Malawi: Loan Scheme to Assist Rural Poor

Sunday, April 24, 2005

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.
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Source: IRIN