WHO is credit worthy? Who is eligible to get a bank loan? Even as there are various loan schemes available for different segments of people, a simple and straight answer is that those who have repayment capacity and substantial security to offer are eligible to get a loan from the bank. It is also ‘mandatory’ for majority of the loan schemes that the prospective borrower has a regular income. Since the role of banks is seen beyond their commercial character, it has become imperative for the banks to play a pivotal role in combating poverty through various poverty alleviation schemes.
 A few days back, in one of the national business dailies I read an interesting story about an innovative way of bank to reach out to the poorest of the poor. The author, professor of international business and strategic management at Suffolk University, Boston, US, had narrated his experience while in Dhaka, Bangladesh. During his Dhaka visit he had spent more time sitting in traffic than visiting people and places, and the ‘mix of vehicles along with indisciplined driving behaviour’ had added to his woes. Even as the traffic jams annoy everybody, he found a group of people who were quite pleased with the traffic jams. They were the beggars.
 During his visit these beggars became centre of attraction for him and what he learnt is amazing. He came across Grameen Bank’s initiative in Bangladesh which launched a social rehabilitation programme for beggars in 2002. Under this innovative programme, Grameen is giving ‘Beggars Loans' and this is an attempt to convert beggars into entrepreneurs. These loans are interest-free and many of the existing rules of the Bank do not apply. Repayment terms of the loan are flexible.
 The most interesting part of the programme, as written by the professor, is that ‘under this social rehabilitation programme, the beggars are not told to stop begging; the attempt is to slowly rehabilitate them into society by encouraging them to begin income-generating activity at their place of begging! It is believed that, over a period of time, the beggar would want to give up begging’. Of the 111,713 beggars who have joined the programme, the Bank estimates that about 20 per cent have stopped begging. About 10 per cent have joined the Bank as mainstream borrowers, reveals the study done by the professor.
 Interestingly, the recovery rate of beggar loans is about 77 per cent as against a 97 per cent loan recovery rate for the other loans of the Grameen Bank.
 Notably, beggars covered under the programme are provided life insurance cover  and loan insurance programmes, free of cost. What would a beggar do with a loan? The professor has found that these are for very small amounts, such as to buy a mosquito net or an umbrella. After a while, the beggar is encouraged to get hold of a basket, buy a few items, and go selling stuff from door-to-door.
 Now let’s have a look at the banking scene in our own state. Over the last several years now, the banking sector here has taken significant strides to achieve profitability and competitiveness to cater to the increasing demand for banking services. However, the growth in banking services has been limited to a minority of the total population of the state, as the banks operating here have not been able to reach deeper into the rural segments, where most of the population is deprived of even basic banking services. Financial exclusion has been predominant in rural areas of the state primarily due to poor infrastructure resulting in lesser access. This along with financial illiteracy, burdensome documentation and procedures insisted by formal sources of credit, lack of customized financial products leads to exclusion.
 Among 34 banks operating in our state, we have 20 nationalised banks. Even as the nationalized banks are considered as pillars of social banking, they have a negligible role on record in reaching out to the poor strata of society in our state. And this is totally against the aim of achieving total financial inclusion.
 However, it is J&K Bank having a vast presence in the state where its branches are even at Line of Control, which launched its mission ‘Reaching out to all’ so that unbanked segment of population is brought under the ambit of formal banking system. While considering the huge positive impact on generation of livelihoods, financial empowerment to the rural masses and poverty alleviation, the bank in the past few years has rapidly adopted customized business models for bringing unbanked areas into the banking fold so that larger socio-economic objective of inclusive growth through financial inclusion is achieved.
 As far as productisation of services is concerned, we have not witnessed the development of products by the banks (particularly the nationalized banks and new generation private banks ) operating in our state as per the needs of the customers. The products designed by them for rest of the customers in India are not matching the requirements of various sectors of economy. In light of this scenario, J&K Bank has been proactive in tailoring new products and services and at the same time has restructured some old products to match the present day requirement of its customers. It is not profitability alone but the customer convenience, which has been kept in mind while developing or restructuring the products and services.
 As far as J&K’s various sectors of economy like horticulture, agriculture, industrial and artisan sectors, are concerned, J&K Bank has laid a special focus to tap the potential, which remained unexplored for want of finances. In addition to this, over the last few years, the bank has introduced a number of eco-friendly products with the objective of providing customers with alternatives to use cleaner sources of energy for domestic consumption. A few months back, the bank introduced a special scheme for financing LPG connections for all ration card holders (both Below Poverty Line  and Above Poverty Line). It aims at inducing them to switch over to cleaner sources of energy rather than the traditionally used fuels like firewood/kerosene oil/ dung cakes, etc.
 A few days back, the bank launched a rehabilitation programme for pony wallas who have all along played a very important role in the promotion of tourism in our State. Besides providing transport facilities, they have acted as local guides and facilitators for the tourists mostly at Gulmarg, Pahalgam, Sonamarg, Yusmarg etc. Since the profession was main the source of livelihood for their families, modernization of transport facilities, particularly the upgradation of road network at most of the hill stations rendered them jobless and tourists are now show less interest in hiring their services. Even the installation of Gandola, the cable car system at Gulmarg has further added to the miseries of the Pony Wallas. There is every likelihood that many more Pony Wallas would be rendered jobless in near future.
 In view of this, the bank has acted proactively and came out with a rehabilitation schemes for these Pony Wallas by providing access to the resources by way of hassle free financial assistance at softer terms and conditions. Under the scheme, current or ex- pony wallas registered with the department of J&K tTourism department will be given term loans for purchase of mini buses, small load carriers, taxis etc. (both two and three wheelers) at comparatively softer terms conditions. The banks shall be providing loan facility up to Rs.6 lakhs or 85 per cent of the cost of the vehicle, whichever is lowest. The loan is to be repaid in 70 monthly installments after two months of moratorium.
 The loan facility is soft and hassle free and the pony walla is not required to present any sort of collateral security to the bank. This loan shall be covered under Credit Guarantee Fund Trust Scheme for Micro & Small Enterprises (CGTMSE). However, the vehicle shall remain hypothecated to the bank.
 Precisely the bank has launched an offensive to combat poverty, particularly in rural areas of the state, by providing collateral free credit to the poorest of the poor. Notably, the arts and crafts of the Kashmir valley are known worldwide, but the artists who carve out these products have been living in abject poverty since ages. The schemes for artisans introduced for various categories of artisans are proving a great helping hand for them to pull themselves out of the abject poverty. This credit delivery is being done through tailor-made schemes not only for income-generating activities but also for improving their living conditions.

(The views are of the author & not the institution he works for. Feedback: sajjadbazaz@greaterkashmir.com)

Lastupdate on : Sun, 13 Jun 2010 21:30:00 Makkah time
Lastupdate on : Sun, 13 Jun 2010 18:30:00 GMT
Lastupdate on : Mon, 14 Jun 2010 00:00:00 IST