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REPORT OF THE REGIONAL WORKSHOP

ON

MICRO CREDIT DELIVERY SYSTEM AND GOOD GOVERNANCE IN RURAL DEVELOPMENT

held on 07-18 February 2010, Comilla, Bangladesh

AFRO-ASIAN RURAL DEVELOPMENT ORGANIZATION (AARDO) NEW DELHI

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Back Cover Photo :

The participants of the "Regional Workshop on "Micro Credit Delivery System and Good Governance in Rural Development" with Mr Md. Ataur Rahman (sitting middle), , Director General, BARD on 7 February 2010.

Published by : Afro-Asian Rural Development Organization 2, State Guest Houses Complex, Chanakyapuri New Delhi 110 021, India

Phones : 91-11-26877783/24100475/26115936 Fax : 91-11-26115937/24672045 E-mail : [email protected] Website: http://www.aardo.org No.08-10-250

The report has been prepared under the kind guidance of H E Dr Abdalla Yahia Adam, Secretary General, AARDO by Dr Sanjeeb Kumar Behera, Head, Research Division and Dr Rajeshwar Dyal, Head, IEC Division, AARDO. Designed by Mr Kamal Dhameja, Technical Officer II, AARDO.

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CONTENTS

Page Preface Acknowledgements 1 2 3 4 5 6 Proceedings of the Workshop Groups Discussion and Recommendations Valedictory Session A Note on the Field Visits Evaluation Report Annexures 6.1 Keynote and Expert Papers 6.1.1 Keynote Paper on "Micro Credit Delivery System and Good Governance in Rural Development" by Mr Md. Ataur Rahman, Director General, BARD Rural Development : Concepts and Dimensions (Abstract) by Mr Hasnat Abdul Hye Dimensions of Poverty : A Synopsis by Mr Hasnat Abdul Hye Rural Development and Poverty Reduction Linkages by Dr M. Solaiman The Third Generation Co-operatives/Groups: The Experiences of CVDP and SFDC by Dr A K Fazlul Bari Rural Development in Select Asian Countries: An Overview by Dr S K Singh Role of NGOs in Poverty Alleviation in Bangladesh by Dr S K Singh 7 9 10 46 52 54 56 59 61 63

6.1.2

77

6.1.3 6.1.4

79 82

6.1.5 6.1.6

85 91

6.1.7

110

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6.1.8 6.1.9

Microfinance Institutions: Role of PKSF by Dr M A Hakim Micro Credit and Entrepreneurship Development by Dr M A Hakim

113 136

6.1.10 Coordination for Governance at Local Level : Experience of Bangladesh by Dr Swapan Kumar Dasgupta 6.1.11 The Grameen Bank Model of Micro Credit in Rural Bangladesh by Mr Md. Ayub Ali Howlader 6.1.12 Issues and Concepts : Millennium Development Goals (MDGs) and Poverty Reduction Strategies (PRSs) with Emphasis on Governance and Poverty by Dr Quazi Mesbahuddin Ahmed 6.1.13 Social Safety Net Programme for Poverty Reduction by Dr Quazi Mesbahuddin Ahmed 6.1.14 Micro Credit Regulatory Systems in Bangladesh by Mr Khandakar Muzharul Haque 6.1.15 Micro Finance Model and Bangladesh Experience by Dr Mahabub Hossain 6.1.16 Non-farm Economy in Bangladesh: Nature, Determinants and Impact on Poverty Reduction by Dr Mahabub Hossain 6.1.17 Concepts and Elements of Good Governance by Prof. Nazmul Ahsan Kalimullah 6.1.18 Good Governance in Rural Development: Challenges and Opportunities by Dr Iftekharuzzaman 6.2 Country Papers 6.2.1 Micro-Credit and Good Governance in Bangladesh A Joint Paper by All Participants of Bangladesh The R O China Experience in Integrating the Agricultural Finance System and Activating Rural Economy by Mr Chih-Pei Lin

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162

170

179

189

196

204

211

217

225 227

6.2.2

250

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6.2.3

Micro Credit Delivery System and Good Governance in Rural Development in India by Mr Chandra Kumar Jamatia Micro Credit Delivery System and Rural Governance in Lebanon by Ms Mona Asaf Micro Credit in Sultanate of Oman by Ms Badra Rashid Saeed Al-Qutaiti and Mr Nasser Mubarak Al-Alawi Micro-Credit in Syria by Ms Sahar Abdin

264

6.2.4

273

6.2.5

288

6.2.6 7 8

308 311 316

Programme Schedule List of Participants

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PREFACE

Afro-Asian Rural Development Organization (AARDO), one of the earliest examples of SouthSouth cooperation and Afro-Asian solidarity, was established in 1962 as an inter-government Organization to serve as a forum for the countries of Africa and Asia to jointly discuss their problems, exchange views, ideas, information and experiences in the field of rural and agricultural development. The main objective of AARDO is to act as a catalyst in the Afro-Asian region for promoting economic and social changes among its member countries and accelerate the pace of their rural development in particular. AARDO's strategies for rural development are focussed on three broad areas i.e., human resource development, financing of development pilot projects and dissemination of information. Micro-credit as a system of financing the poor emerged as an alternative approach to the conventional credit system in literature and practices through introducing collateral free, small amount of credit support to the poor. Generally, capital is considered as one of the factors of production and credit is one of the means of capital formation. Yet, it is also a tool of generating self-employment. But unfortunately most of the people in the rural areas, where the scope of formal employment opportunities is negligible, were bypassed by the formal credit sector. As a result, the poor had either to depend on the village moneylenders or to go without. Micro-credit has proved that the poor are bankable, and gradually, credit has been recognized as one of the right of the people. Bangladesh is the country where the seedbed of micro credit was prepared, experimented, nourished and flourished with a recognized system to serve the poor. Research findings show that micro credit is not only linked with income generating activities at household level, it has positive contribution towards the field of social development especially the empowerment of women and human development through increased access to health and education. The transformation process of household welfare by micro credit has several facets. Income Generating Activities (IGAs) help to increase household income; formation of savings habits helps to acquire assets and adopt positive mechanism of crisis mitigation; bindings of repaying weekly installments force people to be employed in more productive sectors etc. The official declaration by the Nobel Committee during the awarding of Nobel Peace Prize in 2006 to Dr. Muhammad Younus and Grameen Bank articulated that lasting peace could not be achieved unless large population groups found ways to break out of poverty. Micro credit is one of such means. International accreditation of micro credit also recognizes the role of micro credit in poverty alleviation. Good Governance has become a cross cutting issue for most developing countries. It assumes the necessity of government's ability to guarantee law and order and to create or promote conditions necessary for economic growth and freedom of choices of the citizens. In the recent years, the issue of good governance has raised the concern to be more responsive to the felt needs of the people, particularly the poorer and weaker section of population. Therefore, the issue has gained a strong ground and has also been given a paramount 7

importance in the Millennium Development Goals (MDGs) and Poverty Reduction Strategy (PRS) of many developing countries. As a result many developing countries have been embracing rapid development that have been consequential to the decentralized and participatory approaches of good governance. Good governance in rural development devotes a wide spectrum of ideas like the form and nature of local governance and management of rural development programmes/ projects and the capacity building of the local government institutions in formulating and implementing local development policies and programmes. In order to accelerate the pace of poverty reduction through micro-credit programme, it might be useful to learn from the successful practices and experiences achieved by Bangladesh and apply those practices in other places/countries by taking into consideration the socio-economiccultural diversities. Concerned with high probability of sharing the micro-credit delivery system in Bangladesh, Afro-Asian Rural Development Organization (AARDO) in collaboration with the Rural Development and Cooperative Division of the Ministry of Local Government, Rural Development and Cooperatives, Government of Bangladesh and Bangladesh Academy for Rural Development (BARD) organized a regional workshop cum training programme on "Micro Credit Delivery System and Good Governance in Rural Development" during : 07-18 February 2010 with the objectives to enhance the knowledge

of the participants on the issues and concepts of rural development, micro-credit operation, good governance and poverty reduction strategies and exchange experiences of best practices in the participating countries. The specific objectives of the training workshop were a) discuss the concepts and dimensions of rural development, microcredit operations and the linkages between micro credit and poverty reduction; b) exchange the basic concepts of good governance, local governance and its relationship with the Millennium Development Goals (MDGs) and Poverty Reduction Strategy (PRS); c) share experiences of poverty reduction programmes, micro credit operation and good governance with special emphasis on rural development efforts of different AARDO member countries; and d) develop strategies of pro-poor micro credit management and good governance for serving the people. I hope that the workshop report will prove to be useful to the policy makers, researchers, investors and other stake-holders in Afro-Asian region and elsewhere as it contains useful information on micro-credit and good governance for rural development of Bangladesh as well as that of the participating countries. Any comments and suggestions would be greatly appreciated and would be considered in future AARDO activities. New Delhi India Dr Abdalla Yahia Adam Secretary General

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ACKNOWLEDGEMENTS

The successful organization of the regional workshop cum training programme on "Micro Credit Delivery System and Good Governance in Rural Development", held at Bangladesh Academy for Rural Development (BARD), Kotbari, Comilla, Bangladesh during 07-18 February 2010 was possible largely due to the support and kind cooperation extended by the Rural Development and Cooperative division (RDCD) of the Ministry of Local Government, Rural Development and Cooperatives, Government of Bangladesh and BARD. First and foremost, Afro-Asian Rural Development Organization (AARDO) expresses its profound and sincere thanks the Secretary, Ministry of Local Government, Rural Development and Cooperatives, Government of Bangladesh for his kind support in organizing this workshop. AARDO is also thankful to Mr. Md. Ataur Rahman, Director General, BARD for taking the initiatives to organize this programme at his esteemed institute. Needless to mention here that he was the guiding spirit behind the workshop. The Organization wishes to acknowledge with

sincere thanks the noteworthy contribution of all BARD faculty members, especially Mr. Mir Kashem, Dr. S J Anwar Zahid, Dr. Milan Kanti Bhattacharje, Mr. Md. Mizanur Rahman, Mr. Anwarul Azim, Mrs. Kazi Sonia Rahman. The organization is also thankful to the all guest speakers for sharing their rich experiences and expertise with the participants. AARDO wishes to convey its sincere thanks to the esteemed government of the participating member countries, namely, Bangladesh, R O China, India, Oman, Lebanon and Syrian Arab Republic for sparing the services of their senior officials to participate in this programme. Thanks are due to the participants for preparing comprehensive country papers highlighting the micro credit delivery system and good governance in rural development of their respective countries. Last, but not least, the Organization also gratefully wishes to acknowledge the cooperation of all those who worked behind the scenes to make this regional workshop cum training programme a great success.

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1. PROCEEDINGS OF THE WORKSHOP

1.1 Inaugural Session Bangladesh Academy for Rural Development for their kind and unceasing cooperation in organizing the workshop. Giving a brief introduction about the activities of the Organization, he mentioned that AARDO, established in 1962, is an intergovernmental organization in the field of agricultural and rural development. Its main objective is to act as a catalyst and provide a forum for the member countries to jointly discuss their problems, exchange views, experiences and information in the field of agriculture and rural development. AARDO organizes training programmes, workshops, seminars; study visits both at international and regional level. In addition, AARDO provides financial assistance for various aspects of development under its pilot project scheme. He further mentioned that considering BARD's significant role as a leading training institute for the practitioners and policy makers in rural development through its unified approach of training, research and pilot experimentation; and significant contribution to human resource development for local level planning and management of rural development programme in Bangladesh and past professional relationships, it has been mutually decided to organize workshop cum training programmes at BARD. Now with this workshop cum training programme at BARD, AARDO has added one more centre of excellence in the Asian region and sincerely hopes that the Academy will continue to serve as one of the centers of excellence for AARDO programmes for a quite a long time. Finally, he hoped that the workshop cum training programme would create an opportunity of sharing experiences among the participants and they would be benefited from the rich experiences of Bangladesh.

The Inaugural Session of the Regional Workshopcum-Training Pogramme on "Micro Credit Delivery System and Good Governance in Rural Development" was held on 07 February 2010 at 10:30 am in the Dr. Abdul Muyeed Conference Hall, Bangladesh Academy for Rural Development (BARD), Comilla, Bangladesh. Mr Md. Ataur Rahman, Director General, BARD presided over the session. Welcoming the participants of the workshop, Dr S J Anwar Zahid, Director (Training), BARD highlighted the important role being played by the Academy in developing human resource through organizing training programmes for civil servants, government and non-government officials, grass-roots leaders and functionaries of local government since its establishment. He also mentioned that BARD organizes international and national workshops/seminars on a regular basis and this workshop is such an endeavour in collaboration with Afro-Asian Rural Development Organization (AARDO) and Rural Development and Cooperative Division of the Ministry of Local Government, Rural Development and Cooperatives, Government of Bangladesh. In course of his welcome address, he also outlined the objectives of this programme. Representing H E Dr Abdalla Yahia Adam, Secretary General of AARDO, the Head of Research Division in the AARDO Secretariat, Dr Sanjeeb K. Behera expressed his thanks and gratitude to the esteemed Government of the Peoples' Republic of Bangladesh and the 10

Mr Md. Ataur Rahman, Director General, BARD and Chairperson of the Inaugural Session welcomed the participants to BARD and hope for their pleasant stay in his country. He highlighted the activities of BARD regarding training, research and project experiments. He mentioned that BARD feels proud of working jointly with AARDO. He requested the participants to share their experiences and ideas of effective microcredit system and governance issues. Thanking AARDO and the Ministry of Local Government, Rural Development and Cooperatives, Government of Bangladesh, he for mally inaugurated the programme. 1.2 Objectives

iv) develop strategies of pro-poor microcredit management and good governance for serving the people. 1.3 Participation

The general objectives of the workshop cum training programme were to enhance the knowledge of the participants on the issue s and concepts of rural development, micro-credit operation, good governance and poverty reduction strategies through exchange of experiences of the best practices in the participating countries. The specific objectives of the programme were to: i) discuss the concept and dimensions of rural development, micro-credit operations and the linkages between micro-credit and poverty reduction; ii) exchange the basic concepts of good governance, local governance and its relationship with the Millennium Development Goals (MDGs) and Poverty Reduction Strategy (PRS); iii) share experiences of poverty reduction progarmme, micro-credit operation and good governance with special emphasis on rural development efforts of different AARDO member countries; and

The workshop cum training programme was attended by thirteen participants from six AARDO member countries of Asia region. They included one each from R O China, India, Lebanon and Syria; two from Oman and seven from the host country Bangladesh. The resource persons of the workshop included policy planners and implementers of rural development programmes, NGO functionaries and eminent academicians from the host country Bangladesh and intergovernment international organization. The list of participants and resource persons is given in the annexure. 1.4 Technical Session

1.4.1

Presentation of Keynote/Expert Papers

Keynote Paper : "Micro Credit Delivery System and Good Governance in Rural Development" by Mr Md. Ataur Rahman, Director General, BARD

The inaugural session was followed by the first technical session of the workshop. The key note paper was presented by Mr Md. Ataur Rahman, Director General, BARD. Giving a brief description of major shifts in development focus since the colonial era, he mentioned three conceptual issues, namely - micro credit delivery system, good governance and rural development ­ the themes of the workshop. After that he elaborated on the concept of rural development by highlighting the salient features of the Bangladesh economy, which he described as still 11

agrarian in nature and rural development is directly linked with agriculture. Agriculture provides 57.6 percent rural employment and 26.7 percent rural income. However, land distribution pattern is highly uneven and 55.2 per cent households own only up to 0.49 acres. 43.8 per cent rural people live below the poverty line. Income poverty decreased from 58.8 per cent in 1991 to 40 percent in 2001. It is not possible to improve the poverty situation without improving the condition of landless and marginal farmer. The country made notable progress in terms of certain social indicators such as education, health and sanitation. He pointed out that stagnation in agricultural employment is compelling the rural population to find alternative source of employment. One alternative may be to absorb them in formal sector and another is to create opportunities of selfemployment. But, the threat emerging out of national disasters (which cause huge loss to economy and rural livelihoods), market factors, gender inequality and climate change effects are serious threats to agriculture as well as to the alternative source of income. Outlining the objectives and strategies of rural development, Mr Rahman mentioned that the thrust of the national government is to focus on key factors like accelerating the growth in rural economy, reduction of poverty and sustainable environment. However, these three are highly competitive and consequently critical situation of trade-offs may arise. In this context, high degree of complementarities is desirable which is one of the key challenges for policy makers. He stated that growth into its wake brought many benefits in terms of food production, labour productivity, employment and purchasing capacity. But the Green Revolution failed to translate agricultural growth in national economic growth and eradicate 12

rural poverty due to inequitable access to land, structured rural financial institutions and weak distribution patterns of benefits. Against this backdrop, micro credit emerged to meet demands of diverse sections of the households and diverse necessities. BARD experimented micro credit, but the Grameen Bank popularized it. Despite NGOs, large scale involvement in the micro credit programmes according to their own way of approach(es), the government also entered into the market. However, they are not competitive to one another. Thereafter, Mr Rahman pointed out the features, strengths and magnitude of operations of micro credit in Bangladesh. Loan is distributed mostly to women and collateral is the group responsibility. It reaches targeted community directly. Micro credit helps rural urban economic integration providing more scope for self employment. In Bangladesh, agricultural growth is the inducing factor for its success so far. Micro credit has had positive effects on household well being. It has reduced the risk of perpetuity of poverty, raised labour productivity and enhanced women's empowerment. He also mentioned that due to the nature of supervised credit, the rate of interest of micro credit in Bangladesh is high. However, higher rate of interest is not a concern in consideration of increased productivity, moderate income return and high rate of loan repayment. At present, the funds are highly subsidized. In future, sustainability may face challenges in case of skewed flow of fund from donors. The real challenge is scaling up from micro credit to micro finance. Grameen Bank has diversified its financial services experimentally. Further, the exclusionary policy of micro credit needs to be revised by adding vulnerable non poor, small and marginal farmers.

Finally, Mr. Rahman discussed good governance by clarifying the concept and linking the issue with fulfilling basic needs of the poorest. He stated that government considers good governance from the perspective of more effective growth and poverty reduction. He related the issue of good governance to rural development with emphasis on better service delivery in social sectors, infrastructure development, reduction of income erosion threats and decentralization through local governance. He also emphasized on a more responsive public administration, enhanced transparency and accountability, easing access to information, opportunities to voice people's concerns, a proper monitoring system to strengthen accountability and the need for continuous reform. Comments of the Discussant Considering the presentation as an excellent and elaborate, Dr Salehuddin Aminuzzaman, Professor of Public Administration, University of Dhaka commented that the author has rightly pointed out that micro credit was not an innovation of the 70s, rather it originated from the "Famine Code" of the colonial era. The way the presenter has related three different issues of micro credit, rural development and good governance is appreciable. Prof. Dr Aminuzzaman mentioned that subsections of the paper brilliantly overviewed agriculture, gender and poverty. He supplemented that donors shift their focus quickly. They emphasize on micro credit for poverty reduction rather than on micro credit for rural development and NGOs avoid reaching the ultra poor which still remains a challenge. Around 732 billion taka was disbursed as micro credit, but poverty has not been proportionately reduced. NGOs must take note of that. Differing with the presenter, he said that micro credit does not stimulate agriculture in real sense. Micro credit from NGOs has done

something wrong, i.e. alienating people from the government. Over the years, the delivery system by the state has declined resulting declining faith in state. In other words, the NGOs have pushed the state to a back seat. These things need serious attention. He also endorsed the interpretation of high rate of interest of micro credit as mentioned by the presenter. The scaling up of micro credit to micro finance, improving the quality of public delivery system and the need for a strong monitoring system are some of the aspects which are the urgent needs of the time.

Expert Paper 1 : "Rural Development : Concepts and Dimensions" by Mr Hasnat Abdul Hye

Referring to the dynamic nature of the rural development, Mr Hye mentioned that rural development implies the development of rural areas and improvement of the standard of life of those who live there. Generally, the term is used to denote the actions and initiatives taken to improve the standard of living of people in nonurban areas and particularly of agricultural based community people involved in activities like agriculture, fisheries, livestock, forestry and cottage industries. The economy constitutes the three sectors : a) Primary sector which constitutes agriculture b) Secondary sector which is industries and trading, and c) Tertiary sector which is services.

Transformation of economy may occur from primary sector to secondary and to service sector. He spoke about the characteristics of rural areas, which included poverty, unemployment, 13

conventional feudalistic society with hereditary based succession of rural elite, semi-capitalist mode of production, particularly in agriculture sector, etc. There are oppose to change favouring status quo. Rural areas of the developing countries are generally characterized by poor physical infrastructures (roads, embankment, etc.) and lack of socio-economic institutions like schools, hospitals, banks, etc. The urban bias of development hinders the real rural development. The patriarchy or male dominated social system indulges in gender discrimination. The different dimensions of development, according to Mr Hye, are : production oriented rural development (such as green revolution, introduction of modern technology), area development (such as hill tracts development in Bangladesh, drought area development in India), target group oriented development such as poverty alleviation programme, women's empowerment programme (It also includes targeting the poor for socio economic development through micro credit, skill development training, providing seasonal works) and integrated rural development which is not fully operating in developing country like Bangladesh. In course of his presentation, he also highlighted the causes for non-implementation of such programmes and attributed reasons like lack of coordination and complementary efforts for these. He concluded his presentation by emphasizing the new approach of urban-rural interfaces, rural urban connectivity and expanding the urban or social amenities in the rural areas. Interventions The participant from Lebanon supplemented that in Lebanon, 92% people live in urban areas. The growth of agriculture in Lebanon has declined from 20% to 6% in recent past. For self reliance, 14

it is essential to improve the rural sector in Lebanon. The modernization of agriculture also benefits the urban development and improves the secondary and tertiary sectors of development. She further mentioned that the rural people should not be kept in uncivilized conditions and modern day development should reach to the rural people. In response to her comments and suggestions, Mr. Hye said that the present rural development trends have to bridge the opportunity gaps between urban and rural people like as in developed countries such as Japan and South Korea, where the gaps between the rural and urban areas in terms of facilities and infrastructure are hardly different. He further mentioned that even in the absence of comparative advantage and prevalence of high cost of production, Saudi Arabia, Japan, European countries and USA produce agricultural crops considering agriculture as the mother industry. This remains a dilemma with the World Trade Organization. Mr Nasser Mubarak Al-Alawi from Oman wished to know how many people of Bangladesh are now engaged in primary, secondary and tertiary levels. Mr. Hye informed that majority of people are still engaged in agriculture in Bangladesh and at present it consists of 38 per cent, followed by industrial sector with nearly 20 per cent. On the other hand, service sectors are growing. The progressions are visible and service is very soon likely to occupy the number second position in Bangladesh. In response to a question from Dr Shafiqul Islam, the participant from Bangladesh, the speaker mentioned that Bangladesh economy has diversified and that is also a sign of development and progress. On the other hand, the country has achieved near self sufficiency in food grains.

Expert Paper 2 : "Dimensions of Poverty" by Mr Hasnat Abdul Hye

In his second presentation, Mr Hye began the discussion with the multidimensional problem of poverty. He mentioned that poverty refers to the condition of not having the means to afford basic human needs, that is, incapacity. According to a broader definition, poverty means economic, social and psychological deprivations occurring among people lacking sufficient ownership control of access to resources to maintain or provide individual or collective minimum levels of living. At the narrower definition, poverty is measured by the percentage of population having income below the minimum basic needs. As regards measuring poverty, Mr Hye mentioned that a minimum nutritional diet consisting of food items typically consumed is first estimated and the diet is then valued at representative prices. If non-food items (housing, clothing, education, medicine) are excluded, the narrower definition leads to a poverty line income by applying the cost of the normative dietary pattern from the household expenditure survey. He mentioned that the poverty line income can define both absolute and extreme poverty. Absolute poor are those who cannot take more than 90% of recommended calorie intake and the extremely poor are those who cannot take more than 80% of required calorie intake. Mr Hye indicated the dimensions of poverty and their causes. a) lack of income or adequate income the causes are: lack of access to assets, having no skill, lack of savings and credit, lack of social capital; b) unemployment and underemploymentthe causes are : lack of information, seasonality of production, natural disaster; c) inadequate food intake- the causes are: vicious cycle of inadequate income, lack of medical facilities, neglect by

government and NGOs. The other dimensions are poor health and morbidity, illiteracy, poor shelter, lack of voice and participation, vulnerability to adverse shocks and inability to cope with them. The social dimensions are domination, patron client relations, lack of social amenities, etc. Interventions After his presentation, the participants asked questions largely on calorie intake. The participants from Bangladesh, Lebanon, Syria raised the sources and methods of calculation of the calorie intake. They also questioned the universal criterion applicable to the calorie intake in one country as people from different working background live in one country. Moreover, it has been pointed out by the participants that calorie intake is determined by the nature of a country's economy. In response to the queries of the participants, the resource person mentioned that in the case of labor intensive country, the recommended calorie should be high. Each age group and gender need different amounts of calories, depending on amount of activity they take part in each day. There is also a recommended intake for carbohydrates, protein and fats which is universal for every country. FAO calculated intake based on the energy requirement of activity. There is difference between average and mean. Mean includes the differences of gaps. However, which ever is calculated, it should be statistically significant.

Expert Paper 3 : "Rural Development and Poverty Reduction Linkages" by Dr M. Solaiman

The day two of the programme began with the presentation of Dr M. Solaiman, former Additional Director General of BARD. He began his presentation by a brief description on rural development and poverty reduction and their 15

probable linkages with some examples from Asia and Africa. He then explained six important issues: i) ii) iii) iv) v) vi) goals of rural development, rural development principles, role of agriculture, steps to be taken to develop agriculture, role of non-farm sectors, and micro credit for poverty reduction.

of people to the administrative bodies/ functionaries, arrangement of inputs and services, participation of people in planning, budgeting, decision making and implementation process, more public investment in rural areas and comprehensive and coordinated programmes. For development of agriculture, he stressed agrarian reform including land augmentation and mobilization and better utilization of land resources. He also emphasized on bringing equity and distributive justice, ensuring price incentives and subsidy, marketing and agro-processing. Development of non-farm sector economy to absorb surplus labour force is equally important while efficient and diversified use of micro credit also plays a crucial role. Interventions In response to the queries from the participant from Lebanon, Dr Solaiman mentioned that local resource mobilization helps sustainable rural development and there is still very little scope for local government to control activities of the NGOs. Besides, donors know that working with the public sectors is time consuming and they also apprehend system loss in the public sector investment. In reply to another query regarding how to reduce the rate of interest of NGO loan money to the poor people, the presenter replied that government is trying to control it in a coordinated way but still there is work enough to be accomplished in this area. Replying to a question from the participant from Oman on the issue of agricultural activities in the absence of sufficient water resources, the presenter suggested that as there is scarcity of water in Oman, farmers should go for producing some selected horticultural crops. The participant from India remarked that decentralization is very essential for rural

After that he elaborately discussed the role of physical infrastructure, organizational infrastructure and the administrative infrastructure in the context of rural development. Considering rural development as a process that leads to a continuous rise in the capacity of rural people to control their environment ­ physical and socio-economic, accompanied by a wider distribution of benefits resulting from such control, he explained as to how the calculation of calorie intake is done and subsequently discussed the issue of Minimum Food Basket along with the Millennium Development Goals. According to him, the goals of rural development also include the increase of production, generate employment, bring equity, and ensure access to and control over productive resources. Recognizing the needs for a strong organization at the national level with effective decentralization machinery at the local level, he emphasized the development of infrastructures including local government structures and market centers, organization of people including women into groups/cooperatives, empowerment, easy access 16

development although it has some limitations. He also emphasized that role of local government in micro credit disbursement process is essential. In response to a query from one of the Bangladeshi participants on strengthening the institution of local government without giving adequate power to the locally elected representatives, the resource person mentioned that the locally elected representatives must have been given the complete authority to practice and apply their power at the local level for achieving the expected rural development. Bangladesh government is also gradually moving towards that direction.

Expert Paper 4 : "Comilla Approach to Rural Development", by Mr Mohammed Mir Kashem, Director (Administration), BARD

Mr Mohammed Mir Kashem began his presentation by pointing out that the physical and social environment of the then East Pakistan set up the basis for evolving the Comilla Approach which is also known as Comilla Experiment. With the passage of time, Comilla Model has got different dimensions. At present, several NGOs are working with the same spirit and time has come to see as to how it could be made more effective. During the 60s, BARD tried to evolve innovative models for changing the socio-economic settings of the rural society. BARD evolved the Comilla Model in its social laboratory at Comilla. The model consists of four component programmes, namely RWP (Rural Works Progamme), TIP (Thana Irrigation Programme), TTC (Two Tier Cooperatives) and TTDC (Thana Training and Development Centre). In course of his presentation, Mr Kashem mentioned that Rural Works Programme was implemented to develop infrastructures of the rural areas by building bridges, culverts,

embankments and roads so that the people of rural areas could establish better communication. It helped employment generation through involving rural people in construction works and facilitating agriculture. Similarly Thana Irrigation Programme was taken to develop physical infrastructure of irrigation system by providing deep tube well, power pump, etc. He pointed out that during that period only one crop was produced in a single year. But the TIP helped the farmers to become self reliant and self managed by helping them in producing crops more than once in a year. TTDC, another major component of Comilla Approach was taken to develop institutional capacity at the bottom level. During that period, all the facilities to be provided to the common people were scattered. People had to suffer to get the desired facilities from the government. But TTDC worked as an umbrella institution where all the branches of Nation Building Departments could ensure their respective representation. The Thana (Police Station) was later upgraded to Upazila (Sub-District). One of the major components of Comilla Model, namely Two Tier Cooperatives had the principle of making the rural people self-reliant. The primary tier was at the village level and the secondary tierthe federation of primary cooperatives was at the Thana (now Upazila) level. Mr Kashem said that after the evaluation of the Comilla Model, the then government replicated it all over the country. The model was evolved in the backdrop of low income, high poverty rate, huge unemployment and frequent flooding. The river Gomti was known as the sorrow of Comilla affecting agriculture drastically. But the Comilla approach originated by Dr Akhter Hameed Khan, the founding Director of BARD, changed the scenario of that time. He further pointed out that the components of Comilla Model were 17

supportive to each other. For ensuring sustainable development, people's participation is required. The government needs to play a vital role to ensure institutionalization. The Comilla Model had some distinct attributes. It emphasized encouraging leadership, people's participation, and institutionalization. At present, it requires fair treatment from policy planners. He also pointed out that agriculture is the basis of all rural development. Interventions In response to a query from Ms Mona Assaf from Lebanon as to whether the concept of Comilla Model was taken from United States or some other countries, Mr. Kashem responded that the concept of Comilla Model was shared and adapted in our own way. He further added that socialism and capitalism were two existing trends during that period and keeping in mind different economic dimensions, BARD experimented it in its own way. The concept of the then cooperatives of England and Germany was observed and applied in the Comilla Model in a combination of concepts borrowed from certain countries including USA. Dr Shafiq from Bangladesh wanted to know the exact sequence of the components of Comilla Model with regard to its implementation. The presenter replied that the components of Comilla Model were replicated simultaneously. All the programmes had logical interrelation as each programme is supportive/ complimentary to each other. Mr Narayan Chandra Sarkar from Bangladesh observed that Two Tier Cooperatives and KSS are not working actively now-a-days. He wanted to know the future prospects of the Cooperatives. Mr Mir Kashem replied that the principles of Cooperatives were not followed properly. With the changing processes, emerging out of globalization, 18

cooperatives need to be reorganized. Cooperatives can play a vital role in enhancing agricultural productivity and promoting marketing of village products. He further added that adult education, women development initiatives, etc. can also be revitalized in this process. Mr A K M Khairul Alam from Bangladesh enquired as to why the Comilla Model is now not playing the desired role. Mr. Kashem replied that the Comilla Approach was politicized to some extent in the past. The programmes of Comilla Model are now conducted by different departments of the government. The government needs to coordinate the activities of these departments and also that of NGOs as many NGOs are now dealing with the same problems. BARD has been acting as a think tank. TCC could be revitalized in this regard, he emphasized. Farmers should get marketing support and local government be given proper authority. Accountability and good governance need to be ensured. Ms Mona Assaf from Lebanon supplemented that in Lebanon cooperatives have channels in external and internal market. During the time of globalization, this process could play a key role for revitalization of stagnant cooperatives.

Expert Paper 5 : "Third Generation Cooperatives/ Groups: Experiences of CVDP and SFDP", by Mr Fazlul Bari

In the afternoon of day second of the workshop, the fist presentation was made by Mr Fazlul Bari, who began his discussion on Comilla Approach to rural development and said that some interrelated and interdependent programmes were a pert of it. According to him, the programmes emphasized development of physical, administrative, Cooperative and Irrigation Infrastructure and as a result, communication system, service delivery through nation building

department were developed and the Two-tier cooperatives started functioning. But there were also some criticisms that the rich became richer, poor became poorer. Participation in cooperatives became weaker and management problems cropped up and the number of poor grew in percentage. The next questions arose as to how the poor could be better served and whether cooperative was the preferred way of development. The main philosophy of two tiers cooperative was that there would be primary society at the grassroots level and a federation would be there at the sub district level. The primary society would act as a production unit while the federation would support the primary society. But when the programme was replicated widely it was not implemented as it had been designed. Comprehensive Village Development Programme (CVDP) was experimented to develop an institutional framework for providing services to the people at the village level by inclusion of members irrespective of age, sex and profession. The CVDP encourages delivery of credit from its own capital. For assessing the condition of small farmers, a study was conducted by FAO in early 70s in eight countries. The study found that there was no credit support for the poor in delivery system and participation of the poor was lacking in the receiving mechanism. The study recommended that poor needed to form separate group and some adjustment was necessary in the delivery mechanism for fulfilling the requirements of poor. Small Farmers and Landless Laborer development Programme (SFDP) started its journey following the recommendation of the study in Bangladesh. The poor people were organized in separate groups and a mechanism was developed to

provide collateral free micro credit from the commercial bank. Later the programme has been transformed into a Foundation by observing its success. Close supervision and monitoring are essential for making the programme a success. Interventions In response to the various questions of the participants from Lebanon, Bangladesh, India and AARDO representative, Mr Bari clarified the following points : i) The main philosophy of micro credit is that Bank has to go to the poor rather than the poor needs to go to the Bank. ii) The concept of micro credit initially came from FAO and it was operationalized by the Grameen Bank. iii) Some interest needs to be charged for making the programme sustainable. iv) There is overlapping of micro credit in Bangladesh. Overlapping of micro credit also creates opportunity for the real performer as she/ he takes advantage to invest more in entrepreneurial activity. v) Initially there were lot of formalities for providing micro credit but over the years the system has been simplified.

Expert Paper 6 : "Government Service Deliveries for Rural Livelihoods" by Dr M. Solaiman

The presenter at the beginning remarked that Government has commitment to provide services. Service delivery is needed because people individually or in group cannot always arrange all 19

the production inputs and required services. As problems of service delivery, he mentioned the following: Inappropriate identification of services, delay in providing services, apathy of the servicing departments, apathy of people towards government service delivery, inappropriate mechanism for service delivery, shortages of services to be delivered, shortages of personnel, incapacity of people to procure services, and corruption. The prerequisites for ser vice delivery are commitment of the government, nearness of servicing agencies to people, supply of appropriate inputs, providing exact information, people to have purchasing capacity, price subsidy etc. Later he mentioned certain approaches of service delivery such as government approach, individual approach, group approach, NGO approach, etc. He also explained the characteristics of these approaches. Finally, he mentioned that government and local government agencies have the roles of planning, coordinating, monitoring and evaluating relating to service delivery. Interventions After the presentation the participants from India, Bangladesh and Lebanon made the following supplements : i) Total Quality Management (TQM)- a systematic approach to satisfying the customer can be incorporated in the service delivery mechanism of government system. PDCA Cycle i.e. Plan, Do, Check and Act may be introduced in the government sector for developing quality of services. ii) The government of Lebanon is committed to distributing the pesticide properly. 20

Government has constitutional obligation to do something for the welfare of common people while the NGO sector does not have such kind of obligation. iii) Mismanagement and corruption are major problems for providing government services in Third World countries. iv) The health services in the rural areas of most of the country are not satisfactory due to unwillingness of the health professionals to work in the rural areas.

