PKSF, a 'not for profit' organisation, has become the purveyor of a new economic sovereignty and the architect of neoliberalism within a modernist developmental discourse of poor people's empowerment.
PKSF provides credit without any collateral to the poor in rural Bangladesh who have been kept outside the conventional banking on the ground that they are 'not creditworthy' and accordingly it has already created a banking system based on mutual trust, accountability, participation, and creativity. As of December 2009, PKSF has disbursed a sum of Tk 49,879 crore (US$ 7156.24 million) to about 1 crore (10 million) beneficiaries through its 227 Partner Organizations (POs) with a record credit recovery rate of over 98 percent. PKSF's POs include cooperatives, voluntary agencies, and non-government, semi-government and government organisations.
Besides providing fund for microcredit, PKSF also provides capacity-building support for development professionals so that they can manage the institutional development process and the human resources efficiently in undertaking their programmes effectively. This mentoring effort of PKSF helps POs' personnel in overcoming the challenges of successful microcredit operation and contributing to rural infrastructure development by aiding in increasing literacy rate and providing access to essential healthcare, sanitation and safe drinking water and eventually eliminating social inequalities.
Now, after two decades of operation, PKSF can certainly deserve the pride for its vast microcredit operations in Bangladesh with its transparent loan disbursement process.
Diversification of PKSF's microcredit programmes: In the journey along the road of transforming dismal poverty into prosperity, PKSF has initiated a new development paradigm. As the poor's isolation from the market system unleashes poverty, PKSF's microcredit programmes are expanded to diversified sectors like agriculture, livestock and fisheries, targeting to bring the poor into the mainstream of economy. PKSF has paid particular attention to agriculture and the rural non-farm sector as the two main drivers of increased productivity.
PKSF's flagship programmes focus on microcredit for rural and urban ultra poor, microenterprise and agricultural sector development through its Rural Microcredit (RMC), Urban Microcredit (UMC), Microenterprise Lending (MEL), Ultra Poor Programme (UPP), Seasonal Loan and Agricultural Sector Microfinance Programmes. It also has special projects and loan programmes dealing with participatory livestock development, microfinance support for marginal and small farmers, rural infrastructure development, enterprise development, socio-economic rehabilitation for SIDR victims and Monga-hit people, ensuring food security for vulnerable group, expanding safety net for the poorest, disaster management and supporting innovation and new technology for employment creation through Participatory Livestock Development Project (PLDP II), Microfinance for Technical Support (MFTS) and Microfinance for Marginal and Small Farmers (MFMSFP), Integrated Food Assisted Development Project (IFADP), Socio-economic Rehabilitation Loan Programme (SRLP), Financial Services for the Poorest (FSP), Rural Electrification Development Project (REDP), Finance for Enterprise Development and Employment Creation (FEDEC), Microfinance Support Intervention for Food Security for Vulnerable Group Development (FSVGD) and Ultra Poor Beneficiaries Project, Programmed Initiatives for Monga Eradication (PRIME), Learning and Innovation Fund to Test New Ideas (LIFT), Rehabilitation of SIDR-affected Coastal Fishery, Small Business & Livestock Enterprises (RESCUE), Special Assistance for Housing of SIDR-affected borrowers (SAHOS), Livelihood Restoration Program (LRP), Disaster Management Fund (DMF) etc. These programmes, being implemented by PKSF's POs, have reached almost all parts of the country and by using PKSF's financial support as revolving funds, POs and MFIs have reached out to over 10 million poor beneficiaries- over one third of the total microcredit borrowers in Bangladesh.
In development rhetoric, microcredit is the extension of small loans to the poor for income-generating projects and has been eulogized as a magic means of poverty alleviation. But to PKSF, microcredit is not merely a matter of extension of credit; rather it has a unique set of social objectives aimed towards building sustainable social capital, as opposed to consumption only. PKSF thrives to free the people from the shackles of poverty and to serve as a catalyst in the overall improvement of their socio-economic conditions with the help of its innovative and successful poverty alleviation programmes. Already PKSF has made considerable progress in improving the chronic poverty situation in Bangladesh by increasing economic growth, implementing social safety-net programmes for the poor and augmenting investment in sectors like education, health and nutrition to have an effective dent in the poverty situation.
PKSF reckons that without expanding grass-roots people's access to financial services and creating employment opportunities for them, any headway with poverty reduction cannot be made possible. So PKSF has laid top priorities on construction of labour-intensive infrastructures for strengthening self-employment opportunities through microcredit programmes and developing Micro, Small and Medium Enterprises (MSME) which can vitally contribute to the economy by ensuring local value addition and producing exportable surpluses. And hence PKSF attempts to revamp the rural economy by creating an enabling environment for flourishing both agro-based and non-farm MSMEs. Thus PKSF is proceeding with its enshrining promise to march along the government's charter of change.
Microcredit is not the panacea for poverty eradication, but microcredit has proven itself as one of the most effective tools for poverty alleviation by now. Today, Bangladesh's microcredit programme is the largest in the world, and the government has been considering microcredit as a significant component of its plan for halving the number of people living in poverty in Bangladesh by the year 2015. Despite a wide range of development programmes, including the trail-blazing microcredit scheme that leaves a significant impact on the lives of millions of Bangladeshis, millions more have yet to be reached. With this pressing challenge of chronic poverty, PKSF is agile to spread its microcredit programmes in the far-flung areas of the country. Not that it has turned each poor man solvent, but the coverage of the poor is rising and PKSF is optimistic to overcome the key challenges for eradicating poverty substantially within one generation.
Mahbub Saeef is a communication specialist.