Banking on the rural poor

The Projek Ikhtiar(PI)is a rural credit scheme in Malaysia which follows an adapted version of the Grameen Bank Approach (GBA). PI provides credit on reasonable terms to very poor small farm households with the aim of reducing poverty.

To identify the target group of very poor people, PI, unlike in the GBA which identifies the target population exclusively on land ownership, uses a rigorous means test. Under this test field workers of the project accurately identify the landholdings, occupations and assets and quantify all major sources of household income of the potential loanee and his/her family.

The PI initially followed the GBA of identifying potential borrowers and then motivating them to form themselves into groups. This method however, when operated in the Malaysian context, ran into considerable difficulties in that qualified potential borrowers failed to rush to accept the credit scheme.So much so that not one single potential loanee followed up the first projection meeting.

The reason was simple. The people were being cautious and waited to see some evidence of benefit before participating in the new programme. The target group of the very poor had little margin for error and could not afford to take risks. They did not dare get further into debt and did not want to obtain any loans unless they could be sure of their ability to make repayments. Social belief too governed their reluctance to join the scheme hastily as older potential borrowers as good Muslims were not prepared to risk dying with a loan unpaid.

It took several months for potential borrowers to become interested in the scheme. The PI however persisted in popularising the benefits of the scheme and reached the very poor who were easier to convince and who formed themselves into groups of loanees quickly. Within a number of months the project became known and membership increased.