The Saving and Micro-credit Bank that was established 13 years ago has improved the living standard of many Eritreans throughout the country by providing them loans. Following independence, the economic situation of Eritrea was devastated due to the long years of war and the irresponsible policies of colonizers. Thus, most of the people were forced to live below the poverty lines, especially in the remote areas.

The thirty years of war for liberation and the brutal Ethiopian colonialism left the country in ashes. The main responsibility of the Government of Eritrea and the PFDJ, right after independence was to provide basic social services to all Eritreans in a short period of time. Building major infrastructural works on health, education, transportation, agriculture, housing, and communications through different ways, showed a promising progress and the livelihood of many citizens registered a promising improvement.

Improving the living standard of the people in general and of those who live below the poverty line in particular, was the basic initiative the Government took. Providing needy farmers with livestock, agricultural equipment, fertilizers, crops… was what the Eritrean saving and micro-credit program worked with at its primary stage.

According to the head of the operations unit of the Savings and Micro-credit Bank, Mr. Ghetachew Eyob, the program that was established in 1996, has three basic objectives: to enable those who live in the remote areas to have access to credit programs; to help women become independent by participating in income generating activities; and to establish an independent micro-credit financial institution.

The Saving and Micro-credit Bank started its work by establishing 25 village-level banks as a pre-test. And it opened five micro-credit oriented banks in each zoba, except with the Southern Red Sea Zoba. Soon, the Bank expanded its capacity and went down from zoba to sub-zoba level. At the present, the Bank provides its services in 55 out of the 58 sub zobas in the country in which it established 469 village level banks.

The sub zobas of Adobha, Dahlak and Selea are the only three sub zobas that are short of the bank’s immediate service due to lack of adequate transportation services. However, residents of these areas could receive loans from the bank’s offices from arrears near them.

The saving and micro-credit bank has about 42 thousand clients at the moment. At first, it started its credit amount ranging from 750 up to 3000 Nakfa; but now a person could get up to 150,000.

The number of the Bank’s clients is increasing from time to time and by the end of this year, it is expected to reach 50 thousand. Reaching that number, the Bank would be able to meet the international credit program measurement level.

Savings and micro-credit programs are popular in many countries and especially in the Far East. In Bangladesh, for example, institutions such as Grameen Bank and ASA have about 12 million clients. Since the region is exposed to continuous natural disasters, such institutions play an important role in the rehabilitation of disaster victims. Similarly, ASA provides job opportunity for more than 42 thousand Bangladeshis.

Speaking on the life improvements the SMB brought to its clients, Mr. Getachew said: “at first our clients were those who live below the poverty line and who are able to make benefit from the loan provided to them. Similarly, demobilized fighters, war displaced citizens and refugees who returned to their country were also the targeted part of the society. In a ten year work assessment we conducted, 85 percent of the recipients paid back their loans on time which demonstrates that they were successful in the business they were engaged.”

Although the program was successful, some of its clients claim that the 16 percent interest rate is too high. Regarding such beliefs Mr. Getachew said that the basic measurement of the success of such programs, even at the international level, is not the interest rate, rather it is whether the recipients are investing the money on a business that they could get swift benefits from.

The clients of the SMB are either individuals or group of people who want to run business together. In order to reduce the expenses of its clients, SMB sends its workers to the areas where the clients are. So, the beneficiaries would not have transportation and other expenses to get their loan. The Bank also provides its clients with efficient financial management and possible business alternatives.

“At the beginning, when the creditors came, we inform them that it is a short term loan so that they couldn’t built houses or establish major business institution with what they borrow. What we provide them is an income generating loan which would be paid back in a short period of time. So, they would be encouraged to actively invest on areas where they could manage and make a profit,” said Mr. Ghetachew Eyob.

As part of its continuous work improvement, SMB has introduced new programs since 2008. It provided different amount of loans to those who are engaged in seasonal and irrigation farming, in livestock fattening and trade activities. The Bank provided about 29 million Nakfa loan to the seasonal farmers.

Regarding those who are engaged in irrigation farming, it provided 48 million Nakfa to help them buy generators, for digging wells and the like. Similarly, the Bank spent 40 million in micro business loan to those who are engaged in livestock fattening and another 40 million for those in small business loan category such as running kiosks and trading activities.

Apart from such programs, the Bank also offered an ‘oxen loan’ to the needy farmers and distributed thousands of oxen bought at the cost of 14 million Nakfa, most of them in the Gash Barka region.

Interested government workers are also provided with the opportunity of borrowing money equivalent to their six months’ salary which would be paid back in two years. Such kind of loan is ‘unrestricted’ in which the creditor can use the money for whatever plans he has. The interest rate of this loan is seven percent. Since the SMB insures the recipient, if he dies before paying back his debts, the account will be closed. For this purpose, the Bank has invested 20 million Nakfa.

In 2008, the Bank loaned 152 million Nakfa to its about 23,000 clients. During its work years, the SMB invested about 1.3 billion Nakfa in loan and has improved the livelihood of most of its clients.

Translated by A. Tesfay

Source: Hadas Eritra, June 27, 2009