D. Provision of access to credit and capital

73. Because of the low capital requirements for production of most indigenous building materials, there are opportunities for investments by local entrepreneurs. However, these can only become a reality, if the requirements of local entrepreneurs, in terms of credit and capital, are met. Even though the credit requirements for investment in indigenous building materials production are relatively low, they cannot be met within the capacity of existing financial institutions. For this reason, the promotion of such materials will require special arrangements for the provision of credit to entrepreneurs.

74. A large proportion of the credit requirements will be for small-scale operators who may not be able to meet the normal guarantees for the provision of loans by credit institutions. In addition, a substantial part of credit needs will be for working capital rather than fixed capital. Sometimes, demand for funds and the corresponding payback period will not follow regular procedures of conventional finance institutions. For these reasons, innovative arrangements in the provision of credit to local entrepreneurs is required. One important issue that has to be addressed in this regard is the question of the unfavourable competition which imported materials offer to indigenous materials. Because the cost of production or market price of imported materials is often subsidized, there is need to provide credit at preferential interest rates to entrepreneurs engaged in the production of indigenous materials, so that the latter materials have a chance of being attractive on the market.

75. Sometimes, a relatively small imported input is indispensable for the production of an indigenous building material. However, limitations in the supply of foreign exchange and the cumbersome process of foreign-exchange allocation can be a constraint to the production of indigenous building materials. In order to address this problem, it will be desirable to make basic imported capital inputs available to local entrepreneurs. Certain imported capital inputs can be purchased by governments and made available to interested producers in the form of loans. Alternatively, capital items can be provided on a communal basis. For instance, vehicles for carting clay or limestone from the source of the raw materials to the various production sites can be provided in the form of a plant pool.