South Africa can learn from State Bank of India

Thursday, 25 March 2004, 08:00 Hrs
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JOHANNESBURG: An Indian banking official here says South Africa can learn from the State Bank of India's experience in poverty alleviation programmes to reduce wealth disparity in the country.

"The State Bank of India (SBI) has always played a pivotal role in poverty alleviation in India," the chief executive officer of the bank's South African operations Sudhir Garg said at a seminar here on poverty alleviation.

"The bank has a large market share in providing about 38 per cent of the credit. So the benefit to small and medium enterprises and to micro-credit organisations helping the poor is in the same proportion," Garg told IANS.

Garg said the SBI had, in fact, been doing much more than its proportionate share in poverty alleviation because of its traditional strong presence in the poor areas, rural areas and semi-urban areas.

"One message I would like to pass on to the South African institutions and government departments is that South Africa also has to take care of the equitable distribution of wealth, of which there is enough in this country, and probably more than in India," Garg said.

But, he said, the disparities were much more in South Africa, whereas in India the problem of inequitable distribution of income had been solved to a large extent.

"It is in the process of getting solved every year, but in South Africa it still remains to be solved," he elaborated.

Banks had to play a major role in this process as they were the major channels through which the finances had to be made available.

But Garg did not believe that government needed to intervene to deal with the reported reluctance of most banks in South Africa to make loans available to the poor.

"No, government should not compel banks, but certainly government can set up some benchmarks to give some incentives for such lending."

Another speaker at the seminar, Marie Kirsten, a policy analyst at the Development Bank of Southern Africa, said the Banking Council in South Africa was working on ways to assist the poor with loans.

"In India government has strongly supported rural development projects through subsidies, but in South Africa the government has set up a wholesale structure to lend money to NGO's that is not subsidised," she said.

"That is also all they get here - there is no training or practical support, whereas it is my understanding that a similar wholesaler in India provides much more than just loans. In that way the government programme (in India) can be more successful, while the (South African) support is very small."

Kirsten said the Grameen (village) Bank concept of lending amounts to rural farmers, mainly women, and ensuring repayment through peer pressure and an honour system had been very successful in Bangladesh and India, but the cost of capital for a similar venture in South Africa was too high.

Source: IANS
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