This issue of the BWTP newsletter reports Country Workshops held in Sri Lanka, India, Pakistan and Nepal. As reported in our last newsletter (December 1993), the first of the series of national workshops held under the auspices of CIGAP (the UNDP's Program of Credit for Income Generating Activities of the Poor) was held in Manila, the Philippines, in December 1993. During January and February the series was continued, with extremely successful workshops in four South Asian Countries. In each case, our national workshop for bankers was addressed by the Governor of the respective Central Bank. In Colombo the Foundation was honoured to have the President of Sri Lanka perform the opening ceremony. Workshops for NGOs in each country produced strong followup programs which are likely to strengthen the bank/NGO relationships emerging in the South Asian region. The Foundation acknowledges supplementary assistance provided by the Australian Government through its diplomatic missions in Colombo, New Delhi, Islamabad and Kathmandu to defray the in-country costs of these workshops, and in particular to finance the participation of NGO representatives. This issue of the Newsletter also looks forward to future activities to be conducted under CIGAP. The most significant of these will be the Third Regional Workshop on Banking with the Poor to be held in Brisbane in October or November 1994. It follows earlier regional workshops in Manila (1991) and Kuala Lumpur (1992). Sri Lankan President opens Colombo Workshop for Bankers With the President of Sri Lanka presiding, around 170 people gathered in Colombo to attend the opening session of the Banking with the Poor national workshop for bankers on 24 January. Participants represented the Sri Lankan commercial banking community, the central bank, other government agencies, NGOs and international agencies. The workshop, held on the premises of the Central Bank of Sri Lanka, was opened by the President, D.B. Wijetunge, and addressed by Mr H.B. Disanayaka, Governor of the Central Bank and Mr Rienzie T. Wijetilleke, Managing Director of Hatton National Bank, among others. Addressing the workshop, the President indicated clear support for Banking with the Poor's contention that commercial banks have a role to play in poverty alleviation. President Wijetunge commended the Foundation and its local partners for the initiative they had taken in convening the workshop. Governor Disanayaka endorsed the Foundation's approach to credit provision, as a weapon in the Government's armoury of poverty alleviation measures. Statements by senior Central Bank staff during working sessions of the workshop supported further trialing and expansion of linkages between banks and NGOs. Other key elements in the Banking with the Poor strategy, including the abandonment of subsidised credit still being provided in Sri Lanka by government and external donor sources, received general support. Statements by a number of leading commercial bankers indicated their willingness to expand present pilot projects in the field of poverty lending. These involve attempts to achieve commercially-sustainable linkages of the type advocated in Banking with the Poor. Sri Lanka NGO Workshop A second workshop in Sri Lanka, attended by some 70 representatives of 38 Sri Lankan NGOs, was held on Wednesday 26 and Thursday 27 January at the Central Bank's Rural Staff Training Centre in Colombo. The leaders of two major NGOs, Sarvodya and Sanasa, and the NGO umbrella body, NANGO, were joined at the workshop by senior Central Bank officials and commercial bankers. A major outcome of this workshop was a clear attitudinal change by most participants, in favour of commercial linkages between banks and NGOs. By the end of the second day there was substantial majority opinion in favour of further exploration of this possibility. The meeting adopted an action plan to establish a mechanism for coordination of NGO efforts, for communication with other NGOs in the area of microcredit, and to communicate with the banks on behalf of NGOs. The action plan was endorsed by the Executive Director of Janasaviya Trust Fund, the Deputy Managing Director of Hatton National Bank and an Executive Director of the Central Bank. All three promised the support of their respective organisations for the plan. The NGO action plan proposes the establishment of an action committee to facilitate the linkage of NGOs with banks in sustainable commercial relationships. This body parallels the committee to be set up in the Philippines, which was an outcome of the Banking with the Poor workshops held in Manila in December 1993. The action committee will be convened by the Chairman of Sanasa, Mr. P.A. Kiriwandeniya. Sanasa is the Foundation's NGO partner in Sri Lanka. Central Bank Governor Disanayaka