MALAWI: Loan scheme to assist rural poor

[ This report does not necessarily reflect the views of the United Nations]

LILONGWE, 22 Apr 2005 (IRIN) - Malawi's rural poor have cautiously welcomed a government-sponsored loan scheme, saying similar aid packages in the past have tended to favour supporters of the ruling party.

The scheme, introduced three months ago, is worth around Kwacha 5 billion (US $44 million) and is expected to provide small loans to impoverished rural households, in a bid to assist thousands of families struggling to make ends meet. According to official figures, about 65 percent of the country's 12 million inhabitants live below the poverty line.

To ensure the loans are paid back, the government has employed a 'peer pressure' mechanism: a group of 10 individuals collectively borrow from the scheme and repayment is made as a group. Should one individual renege on their share of the repayment, the group will not receive a further loan.

While vulnerable households say the loan scheme is timely and necessary, they remain sceptical as to whether the funds will directly benefit communities in need.

"During the [Bakili] Muluzi administration we were told there were loans for those who wanted to do business. I registered my name with some [United Democratic Front] party officials, but we never saw the loan. I am afraid that this, too, is just a political ploy to fool us," Rafton Gondwe from the northern Mzimba district told IRIN.

"I spend most of the time doing piecework. With the money I get, I pay school fees for my children and buy their clothes, apart from feeding them. If indeed the loan is meant for poor people like us, it will help a lot," he added.

Gondwe said if he got the chance, he would borrow US $85 from the government loan scheme to start a small business.

Wiseman Somba from Blantyre, in the south of the country, said he hoped access to the microcredit loans would not be restricted to government supporters.

"In the past we had similar loan schemes, but those who benefited were people related to, or who supported, the ruling party. This resulted in them failing to pay the loans, because they thought it was a gift," he said.

The scheme will be managed by the Malawi Rural Development Fund (MRDF), while the budget and finance parliamentary committee is expected to oversee its activities to ensure transparency.

[ENDS]