The Rural Credit Programme is the main poverty alleviation programme of Khan Foundation providing loans to the disadvantage groups. The aim of this area-specific project is to provide loans at very simple terms, so borrowers can invest their money in income-producing activities to improve their economic condition, to promote self-reliance, and to raise social awareness for development. This programme is unique for its low service charge. At present the Foundation is working in Narsingdi District and has about 3000 beneficiaries.

More About RURAL CREDIT PROGRAMME

Economic development is essential to develop the poor people’s social rights and rights as citizens. Through economic development, they will enhance their social status as well as maintain the families with proper care. Analyzing the present situation, it becomes evident that the propensity of having more children is prominent among the poor people because they believe that if there are more numbers of children, the more are the possibilities that the children will shoulder the responsibilities of their old parents. At one stage, those children become burdensome on their parents and become deprived of their basic rights, specially female children; they are the popular victims in this aspect. The government and non-government organization have been implementing various activities to improve their education, health and economic status.

The NGOs have a significant role in the micro credit programme. Under the programme, the poor people who have been living below poverty level have gained socio-economic development. Polarization between rich and poor are so high that it is very difficult to draw a rational picture of the rich and poor. The rich people have ample opportunities to receive formal loan but the poor do not that option. Under this circumstance, informal credit was badly needed for the people living below poverty level. As a result, micro credit has drawn the attention of those who did not have any access to the loan from the schedule bank or formal loan system.

GDP of Bangladesh is mostly depended on high productivity of agriculture and agricultural activities depend on Mother Nature. So low productivity, high dependence on non-irrigated agriculture, unemployment leading to acute malnutrition, inadequate primary health care facilities, low literacy rate and growing landlessness are major problems faced by the economy. The below poverty level people and the poor peasantry feel secured thinking that they have access to schedule bank facilities without any collateral and at the same time getting away from local usurer who always charge interests more than double the money they received.

Taking this situation in consideration, Khan Foundation has designed its Rural Credit Programme since the year 1995. Rural credit programme for the local people was the beginning of KF's long term involvement in the development arena of Bangladesh. Improving the quality of life and promoting self reliance as well as social awareness for humanizing the quality of life and economical emancipation for its target people are the broader objectives of the programme. The specific focus of this on-going project is to alleviate the sufferings of the distressed rural vulnerable women & children (having low family income) and to empower them socially and economically. In this way, Khan Foundation has taken "Rural Credit Programme" (RCP) as its major Development Programme.

Goal
To raise the standard of living of rural families and especially women by enabling them to engage in income generating activities through providing very easily accessible loans and support services.

Objectives

a)      To provide credit without collateral to land-less women in order to achieve poverty alleviation through income-generating activities and savings.
b)      To monitor and evaluate the socio-economic development of borrowers.
c)      To educate poor women and children (including basic accounting, reproductive health, functional literacy classes.)

Project Components

a.      Credit and income generating activities
b.      Capacity Building Training
c.      Savings programme         
d.      Adult education               
e.      Monitoring and Evaluation.
           
Target Group

Poor women with an annual income of less than Tk. 2400/= and with none or only marginal land ownership are the target groups of this programme.  Special emphasis is placed on women and as of now, all loans have been granted for women.

The method of providing loans to women is based on two criteria, which are:
a.      Women with no prior experience in credit investment mechanisms would be provided with opportunities to develop a business oriented attitude.
b.      The women would be acquainted with market mechanisms and basic business skills before launching any investment directly.
           
Project Area

RCP is planning to cover the whole of Narsingdi District; presently the Khan Foundation has approximately 3,500 number of beneficiaries. By the year 2006, RCP will reach an estimated 5000 beneficiaries and their families. Owing to the success of the Credit Program the number of the members is increasing day by day. 

           
Different Activities

• Credit and Income Generating Activities

Capital is the main problem for rural women to undertake any income generating activities. The Rural Credit Programme of Khan Foundation provides credit support to create employment and income earning opportunities for the beneficiaries. The program's goals and objectives relate directly to the success of credit and alternative income generation.
The Income Generating Activities of the members of the Samities during the year were: Poultry Farming, Cattle raising, Grocery Shop, Nurseries, Tailoring, Weaving, Vegetation, Cultivation etc.

