If you think a state-run organization is always doomed to fail you are wrong. Better look at Palli Karma-Sahayak Foundation (PKSF), a non-profit government organization, to change your mind.

In Bangladesh success in state-run organizations is in short supply. Almost anything run by the government is plagued with failures. There are however, a few exceptions, Palli Karma-Sahayak Foundation (PKSF), the world’s largest state-run microcerdit funding institution, is one of the country’s success stories that has helped the poor get jobs and start small businesses.

In last one decade, PKSF that prides in efficiency and pro-poor policies, achieved tremendous performance in utilizing the capacities of NGOs to deliver financial services to the poor.

Because of its potentials and success, many countries like India, Pakistan, Nepal, the Maldives, Uzbekistan, Argentina and Burundi are showing keen interest in PKSF activities, and trying to replicate its model.

While talking to News Network, PKSF Managing Director Dr. Salehuddin Ahmed said the authorities in Pakistan and Nepal have already taken steps to set up similar organizations in their countries.

He said PKSF disbursed about Tk five billion or $104 million since its inception in May, 1990 to March, 1999 and the number of its beneficiaries is about 1.4 million, about 20 per cent of the total microcredit borrowers.

About its source of funding, he said PKSF has got US dollar 1.9 million from the government since its inception while it has a credit line of US dollar 105 million from World Bank. PKSF has another credit line of US dollar 18 million from Asian Development Bank. It also has received a grant of about 10.5 million US dollars from USAID for seed capital.

To a query, Dr. Ahmed said PKSF prepares its own budget, which is approved by the Board of Directors and it has no link with the national budget. PKSF approved a Tk. 264 crore for the outgoing fiscal (1998-99), which also included credit disbursement target of Tk. 223 crore. The budget for the new fiscal (1999-2000) has not yet been finalised.

The cumulative disbursement of PKSF to their partners organizations, mostly NGOs, till March 1999 was Tk. 496.55 crore while the target for 1998-99 fiscal is Tk. 222.66 crore.

Officials said PSKF has got 155 active partner organizations out of 182 enlisted ones in 60 districts out the country’s 64 districts while the total number of beneficiaries is about 1.4 million.

Among the partner organizations, big NGOs are taking more than 70 per cent loan from PKSF while the rest goes to the small partner organizations.

PKSF disbursed about Tk. 500 crore out of Tk. 14,487 crore of the country’s microcredit programme, which is 3 per cent of the total volume. It’s fund mainly goes to NGOs and the percentage of PKSF fund in NGO microcredit is about 9 per cent.

The financing systems of PKSF are not the same as Grameen Bank of Bangladesh. While Grameen Bank finances the poor borrowers directly, PKSF does it through its partner organizations or NGOs.

Dr. Ahmed said although 90 per cent of the beneficiaries of this credit programmes are women, the microcredit has not yet effectively reached the poorest of the poor or the "hardcore" poor. Most of the country’s hardcore poor are still far away from these opportunities.

Attributing this failure to the difficulties in organising these poor people and introducing microcredit practices for them, he said, "The NGOs have not been very successful to cover these people."

An NGO executive working in northern region of Bangladesh said, "We feel that we should provide credit to the hardcore poor, but here is little or no guarantee to get the loan back, because most of the hardcore poor are very much mobile. Those who are living here today, they may not be there tomorrow.

"They need more motivation and training to utilize the credit. But this is more expensive than out ongoing programme," he said.

According to information gathered from various sources, some NGOs working as micro finance institutions in the semi-formal sector have disbursed a cumulative amount of Tk. 5359 crore to about 4 million borrowers.

Dr. Ahmed said, "PKSF has decided to launch a pilot project to cover the hardcore poor. But these people need some training and they should be reorganized. And the system of credit delivery should be flexible suiting their conditions and needs. There should be special support and incentive too in the credit programme."

PKSF is now trying to increase the outreach of its present programme through deepening the credit programme as well as geographical expansion of its areas. This may need enlistment of new partner organizations.

The PKSF Managing Director said that they also have plans to introduce credit programme on experimental basis for micro enterprises, credit for urban poor of small district towns.

Stressing the importance of a legal regulatory framework, he said NGOs providing microcredit are registered under various acts and regulations, which do not cover the provisions of financial products and services by NGOs

The conventional regulatory framework like that of formal banks and financial institutions will not be appropriate, he said suggesting self-regulation through effective supervision and internal control within the fold of an agreed "Code of Conduct" for NGOs.