Micro Credit

Micro credit is the disbursement of small loans on reasonable terms exclusively to very poor rural dwellers to finance additional, income generating activities.

            Micro credit covers Swanirvar Credit Program, Pilot Employment Generation Program. Women Entrepreneurship Development Program, Self-help Credit Program etc.

4.1 Micro Credit Program of RAKUB:

        RAKUB has five (5) major micro credit programs. That are-

1)    Poverty Alleviation:        

2)    Agro-Based Industries and Technology Development Program (ATDP)

 3)   Credit Guarantee Scheme.

4)    Shosho Gudam Rin Prokalpa.

5)    Small Trading Loan for Small and Marginal Traders in Urban.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

4.2 Poverty Alleviation Program:

        The maximum people of Bangladesh are fighting for meeting the demand of food and basic needs. But their income and standard of living are very low. The people whose daily income is below one dollar, they are treated as poor. According to above line maximum people of our country are living below poverty line and govt. takes various programs for poverty alleviation and as a part of it RAKUB has started a gigantic program to alleviate poverty.

        To increase income and remove poverty of the people of Rajshahi zone RAKUB has taken the following programs-

Zero Poverty Loan Scheme:

The bank has initiated a special group-based micro-credit program entitled "Zero-poverty Loan Scheme" for the extreme poverty stricken 23 upazilas in greater Rangpur district. Poor people in the area pledge labor at lower to landlords during lean season for borrowing money. The program is expected to restrain the tendency and eradicate poverty from the region by providing up to Tk 3000 collateral-free credit to day-laborers at only six percent interest rate.

Marginal & Small Farm System Crop Intensification Project (MSFSCIP):

The project aims at increasing productivity in agriculture as well as off-farm  activities, helping target group people achieve sustainable development, resist the  increasing trend of  losing land under cultivation and attain self-dependence.

RAKUB Self-help Credit Program (RSCP):

The project aims at self-employment generation among landless and marginal farmers through collateral-free credit distribution. The program is a propagation of MSFSCIP model at bank's own initiative.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

Swanirvar:

The term Swanirvar means self-dependence.

The bank has introduced the credit program under the auspices of Swanirvar Bangladesh, an NGO to improve socio-economic condition of the helpless rural poor by creating employment opportunities.

Semi-intensive black Bengal goat rearing program:

Marginal, small & medium farmers, unemployed youth of Rajshahi division are the target group of the program. The program  will make contribution to the economy through goat skin export & production of high  quality meat for domestic & export markets.

United Nation Capital Development Fund (UNCDF):

Under the program, credit facilities are extended to entrepreneurs of cottage industries for creating self- employment opportunities. The program aims at economic development and upliftment of the craftsmen.

RAKUB-NGO Linkage Program  (RNLP):

 Under the program RAKUB  provides fund to select NGOs for financing micro-credit among landless, marginal & small farmers within Rajshahi division.

Pilot Employment Generation Program (PEGP):

  This is a BSCIC (Bangladesh Small & Cottage Industries Corpn.) assisted program which aims at employment generation among rural poor women and women artisans in selected  areas. Maximum credit limit under the program is TK. 6,000 per borrower.

Women Entrepreneurship Development program (WEDP):

The BSCIC assisted program aims at promoting cottage industries and encouraging women entrepreneurship in villages and suburban areas.

Shasya Gudam Reen Prokalpo (Food grain godown credit program):

RAKUB implementing since 1988 as support to the sharecroppers, marginal and small farmers having up to 5 acres of land. Small and marginal farmers receive loan against stored crops in godown immediately after harvest.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

Performance of Select Poverty Alleviation Programs (Oct. 2005)

