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Micro-Credit Bank

  1. HUBCO not to pay dividend this year

  2. Tax survey results

  3. Debt servicing

  4. Poverty alleviation programme

Will it alleviate the poverty?

Aug 21 - 27, 2000

The establishment of Micro-Credit Bank has once again raised the hopes of the poor to get away from the nightmare of poverty, ignorance and disease they are suffering for the last 50 years.

They had also welcomed with both hands the "Roti-Kapra aur Makan" and yellow cab schemes launched by the PPP and PML governments respectively. However those schemes were proved merely a political slogans and the dreams of the poor never come true.

The establishment of Micro-Credit Bank under the poverty alleviation programme of the present government led by Gen. Pervez Musharraf however carries some weight because the programme is not politically motivated. Unlike the political governments, the present government is not intended to exploit the poor for vote grabbing or other sort of political gains. The government has come out with a 3-year agenda for economic reforms and poverty alleviation is on top of their agenda. The idea of introducing Micro-Credit Bank in Pakistan is based on the experience of Grameen Bank in Bangladesh and Bank Rakyat in Indonesia, which have proved to be a phenomenal success. Hopefully, the experiment of establishing a micro-credit bank would certainly play a vital role enabling the poor economically self-reliant. Sincerity of the purpose in implementation of the scheme by the economic planners and efforts of the beneficiaries to utilize the credit judiciously could lead to an economic revolution in Pakistan.

The Micro-Credit Bank has already gone into operation and its first branch established at Dera Ghazi Khan was inaugurated by Gen. Pervez Musharraf on August 11 for which an initial capital worth Rs1 billion has been allocated. Beside an amount of Rs35 billion allocated for poverty alleviation programme, the scheme has also been ratified by the Asian Development Bank has promised to provide an amount of $ 150 million as a soft term loan. According to preliminary terms and conditions of ADB loan, the repayment period is spanned over 33 years with a mark up of one per cent. Though the support from ADB is worthwhile yet it is not enough to combat the formidable size of poverty level in Pakistan. The situation demands that such soft terms credit arrangements should also be arranged from other foreign resources specially from banking sources of brotherly Muslim countries. According to informed sources, the government has decided to borrow staff from banking sources in the public sector. After golden handshake scheme introduced in big banks run by the government they are already short of the staff. This newly created bank can also help in reducing poverty level by offering job opportunities to a large number of unemployed youth if strict financial discipline is ensured in running the scheme on commercial basis. Only experienced staff in the higher cadre may be borrowed from the banking sources.

In fact this programme is of vital importance in view of alarming rise of poverty level in Pakistan. For almost over a decade, the non- development expenditures have deprived the people of economic prosperity and growth in Pakistan. According to a report 35 million people were living below poverty line in 1980, which reduced to 25 million in 1988. The declining graph of poverty line was achieved due to some good economic decisions bringing some economic stability to the country. However due to various reasons, corruption is on top of them and inconsistency of economic policies, the number of people living below poverty line has once again increased from 25 million in 1988 to around 49 million in 2000.

According to yet another report the stagnant economic conditions and a large number of retrenchment from public sector organizations altogether have added to the menace of the unemployment to an alarming level. The percentage of persons employed in agriculture has declined from 58 per cent in 1960s to 44 per cent at present. Similarly the share of those employed in the manufacturing also was declined drastically.

The government's plan to extent micro-credit facilities to 30 less developed districts of the country is of course a well directed measure because 70 per cent of the population suffering from poverty line in the rural areas of the country.

Apart from the experiences of Bangladesh and Indonesia, the First Women Bank in Pakistan has also successfully carried out micro-credit scheme in the rural areas of the country. Unlike the big commercial banks where people only from affluent class have the access, the First Women Bank extended advances on smaller scales in the rural areas and managed to maintain 100 per cent recovery.

The Micro-Credit Bank which is the brain child of the Chief Executive Gen. Pervez Musharraf can be an ice breaking fector in bringing the banking sector to the access of the poor. However, the problem of poverty is so gigantic that Micro-Credit Bank may find it a hard nut to break unless other commercial banks are asked to join hands.