Expert Paper 7 : "Rural Development in Selected Countries : An Overview" by Dr S K Singh

Introducing the emergence of rural development as an independent field of inquiry in the post 2nd world war era, Dr Singh mentioned that rural development encompasses a range of approaches and activities that aim to improve the welfare and livelihoods of people living in the rural areas, which are holistic and integrated in nature. In this scenario, he explained the formation of the Centre on Integrated Rural Development for Asia and the Pacific (CIRDAP), which is a regional, intergovernmental and autonomous organization. He mentioned that CIRDAP was established on 6 July 1979 at the initiative of the countries of the AsiaPacific region and the Food and Agriculture Organization (FAO) of the United Nations with support from several other UN bodies and donors. The Centre came into being to meet the felt needs of the developing countries at that time by promoting integrated rural development in the region. Dr Singh, thereafter proceeded to define rural development and said, that the answer to `what rural development is' encompasses many dimensions. It is a complex, multi dimensional and holistic subject that encompasses natural and social

phenomena, targets improving the quality of life of rural people with increase of agricultural productivity and emphasizes inclusive development. Different people and organizations perceive rural development in different ways. All perceptions of development are important inputs for policy formulation and working with the people. Evolution of rural development began with community development programme in 1950s. Later it turned to integrated rural development and simultaneously to infrastructure development programmes. The context of rural development, also known as RD, has always been high on the national development agenda. The major approaches of RD vary in nature, from nation to nation and region to region. Redistribution with growth and basic human needs approach are the conventional approaches of RD. On the other hand, participatory development, social mobilization, more emphasis on poverty eradication, self reliance in food production, food security, decreasing role of foreign assistance, human development, etc. are the new as well as emerging approaches and dimensions of the present RD context. The CIRDAP countries of Asia have some common trends of progress. The contribution of agriculture and farm on GDP are decreasing. On the other hand, the industry and service sectors are getting vibrant and in progression. Rural nonfarm sector is growing and labor absorption at farm sector has squeezed day by day. Normally, the labor force of a country (or other geographic entity) consists of everyone of working age and people actively employed or seeking employment. However, creating scope of employment is a huge task for the public and private sectors. The challenges of RD lie with achieving sustainable development and growth with required job creation, satisfying people's needs and maintaining

food security despite decrease of arable land, and materializing participatory decision making, decentralized administration and inclusive social development. Interventions In response to the presentation of Dr Singh, the participants in their remarks noted that RD has shown regional variations. Lebanon is nearly an urban based country, while Bangladesh and India are predominantly rural with a thrust on agriculture. Agro processing and agro business may offer more employment. The self and wage employment needs institutional interventions and human resource development efforts. Each country hosts several rural development programs. Now a days, Small and Medium Entrepreneurship (SMEs) are one of the major concerns of RD. ICT may create huge opportunities in these countries. On the other hand, RD has to cope with global climate changes of which most Asian countries are victims. Each country has innovative approaches in RD as well. For micro credit operations, Bangladesh is the hub. India is another unique example of employment guarantee scheme operations. Dr Singh supplemented that while RD is holistic in nature, the crop diversification and food security are simultaneously considered crucial. The recent Dhaka Declaration 2010 of CIRDAP InterMinisterial Meeting offers new approaches to encounter poverty. Without poverty eradication, the dream of RD could not be translated into action. Considering $1 per day per person income, the percentage of people below the poverty line in Bangladesh is 40. On the other hand, if $ 2 per day per person income is considered, 80% people live below the poverty line. Therefore, the nature, magnitude and variations of poverty are diversified. A policy should consider such variations and variety of socio-economic matters for people's welfare and well-being. 21

Expert Paper 8 : "Role of NGOs for Poverty Alleviation in Bangladesh" by Dr S K Singh

In his second presentation of the day, Dr Singh mentioned that NGOs are playing a prominent/ crucial role in Bangladesh as a substitute to government because of people's preference. NGOs in Bangladesh initially started working for relief and rehabilitation and later expanded their dimensions in various fields of development. NGOs are now an integral part of the institutional structure for addressing poverty alleviation; rural development; gender equality; environment protection; disaster management; human rights and other social aspects. NGOs in Bangladesh are involved in social mobilization; enhancement of ability and capability to mobilize and arrange resources for sustainable development; and improvement in the quality of life of the poor people. Activities taken by NGOs include: group formation, micro-credit, formal and informal education, training, capacity building, health and nutrition, maternal and child health, women's development, agriculture, human rights and so on. In this regard, he discussed a programme undertaken by an NGO (Red Crescent) as an innovative practice in disaster management. He also elaborated actions of different NGOs on various development issues citing examples of NGOs working in Bangladesh. He mentioned some governance weaknesses related to regulation of NGO affairs in Bangladesh that include multi institutional registration; no system of renewal; no proper census regarding their activities after their registration; and donor's preference to NGOs compared to government. Intervention After his presentation, Ms Mona Assaf, the participant of Lebanon expressed the view that 22

government and NGOs should made coordinated efforts and government should take more measures to improve capacity of human resource in the government sector. Responding to this remark, the speaker pointed out that both government and NGOs have some positive and negative aspects. He expressed that mindset of the government officials needs to be changed and they have to work as change agents rather than regulators.

Expert Paper 9 : "Impact of Foreign Trade on Local Economy with Special Reference to Bangladesh: by Dr Shah Mohammad Farid

Dr Shah M. Farid, in his presentation highlighted foreign trade in the perspective of comparative advantages and globalization. He pointed out that foreign trade is a crucial factor for overall development process of Bangladesh as it contributes enormously in the government exchequer through import duty and value added tax. In natural disasters, importing food grains is the only way to avoid famine. Foreign trade can also help Bangladesh become economically strong by increasing exports. He mentioned that Bangladesh is receiving some preferential treatment in the foreign trade as a member of LDC and SAFTA. He elaborated globalization in terms of greater interdependence. He discussed direct and indirect effects of ready made garments in the economic sector of Bangladesh as it is generating huge export earning and also the huge contribution of manpower export to the economy as Bangladesh is a big exporter of manpower. He discussed impact of global economic recession on the economy in the recent times as export earning dropped by 11.66% in the first quarter of 2009-10 compared to corresponding earning in 2008-09. In his concluding remarks, he mentioned that foreign trade opens up many doors and at

the same time shuts some doors and the challenge of foreign trade for a country like Bangladesh is to maximize the opportunities and minimize the threats. Intervention After his presentation, the participant of Lebanon made an observation that import duty may increase the price of different imported commodities in any developing country and hence reduction of custom duty is needed. With this observation, the session came to an end.

Agency of the World. It has 227 Partner Organizations (POs) that have around 12000 branches. It has a loan portfolio of US$ 424.72 million with POs where the POs have a loan portfolio of US$ 1.32 billion. Its total micro credit clients are 8.07 million and total staff in micro credit programs is 125000. The loan recovery rate of PKSF is 98.13% and that of POs is 98.85%. Giving a brief description on the selection criteria, he mentioned that need of micro credit, conducive public policy, environment, longstanding culture of non-profit organization, committed governing body & staff, appropriate strategy, policies & systems, macroeconomic stability and independence of PKSF outside government bureaucracy are the reasons for success of PKSF. The major role played by PKSF includes spread of micro credit movement at home and abroad, setting industry standards, institutionalization of micro credit program, creation of institutional capital in the form of Partner Organizations, contribution to GOB efforts to regulate MC sector and strengthening GO-NGO collaboration. The future challenges of PKSF are enabling POs to respond to changing needs of different market segments, disaster management, broadening the resource base for POs, optimal trade off between double bottom line targets, good governance and monitoring & supervision. Interventions In response to the queries of the participant of Lebanon, the presenter mentioned that PKSF management mobilize funds in the form of grants, loans, and contributions from Government of Bangladesh, private individuals and organizations, foreign governments, international donors, lending agencies and capital markets. In reply to a question 23

Expert Paper 10 : "Microfinance Institutions: Role of PKSF" by Dr M A Hakim

Dr Hakim began his presentation by introducing the Palli Karma Sahayak Foundation (PKSF) as a unique organization, first of its kind in the world that has played a key role in shaping the NGOMicro Finance Institute (MFI) sector of Bangladesh to its present stage. This sector has now an outreach of more than 20 million clients and a portfolio of more than US$ 2 billion. He briefly highlighted the evolution of the concept and practices of micro credit and genesis of PKSF for better understanding of PKSF's contribution. He pointed out that PKSF made fresh reinvigorated efforts to devise systems of reaching the poor with sustainable credit program. According to him, lessons learnt from three experimental projects were revolutionary, which covered the target group approach to reach the poor with credit; price of the loan to run the credit program on a sustainable basis; implementing institutions of the credit; social collateral to replace material collateral He mentioned that after adopting these strategies, the Foundation emerged as the largest Apex Financing and Capacity Building

from one of the participants from Bangladesh on the system of appointing the Chairman of PKSF, Dr. Hakim informed that the Chairman is nominated by the Government from persons, who are not in service of the Republic, usually for a term of three years. Responding to a query from the Indian participant, the presenter mentioned that PKSF has a working network all over the country. He also informed that PKSF extends its loan programs only to the NGOs. But some innovative activities run for the poor by the individual level are also covered. In answering to a question from the participant from Syria, the presenter mentioned that only Yemen is brought under the umbrella of PKSF among the Arab countries. In response to the queries of the participant from Taiwan, Dr. Hakim said that the loan programs are being sanctioned based on the performance records of the POs. Responding to a question from Bangladeshi participant, he informed that the government normally borrows fund from donor agencies with a very soft rate of interest while the rate increases a little from the PKSF side and more from the POs' side.

need of micro credit as half of the country's population live under the poverty line with 80% in rural areas. He informed that micro credit includes financial service covering credit, savings, social capital, entrepreneurship and business, enterprise and social service. Almost in every village of his country, people are involved in micro credit process in different ways. In most of the cases, micro credit is provided to the poor women with the aim of empowering them. It is not only a financial process; it also includes social development and empowerment of women. He further said that micro credit aims at the poor people by making them subject. He emphasized that there should be a friendly supervision in micro credit process. In the micro credit programme, people need to be taken into confidence and due consideration should be given to their problem. He further said that loan programmes are informally appraised. Access to loan is assured if repayment is satisfactory. According to him, rapid extension of micro credit drew the attention of the development practitioners from all corners. These days nationalized commercial banks, specialized government organizations and semi formal government institutions are engaged in micro financing. There is a continuum of enterprises. There are family based enterprise, micro enterprise, small enterprise, medium enterprise and large enterprise. There are several factors in entrepreneurship development like capital/finance, skill development, market access/ expansion (both input and output market). Micro credit is delivered on a soft term. He mentioned conditions that help to remove liquidity constraints to start new enterprise, expand existing enterprise, and adopt new mechanism. It also provides savings and skill development services and facilitates marketing. Dr. Hakim also said that micro credit programme provides a ladder so that one can go

Expert Paper 11 : "Micro Credit and Entrepreneurship Development" by Dr Abdul Hakim

The second presentation of Dr Hakim began with a film show, which gave a brief introduction on the activities of PKSF highlighting the active role of PKSF in alleviating poverty from the country through micro-financing and also referring to the training, research and projects components. After that, he delivered the lecture on micro credit and entrepreneurship development. In his presentation, he stated that micro credit has emerged as one of the tools for poverty alleviation for the least developed and developing countries. In a wider prospect, it is also known as micro finance. The socio economic set-up of Bangladesh is still in 24

up and up. He added that PKSF has some specialized programme like Mainstream Programme, Special Projects (RMC, UMC, MEL, Seasonal loan, Agri finance, LIFT) and Disaster Management Programme. In course of his presentation, he referred to some of the government and non government programmes on micro credit. Highlighting the impact of micro credit programme of PKSF, he said that it has strengthened the subsistence of the poor people through diversification and strengthening of their survival process. Above all, the micro credit programme has uplifted the socio economic conditions of women. Interventions During and after the presentation, some questions were raised regarding the activities of PKSF and micro credit . Mr. Chandra Kumar Jamatia from India wanted to know as to how PKSF helps people in foreign employment and what kind of contribution was made by PKSF in the construction of village roads. Dr. Hakim replied that the people of poor areas like the northern part of the country suffer from various problems like flood, insufficient infrastructure, etc. Therefore, the ratio of migration to foreign countries from that part of the country is very low. PKSF initiated a programme with the help of the government to finance migration of the people of that area to the foreign countries especially to the Middle East. He further informed that they have established a link with the private companies to coordinate the migration process. He said that the rural roads of that area need to be developed and PKSF conducts such programme to develop rural infrastructure. But those programmes are not permanent. Mr. Abdul Quader from Bangladesh asked about the source of fund of PKSF. Dr. Hakim replied that PKSF has its own fund. It also gets fund from

DFID. He further informed that the programmes of PKSF are implemented through its partners and added that most of the NGOs are dealing with poor women and not with men. Dr Hakim supplemented that the micro credit service is done basically for family welfare. It is done through women to encourage them and to help their empowerment so that they could play some role in the development process because in most cases they are the worst sufferers. Dr Shafiq said that in most cases women take loan and give it to the male members of the family. He wanted to know whether there is any data regarding the percentage of taken loan by female. Dr. Hakim replied that in most cases women take the loan and when a woman joins a group she could contribute in many ways. He also said that empowerment is not absolute. Micro credit alone cannot bring empowerment and alleviate poverty. It just works as a powerful tool. Mr. Quader added that it is often said that there exists a religious barrier in bringing women in the process of empowerment. But religion doesn't create any obstacle in empowerment. It is attitude that creates barrier. Mrs Nasima Akhtar from Bangladesh said that women have got multiple role to perform in a family and also in a society. So it is better not to mention that religion acts as barrier to women's empowerment. Replying to her, Dr Hakim said that a number of factors work as obstacles to women's empowerment and religion is one of them. He also cited the example of world economic recession which also has affected all.

Expert Paper 12 : "Coordination for Governance at Local Level : An Experience of Bangladesh" by Dr Swapan Kumar Dasgupta

Highlighting the need for coordination, development administration approach, organizational management, governance, etc., Dr Dasupta 25

mentioned that coordination refers to matching available development supports/services/ resources with the real needs of their recipients through interaction among all stakeholders and is a matter of motivation and psychology. Coordination has two sides: one is development administration approach and another is organizational management approach. Development administration approach includes orderly arrangement of group efforts to provide unity of action in the pursuit of a common purpose. He also added that to minimize the problem of coordination, there are four principles for grouping positions in an organization for gaining optimal efficiency and economy which can be ensured by process, by purpose, by client and by place. According to the organizational management approach, there are intra-organization and inter-organization coordination. He further said that coordination is needed to ensure team work and cooperation. Referring to the term Governance, he said that it is the manner in which power is exercised in the management of a country's ecological and social resources for development. Good governance means proper exercise of power, rules and regulations in the management and allocation of development supports and services in favor of those who really need them. Governance has both institutional dimension, legal dimension and development dimension. He added that local level includes union, ward and villages, and all the government and non governmental supports and services are known as support service. He also said that local level transparency is needed for villagers' awareness of field workers, development services, use of development services, and the systems of development services delivery and reception. Local level accountability is also needed along with local level participation. 26

Against this background, he discussed the Link Model and said that it aims to promote and institutionalize sustainable linkage among the various stakeholders of rural development like Union Parishad (UP), field workers of Nation Building Departments (NBDs) of the government (GOs) and Non-Government Organizations (NGOs) and villagers through formation of a Village Committee (VC) in each village. He also highlighted the formation of UCC, VC and introduction of UDO. He said that the UCC is comprised of UP chairmen and members, GO and NGO field workers in the respective Union and VC chairperson or a representative thereof from each of the VCs. Highlighting the local Coordination Activities in the Link Model he said that VCM and UCCM are held every month. The UCC practices coordination among the stakeholders of rural development. Participation in the monthly UCCM is obligatory. At the monthly UCCM, first of all, VC chairpersons/ representatives and the UP members individually present current development problems and villagers' real needs for development services one by one. Pointing out the outcome of link model he said that it has increased transparency of delivery of services to the villagers. It has also increased accountability of the GO/NGO workers working in the villages. Local level transparency has been increased by the two-way trafficking of development information between the villagers and GO/NGO field workers through VCM, UCCM, VC members, community notice boards and the UDO. Interventions After the presentation, Mr Md. Kamruzzaman, participant from Bangladesh commented that there is lack of coordination in implementing micro credit programme in his country. He asked as to

whether there is any scope for BRDB to come forward in this regard. Dr Dasgupta replied that UCC can coordinate implementing the micro credit programme. BRDB is also coordinating micro credit programme to some extent. Mrs. Sahar Abdin from Syria wanted to know whether the women working in the project as shown in the video presentation are paid for their job. Dr Dasgutpa replied that they are not always paid in cash. Sometimes works are done voluntarily through community mobilization. Ms Mona from Lebanon appreciated the local level coordination mechanism in the link model and wanted to know as to whether there is any ministry for looking after the construction of roads in the villages or not. Dr Dasgupta informed that there is a ministry of roads and highways which looks after the construction of highways in Bangladesh. On the other hand, the Local Government Engineering Department and Union Parishads look after road construction in rural areas. For some reasons, government always cannot pay attention to the construction of small link roads in the villages. The link model has shown success in constructing such link roads within the village using the UCCM. Dr Behera from AARDO wanted to know whether the people pay any tax to the government for receiving services. Dr. Dasgupta replied that people have to pay tax to the local parishad. Mr. Chandra Kumar Jamatia from India wanted to know the use of those taxes. Dr Dasgupta replied that the taxes are defined by the central government and it is collected to enrich revenue of the government. Mr Ouader from Bangladesh supplemented that the local government collects taxes to accelerate the development process as a whole. He also wanted to know how the committees are formed in the link model- whether by election or by selection. Dr Dasgupta replied that in the link model committees are selected voluntarily. Especially the prominent figures in the locality are selected in this process.

Expert Paper 13 : "The Grameen Bank Model of Micro- credit in Rural Bangladesh" by Mr Md. Ayub Ali Howlader, Deputy General Manager, Grameen Bank

Introducing the mission of Grameen Bank (GB) to alleviate poverty from the lives of the poor people of the country, Mr. Howlader said that Grameen Bank is owned by the poor and explained the structure of GB and the group formation criteria of the clientele. He narrated the credit and information receiving & delivery system of the GB. He mentioned that GB has over three decades of experiences, which proved that microcredit is a very effective instrument to empower the poor, especially the women. It is cost-effective and sustainable. Micro credit creates opportunities for the poor to move out of poverty. The poorest, particularly poor women get opportunities of selfemployment. In the Grameen Bank system, the poor do not need to go to the bank; rather the bank goes to the poor. GB is dedicated to establishing credit as a human right. GB's scholarships are given 60% to girls and the remaining 40% to boys. It provided higher education loan to 44,640 recipients. It also provided business loan to the graduate students. While explaining the financial management of GB, he mentioned that savings products brought the Bank financial self-reliance. As of December 2009, deposit ratio between GB members and nonmembers was US $ 649.71 million and US $ 552.69 million respectively. He highlighted the insurance program in Grameen which includes the loan insurance savings fund for GB borrowers, life & loan insurance for the beggars and health insurance through Grameen Kalyan. There is substantial evidence of GB's impact on higher income and empowerment of the poor rural women, capital accumulation, employment, rural wage structure, women's participation and 27

economic potentialities. Later he mentioned GB's Goals for Year 2015. Finally, he said that moving out of poverty, staying far away from poverty and preparing the future generation with education and knowledge so that the families do not slip back into poverty are the long term vision of GB. Interventions Answering a question from the participant of India, Mr. Howlader mentioned that nonmembers mean any person other than the GB members. In response to questions from one of the Bangladeshi participants, he mentioned that although the flat rate of interest is low, the cumulative interest rate is quite high, and GB has kept the provision for the GB members to become share holders which reflects that GB is owned by the poor people. Dr Behera from AARDO wanted to know the policy of the bank towards the defaulters. In his reply, Mr. Howlader mentioned that default loan cases are handled through sanctioning further loan to the defaulters and thus a new schedule is made for the defaulters. He mentioned that no measures are taken once it has become a debt loan. Responding to a query from the Indian participant, the presenter informed that Central Manager and the Branch Manager are responsible for forming the groups following the rules and regulations of the Bank.

hunger proxied by child malnutrition , access to improved sanitation and rate of immunization. But in case of adult literacy, primary school completion rate, maternal mortality and child malnutrition, progress is less satisfactory. Highlighting the objectives of the PRGF Program, he discussed the historical development leading to the Poverty Reduction Strategy Programme (PRSP). In course of his presentation, he elaborated the participatory approach and said that Bangladesh completed the draft I-PRSP in April 2002 and a final I-PRSP in March, 2003. The first PRSP in Bangladesh is Unlocking the Potential: National Strategy for Accelerated Poverty Reduction (FY 2005-07). PRSP-I was approved by the NEC on October 16, 2005. Thrusts of first PRSP were to accelerate the process of reducing income-poverty and hunger, ensuring necessary conditions for pro-poor growth, and creating sufficient conditions for pro-poor growth by critical sector. The NEC approved the PRSPII (Steps towards change) on December 29, 2009. Interventions After his presentation, the participants raised their queries and in response to those, Dr Ahmed mentioned that low income countries which want to take loan from the soft window of World Bank must need to prepare PRSP; there were no influences from the development partners or other external force during preparation of PRSP in Bangladesh and there are lots of criticisms against the PRSP. But this process puts pressure on the government to allocate resources prudently. As the process was participatory and civil societies are playing vibrant role, it certainly creates a pressure on the government.

Expert Paper 14 : "Issues and Concepts: MDGs and PRSs with Emphasis on Governance and Poverty" by Dr Quazi Mesbahuddin Ahmed

Giving a brief introduction on the Millennium Development Goals (MDGs), signed by 189 countries Dr. Ahmed said that Bangladesh is "on track" in respect of most social MDGs such as infant and under five mortality reduction , primary and secondary school enrolment , eradication of 28

Expert Paper 15 : "Social Safety Net Programme for Poverty Reduction" by Dr Quazi Mesbahuddin

Explaining the necessity of Social Safety Net Programme (SSNP), the presenter said that it is designed to help the vulnerable people who are not able draw benefits from the market for reducing their poverty. However, safety nets are never the whole or sufficient answer to poverty reduction or risk management. The SSNP is the subset of Social Protection concept. Highlighting the main arguments for designing safety net programmes, he said that a good safety net system should have several attributes such as cost effective, incentive compatible, sustainable and dynamic and should be appropriate, adequate and equitable. Safety nets may serve one or a combination of the following groups: i) chronic poor; ii) transitory poor; iii) vulnerable groups; iv) people with disabilities; v) elderly; and vi) orphans. Although there are lots of arguments against the safety net programme, yet it is also true that it involves a high cost of inaction. For effective utilization of resources, emphasis should be laid on designing the safety net programme according to the situation and developing administrative system for implementing the programme that discourage corruption and leakages. Although there is an on-going debate about the effectiveness of in-kind transfer as opposed to cash transfers in social protection programmes, every mode of transfers has its own advantages and disadvantages. Experiences show that, vulnerabilities that the poor faces are major determinants for selecting mode of transfers. Sharing the experiences of SSNP of Bangladesh, Dr Quazi informed that presently the government is implementing 27 social protection programmes of which 5 are food-based and remaining 22 are either cash-based or cash-cum-food based.

Limited coverage, lack of an integrated national policy, inadequate transfers, mis-targeting and leakages, etc. are major problems in implementing social safety net programme. Interventions Clarifying the issue of Social Safety Net and Social Protection raised by Dr Shafiqul Islam, the presenter indicated that safety nets are still largely associated with the idea of a short-term safeguard. Social Protection (SP) incorporates safety net programmes along with the role for renewed state involvement, emphasizing a longer-ter m developmental approach. Responding to a question of Ms. Mona of Lebanon, the presenter informed that public, private and NGO sectors individually or jointly are involved in implementing the safety net programme. But, there is no evidence to conclude as to which sector is efficient. However, efficiency in implementation depends on the transparent system of safety net programme. The presenter also agreed to the idea of further expanding safety net programme in the health sector as there are few safety net programmes in this sector in Bangladesh. One of those is providing nutritious food to the lactating mother in some vulnerable areas of the country.

Expert Paper 16 : "Micro Credit Delivery Systems in Bangladesh" by Mr Khandakar Muzharul Haque

The presenter mentioned that micro credit programmes being implemented through different channels, both private and public, is an important instrument to address poverty in Bangladesh. Government has micro credit operations through different ministries, departments, specialized institutions like BRDB, Palli Daridro Bimochon Foundation, etc. However, private sector plays a dominant role in providing micro credit services 29

in Bangladesh. Among the private institutions Grameen Bank works as a Microfinance Bank while there are NGO-MFIs (Non-Profit, nongovernment Microfinance Institutions), and also the banking sector which works through linkage programme with the NGO-MFIs. Giving a brief history of micro credit in Bangladesh, he informed that during 1970s and 1980s the targeted and subsidized rural credit programmes through government owned institutions were dominant. Nationalized Commercial Banks (NCBs) and specialized banks, including Bangladesh Krishi Bank initiated microcredit programme with diversified products. But these efforts could not yield positive results due to lack of proper monitoring, lack of right kind of client selection, poor service delivery mechanism, poor recovery rate, etc. The market failure of public sector institutions, led to the emergence of private microfinance organizations to penetrate into micro credit operations along with their development activities. The NGOs started working as social development organizations other than microfinance, and most of them shifted to microfinance operations sometime in late eighties. Currently, almost all these NGOs have microfinance operations in their development portfolio. However, these operations remained excluded from any centralized monitoring system till 2006 before the enactment of Micro Credit Regulatory Authority Act, 2006. He also explained in brief the objectives, activities and basic information of some prominent GOs and NGOs and the Grameen Bank engaged in poverty alleviation and micro credit. As regards the legal framework of private sector MFIs he mentioned that Grameen Bank was established in 1983 under an act known as "Grameen Bank Ordinance '1983 while Non30

Governmental Organizations or NGOs are registered as social development organizations under such following legal systems as Societies Registration Act of 1860, Companies Act 1913/ 1994 as a non-profit companies, Voluntary Social Welfare Agencies Ordinance of 1961, Foreign Contribution Ordinance of 1962, Foreign Donation Regulation Ordinance of 1987, and Trust Act 1882. Interventions In response to several queries of the participants, the presenter supplemented the following: access to micro credit requires fulfillment of certain criteria. For example, the beneficiaries have to form groups; the land ownership has to be less than .50 acre or the total value of assets will not exceed the value of one acre of land. Because of overlapping, although 25 million families benefited from micro credit, actual number is lower than this because they take loans from various sources. Overlapping is found to be 40% in Bangladesh. To avoid such overlapping, ASA and PROSHIKA are coordinating their programmes. Grameen Bank savings are higher than its outstanding loans. Grameen Bank interest is lower because of low cost of fund. For this, people prefer GB loan to loans from other MFIs. The flat rate of interest for Grameen bank loan is 10%. But the effective rate goes up to 20%; and for many NGOs, it goes as high as 40%.

Expert Paper 17 : "Micro Credit Regulatory Systems in Bangladesh" by Khandakar Muzharul Haque, Executive Vice-Chairman, Microcredit Regulatory Authority, Bangladesh

At the beginning, the presenter gave a background of the Micro Credit Regulatory Authority in

Bangladesh. He informed that microfinance operations of the NGOs remained out of any centralized monitoring system till 2006 before the enactment of Micro Credit Regulatory Authority Act, 2006. NGOs started different social development works in Bangladesh in the beginning of seventies of the last century and gradually entered into the field of microfinance along with their development activities. MFIs engaged themselves in the process of financial intermediation through providing various kinds of financial services such as credit, savings, insurance, etc. In the aftermath of booming expansion of microfinance sector in 1990s, the regulation of Microfinance Institutions (MFIs) came forward as an important agenda for discussion. Increasing role of MFIs in building an inclusive financial market could not be ignored anymore. The Bangladesh Bank commissioned a study in December 1997 to examine "the Regulatory Aspects of Microfinance Institutions (MFIs) and linking it with the formal financial Sector". The major findings and recommendations were: a) The regulation available in the form of statutory requirement under the existing banking and financial laws will not cater for the special needs of this sector, and b) Legal recognition of MFIs through enactment of law is required to access formal sources of funds. Subsequently in the light of the above recommendations stakeholders raised the issue of regulation for this sector. Consequently, the government formed a Committee under the chairmanship of the Governor of Bangladesh Bank in October 1999. This Committee discussed the issue with policy makers, stakeholders, academicians and other civil society members at national level and submitted the report to the Government in March 2000. The major recommendations of the committee consist

of formulating the following policies and actions: a) Policy for loan classification, provisioning, interest rate, reserve requirement against savings/ deposit, and investment of savings/deposits, b) Policy for uniform accounting standard, internal and external audit, c) Fix up the upper limit of administrative expenses of NGOs, d) e) and Formulation of a prudential guideline, Formulation of performance standard,

f) Creation of a separate regulatory body or a subsidiary organization of Bangladesh Bank. On the basis of the above recommendations, a unit namely "Microfinance Research and Reference Unit (MRRU)" was established in June 2000. The Governor of the Bangladesh bank headed this unit which included members from both government and private sectors. Eventually, a draft law was prepared with the help of the sector representatives and lawyers, which was enacted by the Government on 16 July 2006 as "Microcredit Regulatory Authority act, 2006" with effect from 27 August 2006. Referring to the legal requirement regarding licensing, the presenter indicated that, according to the Act, no MFI can carry out micro credit activities without obtaining licence from MRA. Section 15 (2) of " Micro Credit Regulatory Authority Act, 2006" has made it mandatory for MFIs which had micro credit activities before the effective date (27 August 2006) of the Act to apply for license to MRA within six months 31

(February 26,2007) from the effective date of the Act. Explaining minimum criteria for licence, he stated that, according to the provision of the law, 4236 NGO-MFIs applied to MRA for license by February 26, 2007. For primary selection, the authority had set a threshold level for the MFIs of having either 1000 borrowers or TK 40 lacs principal loan outstanding, and a little over 600 MFIs were selected primarily under the criteria. Rest of the institutions were given time up to 30 June 2009 to fulfill the aforesaid criteria which was later extended up to 31 December 2009. Recently a circular has been issued among the MFIs, having number of borrower below 800 and loan outstanding below Tk 40 lac to stop micro credit activities and refund the savings (if any) by March 2010. Mr Haque also explained the licencing procedures, off-site assessment and on-site inspection. MRA has prepared a set of draft regulations which is now pending with the government for approval. The regulations include governance issues like Chairman & CEO will not be the same person; they will not be of the relationship of fathermother, daughter-son, husband-wife and brotherssisters; maximum tenure of membership of board of directors for 6 years in consecutive two terms, and also issues relating to financial management, operational aspects and savings mobilization. The conditions for voluntary savings include documentations supporting profitable operations of last 3 years, minimum 5 years' experience in microcredit operations, current and cumulative recovery rate not below 95% and 90% respectively in the last 5 years and maximum amount of voluntary savings must not exceed 25% of capital fund. On the other hand, the conditions for mobilizing term savings include minimum 10 years' 32

experience of microcredit operations and maximum amount of voluntary savings must not exceed 25% of capital fund. MRA, INM, PKSF and a USA based research organization named Transparency International are collaboratively conducting research on maximum effective rate of service charge of the MFIs. Until the research is completed, the MFIs have been advised to charge the clients in such a way so that the effective rate of service charge does not exceed 30%. Finally he concluded his presentation stating that it is expected that implementation of the said regulation will accelerate the growth of the sector and at the same time will protect the interest of the poor clients. Interventions A number of issues were raised during and after the presentation. In response to these, the presenter informed that in case of minimum criteria for license to MFIs, the threshold of either 1000 borrowers or Taka 40 lacs principal loan outstanding has been determined because without this, an organization cannot survive. He also informed that at present new MFIs are not considered for license because the regularity authority has to first finalize the pending cases of old MFIs. Cooperatives are not within the jurisdiction of the Micro Credit Regularity Authority and are guided by Cooperative Act. Government is also planning to set up a separate authority for NGOs other than MFIs. However, even NGOs like BRAC are brought under the supervision of the MRA because BRAC is an NGO-MFI although it has other social development works as well and the authority is supervising only its micro credit side. The MFIs have to register first with recognized authorities before applying for licenses from MRA.

Expert Paper 18: "Microfinance: Model and Bangladesh Experience" by Dr Mahabub Hossain, Executive Director, BRAC

At the outset, Dr Hossain defined the microfinance as a programme for supply of small credit to and mobilization of small savings from households who do not have access to formal financial markets. The term was coined to describe the replication of the Grameen Bank model for micro-credit in the developing world that combines savings mobilization with supply of small amount of loans to low-income households for generation of basically self-employment in various types of income generating activities. He then explained the origin of the Grameen Bank Model and the key features of the Grameen Bank micro-credit model. He briefly described the transition from micro-credit to microfinance. He covered the role of microfinance and explained the possible economic activities organized with microfinance. He elaborated the critique of the microfinance model and also covered the present position of microfinance in Bangladesh. Besides touching the comparative performance of GB, BRAC, ASA, TMSS and BURO, Dr. Hossain also explained the achievements of BRAC microfinance program from 2006 to 2008. In conclusion, Dr Hossain pointed out that one must recognize that traditional microfinance products (annual loans with weekly repayments) can reach market saturation if the rate of expansion is not in conformity with general growth of the economy; unplanned expansion can lead borrowers to poverty deepening rather than to poverty reduction; the microfinance organizations must seek vertical expansion with larger loan size with different loan products and different delivery

and recovery mechanism. He added that the expansion of micro-credit for generation of selfemployment in non-farm activities has led to tightness in the rural labor market and rapid increase in rural wages. The micro-credit movement thus has indirectly helped increase income for labor selling households not reached by micro-credit. There is unmet demand for credit for many other economic activities in rural areas not yet served by formal financial institutions. Traditional micro-credit model of delivery and recovery of loan is not suitable for servicing these loan demands. Thinking "out of box" is necessary to extend supply of credit to these directions. Interventions In response to a query of the participant of Lebanon, the presenter informed that for the first 10-12 years, micro-finance in Bangladesh was known as micro-credit, and afterwards it is being addressed as microfinance. In reply to another query, the presenter said that loans are offered for a year with a repayment schedule of 50 equal weekly installments, and the repayment of interest in the remaining two weeks. The participant from India wanted to know the ceiling of loan of Grameen Bank(GB) The resource person informed that initially the ceiling of loan of GB was lower than Takka 2000 but now-a- days it has become as high as Takka. 20,000. He further mentioned that sixteen decisions become the code of conduct for members of the credit programme of GB. The weekly meeting begins with chanting the sixteen decisions. Replying to a query of the Taiwanese participant, the presenter informed that ASA Model of microfinance has become popular all over the world. He also added that credit accumulation is done in the name of the group. 33

Expert Paper 19 : "Non-farm Economy in Bangladesh: Nature, Determinants and Impact on Poverty Reduction" by Dr Mahbub Hossain, Executive Director, BRAC

At the outset, Dr Mahbub said that from the dawn of civilization, human beings started finding various ways of satisfying their needs. Agriculture was the basis upon which human beings had to depend for their survival. But with the passage of time, supply side was also created having the status of a different sector. He also referred to the statement made by Rosegrant and Hazell, 2000 which defines Rural Non-Farm Economy (RNFE) in development process as: "From relatively a minor sector, often largely part-time and subsistence oriented at the early stages of development, the RNFE develops to become a major motor of economic growth in its own right, not only for the countryside but for the economy as a whole." And "The growth of rural non-farm economy also has important implications for the welfare of women and poor households, sometimes helping to offset inequities that can arise within the agricultural sector." He further stated that economic development is not confined to agriculture alone. The expansion of non farm activities has also created an impact on the economy. He said that agriculture in Bangladesh is dependent on land and land is distributed unequally. In the long run it creates inequality in income as well. He briefly highlighted the nature of RNFE in Bangladesh, determinants of participation in RNFE and impact of participation on reduction of poverty and income inequality. Rural non-farm activities are manual labor based, human capital based and physical and human capital based. Rural business enterprises included the related issues to agricultural input, crop output and livestock and fisheries, forestry, agro-processing 34

and construction materials, transport operation, restaurants/ tea stalls and others. He further stated that RNFE has been playing a significant role in reducing income inequality and engaging women in income generating activities. The extreme scarcity of land has reduced the productivity of agriculture resulting an expansion of non farm activities in the country. Defining the backward and forward linkages of agriculture, he also discussed the importance of different business activities and the average size of capital, 2000-01, share of non-farm activities in rural capital formation, duration of employment and labor productivity in off-farm and non-farm activities, structure and growth of rural income, 1987 and 2000, determinants of participation, major occupation for workers with different levels of education and impact on reduction of poverty and inequality. Dr Mahbub further said that limited capacity of agriculture has enhanced the need to generate productive employment. He pointed out that for human resource development, household investment of agricultural surplus and capital accumulation in non agriculture is needed to facilitate occupational mobility. RNFE has become a vibrant sub-sector contributing to productivity growth and reduction of poverty, he added. Finally he said that public sector investment for universal secondary education and physical infrastructure needed to support expansion of RNFE and better distribution of income. Interventions Ms Mona Assaf from Lebanon wanted to know whether the service sector is expanded in rural areas. Dr Mahbub replied that though non farm services have expanded in the rural areas, their further expansion requires support through government policy formulation.

Expert Paper 20 : "Concepts and Elements of Good Governance" by Professor Dr Nazmul Ahsan Kalimullah, Department of Public Administration and Director in charge, Japan Study Centre, Dhaka University

The resource person stated that good governance is a normative conception of the values according to which act of governance is realized. It has two approaches; viz:- like academic and donor community approaches. According to the academic approach, the generic understanding of governance is the management of resources and policy-making by means of exercising authority and power. Thus, it entails all instruments through which different policy stakeholders exercise legal rights with the aim to achieve political, economic, cultural and social objectives. The concepts have variety of contexts, which include technical, social, political contexts dimensions. The varieties of governance are democratic governance, egovernance, corporate governance and global governance. For down earth governance, eight elements are vitals: participation, rule of law, transparency, responsiveness, consensus oriented, equity and inclusiveness, effectiveness and efficiency, accountability. Interventions Following the presentation, several queries were made by the participants and the response of the presenter is given below : · Good governance requires awareness of the people. To prevent the misuses of power, citizens need organized activities, watchdog, vision and determination. However, these are long term activities in citizen spheres. · There is mismatch of mindsets of

different levels of development partners. Government as the largest organization needs to show promoting attitudes and has to create congenial atmosphere. Government should play supportive role. The examples of some of non state actors in Bangladesh are Grameen Bank, BRAC, etc. · In respect of corporate governance, multinational companies have own agenda and their board of directors are accountable to the mother country. In that case, global governance is challenging for the developing and least developed countries. · Oligarchic character was found in developing countries in 1960s and 1970s. To make it more transparent and fulfill the development desires, the governance aspects were considered. · The World Bank, ADB, UNDP and other international organizations have different views on governance and offer lofty ideas that are normative or idealistic. · Due to Bangladesh's security paranoia, the country adopted the Information Community Technology at a later stage. The initial opportunity was left out. Now the country has established its link with the submarine superhighway cables. Although it is not enough yet a good beginning. · An issue was raised that governance likes to create the win win situation. There is an interface of State and citizen where citizen is weaker than the state and what might be the consequences. In response, the presenter said that State is the highest social organization. The opportunity and the basic social amenities should reach the doorsteps of every citizen. State should ensure justice, respect and human rights. Every one should have equal access 35

to the basic rights. To fulfill the people's aspirations, many actors like civil society and citizen committees are needed. · Citizen charters are vital for ensuring good governance. It should be translated into practice. In this case, bureaucrats, intellectuals and other actors should translate it into their activities. To ensure good governance, merit based recruitments in government offices are vital. · Since the mindset is important, to change the mindset of someone it requires changes in the stake and structure of the society. Because structure and stake create the mindset.

simultaneously considered for academic discussion on the subject matter. Corruption originates from the governance failure. The types of corruptions are grand and petty; by process the types are coercive and collusive. The key actors of corruption are political, public sector, private sector, intellectual and institutional. Interventions In response to the queries of the participants from Lebanon, India, Bangladesh and Oman, the resource persons gave the following answers : · In order to make Union Parishads (UP) more accountable and pro people, TIB has a program called Integrity Pledge. For the signing of integrity pledge at Union Parishad level, TIB follows such steps as: citizen report card on services, tool for communication and street theatre for raising awareness. By these steps a good understanding between the UP and people is created and then UP signs the integrity pledge. · To check the corruption, the catalysts are important factors for pressurizing and making institutions accountable. In that case, TIB has created the citizen committees so that people can raise their voices. · TIB prepares its reports not only based on media, but also based on collaborative survey with world economic forum, different universities, etc. TIB conducts research on social sciences aspects which are changing in nature. · A totally corruption free country is not possible, but it is a dream or vision. TIB only controls the corruption. Effective control of corruption is important. Harnessing the ethical matters such as honesty, integrity, morality, etc. are important.

