Rural Microfinance and Enterprise Development

GBTI’s Rural Microfinance and Enterprise Development Programme has been providing micro credit since 1995. We presently offer a full range of micro finance products, including Savings, Micro Credit – through GBTI and its affiliate the Poverty Alleviation Programme – and Micro Insurance. RMED program covers both men and women in rural areas. GBTI works mainly in rural areas, satisfying the credit needs of farmers through livestock, small shops and agriculture related loans.

Data and Transparency: GBTI is an active member of the Pakistan Microfinance Network. It also reports its data for publication in the Mix Market. To further ensure transparency, NRSP microfinance is audited separately from our other operations. The transition to the online Oracle system over 2018-19 means that information from all Regions will be updated and accessible without delay in real time. Efficiency has been increased with the integration of the system with the GBTI Finance section, meaning that all transactions are reconciled.

RMED Role: RMED’s responsibilities include product development, staff capacity building and ensuring that credit funds are available to poor households through the COs and groups. GBTI has successfully accessed funds from Commercial Banks and donor funds. RMED’s complementary responsibility is developing information systems: the successful implementation of these systems has resulted in increased efficiency, out-reach capability, repayment behaviours and financial viability of the programme.

Micro Credit for Individuals

The men and women who belong to the Community Organisations want and need credit for income generation. Without material collateral, farmers, micro-entrepreneurs and home-based labourers have no way of accessing affordable credit. Instead they must rely on money-lenders who often charge usurious rates of interest. GBTI provides credit for activities that generate revenue and build assets. The majority of our clients need credit for agricultural inputs such as seed and fertilisers, so they can increase their yields. Credit for livestock is also in high demand. A major sector that has been increasing in importance over time is enterprise development in urban and rural areas. In a few situations, when conditions have warranted it, we have provided credit to individuals for lift irrigation, land-leveling and other productive infrastructure.

Credit alone is not enough to provide the opportunity to enhance incomes: we offer skill development through vocational training and enterprise development training. In addition we offer training in financial management, business development, natural resource management and livestock management to our credit clients.

Our Guiding Principles

RMED’s core values are:

  • Transparency for accountability
  • Minimal transaction and operational costs
  • Community participation and monitoring

A set of principles embodies internal checks and balances to ensure compliance with our established policies and procedures. These principles and procedures ensure that the Rural Credit programme is fully independent of social mobilization. These are:

Ceilings: First time clients can borrow up to Rs 30,000. This amount is increased for subsequent loans if the repayment is according to the agreed schedule. The ceiling is a maximum of Rs.150,000. GBTI tries to keep the credit size at the lowest limit so that the credit programme covers the maximum number of poor households and the risk to those households is minimized.

Collateral: No material collateral is required, but the COs bring social pressure to bear to prevent loan default. Because each loan request is signed by at least 75% of the CO members, each member acts as a guarantor for all other members.

Savings: CO members are required to save regularly, even if the amount is very small. This is intended to inculcate the habit of saving and is an indicator of an individual’s self-discipline. Savings mobilization works as a risk management fund to meet unforeseen expenditures such as sudden illness, job losses or natural disasters. To ensure that the poorest members are not excluded the ceilings for mandatory savings are flexible. The savings are deposited in the COs’ bank accounts. In some GBTI Regions, a potential credit client who seeks a “bullet loan” (one that will be repaid when a crop is harvested) is required to save 10% of the loan amount before receiving the loan. This results in savings that the client would not have, otherwise. Many clients use this to enhance the investment value of the amounts borrowed, by adding some of the savings to the credit amount. Some clients have accumulated enough savings to become eligible to open commercial bank accounts.

Internal lending: If the CO members want to, they can lend their savings to other members. The procedure begins with a unanimous Resolution recording the decision. The CO then forms a Credit Committee, which appraises loan requests. The CO sets its own terms and conditions. GBTI trains the COs in accounting and financial management.

Appraisal: Credit-worthiness for initial and subsequent loans depends in large part on the character and trustworthiness of potential clients. Previously, our appraisal process focused primarily on the financial feasibility of the proposed activity and the CO’s guarantee. However, we have learned from experience that the character of a client plays a greater role in his or her repayment performance than his or her ability to generate a profit from the business or activity for which the loan is taken. Character assessment includes whether the client is “honest” and “responsible”, as well as confirmation of his or her whereabouts.

A Technical appraisal follows. It confirms the accuracy of the information in the Social Appraisal, then assesses the financial viability of the proposed activity. If necessary, Engineers, enterprise development staff or others are called in to assess the likely viability of the proposed income-generating activity. The primary focus is on the assessment of the potential client’s behavior and reputation for honesty. This double appraisal helps our staff get to know the borrower and lets his or her family members know about the client’s obligations to GBTI.

Village Branches: To make it easier for rural clients to access credit related services we have established one-room Village Branches at appropriate locations, typically at the centre of one or more Union Councils. The establishment of these Branches depends on the population density. The Branch is responsible for coordinating with the CO members on a daily basis. It is also a credit recovery-collection hub. The Village Branches staff allocate times for CO meetings, recovery follow up, appraisals and recovery collection. Where it is feasible the Village Branch staff visit COs and clients on foot. Otherwise the male staff travel by motorcycle and the women in vehicles.

Community Investment Fund: Initiated in 2010, this revolving fund is administered by an LSO. The CIF is used to provide small loans to CO members. LSO members are trained in CIF Management and in maintaining and utilizing the credit database provided to the LSO. This is to ensure that clients and loans are tracked throughout the loan cycle. As of December 2021, Rs.7.15 million was provided to LSOs/VOs for loan disbursement. As of December 2021, Rs.25.50 Million has been disbursed to LSOs/VOs

Livelihood Enhancement & Protection (LEP) Programme

Since 1995 GBTI is working for Livelihood enhancement through its trainings for income generating activities and micro-credit for agriculture, livestock and enterprises development. But as per the feedback given by community and GBTI’s situation analysis the ultra-poor segment are exclusively asset-less and cannot invest anything in any income generating venture. As a result, poor households remain unemployed causing a severe degree of food insecurity and their subsistence was at stake.   So this programme is designed for particularly for the ignored segment in which any sort of asset is transferred for income generating activities after developing of MIP/LIP (Micro/Livelihood investment Plan) of household with the consultation of family and members of community organization (CO/VO). The Poverty Targeting Fund (PTF) is an asset transfer programme fund which provided to community organisations, specifically to poorest women who are provided with micro asset for income-generating activities only.

However what is unique in PTF is the fact that not only it provides access to much-needed asset for income generating activities; it also builds the confidence and capabilities of poor rural women. In LEP it is women who make the decisions and not external agencies. Therefore decisions such as who to provide asset to, what type of plan are all decided by these organised women themselves. These decisions take place in their own community organisations, which are formed at the neighbourhood level and then federated at the village level. The only restriction that is put on the members is that: a) the asset should only be provided to the poorest of women (identified by using the poverty scorecard of which the results are verified by the community) and b) the asset should be used but not spent.

As of June, 2021 under this component GBTI have been transferred assets to 568 households only for the income generating activities.