has welcomed the establishment of the Sri Lanka NGO committee. In a subsequent discussion with Foundation representatives John Conroy and Ganesh Thapa, Mr Disanayaka proposed that it should form the basis of a larger consultative body, incorporating representatives of the Central Bank and major state and commercial banks with a demonstrated interest in 'poverty lending'. India: Building on Firm Foundations The Banking with the Poor Indian national workshop for bankers was held on Monday 31 January 1994 in the World Trade Centre in Bombay. This workshop was held with the assistance of the Indian Banks' Association and under the patronage of the Reserve Bank of India. Almost 80 leaders of the Indian banking industry from 30 major commercial banks, together with officials of the Reserve Bank, the National Bank for Agriculture and Rural Development (NABARD), other financial institutions, the Indian Institute of Bankers, NGOs and international agencies attended. In his keynote address to the opening session of the workshop, the Governor of the Reserve Bank of India, Dr C. Rangarajan, strongly endorsed the thrust of Banking with the Poor. He outlined recent initiatives of the Government of India designed to overcome the 'large scale misutilisation and default of credit' which have accompanied past attempts to increase the flow of credit to the poor. These initiatives include encouraging formal credit institutions to link with NGOs and self-help groups of the poor as financial intermediaries, a key Banking with the Poor recommendation. Senior commercial bankers and NGO leaders also supported the Banking with the Poor concept at the workshop. Mr P. Kotaiah, Chairman of NABARD, urged the audience of bank executives to 'send to your branches the message that this (the linkage with NGOs and self-help groups) is the best possible credit delivery model to reach the poorest of the poor'. He urged them to develop this mode of lending in their banks. Sufficient numbers of self-help groups with experience in savings and credit operations already exist in India to enable considerable expansion of the volume of bank lending through this channel over the next two years. NABARD itself will commence a pilot program of lending directly to NGOs, and hopes that this will engender greater confidence among bankers in the capacities of these voluntary agencies. Mr Kotaiah also stressed the flexible nature of the Banking with the Poor model. Terms and conditions of loans are set by the self-help groups themselves. Credit discipline is a feature of the group lending approach. The initial emphasis of groups is on accumulation of savings and group management of these resources for lending to members. Bank resources become available only at a later stage. Mr P.M. Tripathi, General Secretary of the Association of Voluntary Agencies for Rural Development (AVARD), welcomed FDC's initiative in mounting the workshop and called for recognition of the potential of voluntary agencies to contribute to poverty alleviation through the provision of credit. He said that India has the world's largest NGO movement, with outreach to some 50 percent of villages in the country. While most of their activity is social and welfare-oriented at present, the capacity of NGOs to contribute to economic development is also great. FDC's partner NGO in India, MYRADA, now has some 2,000 self-help groups and 8,000 micro and small businesses on its books. However, MYRADA's Executive Director, Mr Al Fernandez, said that only a small proportion of these groups is linked with banks as yet, indicating the potential for further expansion. MYRADA has instituted a training program on self-help group issues for bank managers, resulting in a more positive environment and a perceptible shift in attitudes of bank staff. Mr Fernandez stressed that NGOs and self-help groups need to be professional in their record keeping if they want to develop commercial relationships with banks. Indian NGO Workshop AVARD and MYRADA jointly organised the second of the Indian workshops - for NGOs - at Bangalore in southern India over the period 2 to 4 February. A number of delegates also attended a field trip to meet MYRADA self-help groups on 5 February. Total attendance was 40, with 25 delegates from 21 NGOs representative of major regions of India. Representatives of the Indian banking community at the meeting included NABARD's Chairman, Mr P. Kotaiah, the Executive Director of the Reserve Bank of India, Ms I.T. Vaz, and senior executives of commercial banks headquartered in Bangalore. A representative of the newly-established National Women's Credit Fund also participated. The Counsellor (Development) at the Canadian High Commission in New Delhi, Mr Andre Gingras, said that in an era of declining aid budgets, Banking with the Poor