Expert Paper 21 : "Good Governance in Rural Development: Challenges and Opportunities" by Dr Iftekharuzzaman, Executive Director, Transparency International Bangladesh (TIB)

Dr Iftekharuzzaman, in his presentation, mentioned that despite remarkable achievements like steady economic growth, decline of child mortality, presence of vibrant private and non governmental sector, Bangladesh suffers setback due to its position at corruption perception index in the recent past. The recent concept of rural development encompasses the governance matters and pro people agendas that directly impinge on the rural people. Key actors of rural development are political authority, public representatives, public ser vices, private sector, NGOs, people, development partners and researchers/thinkers. Leadership is vital for implementing the rural development projects and programs. The other criteria are participatory approach, reliance on homegrown projects or ideas, decentralization, motivation, capacity building, etc. Corruption means misuse of power at any levels or sectors. Capacity and ability to misuse power is 36

· Recruiting youngster volunteers are vital for TIB to fight against corruption by organizing them, harnessing leadership and imparting skill training. · In recent times, TIB is getting funds from DFID, Canada, Denmark, Swiss Government, Norwegian Fund, etc. This Organization was initiated by the civil society. By adopting several measures, TIB is also developing its own funds. · TIB has 36 offices in Bangladesh, having 290 staff and 500 registered volunteers. It advocates the institutional and legal reforms of the public and private sectors. Recently TIB's reports on NGOs and Chittagong Port brought some changes. Transparency and accountability problems are/were found in the NGO sector. NGO reforms require three interrelated categories like NGO sector itself, government regulations, and donor perspective. · To establish a society free from corruption, state should not encourage opportunity for making black money into white money. This may give wrong signals. · The personality of individual is important for not taking bribe or indulging in other malpractices. However system should be changed.

what are the vulnerabilities with respect to social, economic and political considerations. The participants worked in the groups and presented group discussion outputs. The resource person played the role of a facilitator. She then synchronized the opinions of the participants and further elaborated the issues. She described the economic dimension of gender in poverty as possession of inadequate assets and resources, human capacity and constraints for access to labor market, limited access to bank credit, burden of non profit family work, rearing and caring activities. She explained social vulnerability as socio-cultural restriction, harassment, less access to the decision making process in family and society, lack of special health care address to women's needs. She pointed out the political vulnerability as under representation in political parties, parliament and local government bodies, where elected women representative do not enjoy equal rights like their male counterparts in the decision making process. Besides, she explained the concept of empowerment, empowerment in relation to women component, women empowerment, key issues for economic, political, legal and social empowerment of women, linkages in the empowerment process of rural poor women, to what extent Bangladeshi women have been empowered, role of microfinance from the economic viewpoint, and role of microfinance from the social viewpoint. She collected the positive and negative impacts of microfinance on women empowerment from the participants through providing cards to each pair of participants. In conclusion she mentioned that the micro finance program is a vital tool for enhancing social and economic situation of 37

Expert Paper 22: "Poverty from Gender Perspectives and Micro-Credit Intervention" by Ms Shirin Banu Mitul, Director, Gender and Governance, PRIP Trust, Bangladesh

The resource person at the beginning divided all the participants into three groups all of which were given assignment to discuss and write down the issues related to what is empowerment; what is women empowerment and its component and

women that enables them to have access to market, ensure freedom of choices and reasonable participation in policy making in every sphere of individual, family and social life. Micro finance addressed both poverty alleviation and women empowerment. Today, the micro finance program is considered as a comprehensive social program and highly appreciated and accepted all over the world. Thanking the resource person for such a participatory approach on the crucial issue of gender, Dr. Behera from AARDO, mentioned that mindset is important for women development and government has to create an environment for it by implementing the laws properly.

1.4.2

Presentation of Country Paper

The Regional Workshop-cum-Training Programme was attended by participants of six countries from Asia. They were from Republic of Lebanon, Republic of India, Sultanate of Oman, Republic of China, Syrian Arab Republic and People's Republic of Bangladesh. The country papers were presented in three sessions.

limited economic growth at the late nineties widened the huge gap between rich and poor. In 2005, one fourth of the population, around 1,330,000 people, was estimated to be in poverty. The population is urban centric with around 92% live in the cities and town. The driving sector of the local economy is the service sector (84.3% of GDP), in particular banking, tourism and commerce. Agriculture and industry contribute to create the internal domestic product respectively for 6.2% and 9.5%. In fact, 1% of borrowers seem to benefit from more than 50% of the total loans. Capital funding is not the sole problem of Lebanese micro enterprises, which also suffer a low competitiveness of the market, due to insufficient infrastructures. In such a context, micro credit seems to have the chance of playing a fundamental role in the informal sector, to become an alternative financing channel for micro and medium enterprises, insufficiently assisted by the banking system and the Government. Agriculture and agro-businesses in South Lebanon tend to be family-owned micro and small enterprises with low productivity and competitiveness. ESCWA and the Arab Authority for Agricultural Investment and Development launched a project in 2007 that seeks to improve financing opportunities for existing and newly established micro and small enterprises in South Lebanon that are involved in agriculture and agrobusinesses, and to build the capacity of local entrepreneurs. A revolving micro-credit fund was established with an initial size of US$ 210,000. Loans were disbursed at a flat interest rate of 12%, a rate considered to be competitive in comparison with micro-credit initiatives operating in Lebanon and other developing countries. Furthermore, a subsidized interest rate of 8% was offered to farmers who have been directly affected by the war in Lebanon during 2006. No capital guarantees

Country Presentation Session 1 : The first session was chaired by Mr Md. Ataur Rahman, Director General, BARD. In this session, participants from Lebanon and India made their presentation.

Republic of Lebanon The country paper was presented by Ms Mona Assaf. Giving some basic information about the geography, demography and economy of her country, she mentioned that Lebanon is considered a medium developing country and is one of the richest countries of the Arab world, with a GDP per capita of $5,000. The great impoverishment of the country, resulting from the civil war, and a 38

were required, which constitutes a major advantage over bank financing. As a result of the loans disbursed up to January 2008, 37 new work opportunities were created in South Lebanon while 97 jobs were sustained. In addition, a near 100% loan repayment rate has been achieved The microfinance sector in Lebanon, which came into existence in the late nineties, seems to be going through its first period of stalemate, despite its young age, relative to the more consolidated international experiences. The micro credit industry in Lebanon, measured by the number of active clients, is one of the smallest of the Arab world: in fact, its 13,500 clients represent only 2% of the total market. Besides, its growth rate doesn't seem to be so positive as it registers a slow growth, involving mainly the sole market leaders. Another extremely significant data is that only a relatively modest percentage (18%) of the potential target is nowadays served by the micro credit institutions in Lebanon Micro-credit is characterized by : (i) dominance of male clients, (ii) women represent only 35% of the total clientele, (iii) dominance of individual lending, (iv) with less than 20% are group guarantee loans against more than 80% of bigger individual loans, (v) frequent use of collateral, (vi) highly concentration in urban areas, (vii) focusing mainly on credit, The offer of savings, deposits and micro insurance is limited not only by regulation, but also by the prevalent mentality, i.e. consumption and not capital accumulation oriented. The Lebanese micro credit sector receives an important support by the international cooperation in particular by UNDP and USAID funds, by the Spanish Government and, more recently, by the European Union, The presenter also described the activities of Al Majmoua Lebanese Association for Development and AMEFN (Access to Micro

finance and Enhanced Niches) in micro-finance. Highlighting the weakness of micro credit market in Lebanon, she mentioned that it is the very high concentration that means low competitiveness, and in general, operative inefficiency and lack of incentive to innovation. The Cooperative Law framed in 1964 provides the legal framework of cooperative institutions in Lebanon. With the increasing participation of civil society in the postwar regeneration of the rural economy, there is increased attention towards strengthening the rural cooperatives. The cooperative institutional framework comprises primary cooperatives in the housing and consumer sectors in urban areas and over 400 rural cooperatives including some regional societies. The coverage of most cooperatives is low. Nearly 39% of cooperatives (180) have less than 20 members and another 33% (150) consist of a member base of 20 to 50. Only 13% of cooperatives (60) have more than 100 members. Still, according to her, the rural cooperatives have potential to develop into strong, broad-based (expanding coverage of membership) and self-reliant institutions, capable of organizing more effective and diversified services to members. They need a paradigm shift in their orientation and capacity building inputs. They are also in need of financial services, both short-term for input supply services, etc. and investment loans. Referring to the NGO sector in Lebanon, she said that NGOs became active during the prolonged civil war and provided social services and other forms of humanitarian relief. Several of these NGOs have remained and reoriented their activities to emphasize a more traditional economic and social development role. Republic of India The next country paper was presented by Mr Chandra Kumar Jamatia, who began his 39

presentation by referring to the poverty, which differs from state to state and a huge segment of poor people remain outside the fold of the formal banking system. In this situation, the Self Help Group (SHG)-bank linkage approach has been found an effective alternative. Microfinance has made tremendous strides in India over the years and it has become a household name in view of the multi-pronged benefits reaped from microfinance services by the poor. Self Help Groups (SHGs) have become the common vehicle of development process, converging all development programmes. According to him, microfinance sector has covered a long journey from micro savings to micro credit and then to micro enterprises and now entered the field of micro insurance, micro remittance, micro pension and micro livelihood. This gradual and evolutionary growth process has given a great boost to the rural poor in India to reach reasonable economic, social and cultural empowerment, leading to better life of participating households. The micro-credit models involving credit linkage with banks are SHGs, Swarnjayanti Gram Swarozgar Yojana (SGSY), Micro Finance Institutions (MFIs), Banking Correspondent Agent (BCA), Non Banking Financial Companies (NBFCs), Financial Corporations (FCs), and Tripura State Support Project on SHGs (TSSPS). The SHG - Bank Linkage Model which was launched by NABARD in 1992, with the policy backup of the Reserve Bank of India involves the SHGs financed directly by the banks. He concluded that the microfinance movement has been widened, deepened and diversified. The SHG­Bank Linkage Programme has transformed the whole range of institutions ­ Government, banks, NGOs and development institutions, in their approach towards development of the poor. 40

The programme is growing steadily and it is likely that coverage of 100 lakh SHGs would be accomplished much before 2015 as envisaged. All the stakeholders in their upscaling process are however, expected to champion the core values, visions, principles and philosophy of SHGs and SHG ­ Bank Linkage Programme for orderly growth of microfinance movement. There is a need for recalling, reiterating and reinforcing those fundamentals for sustenance of the movement. National Agricultural Bank for Agriculture and Rural Development (NABARD) has been the conscience-keeper in this regard and has been focusing the same in every fora. As in the solar system, with Sun at the center and all stars moving around remain in balance when centri-petal and centrifugal forces are kept in balance, similarly, microfinance eco-system with the Sun of SHG ­ Bank Linkage Programme at the center, could remain in balance if all the players and programmes revolve round the central value system in the changing times ahead. Interventions In response to a query whether there is a special programme for the handicapped in India, Mr Jamatia said that the programme of SHGs also cover the handicapped. A point was raised that the paper did not include basic information about India and also about the good governance issue. The presenter said that he tried to focus on micro credit since this is one of the major concerns. However, while elaborating the convergence of SHGs and other programmes, he tried to link the governance issue. In reply to questions regarding programme for religious minorities, the presenter said that the SGSY has special safeguards for them. They get basic orientation and skill training from DRDA, line departments and NGOs. Dr. Sanjeeb K. Behera supplemented that the National

Minorities Development Finance Corporation (NMDFC) in India provides micro-credit to the five minority communities for their socioeconomic development. Replying to a query about the role of NGOs is Tripura, Mr. Jamatia explained that NGOs are not very much active in this state. They are working under controlled situation. Regarding the query of funding, he said that 90% fund comes from the central government and 10% from the state government. At the end of the session, the Chairperson said that the micro credit system working in India is really excellent. It is run through the banks which are controlled by the central bank. The system is effectively institutionalized. The government control over the whole system is the strength of the programme. The Central Bank of India plays a key role in the country's economy. Another excellent feature is the provision for inclusion of at east 3% handicapped people. Finally he said that micro credit supports poor people as well as small farmers and non-farm activities. The receiver of micro credit needs to be protected. So far the terms and conditions are not adequate to protect them. Rules and regulations also need to provide the opportunity of exit from micro credit. The micro credit providers should also be brought under rules and regulations. At the same time, there should be an in- built mechanism for handling complaints and disputes from both receivers and providers. There should also be enforcement of rules by providers and by government agencies. Lastly, a synergy should be established among the five actors: clients, providers/institutions/NGOs, banks, government and international communities.

Sultanate of Oman The first presentation of the second session was made jointly by Mr Nasser Mubarak Al_Alawi and Miss Badria Rashid Saeed Al-Qutaiti of Oman. Giving a brief introduction on the rich natural resource, Mr. Nasser mentioned that Oman is the second largest country in the Arabian Sea. In early seventies, the economy of Oman was dependent on subsistence agriculture and fisheries, but the national economy derived stimulus from the exploitation of oil and gas and has benefited the development and modernization of agriculture. Agriculture and fisheries are Oman's main non-oil exports, representing 70% of the country's nonoil exports. He mentioned that date is the major agricultural product of the cultivated areas along with other fruits and vegetables. Mr Nasser referred to different types of commercial banks in Oman, which are providing loans to Omani people but with high interest. However, the government provides people having small scale entities with interest free loans subject to having a capital not exceeding RO 5,000. Those loans are provided through Oman Development Bank (SAOC), Sanad Program, Ministry of Social Development/Livelihood (RizGH) Resources Projects, the generous gestures of His Majesty Sultan Qaboos and Fund for Development of Youth Projects "Sharakha. Ms. Badria, the other participant from Oman supplemented that Oman Agriculture and Fisheries Bank provides loans to all categories of farmers, with priority to small farmers and productive agricultural projects. The Bank also administers some agriculture and fisheries loan programmes, and grants loans in cooperation with the relevant departments of the Ministry of Agriculture. Bank Muscat, HSBC Bank Middle East Limited and Bank Sohar also provide credit for the development of Small and Medium Enterprises. 41

Country Presentation Session 2 : This session was presided over by Mr Mohd. Mir Kashem, Director (Administration), BARD. In this session, the participants from Sultanate of Oman and R O China made their presentation.

Interventions After the presentation, the chairperson of the session, Mr Mir Kashem invited comments/ question from the floor. Responding to a question of Ms Mona Assaf of Lebanon, Mr Nasser informed that agricultural credit covers agro-based industry and livestock sector. Replying to Mr. Narayan Chandra Sarkar, Bangladesh, he informed that the contribution of Petroleum to the GDP of Oman is around 60 to 70 per cent while the contribution of agricultural sector is 5 to 10 percent. Clarifying an issue of irrigation infrastructure of Oman raised by Mr K M Kahirul Alam, Bangladesh, he informed that underground and rain water is used commonly for irrigation purpose. The Government also undertook an experimental project to use sea water for agriculture after giving treatment. In reply to a question of Mr. Shafiqul Islam of Bangladesh, Ms. Badria informed that there are one or two NGOs in Oman. She also added that the terminology of interest is widely used in Oman and they don't face any problem with this terminology. As regards the query of Mr. Chandra Kumar Jamatia, she informed that the system of mortgage for providing credit does not create any problem as every household has its own homestead. This system intends to get commitment from the loan receiver to pay back loan amount and it is functioning well. Answering a question of the Chairman of the session, Mr. Nasser informed that new graduates need to wait some time to get a job in the government sector as the government job is prestigious in Oman and for this reason, sometimes unemployment rate rose upto 15 per cent. Republic of China In his presentation, Mr Chih-Pei Lin mentioned 42

that farmers and fishermen's associations which were established first in 1990 are the most widelyspread and influential farmers' organizations in the Republic of China, providing the most comprehensive and diversified services. The services provided by the associations include credit, supply and marketing, agricultural extension and insurance. The Credit Department is responsible for the deposit and lending of funds. Other departments are the Supply and Marketing Department, the Extension Department and the Insurance Department. Since the Farmers and Fishermen's associations are based at the grassroots level, it is easier to serve the wide range of people through this network which is hardly possible by the commercial bank. Due to some internal and external factors the credit departments of far mers' and fishermen's associations have faced great challenges since the year 1996. They gradually lost their competitiveness in the market due to restriction in the scope of business. The series of disasters experienced by the farmers in the recent years deteriorated the situation of farmers' capacity to pay back credit amount. Financial crisis in 1997 and Earthquake in 1999 have placed the rural villages in the affected areas in a miserable situation, and the agricultural reorientation policy implemented by the government forced the pig farmers to move away from the agricultural industry. The country's entrance into WTO in 2002 has further caused the disorder in the industry. All these have not only adversely impacted the rural economy, but also impaired the capability of the farmers in the repayment of interests. Due to remarkable changes in the agricultural industry of the country and in the competitive financial environment, credit departments of the farmers' and fishermen's associations faced operational difficulties in the credit market.

After that he discussed the steps taken by the government for improving the business structure of the credit departments of farmers' and fishermen's associations, maintaining the order in agricultural finance, providing integrated services in the related fields, and activating the economic development in the rural and fishing villages. He also mentioned that since the establishment of the agricultural finance system of the R.O.C, the industry has been under the efficient supervision of the competent authority, at the same time receiving active training from the Agricultural Bank of Taiwan, full support from the Agricultural Credit Guarantee Fund and collaborative efforts from all the farmers' and fishermen's associations. All these have contributed to the improvement of the quality of life of the farmers and fishermen and activation of the rural economy, and also have built up a solid foundation for the sustainable agricultural development of the Republic of China. Interventions After his presentation, the participants raised several issues and made supplements. Responding to a query of Mrs Nasima Akhter of Bangladesh, the presenter informed that men and women in ROC enjoy same privileges. For that reason, any special programme for the women is not essential. Mr. Khairul Alam of Bangladesh informed that he had an opportunity to visit Taiwan some time back and from his experiences, he shared that Producers Association in different sectors of agriculture in Taiwan plays an important role in protecting their interest and marketing agricultural products. He also said that policy regarding distribution of cultivated land from the government has also an impact on rural economy. Responding to a question of Ms Mona Assaf of Lebanon, the presenter said that agricultural credit consists of agricultural

industry and livestock. He added that the contribution of agriculture to the GDP is 5 to 10 per cent and petroleum constitutes 60 to 70 per cent of the GDP. The source of irrigation water is underground and rainfall. The government has recently taken a treatment project of sea water.

Country Presentation Session 3 : The last and third session on country paper presentation was chaired by Dr Sanjeeb Kumar Behera, Head of Research Division, AARDO. In this session, the participants from Syrian Arab Republic and Bangladesh presented their country papers.

Syrian Arab Republic Introducing the geographical situation of her country, Ms Sahar Abdin, the participant from Syria mentioned that the Public Corporation for Employment and Enterprise Development (PCEED) was established in 2006 to replace the national program to combat unemployment from 2002 ­ 2006. Some of the specific objectives of PCEED are: implementing small and medium enterprises and supporting and encouraging suitable environment for entrepreneurs; and implementing micro-finance programs by nongovernmental organizations. She also mentioned that there are an estimated 260,000 to 420,000 households in Syria requiring access to micro credit for business purposes, and one million households requiring credit for non-business purposes such as housing, education and medical care. The existing microfinance institutions operating in Syria serve just 3 per cent of all needs. Referring to the First Micro Finance Institution, Syria (FMFI-S) is the leading private-sector microfinance service provider in Syria, she mentioned that it was originally established in 2003 as a microfinance program, but it became a 43

deposit taking institution by October 2008. Referring to its various activities, she mentioned that FMFI-S works in close collaboration with the Ministry of Agriculture and Agrarian Reform.. It also works closely with other programs in Syria to maximize the local development impacts. In addition, she informed that the Village Business Incubator (VBI) project under the framework of Fund for Integrated Rural Development of Syria (FIRDOS) is a service centre for the development of female entrepreneurship in rural areas of the Lattakia Governorate of Syria. She also referred to the fact that the project provides support to its women entrepreneurs through cooperation with the women themselves. The annual Christmas Bazaar is an opportunity for the marketing of women's quality products Interventions After the presentation on Syria, Mr A K M Khairul Alam of Bangladesh wanted to know about cultivation system and production in the fertile Zara region of Syria. In response, Ms Saha mentioned that Syria has adopted well developed cultivation methods and is advanced in agriculture compared to other Arab countries. Finally, the Chairperson of the session remarked on the strengths and limitations of the paper and thanked the presenter and the participants. Peoples' Republic of Bangladesh The last country paper of the workshop on Bangladesh was presented by Dr Md. Shafiqul Islam, Joint Director, BARD. He presented the paper on behalf of the seven participants of Bangladesh. The presentation started with the country profile on Bangladesh, where the presenter pointed out area, geographical location, population, poverty level and other socio44

economic information of Bangladesh. Then he talked about the history of rural development of Bangladesh covering the pre-British period, British period, and Pakistan period. In this regard, he highlighted the contribution of Bangladesh Academy for Rural Development (BARD) and its various successful models, including the famous Comilla Model. He also mentioned about different institutes developed from the experiments of BARD. He discussed rural development programmes in two categories : (i) class or target group-based, and (ii) problem or purpose-based, and at the same time, cited some examples of these programmes in government and nongovernment sectors. He noted recent experiments of BARD with special emphasis on Comprehensive Village Development Programme (CVDP). Describing various forms of hurdles to rural development in Bangladesh, he narrowed down the discussion on micro-credit and mentioned that broadly micro credit can be classified as: i) Traditional informal micro credit; ii) Micro-credit based on traditional informal groups; iii) Activitybased micro-credit through conventional or specialized banks; iv) Rural credit through specialized banks; v) Cooperative micro credit; vi) Consumer micro credit; vii) Bank-NGO partnership based micro credit; viii) Grameen type micro credit or Grameen credit; ix) Other types of NGO micro credit; and x) Other types of non-NGO non-collateralized micro credit. He pointed out that the concept of collateral free micro credit to rural borrowers originated from Rabindranath Tagore's philanthropic act when he founded the Kaligram Krishi Bank in 1905 in village Patishar in the district of Naogaon in northeastern Bangladesh. Today's use of the expression of microcredit in Bangladesh has it roots in 1960s. The pioneer in this sector is Akhtar Hameed Khan, a world-renowned social scientist and the founder

Director of Bangladesh Academy for Rural Development (BARD), Comilla. The "Comilla Model" was largely based on a group approach and providing micro credit to the co-operators. It was expanded throughout the country in 1970s as the Integrated Rural Development programme (IRDP). Farmers were organized into two-tier cooperative groups. In 1982, the IRDP was reconstituted as Bangladesh Rural Development Board (BRDB) which continued and strengthened its initiatives to organize marginal and landless farmers & poor women into formal and informal co-operatives for their empowerment through micro credit interventions. Another pioneer of micro-credit is Prof. Mohammad Yunus, the founder of Grameen Bank of Bangladesh starting and shaping the modern industry of micro financing in the seventies. Mr. Islam also discussed the micro credit progarmmes of the government. After that he discussed on some of the conceptual issues and dimensions of good governance, and explained the linkage between good governance and rural development. He stated that lack of good governance is the core cause of endemic poverty, low economic growth and underdevelopment in the rural areas of Bangladesh, and lack of good governance results in the misuse or misallocation of resources, leads to inefficiency, wastage, corruption, injustice, violation of human rights, political discontent and social unrest. Therefore, establishment of good governance is required at all levels of central and local governments of Bangladesh for enhancing rural development. Interventions Before opening the session for discussion,

chairperson of the session, Dr. Sanjeeb K. Behera, commented that the paper was nicely structured and well-written. Ms Mona Assaf liked to know as to whether any conflict prevailed among the different micro-credit landing institutions. In response, the presenter said that there are some problems with the micro-credit giving institutes as mentioned in the paper. He agreed that there is some coordination problem in the micro-credit operation. Mr Chandra Kumar Jamatia, participant from India, mentioned that the paper is wellstructured and described elaborately the microcredit part, but it has missed good governance practices and measures of Bangladesh. In the regard, Mr Abdul Quader, one of participants of Bangladesh pointed out some measures taken by government recently, such as reorganization of Anti-Corruption Commission, introducing Citizen Charters, etc. Mr Nasser Mubarak Al-Alawi requested the presenter to provide web address of major micro-credit giving organizations of Bangladesh. Finally, the Chairperson thanked the presenter and made some comments regarding micro-credit programmes of Bangladesh. He suggested that there be an impact evaluation on socio-economic development compared with base line survey instead of comparison between the beneficiaries and non- beneficiaries of micro credit programmes. He cited the example of good governance from India and mentioned that the Right to Information Act as a historic step by the government in this regard. Similar initiatives from national government will ensure transparency in the system. He concluded the session with a note that awareness building among the rural people and more specifically women's education is one of the crucial factor for ensuring good governance.

45

2. GROUPS DISCUSSION AND RECOMMENDATIONS

Following presentation of key note address, expert papers and country papers, group discussion was organized to arrive at the appropriate recommendations. The participants were divided into three groups. All three groups were assigned the task to deliberate and discuss on : i) MicroCredit Delivery System: Role of Government and Civil Society Organization including NGOs and ii) Rural Development and good Governance: Challenges and Possibilities. At the end of their deliberations, each group came out with a set of recommendations, which they presented in the plenary session. The session was chaired by Mr. Md. Ataur Rahman, Director General, BARD. The compositions of the group along with their presentation (revised in the light of discussion) are presented below : Group "A" Members : i) ii) iii) iv) Mr Nasser Mubarak Al-Alawi (Oman) Mr Chih-Pei Lin (Taiwan) Dr Md. Shafiqul Islam (Bangladesh) Engr. (Ms) Mona Assaf (Lebanon) i) Government through its different Ministries/Departments/Projects. ii) Non-Government Organizations.

iii) International donors, banks and other financial institutions.

2

Expected Role of the Government

i) Government should play the vital role in delivering the micro credit through its policies, strategies and implementation. ii) Government should have a rural development multi-sectoral scheme including all relevant ministries and line departments. iii) Government should have place proper monitoring and evaluation system of all micro credit related projects and programmes for ensuring the benefits of microcredit to the grassroots poor. iv) Government should be transparent in delivering the microcredit.

Topic 1 : Micro-Credit Delivery System: Role of Government and Civil Society Organization including NGOs

3

Expected Role of Civil Society Organizations

1

Micro credit Delivery System

i) Civil society organizations should feed to the government developmental schemes. ii) Civil society organizations should ensure sustainability in the projects and programmes.

Micro credit delivery system differs from country to country. However, they can be summarized as below: 46

iii) Civil society organizations should be more transparent and some accountability to the government as well as beneficiaries. Topic 2: Rural Development and Good Governance: Challenges and Possibilities 1 Rural Development and Good Governance: Challenges Compatibility; Transparency;

GROUP "B" Members: i) ii) iii) Mr A K M Khairul Alam (Bangladesh) Miss Badria Rashid Saeed Al-Qutaiti (Oman) Mr Md. Abu Salek (Bangladesh)

i) ii) iii) iv)

Topic 1: Micro-Credit Delivery System: Role of Government and Civil Society Organization including NGOs 1 Micro-Credit Service Providers

Commitment; Coordination/integrity at all levels; Ministries of the Government and its Line Departments, NGOs and Financial Institutions through their branches 2 Target Groups

v) Decentralization of governmental systems to reach the grassroots people; vi) Bottom up and participatory development planning; and vii) Complementary coordination with civil society organizations. 2 Rural Development and Good Governance : Possibilities

Landless Poor People, Women, Farmers & Fish Workers, Unemployed People, Students, Physically Disabled, Other Marginalized Sections of the Society 3 Service Offered

i) Enabling and developing the human resource in the public sector; ii) Developing the government towards egovernance to have more efficiency; iii) Institutionalizing the overall rural development process; iv) Ensuring coordination and complementarity of the developmental process by the government.

Providing Credit, Capacity Building through Training, Providing Infrastructure Facilities 4 4.1 · · Results/Outcome Economic Impact Increase in the income level of people Increase in production & food security

· Emergence of the habit of saving among rural people 47

· Increase employment opportunities in rural areas 4.2 Social Impact

· Each country should prepare& update authentic data base from time to time · All micro-credit institutions- government, NGOs & other; financial institutions should come under the proper authority · The best practices of micro-credit should be documented and shared with other countries through bilaterally and multilateral organizations like AARDO, CIRDAP, etc. 5.2 For Civil Society Organization & NGOs

· Awareness building and increase in the level of education · Social empowerment · · 4.3 advancement women

Social mobility Institutional development in rural areas Problem Areas · NGOs should be complementary to the government in micro-credit delivery system and should not act as a competitor · It should play a more pro-active role as a link between government and people · NGOs in collaboration with the other civil society organizations should ensure the creation of awareness among the people · CBOs should act as a check and guide for NGOs in the rural areas Topic 2: Rural Development and Good Governance: Challenges and Possibilities 1 Challenges

· Lack of coordination among different service providers · · · Lack of awareness among the people Insufficient infrastructure facilities High rate of interest

· Lengthy and complicated process to get Loan (government loan) · Weak support system (training, etc.)

· Vested interest of the service providers (in some cases) · · 5 5.1 48 Improper use of credit Unauthorized transaction Recommendations For Country Government

· Population pressure & illiteracy- lack of awareness · · · Poverty Food insecurity Lack of rural infrastructure

· · · · · 2 ·

Pressure on agricultural land Gender biasness Lack of people participation Lack of transparency & accountability Corruption at different levels Possibilities

· To take appropriate planning, monitoring and evaluation for infrastructure development in rural areas by involving people; · To take measures and steps for poverty alleviation through proper utilization of microcredit & finally; · Ensure building of awareness among the rural people, with a thrust on women education. GROUP "C"

Effective use of HRD in development Members:

· Better implementation of micro-credit for poverty alleviation · Use of modern technology for agricultural development · Opportunities to create self-employment for women · Infrastructure development- roads, market, schools, hospitals, banks, etc. 3 Recommendations

i) ii) iii) iv)

Mr Chandra Kumar Jamatia (India) Mrs Sahar Abdin (Syria) Ms Nasima Akhter (Bangladesh) Mr Md. Kamruzzaman (Bangladesh)

Topic 1 : Micro-Credit Delivery System: Role of Government and Civil Society Organization including NGOs 1 Introduction

· To reduce the population growth rate and use people as human resources in productive sectors; · To ensure food security for all;

Micro Credit is a program for supply of collateral free small loan for self employments of the poor people who do not have access to formal financial markets, with short processing time, reasonable delivery cost, easy installment repayment given to the loanee, disadvantaged target members preferably distressed women etc. for income generating activities. 2 Micro Credit Providers

· To build up better coordination system between Government- NGOs and CBOs for sustainable development of rural areas; · Ensure transparency and accountability of different stakeholders;

Government machineries, Non Governmental Organization (NGOs), Banking Sectors, Private Financial Institutions, etc. 49

3

Approaches

6

Role of Civil Society Organizations including NGOs

Group Approach, Individual Approach, Cooperative Based, Comprehensive Approach, Holistic Approach, etc. Capital building through weekly savings, Installment Based Repayment. 4 Problems of Micro-credit Delivery System

To mobilize the poor people, especially women, To link between poor people and micro credit providers, To identify the training needs, To provide skill development training, To organize awareness campaign on education, health and sanitation, environment, gender equality, etc. Topic 2: Rural Development and Good Governance: Challenges and Possibilities 1 · Scenario and Challenges Lack of infrastructure in rural areas

Lack of proper rules and regulations, over lapping loan distribution, Lack of coordination, High rate of interest/ service charge, No grace period, Lack of monitoring on proper utilization, Using as a business purpose etc. 5 Role of Government in Micro-credit Delivery System To make proper rules and regulations

· ·

· Overlapping and multiplicity of institutions/organizations · · High rate of illiteracy Lack of transparency

To coordinate among various micro credit providers

·

To regulate lending rate of interest

· To use the micro credit as a tool of poverty eradication, not as a business purpose · ·

To provide subsidy

· Lack of accountability of micro credit providers 2 Possibilities

To provide training on Income Generating Activities (IGAs)

There is still great room for further improvement in micro credit delivery system and good governance: · To enact proper rules and regulations,

To strengthen local government institutions and link with micro credit delivery system

·

· Appropriate technology and business incubator promotion, · Education and empowerment of people, awareness and capacity building,

·

people 50

To ensure participation of the poor

·

ICT Development,

· ·

Focus on self employment, Decentralization of good governance,

· Development of rural infrastructure : physical and social, · Total Quality Management: Development and Continuous Improvement, · To ensure agricultural development and provide marketing facilities, · To ensure human resource development and proper utilization of social capital, · Enhance youth vocational training,

· Convergence of poverty eradication schemes, · 3 Political will. Conclusion

Micro credit is an important tool for poverty reduction. But, alone it is not a panacea for reduction of poverty. Through government, civil society organizations and good governance practices, micro-credit service providers can accelerate rural development.

51

3. VALEDICTORY SESSION

The closing session of the International Training cum Workshop on "Microcredit Delivery System and Good Governance in Rural Development" was held at 11.00 am on 18th February 2010. The session was chaired by Mr. Md. Ataur Rahman, Director General, BARD and H E Dr Abdalla Yahia Adam, Secretary General, AARDO was present as the Guest of Honour. On behalf of the participants, Mr Chandra Kumar Jamatia of India and Ms. Mona Assaf of Lebanon thanked BARD and AARDO for giving them an opportunity to come to Bangladesh and get exposed to the delivery mechanism of micro-credit for the socio-economic upliftment of the rural poor. Mr Jamatia mentioned that overall coordination was excellent, interaction was very friendly and the visits to different places were very effective. The training was much beneficial for them and they have developed a commitment to replicate the microcredit experiences in their respective countries. Ms Mona Assaf further stated that the participants have gained very rich experiences from the training cum workshop in Bangladesh which is the seedbed of micro credit. They have also learnt the necessity of good governance and several dynamics of people of the host country. She gratefully remembered the hospitality and generosity which they enjoyed during the stay at BARD and particularly the personal care taken for each and every participants by the Director General of BARD. The Workshop Director and Director (Training) of BARD Dr S J Anwar Zahid expressed his satisfaction that the training cum workshop came to a successful conclusion. This was the second 52 programme jointly implemented by AARDO and BARD. The lively participation of the participants made the course very effective. They were acquainted with the concepts of microcredit and good governance. They also shared experiences of their respective countries. He thanked H E Dr Abdalla Yahia Adam for extending collaborations in many ways to Bangladesh and BARD and also for his kind presence in the concluding session. He expressed his gratitude to DG, BARD for his guidance, close monitoring and academic contributions in different sessions. Dr. Zahid added that the relation between BARD and AARDO would further enhance in future. He thanked resource persons, Faculty Members and officials of different committees and service sections of BARD for their sincere efforts. Finally he recorded his high appreciation for the participants for their excellent cooperation and friendly attitude. Mr Anwarul Azim, Associate Workshop Director presented the synopsis of course evaluation by the participants. The evaluation report of the workshop is given separately in this publication. After the presentation of the workshop evaluation, the certificates of participation were distributed by the Secretary General, AARDO and Director General, BARD. Thereafter, the Guest of Honour, H E Dr Abdalla Yahia Adam, Secretary General of AARDO in his remark expressed his happiness that he managed to come for the closing session although he could not attend the opening session for some other important commitments. He mentioned that the history of his Organization's collaboration with

BARD is not long but it is proved to be as long as anybody can expect. The workshop is the outcome of an MoU for cooperation between BARD and AARDO. He was very happy to know the outcome of the workshop. The Director General of BARD took personal interest in making the course successful by closely monitoring the progress of work and interacting with the participants. For this, the Secretary General expressed his gratitude to Director General of BARD. He also thanked the Workshop Management and Faculty Members of BARD for very ably conducting the course and preparing the materials in due time. He also thanked the participants for their full cooperation and their nominating governments for ensuring their participation in this programme. Later justifying the organization of the course at BARD, he mentioned that Bangladesh, the home of microcredit has four decades of experiences in this field. Secondly, since BARD is close to rural areas, the course offered the opportunity of feeling poverty by staying very close to the poor. He added that assessing the impact of microcredit on socio-economic changes of the poor encompasses such issues as food consumption, human capital and physical capital formation, social mobilization and people's participation. Social mobilization is crucial for any participatory movement. Repayment of loans is a yardstick for microcredit performance; but more important yardsticks are income generation, asset creation, savings accumulation, women empowerment, enrolment in school, etc. He concluded his remarks by stating that microcredit is expected to keep pace with the levels of poverty to include creation of small and medium scale assets, durable

household assets, rural housing, pay for education, health insurance, medication etc. leading to a dignified living to those who are identified as poor. The Chairperson of the session Mr. Md. Ataur Rahman, Director General, BARD said that it was his great pleasure to record the gracious presence of His Excellency Dr Abdalla Yahia Adam, Secretary General of AARDO in this session. His presence encouraged the participants and all those associated with the course. Poverty has been receiving much attention from all corners for the last five decades. Poverty remains a growing concern but results are not satisfactory both nationally and globally. In tackling poverty, microcredit has become a powerful tool. The workshop is important because it addressed contemporary issues like microcredit and good governance. The participants actively participated in the deliberations. Such workshops offer excellent forums to share experiences, which can be used to assess results of micro credit in respective contexts of the participants. The workshop helped to learn strengths and weaknesses associated with microcredit and good governance. Mutual cooperation and uninterrupted interactions are required to address the weaknesses. He further mentioned that the recommendations of the workshop should be disseminated at concerned levels along with follow-ups. Finally, he acknowledged that Dr. Behera of AARDO took lot of responsibilities and made the work easier. He thanked the workshop management for conducting the programme with devotion. He thanked the participants for their very cordial participation and hoped that they would remember their friendship with BARD and with one another.

