Bank struggles to recover losses from Musharraf scheme

Jamal is one of thousands of people who got loans from a nationalised bank under the Rozgar Scheme launched in 2006.

LAHORE: Jamal sits up in his beat-up four-stroke CNG rickshaw and stretches out hands blackened by engine grease. “I have to work on it and rebuild it every morning before I can use it,” he says. “This is a horrible rickshaw.”

Jamal was one of thousands of people who got loans from a nationalised bank under the Rozgar Scheme launched in 2006 by then president Pervez Musharraf. He regrets it every day. “I am on my last stand. I am thinking, ‘Take my rickshaw, but I won’t pay the instalments,’” he said.

The scheme was suspended in January 2009. A senior official of the bank said that the default rate on the scheme was 80 percent in Lahore and the bank suffered overall losses of Rs4 billion.

Seeking to recover a fraction of those losses, the bank is repossessing rickshaws. It auctioned 175 rickshaws like Jamal’s which had been bought through the Rozgar Scheme, at a Township warehouse on Wednesday afternoon, another bank employee told The Express Tribune.

“The main idea of the auction was that the bank gets a return on rickshaws we helped finance,” she said. “Pretty much everyone complained about the poor quality of the rickshaws, so we are fixing that by helping them surrender the rickshaws and the loans.”

Jamal paid a 10 percent advance on a Rs210,000 loan and a down payment for insurance on his rickshaw. He said the bank was now continually harassing him to repay his loan.

The bank can repossess the rickshaw after two missed loan payments. “The rickshaw does not work,” he said. “The market rate for it is around Rs30,000.”

Khalid, another rickshaw driver, said that judging from what he had heard from friends and family, he was lucky not to have taken a bank loan to get his rickshaw.

“The bank has taken rickshaws away from many people and auctioned them for very little,” he said.

The senior bank official said when the Rozgar scheme was launched, the Punjab government had only approved one company’s rickshaws. “People who started on the first batch of rickshaws saw that they were of very poor quality. But the bank had no recourse because there were no other rickshaws. Soon we were not being paid the instalments and we realised that the rickshaws that had been financed were poor.”

He complained that people who had bought high quality rickshaws later had also defaulted on their loans. “So we decided on a plan that would allow the loan defaulters to surrender their rickshaws so the bank could recover a portion of the loan,” he said. “We are cutting our losses.”

Arshad owns a four-stroke petrol rickshaw that he had financed through a private dealer. “The issue with the government banks is that the repayment is too large,” he said. “But repayment is always an issue. Even with the dealer if you miss three months worth of payments, he sends a guy on a motorcycle to confiscate your rickshaw.”

Despite this, rickshaws are a good business these days,  Arshad said.

“Most rickshaw drivers are meeting their margins. Business is pretty good across town. And CNG even now is saving the most,” he said.

Published in The Express Tribune, October 14^th, 2010.