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Govt working hard to set up micro credit bank: Ishrat

RECORDER REPORT

ISLAMABAD: The government is working diligently on setting up 'Micro-Credit Bank', which would be formed soon, Dr Ishrat Hussain, Governor, State Bank of Pakistan, said on Wednesday.

Inaugurating a two-day seminar on "Micro-finance in Economic Development and Poverty Alleviation," he said the proposed bank would go in directly to work for the development of the poor community, but ultimately it would be the management of any project that would matter.

Commenting on the human resource, he said good policies "have to be implemented" through human resources, "which makes all the difference".

"If the policies are to be implemented efficiently, the human resource base has to be widened and improved. There are horror stories in this connection all over the world," he said, and added that "relatives of the elite formed different groups, which could not deliver well."

He said the elite would care too much for themselves and, as a consequence, ignored the poor who should be the real target of all efforts.

The SBP governor said that ultimately the management of any organisation was important, because State Bank "can not handle and supervise" thousands of small units effectively, as it is busy with its original regulatory work. In some other countries, he said, municipal development funds exist which have their own strong evaluation and rating system and supervisory role. At the time of handling any development project the banks and the non-governmental organisations (NGOs), therefore, use this to target poverty and plan other related activities.

Also, he said, the regulatory role is fulfilled by the funds. In Pakistan, committed management is, therefore, of absolute necessity, he added.

In Pakistan, he said, the bureaucratic approach in reaching out to the poor "is an impediment", which was harming development. "If we have to make the progress now, a totally non-bureaucratic approach in targeting poverty, and then reaching out to poor, has to be adopted.

Dr Ishrat said that cost-effective and sustainable operations in financial sector needed transparency and accountability, for which committed management was the answer.

APP adds:

NEED FOR THE BANK

The SBP governnor underlined the need of having a strong micro-credit banking system in the country, with particular focus on rural areas in terms of poverty alleviation.

"We need very strong micro-credit banking system in the country to achieve the high objective of economic development and poverty alleviation", he said.

The seminar has been organised by Microfinance Group - Pakistan (MFG-P).

He, however, stressed that such micro-credit banking should be based on sound footing, with effective management information system, accountability and high quality audit structure, so that remedial measures could be ensured.

He siad the micro-credit banking facility should reach the poor poulation down to the districts and tehsils in rural areas, 'which are the real target of microfinancing'.

Ishrat further cautioned that there must be a difference between the micro-credit banks and public sector banks, as micro-credit baning was aimed at mitigating poverty. "If micro-credit banks become like other banks, then we will again be beginning the public sector banking", he added.

Dr Ishrat said the participants in their discussions on microfinancing should focus on the questions yet to be determined for a micro-credit banking system in the country.

It may be mentioned here that the MFG-P is an association of microfinance institutions which aim to strengthen the microfinance sector.

The MFG-P membership includes: Aga Khan Rural Support Programme, Aga Khan Foundation, Asia Foundation, Kashf Foundation, National Rural Support Programme, Orangi Pilot Project, Sarhad Rural Support Corporation, Sindh Agriculture and Forestry Workers Cooperative, South Asia Partnership - Pakistan, and Sungi Development Foundation.

The first day of the seminar, attended by a total of 75 participants, brought together top managers of microfinance programmes, government officials, representatives from banks, international donors and various organisations to discuss the key challenges to the future development of microfinance.