	Loan Disbursement (Tk Lac)		Loan Recovery (Tk Lac)		Rate of Recovery	Outstanding (Tk Lac)
	Number	Amount	Number	Amount	%	Number	Amount
Swanirvar	118603	8670.11	80507	7085.05	90	36780	1894.60
RAKUB Self-help Credit Program (RSCP)	8740	5468.83	2783	4169.60	98	6802	1723.21
UNCDF Credit Program	28678	1515.81	18461	734.00	94	10147	959.66
Women Entrepreneur-ship Development program (WEDP)	4878	278.77	2964	185.01	91	1967	203.99
Shasya Gudam Reen Prokalpo (Food grain godown credit program)	1967	570.46	1219	532.62	96	1985	124.69
Marginal & Small Farm System Crop Intensification Program (MSFSCIP)	12928	2873.74	11653	2065.78	99	1196	1076.18
Pilot Employment Generation Program (PEGP)	4048	124.35	3622	104.51	96	432	26.12
Physically Challenged Person	753	122.53	98	51.32	89	654	75.88
Black Bengal goat rearing program	118019	1257.22	4298	335.78	88	13560	1069.29
Nursery/ Herbal	591	219.66	297	141.23	86	291	83.05
Zero Poverty Special Credit Program	11143	435.41	335	68.41	47	10808	288.10
RFP	0	0	0	0	0	274	34.78
Self Employment	0	0	0	0	0	97	37.62
Youth Developement	0	0	0	0	0	2	3.54
Village Mechanics	0	0	0	0	0	1	.14
Guchcha Gram Program	0	0	0	0	0	35	2.20
Small Enterprises Development Credit Project (SECP)	3707	1108.61	998	482.92	94	2709	707.16
Others Program	24447	334.47	1771	220.18	81	5581	450.12
TOTAL	207518	22104.04	125125	15594.11	92	82401	7654.03

MICRO CREDIT                                                                                                                         CHAPTER FOUR

4.3  Agro Based Industries and Technology Development Program (ATDP):

A.    USA Government Agricultural Development Agency IFDC (International Fertilizer Development center) and Government of Bangladesh (GOB) made a contract number 388-0087-C 209-05, under the contract USA Government credit agency ATDP supply Tk. 1000 millions as Agro-business credit fund (ACF) to the government of Bangladesh leas agencies for co-operating management of fund under the contract are-

2   The Bangladesh Bank.

2   Ministry of Commerce & industries

2   The ministry of Agriculture for government of Bangladesh.

B.   The main objectives of ACF:

2   To develop and create employment opportunities in this agriculture sector/sub sector.

2   To provide credit timely.

2   To supply Agricultural inputs and service to the entrepreneur.

C.    Under this program ACF provide adequate credits for existing and potential agro-business entrepreneurs/farmers to meet working capital requirements.

i.     Seeds

ii.    Fertilizers.

iii.   Agro-firm machinery

iv.    Live stocks.

v.     Agro-Processing sectors.

vi.    Horticulture.

 

Table-

Showing the ATDP disbursement

Sector	FY 2002-03			FY 2003-04				FY 2004-05						FY 2005-06						Ratio
	Disbursement			Disbursement				Disbursement						Disbursement
	ACF	OWN	Total	ACF	OWN	Total		ACF		OWN		Total		ACF		OWN		Total
Seeds	-	-	-	25.8	25.8	51.4		-		-		-		31.05		31.5		62.19		1.1
Fertilizers	2.85	8.55	11.4	8.4	25.2	33.6		17.87		53.63		71.50		50.5		151.5		202.00		1.8
Livestock	25.30	25.30	50.6	72.46	72.46	14.92		6.00		86.25		17.00		22.10		22.10		44.20		1.1
Agri-machinery	20.10	20.10	40.20	62.50	62.15	124.43		19.25		49.25		98.50		10.20		10.20		20.44		1.1
Agro-processing	256.9	259.9	516.8	580.88	580.88	1161.76	418.50		418.50		837.00		159.16		159.16		318.32		1.1
Total	306.10	309.90	616.00	749.69	766.49	1516.18		571.62		607.38		1179.00		273.01		374.01		674.02

Source-Loan and advance department-2, RAKUB.

Table

Show the recovery (Tk, in lakh)

Sector	Cumulative amount due for recovery	Recovery	Recovery in %
Seeds	51.60	51.60	100
Fertilizers	142	142	100
Livestock	134	118	88
Agro-machinery	275	260	94
Agro-processing	160	145	90
Total	152.52	143.32	94.40

Source-Loan and advance department-2, RAKUB.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

Comment

 From the above table it appears that the average recovery performance is satisfactory. The recovery performance against disbursement in agro-machinery is less efficient i.e. 88%, where the recovery performance of seeds and fertilizer sector are more efficient.

4.4 The Credit Guarantee Program:

        The credit guarantee program is inactive, new loan is provided in this sector.