53

4. A NOTE ON THE FIELD VISITS

On the afternoon of 12 February 2010, the participants visited the Bamoil Peasants Cooperative Society, located in village Bamoil near Comilla. On arrival, the office bearers of the society welcomed the participants and explained the society's experiences in transferring their areas from undeveloped to a model for development The Chairman of the society Mr. Firoj Ahmed informed the participants that the society was formed on 4th April 1962 at the initiatives of fourteen members. Initially, its' activities were confined to the agricultural sector. However, the society embarked on the journey of Comprehensive Village Development Programme (CVDP) in the year 1987 under the guidance of BARD. He further said that massive training in the field of economic and social development, own capital formation, motivation, awareness building partnership with the local government, national building line departments and specialized village workers are some of the key strategies adopted for the development of the villages. The society has evolved a system of governance through learning by doing, involving participation of cross section of the people, transparent and accountable record keeping, sharing of knowledge and giving advisory support from BARD, which, according to the Chairman of the society may be viewed as certain practices of good governance at the grassroots level. The society covers three nearby villages and any adult member, irrespective of caste, religion and gender can become a member of the society by paying the membership fee, payable at the time of entry. The villagers below the age of eighteen may also join the society as associate member and they become full fledged member once they attain the age of eighteen. He 54 also enlightened the participants about the governance of the society and also the benefits the member gets from the society. Now the society is involved not only in the economic upliftment of the three villages under its areas of operation, it is also helping the people of the nearby areas by irrigating their lands; developing infrastructure like school, colleges, etc. in the village; providing social safety net and a host of allied activities for the welfare of the villages. The participants from Lebanon, Oman, R O China, and India enquired about the women participation in the credit programme and other development programme of the society. In response to the queries of the visiting participants, the Chairman and other members of the cooperative society supplemented the followings: 1 The cooperative society distributed dividend at therate of 15 per cent on share amount. The value of per share is Tk. 10. A member can purchase share up to Tk. 20,000. According to the cooperative law, 50 per cent of the profit can be distributed among the members of cooperative society and the balance amount is reserved in different funds of the society, 2 The society has a plan to establish a cold storage for providing storage facilities of vegetables to the farmers. The society has already purchased a plot of land for that purpose. 3 The people who are living outside the catchment area of the society are not entitled to become members of the society. But they can get irrigation facility provided by the society by paying higher prices than the members.

4 The society is providing credit to the beneficiaries from its own capital. There are two types of loan provided - one is long term and another is short term credit. Long term credit is provided as agricultural credit while short term credit is provided for non-farm activities. 5 The society has taken an initiative to establish a primary school in their locality for educational development of the villagers. This

primary school is upgraded up to college. Earlier enrollment of girl-students was very poor but now girl enrollments at primary and secondary level is found higher. After that, the participants also visited the school and college, established by the society and got an opportunity to interact with the children and women of the village.

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5. EVALUATION REPORT

At the end of the workshop, the participants were given an evaluation form to give their feedback on the overall organization including the logistic of the workshop. The main objective of getting the feedback from the participants was to improve the overall standard of the workshop/seminar/ training programme of the Organization in future. The evaluation form contained queries related to the objectives, relevance of the themes, effectiveness of the contents, duration of the workshop, relevance of field visit, etc. (the copy of the evaluation format is given at the end of this report). All thirteen participants submitted their duly filled questionnaire. Their comments and recommendations are as follow : · Though the opinion of the participants is divided on the relevance of the objectives and themes of the workshop, they all, by and large, agreed that the objectives of the programme were either highly relevant (eight participants) or very much relevant (five participants) to their professional requirements. · With regards to the extent of the success of the programme in fulfilling its objectives, majority of the participants agreed on the point that the workshop-cum-training programme is highly successful by giving four points in five point scale, thus indicating the fact that there is a scope for further improvement in the programme to make it exceptionally successful. · On the effectiveness of the contents in relation with the objectives of the programme was considered "exceptionally successful" by six (6) participants; highly successful by five (5) participants 56 and successful by two (2) participants. All participants agreed to the point that the workshop contributed to a great extent in their knowledge base on the subject and now they are better equipped to address the problems in their country's situation. · The participants were asked to give their views/comments on the presentation of country papers, expert papers, group discussion and field visits. According to four (4) participants, the presentation of country papers were highly effective; seven (7) opined it as very effective and for two (2) participants, the presentations were effective. Most of the participants opined that the presentations, made by the resource persons were very effective (10), three (3) participants termed it as highly effective. On the effectiveness of the group discussion, five (5) participants were of the view that the group discussion was highly effective, seven (70 considered it as very effective and only one participant (1) was of the view that it was effective. On the effectiveness of the field visit, four (4) participants considered the field visit as highly effective; five (5) participants as very effective and the rest four (4) as effective. · All the participants expressed their satisfaction on the duration of the workshop cum training programme as they all indicated that the duration of the programme was adequate. · Most of the participants were either exceptionally satisfied or highly satisfied with the overall coordination of the programme, workshop room cum computer facilities including internet availability, air travel, accommodation, food and local transportation.

Suggestions The participants gave the following suggestions for further improvement of the AARDO programme more effectively : · More emphasize on field visit and more interaction with the beneficiaries and implementing agencies of micro-credit programme; · Repetition in the lectures should be avoided;

· Ensure greater participation by involving participants from more countries; · Balancing the sessions between MicroCredit and Good Governance; · One day break during programme; and

· The programme was more focused on economic point of view. It would be better if it can be seen from the agricultural and environmental view points.

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6. ANNEXURES

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6.1 KEYNOTE AND EXPERT PAPERS

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Annexure 6.1.1

Keynote Paper on

MICRO CREDIT DELIVERY SYSTEM AND GOOD GOVERNANCE IN RURAL DEVELOPMENT

Mr Md. Ataur Rahman

1 Introduction And in reality, all of the countries have achieved more or less progress, although most of the country's achievement is far less than the expectation. Lack of good governance, or more correctly, least success in establishing good governance might be the reason for so disappointing performances in comparison to their high expectations. Rural development is one of the most critical and complex issues of any country. For Bangladesh, the issue seems to has been much more difficult for exploding population, resource constraint, legacy of the colonial era of `no-investment' in rural areas, recurring natural calamities etc. With all the explanations and excuses, the ground reality is that millions of people are living in abysmal poverty. However, efforts of the government for poverty reduction as well as rural development were always under careful examination in terms of resource mobilization towards rural areas and it's out come. The challenges for rural development are undoubtedly huge, but synergies of strategies and programs have always the potentials to produce far greater output. The thematic area of the workshop is `Micro Credit Delivery System and Good Governance in Rural Development'. The area embraces three conceptual issues, namely - Micro credit delivery system, good governance and rural development. 63

During the colonial era, a `Famine Code' was compiled, wherein three measures were prescribed to overcome a famine situation: `Loans' for the landowners, `test' work for labourers and `doles' for the disabled'. According to Khan (1983), `small credit, starvation wages, and skimpy doles, the imperial satraps, according to their own estimation, overcame one famine after another more effectively than their predecessors'. It was conceived that `loans alone could regenerate cultivation and thereby could generate employment'. Generation of employment was considered important not only from the point of psychological and physical misery of the unemployed, but from `the fact that' so many men who could produce real wealth were doing nothing was sheer waste'. The issue of credit, especially micro credit of the recent vocabulary could have better explained from this viewpoint of employment generation and producing real wealth. The issue of good governance is essentially not a new concept. In the recent past, one of reasons for liberation movement of Bangladesh and many of the Asian and African countries was the aspiration of the people for good governance. The expectations were that good governance would bring to their lives progress and prosperity.

It seemed that the first two issues encompass the third issue of rural development as their focus and therefore, the concept of rural development has been discussed first, with reference to Bangladesh. The reason for construing the discussion on Bangladesh only was that instead of making the discussion wider, the paper tried to make it deeper. 2 Rural Development : Bangladesh Perspective

With an estimated population of about 144.5 million and a density of 979 persons per sq. km., Bangladesh has about 75 percent rural population. 57.6 percent of the rural employment is generated in the agricultural sector, and 26.7 percent of rural income comes from agriculture. Although the share of agriculture has been gradually declining, yet agriculture contributes about 21 percent to the total GDP and thereby remains the mainstay of the rural population and the economy still continues to be identified as an agrarian economy. Therefore, rural development and development of rural economy is directly linked with the development in agriculture. Although agriculture has been the main source of rural livelihood, yet land distribution pattern, like most Asian countries, is highly uneven. According to a recent survey, 5.3 percent of the rural households do not own any land whatsoever, and 55.2 percent own up to 0.49 areas of land including homestead. Another 12.4 percent of rural households who own land up to 0.99 acre are also marginal farmers and therefore, about 73 percent of the rural households cannot make their subsistence depending solely on farming. The percentage of population below poverty line was estimated as 40 in 2005 at the aggregate level, 64

but 43.8 percent of the rural population so far were below poverty line. The figures manifest the rural biasness of poverty. Similarly, 46.9 percent of owners of land up to 0.49 acre were found to be below poverty line. However, poverty is not related only to land ownership; it has seasonal as well as regional variation too. Therefore, it is `not possible to improve situation of the country without improving the condition of the landless and marginal farmers' (GOB, 2008). Income poverty decreased from 58.8 percent in 1991 to 40 percent in 2005. In spite of the achievement the present level of poverty is unacceptably high. Moreover, income shares of deciles - I went down to 2.25 percentages in 2005 from 2.80 percentages in 2000 in rural areas. The Gini Co-efficient went up from 0.393 to 0.428 during the same period for rural areas; however, nationally it went up from 0.451 to 0.467 during the same period. Therefore, poverty reduction in rural areas still remains at the centre of all development efforts in Bangladesh. Making improvement in the rate of literacy is still a challenge for Bangladesh. The aggregate rate of literacy for population 7 years and up in 2006 was 52.5 percent; whereas it was 48.7 percent for rural and 64.0 percent for urban areas (BBS, 2008). Percentage of children enrolled in schools aged 6-10 years has also variation. The aggregate average of enrolment being 80.42 percent, the rural and urban enrollment was 79.47 percent and 83.98 percent respectively representing a disparity. However, alike the rural-urban variation, poor and non-poor variations were also remarkable (HIES, 2005). The difference in attainment of education has ultimate contribution towards average per capita income differentiation between rural and urban population (HIES, 2005). Therefore, narrowing down the rural urban disparity is another concern that demands immediate attention for attaining sustainable rural livelihood.

In the health sector, in spite of a bit lower achievement than the national average, the success so far achieved in the rural areas in reducing crude birth rate, crude death rate, infant mortality rate, and increase in life expectancy at birth have contributed much to their own life as well as the Human Development Index (HDI) of Bangladesh. The EPI coverage for all diseases is almost 82 percent (GOB, 2008). Again a careful examination is required whether rural people has an even access to curative health care services in terms of availability of physicians, proximity to the service centers, communication facilities to reach there and above all, the affordability to pay for the services. Since Bangladesh is still an agro-based economy, the scope of employment generation using the available technology in the agricultural sector, particularly in crop sector has become very limited. Stagnation or decline in agricultural employment generation opportunities has compelled both the government and the laborers to search for alternative sources of employment. Besides, the economy of Bangladesh has been advancing through transition and in the process the share of agriculture to national income has fallen gradually. But the share of agricultural employment fell more slowly than its share to national income. The inevitable consequence is surplus labor in the rural areas and therefore, the critical economic problem is to absorb the surplus labor so released from agriculture elsewhere in the economy as quickly as possible. One alternative is to absorb them in the formal manufacturing sector through adequate investment and another alternative might be the creation of opportunity of self-employment that requires the least investment from the part of the government. The natural disasters like flood, drought, cyclone,

tornado and river erosion cause huge loss to the economy and rural livelihoods. The general effect is that they make the lives more miserable and push the rural households to vulnerability. Apart from the natural calamities, the economic factors also add additional threats of vulnerability through the forces as imperfect market, limited access to market, inadequate market structure and market regulatory system. During transition of the society and the economy, the process of `pauperization' and `polarization' take place making the development process more complex. The issue of gender cannot be over looked. Without bringing the women folk in rural development process, improvement in the quality of life remains too distant a target. It is often cited that `being women and living in rural areas are double deprivation'. Gender inequality includes, among others, denial of access to education, health care and nutrition; physical and psychological abuse, wage discrimination etc. But the most concerning inequality is seen in the sphere of participation in economic activities, both in terms of real and potential participation as a laborer and as an entrepreneur. As a consequence, they remain outside the earning potentials, for themselves as well as for their families. The situation is worse in the rural areas in particular. The changes in farming practices have created a threat to environment through possible water depletion and soil degradation. A gradual shift from rain fed rice cultivation to ground water based irrigation dependent rice cultivation combined with unbalanced input use have been degrading the environment. Like many other countries the most serious emerging threat to Bangladesh is the climate change. It has been estimated that about 17 percent of the 65

country's total area may be submerged with the rise of one meter of sea level. That will cause displacement and migration of millions of rural people, who will become destitute loosing their means of livelihood and the social solidarity. Similarly, there is an increasing apprehension of change in the seasons, delayed and short monsoon, excess or less rainfall, prolonged drought - any of the consequences will create drastic change in the existing cropping pattern, which may have unbearable impact on the rural people in particular. Considering the factors that affect the livelihoods of the rural people, rural development may be considered as a continuous process of bringing positive change in the socio-economic condition with the objective of improvement in the material quality of the life of rural people, emphasizing special attention to the more deprived and vulnerable section of the rural population. Material quality of life includes fulfillment of basic needs and thus getting out of poverty; access to `essential services provided by and for the community at large', promote greater gender equity, empower ment of rural people, adequate infrastructure and availability of safety net programs at times of necessity. The attainments of the objectives are conditional to a number of factors. The key factors as have been identified are: accelerated growth in rural economy, reduction of abysmal poverty and sustainable management of environment. These factors may become highly competitive and even a critical situation of trade-offs may arise; but a high degree of complementarities is desirable, and creation of such conducive environment seems to be the key challenge for the policy makers. Sound policies, prudent investment and pro-poor institutions, all require to be directed towards achieving the goals. 66

3

Rural Development: Experiences of Bangladesh

During the fifties of the last century, a comprehensive rural development program was launched by the government through Village Agricultural and Industrial Development (V-AID) programs that was however, abandoned in 1961. At that time, in 1959, Bangladesh Academy for Rural Development (BARD) was established for capacity building of the government officials through training. Later, research and action research programs were incorporated into the activities of the academy to get the most output by making the training program more practical, demonstrable and effective. Through the process, the Academy innovated a model, known as `Comilla Model' having four components. The components of Comilla Model worked from four different corners: (a) two- tier cooperatives to organize farmers for increased production; providing access to input markets; harvest the new technology coming in the production function and access to credit market through cooperatives; (b) Thana Irrigation Program (TIP) to offer small scale irrigation facilities as well as employment to the rural laborers during construction of irrigation infrastructures; (c) Rural Works Program (RWP) to provide non-farm employment during the lean season but at a comparatively lower wage rate so that agriculture would not face competition in labor market and (d) Thana Training and Development Centre (TTDC) that provide the opportunities for training of the officers and farmers at the local level as well as planning and implementing the need-based small projects. The cumulative effect of the model was an excellent growth in rural economy in general and in agriculture in particular.

Gradually, the model became an approach to Integrated Rural Development (IRD) Program and was replicated throughout the country by the government. A new organization, Bangladesh Rural Development Board (BRDB) was established to carry out the program. A recent study shows that the contribution of BRDB alone is about two percent to the GDP of the country. However, two external factors also contributed in the process. Firstly, the construction of infrastructure in the rural areas by the government that helped easier access to input - output market and wider linkage between rural, urban and periurban areas as well as among the villages. Secondly, the innovation of High Yielding Variety (HYV) rice by IRRI that made possible the `Green Revolution'. Green Revolution was the `first major expression of the application of modern science' in Asia's and of course in Bangladesh's agricultural sector. The consequential growth of agriculture due to green revolution provided `basic foods, raw materials for agro-industry, and exports and freed up foreign exchange for the importation of strategic capital and industrial goods'. It supported and generated more purchasing power for nonfood consumer goods and services in rural areas and thereby provided an internal market for manufactured goods. In some countries including Bangladesh it helped reducing poverty by raising labor productivity and non-farm employment in rural areas and by reducing food prices for all. However, for several economic and social factors, green revolution could not translate the agricultural growth into national economic growth; most important factors, among others, were inequitable access to land, absence of market liberalization, absence of structured rural financial institutions,

lower investment in human capital, slower expansion of infrastructure and weak distribution pattern of benefits from agricultural growth. Therefore, the positive growth in agriculture remained incapacitated to eradicate rural poverty. It may be points for consideration that socioeconomic transformation of a low-income country is dependent upon `the continuous flow into agriculture of investments in modern technology with high economic return'. Besides `the elaboration of a large number of new or modified institutions accompanies rapid economic growth'. Rural development programs in Bangladesh could not succeed to meet both the requirements. Though the rural people in Bangladesh are homogenous in culture, but in reality, are heterogeneous in social setting, economic condition, asset base, quality education and proximity to infrastructure. All these factors lead to different opportunities for different households. Therefore, rural development efforts at the aggregate level and at the individual or household level respond differently. To bring a synergy between the two levels, rural development programs need to be diversified according to the demand of each section of the households. This diversity of necessities may be considered as the country setting on which the micro credit emerged in Bangladesh. 4 Micro Credit : Emergence

Micro-credit has been identified as one of the inputs essential for development of the small and marginal farmers, rural women and the landless. The World Conference on Agrarian Reform and Rural Development held in 1979 recommended that `access to credit be made easy and adequate'. Some cautious academics think that credit for the 67

poor cannot solve all the problems caused by poverty, but others view that it `can help put resources and power into the hands of the poor and low-income people themselves, letting them make everyday decisions and chart their own paths out of poverty'. Generally, in an agrarian society, credit was always needed by the farmers at different times for different activities. Apart from the relations, neighbors, and friends, the money lenders were a usual source of credit. Also were the traders, processors and input suppliers important sources of credit. It was found by a survey conducted by FAO that in India `four out five rice mills offer advance payments to farmers to cover the input costs'. The usurious rate of interest was one of the major impediments for small farmers in British Bengal to retain their land holdings as well as raise conditions of their livelihoods. In Bangladesh, formal credit is available for a farmer `through the commercial banks, specialized banks, specialized financial institutions, cooperatives and NGOs'. But the avenue to access to the formal credit market for a farmer is very narrow due to cumbersome process and so-called `security of investment'. Under the existing circumstances, access to the formal credit market for a landless poor individual appears to be simply impossible. Increasing landlessness and decreasing agricultural employment pushed millions of people under poverty line who became almost destitute. Credit, as capital, has always been regarded as a means of production for goods and services; but the formal credit market of the country has been a shut-thedoor for the rural poor and destitute. Possibly credit could provide them a flow of income to sustain their livelihood. 68

Cooperatives had a wider scope to fill the gap, but the conventional cooperatives could not come up with innovative ideas to include the marginalized poor. The failure of the conventional financial sector to reach the poor and landless people gave the headway of micro-credit in Bangladesh. Although BARD made some experiments on micro-credit during the late sixties, but what is seen today in Bangladesh is mostly the contribution of the Grameen Bank and its founder Dr. Muhammad Yunus. Grameen Bank popularized micro credit throughout the country and beyond. At the same time a number of NGOs came up with their own micro credit programs similar to the Grameen Bank. Impressed by the success stories and to meet the growing necessity, Government also entered the market through some of its departments. Now quite a good number of NGOs and the government are in the operation of micro-credit. It is worth mentioning that generally they are not competitor to one another, rather they seem to be in complementarities in their activities for the greater cause of reduction of poverty. 5 Micro Credit: Salient Features

Micro credit is a small amount of credit provided to the rural poor, particularly through an informal peer group formed by the rural poor women, without any collateral i.e., security. The solidarity among the members of the group is considered to be the security of the loan. It reaches directly to the clients and helps them develop their entrepreneurial capacity. Micro credit that is being practiced in Bangladesh has some distinct features that may be summarized below:

i) Loan is disbursed only to a group member, not to an individual; ii) No collateral, only group cohesion of responsibility, solidarity and loyalty to the group is the collateral; iii) Loan amount is small and therefore the repayment installment is also small; iv) An in built system of weekly compulsory savings; v) Loan is granted for one year and repayable in 52 equal installments; vi) In built continuous training to the beneficiaries on income generating activities; vii) Continuous supervision on utilization of credit by the provider as well as by the group chairperson; and viii) Loan utilization and full repayment certificate forms the basis for granting a fresh loan for another year. Micro credit has become a powerful instrument for providing credit to the target groups due to its several strengths. More important among them are that it reaches the beneficiary directly; builds capacity for self-employment; helps participate in income generating activities; develops entrepreneurial capacity; provides ladder to get out of poverty and thereby allows the beneficiary to graduate from poverty. The magnitude of micro credit in Bangladesh can be perceived through few statistical figures. Grameen Bank alone distributed over Tk. 58.34 billion from July 2008 to April 2009 among 7.8

million beneficiaries and of them 7.6 million were women. In 2008 BRAC and ASA distributed Tk. 84.29 bn and Tk. 60.84 bn respectively. The money was distributed among 8.1 million of BRAC and 7.2 million of ASA beneficiaries. There have been other over five hundred smaller NGOs providing micro credit in the country. BRAC and ASA could reach to 7.8 million and 7.2 million women respectively. A survey conducted by Credit and Development Forum (CFD) in 2007 on 535 NGOs found that micro credit has been benefiting about 39.1 million people. Their cumulative credit disbursement was Tk. 732 billion and cumulative savings was Tk. 30.91 billion. 6 Micro Credit : Delivery Channels

Micro credit is being delivered through three major channels - the NGOs, the government departments and the specialized financial institutions. Among these three, the contribution of the specialized financial institutions are mostly symbolic, they have kept their presence in the field only. But the other two are the most contributing actors in the arena. The detail operational system of micro credit remains outside of this paper, expecting that it will be discussed during the course by the respected resource persons on the same. Therefore, the paper attempts to explore some of the contributions of micro credit and its future potentials in rural development. 7 Micro Credit : Opportunities to Flourish

As has been indicated earlier, over 40 percent of the rural employment is generated in the non farm sector. As long as the agro-economy grows, demand for agricultural inputs and supply of nonfarm complementary goods and services also 69

grows. This opportunity has created an ample scope of increase in non-farm self-employment. Agriculture has been gradually transforming from subsistence to commercial farming and it has brought changes in the production technology as well. As a consequence, demand for HYV seeds, chemical fertilizers, pesticides and irrigation equipments have grown and thus have created a market. There is also a noticeable change in the use of post harvest technology and equipments. This is going to be another market in near future. Similar changes will continue in future with wider opportunities for generating self-employment. With the development of infrastructure and increased access to market, rural economy is gradually integrating more and more with the urban economy, providing more scope for nonfarm self-employment as traders of agricultural products. In the process, non-farm activities have increased many folds due to increased demand for non-farm goods and services. Thus the sources of income have been diversified and have contributed towards expansion of micro credit through eventual increase in demand and rise of productivity of small capital. It can safely be assumed that in Bangladesh, agricultural growth has been conducive for success of micro credit so far. 8 Micro Credit: Contributions

Contribution of micro credit to household well being could be measured, analyzed and expressed using a number of parameters. Before that the profile of the micro credit clients can be glanced at a quick look. In rural areas, the households are constituted by poor and very poor, and mostly they are disadvantageous, marginalized and excluded. They are unemployed or under employed as agricultural laborers or daily laborers engaged in petty income generating activities or hawkers etc. In Bangladesh, the clients for micro credit are mostly rural women just starter to income earning opportunities. Almost all of them are below and some are well below the poverty line. They may be categorized as the `extreme poor' and `moderate poor', and a few are `vulnerable non poor'. Stuart Rutherford has observed the general trend of using micro credit in three major areas: i) on life-cycle events; ii) to meet emergency needs and iii) to meet investment opportunities. He mentioned that the life cycle events include `once-in-a-lifetime' occurrences or recurrent incidents. In Bangladesh and India, the dowry system may be considered as an example of very expensive business of the life cycle events. Similarly, the poorer a family the more emergencies it faces from loss of employment, sickness or injury, or sudden death of the bread winner. However, the third one i.e. the investment opportunity is, perhaps, most relevant for analyzing the contribution of micro credit on household well being. The poor in particular always look for opportunities to invest: in income generating activities, on land or household assets. They also want to invest on items that make life more comfortable like better roofing of the house or a piece of furniture. This attitude of seeking for investment opportunities is the inner driving force

At the national level, the contribution of micro credit can be viewed at least from two sides. First, it has reduced the number of vulnerable people and thus has reduced the immense pressure on social safety net programs that were targeted to save people from starvation. Second, it has raised the capacity of the government to widen the safety net programs utilizing the resources so released to other priority areas and investments for accelerated development. 70

of micro credit that is being extracted successfully by most of the micro credit providers. Studies have found that, use of micro credit has enhanced the material well being including better management of crisis and vulnerability, social well being and empowerment of the female clients that have combined effect on poverty reduction. Material well being embraces increase in income and consumption, creation of asset, increase in net worth and increase in savings. Increase in savings, though very small, has increased coping capacity with crisis and reduced vulnerability. Enhanced social well being incorporates wider access to education, health and sanitation. In this process, it has reduced the risk to remain in `perpetuity of poverty', and raised their `labor productivity', thereby decelerated the `process of pauperization'. The issue of empowerment can be viewed from a very wide range from family to national level. However, in the discourse of micro credit, where rural poor women are the maximum beneficiaries in number, empowerment in relation to them may be seen as `less dependency on their husbands or male counterparts, more capabilities to engage themselves in income generating activities, increased capacity to accumulate assets along with the rights to sell, increased role in household decision making, moreover, increase in their level of self-confidence and awareness about social issues'. Different studies have shown positive contribution of micro credit to empowerment. Enhanced empowerment helps reduce social and market exclusion as well as mobility deprivation. 9 Micro Credit: Limitations

first one is the `level of efficiency'- how much of distribution of credit reduces how much of poverty. In a static socio-economy, the analysis would have been easier using any available inputoutput model. But in a dynamic economy, particularly in an economy in transition, the analysis is quite complex. To our understanding, so long the forces of `pauperization' and `polarization' continues, and the overall economic growth remains slow, the efficiency of micro credit will not be able to extract its full potential. The second one is the `limitation of integration' i.e., integration of poverty reduction with rural development through micro credit. Experiences and observations reveal that the beneficiaries of micro credit mostly depend upon the recurrence of the credit facilities and the dependency is probably ever increasing. Moreover, individual credit always targets the individual, not the society as a whole. Under such circumstances, micro credit will continue to remain as a poverty reduction program rather than a rural development program. The third one is the `limitation of alienation' i.e. alienation of government and the people. Despite the existence of government and local government functionaries at the grass roots level, the micro credit providing NGOs, for their own reason and philosophy, do like to work in a disintegrated manner. The situation gradually may create a gap between the government and its organizations and the people and thereby may diminish the effectiveness of the government as the service provider in the long run. However, all the three limitations discussed above warrant separate study, and it was not intended to examine through the paper. We only keep a record of the issues. 71

Micro credit remains to continue under critical analysis from at least three different directions. The

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Micro Credit: Future Challenges

With all its present performances and future potentials, micro credit is not immune from the future challenges in the changing economic features of the financial markets. Generally there is a concern about the higher rate of interest of the micro credit, though a close and careful examination may reveal that the concern is too amplified. Micro credit is a sort of supervised credit in Bangladesh and supervision accrues some benefits as well as incurs some costs. A regular supervision raises the `productivity of capital' and therefore, for a more productive capital the rate of interest will, obviously, be higher. Moreover, the micro credit providers continuously provide training to the borrowers that increases the `labor productivity', but again, has a cost, which in turn, incorporated into the `rate of interest'. Then the rate of interest for micro credit may be considered as `a package rate of interest, and supervision and training costs'. The increased productivity of capital and labour together enable the clients to earn a moderate return from their investments and repay the principal amount. Therefore, `higher rate of interest' as such does not seem to be a real issue of concern. Sustainability seems to be another concern for micro credit. Presently the fund that is being used by the government and the NGOs are subsidized or provided by the development partners as grants or with minimal interest. In future, for any reason or under any circumstances, if the flow of fund faces any debacle, then the entire program will face serious problem. The issue is really threatening to sustainability of micro credit. Experiences show that no subsidized program has ever sustained, and that is the ground reality. To avoid the 72

apprehended situation, the rate of interest should have to be equated with the cost of capital and investment. The general observation is that the sustainability of an economic program largely depends on economic viability and therefore, if micro credit can retain and enhance its economic viability, then undoubtedly it will sustain. The future potentiality of expansion in rural non farm activities will be the determining factor of the economic viability in real terms as well as sustainability of micro credit programs. Failure to reaching the ultra-poor is another issue of concern for micro credit. A number of studies have shown that micro credit could not reach the poorest of the poor; even the studies conducted by the micro credit providers also have admitted the fact. However, to be very pragmatic, one should not think of a jacket fits to all. Instead of inventing such an all inclusive solution, voice can be raised in favor of wider coverage of social safety net programs that will provide sustenance, and further help the ultra-poor in capacity building to enable them to participate in the economic spheres of the economy. Meanwhile expansion of economy will make room for them and they will be able to reach the services ­provided by micro credit or the similar programs, if any. Micro credit is not a solution for any or all the problems. The real challenge lies in the scaling up the program from micro credit to micro finance. The fact is that every poor client does not possess entrepreneurial qualities and thus may not need credit, but all of them may need some sort of financial services in the form of savings or insurances or something like that. The financial services so needed, require to be provided. Grameen Bank in Bangladesh has initiated diversification of its financial services and thereby scaling up itself as a pioneer in the field. The

experience needs to be steered and disseminated. However, the relationship between micro credit and micro finance is in no way a competitive one; rather it is much more complementary. The transformation process is a challenging task indeed considering the obstacles and impediments of the rural financial market. Diversification of the program is another challenge for micro credit. Up till now, micro credit focuses mostly on rural landless and poor women. In the present context, the policy is highly appreciated. However, vulnerable non poor as well as the small and marginal farmers also do need credit facilities for their enterprises. Micro credit, as such, has not reached them, but this exclusionary policy needs to be reviewed. It was pointed out earlier that the growth and expansion of economic activities in agricultural sector created conducive situation for extensive non farm activities. With the understanding of the complementary relationship of agriculture and non-farm income generation, diversification of micro credit has become more immediate challenge for it. Micro credit has not embraced technology nor has taken steps so far for technology transfer which is a very big threat for the program. A challenge for micro credit is to innovate, adopt and customize technology for its clients as well as for its own sustenance. Consolidation of the past achievements, prevention of slippage and moving forward will be the future course of micro credit. 11 Governance

ii) The capacity of governments to manage resources efficiently and formulate, implement, and enforce sound policies and regulations (Administrative Capacity); and iii) The extent of participation of the citizens in the affairs of the state (Democratization). (Daniel Kaufmann, Aart Kraay and Pablo ZoidoLobaton, 2000) The UNDP (2004) views governance as the exercise of economic, political and administrative authority to manage a country's affairs at all levels to ensure well-being of her citizens. Governance includes all methods used to distribute power and manage public resources, and the organizations that shape the government and the execution policy. Governance encompasses the institutions, mechanisms and processes through which people and civil societies articulate their interests, exercise their legal rights, meet their obligations, and resolve their differences. 12 Good Governance

Academics assess governance in three dimensions: i) The process by which governments are selected, held accountable, monitored, and replaced (Political Process);

Good governance embraces the concepts that authority is based on the rule of law, that its policies are transparent, that it is accountable to the society, and that it is based on institutions and not on individuals (ADB, 2000). Good governance also lies in the management of a country's resources and affairs in a manner that is transparent, accountable, equitable and responsive to peoples' need (World Bank). In other words governance is good when it serves not just only public interest but also the interest of the most poor and vulnerable of the society. Good governance may be looked as the resultant of three major components: process, content and 73

deliverables where process includes transparency and accountability, content include values such as justice and equity. Governance must ensure that the citizens, especially the poorest, have the basic needs and have a life with dignity. If all these conditions are satisfied governance becomes `good governance' (Aminuzzaman, 2006:13). Good governance is equitable and effective in making best use of development resources. It promotes democracy, the rule of law, includes the state, civil society and the private sector. Transparency, accountability, participation and integrity are the intertwining principles and accelerate all the attributes of good governance at all levels of the central government, local government, NGOs and civil societies for the pursuit of sustainable development. Transparency comprises all means of facilitating the citizen's access to information and also his/ her understanding of decision-making mechanisms (UNDP, 2003). Accountability has political, administrative, legal and moral dimensions, which form a rather complex web relying on clear rules of transparency, and on the threat of sanctions in case of non-compliance (Schneider, 1999). Accountability implies being answerable to people and government for policies and actions. `Participation' refers to the close involvement of people from all walks of life irrespective of sex, race, group, caste, color, and religion in economic, social, cultural, and political decision-making process of an area (UNDP, 1993). The issue of participation is pertinent for the reason that it enhances the sense of ownership. Integrity is defined as incorruptibility, an unimpaired condition or soundness, and is synonymous to honesty. In terms of public service, 74

integrity requires that holders of public offices should not place themselves under financial and other obligations to outside individuals or organizations that may influence them in the performance of their official duties. The government of Bangladesh considers the issue of good governance from the perspective of a `more effective growth and poverty reduction'. Good governance pertains to `better articulation of priorities, creation of enabling environment for public and private action, and optimum use of resources and distribution of benefits'. In course of discharge of functions of the government, good governance emphasizes on, among others, `the rules and norms that determine holding and exercising authority, relationships of accountability among state functionaries and between these functionaries and citizens, the capacity of government to make policy, manage administration and fiscal affairs of the state and deliver goods and services and opportunities and efficacy of redress to citizens'. Therefore, governance may be viewed from the perspective of performance of the government. 13 Good Governance Development in Rural

Academics and professionals frequently opine that lack of good governance is the core cause of endemic poverty, low economic growth and underdevelopment in the rural areas of many developing countries including Bangladesh. Lack of good governance results, among others, in the misuse or misallocation of scarce resources, leads to inefficiency, wastage, corruption, injustice, violation of human rights, political discontent and social unrest. Since Independence, Government of Bangladesh

with the help from the development partners mobilized lot of development supports and services towards rural development. Unfortunately, all those efforts could not produce desired result in rural development in Bangladesh. Insufficient governance has been considered as the most important hindrance to achieve a desirable level of rural development. Therefore, establishment of good governance in the allocation and management of supports and services for rural development has become a critical demand of the civil societies and mass people in Bangladesh. Exploring into rationales why good governance is so importantly linked to a strategy for rural development is very critical to formulation of priorities. The priority areas for rural development appear to be the following: i) Better service delivery particularly in the areas of health and education for human development; ii) Providing infrastructure in the rural areas for wider linkage and opening up of the opportunities; iii) Regulatory support to the informal and unorganized sectors of the economy where a majority of the people pursue their livelihoods; iv) Reduction of income erosion threats to the poor and vulnerable families due to various forms of insecurity and improper application of power; and v) Decentralized service delivery through local governance, grass-roots level accountability and regeneration of local economies through relevant partnerships amongst local government bodies, CBOs, NGOs, private sector and central government agencies.

14

Synthesize Good Governance and Rural Development

To get better results from rural development efforts, some of the areas of governance warrant immediate attention. The service delivery needs to be more cost effective and efficient and to be able to better meet the changing needs of the people. It requires both improvement in public administration and public sector management and movement towards more diversified delivery of services that is responsive to the felt needs of the stake holders. Further improvement is needed to enhance transparency and accountability in service delivery in rural development programs. Moreover, improvement in efficiency and effectiveness should target to reduce the apprehension of corruption. Secondly, the government would reduce implementation problems and would try to obtain public support for the program by `easing access to information and allowing affected communities the opportunities to voice their concern'. Thirdly, considering the greater importance on quality of life indicators, rural social services like health and education deserve special priority. Private sector investment is greater in urban areas due to lower delivery cost and higher return, and government should consider the issue during allocation of resources between urban and rural areas. Similarly, rural infrastructure needs more consideration during resource allocation. Fourthly, provision should be made for effective decentralization to ensure `participation' in the process of rural development. Fifthly, government should develop proper monitoring system to assess progress on 75

outcomes, to strengthen accountability and to correct and improve program implementation so that a visible result comes out of the program effects. Good Governance is a concept of continuous reform which in itself is slow and painful. Besides, the actors from within the government remain `hibernate' to reforms. ADB observed that the challenge for many Asian governments `will be to manage their own transition from direct providers of good and services to facilitators and regulators of private and civil society activity'. However, in an underdeveloped country like Bangladesh, the government will have to play direct roles in certain areas for sustainable rural development for many more years, side by side

to the regulatory and facilitating role as has been advocated by ADB. As for example, the rate of return from the investment in rural infrastructure is considerably low and therefore, it is unable to attract private investment in immediate future. Similarly, investment in research and development in the traditional agricultural technology, incurring investment in rural human development by the private sector in near future is also bleak. The reduction of poverty, and inequality and pro-poor growth may not be in the agenda of the private sector investment. Considering the ground reality, the government should carefully examine and decide on merit where to confine its activities as a regulator and where to expand activities as direct service provider. This seems to be the major challenge of good governance in rural development for Bangladesh during the years to come.

