Bank of the Poor: Additional Asset to The Social Network [Archives:2002/02/Business & Economy]

January 7 2002

With the capital of US$ 5 million the Yemeni government adopted a new project to establish the Bank of the Poor for offering small loans to alleviate poverty in the country. However, the question now is that: to what extent this bank can help reducepoverty in the country?
Since Yemen has adopted the Economic Reform Program in 1995, a number of funds has been established with the view of curbing the burdens originated by the program; such as the Social Care Fund, 1996, the Social Fund for Development, 1997, Public Works Project, 1996, the National Program for Productive Families, 1998.
Considerable funds have been allocated to this projects from the government, World Bank, the International Monitory Fund and some donor countries. However, the extent of gravity of poverty has never been reduced as prices have further soared and subsidies on some products have been lifted. Economists believe that small loans constitute one of the most effective means to fight poverty and unemployment. Consequently, international organizations involved in development are now more attentive to the issue of establishing banks for the poor, particularly after such banks have proved to promote small self-help enterprises and create job opportunities without the need for state-sponsored initiatives. Economists are unanimous in support of setting criteria for granting loans on the following bases: carefully specifying the poverty-ridden sections of the society; distributing loans in accordance with the classification of trades and occupations and combating favoritism. They also recommend that families with middle incomes should not have access to this kind of banks.
Small loans granted to small income-generating enterprises by the Social Fund for Development have been, for the most part, processed in a random manner. Also, the projects implemented by the Public Work Project lack organization and planning; thus they failed to create sufficient job opportunities. The training programs provided by the National Program for Families could not achieve its objectives to impart poor women with skills with the exception of creating a limited number of projects for low income families. The financial aids granted by the Social Care Fund to 453,758 families in 2001 did not include all poor families. Further, the monthly YR 1000 to 2000 allocated to each poor family could not suffice the needs of a family even for two days.
The implementation of the Bank of the Poor, which is supported by the Arab Gulf Fund for Supporting the UN Development Organizations, necessities learning lessons from the previous experiences of funds involved in helping the poor. And so as not to make of the loans granted by such banks an additional burden on the poor families, careful studies should be made on the would-be projects.
Solving the problems of poverty in Yemen needs a national mechanism to help carry out what has been stated in the plans of the Ministry of Planning & Development to restrict poverty and surpass its negative aspects.