Rural Pakistani communities increase their income by 30 percent or higher

Zarina Baloch of Ramzan Pathan village near Hyderabad bought two goats and cow with a USAID-supported loan

Residents once exploited by local moneylenders now make low monthly payments for USAID-funded loans for livestock, agriculture and trade purchases

When rural residents of Pakistan's Sindh province needed loans for crops, livestock or trade, they usually turned to local moneylenders or landowners who insisted on at least 100 percent interest, a hefty share of profits and repayment in 15 days. So when residents heard of a bank that provided small loans at low interest, allowed monthly payments for as long as a year and insisted on community-created savings accounts, they doubted its intentions. Moneylenders played on their suspicions and tried to scare residents off the new microfinance loans, said Qadir Bux of Shaikh Rehan village near Hyderabad. "They said the bank staff will kidnap you, they will sell you as a slave," he said. Residents were afraid that an unknown entity like a bank would run off with their savings.

Two years later, no one believes the moneylenders anymore. An $8 million program funded by USAID and implemented by Khushhali Bank, a government-established microfinance institution, has disbursed 131,000 loans in three years across 14 rural districts in Sindh and Balochistan provinces. To be eligible for loans of 3,000 to 10,000 rupees ($50 to $167) each, community members organize into groups and agree to take responsibility for each other's repayments. Payments may be quarterly, biannual or, like for farmers dependent on harvest, annual. Each of the 18,000 community groups saves 10 percent of their loan amount in a joint bank account, meant for funding community projects like building a town hall. After paying off one loan, borrowers qualify for another 20 percent larger. Residents at sev-eral Sindhi villages have completed at least two loan cycles and report an income increase of 30 percent, thanks to investments like goods for stores or fertilizer for boosting orchard harvests.

Many women, like Asha Pathan of Ramzan Pathan village, invest in livestock. Earlier, residents could only afford very young animals that they raised for two or three years before selling. Now they buy mature livestock and get faster turnover. Pathan bought a cow for 10,000 rupees and sold it for 18,000 during the Muslim festival of Eid. "Before these loans, our whole household ran on one person's income," a woman said. "Now my husband is happy I am helping too." The best part of the program, said Mohram Ali of Khan Mohammed Leekhi village, is the dignity it allows. "You don't have to ask favors of anyone," Ali said. "You earn yourself, and pay back the loan yourself."