Beneficiaries unsure where to invest

Beneficiaries unsure where to invest first installment of govt microfinance loan programme, Waeela-e-Haq.

KARACHI: After receiving Rs50,000, the first instalment of the government’s microfinance loan programme Waseela-e-Haq, Sadaf* says she is unsure of where to invest the money, the likes of which she has never seen before.

“I told the government that I plan to open a shop, but where do I start from?” she says on the loan given to her under Waseela-e-Haq, an offshoot of the Benazir Income Support Programme (BISP).

The predicament this resident of Juma Himayati Goth in Bin Qasim Town faces is one experienced by many selected beneficiaries, who have been awarded a loan of up to Rs300,000 through computerised balloting.  Each month, some 800 families are randomly selected through this draw and are offered an interest-free loan to set up a small business that can empower them economically in the long term.

Out of the total 597,000 BISP beneficiaries in Sindh, 116,747 are registered in Karachi. Of these, 545 women have been awarded the loan under Waseela-e-Haq over the past 14 months. In the recent draw held in July, 144 were selected of which Sadaf is the only one to have received her first instalment. Others are being made to wait till they decide what business they would like to take up.

“We can’t just give away such an amount without inquiring how people plan to invest it,” Ilyas Soomro, Director BISP Karachi, tells The Express Tribune. “If we do, women will end up using the money for their personal expenses,” he says.

His scepticism is based on the government’s past experiences with these beneficiaries, who were initially handed over cheques of Rs100,000 or more without inquiring about the investment plan of the family. The BISP department in Sindh claims that their monitoring teams later learnt that most women had spent the money buying dowry for their daughters’ wedding or purchasing other household items such as televisions and refrigerators.

“In fact, a family said their money would be invested on a cattle farm, but a few weeks later the head of the family returned to our office saying that his entire herd of buffaloes had died, adding that he would not be able to repay the loan.”

Having learnt their lesson, Soomro adds that the government is now in the process of importing tracking devices for cattle that a family invests in. “Once this tracking chip is inserted, we will be able to track the location of their cattle and families won’t be able to lie.”

Under the Waseela-e-Haq programme, the loan has to be returned to the government in 12 to 15 years, but it remains interest-free. The programme currently has up to Rs70 billion reserved for some five million BISP beneficiaries in the year 2009-2010. Most of this money is from the US that extended its financial assistance for BISP through US Agency for International Development and the Kerry-Lugar Bill. “The idea is to empower them financially so they don’t remain dependent on the monthly aid from BISP all their lives,” says Soomro.

How viable is it?

Noted economist Kaiser Bengali, who is also the adviser to Sindh chief minister for planning and development, however, believes the idea is not viable and measures like these will only increase the government’s import bill. He adds that these so-called micro-credit schemes are also impractical as they ultimately increase indebtedness among the locals, most of whom will end up wasting money because they will not be willing to start a business.  “A BISP beneficiary who runs a donkey-cart will continue to do so for life because that is all he knows,” says Bengali. “You can’t turn him into a businessman overnight.”

He adds that if the government micromanages people’s lives and they are constantly told what to do, many may eventually find their role intrusive instead of helpful.

In order to create employment, you need to invest in industries, suggests Bengali. “By giving away these cheques to people who, in most cases, have no knowledge or experience of business is ridiculous.”

Soomro, however, says that to avoid such a situation the government has partnered with the National Vocational and Technical Education Commission (Navtec) to provide occupational training, counselling and assistance in selection of business. When contacted by The Express Tribune, a Navtec official acknowledged that such a deal had been signed with BISP officials, but added that no such training has been provided to any Waseela-e-Haq beneficiary in Karachi as yet.  *Name changed upon request

Published in The Express Tribune, October 26^th, 2010.