Credit Facilities for Netrakona's Peoples

The strong need for capital is often cited as a major precondition for economical development. In Netrakona District, loans can be taken from the following institutions:

Bank

Official bank rates probably circiuate  around the ten percent mark per year. Poor businessmen and farmers are deprived of those credit facilities because they are not creditworthy by the official banks’ standards. But even those who would get a loan, allegedly face demands for a bribe and have to wait for a long time until they actually obtain the money. As far as I could understand, even the  Krisi-Bank does not really provide reliable credit facilities to the farmers. 

Moneylenders

The reasons mentioned above lead especially the poor people to the moneylenders in their village. They are often rich landlords themselves and discovered money lending as a second income source. Their advantage is a loan on trust, no need for securities and an immediate provision of the money. The main seasons for money lending are from January to March and in September/October, when the need for agricultural inputs, such as fertilizer, is high.  A Muslim moneylender in Pukuria, a small village near Netrakona town, claimed that he was a small farmer before and gradually had saved some money, which he had started lending to other people about fifteen years ago. Since then, he could increase his land property from 30 decimals of land to more than one and a half acres. Still, he works as a farmer himself, but also lends some of his land to other farmers. Most of his borrowers are farmers, but there are also businessmen. The majority takes a loan around 1000-5000Tk and pay back within three months. However there are also borrowers who take 30.000 or 50.000Tk and some people need one to two years to pay back the loan. He said that that he gave the money on trust and that if somebody didn’t pay back, he would just not get a second loan. He makes written contracts only from 30.000Tk onwards. 

The interest rate is measured from the rest loan so the absolute amount decreases with the repayment. He claimed that from small farmers he didn’t take mortgage, only from those farmers, who take more than 20.000Tk. His wish was to stress that he was also generous, telling me that when somebody had taken a big loan and paid all the interest, he waived a small part of the loan. Also, he, like others in the society, helped poor people with the costs of their daughters’ wedding. He himself has got two sons and two daughters. One daughter suffers from bone cancer. She was  in Mymensingh in a private hospital for treatment and stays at home now.  His wife once was the president of a SUS women group but she is no longer a member. ‘Five years ago’, he said, there were about 30 moneylenders in town, but now there are only three to four of them left. NGO micro credit activities have taken over. But still he has got comparative advantages in spite of the high interest rate: He can provide the money immediately and his repayment is flexible. Unlike the NGOs, there are no groupduty and no compulsory weekly repayments. Apparently, this is why farmers still take money from him. 

Another Muslim moneylender lives in Komri, about ten Kilometers outside of Netrakona. He is married and has two boys and one daughter, latter one is studying in a college in Mymensingh. He claimed, that he had inherited his 30 acres of land from his grandfather and had bought very few land additionally. He doesn’t work on his land, but rents it out to tenants and they share input costs and profit. 

In addition to this, he owns several fishponds and also some shops in the village. On his property, there are several brick houses with tin roof, a sign of wealth. According to his statement, he started money lending eight years ago and borrows only small amounts about 100-5000Tk to farmers, based on trust (“village family”). He said, that most of them paid back in two to three months. However, five percent would be ‘loss’. By this, he meant that those people needed much more time to pay back the credit.  

Maybe, he didn’t mention that he also borrows significantly more money at 20% interest.  Instead, he also gave the impression of being an indulgent man, stressing that if somebody could not pay the interest, he sometimes renounced on it. Also, when the tornado in April 2004 hit Kanchongpur, he had rushed to the spot in the same night, and later had helped with food and money. 

NGOs

The non-government sector favors the women’s group approach as a security instead of assets or land. Savings that are accumulated at an NGO account gradually build up a second deposit. At Sabalamby, every member  has to give 20Tk a week on its savings account for twelve weeks, before she gets the first credit over 4000Tk. The credit has to be paid back in 50 weeks, including the fixed interest rate of ten percent of the initial loan. This rate one of the lowest among the Bangladeshi NGOs. But the savings also go on and after two years, when the amount is sufficient, Sabalamby honors them with a bank oriented interest rate, currently around five percent.  The SUS staff visits the women group every week to collect the payments and to counsel the members.

There is a group book where the installments of all the members are written down. The group leader has to sign the book and obtains a voucher. She is responsible for the organization and representation of the members. Furthermore, every single member has got her personal book with a pass photo.

Current interest rate for the savings, amount of total savings, number of the week (1-50), amount of weekly installment, amount of interest paid in respective week, penalty fine (i.e. if paying is repeatedly not in time), total balance of credit and the signature of the SUS staff. Once the first credit is paid back, a new credit over 5000Tk can be obtained and so on. 

In general, micro credit seems to keep the system going, but the critique is also manifold. Some people say that micro credit from the NGOs is not enough input to bring about positive changes for a big family. On the other hand, there is no doubt about that the weekly installment paying modus is very tough for the beneficiaries. Many would prefer a monthly rate but this would probably not fit with the idea of the system. There are definitely incidents of membership in several NGOs, in order to pay the installments of one credit with the  loan taken from another NGO. Some people also have to ask neighbors to help them with the payments. Last but not least, there are clever husbands, who take several wives, all being members of a women’s group, to skim off the profit.