• Capacity Building Training (For the Samity Presidents and Group Leaders)

As part of the capacity building for the members of the groups, Khan Foundation organized leadership development training workshop for the Samity Leaders of Rural Credit Programme. The purpose of the training was to provide them with the knowledge of loan administration regarding RCP and also to enhance the management capability and leadership of the credit groups and the society. Khan Foundation also organized some field level trainings for the Samities on the basis of accounting, reproductive health and various income generating activities. Khan Foundation has also arranged free medical treatment program in the project areas.

Savings Program

Investment is a compulsory element of the program, savings are entered in the passbooks of each member, and interest accrues over their savings at usual bank rates. The members take their borrowings on the one hand and side by side deposit their personal savings. Savings deposits vary from a minimum of taka ten (10) per week to any given maximum. Thus the members become accustomed to investing for their future in this program.

The members repay the installments and deposit the savings to the field organizers on a weekly basis. Thus the members effectively get banking facilities brought to their homes. KF is

Adult Literacy Program

Adult education is a co-program component of the RCP. There is a non-formal child's education program run alongside with the adult literacy program. Thus KF not only works for the economic emancipation of their members but also works side by side with them to eliminate illiteracy. Participants can now read and write Bengali and understand basic arithmetic, and in the process maintain their accounts. All members can now write their names.

• Monitoring and Evaluation

The program is monitored and evaluated to help the borrowers for proper investment and to find out effectiveness of such investment. The credit process is monitored through participatory involvement of the borrowers along with the core staff of Khan Foundation.

For the effective monitoring KF has developed a list of field officers chosen by the project officers. These officers established contacts with the Samity members at least once a month to report on development and corporate activities.

• Forming a Group

KF identified poor women and low-income families as the most needy and decided to target women who have marginal or no land ownership. Because people need to be motivated, organized and supported in order to lift themselves out of poverty, the initial exercise was the formation of Mohila Samities (women's groups). Each Samity consists of five small groups and each group is consists of five members who guarantee one another and therefore must repay the loan of a defaulting co-member. Thus peer pressure is used in addition to training and monitoring to ensure that the businesses are successful and the loans are repaid in full.

At present KF is working at four unions in two Thanas under Narsingdi District. Three(3) unions namely Gajaria, Jinardi and Ghorashal of Palash Thana and Amdia of Narsingdi Sadar Thana. In these unions a total of 85 Samities have been formed representing a total number of 2,050 members. The age group of the members is between 14 and 60 years. Individual loan size is between Taka 2,500 to 5,000 and is repayable over a period of one year. There are now approximately 3,500 beneficiaries covered by this project.

Special Aspects of RCP

RCP is different from other micro-credit programs;
a.      Firstly, there is no membership fee required.
b.      Secondly, beneficiaries of the RCP pay a service charge of only 8% and 2% emergency fund.
c.      Thirdly, savings are entered in a passbook of each member, and 5% interest is given on the savings.
d.      Fourthly, KF charges 5 taka as insurance from the borrowers on every 1000 taka borrowed. Incase of the death of the borrower the money borrowed by the borrower shall be adjusted from this insurance.

Until now, the recovery rate in the program has been above 95%, one of the highest recovery rates in the country. The unique feature of the RCP is to help women avoid dependence on high interest loans year after year, and enables them to obtain economic autonomy.

Project Impact

KF successfully disbursed credit to the members of Mohila Samities. The members invested loans in off-farm employment generating activities. They repaid the loan from their profit money and at the same time continued to deposit savings. These members no longer were considered as a burden to their families. The training of RCP also gave these members some basic accounting skills as well as basic knowledge on sanitation, safe environment, importance of family planning, reproductive health etc. KF believes that by strengthening this type of credit program, the condition of rural people in Bangladesh will be greatly improved.