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Govt studying micro credit bank proposal

TAHIR DHINDSA

ISLAMABAD: To alleviate poverty and engineer social-economic change at the grass-root level, the government is fine tuning a proposal to establish a micro credit bank with the capital of between 20 to 25 billion rupees.

The bank will provide short-and medium-term loans to individuals and small enterprises at low mark-ups. The loans will be renewable after return of the principle for another term, provided the concern was performing good. It could be utilised for establishing an export-oriented new venture or financing a running business.

The base fund for the bank will be established from sources other than the budgetary allocations provided in the budget 1999-2000. Sources said the government is likely to ask multi-donor banks for the loan, which may be sliced out of development schemes in social sector.

Sources told Business Recorder that the bank will follow in the footsteps of Grameen Bank of Bangladesh, established for the same purpose and proved a roaring success.

The government in fact wanted to announce the establishment of the bank through December 15 speech of Chief Executive General Parvaiz Mushrraf, but it was delayed so that the Grameen experience could properly be incorporated in and utilised.

In the first phase the government will be giving small loans of about Rs 25,000 each to individuals for establishing business in their respective areas. Wherever possible the bank will buy machinery or other business related facility rather than handing over money to the client.

To ensure optimum utilisation of facility in proper hands, the government is examining the role of non-governmental organisations (NGOs) in allocation and distribution of loans. A major portion of individual loans is likely to be disbursed through them.

It is often seen that poor individuals find it difficult to provide guarantees for the loans, so community guarantees would be thought sufficient for the purpose.

The Minister for Environment, Local Government and Rural Development, Omar Asghar Khan, has a vast experience in running NGOs in social sector carrying out development work at the grass-roots level.