meets the need for mutually beneficial partnerships, rather than unequal donor/recipient relationships. Banking with the Poor reflects this notion of partnership with mutual benefit. Borrowers are no longer merely 'recipients'. He was excited to see a very traditional and conservative section of society, the banking community, sitting down with NGOs to discuss poverty issues. A strategy for further action was adopted at the workshop which includes conferences between banks and NGOs at district, state and national levels and providing to the Government of India and the Reserve Bank a number of recommendations to improve bank/NGO linkages and the flow of credit to the poor. Pakistan: Combined Bank/NGO Meeting The Pakistan Country Workshop, held at the headquarters of Habib Bank in Karachi on Thursday 10 February, was a combined meeting for both banks and NGOs. It was attended by more than 50 banking executives, officials of NGOs and representatives of international agencies, and was conducted with the support of Habib Bank and the Pakistan Banking Council. His Excellency Mr Philip Knight, Australia's High Commissioner to Pakistan, inaugurated the workshop. The keynote address was given by the Governor of the State Bank of Pakistan (the Central Bank), Dr M. Yaqub. Dr Yaqub's address strongly supported the concept of Banking with the Poor, especially the role of banks in channelling credit to the poor using NGOs and self-groups as financial intermediaries. He stated that past initiatives designed to provide credit for productive enterprises and employment generation for the poor had been marked by deficiencies and inequities. He noted 'a weakening of links between the financial institutions and poorer sections of society' and acknowledged that 'various schemes introduced so far have only benefited the middle class'. Governor Yaqub urged commercial bankers to extend credit to microentrepreneurs, setting up pilot projects for the purpose if necessary, and to regard this as business rather than charity. However, he acknowledged that there exist very few NGOs with experience in savings and credit operations in Pakistan. Working sessions of the workshop were attended by representatives of Habib Bank, the Allied Bank, the Muslim Commercial Bank, First Women's Bank and members of the Pakistan Banking Council. NGOs represented were from Karachi, Islamabad, Lahore and the Northwest Frontier Province, together with the umbrella NGO body from Punjab, a province containing some 60 percent of the national population. A contingent of international agency officials participated, most of them from Islamabad. They included UNDP, UNICEF, UNIFEM, ILO, AIDAB, USAID, the Asian Development Bank, the World Bank and a World Bank shelter project. Leaders of FDC's partner NGOs in Pakistan, the Orangi Pilot Project (OPP) and the Aga Khan Rural Support Program (AKRSP) made presentations on their credit activities. OPP's linkage with Habib Bank has resulted in a 98 percent repayment rate, a fact which had 'amazed' the bank. OPP founder Dr Akhter Hameed Khan noted that the urban informal economy is now the most dynamic element in Karachi and other urban areas of Pakistan. OPP serves the credit needs of a thriving class of microentrepreneurs in this 'booming sector' and has established credit lines with several banks for this purpose. AKRSP representative Mr Hakim Feerastra said that the case studies in FDC's report on Banking with the Poor had 'blown the myth' that the poor are not bankable. Since 1981, AKRSP has established 2,333 self-help groups and had moved over time to set interest rates at market levels to assure the sustainability of its operations without government or donor support. Pointing to a net outflow of resources via the banking system from areas where AKRSP is active, Mr Feerastra said that he hoped that it would be possible to tap domestic financial resources to reverse the flow of loanable funds in favour of backward regions. Dr Javed Ansari, spokesman for Allied Bank, argued for a 'division of labour' between banks and NGOs which would enable each to benefit from the other's strengths. The Banking Council representative agreed, stating that while banks are 'financial conduits', NGOs are development agencies. To provide finance for development in a manner beneficial to the poor requires banks and NGOs to develop closer working relationships. Nepal NGO Workshop Action plan agreed in Kathmandu NGO leaders meeting in Kathmandu adopted a strong program of action designed to equip Nepali NGOs for linkages with banks. They agreed to form an action committee to act as a pressure group on behalf of NGOs, liaising with the Nepal Rastra Bank (the Central Bank) and the Nepal Bankers' Association. The NGO Federation of Nepal is to take the leading role in this