In a recent report entitled ‘Microcredit boon for Penang’s poor’ in Malaysia’s ‘Sun2Surf’ online publication [1] , Penang-based freelance journalist Mr Himanshu Bhatt discusses the recent introduction of a ‘microcredit aid’ scheme in Penang. Penang is a state in the North of Western Peninsula Malaysia. Sun2Surf is the web companion to Malaysia’s widely read ‘The Sun’ newspaper. Dubbed the ‘People’s equality bridging project’, the microcredit scheme was announced last month as a joint effort between the Penang Development Corporation (PDC) [2] and Universiti Sains Malaysia [3]. The PDC is a semi-governmental organisation focused on the socio-economic development of residents in the Penang state. University Sains Malaysia is a Penang-based tertiary institution that focuses on scientific education. The report by Mr Bhatt refers to the benefits of the scheme but highlights the use of the scheme by opposition politicians in the country to gain political mileage.
According to report, the scheme is backed by a revolving fund and allows for the issuance of very small loans. The writer added that the scheme is targeted at ‘those at the bottom rungs of the income pyramid‘. These include single mothers and the disabled who rely on welfare assistance, as well as petty traders with a monthly income of less than RM400 (approximately USD 115) to sustain their families.
Mr Bhatt observed that the introduction of microcredit in Penang was in part doubt motivated by the well recorded successes of Bangladesh‘s Grameen Bank [4] and like institutions. He added that microfinance is appealing to some as ‘microcredit programmes require much less resources from the authorities and implementers‘ and that ‘the potential economic benefits brought about by the ripples of new activities spun out from the funds are plenty‘. In Penang, the state government and PDC have each allocated Ringgit Malaysia (RM) 1.5 million (approximately USD 431,900) to the fund for a period of three years. The maximum loan allowed by a single applicant is RM 5,000 (approximately USD 1440). The loans are scheduled to be distributed from 1 October 2009.
Despite the potential benefits of microcredit schemes, some critics have warned of the danger of societies becoming over-dependent on ‘such aid from the authorities‘. The writer also cautioned that it is important to have in place ‘a monitoring mechanism to ensure that money that is given out is genuinely used for the purposes stated by the borrowers and their families‘. More significantly, the report referred to the possibility that the microcredit scheme may have been indirectly used by opposition parties in the country to improve their political standing, particularly among the rural and non-rural poor. As stated by Mr Bhatt, the microcredit scheme was ‘consistently raised’ by opposition party leaders during a recent campaigning exercise. He added that reporters who covered the campaign rounds in villages and rural areas kept hearing opposition party members ‘extolling the virtues of the new scheme’.
Recent Microcapital.Org publications on microfinance in Malaysia can be found in the Bibliography section below [5] – [9].
By Chinq Yee Chong, Research Assistant
Bibliography
[1] Report entitled ‘Microcredit boon for Penang’s poor’: http://www.thesundaily.com/article.cfm?id=38296
[2] Penang Development Cooperation: www.pdc.gov.my/
[3] University Sains Malaysia: www.usm.my/
[4] Grameen Bank: www.grameen-info.org/
[6] MICROCAPITAL STORY: Malaysia Allows International Banks To Provide Microfinance
[7] MICROCAPITAL STORY: Bank Negara Malaysia Launches a $56.6m Micro Enterprise Fund
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