PKSF

                           RURAL MICROCREDIT(RMC): Bringing the rural poor into development pathway

The employment opportunities in the rural agricultural sector have continuously been shrinking in the last few decades because of saturated economy. Since its inception, PKSF has always been particularly focused on rural development. The initial target was to provide funds to the rural poor for investing in off-farm activities with an aim to diversify their income opportunities. It was expected that the employment opportunities in the off-farm areas would re-energize the entire rural economy. Gradually, microfinance services have incorporated the on-farm activities and covered the entire rural areas in Bangladesh under the Rural Microcredit (RMC) programme.

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A vast majority of the poor exists in the rural areas of Bangladesh. They are so poor that it is difficult for them to access any formal financial organization. From its very beginning, PKSF has been insistently trying to fill up that gap with the help of locally grown Microfinance Institutions (MFIs), termed as Partner Organizations (POs). The fund of PKSF is channeled into the rural areas through its POs who provide loan to the landless and the poor with no or very little material posessions. The target group of RMC is the rural poor who own an arable land of less than 50 decimals or a total asset that is worth not more than the value of one acre of land. Under RMC, the rural microcredit borrowers undertake Income-Generating Activities (IGAs), which are generally family-based. The group solidarity approach is often followed in this microfinance programme according to which, the poor are organized in groups comprising of not less than five members. They ought to be the residents of the nearby areas. A group must be formed with like-minded people from the same economic strata having confidence and trust in each other. The amortization schedule of loan largely depends on the nature of investment but it is generally for one year. The administrative and related expenses in connection with the implementation of the credit programme of POs are met from the service charges paid by the beneficiaries. In FY 2010-11, PKSF’s disbursement to its POs under this programme was BDT 6.01 billion and hence the outstanding loan reached BDT 13.18 billion, while POs disbursed BDT 57.18 billion to their beneficiaries through RMC and outstanding loan came down to BDT 32.39 billion. Although PKSF’s disbursement to its POs under RMC reduced by 12.32% in the FY 2010-11 from that of the previous FY, the POs disbursement to its borrowers grew up by 9.25%; which clearly indicates a huge rotation of loans by POs under this programme. As of the last FY 2010-11, the total number of RMC borrowers under PKSF umbrella reached 5.86 million, which is about 76% of the total RMC members, and the average size of RMC loan to beneficiaries stood at BDT 13,301.