76

Annexure 6.1.2

RURAL DEVELOPMENT : CONCEPTS AND DIMENSIONS (ABSTRACT)

Mr Hasnat Abdul Hye

1 Concept of Rural Development economy offers fewer employment opportunities keeping people unemployed and under-employed. Imbalance in the supply and demand for labour depresses wages forcing subsistence living for many. In a relative sense are poorer than the urban poor people because the latter have more employment opportunities and higher wages. iii) The rural areas in many developing countries are characterised by the coexistence of feudal, semi-capitalist and capitalist mode of production, particularly in agriculture. Rural development involves the transformation of the mode of production from the feudal or semifeudal system. Changes in ownership of the means of production (e.g. land, water) and technology are required for this. iv) In rural areas the ruling elite is mostly based on heredity. They favour status quo and regard social change through development as a threat to there authority. v) Rural areas have poor infrastructures (roads, embankments etc.) because of what has been called `Urban Bias'. Likewise, social infrastructures (schools, health clinics) are also few and far between. vi) Because of traditional culture and conservatism, rural societies are more male 77

Concepts are ideas about matters and institutions. When these are widely accepted, they define the subject in question. In discussing the concepts of rural development, some popular definitions can be discussed. i) Rural development implies the development of areas that are rural and improvement of the standard of life of those who live there. But what is a rural area? It is an area where the predominant means of livelihood is agriculture, fisheries, livestock and cottage industries including handicrafts. These constitute the primary sector with which an economy starts moving towards the secondary (industries, trading) and tertiary sectors (services). The faster is the transformation of the economy from the primary sector in terms of production and employment the less rural it becomes. However, in countries where population increases faster than the rate of industrialization the country and the economy remain predominantly rural. In these countries the majority of population continue to live in rural areas. ii) Rural areas are also defined as those where the majority of poor people live. Compared to industries in urban areas the agriculture based rural

dominated than urban areas and gender discrimination is more rampant there. 2 Dimensions of Development

backwardness or to exploit the potentials for development. The strategy emphasizes multisectoral development of the area. c) Target group oriented development: In this approach a certain group or groups are selected for their socio-economic development. Poverty alleviation program or women's empowerment are examples of this type of program. d) Integrated rural development program: This is a combination of all the above programs with the difference that its coverage both in geographical and program intervention is wider and deeper. In countries that are predominantly rural with the overwhelming majority of people living there in conditions of underdevelopment some or all of the above dimensions of rural development have been witnessed or are still in vogue. However, there is a strong tendency for departmental approaches by government agencies to prevail.

Keeping the above aspects of rural areas - its society, culture and economy, the strategies of rural development have highlighted the following dimensions : a) Production oriented rural development: The objective of this strategy is to increase production in agriculture and other economy activities in the rural area. For this purpose use of modern inputs, new skills and institutions (market, cooperatives) are popularised and physical infrastructures are developed. The goal of this strategy is to increase income of producers and to have surplus for the urban sector (food grains, raw materials). b) Area development : The objective is to develop a particular area to overcome its

78

Annexure 6.1.3

DIMENSIONS OF POVERTY : A SYNOPSIS

Mr Hasnat Abdul Hye

1 What is poverty? expenditure surveys for the lower income groups and is then added as a percentage of the expenditure on food items to the costs of minimum nutritional diet to determine the poverty line expenditure. If non-food items (housing, clothing, education, medicine) are excluded the narrower definition leads to a poverty line income by applying the cost of the normative dietary pattern (recommended by an acceptable authority) to the pattern of distribution of income from the household expenditure survey. Relating the poverty line thus defined to the distribution of population according to household expenditure the number of people below the poverty line can be arrived at yielding the headcount ratio or the percentage of people below the poverty line. 2 Similar to the above definition is the way International Fund for Agricultural Development (IFAD) looked at poverty where it was stated that, `Poverty is more than physical deprivation. It has social and psychological effects which prevent people from realising their potential'. In the narrower definition, poverty is measured by the percentage of population having income below the minimum basic needs. A minimum nutritional diet consisting of food items typically consumed is first estimated and the diet is then valued at representative prices. Expenditure on non-food items are estimated from the household Absolute and Extremely Poor

According to the broader definition, poverty refers to forms of economic, social and psychological deprivation occurring among people lacking sufficient ownership, control or access to resources to maintain or provide individual or collective minimum levels of living. In this view, the cause of poverty is lack of adequate access to resources and or control of the processes of resource accumulation and distribution. As a result the ability to provide for minimum nutrition, health, education, shelter, security, leisure and other aspects of life are impaired. Poverty according to this definition also represents and exclusionary relations denoting the state of being excluded from or denied access to a package of resources.

Based on cost of food items and the pattern of income distribution the resulting poverty line income can define both absolute and extreme poverty. Absolute poor are those who cannot take more than 90% of the recommended calorie intake and extremely poor are those who cannot take more than 80% of required calorie intake. Most of the poverty studies have followed the above criteria. But from the point of view of improving physical quality of life and not simply reducing hunger poverty definition that includes both food and non-food items of basic needs is considered both conceptually and operationally 79

relevant. To define poverty in terms of basic needs income is calculated taking into account the requirement of food, clothes, medicine and other items in the basic needs basket of goods and services. Depending on the definition and calculation we have thus absolute poverty, extreme poverty and basic needs poverty. The first type of poverty is obviously the most critical. Absolute and extreme poverty indicate emergencies calling for relief operations for food distribution. Poverty due to lack of basic needs is not life threatening but is cost for concern because of the poor quality of life that it implies. It calls for sustained efforts at poverty alleviation ensuring basic needs to the poor. 3 What Framework of Action is needed to Effectively Reduce Poverty in all its Dimensions?

collaboration. Government intervention is also required to make education, health services available to poor. Public sector employment programs, both growth based and welfareoriented (Physical infrastructure, Food for Works Programs), can provide income during slack seasons. The greatest potential lies in the area of self-employment. Access to credit and training in skills coupled with marketing arrangement can ensure steady income to the poor making them self-reliant. Development of physical infrastructures like roads, embankments, irrigation works, markets and growth centres can promote both public sector activities and those undertaken through private initiatives. Development social infrastructures like schools, clinics and hospitals not only provides basic needs to the poor but also develops human capital contributing to overall economic growth. Institutional building like local government, cooperatives cannot only promote development but also provide scope for participation by the poor. Economic growth reduces poverty. But because it may be slow and its benefits can be captured by the elite government international donor community have to devise programs specifically for alleviation poverty.

National economic development is central to the strategy. Growth reduces poverty, but growth may be slow. Moreover, benefits of growth may be captured by those who are influential and control decision making. So alone with growth direct action in needed to channel distribution equitably for the purpose of poverty alleviation. To facilitate access to assets programs like land reform, microcredit, training in skills for wage and self employment etc. have to be undertaken by the government. NGOs can help through

80

Table 1 : Dimensions of Poverty and their Causes Dimensions 1. Lack of income or adequate income Causes 1. Lack of access or inadequate access to assets: a) Land for cultivation and building to rent b) Skills c) Saving and Credit d) Social assets as for example networking of contacts and reciprocal obligations and political influence over resources. 2. Lack of or inadequate employment due to limited economic activities caused by slow rate of economic growth. 1. 2. 3. 4. Limited economic activities Lack of information Seasonality of production Nature disasters

2. Unemployment and Underemployment

3. Inadequate food intake

1. Inadequate and irregular income 2. Limited supply of and high price of good grains. 1. Inadequate income 2. Non-availability of medical facilities 3. Neglect by government agencies and their programs. 1. Lack of adequate income 2. Use of children as sources of income 3. Absence schools and incentives for the poor. 1. Lack of adequate income 2. Absence of government policy and programs. 1. 2. 3. 4. 5. Lack of asset, status and illiteracy Domination of rural elite Patron-client relationship Lack of scope for participation in local bodies Inequality between men and women based on local culture.

4. Poor health and morbidity

5. Illiteracy

6. Shelter

7. Lack of voice and participation

8. Vulnerability to adverse shocks and inability to cope with them

1. Lack of or marginal land 2. Poor rainfall or flood 3. Higher risk of diseases 4. Risk of being excluded and victims of violence 5. Inability or failure of the state to develop mechanism to reduce or mitigate the risks.

81

Annexure 6.1.4

RURAL DEVELOPMENT AND POVERTY REDUCTION LINKAGES

Dr. M. Solaiman

1 Definition of Rural Development · Decentralization with effective machinery at the local level · Local government bodies to take up leadership · Development of infrastructures Physical Drainage channel Irrigation channel Water conservancy

Rural development is a process which leads to a continuous rise in the capacity of rural people to control their environment­physical and socioeconomic --, accompanied by a wider distribution of benefits resulting from such control. 2 Poverty Reduction

Reducing the number of people living below the poverty line : · · · · 3 · · · · 4 · 82 Calorie intake Minimum food basket One dollar twenty five cents income a day Millennium development goals Goals of Rural Development Increase of production Generation of employment Bringing equity Ensuring access Rural Development Principles A strong organization at the national level

Rural roads ­ transportation, communication and marketing Local government structures Market centers

Offices, training and demonstration centers Organizational

Organization of people including women into groups/cooperatives Control of social and administrative power structures

-

Empowerment Administrative

·

Agrarian reform

Mobilization and better utilization of land resources Increasing agricultural production Bringing economic development Ensuring favorable institution Bringing equity and distributive justice Improving soil quality Land use planning

Administrative structures nearest to the people Planning for development of development

Coordination programmes

Providing training on new ideas and skill improvement Introduction of new technologies Arranging inputs and services

· ·

· Participation of people in planning, budgeting, decision making and implementation process · More public investment in rural areas and coordinated

· Appropriate planning for production of cereals, vegetables, horticulture, crops, livestock and fishes · · · · · Intensification of agriculture Adoption of new technologies Price and subsidy Marketing of agricultural products Agro- processing

· Comprehensive programmes 5 · · ·

Agriculture to Get Priority Provides food and nutrition Generate employment Provides raw materials for industry

5.2

Not to Neglect Non-farm Sector

· Agriculture cannot absorb all the rural population · Trade, processing, storage, transportation, repair and maintenance services absorb the landless and both directly and indirectly help agriculture 6 · Micro-credit for Poverty Reduction Investment by poor people 83

· Generates surplus income for further investment

5.1

Steps to be Taken to Develop Agriculture

Land augmentation

·

· · · ·

Increase in employment Increase in production Capital accumulation Increase in income and asset

· ·

Increase in awareness and empowerment Education of children

· Improvement in housing, health and sanitation

84

Annexure 6.1.5

THE THIRD GENERATION CO-OPERATIVES/ GROUPS : THE EXPERIENCES OF CVDP AND SFDC

Dr A K Fazlul Bari

1 Historical Background and Role of BARD in Micro-Credit (At the initiative of Dr Akhter Hameed Khan, ICS) BARD was established in 1959 Building rural communications with roads, culverts, bridges and drainage Providing employment in lean periods Ensure peoples participation of Administrative

·

· Comilla Thana (Upazila) was the social laboratory area for experimentation on rural development · Area was approximately 250 kms

· Development Infrastructure

New roles and responsibilities of line officials Establish coordination and integration among departmental agencies · Development Infrastructure of Cooperative

· Except government, no other agencies were working for development of the village population. · Characteristics of the Area :

Densely populated with dominance of small farmers Farming was main occupation but highly traditional­below subsistence economy ­ 2 · Male dominated puritanical society women being made conservative Role of BARD in 1960s Development of physical infrastructure

Two-tier system of cooperatives

­ Village groups as production units and Upazila Associations as support units · Villagers as Change Agents Development of Irrigation Infrastructure Utilization of surface and ground water

Mechanization of agriculture and introduction of modern methods of cultivation of HYVs 85

Simultaneous implementation of these four Programmes together made the Comilla model as an integrated approach of rural development. · Supporting Programmes

·

Poor growing majority in percentage

· Participation in cooperatives became weaker and management problems cropped up · Technologies accepted, but others showed signs of decay 5 i) Two Vital Questions Raised How to help the Poor?

Emancipation and empowerment of rural women Special cooperatives professional laborers for poor/

Family planning programmes Cooperative workshop

ii) Is cooperative the preferred way of development? 6 ASARRD Builds the Concept of SFDP : Innovative Programmes on Micro-Credit

Marketing (rice mill, cold storage, creamery, etc.) 3 Results

· Good communications system with land improvements done · TTDC established with all Government officials having their new roles · Two-tier cooperatives started functioning

· 16 Workshops in 8 countries at the initiative of FAO (Mr J. C Mathur, ICS)

6.1

Major Findings

Conventional programmes of `delivery system' and `receiving mechanism' had two defects: No credit supports for the poor in delivery system Participation of the poor is lacking in receiving mechanism Therefore the disadvantaged/Poor were by-passed from conventional programmes

· Villagers/women acted as change agents in development fields · TWs/pumps established, winter became major crop, production raised, agro-processing, manufacturing units started growing · Programmes were successful and expanded to new areas. 4 · 86 Weaknesses/Criticisms Rich becoming richer, poor poorer

6.2

Recommendations

Poor to be for med into separate "Receiving Mechanism"

Adjustment needed for "Delivery Mechanism" to fulfill requirements of the poor. 7 Field Action Project of FAO

· Formation of Inter-group Associations are optional · Disbursement in-kind (initially) or in-cash (subsequently) · Repayment schedule is either weekly or at the end of the loan period · Interest rate varies from 10 per cent to 15 per cent approximately · Collection of loan money is done by the Field Organizer or by the group leader · Disbursement period between the two loans varies 10 Characteristics Programmes of Successful

· Agreement with Bank and establishment of GRF for micro-credit for the poor · Identification of poor and formation of small informal groups · · · Preparation of production plans Disbursement and repayment of loans Formation of village associations

· Initial successes led to formation of Foundation. 8 Other Similar Programmes

· BRDB started programmes RD-12, RD5, RPAP, Women's Programme etc. (both cooperatives and informal groups). Later these programmes were developed into Foundations to make them self-reliant. · Grameen experimented at Jobra and expansion at Tangail · 9 NGOs started with own and donor funds

· Mostly women forming informal groups Disbursement based on production plans · Repayment on weekly basis

· Disbursement and collection done by field organizers through weekly assembly · Savings/loan deductions generate special funds for emergency requirements · Daily monitoring and supervision Accounts updated every day Defaults are scrutinized and resolved

Diversity in Implementation Procedures ·

The diversity in the implementation procedures occurred due to variations in the conceptualization, objectives set for the programme and the manpower strengths of the implementing agencies: · Group size varies from 8 to 30 members

·

· Subsequent increase of loans making `graduate' members and turning them to small entrepreneurs. 87

11

Sustainability Programmes

of

Micro-Credit

programmes like CVDP operate credit with their own funds. · NGOs usually take around 18 months (5 staff, 1800-2000 borrowers having 7-8 m Taka as outstanding) to achieve break-even point. For remote areas like hills/scattered places, it takes around 36 months.

· Programmes like RD-12 of BRDB, SFDP of BARD were made Foundations to operate micro-credit independently. · Central Cooperative Associations and

Big Farmers (10 per cent) Small Farmers (70 per cent) Landless (20 per cent)

Fig. 1 : Classification of Households

88

Farmers Cooperative Farmers Cooperative

Farmers Cooperative

Upazila Central Copprative Association

Farmers Cooperative

Farmers Cooperative Farmers Cooperative

Farmers Cooperative

Fig. 2 : Two-Tier Cooperative System

Landless Group Farmers Group

CVDP

Children's Group Women's Group Youth Group

Fig. 3 : Functional Group of CVDP 89

National Programme for Agriculture and Rural Development Delivery System of Line Department SubDistrict Ext Bank Health Inputs Live stock Fish

Special Progrram For Small Farmers those belowe average)

Group Approval Committee

Group Production Plans Top 50 per cent Farm Families Access as Individuals Village Bottom 50 per cent Farm Families Access through S.F. Groups G.P.P G.P.P G.P..P G.P..P

Small Farmer Group

S.F.G

S.F.G

S.F.G

Group Organizer

Receiving System of Small Farmers

Fig. 4 : Special Programme for Small Farmers

90

Annexure 6.1.6

RURAL DEVELOPMENT IN SELECT ASIAN COUNTRIES : AN OVERVIEW

Dr S K Singh

1 The Context literature on the subject and it do suffer from limitations in the absence of relevant information and data. Among the secondary sources, country reports available with CIRDAP have been scanned to cull out country specific information, policies and programmes. Hence, there may be some gap in country specific presentations. Sources are also acknowledged, if some are not properly acknowledged, it is because of oversight. 2 Poverty Scenario

The development policy perspectives of the majority of countries in Asia and the Pacific region always placed rural development high on their agenda since a sizeable portion of their countries have rural areas and a vast majority of population are living in these areas that are poor. Notwithstanding the fact that the portfolio of rural development in these countries over a period of time multiplied substantially by launching of several programmes, even then, the problems of rural areas remained acute and perennial. It is, therefore, a challenging task for policy makers to tackle the problems of poverty alleviation and providing livelihoods to rural poor. Rural areas in most of the countries do suffer from various basic problems and among them rural livelihoods have emerged as a crucial issue for the policy planners. This short paper attempts to address briefly the critical issues of rural development and examines the poverty scenario in this region so as to suggest how to improve alleviate poverty from rural areas. The theme of rural development is topical, complex and multi-dimensional; therefore, it is necessary to examine the underpinnings of poverty focused development towards rural poor. The analysis can be utilised for future planning as well assessing the benefits of existing programmes. Analysis provided in this brief paper is entirely based on secondary sources of data and available

Undoubtedly, land is fundamental asset and dependency of rural poor is more on agriculture, but, due to decreasing productivity it is not as profitable as it involves various risks and limitations. Thus, there is a need to diversify the income of households. Empirical evidence suggests that rural households are indeed engaged in multiple activities and rely on diversified income portfolio. Obviously, dependency on agriculture has declined in terms of providing employment and thereby earning livelihood. According to available data for developing countries as a whole, agriculture accounted for 47% of employment in 1999 (down from 66% in 1970). Consequently, there is a rapid growth in non-farm sector and share of income from the non-farm economy is growing. The reason for growth of non-farm sector is an increase in the labour force and decreasing absorption capacity in agriculture sector. More so, 91

there is a decrease in arable land area in most of the countries. The Table 1 shows the income from non-farm activities in rural areas of the countries of the AsiaPacific region. The share of income from the nonfarm sector is high and substantial in most of the countries. In case of Iran, it is highest accounting for more than 70% (2005), a substantial increase from 58.8% (1995). Similarly, Sri Lanka and Philippines are accounting for 56.4% and 58% of share of income respectively from non-farm activities. The least income recorded is 40% in Indonesia, nevertheless, it can be considered as a good contribution. It is evident that there is a shift and non-farm is indeed growing fast and has potential. A range of strategies can boost this sector, such as industrial clustering, infrastructure investment, etc. A few important parameters have been examined to ascertain the extent and nature of poverty and its ramifications in order to conceptualise and put rural livelihood in proper perspective. Recognising the fact that there is a general agreement globally that poverty is non-acceptable as a part of human condition and it has been emphasized in Millennium Development Goal (MDG). Moreover, livelihood approaches have considerable potential to deal with and many countries have adopted this approach to development. Table 2 provides average annual growth rate in labour force in the Asia-Pacific countries. Data show that there is increase in labour force in all countries ranging from 1% to 4% during 1999 ­ 2006. The highest rate recorded is in Iran (3.9) followed by Pakistan (3.3), Philippines (3.1), Malaysia (3.0). In absolute terms, the highest labour force is recorded in India (438 Million) followed by Indonesia (109.2 Million) and Bangladesh (71 92

Million) in 2006. Evidently, a large number of persons are joining in labour force and they will look for employment. The agriculture sector has limitation to absorb them hence new avenues are to be created. This is a pertinent issue and challenging task for the policy makers as to how to absorb and mainstream the growing labour force in respective countries. This huge human capital and youth energy has to be harnessed in constructive way otherwise there could be aberrations. The sectorwise absorption of labour force in AsiaPacific countries for the year 2008 is given in Table 3. The pattern shows that agriculture remains an important sector for providing employment than other sectors. It is evident that the highest engagement of labour force is in agriculture sector in countries like Nepal (81%), Lao PDR (80%), and Afghanistan (80%). Myanmar follows the suit with 70% employment in agriculture sector. Service sector is next to agriculture that provides employment to considerable extent and has potential to absorb more. Thus some countries have shifted towards service sector and industries, not much depending upon agriculture. Iran shows that maximum labour force engagement is in service sector to the tune of 46.5% followed by industries 32.2% and less in agriculture 21.2%. Similarly, in Sri Lanka and Philippines, service sector provides more employment than agriculture to the extent of 39.2% and 46.5% respectively. Nepal has lowest employment in service sector at the rate of three percent only. Therefore, there is a need to expand and diversify service and industrial sector opportunities in rural areas for sustainable livelihood. The policy needs to address to provide vocational training and opening new avenues by developing industrial clusters and infrastructural investment to absorb growing labour force.

The potential of agriculture to absorb labour force is also depended upon available arable land in these countries. Table 4 shows that the available arable land in most of the countries to the total land area is quiet less, except Bangladesh and India. The minimum arable land to the total land area is only about 4 per cent in Lao PDR followed by Malaysia to 5.5 per cent. Surprisingly, 80 per cent labour force in Lao PDR is engaged in agriculture sector with less arable land. Moreover, there is a decline in the availability of arable land in most of the countries except in Philippines, Sri Lanka, Lao PDR, Iran and Indonesia. Vietnam shows good increase in arable land by 5 per cent. However, the availability of arable land per capita per hector is static in all most all countries except Thailand, Philippines, Pakistan, Nepal and India which is showing a bit declining trend over the period of 1990 to 2005. It is obvious that pressure on land continues to be more than before. The shrinking arable land area also leads to migration of rural people to urban centre for job and earning livelihoods and it creates unemployment and underemployment in rural areas. Another important parameter is the contribution of agriculture to national GDP. It can be seen in the Table ­ 5 and Figure ­ I that the contribution of agriculture in GDP is decreasing in all countries during 1998 to 2008. The highest contribution of agriculture in national GDP is in Lao PDR, Myanmar and Nepal which is above 40 percent but it is showing decreasing trend. Some countries like India, Malaysia, Sri Lanka, Pakistan and Iran are observing sharp decline. The contribution of industry sector to the national GDP tends to be increasing in all countries during 1998 to 2008, as shown in the Table 5 and Figure II. The substantial increase is noticed in Iran, Lao PDR, Myanmar and Vietnam. Although

contribution of agriculture sector in GDP in Myanmar is about 41 percent even than contribution of industry has doubled in the national GDP. In Indonesia, Thailand and Malaysia the contribution of industry sector in the national GDP is much more than agriculture and it is higher among the Asia-Pacific countries. This also demonstrates that South East Asian countries are more going towards industrialisation than other countries in this region. Similarly, it is noticeable that the contribution of service sector to the national GDP is also increasing in all most all countries except Thailand and Vietnam (Table 5 and Fig. III). In Philippines, Sri Lanka, India, Bangladesh, Iran, Malaysia, and Pakistan, the contribution of service sector is more than agriculture and industry in national GDP. Evidently, it has more potential than other sectors. It is remarkable that the contribution of service sector is more than fifty percent in Bangladesh, India, Pakistan, Philippines and Sri Lanka. This sector need to be further exploited for employment and thereby it can be a good source of livelihood opportunities in rural areas. The policy for rural livelihood can also be determined on the basis of the quantum of unemployed people in the country. Table ­ 6 provide data on unemployment rate and it shows that it is increasing in India, Lao PDR, Nepal, Philippines and Vietnam, where as it is marginally decreasing in Bangladesh, Indonesia, Iran, Malaysia, Pakistan and Sri Lanka. Nevertheless, it is a matter of serious concern for policy makers to provide employment to people in the country. Data on persons below poverty line in the country is an important in put for policy formulation as it shows the enormity of problem of poverty that needs to be tackled. The poverty scenario is more 93

reflected in rural area and issues are very crucial. Table ­ 7 provides data relating to poverty ratio in Asia-Pacific countries on the basis of income per day $1 and $2 collected during the period of 1990 to 2005. Although countries claim that poverty is decreasing, but issue still remain critical and challenging as they have to del with huge number of persons in this category. On this basis of per day income of $1 calculation, the highest poverty ratio is in Bangladesh (41.3%), followed by India (34.3%) and Lao PDR (27%). A silver lining can be seen in countries like Iran, Malaysia and Thailand where they could achieve to restrict poverty to a low level of less than 2 per cent. However, data suggest that combating poverty in some countries of this region is a challenging task for policy makers. 3 Rural Development and Climate Change

The rural development context is vulnerable due to climate change and it is influenced by external environment which is beyond control. Climate change has become a global concern and highly debated and it has impact across the globe and intensity and frequency are unpredictable. Recently concluded World Summit on Climate Change in Copenhagen, Denmark, has highlighted crucial facts that many countries are susceptible to climate change. So, the Asia-Pacific countries are not exception rather impact of climate change are being experienced as pointed out by the scientists. It is pointed out that the Asia-Pacific region will suffer from drought, flood, cyclones, heat waves, and other climatic phenomena which will have direct bearing upon productivity and thus the living conditions of the people will definitely disturbed. So to say, agriculture will be extremely vulnerable and higher temperature will reduce yields and consequently there will be shortage of food. More 94

so, there will be loss of arable land that will have impact on the agriculture and food production. There will be raising sea level due to global warming by which there will be loss of agricultural land in many countries in this region. It is also predicted that there will be displacement of huge number of people in many countries leading to decrease of GDP. As estimated, there will be one meter rise in sea level which will inundate huge area of land directly threatening to the population and their livelihoods. The rivers will also have impact because of sea level rise and a large number of population will be affected. Various available reports and trends show that Asia-Pacific region is the most vulnerable to climate change. It will have impact on agriculture, water sectors etc. As the people are highly dependent upon agriculture, natural resources and forestry, they will have adverse impact on the livelihood of the people. Keeping this in view, a suitable policy framework has to be formulated to mitigate the impact of climate change on rural livelihoods in this region in general and country specific in particular. 4 ICT and Rural Development

Information and Communication Technology (ICT) will play a key role in the rural development. In the decision making process the poor also look for certain information to be incorporated into their livelihood strategies for both short term as well as long term strategies. The rural poor require more information to fulfill their variety of needs such as availability of jobs, market information (price, location, etc.) access to government programmes and services, maintaining social networks, etc. The information requirements of this group are diverse and it requires reliable and good quality information. It is also necessary that information needs are locally generated in local language.

According to available statistics on ICT, the countries in the Asia-Pacific region have better access to information through telecommunication in terms of mobile service, landline service and internet. The intervention of ICT has a positive impact on the livelihoods to improve and enhance social networking at various levels and reducing cost and time. There are various successful and innovative examples of application of ICT in rural areas in the countries of the Asia-Pacific region. The impact of innovative and appropriate technologies on the livelihoods of the poor is enormous and it plays substantial role in poverty reduction. For example in Bangladesh access to mobile phone (Cell Bazaar) allows the rural poor to enhance their livelihood out come through better information. There are several other services in this context, such as, e-Krishok, Hat Bazaar, Pallitathya Kendra, etc. in Bangladesh. Similarly, in other countries are ­ Pakistan, ICT for RD, Rabat Ghar; Sri Lanka ­ eTuktuk, Govi Gnana Seva, Nanasala, etc; Malaysia ­ Agribazaar; Philippines ­ B2B Pricenow.com; India ­ Bhoomi, echoupal, ekrishak,ePanchayat, Gyandoot, etc. These services are meant for helping people and improve delivery of services. It also facilitates in access to credit and improved educational and health services and allow the rural poor to enhance their livelihood strategies. 5 Country Specific Policies and Programmes

so the Government of Afghanistan pays more attention on agricultural development for rural livelihoods. The main policy thrust is focusing on rural livelihood and rural development. Accordingly, the Afghanistan National Development Strategy (ANDS) has been launched for five years on the basis of MDG covering development of economic and social sectors. The long term vision is to ensure the social, economic and political well-being of rural communities. Therefore, some thematic areas have been focused, such as, local governance, increase agricultural production, improve agricultural and rural infrastructure, economic regeneration, poverty reduction and sustainable job creation in rural areas, series of marketing and value-chain initiatives and expansions of micro finance service. In the coming 10 years, the Afghanistan Rural Enterprise Development programme (AREDP) will provide inclusive private sector-led growth and sustainable rural employment and income generation. For the purpose, Micro Finance Institutions (MFIs) were established in 2003 for providing financial services in rural areas where formal banking services are unavailable for the poor. Till 2007, 17 MFIs have been established and providing micro credit to the rural people. Another development plan of the Ministry of Rural and Rehabilitation Development is for three year period (2006-2008) with the mandate to improve rural livelihoods in Afghanistan.

To appreciate and understand efforts of countries in this region to address problems of rural development, a brief analysis of policies and programmes in vogue are discussed in the following paragraphs.

5.2

Bangladesh

5.1

Afghanistan

Agriculture is mainstay of Afghanistan economy

The policy priority of the Government of Bangladesh has been modified from time to time based on needs. These policy priorities included achieving growth with equitable distribution, employment generation, capacity building for reaping the benefit of market economy, promoting local governance etc. In Bangladesh, a 95

comprehensive rural development effort was started in 1953 through the Village Agricultural and Industrial Development (V-AID) programme. In the post independence period, the IRDP received special importance. In this stage micro credit has taken special place to enhance the economic capacity of the poor. Since 1970s the Government of Bangladesh has implemented Five Year Plans (Five Plans) for rural development and poverty alleviation. Of these the 4th and 5th Five Year Plans concerned more on human resource development and generation of productive employment in the rural areas. Currently, number of government and non governmental programmes such as social safety net programmes and micro credit programme are implementing for poverty alleviation, rural livelihoods and income generating activities. Bangladesh has emerged as Micro-credit hub in this region and one third of the households in rural areas are the beneficiaries of micro credit. According to available data till 2005, about 690 NGOs are operating in the field of micro credit. There are some specialized and big micro finance organizations like Grameen Bank, BRAC, PROSHIKA, Bangladesh Rural Development Board (BRDB) and Palli Karma Sahayak Foundation (PKSF). They are contributing in poverty reduction, diversifying and improvement of rural livelihoods. Several Ministries and various agencies have their own programmes for poverty reduction and rural livelihoods. Among them, Bangladesh Rural Development Board (BRDB) has been implementing rural livelihood projects in 152 Upazilas. They are implementing another important programme called Integrated poverty alleviation programme in 446 Upazilas covering secondary crop production, preservation, processing and 96

marketing. Moreover, Department of Youth Development implements youth vocational training courses. It has imparted training to 2.75 million youth on various trades, out of which 1.53 million were engaged in self employment activities. Recently government has implemented 100 days employment project to reduce poverty.

5.3

India

In 1980s, the Government of India put greater attention on poverty reduction, removal of unemployment and under employment, improving the efficiency of infrastructure and the economic sector. In this period expansion of irrigation, multiple cropping, application of improved technology, conservation and better use of land and water resources were the key activities adopted for higher agriculture growth and labour absorption. Promotion of export of agricultural products has taken greater attention since 1991 and its effects on incomes of the farmers and employment of poor were considered as favorable. The XI plan also concerned and views agriculture as a growth engine and envisages a strategy of inclusive growth including creation of large scale non- farm employment, decentralization of development planning process, democratic and people centric governance and public private partnerships in infrastructure development. The Government of India implemented number of programmes related to rural development, poverty alleviation and rural livelihoods such as Integrated Rural Development Programmes (IRDP), Swarnajayanti Gram Swarozgar Yojana (SGSY), Sampoorna Gramin Rozgar Yojana (SGRY), National Rural Employment Rural Guarantee Programme (NREGP), Integrated Wastelands Development Programme (IWDP), Drought Prone Areas Programme (DPAP) and

Desert Development Programme (DDP). Many of the programmes comprising self-employment programmes (IRDP, DWCRA, TRYSEM) and wage employment programmes (NREP, FFW, RLEGP) for the small and marginal farmers and landless labour etc. The IRDP covered about 35 million poor families during the eighties and provided 134.5 billion rupees of financial assistance. The NREP (1983) and Rural Landless Employment Guarantee Programme (RLEGP in 1983/84) generated 4664 million person days of employment for the poor at an expenditure of Rs. 75,775 million during the decade of the Eighties. SGSY is the largest self-employment programme for the rural poor, which was evolved by merging the earlier self employment programmes such as IRDP and Development of Women and Children in Rural Areas (DWCRA) in 1999. Under this programme the government has disbursed credit amount Rs. 107051.6 million as at March 2008. This programme is likely to be enlarged and named as National Rural Livelihood Mission. Another flagship wage employment programme is NREGP, it is the rights based intervention in rural labour markets with focus on transparency, quality implementation and accountability of delivery system to the community. It aims at provision of 100 days of (unskilled) employment for adult members of the rural households who are willing to take up manual work at minimum wage. Under this programme 390.8 million person days of employment have been provided to poor people from 2006/07 to 2008/09.

Government introduced the Presidential Instruction on Disadvantaged Villages (IDT), Income Generating Project for Marginal Farmers (P4K), Kecamatan Development Programme (KDP), and The National Community Empowerment Programme (PNPM). P4K is a programme to enhance farmer welfare through the improvement of supporting infrastructure, increasing subsidy of fertilizer and the improvement of crops price regulation. KDP was carried out for over eight years and was one of the largest empowerment programmes in Indonesia. KDP is now part of the PNPM. PNPM was launched in July 2007 aiming to accelerate achievement of three purpose of MDGs viz., improvement of basic education, reduction of under fives mortality rate and the improvement of married women health.

5.5

Iran

5.4

Indonesia

The government of Indonesia carried out some direct and indirect approaches for poverty alleviation, rural development and rural livelihood. For example, during the period of 1993-1997 with the target of poor area development, Indonesia

Since the Islamic revolution, rural development in Iran has had two phases: firstly, `infrastructure development' and secondly, `social development'. The second phase emphasised on entrepreneurship, diversification of rural income generation, production credit development, self employment development, development of rural and small industries, commissioning of rural ICT centers, social capital development, enhancing women's participation and decentralized planning development. The government has increased loan amounts for natural resources and agricultural sector form RIs 1646 billion in 1995 to RIs provides 2951 billion in 2000 and for industrial sector RIs 217 billion in 1995 to RIs 425 billion in 2000. Furthermore, government established Rural Employment Development Soft Loan Fund (REDSLF) in 2002 with the goal of meeting the credit requirements of the rural people. The new process of the Iranian rural development will be 97

more or less based on a series of upstream documents such as the national vision 2025 and the 4th and 5th state economic development plan documents.

5.6

Myanmar

In Myanmar about 72 per cent of the total population is living in rural areas and depending upon agricultural for their livelihoods. The prime economic objective is the development of agriculture as a base and all round development of other sectors of the economy as well. Therefore, the Government of Myanmar implements several programmes to achieve objectives of promotion of productivity in agriculture, increase farm income and improve the livelihood of farmers in rural areas. In addition to that, Myanmar government adopted wide-ranging programmes to reduce poverty and develop the agricultural sector such as Agricultural Land Development Programme and Modern Upland Reclamation Project, construction of dams, reservoirs and pump irrigation facilities for the expansion of irrigation networking. Furthermore, government of Myanmar has put special emphasis on micro credit as an important instrument for poverty alleviation and rural livelihood. Three government banks, namely Myanmar Agricultural Development Bank (MADB), Myanmar Economic Bank (MEB) and Livestock and Fisheries Development Bank (LFDB) have been providing micro finance to rural farmers to improve their livelihood activities and income generation.

Therefore, Nepal government had formulated Land Act (1964) to deal with land reforms. Besides, there are special efforts to improve the conditions of land and agriculture productivity. To improve rural livelihood government has introduces credit facilities for both farm and non-farm. Agricultural credit is disbursed by the Agricultural Development Bank and credit for business, commerce and industries is disbursed by the Nepal Industrial Co-operation (NIDC) and the Rastriya Banijya Bank.

5.8

Pakistan

5.7

Nepal

Nepal economy is predominantly based on agriculture, which remains as a main source of livelihood for the majority of the people. 98

The Government of Pakistan since 1953 implemented a number of programmes and project to improve rural livelihood and rural development. The Village Agricultural and Industrial Development Programme (V-AID) was the first comprehensive multi sectoral and multi purpose programme aimed at rural development. The programme focused at increasing income of the rural people, raising the agricultural production and establishment of rural small scale industries. Under this programme the Agricultural Development Finance Corporation (1952) and the Agricultural Bank (1957), the Small Industries Corporation (1956) were established by the government to achieve its target. The Rural Workers Programme (1963-71) was launched with twin objectives of providing gainful employment to rural people and to provide rural infrastructure needs. The focus of the programme was to take up works of labour intensive and create productive assets that include utilization of available local resources with involvement of local leaders. This programme was subsequently merged in People's work programme in 1972. These two programmes provided some temporary employment to the landless laborers. Furthermore, the Government launched another programme

namely "Khushhal Pakistan progrmme-2000" focusing to generate employment through the construction of essential local infrastructure in rural areas and low income urban areas. The programme provided job opportunities to around 2 million people and an amount of Rs. 36 billion was spent in two years time. During the 1972-80 the Government of Pakistan implemented Integrated Rural Development Programme (IRDP) which aimed at providing services, facilities and opportunities for both farm and non farm activities in the Markaz (centre). This programme was partial success but could not make much headway in bringing socio-economic changes in the rural areas. The Government of Pakistan implemented Special Development Programmes for improvement of comparatively less developed regions and groups including women, youth and children. Under this programme government has established Bait-UlMalL (Bank for the poor) which aimed to rehabilitate the children involved in labour due to poverty, vocational training centres for children labour, handicraft schools to enable widows and orphan girls' to earn livelihood. To provide the financial services to poor on sustainable basis government has launched micro finance sector development programme since 2000 and established Khushali Bank (KB) for micro finance. It is estimate that 40 micro finance institutions are operating in the country and these institutions have provided credit to the tune of around Rs. 6.6 billion in 2005-06. Furthermore, the government established Pakistan Poverty Alleviation Fund (PAF) in 1997, with endowment of US$ 9 million, an apex institution to help the poor. Outreach of the programme as of June 2002 was around US$ 15 million and the number

of borrowers were over 65,000. For development of non farm sector employment, government established `Employer-led-Skill Development Councils' in all provinces. These councils are entrusted to identify needs of geographical area, prioritize them on market demand and to facilitate the training of workers through training providers in public and private sectors. These councils have trained 46,674 persons so far.