program, identifying NGOs with the potential to engage in linkages with banks, and training and motivating their leaders. The Central Bank is to be asked to monitor progress in the development of NGO capacities, and in the numbers of self-help groups, with the participation of the Bankers' Association. FDC has been asked to continue to provide opportunities for Nepali NGOs to share experiences, and to disseminate information and documentation about successful cases through the BWTP network. These decisions resulted from exhaustive discussions over two days (19 and 20 February) involving more than 30 local and international NGOs. Financial assistance for incountry costs, provided by the Australian Government, ensured the attendance of NGO representatives from all over the country. The commitment to Banking with the Poor of FDC's Nepali banking partner, the Rastriya Banijya Bank, was shown by the attendance at the workshop of nine rural branch managers who are currently administering linkage arrangements with NGOs. Senior Central Bank staff also participated actively throughout the workshop, which was conducted for the most part in the Nepali language. Bankers' workshop in Nepal More than 50 representatives of commercial banks, other financial institutions, international agencies and NGOs attended this meeting on 16 February in Kathmandu. Governor H.S. Tripathi of the Central Bank gave the keynote address in which he outlined the 20 year history of the Government of Nepal's attempts to channel credit, usually on subsidised terms, to those in absolute poverty (reckoned, on a recent estimate, to number some 49 per cent of the population). The Governor noted that the results of these efforts have been disappointing. Mr Tripathi pointed to a political dilemma facing Nepal, where a relatively new democratic government is under pressure to move away from explicitly redistributionist policies towards economic and financial liberalisation. Previous policies for policy alleviation are now untenable; banks are being pressed to conform to international accounting and prudential standards and in the process the Central Bank is reluctant to issue directives to require them to engage in rural or poverty lending. The Bank is actively exploring new alternatives to address the needs of Nepal's rural majority. The Governor sees the relatively recent emergence in Nepal of NGOs and self-help groups of the poor active in savings and credit operations as requiring the Bank to trial this new approach. The positive experience of the Foundation's banking partner, Rastrya Banijya Bank, is encouraging. Mr Tripathi urged other commercial banks to trial this mode of lending. A representative of Rastriya Banijya Bank said that the bank has now advanced some NR4.86 million (US$100,000) to groups, resulting in almost 800 individual loans over a 33 month period. Repayment rates have been very high. Group members have accumulated savings of NR0.5 million (US$10,000), in a country where the poverty line is set at a daily per capita income of NR6 (or US$0.13). With experience of the level of transaction costs, it has been found possible to reduce lending rates from an initial 18 per cent to 14 per cent now. Transaction costs are calculated at just 3.3 per cent, with 1.5 per cent of this attributed to the self-help groups. The meeting concluded with a commitment by the Chairman of Rastrya Banijya Bank to continue to expand its linkage lending, and with a challenge from Governor Tripathi for the other commercial banks to contribute to the alleviation of poverty. The action plan set in motion by NGOs at their meeting some days later will provide a basis for further progress in this regard. South Pacific News The last issue of the Banking with the Poor Newsletter (December 1993) carried a report on South Pacific consultations undertaken by FDC under the auspices of CIGAP. A number of the South Pacific organisations contacted by FDC were also present at the Second South Pacific Credit Unions Conference in Sydney on 15-17 February 1994. Among those at the Sydney meeting were representatives of South Pacific Credit Union Leagues, South Pacific and Australian NGOs, governments, Central Banks and AIDAB. FDC Program Officer Mark Otter represented the Foundation and briefed participants on Banking with the Poor. While the meeting focused on issues affecting credit unions in the region, there was considerable discussion of the appropriate role of external donor agencies and the policy functions of governments in facilitating - but not subsidising - credit schemes. Echoing discussions at the Banking with the Poor Country Workshops in Asia, the theme of partnership between equals in the development process, rather than a donor/recipient relationship, was emphasised by many participants in Sydney. |