Microcredit and productive sector |
M Enamul Haque
Often there raised an allegation from among those who tend to think over utility and effectiveness of microcredit that microcredit providers extend more of it towards non productive i.e. non-farm activities than to productive schemes. This is half wrong or half right. Recently (last year), Credit & Development Forum (CDF), a national level microcredit coordinator, published 2005 statistics. It showed, only 32.40 percent of the NGO invested schemes in productive sector. Direct investment in agriculture is in only 24.63 percent of schemes. Bangladesh basically is an agrarian country. The basis and driving force of its economy still is agriculture. From this perspective less attention to agriculture as well as lesser direct involvement of NGOs in this sector undoubtedly projects weaker aspect of the operation.
CDF statistics further stated that about 700 NGOs operated more than 7500 branches. Their membership strength stood at one crore 80 lakh, about one-seventh of the country's population. A significant count indeed, and the most significant part of it is that the savings accumulated by the poor stood much over Tk 2,000 crore.
Another noteworthy thing in the microcredit operation has been the gradual reduction of foreign finance, which has come down to only 8 percent. In this connection it may be mentioned that although there are about 700 NGOs in the field, three large ones, namely Grameen, BRAC and ASA cover most of the operations. One third of the field operation is covered by ASA.
But how much involvement ASA or for that matter the NGOs have in productive sector? Well, involvement is there if not so wide and direct. For instance, the majority of the members from 50 lakh families organised by ASA are landless small farmers. They need money, to buy fertilizer, seed, irrigation water for share cropping specially in Boro season. They used to take Tk 3000-4000 as needed for the purpose from village money lenders at a very high interest rate or against advance sale of harvest. And much of their earning used to be lost this way. ASA took a programme for such investment in agriculture sector. And this gave them incentive to be more active in their field because even after meeting cent percent recovery rate they can earn a considerable income now. Of course the service charge is very low -- 10 to 20 times lower than what they had to pay the village money lenders.
Besides this, another project has been started to create employment in agriculture, increase productivity and market agro products. This is to create small entrepreneurs in agriculture sector providing them credit at easy term. This scheme appears to provide direct contribution in the productive sector. Other NGOs must also be contributing in productive sector directly and/or indirectly in no less significant way. Because most of the NGOs work more in rural areas, their investment obviously touch agriculture whatever small way it may be, and thereby help the sector, which collectively is no less significant.
Therefore, it's not true that microcredit is not visible in productive sector. It is already there and gradually making its presence more visible and effective to the benefit of those engaged in the sector, specially the small share croppers and small entrepreneurs.
M Enamul Haque is executive vice president, ASA.
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