5.9

Philippines

Although during the 1970s, government heavily intervened in agricultural production, marketing and trade, late 1980s government made to reverse the interventionist policies by deregulating the agricultural sector. Monopolies on sugar, rice and coconut were abolished. A land mark rural development policy is the institution of the comprehensive Agrarian Reform Programme (CARP). It covers both land distribution and other tenure improvement arrangements. The law provided a specific mechanism for the delivery of support services to programme beneficiaries. As at end of December 2006, the government of the Philippines distributed agricultural land 8.556 million hectares for farmers. In 1997, government was legislated an Agricultural and Fisheries Modernization Act (AFMA) for the sector's modernization and rural development. AFMA's major provisions include reforms and reorientation in the provisions of public production and marketing services, human resource development, rationalized and strengthened national agriculture and fisheries education system, rural non farm employment, trade and fiscal incentives. The government provides P 17 billion as annual supplementary budget for fulfill AFMA's targets. 99

The Kapit Bisig Laban Sa Kahirapan (KALAHI) or Arm-in-Arm against poverty is the current programme on rural development implemented by the government. The aims of programme are reducing poverty, improving governance and empowering communities. They are following strategies like accelerated assets reform, provision of employment and livelihood opportunities, propoor infrastructure development and security from violence and social protection. The Super Regions Strategy intends to harness the natural advantage of major areas of the country and take advantage of the information technology. Five super regions have been identified each with central theme such as agribusiness, industry and service, tourism, information technology.

There are number of programme implemented by the government for rural development, poverty alleviation, rural livelihoods and income generation. For example, Janasaviya, Samurdhi, Gamaneguma and Gamidiriya. Gamidiriya. These are most ambitious programme currently undertaken by the government for rural development to increase the size and diversity of livelihood options. About 500,000 people in the target districts are being benefited from community infrastructure and productive investment such as drinking water, ICT centres, and access to credit, markets and income generation. Samurdhi is a main safety net programme being conducted by the government since 1994. Its main objective is poverty alleviation through enhancing income generation activities and rural livelihoods. In recent years, the government has placed emphasis on SMEs development with a view to creating new employment opportunities. For the purpose, government has established SME Bank (Lanka Puthra Sanvardana Bank) to provide credit facilities for small and medium scale entrepreneurs. The SMEs provide about 50 percent of employment. In addition, government has been implementing several programmes for youth vocational training through government institutions such as Vocational Training Institutions and Council for National Youth Service in order to create a pool of skill labour to get absorbed in industries and selfemployment.

5.10

Sri Lanka

The government implemented relatively large scale rural development programmes in the past. The major one is the Integrated Rural Development Programmes (IRDP) which is covering three fifth of 25 districts. Starting from concentration on provision of infrastructure facilities to create an enabling environment for rural communities, the emphasis on IRDPs has shifted to helping the poor to undertake non farm activities, primarily through self-employment. In 1980 onwards, smallholder farming sector was taken up to provide technological advancement, crop diversification, market orientation, productivity improvement and income generation. To meet the emerging situation various alternative strategies were tried out such as Agricultural Productive Villages, Export Production Villages, Farmer Bank, Promotion of Agro-wells, Micro Irrigation Support Schemes and Dedicated Economic Centres. It has benefited smallholder farmers. 100

5.11

Thailand

The Government policies and programmes have always emphasized the importance of agriculture and the rural economy. Hence, government has undertaken number of measures such as

restructuring of the agricultural sector, public campaign on food safety and strengthening of the food safety mechanism. Under the restructuring of agricultural sector government encourage garlic framers to switch to other crops where contract farming between private sector and farmers can be made. To facilitate this government has set up an Agricultural Restructuring Fund. The programme on food safety and strengthening consisted of many components such as one million cattle farmers' project, multi year watershed development plan and land reform programme. To assist small and medium scale entrepreneurs, government has established SMEs Bank to meet the needs of small investors.

6

Conclusions

5.12

Vietnam

Vietnam government is implementing several programmes and polices especially targeting to provide rural livelihood through development of agricultural sector. Law of Investment (2005) exhibits the preference that Vietnam attaches more importance to invest in agriculture and rural sector. For example, government implemented incentives for enterprises income tax, enterprise import tax, materials, land tax remission, training support and access to capital market. More so, government implemented many policies on rural livelihood such as credit, technological development and poverty alleviation. Under these policies government launched National Target Programme for Poverty Alleviation (NTPPA) and Programme 135. The focus of the Programme 135 is to establish new economic zone, loans grant for small projects for generating employments, improvement of employment market information system and conducting training on employment management. Government has spent VND 7640 billion for above activities in 2001-2005.

The foregoing discussions and analysis provides conceptual underpinnings, status and impact of policies and programmes in the Asia ­ Pacific countries and it postulates policy dimensions for way forward. Undoubtedly, rural development policy and programmes are conceived central to the national development strategies. However, livelihood approaches have considerable potential for improving the focus of programmes and policies directed toward poverty alleviation by integrating and converging variety of existing programmes. The present approach lacks proper coordination and consistency between the goals and variety of projects and schemes launched by government and donors. They are not able to mobilize collective support for the poor and protect their interests rather benefits of such projects go to them. Dependency on agriculture still continues but it has sharply declined due to vulnerability to various risks and, therefore, it has limitations in exploring the potential to enhance livelihoods. Hence, a diverse portfolio of activities can contribute sustainability in rural livelihoods approach as it may improve long-run resilience in the event of adverse trends or sudden shocks. Thus there is a wide scope within existing rural development policies for support to beneficial forms of diversification. The policy change emphesises a focus on people, their assets and activities, rather than sectors and their performance as a conventional approach. So, expansion of diversification options may be multioccupational and multi-locational households. Evidently, when agriculture is faltering, the nonfarm sector can rescue and it is growing fast and has potential, as its share in rural income is substantially increasing. A range of strategies are 101

required to boost this sector by giving fine tune like developing industrial clustering and infrastructure investment. This needs to be exploited for the advantage of rural areas for livelihood. Land plays a strategic role in these countries besides its productive value. Approaches to rural development and livelihoods should be well integrated with the access to land and important related issues of land reforms. Empirical evidences show that poverty is significantly correlated with lack of access to land. Land ownership gives various social values like social status, political and economic leverage and while obtaining credit from market, etc. A need, therefore, is to consider if politically feasible to go for agrarian reforms in ter ms of tenancy rights, redistribution of ownership of uncultivated land and giving title to land and watercourses owned by the state. For employment opportunities in rural areas, nonagricultural enterprises play a strategic role. Evidences show that some countries made substantial progress in poverty reduction through creating off-farm opportunities. Some countries of this region are good example for creating nonfarm countryside employment. For example, employment of rural labour force in non-farm sector in Thailand is 52 per cent, Myanmar 51 per cent, Vietnam about 50 per cent, which is remarkable. So, rural enterprises can become both an engine of growth and also major contributor to the reduction of rural poverty and livelihood. The potential of labour absorption is high in agribased industries, small and medium industries and service sector. The activities in this sector are labour intensive and provide employment opportunities for semi - and unskilled rural labour. 102

In this regard, Self-employment through vocational training to rural youth to become entrepreneur is another source of stimulus. Some countries like Pakistan and India have such programme. In India, the Swarn Jayanti Swarojgar Yojana SGSY) addresses to mobilize rural folks into Self-help Group to take up economic activities and they are given vocational training. Now it is likely to be expanded as National Livelihood Mission. Infrastructural facilities have a potentially important impact on livelihood. It can contribute in integration of national economies, increasing mobility of the people, expanding market facilities, speeding flow of information and ICT development. This need innovative approach for maintenance of assets created. Wage employment programmes can be another suitable option to provide gainful employment during lean season. India has been providing such employment in rural areas from time to time in planned development approach which has culminated into right to work under Parliament Act on National Rural Employment Guarantee Act. Another important area deserves consideration is credit. There is a need for creating rural financial institutions that are self-sustaining on the basis of savings and loan. Bangladesh is the hub of microfinance in this region. The success of micro-finance in Bangladesh is exemplary, which can be emulated. Poverty is closely associated with low levels of education and skills. Hence, the signification of education, both formal education and workplace skills have to be established for improving livelihood prospects. There is need for investment in human capital.

Participation and governance prominently feature in the discourse of livelihood and rural development. Democratic decentralization through local government institutions and representation of marginalized groups are necessary condition as it brings representatives closer to poor and safeguard their interest. It has been observed that poverty has correlation with local participation, accountability and transparency. References 1 Ahmad, M.M. n.d. Changing Rural Livelihoods in South-east Asia: Constraints and Opportunities 2 Bangladesh Bureau of Statistics.2008. Statistical Year Book of Bangladesh, Dhaka, Bangladesh 3 CIRDAP.2009.A CIRDAP Country Study Afghanistan: Assessing rural development initiatives exploring future opportunities, Bangladesh. 4 CIRDAP.2009.A CIRDAP Country Study Bangladesh: Assessing rural development initiatives exploring future opportunities, Bangladesh. 5 CIRDAP.2009.A CIRDAP Country Study India: Assessing rural development initiatives exploring future opportunities, Bangladesh. 6 CIRDAP.2009.A CIRDAP Country Study Indonesia: Assessing rural development initiatives exploring future opportunities, Bangladesh. 7 CIRDAP.2009.A CIRDAP Country Study Iran: Assessing rural development initiatives exploring future opportunities, Bangladesh. 8 CIRDAP.2009.A CIRDAP Country Study

Myanmar: Assessing rural development initiatives exploring future opportunities, Bangladesh. 9 CIRDAP.2009.A CIRDAP Country Study Nepal: Assessing rural development initiatives exploring future opportunities, Bangladesh. 10 CIRDAP.2009.A CIRDAP Country Study Pakistan: Assessing rural development initiatives exploring future opportunities, Bangladesh. 11 CIRDAP.2009.A CIRDAP Country Study Sri Lanka: Assessing rural development initiatives exploring future opportunities, Bangladesh. 12 CIRDAP.2009.A CIRDAP Country Study Thailand: Assessing rural development initiatives exploring future opportunities, Bangladesh. 13 CIRDAP.2009.A CIRDAP Country Study The Philippines: Assessing rural development initiatives exploring future opportunities, Bangladesh. 14 CIRDAP.2009.A CIRDAP Country Study Vietnam: Assessing rural development initiatives exploring future opportunities, Bangladesh. 15 Chambers, R. and Conway, G. 1992. Sustainable Rural Livelihoods: Practical Concept for the 21st Century, IDS Discussion Paper 296, Brighton. 16 International Development Research Centre. 2008. Scoping Study: ICT and Rural Livelihoods South Asia Component. 17 Overseas Development Institute.1999. Natural Resource Perspectives, ODI Newsletter, No 40, April 1999. 103

18 The World Bank.2008.World Development Indicators, Washington D.C. 19 UNDP.2002. Human Development Report Oxford University Press, United Nations Economic and social commission for the Pacific and Asia 20 UNDP.2008. Human Development Report Oxford University Press, United Nations Economic and social commission for the Pacific and Asia 21 22 www.wikipedia.org Naseem M. Syed (2003): Rural

Development and Poverty in South Asia, ESCAP Development Paper No.3, ESACP, Bangkok. 23 Carney, D. (1999). Sustainable Livelihoods Approach: Progress and Possibilities for Change, DFID. 24 Carney, Diana, "Approaches to Sustainable Livelihoods", ODI Poverty Briefing, London, 1999. 25 Caroline, A and Carney, D. (1999): Sustainable Livelihoods: Lessons from Early Experiences, DFID.

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Table 1: Income Shares of Non Farm Activities in Rural Areas

Country Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam Year 2005 2005 2005 2000 2005 N.A N.A N.A N.A N.A 2000 2005 2000 2004 Percentage 45 43.8 47.0 40.0 70.4 N.A. N.A. N.A N.A N.A 58.0 56.4 44.0 41.7

Source: CIRDAP Country Reports on Rural Development Initiatives, 2008

Table 2: Labour Force Growth Rate (labour force in million) Country

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

1990

51.2 325.6 75.3 15.6 1.5 7.1 20.2 7.1 35.0 23.5 7.2 31.4 31.3

2006

71.0 438.0 109.2 29.1 2.4 11.6 27.3 10.8 59.6 38.4 8.4 36.5 44.8

Average annual growth rate 1990-2006

2.0 1.9 2.3 3.9 2.8 3.0 1.9 2.6 3.3 3.1 1.0 0.9 2.2

Source: World Development Indicators, 2008

105

Table 3: Sector-wise Labour Force Participation (2008) Country

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

Total (million)

15.00 70.86 523.50 112.00 24.35 5.9 11.09 58.82 14.60 50.58 36.81 7.56 37.78 47.41

Agriculture (%)

80 45 60 42.1 21.2 80 70 81 32 34.7 42.6 55.6

Industry (%)

10 30 12 18.6 32.2 20 7 16 13.7 26.1 20.2 18.9

Service (%)

10 25 28 39.3 46.5 23 3 46.5 39.2 37.1 25.5

Source: World Development Indicators-2008, www.wikipedia.org

Table 4: Status of Arable Land Country Land Area (`000 sq. km. 2005)

652.1 130.2 2973.2 1811.6 1628.6 230.8 328.6 657.6 143.0 770.9 298.2 64.6 510.9 310.1

Arable land (%) of total land area 2005 1990

12.1 61.1 53.7 12.7 10.2 4.3 5.5 15.3 16.5 27.6 19.1 14.2 27.8 21.3

Arable land hectares per capita 1990-92

0.05 0.15 0.10 0.24 0.17 0.07 0.21 0.09 0.15 0.07 0.04 0.25 0.08

2003-05

0.31 0.05 0.14 0.10 0.24 0.17 0.07 0.21 0.08 0.14 0.06 0.04 0.22 0.08

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

12.1 70.2 54.8 11.2 9.3 3.5 5.2 14.5 16.0 26.6 18.4 13.5 34.2 16.4

Source: World Development Indicators-2008

106

Table 5: Sector-wise Contribution in GDP Agriculture Country

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

Industry 1998

N.A 27.9 24.7 45.3 36.7 22.0 43.6 9.0 22.2 24.7 31.6 27.5 41.2 32.6

Service 2008

26.0 28.7 29.1 48.1 44.3 32.2 44.6 19.7 20.0 * 26.8 31.6 29.4 44.5 42.7

1998

N.A 22.2 29.3 19.5 24.9 52.6 13.2 53.2 40.5 26.4 16.9 21.1 11.2 25.7

2008

31.0 19.0 17.2 14.4 10.8 41.3 9.7 40.9 40.0* 19.6 14.7 13.4 11.4 19.0

1998

N.A 49.9 45.9 35.2 38.4 25.4 43.3 37.8 37.3 48.9 51.5 51.4 47.7 41.7

2008

43.0 53.7 53.7 37.5 44.9 26.5 45.7 39.3 40.0 * 53.7 53.7 52.3 44.1 38.4

Source: Human Development Report-2002, www.wikipedia.org

Table 6 : Unemployment Rate Country Number of Persons in Unemployment (in `000), (1996/05)

2002 16634 10854 2556 38 370 190 178 3556 2619 623 496 926

Unemployment Rate 1996/05

N.A. 4.3 5.0 9.1 11..5 1.4 3.6 N.A. 1.8 7.7 7.4 7.7 1.4 2.1

2008

40.0 4.2 6.8 8.4 10.4 2.4 3.3 9.4 2.1 7.5 7.6 6.0 1.4 4.9

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

Source: Human Development Report 2007/08, World Development Indicators-2008, Statistical Year Book of Bangladesh-2008

107

Table 7: Population below Poverty Line on Income basis Country

Afghanistan Bangladesh India Indonesia Iran Lao PDR Malaysia Myanmar Nepal Pakistan Philippines Sri Lanka Thailand Vietnam

Less than 1$ a day (%)

41.3 34.3 7.5 <2 27.0 <2 24.1 17.0 5.6 <2 -

Less than 2 $ a day (%)

84.0 80.4 52.4 7.3 74.1 9.3 68.5 73.6 41.6 25.2 -

Below National Poverty Line (%)

49.8 28.6 27.1 38.6 15.5 30.9 32.6 25.0 13.6 28.9

Source: Human Development Report-2007/08

Figure 1

108

Figure 2

Figure 3

109

Annexure 6.1.7

ROLE OF NGOs IN POVERTY ALLEVIATION IN BANGLADESH

Dr S K Singh

1 NGOs have Emerged as: 3 NGOs are Engaged in a Process:

· one of the most effective institutions in poverty alleviation interventions in the country · initially engaged in relief and rehabilitation work after Independence in 1971 · expanded activities enormously since then

· Social mobilisation to develop them and their institutions · Enhance their ability and capability to mobilise and arrange resources for sustainable development · Improvements in the quality of life of the poor people consistent with their own aspirations · Since 1961, more than 19,000 NGOs have been registered with the Department of Social Welfare · The registration does not reveal the number of active NGOs as it does not involve periodical renewal of registration · Till August 1997, the number of foreign funded NGOs registered with the NGO Affairs Bureau was 1,176. These can be regarded as active NGOs · In December 1995, 754 NGOs were listed as members of the Association of Development Agencies in Bangladesh, which is the apex body of local, national, and international NGOs engaged in development activities.

· proved to become effective change agents in the society 2 These Organizations are now an Integral Part of the Institutional Structure for Addressing : Poverty alleviation Rural development Gender equality Environment protection Disaster management Human rights Other social issues (health and education)

· · · · · · · 110

Within the broad spectrum, the NGOs have pioneered and successfully experimented with a number of innovative approaches to poverty alleviation in the country. Some of the notable examples include the following: 4 Group-Based Mobilisation and Beneficiary Participation

·

strips, are accessed by NGOs for various aforestation programmes with landless groups · Landless people are organised and given assistance to own modern irrigation equipment to emerge as a stakeholder in the water market in agriculture. Landless groups are also organised to collectively lease `khas' lands and dry river-beds for fish cultivation, protect the fish released into the open water, production of seedlings in villagebased nurseries etc. (ADAB 1994);

A group-based or target group mobilisation strategy to : i) ensure economic improvement through direct targeting and beneficiary participation, and ii) social and institutional development through strengthening the organising capability of the poor. Such group mobilisation is considered as a key element in ensuring the success of credit programmes through strengthening financial discipline and peer responsibility (BIDSWorld Bank 1995)

4.2

Health education

Promotion of primary health-care concerns, notably immunisation and diarrhoea control, and effective dissemination of health messages through innovative media campaigns

4.3 4.1 Microcredit

Non-formal Primary Rducation

The identification of credit as a critical need and design of efficient and cost-effective credit delivery mechanisms (e.g. Grameen Bank and other NGO models of micro-credit) · Targeting women as beneficiaries

Introduction of a system of primary schools based on non-formal education principles with parent and community involvement

4.4

Non traditional Extension

Agricultural

· Successful targeting of women as the principal beneficiary group · Access to common property resources

Innovative programmes of technology transfer e.g. ground-breaking farm-level innovations in fertiliser-use and pest-management, training of local people and national advocacy campaign, and extension system for appropriate technology transfer to homestead agriculture

· Innovations which allow poor to access land in non-traditional ways in the fields of social forestry and formation of landless and irrigation groups · Government-owned lands (commonly referred to as `khas' lands), in particular roadside

4.5

Development of Appropriate Irrigation Technologies

Low-cost irrigation technologies through research and experiment e.g. treadle pump and bamboo tubewell, Rower pump, and Tara pump to extract water from deeper aquifers. 111

Table 1 : Range of Activities Group formation Microcredit Formal and non-formal education Training/capacity building Health and nutrition Maternal and child health Family planning and welfare Women's development Agriculture Fisheries Forestry Poultry and livestock Environment Water supply and sanitation Advocacy Human rights Legal aid, land and asset distribution Other areas

112

Annexure 6.1.8

MICRO-FINANCE INSTITUTIONS : ROLE OF PALLI KARMA SAHAYAK FOUNDATION (PKSF)

Dr M A Hakim

1 The Setting up of PKSF :The Context Bangladesh with an overall objective of alleviating poverty and improving the quality of life of the rural poor ­ the landless and the assetless people by providing them with resources for creation of employment for enhancing economic conditions. The major specific objectives of PKSF are: a) to provide various types of financial help and assistance to non-government, semigovernment, and government organizations voluntary agencies and groups, societies and local government bodies, so that, as Partner Organizations (POs) and in consistence with the PKSF's image and objectives, they can undertake activities with a view to generating income and employment opportunities among the economically most disadvantaged groups in the society. b) to assist in strengthening the institutional capacity of POs, so that they can manage their programme in a sustainable manner. 3 Operational Strategy of PKSF

With the success of Grameen Bank's programme, several large NGOs in Bangladesh introduced microcredit programme for their target groups. Smaller The smaller NGOs followed the same path. But the smaller NGOs lacked adequate financial support for their microcredit programme. However, there were not many donors ready to come up with funds for microcredit programmes for these small, locally based NGOs. At the same time, for those which received some support there was no guarantee about the continuity of donor funds. However, NGOs had gradually acquired some skill and organizational strength to organize local poor people and to extend financial services to them. In this context, the Bangladesh government set up the Palli Karma Sahayak Foundation (PKSF) in May 1990 as an apex organization to provide loans to the NGOs which in turn would provide collateral free credit to their poor members and to provide advisory services and training to NGOs for enhancing their institutional capacity. PKSF, set up as a "company not for profit" by the government is unique in its character and operations. 2 Mission and Objectives of PKSF

The basic operational strategies of PKSF have been drawn from its objectives: a) It does not directly lend money to the landless and the assetless people rather reaches its target groups through its POs, the delivery mechanism for reaching the poor. 113

PKSF was set up in 1990 by the Government of

b) It provides greater thrust to institutional development. c) It favors no particular model, instead innovations and different approaches based on experience are encouraged. 4 Legal Structure of PKSF

agencies, voluntary organizations or private individuals. The remaining 10 members may be from amongst persons representing POs and/or private individuals. The General Body usually meets once a year for overall policy guidance. Presently, PKSF has a General Body of 16 members consisting of distinguished personalities of the country.

Legally PKSF is a "company limited by guarantee" meaning "company not for profit" and is registered under the Companies Act of 1913/ 1994 with the Registrar of Joint Stock Companies. The legal structure of PKSF allows flexibility, authority and power to take programmes and implement them throughout the country and managing its affairs. 5 Funding of PKSF

6.2

Governing Body

PKSF mandate authorizes PKSF management to mobilize funds in the forms of grants, loans and contributions from a wide variety of sources which include the Government of Bangladesh (GOB), private individuals and organizations, foreign governments, international donors and lending agencies and capital markets. So far PKSF has received funds from the Governmnet of Bangladesh, the International development agency(IDA)/World Bank, USAID and Asian Development Bank 6 Organizational Membership Structure and

The composition of the Governing Body is as follows: (i) Chairman of PKSF (nominated by the Government), (ii) the Managing Director (appointed by the Governing Body), (iii) two members nominated by the Government; and (iv) three members elected by the General Body. That Makes a 7-member Governing Body of PKSF. The present Governing Body comprises persons of international repute including Professor Mohammad Yunus, Managing Director of Grameen Bank.

6.3

Chairman

The Chairman of PKSF is nominated by the Government from persons not in service of the Republic, usually for a term of three years. The present Chairman is a leading economist and a Professor of Economics at Dhaka University.

6.4

Managing Director

6.1

General Body

The Managing Director is the Chief Executive Officer (CEO) of PKSF. The present Managing Director has been appointed by the Governing Body. He is the ex-officio member of the Governing Body.

Maximum number of the members in the General Body will be 25, out of which government may nominate not more than 15 members from amongst persons associated with government 114

6.5

Management

PKSF has four divisions as follows: a) Small and

Medium POs' Loan Operations Division; b) Big POs' Loan Operations Division; c) Administration Division; and d) Audit Division. Loan Operations Divisions are the programme divisions of PKSF that select POs, disburse and recover loan, monitor and evaluate programmes and provide on-site technical assistance and advisory services to POs. The internal audit division reports directly to the Managing Director. PKSF has a small research and a training units to conduct research related to poverty alleviation and to impart training to the staff of POs. These units are under the Administration Division. PKSF from its inception has been following a policy of recruiting officers with high academic standing. PKSF has Programmes to train its Officers and Staff to increase their efficiency and skill. 7 Activities of PKSF

regulations useful for the expansion of microfinance sector Each of the functions are detailed below:

7.1

Provision of Loanable Funds to MFIs

PKSF presently provides loanable funds to its 227 POs ­ 10 big, 217 small and medium under its mainstream credit programme as well as under some projects. The mainstream credit programme includes the following components: (i) Rural Microcredit (RMC), (ii) Urban Microcredit (UMC), (iii) Micro Enterprise Lending (ME), (iv) Ultra Poor Programme (UP), (v) Seasonal Loan (SL), (vi) Special Assistance for Housing of SIDR affected borrowers (SAHOS), (vii) Rehabilitation of SIDR affected Coastal Fishery, Small Business and Livestock Enterprise (RESCUE), (viii) Foreign Employment Creation (FSOEUPP), (ix) Agricultural Sector Microcredit (ASM) and (x) Institutional Development Loan (ID Loan). The projects under which credit funds are provided include (i) Micro Finance and Technical Support Programme (MFTSP), (ii) Participatory Livestock Development Project-II (PLDP-II), (iii) Microfinance for Marginal and Small Farmer (MFMSFP), (iv) Livelihood Restoration Programme (LRP), (v) Learning and Innovation Fund to Test New Ideas (LIFT), (vi) Emergency 2007, Flood Restoration and Recovery Assistance Programme (EFRRAP). 7.1.1 Features of PKSF Credit Programme

As an apex financing institution involved in long term financing of organizations with microfinance services, PKSF puts utmost emphasis on attainment of both financial and institutional sustainability by these organizations. In order to achieve the objective of sustainability. PKSF performs the major functions expected of an apex organization. These include, among others: a) Provision of loanable funds to MFIs

b) Developing best practices for microcredit management and operations of MFIs c) MFIs d) Institution/capacity building support to

Lobbying for appropriate policies and

a) PKSF provides loans to three categories of POs- Organizations Operating in Small Areas (OOSA), Big Partner Organizations Operating in 115

Large Areas (BIPOOL), and Potential OOSA organization (POOSPO). b) PKSF charges 4.5 per cent service charge per year from its OOSA and Pre-PKSF category POs and 7 per cent service charge per year from its BIPOOL category POs. c) Loan received by POs from PKSF are repayable within a period of 3 years. First 6 months are considered as a grace period and loans along with service charge are to be repaid in 10 quarterly installments within the rest 30 months. d) PKSF charges 1 to 1.25 per cent service charge for the ultra poor programme and institutional development programme. 7.1.2 Implementation of Credit Programme

the performance of the organization is found satisfactory it is recommended for acceptance as PO. If there is some deficiency, the concerned organization is kept under observation and suggestions are given for improving the performance. On the other hand, if performance of an organization is found unsatisfactory, the application is rejected. Usually, the main reasons for rejection are the financial mismanagement, gross inconsistency between information in the application and that gathered from field verification. d) Approval by the Governing Body : The final power of accepting an organization as a PO rests with the Governing Body. If the management considers an organization to be accepted as PO, the proposal is placed with detailed description of the organization along with the field report, rationale for accepting it as PO and recommendation of the MD, in a meeting of the Governing Body. The Governing Body after deliberation accepts or rejects or puts certain conditions for accepting the organization as a PO. e) Signing of Loan Agreement: (i) Final step in disbursing loan to the newly selected PO is the signing of a standard loan agreement with PO. The loan agreement contains terms and conditions of loan (e.g. rate of service charge, area of loan disbursement, number of installments etc). The loan is collateral free. In addition to a loan agreement, a promissory note is signed by the representative of the PO. (ii) The loan agreement is signed from PKSF's side by the Managing Director and from PO's side by the Chief Executive of the PO or sometimes jointly by the Chief Executive and the Chairman. f) Verification of Loan Utilization: After the first loan is given, the PO is supposed to disburse

a) Application in prescribed form: PKSF receives application for loan in a prescribed application form that requires the applicantorganization to include details of information about the organization, its programme, its financing, etc. b) Preliminary appraisal: If an organization has experience of managing credit programme for the poor, PKSF preliminarily selects it for field visit to see if all information provided by the organization is consistent. PKSF judges experience in rural credit programme using several criteria: (a) number of years of experience, (b) amount of loan disbursed, (c) number of members and borrowers, (d) recovery rate of loan, (e) adequacy of skilled salaried staff and (f) credibility of sponsors. c) Field visit: Once an organization is selected for field visit, an officer visits the organization. If 116

the loan immediately after receiving the fund and give a list of borrowers to PKSF. An officer from PKSF in charge of the PO visits the PO to verify the loan disbursement and utilization of loan by the members. Usually, PKSF officials visit the POs at an interval of 3 months. g) Application for Successive Loans: The approval of successive loans to a PO depends on several factors: (i) satisfactory utilization of previous loan, (ii) maintaining high rate of recovery of loan at the field level (>98 per cent); (iii) giving reports regularly to the PKSF, (iv) potential for expansion of loan programme; and (v) repayment of loan installments to PKSF, if due. The successive loan proposals upto Taka 2.5 million are approved by the Loan Committee chaired by the Managing Director. Similar loan agreement is signed for each installment of loan. Loan beyond Tk. 2.5 million limit is approved by the Governing Body. h) Pre-PKSF Partner: Recently PKSF has taken a decision to select those NGOs which have potentials for becoming PKSF full partners but cannot meet the criteria for this. PKSF provides small microcredit funds to these NGOs and give technical assistance to build their capacity to make them full-partners eventually. 7.1.3 Performance of Credit Programme

to institutions. Upto October 2009, it has disbursed Taka 79,838.43 million. Loan Outstanding: PKSF has Taka 51,580.14 million loan outstanding with POs as of October 2009. Borrowers : As of October 2009, total number of borrowers financed by PKSF fund was 8.08 million of whom more than 91.76 per cent were women. Recovery of Loan: PKSF has two different recovery rates: (a) recovery rate of loan between the PO and PKSF, and (b) recovery rate of POs. Recovery rate of PKSF is 98.14 per cent. This rate is defined as the percentage of due amount has been received on time. Loan recovery of POs at the field level is 98.87 per cent.

7.2

Developing Best Practices for Microcredit Management and Operations of MFIs

PKSF now funds 227 POs. POs are dispersed all over the country. As on October 2009, the POs of PKSF have been working in all 64 districts of Bangladesh. Loan Disbursement: PKSF in its first year of operations could disburse only Taka 3 million. That was the preparatory year for formulating policies and a period of learning to disburse loan

PKSF reviews its policies and programmes continuously and adjusts them to meet the changing requirements. PKSF in the last decade has prepared a number of policy guidelines and standards for the microcredit sector based on the felt needs involving the practitioners - PKSF staff members and POs representatives and officials. PKSF has a programme to develop standards in further areas and review and revise ones already prepared. Major policy guidelines and standards prepared by PKSF are: i) Guideline for selection POs and Borrowers. ii) Guideline for Accounts: PKSF follows accrual basis of accounting alongwith double entry system for keeping books of accounts. For POs 117

PKSF has a Fund Management Manual which gives procedures to keep records of accounts at field and head office level. There should be a firewall boundary to allocate shared costs or revenues between financial, non financial or social services and commercial activities. Expenses related to actual or anticipated loan losses should be shown separately from other expenses in the income statement. Revenue from donations should be shown separately from income generated by an MFIs financial services and commercial activities. iii) Policy for Loan Classification and Debt Management Reserve: Loan outstanding among beneficiaries or portfolio is the important asset of an MFI. Due to various reasons it may not be possible to recover some loans in full amount. The core fund of any PO for microcredit would be eroded if it does not consider this phenomenon and fails to create adequate `Debt Management Reserve". If the qualitative aspect of portfolio on a continuous basis are classified properly, it helps to create necessary reserve against doubtful and bad loan in a pr udent manner. Through provisioning, MFI recognizes the losses it can reasonably expect to have in its portfolio. iv) Guidelines for Designing Internal Control System for POs of PKSF: This guideline helps to strengthen and in built within the organogram, systems of accountability alongwith prevention of errors and irregularities. v) Management of Savings: This policy provides a detailed guideline on marketable savings products and associated record keeping system along with direction for using savings fund with a view to ensure protection of depositors. vi) Guideline for Management of Service Charge Earnings: This gives policy guidelines for 118

allocating service charge earnings to operational cost components of different categories including loan loss provision, disaster management fund and capital acquisition fund so that maximum amount of surplus can be generated for increasing POs equity base. vii) Guideline for Avoiding Overlapping: When a household receives microcredit from more than one MFI, this will be treated as an instance of overlapping. Adoption of overlapping policy will help in mitigating the emerging problem of overlapping at field level. viii) Management Information System (MIS): Formats used for in-house reporting of field level activities and for reporting to PKSF provide a good basis for analyzing portfolio quality of MCP. POs use these formats for reporting to PKSF on a monthly basis. Some of the donors has accepted the PKSFs reporting format for their own funded activities. Uniform reporting saves time for MFIs. ix) Guideline for Performance Standards and categorization of POs: PKSF has set up performance standards for its POs in relation to various aspects of microcredit management, overall institutional strength and fund absorption capacity of POs and to categorize POs under different grades, which is used as in house evaluation for credit rating of PO before any further disbursement. x) Financial Ratio Analysis: PKSF has developed a programme for financial ratio analysis covering the following areas: (a) effective financial structure (b) portfolio quality (c) self-sufficiency (d) operating efficiency (e) rates of return and cost, and (f) growth. Financial analysis allows MFI management to identify strengths and weaknesses in their microfinance services and provides a basis for business planning and projections.

xi) Policy for the Utilization of Disaster Management Fund: PKSF has provided Tk10m to its POs as grant for creation of a Disaster Management Fund (DMF) by each PO. Each PO will contribute a portion of their service charge earnings to this fund following DMF policy developed by PKSF. This fund will be used for strengthening the disaster coping ability of microcredit clients through interest free loans following DMF policy guidelines of PKSF. xii) Indicators of Early Warning System: PKSF has set up a policy to detect downward trend in MCP through some indicators and to take preventive measures sooner. xiii) Business Plan for POs : In order to implement an effective and sustainable MCP, the POs are required to have a five-year business plan. The guideline are in two parts. The first part is to prepare an expansion plan (horizontal & vertical) and the next is to formulate some institutional development strategies for implementing the above plan having considered the existing strength and weakness of the organization. Both of them have targets that would be annually implemented. xiv) Guideline for Management Audit : This is a policy guideline to evaluate the internal governance, accountability, transparency and reporting of PO through assessment questionnaires. xv) Guidelines for Internal Audit : Rigorous management and financial audits are carried out by internal audit cell of PKSF for each PO. At least 5 field visits are made in a year for each PO for this purpose. A comprehensive internal audit Terms of Reference (TOR) is followed in this regard.

xvi) Audit TOR for external auditor of PKSF for auditing PKSF xvii) Audit TOR for external auditor of PKSF for auditing its POs: At present external auditors, shall audit 75 per cent of PKSF POs during external audit of PKSF, in future this will be 100 per cent. A comprehensive TOR is there to follow uniform auditing and reporting standard. xviii) Audit TOR for auditors appointed by POs: For uniformity of accounting and reporting standard PKSF has given a TOR for external auditor of POs appointed by them. xix) Policy for loans for institutional development. xx) PKSF microcredit programme funding policy for indigenous ethnic minorities.

7.3

Institution/capacity building support to MFIs

Institutional development of PKSF and its POs holds great importance especially from the point of view of sustainability of the microcredit programme that has so far been operational so successfully in Bangladesh. Institutional development has implications on a number of areas comprising programme outreach, absorption capacity of the MFIs, supervision and monitoring, financial management and control, personnel policy including human resource development (HRD), sustainability of micro-credit programme and MCI itself etc. The institutional development components include the following: 7.3.1 Training

Training for POs personnel has been identified as 119

one of the vital activities of PKSF for enhancing institutional capacity for successful management of microcredit programme. To implement the training programme PKSF has created a Training Unit headed by General Manager Administration. The unit is supported by a seven member Implementation Team (IT) consisting of senior level staff members. The Manager and two Assistant Managers carry out the routine works of the unit. PKSF has identified some Training institutes belonging to both public and private sectors and out-sources its training programmes to these institutes following the training plan incorporated in the yearly training calendar. Training Need Assessment: A training need assessment (TNA) was undertaken to design training modules for POs and PKSF staff. Based on the TNA, PKSF developed 22 training modules out of which 7 are for PKSF staff and 15 for POs' staff (Table 1). 7.3.2 On-site Technical Assistance

disaster coping, livelihood strategy, animal vaccination, etc. The training provided by PKSF at different levels is given at Table 2. 7.3.3 Institutional Development Loan Programme

PKSF is implementing a loan programme for its POs institutional development since 1997. Since FY 2000-2001 PKSF has introduced 1 per cent interest to this loan programme. Provides loans to its POs to make office-cum-training centres; Buy Computers, Motor Cycles, By-Cycles, Engine Boats, and Photocopiers. This loan is repayable in two years in eight equal installments. 7.3.4 Workshops/Seminars

PKSF organize a series of workshops on "Strengthening Microcredit Operation" of its Partner Organizations (POs). 7.3.5 Research Programme

PKSF officers, when they make field visits for onsite monitoring of POs' programmes, provide the POs advice on different aspects of management and operations of their microfinance programmes. This on-site technical assistance has been found very effective in improving the efficiency of POs' programmes. Under its capacity building programme, PKSF arranges, on regular basis, training courses for POs' personnel covering a wide range of subjects on microcredit operations and management. PKSF also provides in-country and overseas training to its officers for successful implementation of its microcredit programme. Moreover, under different projects of PKSF, the borrowers are also given training on relevant management skills and different awareness and technical issues, such as 120

PKSF gives much importance to research for institutional development. The objective of research programme is to strengthen and support the microcredit programme of PKSF and its POs.

7.4

Lobbying for Appropriate Policies and Regulations Useful for the Expansion of Microfinance Sector

PKSF lobbies with the Government for appropriate policies and regulation. The Government has constituted a committee to prepare a regulatory framework for the country's microcredit sector. PKSF is an important member of this committee and making contribution to help the Government prepare a microfinance friend by regulatory framework.

