PKSF

URBAN MICROCREDIT(UMC): Linking urban with rural using accessible opportunities   The number of urban poor has been increasing rapidly in Bangladesh because of several crucial factors such as limited employment opportunities in the agriculture sector; land grabbing by the rural elites; and frequent incidents of natural hazards like severe floods and river erosion. All these persistent problems hinder the prospect of reversing the trend and allow the magnitude of existing urban poverty to accelerate further, which is eventually worsening the situation. It is evident that urban poverty is closely linked to rural poverty and the increasing pressure on the urban area can be reduced if rural poverty is alleviated. However, since the initiatives for rural poverty alleviation in Bangladesh are yet to make a significant dent in the whole scenario, there should be simultaneous attempts to introduce initiatives to alleviate urban poverty as well. With this in mind, PKSF made a policy shift in the year 1999 that allowed its POs to extend microcredit support to the urban poor under the Urban Microcredit (UMC) programme. The credit demand of the urban poor is relatively higher owing to the fact that a significant number of the poor lives in urban areas. In addition, the urban economic environment provides dynamic and diversified economic opportunities for the urban poor, which make the urban poor safe borrowers economically . At the same time, there is a higher scope of extending the vertical outreach of microcredit at a low transaction cost relative to RMC. Besides, UMC provides greater scope of effective women participation as they have greater freedom of movement, higher participation in the labour market, voice in household decision-making and greater access to material resources compared to rural women. POs with a good track record in microcredit operations are primarily entrusted with the responsibility of urban microfinance operations. Some of the prerequisite characteristics of the target members for UMC are:  People residing in urban or semi-urban areas with no asset and with a monthly income of between BDT 4000-5000, a resident of the locality for a minimum of three years, and persons who have a permanent or temporary business or a good record in handling the previous loans. In FY 2010-11, PKSF’s disbursement to its POs under this programme was BDT 1.40 billion with an outstanding of BDT 2.91 billion, while POs disbursed BDT 12.93 billion to their beneficiaries through UMC with an outstanding of BDT 5.51 billion. As of FY 2010-11, the average loan under UMC to beneficiaries is BDT 15,669, which is 17.8% higher than RMC; and like RMC, 78% members under the UMC programme availed loan. PKSF’s disbursement to its POs under UMC reduced by 14.72% in the FY 2010-11 from that of the previous FY, but POs disbursement to its borrowers grew by 25.18%; which also indicates the capacity of the POs to revolve loan among the poor under this programme.