Livelihood Restoration Loan (LRL)
Special PKSF loan programme to mitigate Covid-19 impacts in rural areas
Lending the Government’s support to the cause of improving lives and livelihoods of the people affected by the Covid-19 pandemic, Prime Minister Sheikh Hasina announced a multipronged stimulus package to revive the rural economy.
In response to this and to resuming production and compensating for the loss already incurred, the process of necessary support for flexible, low-rate loans from PKSF and its Partner Organisations (POs) for the microenterpreneurs, marginal and small farmers as well as trained and skilled young enterpreneurs has started from September 2020.
On 14 May 2020, the Prime Minister announced a special stimulus package of BDT 2,000 crore for disbursement through Palli Karma-Sahayak Foundation (PKSF) and three specialised banks – Palli Sanchay Bank, Karmasangsthan Bank and Prabashi Kalyan Bank. Each of these four institutions was allocated BDT 500 crore.
From the BDT 500 crore sanctioned in favour of PKSF, the Ministry of Finance (MoF) released BDT 250 crore on 23 August 2020. Both the Financial Institutions Division and Finance Division of the MoF provided active support for the release of the fund.
Three days later, on 26 August 2020, the PKSF Governing Body in its 228th meeting approved a set of policy directives for a special loan programme titled ‘Livelihood Restoration Loan’ (LRL). The Governing Body also sanctioned the entire sum of BDT 250 crore in favour of 111 selected Partner Organisations (POs) to be disbursed among some 80,000 marginal and small farmers, microenterpreneurs and trained young enterpreneurs. The PKSF has formed a seperate implementation committee to coordinate and monitor these disbursement activities.
The service charge of the loan has been set at 5% for all PKSF Partner Organisations with the strategy to help borrowers quickly recover from the shock caused by the pandemic. For LRL, the overall service charge between PKSF and Partner Organisations (POs) has been reduced by 50%.
At the PO level, the maximum service charge has been set at 18%, which is 6% lower than the existing 24% set by the Microcredit Regulatory Authority (MRA). So, the service charge at the POs and borrowers level is 33% lower as compared to other conventional loans.
In the traditional system of loan, borrowers usually repay the amount within a year in weekly installments. But for LRL, they can enjoy flexible payment schedules, weekly, fortnightly and monthly installments, whichever is more suitable to them. They can even pay back the entire amount in one installment at any time within the maximum limit of 2 years.
The special loan programme covers all the 64 districts of the country excepting city corporation and district headquarters areas.
As of 22 October 2020, PKSF has disbursed BDT 243.5 crore to the Partner Organisations who in turn disbursed BDT 145.92 crore among more than 46,000 members. The rest of the amount is expected to be disbursed by November 2020.
The loan programme has already contributed to the revival and creation of livelihoods opportunities for the victims of the pandemic. It has visibly helped restore economic activities and enable many enterpreneurs to invest afresh in their businesses. Resultantly, both the household income and the overall cash flow in the rural economy have increased.
In addition to this special loan programme, the PKSF has been implementing various support programmes to boost the rural economy since the advent of the Covid-19 pandemic.