Vol. 5 Num 694 Sat. May 13, 2006  

Helping the ultra-poor to help themselves

Hoodwinking the supposed risks NGOs of late are extending microcredit to the ultra-poor and in the process are trying to establish the credit worthiness of the extreme poor groups. Just a few years ago in various surveys and researches NGOs were criticised for not reaching microcredit and other financial services to the most needy -- the ultra-poor. Some NGOs rather took it as a challenge and tried to find a sustainable as well as flexible model for the purpose. And some among them have reached the success in their effort by now. About 63 associate organisations of ASA, BRAC, Grameen and PKSF are active with their new models in extending microcredit to the ultra-poor. For instance, the ASA associate has been able to cover one lakh 55 thousand extremely poor families within one and half years with its own source of finance. About Tk 67 crore has been distributed among them with a credit balance of Tk 23 crore. This coverage of the ultra-poor seems to be the highest in the country.

From various surveys and researches it has been known that in Bangladesh the ultra-poor constitute about 15 percent of the population. As such the number of ultra-poor families in the country stands at about 45 lakh. Though Grameen Bank as well as different ministries of the government, other banks and other NGOs succeeded to bring about one crore 50 lakh poor families under the purview of microcredit service but the major portion of the ultra-poor left uncovered. Because the existing standard of transaction and rules and regulations were just beyond the ability of the ultra-poor to abide by.

There was also apprehension among the NGOs whether the ultra-poor can repay the loan extended to them. Besides, extending credit to them would entail more operative cost and risk but less income. In the circumstance, some donor organisations extended their assistance, and some NGO's embarked on the programme. For instance, BRAC took up "Targeting the Ultra Poor (TUP)" project to cover at least one lakh families with a budget of Tk 185 crore within five years ending this year. Their objective has been equal implementation of both financial and social programmes including transfer of wealth, training to imbibe self-confidence among members, increasing savings etc.

Meanwhile, Swiss Agencies for Development Cooperation (SDC) extended assistance to a number of associate organisations for operating development programmes among the ultra-poor. On the other hand, the government handed over a fat amount from the past budged to PKSF for credit distribution among the ultra-poor through the NGOs. By now PKSF could reach Tk 150 crore to more than three lakh ultra-poor through 63 NGOs. Besides, PKSF has covered further 60 thousand families from its own resources. PKSF extended loan to its associates at one percent interest, the associates distributed at 9-10 percent to cover at least their operation cost. Grameen Bank distributed interest free credit to the tune of Tk 4 crore 35 lakh among 60 thousand beggars to motivate them to discard the bad habit.

In a recent workshop on the effectiveness of different models it has been found that each organisation achieved some degree of success in recovery rate, building confidence among the ultra-poor, establishing discipline, motivating them to create their own fund through savings. This proves that the ultra poor are also credit worthy. However, they need some extra facilities, viz, lesser rate of interest, flexible recovery system fixing installments on the basis of income, training etc. However, ASA seems to have provided comparatively more successful and confident model, the main specialty being selecting the areas which are most remote where there is no bank, no big market, economy is solely dependent on agriculture, manual labour is the only basis of income, affected by river erosion and flood where livelihood is always uncertain and members as widows, women deserted by husband, physically disabled etc. ASA created an associate organisation specially for the ultra poor in greater Rangpur and greater Mymensingh districts which opened 41 branches to serve them. They distributed credit on flexible conditions within a ceiling of minimum Tk 600 to maximum Tk 5000 and raised a separate group of workers to manage the operation. And although in this programme expenditure is more and income is less than in general micro-credit programmes, but it is conducted with its own resources without outside aid.

Besides, ASA operate a special programme for the 'monga' affected poor. The branches in the monga prove northern districts extend a credit of Tk 2000 to each vulnerable family before start of monga period to procure food for the time until harvest with half of the amount and meet communicating expenses for work in town or other places during monga with the remaining half. Repayment installments start after three months. Another programme is financing for cattle fattening 6-8 months prior to start of monga period. The members sell the cattle just before monga, repay the loan and ensure livelihood with the profit during monga.

Most NGOs engaged in credit operation for the ultra-poor have their respective programmes and are trying to excel in their respective ways. And with all this it is proved that the ultra-poor are also credit worthy, what is necessary is innovating effective rules and system for such credit operation keeping in consideration their capacity.

Md. Enamul Haque is Executive Vice President of ASA.
An ASA small credit beneficiary.