Micro-finance and empowerment

Apr 10, 2016 APNU Column, Features / Columnists

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(Excerpts from an Address given by His Excellency Brigadier David Granger, in honour of the 30th anniversary of the Institute of Private Enterprise Development (IPED)

The economic empowerment of poor people – from Emancipation in 1838 to Independence in 1966 – has always been constrained by the lack of access to financial credit, among other things.

It is a matter of historical fact that the newly freed men and women resorted to traditional, informal, cooperative savings schemes such as “box hand” to provide some of their needs. The village movement was started when peasants pooled their cash and brought it in bags in a wheelbarrow to Georgetown to purchase the plantation which became known as Victoria Village.
Village economies, however, required greater access to greater amounts of financing for farming and artisanal trades. An innovative solution was found by James Mc Farlane Corry, a Chairman of Den Amstel Village on the West Coast Demerara and the first Chairman of the countrywide Village Chairman’s Conference.
He introduced the idea of cooperative credit banks, patterned after the Raiffeisen banks in Austria, which offered small loans at low rates of interest to the agrarian community. The result was that the first local cooperative credit bank was established in August of 1905.
Cooperative Credit Banks were founded in other villages and the banks in Victoria, Buxton and Rose Hall villages were all reported to be doing well in 1912. The colonial government accepted the idea and established District Credit Banks in 1914. Eighteen such banks were established within the first two years. That much was achieved over a century ago in the colonial era.
Guyana’s financial sector, in the early Independence era, was dominated by foreign-owned banks which traditionally concentrated on short-term trade financing, working capital and providing loans to big businesses. Guyana’s economy, at that time, was controlled mainly by foreign multinationals.
COOPERATIVE BANKING
The Government of Independent Guyana quickly recognised the need to ensure that the average Guyanese could have access to credit for agricultural development, home construction and manufacturing. Three state-owned financial institutions were established – the Guyana National Cooperative Bank (1970), the Guyana Cooperative Mortgage Finance Bank (1971) and the Guyana Agriculture and Industrial Development Bank (1973).
The establishment of these institutions was part of a bold model of economic development that assigned control of the commanding heights of the economy to the State.
Post-colonial Guyana, however, was affected by high levels of capital flight, the emigration of members of the business class and the impact of exogenous shocks, including the oil crisis and poor terms of trade of the economy. These shocks exacerbated the problems within the economy and led to a contraction in growth. A large informal economy sprouted without access to financial resources. Private enterprise and entrepreneurship, admittedly suffered as a result.
ISED and IPED
The need arose “to create, stimulate, encourage and improve entrepreneurial skills in Guyana” to replace those that were lost due to attrition, migration of skills and the contraction of employment in the state sector. Dr. Yesu Persaud recognised the importance of stimulating the development of privately-owned local enterprise as a means of reversing unemployment and boosting entrepreneurship and small businesses. He pioneered the Institute of Small Enterprise Development (ISED) on the 1st April, 1986.
The early successes of the Institute of Small Enterprise Development established micro-financing as a stimulus to business and private sector development.
The restructuring of Guyana’s economy which started in 1989 allowed an enlarged role for micro-financing institutions in the transition to a market economy and in reducing some of the initial problems – unemployment, inequality and poverty – usually associated structural adjustment.
The Institute of Small Enterprise Development, in the context of the economic restructuring which had taken place under the Economic Recovery Programme (ERP), moved towards upgrading their organization into one that supported not just small enterprises but private sector development in general.
The Institute of Small Enterprise Development was rebranded as the Institute of Private Enterprise Development in 1991 in keeping with the thrust to promote private sector development through technical support and credit to both small and medium scale enterprises.
IPED has been a success.  It has, in its three decades of existence, disbursed more than 100,000 loans valued at over G$30B. It provides an average of 12 loans per day. The loans granted have sustained 10,000 jobs in the economy. Women constitute 37 per cent of its clients. It is an important source of financing for rural entrepreneurs who constitute 90 per cent of all the borrowers. It has impacted on youth unemployment with 12 per cent of its loans being granted to young entrepreneurs.
The Institute boasts an impressive repayment rate of 97 per cent. It can be said with confidence that micro-financing has:
·    established itself as a tool of human development;
·    empowered women and young people;
·    enabled individuals to own and operate their own businesses by providing  access to capital; and
·     impacted on reducing unemployment, inequality and poverty.
MICRO-FINANCE AND REGIONALISATION
Human development must be animated at all levels of our country. It must be manifest in all of our Regions. Guyana’s ten regions must become zones of economic growth. The recently-created ‘capital towns’ are meant to be motors to drive the development of the regions.
We are keen to ensure that micro-financing can be available in every ‘capital town’ of this country.  We want to promote human development by providing the poor with access to education and access to credit. We want to reduce the gap in income between rural and urban areas and between hinterland and coastland. We expect to achieve this by stimulating businesses and by creating employment through investment.
Micro-financing, already has an extended reach in this country. It must be further extended to serve the common good within every region. We are proposing, not imposing, that each capital town has its own Municipal Enterprise Network (MEN), similar to the Linden Enterprise Network (LEN), to provide access to microcredit.
IPED’s experience is evidence of the effect that micro-financing can have on human development. Access to credit creates opportunities for empowerment and for transformation of the lives of the ordinary man and woman.

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