Micro-credit as tool for poverty alleviation

Deeply affected by the desiccation of the Aral Sea, Karakalpakistan, an autonomous region in western Uzbekistan, now suffers from the depletion of its fishing and sea transport industries, as well as from reduced agricultural production, all resulting in widespread poverty. "The only revenues for survival are pensions and allocations for children in many rural families. Those families cannot afford the regular banking rates for credits. In some cases, people simply give up the idea of setting up their small private business given the amount of papers, the time necessary to register private business and the bureaucratic attitude of government officials," Klara Bautdinova, a rural inhabitant of Karakalpakistan, told IRIN. "People explain they cannot afford loans from banks, because the rates are too high, and they are often requested to bribe bank employees to have access to credit," Timur Torebaev, a UNDP financial expert in Nukus, the regional capital, told IRIN. In 1998, UNDP launched a pilot micro-crediting programme to stimulate economic development in the region. A total of 180 families benefited from the programme. The participants were able to develop small businesses, cattle breeding, bread-baking and sewing. The rate of credit return was almost 100 percent. "Most beneficiaries of this programme are women who do not have a stable work. The pilot project showed people are interested in credits to develop their business activities in order to improve their living conditions in the long term," said Guldzhan Khalmuratova, deputy-mayor of Nukus. Most women involved are aged between 36 and 45 and with an average of six children each. In 30 percent of cases, the women are the sole breadwinners in the family. "Beneficiaries report a significant improvement in daily life, and are able to purchase good food for the entire family," Kural Seytmuratov, UNDP micro-crediting specialist in Nukus, told IRIN. On average, beneficiaries had seen their income double, compared to similar families who did not apply for the grant, he said. One female beneficiary used the credit to make clothes at home. Later, she developed the enterprise into a workshop, to which she added a small coffee shop, creating jobs for several others in the process. "Thanks to the credit, we were able to buy a carpet, winter clothes for our children and to reinvest the money in our business. We also paid back old debts," explained Nauryzbike Urynbaeva, a beneficiary from the micro-crediting programme. According to a survey conducted among the beneficiaries, three out of four said they were able to develop their businesses independently after receiving credit. The survey found that women were more successful at expanding their businesses than men.