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Govt to float Tk 100cr fund for small NGOs

Plan to raise maximum ceiling for govt micro-credit

STAFF CORRESPONDENT
The government will float a Tk 100 crore fund to support small NGOs with no direct access to external donors.
A'Small NGO Foundation' will be formed with people from the government and non-government organisations to operate the fund to be kept in bank as fixed assets.
The money will be given as grants for work in health care, sanitation, education, environment and other social sector development programmes -- but not for running micro-finance business.
Half the amount would come from the budget that allocated Tk 50 crore for such a head, while the remainder would be pumped in in next five years.
The decision was taken yesterday at a meeting between Finance Minister Saifur Rahman and NGO leaders. Finance Secretary Zakir Ahmed Khan, Founder Chairman of Brac Fazle Hasan Abed, its executive director Abdul Muid Chowdhury and NGO personality Rasheda K Chowdhury were present, among others.
Sources said the meeting decided that the foundation would
provide fund at local level to small
NGOs that do not receive any fund from abroad.
They said that the structure of the proposed foundation would be finalised soon and placed for cabinet approval.
The guidelines for the proposed foundation would be finalised within a month and it would come into being by December, sources said.
Interest proceeds from the seed money would be disbursed among the small NGOs with budget not exceeding Tk 5 crore and network at
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least in 10 upazilas.
"Small NGOs that do not get money from external sources will be given Tk 5 to 10 lakh for running social development programmes," Saifur told reporters after the meeting.
Detailed criteria for the foundation and the targeted NGOs would be finalised soon.
Brac chief Fazle Hossain Abed said they would seek external support to enhance the trust fund to extend more support to small NGOs, which would be between 5,000 and 10,000 in number.
Meanwhile, a high level secretary committee yesterday recommended raising the maximum government micro-credit ceiling from Tk 15,000 to Tk 75,000 at individual level.
At group level, this will be Tk 5 lakh from the present Tk 50,000. In both cases, the rate of interest will be 12 percent.
Presently, interest rate on government-funded small credits is 18 to 20 percent and on NGOs-funded credits, it is 24 to 30 percent.
A secretary level committee on government micro-credit yesterday made the recommendation at a meeting with Finance Minister M Saifur Rahman.
Saifur said the interest could not be lowered further as it would irritate the NGOs.
Placing a set of recommendations, the committee said it felt the present micro-credit level is too low for the borrower to utilise it for income generation.
Currently, the government disburses micro-credit through 26 departments of 24 different ministries. The credit balance of microcredit stood at Tk 4,269 crore till December 2002.
The secretary committee was formed early this year aiming at preparation of a co-ordinated policy as well as to set a uniform rule on the limit of credit, rate of interest and the criteria to get loan.
Finance Secretary Zakir Ahmed
Khan was made head of the committee, which prepared a set of recommendations.
As per the recommendation, the range of micro-credit at individual level will be minimum Tk 5,000 and maximum Tk 75,000. Currently, the micro-credit level is minimum Tk 1,000 to Tk 15,000.
While at group level, the credit will range from minimum Tk 50,000 to maximum Tk 5 lakh against the present minimum Tk 20,000 to maximum Tk 50,000.
The committee suggested instead of paying the recipient in instalments, the government should allow full payment at one go to the borrower. And the borrower should get two years for repayment instead of one.
In case of natural calamity and reasons beyond control, the government might consider giving the borrower one more year for repayment. The committee strongly prohibited waiving of credit money, but may be rescheduled on genuine ground.
Waiver could be considered only if the borrower dies broke.
The recommendations of the secretary committee will be approved at the upcoming meeting of the cabinet committee on micro-credit.
Talking to reporters, the finance minister said the government is preparing a co-ordinated policy regarding disbursement of microcredit by the government. Under the policy, the credit limit will be enhanced and the recipients would be given relief regarding payment of the loan.
"The loans will be given completely collateral free.I am fully convinced that the poor people never misappropriate the loan... they pay the loan in time. Basically, the poor people have high ethics. But the rich people who take loan even does not hesitate to misappropriate Tk 100 crore," he said.