7.4.1

Other Areas of Contribution

Besides the above, PKSF is also making contribution in the following areas: i) Computerization of PO's MIS and Accounts System : PKSF has developed software for PO MIS using oracle and Developer 2000. The software has been tested in 5 POs and will be implemented in all POs soon. PKSF is also developing software for POs' Accounts. ii) Credit Bureau Database : PKSF has taken up a project to set up a Credit Bureau Database at PKSF. The database will have information up to the borrowers level of all microcredit organizations of the country including PKSF POs and Grameen Bank. The data will be kept at a disaggregated level like union/village, which may be used to identify areas in terms of intensity of microcredit programme coverage. iii) Disaster Coping Strategy : PKSF has provided Tk. 10 million to its POs as grant for creation of a Disaster Management Fund (DMF) by each PO. Each PO contributes a portion of their service charge earnings to this fund following DMF policy developed by PKSF. This fund is to be used for strengthening the disaster coping ability of microcredit clients through interest free loans following DMF policy guidelines of PKSF iv) PKSF and Gender Equality : PKSF since its very inception recognized the fact that without the active participation of women who estimate 50 per cent of the country's population, microcredit programme would not be able to achieve its objectives. SO, PKSF encouraged its partners to target their microcredit programmes to include mainly the women. To day, more than 90 per cent of the beneficiaries of microcredit

programmes of its partners are women. PKSF is therefore playing an important role in empowerment of women. v) GO-NGO Partnership : PKSF has very successfully established and developed GO-NGO collaboration in the field of poverty alleviation through the provision of microcredit. 8 Sustainability of PKSF

PKSF has achieved operational and financial sustainability. It can cover its direct costs of operations, such as salaries and administration costs, through its interest earnings. PKSF's interest income from loans both ensures operational sustainability and covers bad debt expenses and financial expenses incurred in making loans and thus it is financially sustainable. With operational and financial sustainability already achieved PKSF is committed to attain economic viability. PKSF has also achieved institutional sustainability. PKSF has a well defined, highly transparent and proactive governance system. Its governing body includes persons with international reputation in the field of rural development, poverty alleviation and microcredit. Its management cadre consists of individuals having distinctive academic record and high degree of professional efficiency and commitment. No individual or person dominates PKSF policy or management. Although it is created by the Government and funded by and through the Government it enjoys operational autonomy. All these factors have contributed to PKSF's institutional sustainability. 9 Sustainability of POs

Fundamental policies to run a successful rural credit programme are in place in many POs. Selection 121

of members, savings and loan policies, portfolio management, financial control, and monitoring and evaluation are some of the fundamental areas of policy formulation. So far, many POs within their limited capacity have tried to recruit competent staff. POs do not have adequate financial resources to recruit staff with better educational attainment and competence. Many POs are being managed by their founders and expected to do so for quite some time. Leadership by the present directors at this early stage of the organization is important for growth and sustainability. Many POs either have physical assets like office buildings and land or purchased land for construction of office, training center, etc. This shows a clear commitment from the part of the organizers for giving POs a solid foundation. The basic issue in financial viability analysis is whether POs can cover the costs of managing their credit programmes from the income of the programmes, mainly the service charge from loans. Some POs have been successful by gradually covering the cost of operations from the income of the credit programme and generating a moderate surplus. It is expected that all POs will continue to improve their profitability. 10 Sustainability of Borrowers

earlier. Micro-level/field-level studies show that average annual rate of return of microcredit investment is very high (Table 3). 11 Impact of Programme PKSF Microcredit

Highlights from the BIDS Study on PKSF's Monitoring and Evaluation System are : A recent study conducted by the Bangladesh Institute of Development Study (BIDS) finds that the microcredit programme of PKSF implemented through its POs has benefited the rural poor in numerous ways. The programme has significantly increased incomes of the poor improved their standard of living, and contributed to their social development and empowerment. According to the Study, the microcredit programme has supported numerous incomegenerating activities and has contributed immensely towards promoting self-employment activities. It is the area of transportation/transport services where the programme has made most significant contribution. The study finds, very close association between programme participation and engagement in nonfarm activities. Increased access to the credit market due to provisioning of MFI loans, rural poor now have greater access to other markets for economic sustenance. This gets reflected in greater involvement of programme participants in the land (rental or mortgage) market, and a greater access to the informal credit market (such as neighbors) for the regular participants among the poor households. Their dependence on moneylenders has also declined. There is also a significant positive effect of regular

To be sustainable, borrowers' IGAs/enterprises should generate enough surplus over all payments including servicing of loan so that the borrowers can add the surplus to their family income. Generation of surplus will depend on the rate of return of microcredit investment. For high return on investment, MFIs, in addition to providing credit, also provide various enterprise development services which we have mentioned 122

programme participation on income and on average consumption of poor households. Particularly, increase in the consumption of pulse, fish and milk. There is also some indication that average consumption tends to rise with increase in the length of membership. The study also finds that the increase in income of regular participants during the flood year was higher than all other sample groups, except the new participants. According to the study, the post-flood recovery was remarkably quick, showing resilience capacity of the poor rural households of Bangladesh. Analysis of the study results shows noticeable impact of programme participation in protecting from such natural calamities/shocks. Improved economic well being due to programme participation has contributed to reduction of household level vulnerability. The participant households were less vulnerable concerning health crisis, large expenses and violence. Programme participants tend to resort to soft options, such as, borrowing at zero or low interest rates, and through mobilizing material and moral support from patrons and kinship network. An important source of economic crisis faced by the rural households is rooted in the seasonal variation of employment and income. The study finds that the programme participation among poor households leads to mixing of non-farm self-employed activities, which reduces seasonal variation in total employment and income. Generally, the study finds programme participants to be less vulnerable to crisis even though they face similar degree of crisis as non-participants. The study finds general improvements in living standards of all sample households. One example is the decline in the use of open space by the adults

for the toilet purpose -the decline being largest for occasional and regular participants. Similarly, access for child immunization improved for all, however, the gender gap for both DPT and Measles vaccination reduced relatively more among children in regular participants. Access to other modern health care facilities such as contraception prevalence increased for all and the increase in such access was higher among the regular participants. One interesting findings from the survey is the decline in reliance on female method, which is more visible among the regular participants. Result of the study shows that participation in MFI programme in general, and regular participation in particular, had positive effect on household resource allocation on house repair, schooling and health care. All these had improved the social well being of the participant households more then the non-participants. More importantly, participation in MFI programmes led to decline in gender gap in access to schooling and to modern health care. Increase in access to credit has generally benefited rural women through increased access to markets, financial institutions, and service providers and to information and knowledge. However, participation had little effect on women's access to labor market, which reflects inflexibility in certain social and cultural norms, which are yet to be removed from the rural society. The most visible positive effect of participation on women's relative position has been with respect to decision making on household expenditure and fertility regulation. The study also shows that women's access to household income has increased and their status in the family has improved. Overall, according to the study regular participants registered a faster rate of poverty reduction 123

12

Some Lessons from PKSF Model

PKSF is unique in its organizational structure, activities and management practices. A few factors can be identified that have made it possible to register such an impressive performance. PKSF has been established and funded by the government, but it has been kept as an independent organization outside government bureaucracy. That enabled PKSF to form its own policies and develop its own management practices suitable for its activities. The outstanding quality of the Governing Body has contributed most in guiding the management and forming and revising policies whenever necessary. The policy of recruiting officials of above average quality has contributed most to the growth and performance of PKSF. PKSF has been successful in utilizing the capacities of local NGOs in quickly reaching the poor and developing the POs to deliver the financial services to the poor. Selection of the right POs was the most crucial factor for PKSF's success.

The key to the sustainability of POs is the assured source of funds and the improvement in the capacity of human resources backed by good management practices. In both areas, PKSF has proven itself to be effective. Financial intermediaries (NGOs) backed by resources from PKSF have been found to be effective in reaching the poor. Both PKSF and the POs can also become sustainable in the process. The rural poor and poorest men and women have proven themselves to be capable of managing money and improving their income. Likewise, the POs of PKSF have proven the ability to select the right target groups and deliver the desired services. One area that needs top priority from PKSF is enhancing the capacity of POs. This can be done by more investment in development of the POs' human resources. The PKSF model (as an apex second-tier organization) shows potential for replication. It can further grow and make a significant contribution in improving the quality of life for the poor and poorest.

124

Table 1 : Training Modules for POs Staff Category of Trainees

Chief Executives

Modules

1) Financial Management 2) Savings And Credit Management 3) Monitoring & Evaluation 4) Strategic Planning 5) Good Governance 1) Accounts Keeping and Financial Management 2) Credit Operation and Savings Management 3) Supervision & Monitoring 4) Training of Trainers 5) Disaster Management 6) Microenterprise 1) Accounts-Keeping 2) Financial Management 1) Group Dynamics, Micro Credit & Savings Management 2) Effective Management of IGA's 15 1) Financial Management 2) Strategic Planning 3) Monitoring and Evaluation 1) Financial Management 2) Micro-Credit Management 3) Budgeting and Auditing 4) Identification and Managing IGA's. 7

Duration of Training Courses

3 days 3 days 3 days 4 days 2 days 3 days 5 days 3 days 7 days 2 days 3 days 5 days 3 days 3 days 3 days

Mid Level Officers

Accountants

Field Workers

Total Asst. General Manager Deputy General Manager

5 Days 5 Days 5 Days 7 Days 5 Days 5 Days 3 Days

Manager, Deputy Manager and Asst. Manager

Total

125

Table 2 : Category

Information of Trainings Provided by PKSF up to June 2008

Number of Participants

POs' officials Officers Field workers PKSF's officials In-country Overseas Borrowers Total

10,195 11,580

328 136 11,59,409 11,81,648

Table 3 : Rate of Return of Microcredit Investment

Type of Activity Number of Cases Average Equity (Tk.) Average Average PKSF Loan Investment (Tk.) (Tk.) Average Annual Rate of Return (Tk.)

196.0 135.0 36.0 415.0 164.0 188.0 51.0 63.5 112.0 64.0 191.0 221.0 167.0 126.0 226.0

Tailoring Rickshaw/Van Scooter (Motorized 3 wheeler) Paddy husking Grocery shop Small trading Milch cow Broiler/cattle fattening Chick rearing/poultry Fish farming Furniture making/bamboo products /pottery Handloom/embroidery Restaurant/sweet shop Veg./agro-processing/nursery Services (painter/welding/shop /black smith) Total

2 3 1 3 9 24 6 7 2 2 6 3 4 9 3 85

7525 1000 70000 2000 19611 12104 16700 32757 1750 5000 4417 4667 9000 3014 14000 12729

5500 6667 10000 9000 8556 8792 9333 11000 5000 11500 8167 8333 10250 7278 7667 8402

13025 7667 80000 11000 28166 21250 26037 43757 6750 13000 11583 13000 19250 10125 21666 21751

Source: World Bank, 2000, Project Appraisal Document on Second Poverty Alleviation Microfinance Project (Microfinance II), Annex­4.

126

Suppliment 1

1

Guideline for Selection of Partner Organization (PO) of PKSF for its "OOSA" (Organizations Operating in small areas) microcredit Program

· It should have a constitution duly approved by the concerned registration authority. · It should have a General Body and an Executive Committee approved by the concerned registration authority. · In case of government, semi-government and local bodies it must be formed lawfully. · The organization should have the mandate to operate credit program for self-employment and income-generation activities of the landless and assetless with an admissible service charge. · It should have a mandate to borrow money from the government, semi-government, private and any other organizations. ii) Organizer

PKSF is presently carrying out its operations through various partner organizations, therefore, selection of PO is a crucial task of PKSF and this is an ongoing process. Under this process PKSF appraises various types of non-government, semigovernment and government organizations, voluntary agencies, societies and local government bodies to select these as POs which have gained experience and expertise or which have the potentials to operate a successful microcredit program for self-employment and income generation of the landless and assetless. In appraising an organization, PKSF follows a clear guideline which can be divided into the following areas: (i) Organization; (2) Organizer; (3) Management; (4) Human Resources; (5) Working Area; (6) Field Activities; (7) Past performance; (8) Management Information System (MIS) and (9) Accounting System. According to the above-mentioned guideline, to become a PO, an organization should have the following features: i) Organization

· The organizer or founder(s) should be socially reputable, respected, honest with intention to serve the poor people · Organizers are to be acceptable to the staff, group members and to the community in general. · The organizers should have the capability and vision to develop a future perspective and strategic plan of a development organization. iii) Management

· The organization should have a legal basis i.e., if it is a non-government and voluntary organization it is to be registered with the appropriate registration authority such as the Directorate of Social Welfare, Department of Women's Affairs, Registrar of Cooperatives, NGO Affairs Bureau etc.

· The organization should have an organogram. 127

· The chief executive should be full time and should possess the mentality to work on a long term basis. In case of local organization the chief executive have to stay in the working area. · The chief executive should have good and dynamic leadership quality and should demonstrate good management capability and be able to formulate strategic plan for the organization. · The organization should have adequate number of regular and full time staff to ensure proper implementation of microcredit program. · The chief executive should have a good reputation and should be acceptable to the staff, group members, and to the community in general. iv) Human resource

vi)

Field activities

· Members organized would be the landless and assetless; the characteristic features of whom would be as follows: those residing in rural areas owning less than 0.50 acre of cultivable land or having total asset of the value less than that of one acre of land in the locality, would be considered as landless-assetless. · Members are to be organized in groups and groups must be formed with like minded people who should be conscious/careful about group discipline and regular in attendance in group meeting, and making saving deposits. Members should have a minimum 6 months practice of regular saving deposit. · The organization should have at least 400 organized members, Tk. 0.2 million operating loan outstanding at field level and should have experience of at least 6 months successful microcredit operation. · Number of organized members should be consistent with the working/operating capital of the organization. · Groups should be organized within the 10 Km radius of the project office. · In case of local organization 'Head Office' should be situated in the working/operational area. · The organization has to maintain a minimum loan recovery rate of 98% on a continuous basis. For a program operating for more than three years a minimum loan recovery rate of 95% has to be maintained on a continuous basis.

· The organization should have trained and skilled manpower to administer the organized group and to maintain a sound accounting system. · Staff should be honest, dedicated, and should possess missionary zeal. v) Working Area

· Working area of the organization should be well suited for microcredit operation. It should have good communication network, banking facility and easy access to market so that the borrowers can utilize their loan profitably. · It should be poverty stricken and such rural areas will be given preference. · There should be potentials for expansion of the program by avoiding duplication with the activities of the other organizations in the same area. 128

· Overlapping with the activities of other organization in the same area must be avoided. vii) Past Performance

· All the accounts should be duly audited by the proper authority and the reports should be readily available. · All the accounts must be correct and updated. 2 Guideline for Selection of Partner Organization (PO) of PKSF for its "BIPOOL" (Big Partner Organizations Operating in Large Areas) Microcredit Program

· The organization should have a demonstrated experience of ensuring proper utilization of loan money with maintaining a high rate of recovery on a continuous basis. · It should have the evidence of successful implementation of all the programs undertaken by the organization. · It should have properly organized members and groups for successful operation of microcredit program. viii) Management Information System (MIS)

· The PO is operating a successful Microcredit program for a minimum of 5 years; · It has at least 100,000 borrowers with a strong potential for expansion; · It has at least Tk. 100 million of equity (including foreign grants, surplus etc.) of its own on the program; · 2.5:1; The debt-equity ratio does not exceed

· System for collecting information from member, group and office level for proper management and monitoring of the microcredit program should be present. · Adequate information should be available regarding microcredit operation. ix) Accounting System

· It maintains a strong and transparent accounting, MIS and internal audit system; · It has its accounts audited by a reputable external auditor on an annual basis; and · 3 The minimum loan recovery rate is 95%. Guideline for Selection of Pre-PKSF Partner Organizations

· The organization should maintain a sound, systematic, correct, detailed and transparent accounting system. · The organization should not have case of any misappropriation or illegal withdrawal of fund. · Savings account of the group members must be complete, detailed, transparent and correct.

The 103rd Governing Body meeting of PKSF held on 14 June, 2001 decided to enlist Pre-PKSF-POs to support potential local NGOs which are yet to qualify the set criteria for becoming an OOSA129

PO of PKSF but are run by honest, sincere, dynamic people. A number of customised training facilities with a small amount of loan are provided to the selected Pre-PKSF partner organizations to improve their overall institutional capacity with an objective to graduate within 6-12 months to enable them to become POs under OOSA category. 4 Guideline for Avoiding Overlapping

c) There should be a thana level forum of the microcredit institutions the members of which should meet initially once in every month and later once in every three months to regularly review the situation and take appropriate action to stop overlapping and its recurrence in future. If the problem still remains unresolved, the matter should be referred to their respective head offices. If still unresolved, the issue may be discussed with PKSF. d) A list of those members from the same village who have received microcredit from and/ or accumulated savings in more than one agency would be prepared and, subject to discussion with the concerned members, they would be allowed to stay with the organization they prefer. However, the concerned members will have to repay all debts to the organization they are leaving and obtain a clearance certificate from it. e) In order to check if any member received microcredit from more than one agency, the microcredit field staff or officers of the agencies may attend the weekly meetings of centers/samities of one another. f) A special seal will be stamped on the Pass Book of the member who received loans from more than one source so that the member can be easily identified. However, caution will have to be applied to avoid negative influence on the concerned borrower. g) The field workers of the local branch of the microcredit institutions must be fully aware of the list of borrowers that received credit from more than one source and the concerned official would motivate the concerned borrowers to repay loans of the other institution in addition to his/her

In close consultation with a number of POs, PKSF has recently formulated a policy to avoid overlapping. The main features of the policy are as follows:

4.1

Definition of overlapping

When a household receives microcredit from more than one institution, this will be treated as an instance of overlapping although the same household can establish links with more than one service providing institution/agency without being branded so. Therefore, in case of microcredit, one household will be able to receive credit from only institution.

4.2

Policies to avoid existing overlapping

a) The microcredit institutions working in a particular village must posses the list of their respective samities/groups along with list of their members, their date of joining, household number and address. The application for membership should contain the photograph of the applicant. Once enrolled, the member should have an identity card containing his/her photograph in it. b) The microcredit institutions working in a particular village must exchange the list of their respective borrowers once in every three months. The exchange of the list may be done quicker, if necessary, in the village where overlapping allegedly exists. 130

own. After the loan is repaid, action as per d above would follow.

4.3

Policies to avoid future overlapping

a) The members organized by one organization cannot be taken over by another organization without prior consultation with the concerned organization. b) The practice of waiting for credit by the borrowers after being organized must be uniform for all the agencies working in a village. In this case duration of waiting varies from 8 to 12 weeks. The members or potential borrowers who failed to receive credit from one organization even after waiting for 12 weeks may be taken over by another organization but in that case they will have to wait for another 8 to 12 weeks under the new organization to receive credit. c) The list of new members along with their addresses of one organization must be circulated to other organizations working in the same village. If no objection is received within 15 days of the circulation, it would be safely assumed that the enlisted people are not members of any other organization and hence the list is final. The persons about whom objection have been received should be absorbed by any of the organizations after mutual discussion. If needed, a household may be provided with a maximum of two loans simultaneously to overcome the situation. d) The member who has just started savings under one organization and was subsequently found to have already received loan from another organization, should receive immediate refund of his/her saved amount along with cancellation of membership.

e) The local level officers of the organizations will hold monthly review meetings at the thana forum. The unresolved issues of that review meeting should be referred to higher authorities of the concerned organizations to resolve before the next meeting. If still not resolved, this should be informed to PKSF in black and white. f) Since microcredit is targeted to the poor, there should be uniformity in the maximum size of the first loan in the loan products under it. Here in this case the maximum size of the first loan should be Tk. 4,000 irrespective of the organization delivering it. This can, however, be enhanced in future to take care of inflation. This ceiling can be exceeded for microcredit under special program. g) While considering inclusion of new POs, PKSF would look into the number of other microcredit institutions and their program in the concerned area. 5 PKSF Microcredit Program Funding Policy for Indigenous Ethnic Minorities

5.1

Introduction

i) This policy describes broad framework for microcredit programs (MCP) that affect indigenous peoples. ii) PKSF will extend microcredit through selected partner organizations (POs), among indigenous peoples, tribes, ethnic minorities, or other groups to increase their capacity to assert their interests and rights in land and other productive resources, following the general principles and guidelines of PKSF. iii) It sets the basic definitions, policy 131

objectives, guidelines for the design and implementation of MCP for indigenous peoples, in a sustainable manner. iv) It should be consistent with the overall policies of the GOB with respect to indigenous ethnic minorities.

b) Self-identification and identification by others as members of a distinct cultural group; c) An indigenous language, often different from the national language; d) Presence of customary social and political institutions; and e) Primarily subsistence-oriented production.

5.2

Definitions

i) The ter ms "indigenous peoples," "indigenous ethnic minorities," "tribal groups,'' and "scheduled tribes" describe social groups with a social and cultural identity distinct from the dominant society that makes them vulnerable to being disadvantaged in the development process. For the purposes of this directive, "indigenous peoples" is the term that will be used to refer to these groups. ii) Because of the varied and changing contexts in which indigenous peoples are found, no single definition can capture their diversity. Indigenous people are commonly among the poorest segments of a population. They engage in economic activities that range from shifting agriculture in or near forests to wage labor or even small-scale market-oriented activities. iii) In accordance with the policies of the GOB, indigenous peoples can be identified in particular geographical areas: Chakma, Mong in Chittagong Hill Tracts (CHT),Manipuri's in Sylhet, Garos in Modhupur and Mymensingh, Shawntals in Rajshahi, etc. iv) The following characteristics are distinct in varying degrees among the indigenous people : a) A close attachment to ancestral territories and to the natural resources in these areas; 132

5.3

Basic Asssumptions for Intervention

i) PKSF addresses the indigenous peoples through its Partner Organization (PO). PKSF will provide fund for MCP, as well as assistance for institutional development following the general principles and strategies of PKSF. ii) MCP will encourage provisions of income generating activities like agriculture, fisheries, forestry, hydropower, horticulture, tourism and all kinds of small business and production. iii) The POs shall have a track record of successful performance of MCP for at least a year. iv) PKSF will monitor the MCP according to PKSFs performance standard. v) PKSF's overlapping policy guidelines shall apply for MCP funding. vi) An upper ceiling rate of service charge from the target people for their loan from PO may be followed as per loan agreement with PKSF. vii) For selection of PO, the environment should be carefully screened. Issues related to indigenous peoples are commonly identified through the environmental assessment or social

impact assessment processes, and appropriate measures should be taken under environmental mitigation actions. viii) The POs in their operational areas will attach due respect and importance towards the ethnic features, education, culture, environment, religion, customs of the area and can not conduct propaganda- campaign or undertake activities that may cause threat to those features; rather conduct their programs keeping harmony with those features. ix) POs should give preference for local people in recruitment of manpower. As because of the convenience for their language and culture, the local people, if recruited, will help POs implement their programs. Recruitment should be made on the basis of male female ratio at a reasonable rate. x) The POs will operate MCP keeping social harmony among the inhabitants in local area irrespective of religion, groups, race, clan, caste etc. xi) The POs which are willing to work with indigenous people have to observe the following restrictions: a) No such activities that create hindrance to social harmony between the races of TribesBangalee can be undertaken. b) No anti religion or unethical activities, particularly campaign for religion conversion will be allowed. c) No PO can undertake such activities that provoke communal unrest.

d) Any activities that cause hindrance to national or regional security can not be undertaken. e) Any such activities that inspire the inhabitants of those areas to involve in separatist, religious or racial movement cannot be undertaken directly or indirectly. f) No PO will be involved in any political activities directly or indirectly. g) The PO will not be allowed to maintain linkage with any persons/organizations or any political parties that are engaged in any illegal activities at home/abroad. xii) The MF-NGOs should restrict their activities to the purview of their work plans and working areas as approved. If any MF-NGOs is involved in any activity beyond the work plans and the areas as approved or violate the restrictions as mentioned above at 3.11(a) ­3.11(g), legal action including actions of cancellation of registration may be taken against them.

5.4

MCP funding of POs working in CHT, shall follow the following guidelines

i) POs intending to work in CHT needs to obtain "no objection" from the Ministry of Chittagong Hill Tract Affair/Regional Council/ concerned District/Local Government Council, and concerned government agencies dealing with indigenous ethnic minorities. ii) If necessary, periodically, PKSF may share progress report of PO with, the NGO Affairs Bureau or an attached office of government organization and the Ministry of Chittagong Hill Tract Affair/Regional Council/concerned District/ Local Government Council will evaluate the activities of concerned NGO in that area. 133

iii) Before applying to PKSF for further expansion of MCP in the new local areas, PO has to seek clearance from the Local Government Council of CHT. iv) For POs working in CHT, PKSF may share the progress and evaluation reports on their activities to the Convenor of the committee and the District Commissioner. Besides, the NGO Affairs Bureau and the registration authorities will regularly maintain contacts relating to NGOs` activities, ensure coordination and send related reports to the Ministry of Chittagong Hill Tract Affairs/Regional Councils/concerned district Local Government Council and PKSF. v) If any dispute in connection with conducting the program or coordination arises, the issue(s) may be referred by PKSF to the Ministry of Chittagong Hill Tract Affairs through NGO Bureau for its settlement. 6 Policy for Utilization of Disaster Management Fund The policy for the utilization of the disaster management fund which will be used to provide support to the PKSF POs' microcredit borrowers affected by natural calamities like floods, draughts and cyclones: i) The concerned PO will determine the size of the disaster loan to be given to a `beneficiary' family after assessing its real need. ii) Disaster loan will be used for rehabilitation of the affected family.

iii) Disaster loan will be given in one installment and the loanee will use this loan for self-rehabilitation. iv) The PO will not claim service charge or any other charge for this loan. v) The PO will recover disaster loan in equal installments which are tolerable to the loanee. The PO will inform PKSF about the size, duration and repayment schedule before receiving fund from PKSF. vi) Before providing this loan the PO will sign a loan agreement with the loanee wherein terms and conditions of the loan should be mentioned. vii) The PO will maintain all records and accounts of disaster loan fund and supervise and monitor its use and repayment. viii) The PO will send monthly report to PKSF with regard to the use and recovery of disaster loan. PKSF will supervise and monitor the use of the disaster loan. ix) Under no circumstances, the PO will use the disaster loan fund for other purposes. This fund will be treated as a part of the POs' `Disaster Management Fund' in which the PO shall have its own contribution. Following clause `9' the PO will contribute a specific portion of its surplus service to this fund on a quarterly basis.

134

Suppliment 2 Summary of Foundation's Loan Programme : Excluding Project and Institutional/Development Loan

No.

Description

Total

A. PKSF ­ PO Level

1 2 3 4 5 6 7 Partner Organization Pre-PKSF Loan disbursed (Tk. in million) (US$ in Million) Loan recoverable (Tk. in million) (US$ in Million) Recovered (Tk. in million) (US$ in Million) Overdue loan (Tk. in million) (US$ in Million) Loan outstanding (Tk. in million) (US$ in Million) Rate of Recovery 227 0 79,838.43 1160.44 51,580.14 749.71 50,617.86 735.72 1,014.74 14.75 29,220.57 424.72 98.13%

B. PO ­ Member Level 1 2 3 4 Loan disbursed (Tk. in million) (US$ in Million) Loan recovered (Tk. in million) (US$ in Million) Savings generated (Tk. in million) (US$ in Million) Rate of Recovery Male Group Female members Total Male Borrower Female Total 482,845.15 7018.10 436,195.61 6340.05 15,357.43 223.22 98.85% 784,702 9,682,752 10,467,454 665,375 7,410,140 8,075,515

Exchange: US$ 1.00 = Taka 69.35

135

Annexure 6.1.9

MICROCREDIT AND ENTREPRENEURSHIP DEVELOPMENT

Dr M A Hakim

progress has been made in implementing the microcredit programme (MCP), and the scope for its efficient expansion is enormous. Money begets money. Adam Smith said "Money, says the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little" ("The Wealth of Nations" 1937, p. 93). It is very difficult for the poor to get small working capital from formal banking system for various reasons. A collateral free working capital loan is the requirement at the doorsteps of the poor at the right time to help them facilitate and start feasible intended income generating activities (IGAs). It is with this background that, microfinance is seen as one of the significant approaches to poverty alleviation. 2 Evolution of Microfinance Institutes in Bangladesh

1

Introduction

In recent years, microcredit, in its wider dimension known as microfinance, has become a muchfavoured intervention for poverty alleviation in the developing countries and least development countries. There is scarcely a poor country and development oriented donor agency (multilateral, bilateral and private) not involved in the promotion (in one for m or other) of a microfinance programme. Many achievements are claimed about the impact of microfinance programmes, and an outside observer cannot but wonder at the range of diversity of the benefits claimed. Although Bangladesh has huge potential for development, it is, for various socio-economic reasons, is one of the poorest countries in the world. About half of the country's population lives below the poverty line with 80% in the rural areas. The burden of poverty falls disproportionately on women, who constitute half of the total population. Logically, therefore, poverty alleviation and creation of rural employment are top priorities in the development agenda of the government of Bangladesh (GOB) which has adopted a broad-based approach to poverty alleviation, emphasizing macroeconomic stability, economic liberalization, and support for a number of government agencies and nongovernment organizations (NGOs). Substantial 136

During the late 1970s, when the `Jobra' experiment was underway under Professor M. Yunus, the Dheki Rin Prokolpa was initiated by the Bangladesh Bank in collaboration with the Swanirvar Bangladesh, and several other pilot schemes were initiated by a handful of the NGOs, which were active then. At that time, it was difficult to conceive that these initiatives would lead to a major microcredit movement, which would make Bangladesh known to the rest of the world. Even

during the 1980s, in spite of Grameen Bank's success, the main discourse amongst development practitioners in Bangladesh centered around the desirability of microcredit programme as opposed to conscientization. By 1990, unhindered experimentation in the fields led to a quiet resolution of the debate and the country experienced a massive expansion of microfinance activities during the 1990s. PKSF contributed significantly to the expansion of microcredit programmes in Bangladesh. This rapid expansion drew attention from all important quarters­policymakers, academia and development practitioners­each trying to grapple with the unfolding stream of issues and trying to shape the course of the social and economic dynamics initiated due to introduction of microcredit. With a view to meet the demand for fund for re-lending by the development partners (NGO-MFIs), and due to an urge to coordinate the flow of such funds to appropriate use, the Palli Karma-Sahayak Foundation (acronym PKSF and the full Bengali name can be translated in English as "Rural Employment Support Foundation") came into being in late 1990. In recent years MFIs have moved from the margins of the financial system towards the mainstream. It is now more widely accepted that populations traditionally excluded by the formal financial sector can, in fact, be a profitable market niche for innovative banking services. The 1997 Microcredit Summit held in Washington D.C., launched a global movement to reach 100 million of the world's poorest families with credit for self-employment and other financial and business services by the year 2005. Much remains to be done, however, to integrate microfinancial systems, and for orthodox financial institutions, notably commercial banks, to recognize its full potential.

3

Coverage Under Programmes

Microcredit

Microcredit programmes (MCP) in Bangladesh are implemented by various formal financial institutions (nationalized commercial banks and specialized banks), specialized government organizations and semi-formal financial institutions (around 1000 NGO-MFIs). The growth in the MFI sector, in terms of the number of MFI as well as total membership, was phenomenal during the 1990s and continues till today. As of December 2007, the total borrowercoverage of MCP in Bangladesh was approximately 2,39,31,028 (Table 1), the cumulative loan disbursement was Tk. 732323.56 million (Table-3) and the savings mobilized by the poor Microcredit borrowers was Tk. 30914.7 million. 4 Microcredit Programme of Palli Karma-Shayak Foundation (PKSF)

Palli Karma-Sahayak Foundation (PKSF), a `not for profit' organization, was established in 1990 with the principal objective of providing financial and institution-building assistance to the organizations implementing microcredit programmes for creating self-employment as well as wage employment opportunities in rural and urban areas. The ultimate goal is poverty alleviation. PKSF has spread its programme to far-flung areas of the country through its partner organizations (POs), which currently number 232. Up to Oct. 2008, PKSF disbursed Tk. 6199.73 crore to its POs. Revolving this amount the POs have disbursed Tk. 39596.38 crore to poor borrowers currently numbering 8.29 million (about one third of the total microcredit borrowers of Bangladesh) while maintaining a recovery rate of more than 137

98%. More than 91% of the borrowers are women. PKSF's microfinance programme, which includes both financial services and capacity building support, has expanded rapidly, particularly during the last four years. The poor borrowers covered under the PKSF's microcredit programme are actively participating in different income and employment-generating activities under the mainstream programmes and also under some special projects, as listed below:

d) Rehabilitation of Non-Motorized Transport Pullers and Poor Owners (RNPPO) Project; e) Rural Electrification Development Project (REDP) f) Finance for Enterprise Development and Employment Creation (FEDEC) g) Promoting Financial Services for Poverty Reduction (PROSPER) h) Micro-finance Support Intervention for Food Security for Vulnerable Group Development (FSVGD) and Ultra Poor Beneficiaries Project

4.1

a) b) c) d) e) f)

Mainstream Programmes

Rural Microcredit (RMC); Urban Microcredit (UMC);

4.3

Micro-Enterprise Lending (MEL); a) Ultra Poor (UP) Programme; Seasonal Loan; and Agricultural Sector Microfinance.

Disaster Management Programme

Disaster Management Fund (DMF);

b) Livelihood Restoration Programme (LRP) c) Rehabilitation of SIDR affected Coastal Fishery, Small Business and Livestock Enterprise (RESCUE) d) Special Assistance for Housing of SIDR Affected Borrowers (SAHOS) e) Emergency 2007 Flood Restoration and Recovery Assistance Programme (EFRRAP) The Rural Microcredit (RMC) Programme is the oldest and largest programme of PKSF. Under this programme, rural microcredit borrowers undertake income generating activities which are generally family-based. The borrowers may not require any special type of training to undertake these activities. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 3578.03 crore to its POs

g) Programme Initiatives for `Monga' Eradication (PRIME) h) Learning and Innovation Fund to Test New Ideas (LIFT)

4.2

Special Projects

a) Participatory Livestock Development Project-II (PLDP-II); b) Micro-Finance and Technical Support (MFTS); c) Micro-Finance for Marginal and Small Farmers Project (MFMSFP); 138

and revolving the amount the POs have disbursed Tk. 29228.40 crore to the borrowers under this programme. Number of borrowers under this programme is 6.06 million. The potential for rising out of poverty through microcredit is high in urban areas. In this context PKSF is implementing the Urban Microcredit Programme in urban areas, including the metropolitan cities of the country. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 487.26 crore to its POs and revolving the amount the POs have disbursed Tk. 3863.22 crore to the borrowers under this programme. Number of borrowers under this programme is 0.60 million. PKSF has introduced a programme to finance the credit needs of progressive borrowers under a separate umbrella called the Micro-Enterprise Lending (MEL) programme. The current loan ceiling under the programme is Tk. 0.03 crore, which is much higher than the loan ceilings under other programmes. This programme finances not only working capital but also fixed capital, which expands capacity of enterprise. In order to expand and strengthen the existing MEL Programme, PKSF has taken up a project titled "Finance for Enterprise Development and Employment Creation (FEDEC) to strengthen the MEL programme. As of Oct. 2008 the total number of borrowers under this programme is 95123. The expansion of the programme is expected to accelerate over the next couple of years. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 494.76 crore to its POs and revolving the amount the POs have disbursed Tk. 2188.40 crore to the borrowers under this programme. PKSF has always shared the concern of delivering microfinance to the poorest families, who were bypassed by the regular, mainstream microcredit

programme. PKSF launched a pilot project called Financial Services for the Poorest (FSP) in 2002 with the assistance of the World Bank to identify the special needs of the poorest and to find out ways to meet their needs. Based on the experience of FSP, PKSF launched a regular programme for the poorest families ­ called the Ultra Poor Programme ­ in late 2004 following a very flexible approach. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 448.94 crore to its POs ­ revolving the amount the POs have disbursed Tk. 1138.90 crore to the borrowers under this programme. As of July 2008 the total number of borrowers covered under this programme is 0.72 million. Additional support is provided to the ultra poor under a collaborative arrangement between PKSF's Programme Initiatives for `Monga' Eradication (PRIME) and other NGO and Government programmes. The support include (i) lean season employment through the setting up of labor intensive small and cottage industries and investment in local infrastructure; (ii) disaster mitigation and consumption loans; (iii) under PRIME PKSF provides remittance services to its beneficiaries who migrate in other parts of the country through its POs. As of June 2008 a total of 2,122 beneficiaries were helped to transfer Tk. 0.46 crore through different POs free of cost; (iv) other safety-net assistance. PKSF also supports propoor innovations under its Learning and Innovation Fund to Test New Ideas (LIFT). PKSF has taken up a programme in collaboration with the relevant government agencies to send as many as 166 poor people from the `Monga' affected districts for employment abroad. So far 14 people have been sent abroad under the programme. Both PRIME and LIFT are supported by PROSPER project. 139

Seasonal credit, focuses on lending to farmers. Small and marginal farmers have very limited access to credit from banks and tend to be excluded from current microfinance programmes, which target the landless poor. Because of strong links between poverty reduction, agricultural growth and growth of the rural economy, it is important to provide financial services to smallscale and marginal farmers. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 224.70 crore to its POs and revolving the amount the POs have disbursed Tk. 286.15 crore to the borrowers under this programme. Number of borrowers under this programme is 0.08 million. The objective of the PLDP-II and MFTS projects is to reduce poverty by increasing income generating activities and employment for the poor, particularly landless households and households headed by women, through the provision of microfinance and other support services focusing on livestock enterprises. The projects are building individual and community capacities to manage production enterprises; these enterprises consist mostly of livestock related activities, marketing initiatives, supporting input supply services and employment opportunities in the private sector. The implementation of these projects is expected to improve the nutrition status of poor borrowers. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 271.67 crore to its POs and revolving the amount the POs have disbursed Tk. 1060.80 crore to the borrowers under PLDP-II programme. Number of borrowers under this programme is 0.38 million. The MFTS project has made a breakthrough in operating mini-hatcheries through an innovative poultry chain model successfully. This has made it possible to produce day-old chicks in remote areas and help in developing poultry chain activities including pullets, eggs, and broiler chicken. As of Oct. 2008 PKSF disbursed loan amounting 140

to Tk. 159.93 crore to its POs and revolving the amount the POs have disbursed Tk. 855.29 crore to the borrowers under this programme. Number of borrowers under this programme is 0.20 million. The overall goal of the Micro-Finance for Marginal and Small Farmers Project (MFMSFP) project is to raise household income, reduce vulnerability, and improve food security by enabling marginal and small farmers (both men and women) to access and utilize microfinance services in order to invest in existing and new farm and off-farm enterprises. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 115.71 crore to its POs and revolving the amount the POs have disbursed Tk. 317.89 crore to the borrowers under this programme. Number of borrowers under this programme is 0.12 million. Under the RNPPO project, PKSF aims at rehabilitating the non-motorized transport pullers and poor owners who have been affected by the ban to ply non-motorized transports in some roads of Dhaka city. The project has been undertaken for a period of two years. Up to Oct. 2008, PKSF disbursed loan amounting to Tk. 18.17 crore under this project. PKSF now expanding its activities in many fold for poverty alleviation of the country. From experiences, it has been observed that the poor people who are involved in microcredit programmes face difficulties in many cases to go for any income generating activities because of non-availability of electricity. Thus, electricity is an urgent need for development of socio economic condition and living standard of the rural poor along with their participation in income generating activities. In this context, PKSF has undertaken Rural Electrification Development Project (REDP) a

project to facilitate expansion of electric connections to rural poor households. As of Oct. 2008 PKSF disbursed loan amounting to Tk. 4.48 crore to its POs under this project. PKSF has a large disaster management programme to help microcredit borrowers cope with the disasters like floods and cyclones. Under the programme, PKSF has so far disbursed Tk. 271.70 crore. Under the RESCUE programme PKSF has undertaken an initiative to rehabilitate the marginal farmers, shrimp cultivators, fishermen, small business and livestock entrepreneurs, through creating self--employment opportunities for the cyclone affected microcredit borrowers using a government fund of Tk. 130 crore. Up to Oct. 2008, PKSF disbursed Tk. 99.92 crore to the affected borrower through its 32 POs. Under the SAHOS programme PKSF has created a special fund amounting to Tk. 50.00 crore out of its own fund to provide long-term interest free loan to SIDR affected microcredit borrowers to rebuild their houses. Up to Oct. 2008, PKSF disbursed Tk. 37.10 crore as interest free loans to the affected borrowers. PKSF has recently lunched an "Agricultural Sector Microfinance Programme" to help the small and marginal farmers to increase production and thereby raise their socioeconomic conditions. An amount of Tk. 50 crore has been allocated for the programme for FY 2008-09 targeting 60,000 farmers. PKSF has a very strong institutional and capacity building programme for its POs, which includes: training, on-site technical assistance, research, and development of policy guidelines on best practices

for the microcredit sector. As of October 2008, PKSF provided training to 20,500 officials of its POs and 279528 microcredit borrowers. PKSF also implements an institutional development loan programme for its POs to help build and augment their physical facilities. Up to Oct. 2008 PKSF disbursed a cumulative amount of Tk. 24.08 crore under the programme. PKSF's apex-microcredit funding approach has been accepted as a model by policymakers, and practitioners across the globe and the model is being replicated widely. Policy makers and practitioners from different parts of the world take part in the different training and study visits organized by PKSF and its POs. PKSF has promoted the setting up of the Institute of Microfinance (InM) to augment the poverty alleviation role of microcredit through research and training programme. Professor Muhammad Yunus, who has been awarded Nobel Peace Prize 2006, has been a member of the Governing Body of PKSF since its inception in 1990.

