April 22, 2005

Loan scheme to assist rural poor

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 which was introduced in January, 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.
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. (IRIN)

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