Friday, March 13, 2009
By By Khalid Mustafa
ISLAMABAD: Farmers accused Micro Finance Institutions of fleecing the borrowers during a workshop on state of micro-finance in Pakistan and recommendations for the future arranged by the Planning Commission in Islamabad.
Planning Commission held organised the workshop with a view to revisit the policies of micro-financing institutions making them acceptable to both lenders and borrowers.
The group of farmers from various villages of Bahawulpur proved with evidence that the MFIs have made them paupers instead of alleviating their poverty.
The poor farmers said that the representatives of the micro-finance institutions such as Kushali Bank, First Micro-Finance Bank and NRSP (National Rural Support Program) trapped them by taking advantage of the their innocence, illiteracy and unawareness about the fallout effects of the high interest rates.
The farmers said that initially they were not ready to get loans, but were persuaded on the promises of bringing progress into the area by installing tube wells, road and schools.
In the workshop it was brought into notices that the lenders did not fulfil their promises. However trapped the poor farmers to meet targets for loans without keeping in view the debt paying capacity of the clients.
The farmers informed the participants of the workshop that the policies of the MFIs are entirely faulty and needs improvement as they had to sell their whole produce to pay the huge interest of 25 to 30 percent so much so they even gold ornaments to retire the interest rates, but they are still groping in the dark as they have failed to come out of the out of vicious cycles of the interest rates.
The farmers group narrated that their pathetic experience saying they started cultivation of crops with loan of Rs 10000 for six months but now after five years nearly all of them are in debt to these institutions to the tune of Rs60,000 to Rs100,000.
The participants were told that no income generating activities were brought to them as per promises. The money was spent and they were asked to get their loans rescheduled. For intervening period they had to borrow from NRSP at 100 percent market up to pay back the loan. And in this way they have been subjected to huge debt burden. “They have sold their assets such as land, animals to pay back the loans, but the debt is still there thanks to the exorbitant rates.”
The representatives of the MFIs kept on insisting that there are also success stories and they failed to present even as single case showing that the borrower has really benefited from the micro-credit in rural areas.
During the workshop a participant from the Ministry of Food and Agriculture quoted Nan Dawkins Scully’s writing on micro credit programs as saying: “A majority of people have neither the skill nor the inclination to be entrepreneurs, why are micro enterprises proliferating?”
He stressed that the land reforms and gender equability would probably be more effective in reducing poverty than micro-credit could ever be.
Dr Zaraf Alraf, Chairman PARC took on banking sector heavily saying that Banks have written off Rs121 billion which the big fishes owed to pay, but a person who gets credit of Rs5,000 from MFIs and get arrested for the delay in paying back or for non ability to pay for some reasons. It was also noticed that all the MFIs are in the race to sell their loans and meet their targets to make their organizations financially sustainable but they are not interested in borrowers sustainability. It also came to surface that many MFIs have extended the credit lines to one borrower without knowing that the same borrower has been given the loan already.