Objectives:

v     Its main objectives are to create job opportunity and increase income in urban small and marginal traders.

v     Those who cannot avail institutional finance against security and annual per capital income in less than Tk. 20,000/- are eligible for this loan.

v     Maximum credit limit is Tk. 50,000/-

v     In first year, involved bank will not distribute more than 25000. On 25 Person.

v     Interest rate is similar with commercial credit rate.

v     Main functions of this kind of loan are-

a.       Nursery

b.      Dairy farm.

c.      Grocers shop

d.      Fruits shop and Vegetable shop etc. 

Very recent/recently starting in

a.       Bakery

b.      Tailors

c.      Leather goods

d.      Clothe store etc.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

This loan is collateral free but the purchased goods are under hypothecation.

1.      Maximum credit limit Tk. 50,000/-

2.      Up to Tk. 5000/- required no collateral.

3.      Above Tk. 5000/- required collateral.

4.      Credit margin is 50%.

Table-15Operation schedule

Particulars	2004-2005	Cumulative up to 2005	Performance (in %)
Disbursement (Tk.) No. of Persons	25.28 146	139.35 1254	* 56.81
Recovery (Tk.) No. of Persons	67.03 532	79.17 74
Overdue (Tk.) No. of Persons		2.37 8
Outstanding (Tk.) No. of Persons		9.05 1090

Source-Loan and advance department-2, RAKUB.

4.5 MAJOR Findings of the Study:

Ø     Under the poverty alleviation program following issues are to be considered:

Ø     The recovery rate of CIP and RSCP is very poor.

Ø     The recovery rate of SWANIRVAR is good in terms of disbursement.

Ø     The recovery rate UNCDF program is very rich and more efficient  

Ø     The overall performances of PEGP are satisfied.

Ø     The recovery rate of WEDP is in good position.

Ø     RAKUB has to be three times financed in respect of ACDF, in 

ARDP.

MICRO CREDIT                                                                                                                         CHAPTER FOUR

  

4.6  RAKUB- Small Entreprise Credit Program (SECP)

The bank has introduced a special credit program titled "RAKUB- Small Entreprise Credit Program" (SECP). The project aims at promotion of entrepreneurship in agro-based small enterprises and non-farm activities in Northwest region of Bangladesh.Norwegian government and RAKUB has jointly provided credit fund for the project. Ministry of Finance, Government of Bangladesh monitors the project activities. Maximum credit limit for a single enterprise has been fixed at Taka 500 thousand (US $ 7.35 thousand approx.). Credit facility amounting up to Taka 75,000 (US $ 1100 approx.) would be collateral-free.

4.7 Salient features of the project:

Project cost
Total Cost of Project	Tk. 599.80 m
Norweigian grant (Nok. 50.00 m)	Tk. 318.30 m
RAKUB's contribution	Tk. 281.50 m
Distribution of Fund:
Technical Assistance	Tk. 93.20 m
Revolving Loan Fund	Tk. 506.60 m
Share of Loan Fund:
Norweigian Grant	Tk. 225.10 m
RAKUB's share	Tk. 281.50 m

4.8   Objective of the project

The main objective of the project is to create employment opportunities through development of small/micro enterprises. The project would provide training, credit support and other related services.

4.9  Target-entrepreneurs

Entrepreneurs engaged in three types of activities namely manufacturing, trading & service providing would be considered. The project will develop or finance 100-150 small enterprises in the first year and 300-400 in the fifth year in each upazilla (administrative tier below district).

MICRO CREDIT                                                                                                                         CHAPTER FOUR

 4.10  Area of Operation

In the first phase, it will start with 8 upazillas in Rajshahi district and ultimately it will cover 50 upazillas in greater Rajshahi, Bogra & Pabna districts by the fifth year.

4.11 Entrepreneurs to be benefited

Around 12,500 entrepreneurs will get credit facility and services from the project. Besides, the project would create 37,500 new jobs.

4.12 Contribution to the economy

It will generate income of the entrepreneurs and employees of the enterprises. It has been estimated that non-farm income of the entrepreneurs will increase at least by 30%. The additional activities caused by this project will have positive impact on transport and other relevant service sectors. People associated with these ancillary sectors will contribute to the growth of GDP.

4.13  Achievement

The project has started its operation on 28.05.2003.

SECP: Position of Loan Disbursement & Recovery (Tk Million)

Loan Disbursement		Recoverable	Recovery	Rate of Recovery	Outstanding
Number	Amount				Number	Amount
4,696	144.82	77.56	73.77	95%	3,046	82.93