Revolving Fund Is a suggestive label for many structurally decapitalizing, short-lived funds which serve the purposes of administrative convenience, electoral campaigning or community solidarity, without strict insistence on the repayment of loans, let alone real positive interest rates. These funds may merit support in Individual cases, but in general they are rather hurtful for the poor target groups, and they are inappropriate for official development assistance, since a fund which spends money for grants as well as credits and which Is lenient in loan collections is impossible to monitor from the outside. Official international aid agencies can only control and should therefore only foment revolving loan funds which are empbryonic banks for the poor. Institutionally, every bank is a revolving loan fund, and it is a guarantee fund, too. The path on which to send the managers of a viable fund, then, is to seek self-financing through sounds mass banking practices and to open deposit accounts for the public rather than to look for subsidies and further aid monies indefinitely. Administrative rules and statutory provisions could ensure that it does not develop into a common commercial private bank serving the interest of only wealthy customers.
