Microfinance & Enterprise Development
National Rural Support Programme
Rahim Yar Khan
NRSP’s Microfinance and Enterprise Development Programme (MEDP) has been providing microcredit since 1992. The Programme provides services to men and women in rural areas, satisfying the credit and insurance needs of farmers through the crop, enterprise, and livestock-related loans.
The microcredit programme serves the agriculture sector. A major portion of microcredit is based on agriculture loans on different crops like sugarcane (the largest portfolio of microcredit), cotton and wheat. This covers loans for crops and livestock. Sugarcane loan in NRSP, Rahim Yar Khan is the major part of microcredit that is empowering farmers and assisting them in the timely procurement of quality seeds for their crops, technical assistance and mitigate irrigation expenses that eventually leads them towards better production and optimum yield.
More About Microfinance & Enterprise Development
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 laborers have no way of accessing affordable credit. Instead, they must rely on money-lenders who often charge usurious rates of interest. NRSP provides credit for activities that generate revenue and build assets. The majority of our clients need credit for agricultural inputs such as seed and fertilizers, 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 also offer skill development through vocational training and enterprise development training. Besides, we offer training in financial management, business development, natural resource management and livestock management to our credit clients.
- "EKL" for the crops of "Rabi" & "Kharif" seasons under a government-funded project titled "Empowerment of Kissan through Financial & Digital Inclusion (E-Kissan)"
- "Interest-Free Loan (IFL) for Women" (only valid cardholder beneficiaries of "Benazir Income Support Programme)
- Lending through "Community Organizations"
- Lending through "Groups"
- "Individual Lending" which is currently available only under a government-funded project titled "Empowerment of Kissan through Financial and Digital Inclusion (E-Kissan)".
Lending through "Community Organization (CO)" includes disbursement of loans among men and women who are looking forward to enhancing their family income but are unable to do so due to scarce resources. In CO lending methodology CO of 6 to 30 members will be formed and registered with the NRSP, all CO members would guarantee loans and credentials of each other. CO Lending enables CO members to resolve their social and economic problems through mutual understanding and decision making.
Before applying for a loan, the applicants are supposed to constitute a CO 6 to 30 members registered with the NRSP, residing nearby to each other and members shouldn’t be close relatives to each other except in certain exceptional circumstances whereby the NRSP may permit as per its policy and procedures.
Group Lending includes disbursement of loans among groups of men and women who are looking forward to enhancing their family income but are unable to do so due to scarce resources. In group lending methodology groups of 3 to 5 members will be formed and registered with the NRSP, all group members would guarantee loans and credentials of each other. Group Lending enables group members to resolve their social and economic problems through mutual understanding and decision making.
Before applying for a loan, the applicants are supposed to constitute a group of 3 to 5 members registered with the NRSP, residing nearby to each other and members shouldn’t be close relatives to each other except in certain exceptional circumstances whereby the NRSP may permit as per its policy and procedures.
Individual Lending includes disbursement of loans among individuals. Loans are offered to certain individuals that fulfill the eligibility criteria of the loan product in order to facilitate them to meet their needs through loans.
Note:- This type of lending is currently available only under a government-funded project titled "Empowerment of Kissan through Financial and Digital Inclusion (E-Kissan)".
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 “Community Organization’s (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.
Social appraisal aims to verify character and credibility of the "Community Organization (CO", "Group" or "Individual" by visiting his/her/their residential place(s). After receiving the Application, the concerned official performs social appraisal through following methods:
- Information from existing borrowers;
- from the living style of the applicant(s);
- views of neighbors about the applicant(s);
- views of the other members in case of CO or Group;
- and personal interview of the applicant(s)
“Technical Appraisal” 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 NRSP.
Through the scrutiny of business plans, the business idea of the intended "Community Organization (CO)" or "Group" or "Individual" will be evaluated to see if it is viable and whether it can generate income beyond the household expenses sufficient for loan repayment. The business requirement is evaluated in the technical appraisal. This will also help fine-tune the applicants' business idea itself. In the case of CO or Group, all the other members will also be interviewed to make sure that they know about the loan and support the business idea. In the case of individual lending, the family of the applicant shall be interviewed.
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.
In cases of individual lending every applicant will provide guarantors as per the requirement of the loan product. Whereas in "Community Organization (CO) Lending" or "Group Lending" the members of the CO or Group would guarantee each other and accept the responsibility of monitoring the borrower and give assurance to persuade the borrower for timely payment of loan.
Community Organization (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 NRSP 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.
Initiated in 2009, this revolving fund is administered by a “Local Support Organization (LSO)”. The CIF is used to provide small loans to “Community Organization (CO)” members. LSO members are trained in the “Community Investment Fund (CIF) Management”.
Once the loan has been disbursed, the concerend officials monitor the client with regular visits to his residence, place of work and the venue of the meeting in case of "Community Organization (CO)" or "Group". The repayments are required to be made as per agreed terms and conditions of the each loan product that is availed. If a repayment is not made timely, the concerned official(s) visit the client to remind and if repayment is still not made then the guarantors are contacted and asked to make the payment.
Microfinance & Enterprise Development Programme (MEDP) is keen to explore new partnerships and new ideas. Several innovations have strengthened our capacity to focus on outreach, enterprise development and rehabilitation programs following the 2010 floods. One of these is an affiliation between NRSP, the “Pakistan Poverty Alleviation Fund (PPAF)” and “International Fund for Agriculture Development (IFAD)” which resulted in many innovative projects that serve as opportunities to test a variety of new ideas and combinations of activities. Depending on the specific project, PPAF and IFAD provides technical and financial support. The programme goals are poverty reduction particularly for the rural poor, some of them women; promotion of economic growth and improving the livelihoods of rural households. These goals were achieved through the provision of equity injections, cash collaterals, letters of credit and guarantees provided by the PPAF to ensure on-lending by commercial organizations.