Micro-credits offer hope for rural communities

Two years ago, 45 year-old Bulekbaev Myktybek was bankrupt and in trouble. Like many of his neighbours in the rural farming community of Tuz, 40 km southeast of the Kyrgyz capital, Bishkek, Myktybek and his music teacher wife had lost all hope for the future. Following the break-up of the Soviet Union, the village of 3,500 inhabitants at the base of the majestic snow-capped Tiau-Shan mountain range found itself in the grips of extreme poverty - the number-one problem in Kyrgyzstan today. The ethnic Germans in Tuz, once comprising 70 percent of the population, left, and the situation steadily deteriorated. “Our village had always been poor, but then it began to die,” Myktybek told IRIN. Tuz is typical of most rural communities in Kyrgyzstan, where poverty remains rife. According to the IMF, the per capita GDP is only US $266 - one of the lowest in all the countries of the Commonwealth of Independent States. An estimated 80 percent of the country’s 4.5 million people live on US $2 a day or less. The UN says over 65 percent of the Kyrgyz population suffers from poverty. In rural areas, that figure jumps to 85 percent. According to the National Human Development Report last year, 55.3 percent of Kyrgyz live under the poverty line of US $7 per month. What distinguishes Myktybek’s situation from most Kyrgyz today is that he is one of a growing number of beneficiaries of a United Nations programme aimed at alleviating poverty by targeting the poorest of the poor and empowering them to take more control over their lives. “Social mobilising and micro-financing is playing an increasingly important role in the alleviation of poverty in Kyrgyzstan today,” Aikan Mukanbetova, manager of the UN’s Participatory Poverty Alleviation Programme (PPAP) in Bishkek told IRIN. “This is proving a much more long-term, sustainable and effective approach than merely distributing humanitarian assistance,” he said. Since its inception in 1998, PPAP has grown significantly in terms of coverage, scope and the maturity of the self-help groups participating in the programme. The main objectives of the programme are to build self-reliance through community mobilisation and the promotion of grass-roots organisations for poverty reduction, and to increase access to micro-credit. To date, US $1.5 million has been distributed in the form of micro-credits. According to Mukanbetova, UN volunteers identify the poorest communities on the basis of specific poverty evaluation criteria, with particular emphasis being placed on women. The programme extends across all seven provinces or oblasts, and groups are established on a basis of mutual trust, responsibility and common interest, with between five and 12 people in each. Later, the group members are given training by UN volunteers on how to survive in a market economy - an often difficult concept to grasp after years of collective farming in the Soviet Union. Since the end of that era, all internal and external market mechanisms have disappeared. Villagers have been left to their own devices to eke out a living from the land, after collective fields and machines had been distributed equally among communities through a privatisation scheme. However, with no money to buy seeds, fertilisers, petrol and coal, life in rural Kyrgyzstan went from bad to worse. “Before UNDP [United Nations Development Programme] came here, we had no future, no hope - nothing,” Myktybek said. The approach taken by UNDP is twofold. “We focus on poverty alleviation, but also governance,” Mukanbetova said. “These are intertwined and cannot be separated.” She added that micro-credit was just one tool, which, by itself, was inadequate. “We try to teach them responsibility for their own lives.” Charging 26 percent interest annually, responsibility doesn’t come cheaply, and people soon understand the rules of a market economy. “Nothing is free,” she warned. The group members have a mutual responsibility to repay a micro-credit after submitting a written plan and pledge to repay the loan within one year. According to Mukanbetova, the money is dealt with in a transparent way, with each step explicitly explained. Almost 90 percent of funds were used in the agricultural sphere, animal husbandry or cultivation activities, she added. Initially, group members receive around US $150 after the loan is divided up, and the motivation to repay it as a group is high. After the first loan is paid back, the group can reapply for a second loan, now providing each member with an additional US $300 to invest, and this time over an 18-month period. “They know if they are successful, they will automatically be given access to a second loan, with further challenges and opportunities,” Mukanbetova added. During its two years of implementation, the programme has provided 6,400 poor people - 54 percent of whom are women - access to micro-finance and the opportunity to increase their income. As a result, over 32,000 family members have also benefited. Mukanbetova said the repayments to date were about 98 percent, demonstrating a strong commitment by participants to be successful. The programme is not without challenges, however. Each province and village in Kyrgyzstan is different, Mukanbetova said. “Traditions and mentalities are very different from oblast to oblast,” she noted. Moreover, there is a certain degree of scepticism among those unfamiliar with the programme. However, at this point, the main constraint seems to be financial. “Our capacity is limited,” she said. “We are currently operating in 90 villages throughout the country, but there is an extremely high demand to expand the programme, and the Kyrgyz president would like to see it multiplied by seven,” she added. The social mobilisation approach will be integrated with the national poverty elimination strategy due for implementation this summer. During a poverty alleviation forum in May, President Askar Akayev said that if the programme was working in 500 villages, it would create a solid base to eradicate poverty in the country. Empowering the rural poor through information, training, confidence building and facilitation of local development activities is not necessarily something openly embraced by other Central Asian countries facing similar circumstances. According to UN officials, in neighbouring Uzbekistan such a programme was was rejected outright by officials, who said there was no poverty in the country. Meanwhile, back in Tuz, efforts by the PPAP programme are continuing to bear fruit, and Myktybek is delighted with the results. There are now more than 500 farmers working in Tuz. In addition to maize, sugar beet, animal feed and potatoes, participants are also encouraged to try other crops that might prove more profitable. Of the village’s 842 households, 131 of the poorest are participating in the programme, and the demand to expand is high. There are already six new groups in addition to the eight existing last year. Myktybek recalled how UNDP volunteers came to his village to explain the programme, and confessed how he, too, had reservations at the time. He fondly remembers how, during training seminars, agricultural specialists advised him which seeds and beans to plant - and proudly displays the copious notes he had written then. In fact, during a recent evaluation of the programme, it was the knowledge participants had gained in the training courses that seems to have had the greatest impact. “I tried to do something before, but I simply didn’t know how,” he said. “They taught us how to deal with money and about making plans for the future - things that were completely foreign to me.” Today, the father of four has a new perspective on life and relishes the self reliance he has learned. Despite having been in the programme only since January 2000, he is already leader of an association of a self-help groups which filters business proposals to the groups, and he is now working on repaying his second loan. He is also planting a new type of bean to be harvested in October. “There is life in this village and a future for my family,” he smiled. Reaping the rewards of his labours, he has taken a more conservative approach to his newly found financial independence, however. Saving money for his oldest daughter and son to attend university this year, he has now decided to invest in his children’s future.