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Microcredit goes from strength to strength

Star Business Report
The microcredit sector has kept its steady growth rate in spite of the difficulties in recent times, according to a leading research organisation.
"It has come a long way since it began its journey some 30 years ago," MA Baqui Khalily, executive director of the Institute of Microfinance (InM), a local research organisation on microfinance institutions, poverty and development, said yesterday.
Annual loan disbursement jumped more than three times to Ik 59,260 crore in 2013 from 2006, he said during a presentation at the closing ceremony of a two-day conference on the role of microfinance institutions towards poverty alleviation and social development.
The conference, held at the capital's Bangabandhu International Conference Centre, was jointly organised by InM, Palli Karma-Sahayak Foundation and the Microcredit Regulatory Authority.
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Between 2006 and 2013, per capita borrowing rose from Tk 4,345 to Tk 14,349 and the number of active borrowers increased 14.1 percent to 2.67 crore.
MFIs are not neglecting the extreme poor though, as more than 50 percent of them have access to microcredit at present, said Khalily, a former Dhaka University professor.
In contrast, only 12.73 percent of the extreme poor have access to banking services, according to InM.
As for the poor, 43.21 percent of them have access to microcredit and one-third to banking services.
But microcredit alone is not sufficient to alleviate poverty on a sustainable basis as only borrowers with enterprising ability and skills can take advantage of it, Khalily said.
Sustainable poverty alleviation requires elimination of the causes of structural poverty, along with access to property, socio-economic institutions such as education, market, health, sanitation and finance.
The InM executive director said the small MFIs need financial support from the government to extend their operations beyond lending.
It is not possible for the small MFIs to extend those services by way of costly commercial bank borrowing.
"It will be counter-productive. So, small MFIs should be supported financially," he said, adding that more than 90 percent of the MFIs are small.
Khalily said the MRA would have to decide whether it wants the MFIs to function as banks or social institutions.
By riding on the contributions of the MFIs, Bangladesh has achieved its
Millennium Development Goal on poverty much ahead of UN-set deadline, PKSF Managing Director Md Abdul Karim said.
Since its inception in 1990, PKSF lent Tk 18,000 crore to its partner MFIs, who, in turn, provided loans worth Tk 169,000 crore among one crore clients, he said.
Information Minister Hasanul Haq Inu said MFIs are neither villains nor cure-alls to poverty alleviation, although in recent times critics have painted microcredit as criminals while its proponents as panacea.
"But we have to admit that microcredit has played an important role in poverty alleviation despite its limitations."
The leftist politician said microcredit campaigners have to be prepared to address the risks facing the sector and retain the stability.
Inu also said MFIs cannot solve the issue of poverty just by lending; they have to go for other services as poverty is multi-faceted.
He opposed the growing pressure for commercialisation of MFIs, as microcredit would not be able to succeed in combating poverty if the micro-lenders are run with a commercial bent.
"Commercialisation of the MFIs has failed in many countries such as India and Bolivia in recent times - we have to keep that in mind."
The information minister said the government would have to decide whether it would like to see MFIs operate as commercial organisations or social organisations and formulate policies accordingly.
"It is also time to reassess the rela-
tionship between MFIs and the government. The government’s role has to be strengthened and involvement enhanced."
Industries Minister Amir Hossain Amu said microcredit should be used as a tool to eradicate poverty and not as a weapon for any fraudulent purpose.
Civil Aviation Minister Rashed Khan Menon said microcredit has given the country's poor, particularly the women, a tool to survive with.
He said although Bangladesh is well-recognised for microcredit internationally, the country has not yet freed itself from poverty, as the number of extreme poor is still very high.
The minister said many successful MFIs are increasingly moving towards commercialisation and are keen to accumulate their own assets.
Menon said the MFIs should be seen as a tool for financial inclusion.
If there is a strong collaboration between the government and the non-governmental organisations, microcredit will be able to play a key role in poverty alleviation, he added.
Water Resources Minister Anisul Islam Mahmud said the sector has allowed 70 percent of the country's population access to financial services.
“The poor borrowers have gained ownership of their assets - their children are now getting education, adequate nutrition and sanitation facilities."
He, too, opposed suggestions to allow MFIs become banks.
"They will then drift way from their aim of alleviating poverty."
PKSF Chairman Qazi Kholiquzzaman Ahmad chaired the closing ceremony.