Micro-credit conference
Saturday, 20 March 2010
SPEAKERS at a three-day international conference on micro-credit operations that concluded in Dhaka last Wednesday shed light on different aspects of micro-credit operations in Bangladesh and also in other countries. Fifty delegates from 20 countries participated in the conference which was also attended by 150 representatives of local governments and non governmental organisations (NGOs). As expected, useful proposals were put forward and wide-ranging views were expressed in the conference. The same can now form the basis for better formulation of micro-finance policies world-wide. Though the conference was meant for meeting the need of global micro-credit operations, it carried a special significance for Bangladesh where micro-credit operations are extensive and, in many cases, have been successful.
However, notwithstanding this distinction of Bangladesh as the country with a great deal of success in spreading micro-credit facilities at the grassroots, it cannot be said that the extension of small loans has had the positive impact to the extent that is desired. Distinguished speakers in the first day of the conference emphasised this point of further streamlining the utility and effectiveness of micro-credits by exploring the opportunities for scaling down of interests charged on such credits. Some distinguished guests and participants having expertise expressed the view at the conference about NGOs -- which are at the forefront in the disbursement of micro-credits -- charging in some cases, high lending rates that prove to be a very big financial burden on the borrowers. It is then argued that both high lending rates and their harsh recovery methods, instead of helping the borrowers to come out of poverty, have been pushing them into some stressful conditions.
While some others may find these criticisms somewhat exaggerated, the advocacy to lower the lending rates charged on micro-credits should, nevertheless, be well received and acted upon with due consideration particularly by the NGOs. Nobel laureate and Grameen Bank founder Muhammad Yunus, speaking at the concluding session of the conference, also highlighted the need for standardisation of micro-credit. The reduction in lending rates is likely to help widen the access to such credit operations for the poor and wean them off village money lenders to whom the borrowers stand to lose everything by taking credits considering them as an alternative to the institutional lenders. In this connection, it will be useful to consider the ways and means for lowering the management or supervision costs of micro-credit operations without compromising their quality. By nature, micro-credits involve intensive supervision and the scale of such credit operations is also of relevance to their costs of supervision.
Meanwhile, it requires wider recognition that on the whole micro credit continues to play its role as a major source of finance in the Bangladesh context. The governor of Bangladesh Bank observed on the eve of the conference in Dhaka about how, despite many sweeping criticisms, micro-credit had been a helpful factor for Bangladesh in facing up to the global economic crisis by sustaining demand in the country. The regular injection of liquid resources in the economy from maintaining and expanding micro-credit operations enabled local demand to remain at the higher level. Local producers, distributors and all others in the production and supply chains, could work to meet this predictable and sustained local demand.
In sum, there can be no denying of the positive sides of micro-credit programme in the Bangladesh setting. Only its operational strategies and terms and conditions of borrowing need to be made softer as far as possible to increase its appeal among the remaining ones of the poor or very poor in the country. Yet another suggestion made by Prof. Yunus about expanding the role of the microfinance institutions (MFIs) to other realms such as natural disaster and health insurance coverage for the poor does also deserve consideration.
However, notwithstanding this distinction of Bangladesh as the country with a great deal of success in spreading micro-credit facilities at the grassroots, it cannot be said that the extension of small loans has had the positive impact to the extent that is desired. Distinguished speakers in the first day of the conference emphasised this point of further streamlining the utility and effectiveness of micro-credits by exploring the opportunities for scaling down of interests charged on such credits. Some distinguished guests and participants having expertise expressed the view at the conference about NGOs -- which are at the forefront in the disbursement of micro-credits -- charging in some cases, high lending rates that prove to be a very big financial burden on the borrowers. It is then argued that both high lending rates and their harsh recovery methods, instead of helping the borrowers to come out of poverty, have been pushing them into some stressful conditions.
While some others may find these criticisms somewhat exaggerated, the advocacy to lower the lending rates charged on micro-credits should, nevertheless, be well received and acted upon with due consideration particularly by the NGOs. Nobel laureate and Grameen Bank founder Muhammad Yunus, speaking at the concluding session of the conference, also highlighted the need for standardisation of micro-credit. The reduction in lending rates is likely to help widen the access to such credit operations for the poor and wean them off village money lenders to whom the borrowers stand to lose everything by taking credits considering them as an alternative to the institutional lenders. In this connection, it will be useful to consider the ways and means for lowering the management or supervision costs of micro-credit operations without compromising their quality. By nature, micro-credits involve intensive supervision and the scale of such credit operations is also of relevance to their costs of supervision.
Meanwhile, it requires wider recognition that on the whole micro credit continues to play its role as a major source of finance in the Bangladesh context. The governor of Bangladesh Bank observed on the eve of the conference in Dhaka about how, despite many sweeping criticisms, micro-credit had been a helpful factor for Bangladesh in facing up to the global economic crisis by sustaining demand in the country. The regular injection of liquid resources in the economy from maintaining and expanding micro-credit operations enabled local demand to remain at the higher level. Local producers, distributors and all others in the production and supply chains, could work to meet this predictable and sustained local demand.
In sum, there can be no denying of the positive sides of micro-credit programme in the Bangladesh setting. Only its operational strategies and terms and conditions of borrowing need to be made softer as far as possible to increase its appeal among the remaining ones of the poor or very poor in the country. Yet another suggestion made by Prof. Yunus about expanding the role of the microfinance institutions (MFIs) to other realms such as natural disaster and health insurance coverage for the poor does also deserve consideration.