Micro-credits effective in fighting rural poverty

Deprived of natural resources except for water, Kyrgyzstan remains a predominantly rural country where the transition to a market economy has created poverty in isolated regions. Today, in many villages, micro-credits have become the only source for sustainable development. Rural areas are the most affected by poverty. In towns, people have a wider range of access to finance and employment. The villages, however, are totally bereft of sources of funds. In most cases, villagers did not even have enough money to travel to a nearby city, and to spend days there filling out forms for hypothetical loans, Aikan Mukanbetova, task manager for the United Nations Development Programme's (UNDP) social governance programme, told IRIN on Tuesday. An estimated 70 percent of the country's population of 4.7 million live in villages, and by and large constitute its poorest social segment. Kyrgyzstan is a mountainous country, where access to urban centres can take days due to poor roads and adverse weather conditions. The main reason for poverty in Kyrgyzstan was the break-up there of the infrastructure of the former Soviet Union, which resulted in massive unemployment and introduced the present cycle of poverty, Mukanbetova said. No longer heavily subsidised by the central government, educational, health and other social services came under severe pressure, and in remote areas in many cases simply collapsed. In order to achieve sustainable development, it is essential to provide poor people with access to credit facilities. However, such a remedy could only become effective in the presence of trained personnel to apply it, Mukanbetova stressed. Social mobilisation is a key component of the UNDP's poverty reduction programme. With this in mind, UN volunteers are working to identify poor villages, draw up lists of the poorest people living in each, whom they then help organise into self-help groups of five to 12 members. Then, after several months of training on basic accountancy and business planning, each group is given access to credit facilities made available by a Kyrgyz institution from a World Bank loan. The members of each group are held mutually responsible in the disbursal of credits. This has proved a success so far, as statistics indicate an almost 100 percent recovery rate for credits in rural areas. Self-help groups often evolve into small credit institutions, and one of them has even transformed itself into a rural bank. The UNDP programme now covers 9,000 households across the country, but needs to be extended to reach more rural inhabitants in need of credit. "What we need is a micro-finance centre to bring together all credit institutions - domestic and international - to share information and bring about a more effective impact. Kyrgyzstan also lacks an agency which could collect all relevant information, and be able thereby to provide a broad picture of the country's needs when approaching potential donors," said Mukanbetova.