IT is not easy for borrowers to access bank loans. Too much paperwork is a hassle. The microcredit seekers’ case, too, isn’t much different. They face difficulties in arranging sureties, getting documents verified, and even filling the application form poses a big problem. Simplifying the procedures is where the Khyber Pakhtunkhwa government’s new micro-credit scheme can play a vital role. An easy access to credit for genuine and skilled workers is necessary to make the scheme a success.

The Pakhtunkhwa Hunermand Rozgar Scheme (Skilled workers Income Scheme), one hopes, will not miss out on the needs of skilled workers. They are the ones who would help fulfill the scheme’s objectives: trigger economic activities at the grass roots level, facilitate self-employment, and reduce poverty.

The government has made an allocation of Rs1.3 billion for the Rozgar scheme. Loans ranging between Rs50,000 and Rs300,000 would be given for a period of three years to skilled workers passing out from technical education institutes in the province.

The number of employed industrial workers in the province has dropped to 24,000 in 2011 from 54,000 in 2008 because of militancy. Many of these workers can set up their personal businesses if funded by microcredit.

Another positive: it will inject money into the provincial economy at a time when the banks are wary of lending in the troubled province. The objectives of the scheme may be difficult to achieve, but given the right approach, it would work. The plan is however not risk-free. Thousands of skilled workers may end up burdened by bad debt and precious public money may be lost, if things do not work out well. A sound strategy based on a detailed market research is what the government should have, before launching the scheme.

How many plumbers should be financed in Peshawar or Abbottabad keeping in view the market’s absorbing capacity, how many furniture related businesses should be supported in Swat and Swabi, how many qualified auto mechanics should be funded for establishing auto workshops at Bannu, Tank, and Peshawar. How many gem cutters should be supported?

The new scheme targets to distribute Rs1.3 billion in 2011-12. According to sources, some 15,000 skilled workers would be provided credit for a period of three years. That makes it no different than the government’s usual development plans: more emphasis on activities than the outcomes.

For the Rozgar scheme, the success depends on the quality of businesses that would be financed. What specific results in terms of reducing poverty and creating jobs the government wants to achieve by the end of the first three years? Perhaps, no one knows in exact terms. The government’s targets lack specifics; all that is known is that the scheme will generate economic activities, create jobs, and reduce poverty.

How many jobs would be created? How many of the new businesses would be viable to start paying their loans within one year after availing the facility? How much poverty will be reduced, say, after three years? The budget documents contain nothing in this respect.

There are other aspects that also need a careful attention on the government’s part. One knows that not all of the qualified skilled workers who pass out from technical institutes possess entrepreneurial and business management skills required to run successfully even the small businesses like auto workshops, plumbing and electrician work, or furniture business.

Diploma holders and those who have done one-year and two-year technical education courses can be an exception. These courses do cover some of the business management topics.

However, thousands of skilled workers, who do short courses, are not imparted entrepreneurial skills. To fill this gap, training workshops will be conducted to impart basic entrepreneurial skills to the successful loan applicants. This, too, happens to be a good move, but with inherent flaws. “Who bothers to attend workshops once loan money is obtained?” asked a former top banker.

According to official figures, about 10,000 students pass out as skilled workers, every year, from the government’s 50 including 17 women technical institutes. A vast majority of them do take courses of four to six months. How much technical skills can one learn by doing such short courses?

Any official at the Directorate of Technical Education knows the answer well. “Three to four years’ on-the-job experience helps them (who do short courses) to master the skills,” said a well-placed official at the directorate.

His views were echoed by the principal of a government technical education institute in Peshawar.

What about the skills to manage and run one’s own business? On its part, Small and Medium Enterprise Development Authority, the implementing agency, will develop business plans for those who qualify for the credit.

Usually, business plan is submitted along with the loan application. It provides basis for the lending agency to evaluate the viability of a business for which the loan is sought. On the basis of the evaluation, the application is either approved or rejected.

However, in this case, business plans will be developed after the loan applications are approved. We can assume that the government wants to go an extra mile to support skilled workers.

Nonetheless, the government should not forget that the Rs1.3 billion allocated for the scheme is public money that may be at stake. After all, it is going to be a business deal between the lender and the borrowers. It is not the welfare money that the government is doling out. The borrowers will get loan at five per cent mark-up and they are supposed to return the borrowed money with interest.