Thousands of cyclone survivors in Bangladesh are to have their small loans written off after one of the country's biggest lenders put up 14.5 million dollars to cancel the debts. Microfinance - tiny loans given to the very poor to help them start small businesses - was made famous by Bangladesh Nobel peace prize winner Muhammad Yunus and his pioneering Grameen Bank.
Lenders including Grameen said last month it would not be possible to cancel the loans despite the severity of the cyclone, which killed nearly 3,300 people. But Bangladesh's biggest non-governmental organisation BRAC said Friday it would cancel the debts of around 125,000 of the most seriously affected borrowers. The organisation has about a million borrowers nation-wide.
"Every year we build up a reserve by allocating two percent of all repayments to the loan loss fund. This year with the floods and now the cyclone, we will be using all the loan loss reserve and some more," said deputy executive director Aminul Amin. Northern Bangladesh suffered major flooding in July and August. Villagers who had their loans cancelled would immediately qualify for new start-up loans, he added.
BRAC announced earlier this week that all borrowers in flood-affected areas would have repayments suspended until March 2008. Grameen also said it had put repayments on hold until next June.
Cyclone survivors have protested that they will never be able to rebuild their lives unless the loans are written off. Many were left without little more than the clothes on their backs after the November 15 storm. Official estimates put the number of families left destitute at more than 560,000. Aid agencies say one of the biggest challenges will be how to help whole communities re-establish livelihoods that were wiped out by the cyclone.
Disaster-prone Bangladesh is one of the world's poorest countries with 40 percent of the 144 million population struggling to make ends meet on a dollar a day. Typical microfinance loans involve borrowers purchasing chickens, a cow, a piece of machinery or mobile phone that can be rented out to provide a modest income.
The concept, which jointly won Yunus and Grameen Bank the Nobel peace prize in October 2006, has been copied around the world and is credited with helping millions out of extreme poverty.
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