4.4

PKSF Funded Micrococredit Program (at a glance)

The summary information of microcredit disbursement, recovery and member enrolment of PKSF funded programme is given in Table 5. 5 Microcredit Programmes Government Agencies of

The Government distributes microcredit through different ministries, departments and agencies. These include the following ministries and their agencies: Ministry of Finance; Ministry of Social Welfare; Ministry of Women and Children Affairs; Ministry of Fisheries and Livestock; Ministry of Industries; Ministry of Textile; Ministry of Agriculture; Local Government Division; Rural Development and Co-operative Division; Ministry 141

of Land; Ministry of Youth and Sports; and Ministry of Liberation War Affairs. Up to December 2006, disbursement was estimated at Tk. 87390.97million and recovered Tk. 73334 million. Some of the major programs are discussed below.

opportunities for the youth of different regions of the country, the Department has leased out 12,717 ponds among youth cooperative societies till March 2008. Up to February 2007, 8137 educated youths were trained through National Youth Center.

5.1

Ministry of Women and Children Affairs

5.3

Department of Social Services

The poverty alleviation programs of the ministry aim to reach the poorest segments e.g. the assetless women and female-headed households develop their capacity and create self-employment opportunities through microcredit. Up to December 2006 under the "Development of Assetless Women Project (FSVGD) phase 2nd, funded by EC (through WFP) 70,074 women were imparted training and Tk. 162.5 million was distributed. A number of 279,999 VGD cardholder women were given income-generating training through this project. Under the project, "Rural Women Employment Creation (2nd phase)", 72000 rural women have received training, credit, and other assistance to develop their productivity, income and sustainable selfemployment.

The Department of Social Services (DSS) has been implementing poverty reduction programs through Rural Social Services (RSS); Urban Community Development (UCD) program; Rural Maternity Center (RMC); and Acid-burnt and physically disabled women in all upzilas and towns. Under these programs revolving funds are used for initial investment and reinvestment. The initial total investment for these three programs amounted to 22.41 million. Under these four programs 2.88 million families have been benefited up to December 2006.

5.4

Poverty Alleviation and Goat Development Project

5.2

Department of Youth Development

The Department of Youth Development (DYD) trained 2.94 million young men and women up to December 2007 under different programs and 1.64 million trained youth have got self-employed. Up to December 2007 a total number of 76599 educated youths has been trained in computer basic courses and graphics design training courses including internet and networking conducted across the country through 70 centers. Up to March 2008 Tk. 7902.4 million has been disbursed among 0.74 million youth. To accelerate self-employment 142

Local Black Bengal goat is one of the most important animal resources. Eighty percent of the total goat populations in the country are reared by the rural poor. Government has taken a national program on "poverty alleviation by goat rearing" in consideration of its economic and social importance for poverty alleviation, selfemployment, enhancing supply of nutritions and expanding export industries on leather and meat processing. A Five-Year (2002-03 to 2006-07) Action Plan has been formulated by a task force comprising representatives from both government and non-government organizations for implementation of this program all over the country. It is noteworthy that the contribution of this animal resource to our national economy is

about Tk. 5040.48 million per year. Consequently, the existing number of 14.8-million goat population is expected to increase to 53.33 million during next 5 years according to the Action Plan target. Under this programme, 99,300 goat farmers of 440 upazilas through out the countries got training on goat rearing up to January 2007 and Tk. 32.97 million was disbursed as microcredit among 50,523 beneficiaries

6

Microcredit Programme of Grameen Bank

5.5

Ministry of Industries

Bangladesh Small and Cottage Industries Corporation (BSCIC), under the Ministry of Industries, implements a microcredit program targeting small and woman entrepreneurs and the cumulative disbursement up to December 2006 is Tk. 2419.5 million.

Though this bank was established in 1983 by an ordinance, it started its activities in 1976 as an experimental project. Later it expanded the operation by organizing the assetless people and providing them credit support for income generation and capital and asset building. An amount of Tk. 397,218.20 million has been disbursed as credit by August 2008 to about 7.57 million members through 2529 branches. The amount of recovery is Tk. 356, 544.37 million during this period. The bank's operation reached 82,994 villages in the country. Grameen Bank members had saved more than Tk. 56, 011.64 million in their savings accounts. With housing loans Grameen borrowers have built 659,734 houses. Grameen model has been replicated in several countries around the globe. 7 Microcredit Programmes of Bangladesh Rural Development Board (BRDB)

5.6

Ministry of Labour and Employment

Under an agreement between the Ministry of Labour and Employment and Karmasangthan Bank, Karmasanghtan Bank is implementing the programme for alleviation of poverty of voluntarily retired/retrenched industrial workers by creating employment opportunities and retraining. Tk. 1745 crore and Tk. 23.60 crore were allotted for FY2004-05 and FY2005-06 respectively. Under this programme, up to June 2007, Tk. 51.12 crore was disbursed among 9642 borrowers. During the same period Tk. 19.08 crore was recovered against recoverable amount of Tk. 31.37 crore (recovery rate 61%). The fund is being used as revolving fund for this purpose as per agreement.

BRDB has been working in the field of rural development, especially, towards poverty alleviation through cooperatives and non-formal group network throughout the country with the financial and technical support of the Government of Bangladesh and development partners. The target groups of the program include small farmers (holding up to 0.50 acre of land), and assetless women and men. Family planning, health and education programs are also included in the credit and training activities. Up to December 2007, 43.67 million members under 163737 societies have borrowed Tk. 59422.7 million, of which, Tk. 55263.11 million has been recovered, the recovery rate is 93 percent. The projects implemented for poverty alleviation (with microcredit component) 143

notably: (1) Rural Livelihood Project in 152 upazilas, (2) Palli Progati Prakalpa in 477 upazilas, (3) Integrated Poverty Alleviation Programme in 446 upazilas, (4) Women Development Project in 100 upazilas, (5) Minor-crop production, preservation, processing and marketing programme in 204 upazilas. 8 Microcredit Programmes of Three Big Microfinance NGOs

PROSHIKA activities have been expanded to 519 new villages, 6 slum, 54 unions 11 upazials and 1 urban thana during 2006-2007. Up to July-2008 PROSHIKA disbursed Tk. 38785.59 million. Total number of borrower is 1.73 million. 9 Microcredit Programmes Nationalised Commercial Banks of

BRAC: Established mainly for relief and rehabilitation activities in 1972, BRAC is, at present, operating in a range of areas such as credit disbursement, non-formal education for both children and adults, primary health care, legal counseling on women rights and so on. Up to July 2008, cumulative credit disbursement and recovery Tk. 202381.58 million and Tk. 180529.24. Total number of borrower is 7.02 million (female 99 percent), working area is in 509 upazilas of 64 districts, and the recovery rate is 98.25 percent. The amount of savings of the beneficiary groups is Tk. 15115.14 million up to July 2008. ASA: ASA has been operating microcredit program since 1992. The cumulative credit disbursement and recovery are Tk. 257338.52 million and Tk. 229381.41 million respectively up to July 2008. The recovery rate is 99.48 percent. The number of borrowers is 5.73 million of which 82.92 percent are women. PROSHIKA: Established in 1976, PROSHIKA has been carrying out a range of activities like, credit support, fisheries and livestock development, sericulture development, irrigation, health and nutrition, installation and distribution of tube wells, eco-friendly agriculture, social forestry, housing programme etc. 144

Up to December 2007 4 Nationalised Commercial Banks (NCBs) and 2 Public Specialized Banks has disbursed Tk. 125029.3 million and recovered Tk. 122558.2 million among 256256 beneficiaries. The recovery rate was 99.79 percent (Table 6). 10 Microcredit Programmes of Other Commercial and Specialised Banks

Other commercial and specialized banks are also continuing microcredit programmes to alleviate poverty and create self-employment side by side with nationalized commercial banks. Up to December 2007 the total number of beneficiaries was 1579216 and the cumulative disbursement of credit was Tk. 30100.3 million. Some disaggregated data up to June-2007 in Table 7. 11 Activities of Borrowers-financed by Microcredit Institution in Bangladesh

Of the various employment activities (mainly selfemployment), small-scale business/trade is the most important, accounting for more than 40% of fund disbursed by the MFIs. On the other hand agriculture, food processing, transport, housing and livestock sectors were getting relatively small portions of fund. This is shown in Table 8. The table 8 shows that a transformation is taking place in the economic activities of the poor households in the rural areas. In the initial years of

microcredit operation during eighties, the traditional sector including fisheries and poultry accounted for a larger segment of self-employment activities of the poor. BIDS surveys conducted during 1997 to 2000 on PKSF funded MFIs, show the predominance of small-scale trade and lately medium and large-scale trading has assumed prominence. There are, however, some weaknesses of the nonfarm sector; many of its activities are unable to accommodate a workforce round the year and also over a period of two or more years (BIDS, 2001). This aspect combined with the market constraints to the expansion of self-employment has prompted the efforts of MFIs to finance microenterprises for the borrowers graduating form income generating activities (IGAs). 12 Impact of Microfinance Programme

A recent study conducted by Atiur et al. (2005) supports the findings of the earlier studies. The study finds that the total household income of microcredit borrowers of PKSF POs has shown a secular growth ranging from 2.8% to as high as 12.2% per annum during the periods from 19772004. The study observed that though nonparticipants had the highest average household income at the outset, participants due to successful interventions of microfinance institutions gradually surpassed them.

12.2

Social Impact

The microcredit programme of PKSF has benefited the poor in more than one way. The programme has strengthened their subsistence through the diversification and strengthening of their survival strategies; enhanced their security by giving them access to assets and rights and augmented their self-respect by providing them choice and independence. The microcredit programme has empowered women and raised their socio-economic status.

Measuring social impact in terms of living conditions (structure of homestead), access to basic services (water and sanitation), health (mode of treatment, expenditure), education (schooling of children), and assets, the study by Atiur et al. (2005) found that microcredit intervention has a positive impact. Some of the earlier studies mentioned in Table-4 also found positive social impacts from microcredit programme.

12.3

Empowerment

12.1

Income

A number of studies conducted in Bangladesh in the 1980s and 1990s on the impact of microcredit programmes highlight the fact that access to microcredit results in an increase in income/ consumption. The results from a few of the studies are shown in Table 1. The table shows that the increase in income/expenditure as a result of MFI participation ranges from 11 to 40 per cent.

Atiur et al. (2005) measured empowerment using the following eight indicators: (i) mobility; (ii) awareness; (iii) decision to spend income; (iv) ability to make small purchases; (v) ability to make large purchases; (vi) involvement in making important household decisions; (vii) relative freedom from domination by the family; and (viii) political awareness. They find that women participating in microcredit programme are significantly empowered with reference to all the indicators. Analysing primary field data, Simeen Mahmud (2004) found a positive impact on women's welfare from microcredit programmes. Hashemi et al (1996), and Kabeer (1998) found that microcredit 145

programmes have a positive impact on women's empowerment. The UN Human Development Report 2005, while explaining Bangladesh's moderate growth and rapid human development, records the role of microcredit in women's empowerment in the following ways: Improved access to health and education for women, allied with expanded opportunities for employment and access to microcredit, has expanded choice and empowered women. While disparities still exist, women have become increasingly powerful catalysts for development, demanding greater control over fertility and birth spacing, education for their daughters, and access to services.

· Spillover effects among non-participants due to growing economic activity: Microfinance reduced poverty among this group by some 1.0 percentage points annually for moderate poverty and 1.3 percent annually for extreme poverty. Based on his data, Khandker concluded that microfinance accounted for 40 percent of the entire reduction of moderate poverty in rural Bangladesh. Atiur et al. (2005) in their study found that between 1998 and 2004, the head count ratio for eligible (target) regular programme participants fell by 10 percentage points (from 78.5 percent to 68.3 percent) as against of 5 percentage points for eligible households (from 75 percent to 70 percent) that never participated in microfinance. The households that left microfinance between 1998 and 2000, (and never rejoined) appeared to have performed best in terms of reduced poverty incidence and poverty gap ratio. This might suggest sustained positive impact of microcredit programmes. 13 Conclusion

12.4

Impact on Poverty

Khandker (2005), a World Bank researcher whose study spans 14 years, was able to draw from research done in 1991/92 and again in 1998/99 by the World Bank and the Bangladesh Institute of Development Studies. Khandker found : · Moderate poverty in all villages declined by 17 percentage points, 18 points in programme areas and 13 percentage points in non-programme areas. · Poverty declined by greater than 20 percent for programme participants who had been members since 1991/92, which is about three percentage points per year. Greater than half of this reduction is directly attributable to microfinance. · The impact was greater on extreme poverty than moderate poverty. 146

PKSF is committed to realizing the full range of benefit that microcredit can provide and to reaching as many people with those benefits as possible. In this context, PKSF will focus on both expansion and diversification of its microfinance program. PKSF's loan disbursement, it may be mentioned, was Tk. 692.61 crore in FY 2005-06, which has been increased to Tk. 1408.08 crore in FY 2007-08. The budget for the current year (FY 2008-09) is Tk. 2223.5 crore. This trend of increase will continue in future as well. References 1 Halder, S. R. (1998), "Social and Material

Well-being of the Participants", Poverty Alleviation and Empowerment (ed) A. M. M. Husain, BRAC, 1998. 2 Hashemi, S. M., S R Schuler and A. P. Riley (1996) `Rural credit programmes and women's empowerment in Bangladesh', World Development, Vol. 24 (4):635-653. 3 Hossain, M. (1984), "Credit for the Rural Poor: The Experience of Grameen Bank in Bangladesh", Research Monograph No. 4, BIDS, Dhaka. 4 Hossain, M. (1988), Credit for alleviation of rural poverty: the Grameen Bank in Bangladesh, Research Report 65, International Food Policy Research Institute, Washington, D.C. 5 Impact Monitoring and Evaluation Cell, Proshika (IMEC, PK), 1995: "Impact Assessment Survey Report", Proshika Manobika nnayan Kendra. 6 Impact Monitoring and Evaluation Cell, Proshika (IMEC, PK), 1999: "Impact Assessment Survey Report", Proshika Manobika nnayan Kendra. 7 Kabeer, N. (1998) "Money Can't Buy Me Love" Re-evaluating Gender, Credit and

Empowerment in Rural Bangladesh. Discussion Paper 363, IDS, Sussex. 8 Khandker, Shahidur R. (1998), Fighting Poverty with Microcredit. Experience in Bangladesh, OUP, New York. 9 Khandker, Shahidur R., "Microfinance and Poverty: Evidence Using Panel Data from Bangladesh." World Bank Economic Review, Volume 19, Issue 2, 2005. 10 Mahmud, Simeen (2004), "Microcredit and Women's Empowerment in Bangladesh" in Attacking Poverty with Microcredit (eds.) Salehuddin Ahmed and M. A. Hakim, UPL, Dhaka, 2004. 11 Rahman, Atiur; M A Razzaque; Nigar Nargis; M Ismail Hossain; Mahbuba Nasreen; Asadul Islam; PK Motiur Rahman; MA Momin (2005), PKSF Follow up Monitoring and Evaluation System (MES) Study, HB Consultants Limited, Dhaka, September, 2005. 12 Rahman, R. I. (1996), "Poverty, Profitability of Microenterprises and the Role of Credit" in Who Needs Credit? Poverty and Finance in Bangladesh (eds.) G.D. Wood and I.A. Sharif, UPL, Dhaka.

147

Table 1 : Disaggregated Statistics on Member of Microfinance-NGOs(As of December 2007)

Items 2007 (N=537) 17,834,780 3,234,642 21,069,422 2,309,998 551,608 2,861,606 20,144,778 3,786,250 23,931,028 2006 (N=611) 14,589,563 3,290,598 17,880,161 1,997,511 634,194 2,631,705 16,587,074 3,924,792 20,511,866 2005 (N=690) 13,267,861 3,174,581 16,442,442 1,752,267 599,281 2,351,548 15,020,128 3,773,862 18,793,990 2004 (N=721) 12,808,688 1,823,573 14,632,261 1,756,378 233,408 1,989,786 14,565,066 2,056,981 16,622,047 2003 (N=720) 10,560,252 2,245,350 12,805,602 1,526,768 298,575 1,825,343 12,087,020 2,543,925 14,630,945 2002 (N=656) 9,575,096 1,714,340 11,289,436 1,388,044 183,135 1,571,179 10,963,140 1,897,475 12,860,615 2001 (N=629) 9,408,258 1,725,547 11,133,805 1,154,477 159,341 1,313,818 10,562,735 1,884,888 12,447,623

Rural Areas

Women Men Sub-Total Urban Women Areas Men Sub-Total Total Women Men Total

Source :Microfinance statistics, CDF, Institute of Microfinance, Vol. 20, 2007 (to be published in February 2009)

Table 2 : Percentage Distribution of Groups of Microfinance-NGOs (As of December 2007) (in percentage)

Items 2007 (N=537) 78.69 8.76 87.45 11.40 1.15 12.55 90.09 9.91 100 2006 (N=611) 78.67 9.78 88.46 10.25 1.29 11.54 88.93 11.07 100 2005 (N=690) 75.29 10.44 85.73 12.98 1.29 14.27 86.27 11.73 100 2004 (N=721) 74.14 11.93 86.07 12.52 1.40 13.93 86.66 13.34 100 2003 (N=720) 72.09 14.9 87 11.1 1.9 13 83.19 16.81 100 2002 (N=656) 73.5 14.04 87.55 10.88 1.57 12.45 84.38 15.62 100 2001 (N=629) 72.42 15.54 88.22 10.45 1.6 12.06 82.86 17.14 100

Women Men Sub-Total Urban Women Areas Men Sub-Total Total Women Men Total

Rural Areas

Source :Microfinance statistics, CDF, Institute of Microfinance, Vol. 20, 2007 (to be published in February 2009)

148

Table 3 : Disaggregated Statistics on Loan Disbursement and Recovery by Microfinance-NGOs

Type Dec.2007 (N=537) Dec.2006 (N=611) Dec.2005 (N=690) Dec.2004 (N=721) Dec.2003 (N=720) Dec. 2002 Dec.2001 (N=656) (N=629) Dec.2000 (585)

A. Rural Areas A1 Women i Cumulative Disbursement 555,568.36 421,045.24 328,152.16 267,562.15 209,025.35 167,047.21 133,301.80 101,846.48 ii Cumulative Realizable amount 488,112.89 372,247.68 293,453.34 236,331.36 183,512.34 146,327.79 116,268.20 86,398.26 iii Cumulative realized amount iv Outstanding loan v Overdue vi Past due A2 Men i Cumulative Disbursement ii Cumulative Realizable amount iii Cumulative realized amount iv Outstanding loan v Overdue vi Past due 484,688.89 369,435.35 291,234.86 233,958.89 181,335.76 143,936.94 114,350.48 70,879.46 51,609.88 36,917.30 33,591.81 26,756.15 22,059.22 18,946.07 940.21 746.31 638.44 2,228.71 861.964 1,086.81 898.716 1,420.23 723.66 579.01 660.33 631.92 784.801 1,476.61 85,501.51 16,278.60 1,299.09 -

70,449.70 59,289.02 58,192.30 12,257.40 356.82 249.46

53,644.19 43,663.96 42,742.98 10,901.21 329.46 160.21

42,396.43 32,398.36 31,448.17 10,948.27 329.13 123.31

26,482.89 23,222.43 22,284.16 4,216.07 234.68 80.42

28,013.26 24,833.09 23,907.49 4,110.57 405.606 154.788

19,540.64 17,095.82 16,038.44 3,494.91 403.094 100.548

15,381.87 13,112.09 11,802.34 3,577.81 566.327 799.77

13,959.77 11,389.80 10,760.26 3,265.88 709.958 -

A3 Sub-total i Cumulative Disbursement 626,018.06 474,689.43 370,548.59 294,045.05 237,082.55 186,587.85 149,097.34 115,806.25 ii Cumulative Realizable amount 547,401.91 415,911.64 325,851.70 259,553.79 208,436.79 163,423.61 129,380.29 97,788.06 iii Cumulative realized amount 542,881.20 412,178.33 322,683.03 256,243.04 205,332.66 159,975.37 126,489.75 96,261.77 iv Outstanding loan (i-iii) 83,136.86 62,511.09 47,865.56 37,807.88 30,837.17 25,554.13 22,607.63 19,544.48 v Overdue (ii-iii) 1,297.03 1,075.76 967.57 2,463.39 1,266.94 1,489.90 1,486.81 2,009.05 vi Past due 1,669.69 883.87 703.32 740.74 787.79 885.35 2,281.68 B. Urban Areas B1 Women i Cumulative Disbursement ii Cumulative Realizable amount iii Cumulative realized amount iv Outstanding loan v Overdue vi Past due B2 Men i Cumulative Disbursement ii Cumulative Realizable amount iii Cumulative realized amount iv Outstanding loan v Overdue vi Past due

93,438.21 81,825.85 81,322.51 12,115.70 146.03 157.55

71,395.16 62,712.04 62,287.72 9,107.44 100.38 90.47

53,498.75 46,900.40 46,581.53 6,913.22 73.35 52.34

39,702.55 34,235.23 34,010.28 5,689.81 284.55 63.11

27,640.68 22,838.62 22,900.13 4,750.25 47.35 36.42

19,775.27 16,031.62 15,781.07 3,995.68 36.21 33.52

13,431.10 10,622.86 10,480.72 2,881.53 34.34 73.50

8,681.29 6,692.82 6,585.35 2,095.97 49.02 -

12,867.29 11,136.73 11,029.19 1,838.11 23.56 34.55

9,592.09 8,144.40 8,034.26 1,557.83 17.08 16.49

7,183.16 6,327.14 6,280.73 902.43 10.36 10.40

4,888.05 4,096.43 4,038.94 848.96 24.17 17.22

4,792.79 4,163.36 3,923.58 876.56 8.67 14.35

2,255.93 1,870.99 1,815.35 438.30 4.51 2.95

1,656.16 1,341.04 1,266.68 350.44 2.26 6.80

1,120.07 860.24 857.02 263.02 28.10 -

B3 Sub-total i Cumulative Disbursement 106,305.50 ii Cumulative Realizable amount 92,962.57 iii Cumulative realized amount 92,351.69

80,987.25 70,856.44 70,321.98

60,681.91 53,227.54 52,866.26

44,590.60 38,331.66 38,049.22

32,389.53 26,910.61 26,734.31

22,031.20 17,902.61 17,596.42

15,164.33 11,963.90 11,892.14

9,801.36 7,553.06 7,442.37

149

iv Outstanding loan v Overdue vi Past due C. Total

13,953.81 169.59 192.10

10,665.27 117.46 106.97

7,815.65 83.71 62.74

6,538.78 308.72 80.33

5,656.36 56.65 49.68

4,433.99 40.73 36.46

3,272.19 36.77 81.14

2,358.99 77.12 -

C1 Women i Cumulative Disbursement 649,006.57 492,440.39 381,650.91 307,264.70 236,666.03 186,822.49 146,732.89 110,527.77 ii Cumulative Realizable amount 569,938.74 434,959.72 340,353.74 270,566.59 206,350.95 162,359.41 126,891.06 93,091.08 iii Cumulative realized amount 566,011.40 431,723.07 337,816.39 267,969.16 204,235.89 159,718.01 124,831.20 92,086.86 iv Outstanding loan 82,995.16 60,717.32 43,830.52 39,281.62 31,506.40 26,054.91 21,827.60 18,374.57 v Overdue 1,086.24 846.69 711.79 2,513.26 909.32 1,123.02 933.06 1,348.11 vi Cumulative past due 1,577.78 814.14 631.35 723.44 668.34 818.32 1,550.11 C2 Men i Cumulative Disbursement ii Cumulative Realizable amount iii Cumulative realized amount iv Outstanding loan v Overdue vi Past due

83,316.99 70,425.75 69,221.49 14,095.51 380.38 284.01

63,236.28 51,808.36 50,777.24 12,459.04 346.54 176.70

49,579.59 38,725.50 37,728.90 11,850.70 339.49 133.71

31,370.94 27,318.86 26,323.10 5,065.03 258.85 97.64

32,806.05 28,996.45 27,831.07 4,987.13 414.28 169.13

21,796.56 18,966.82 17,853.79 3,933.21 407.61 103.50

17,038.02 14,453.13 13,069.01 3,928.25 568.59 806.57

15,079.84 12,250.04 11,617.28 3,528.90 738.06 -

C3 Sub-total i Cumulative Disbursement 732,323.56 555,676.68 431,230.50 338,635.64 269,472.08 208,619.05 164,261.67 125,607.61 ii Cumulative Realizable amount 640,364.48 486,768.08 379,079.24 297,885.45 235,347.40 181,326.22 141,344.18 105,341.12 iii Cumulative realized amount 635,232.89 482,500.31 375,549.29 294,292.26 232,066.97 177,571.79 138,381.90 103,704.14 iv Outstanding loan 97,090.67 73,176.37 55,681.21 44,346.65 36,493.53 29,988.12 25,879.82 21,903.47 v Overdue 1,466.62 1,193.23 1,051.28 2,772.12 1,323.59 1,530.63 1,523.58 2,086.16 vi Past due 1,861.79 990.84 765.06 821.08 837.48 921.81 2,362.82 Source : Microfinance statistics, CDF, Institute of Microfinance, Vol. 20, 2007 (to be published in February 2009) Note : 1)Cumulative figure since beganing, 2)By and large, it covers the entire microcredit sector including major players like, all PKSF partners (BRACK, ASA, PROSHOKA among others), Grameen Bank, BRDB, Commercial and specialized Banks, different Ministries and Govt. Departments/Agencies

150

Table 4 : Percentage Distribution member of Microfinance-NGOs (As of December 2007) (percentage)

Items 2007 (N=537) 74.53 13.52 88.04 9.65 2.30 11.96 84.18 15.82 100 2006 (N=611) 71.13 16.04 87.17 9.74 3.09 12.83 80.87 19.13 100 2005 (N=690) 70.60 16.89 87.49 9.32 3.19 12.51 79.92 20.08 100 2004 (N=721) 77.06 10.97 88.03 10.57 1.40 11.97 87.62 12.38 100.00 2003 (N=720) 72.18 15.35 87.52 10.44 2.04 12.48 82.61 17.39 100 2002 (N=656) 74.45 13.36 87.98 10.82 1.42 12.24 85.24 14.75 100 2001 (N=629) 75.58 13.86 89.45 9.27 1.28 10.55 84.86 15.14 100

Women Men Sub-Total Urban Women Areas Men Sub-Total Total Women Men Total

Rural Areas

Source : Microfinance statistics, CDF, Institute of Microfinance, Vol. 20, 2007 (to be published in February 2009)

Table 5 : Microcredit Programs of PKSFat a Glance: Up to October-2008 (Tk. in million)

Name of Component PKSF-POs Cum Cum Disbursment Recovery a) Rural Microcredit (RMC) b) Urban Microcredit (UMC) c) Micro-Enterprise Lending (MEL) d) Ultra Poor (UP) Programme e) Seasonal Loan Sub Total Special Projects: a) Participatory Livestock Development Project-II (PLDP-II) b) Micro-Finance and Technical Support (MFTS) c) Micro-Finance for Marginal and Small Farmers Project (MFMSFP) d) Rehabilitation of Non-Motorized Transport Pullers and Poor Owners (RNPPO) Project e) Rural Electrification Development Project (REDP) Disaster Management Programme: a) Disaster Management Fund (DMF) b) Livelihood Restoration 35780.2 4872.6 4947.6 4489.4 2247.0 52336.8 22419.7 2369.3 2345.2 2706.2 1463.4 31303.8 POs-Borrowers* OutstCum Cum Outstanding Present anding Disbursement Recovery Loan Borrower 13360.5 2503.3 2602.4 1783.2 783.6 21033 292284.0 38632.2 21884.0 11389.0 2861.5 367050.7 265811.9 34326.9 18363.6 9390.4 1916.8 329809.6 26472.1 4305.3 3520.4 1998.6 944.7 37241.1 6055599 605826 95123 722752 84675 7563975

2716.7 1599.3 1157.1 181.7

1430.4 844.0 342.5 0

1286.3 755.3 814.6 181.7

10608.0 8551.1 3178.9 203.7

8746.8 7322.9 2261.0 61.3

1861.2 1228.2 917.8 142.4

376316 191925 119600 15313

44.8

03.9

40.9

50.3

16.0

34.3

7314

51.8 803.3

40.8 382.3

11.0 421.0

52.9 825.5

48.7 659.2

04.2 166.3

6574 142279

151

Programme (LRP) c) Rehabilitation of SIDR affected Coastal Fishery, Small Business and Livestock Enterpris (RESCUE) d) Special Assistance for Housing of SIDR Affected Borrowers (SAHOS) Sub Total Total

999.2

0

999.2

885.2

141.7

743.5

107678

371.0

45.5

325.5

320.0

44.4

275.6

46511

7924.9 60261.7

3089,4 34393.2

4835.5 25868.5

24675.6 391726.3

19302 349111.6

5373.5 42614.6

1013510 8577485

*PKSF has disbursed loan amounting to Tk. 60261.7 million to its POs. Revolving the amount the POs have disbursed Tk. 391726.3 million to poor borrowers.

Table 6 : Status of Micro-Credit Disbursement of Nationalised Schedules Banks (Tk in crore) Banks Cumulative up 2006-07 to June 2007

6542.35 6972.52 106.58 5051947 1838.46 1899.03 103.29 2644.65 2189.4 82.79 1181772 1152.77 960.57 83.33 1685747 253.36 183.89 72.58 289176 71.34 50.41 70.66 47614 410.02 677.00 165.11 199190

2005-06

2004-05

2003-04

2002-03

Disbursement Recovery Rate of recovery (%) No. of beneficiaries Disbursement Recovery Rate of recovery (%) No. of beneficiaries Disbursement Recovery Rate of recovery (%) No. of beneficiaries Disbursement Recovery Rate of recovery (%) No. of beneficiaries Disbursement Recovery Rate of recovery (%) No. of beneficiaries Disbursement Recovery Rate of recovery (%) No. of beneficiaries Total

Sonali Bank 456.62 485.90 486.37 425.06 106.52 87.48 201841 189560 Agrani Bank 210.60 182.07 100.34 268.39 212.09 97.47 127.44 116.49 97.14 104387 42435 Janata Bank 290.16 193.75 193.75 249.81 106.54 106.54 86.09 54.99 54.99 145080 100073 101220 Bangladesh Krishi Bank 54.51 57.02 58.86 51.84 43.24 37.27 95.10 75.83 63.32 52028 50083 59117 Rajshahi Krishi Unnyan Bank 15.01 29.23 30.73 12.85 21.25 1453 85.61 72.70 47.28 16634 30033 47834 Rupali Bank Ltd. 11.02 16.09 15.28 11.95 10.15 5.27 108.44 63.08 34.49 2804 5431 5402

460.18 547.79 119.04 44.08 51.65 117.17 23099 227.47 163.52 71.89 129908 68.16 46.6 68.37 60987 17.97 12.47 69.39 18597 5.17 2.05 39.65 2427

361.57 434.7 120.23 45.89 43.72 95.27 22160 126.1 120.9 95.88 97000 93.58 98 104.72 80289 13.64 13.47 98.75 11234 2.24 0.82 36.61 2188

152

Disbursement Recovery Rate of recovery (%) No. of beneficiaries

12502.93 12255.82 98.02 8256256

991.32 1271.8 128.30 415736

934.78 879.64 94.10 491848

884.86 688.14 77.54 445568

823.03 824.08 100.13 235018

643.02 711.61 110.67 212871

Source : Bangladesh Economic Review 2007

Table 7 : Microcredit Programs of other Commercial and Specialized Banks (Tk. in crore) Commercial and Specialized Banks Female

Ansar-VDP Development Bank Social Investment Bank Ltd. National Bank Ltd. Islami Bank Ltd. The Trust Bank Ltd. BASIC Bank Ltd. Pubali Bank Total 446380 23818 1085 429778 11 243828 11640 1156540

Number Mf Beneficiaries Male

147827 6332 42536 37372 10353 43505 287925

Disbursement up to June 2007

705.20 66.36 55.11 1396.90 208.75 130.68 8.60 2571.58

Rate of Recovery

95.20 97.00 96.00 99.00 89.50 100.00 100.00

Total

594207 30150 43621 467150 10364 287333 11640 1444465

Source : Bangladesh Economic Review 2007

Table 8 : Sub-sector-wise microfinance disbursement of NGO-MFIs

F. Utilization of Loan by Sector/Sub-sector (per centof Cumulative Disbursement) A. Directly Productive Activities A1. Agricultural Sector i) Crops ii) Livestock iii) Fisheries A2. Processing and Industries Sector i) Food processing ii) Cottage Industries B. Trade and Communication Sectors i) Small Business ii) Transport C. Social Sectors i) Health ii) Education iii) Housing D. Others Total 2006 2005 (N=611) (N=283) 31.87 26.28 9.84 13.12 3.32 5.59 3.72 1.87 45.16 42.65 2.51 2.02 0.73 0.18 1.11 20.95 100 32.40 24.63 7.57 13.77 3.29 7.77 4.78 2.99 43.18 40.47 2.71 2.15 0.77 0.25 1.14 22.27 100.00 2004 (N=379) 34.22 27.94 10.25 14.06 3.63 6.28 3.40 2.88 42.81 40.61 2.20 1.70 0.44 0.06 1.20 21.27 100.00 2003 (N=442) 36.20 29.70 9.08 16.29 4.33 6.05 3.60 2.90 50.85 48.60 2.25 1.58 0.45 0.04 1.09 11.37 100.00 2002 (N=523) 41.51 35.31 12.74 17.73 4.84 6.20 3.39 2.81 46.64 44.49 2.15 1.41 0.39 0.05 0.97 10.42 100.00 2001 (N=489) 41.78 34.98 12.41 17.64 4.93 6.80 3.85 2.95 45.59 42.85 2.74 1.76 0.42 0.11 1.23 10.87 100.00

Sources : CDF Microfinance Statistics, Volume 19, December 2006

153

Table 9 : Impact of MC on Household Income/Expenditure

Source Income/expenditure per annum (Tk.) Project (P) Control (C) Per cent change (P-C) x 100 C 30.9 39.9 27.2 10.9 23.3 16.5 27.2 11.6

Hossain 1984 Hossain 1988 IMEC 1995 Rahman 1996 Khandker 1998 Khandker 1998 Halder 1998 IMEC 1999

Income, per capita Income, per capita Income, per household Expenditure, per household Expenditure, per capita Expenditure, per capita Expenditure, per capita Income, per household

1762 3524 22244 26390 5180 5050 8244 48635

1346 2523 17482 23802 4202 4335 6480 43584

Note: Results across studies are not comparable, because of variations in methodology and the areas covered.

154

Annexure 6.1.10

COORDINATION FOR GOVERNANCE AT LOCAL LEVEL : EXPERIENCE OF BANGLADESH

Dr Swapan Kumar Dasgupta

1 Introduction Simon, 1958; Thompson, 1967). To minimize the problem of coordination there are four principles for grouping positions in an organization for optimal efficiency and economy: by process, by purpose, by client and by place (Gulick, 1973). 3 Organizational Management Approach of Coordination :

Coordination refers to matching available development supports/services/resources with the real needs of their recipients through interaction among all stakeholders. In other words, coordination refers to harmoniously combined efforts to achieve stated objectives. Willingly offered cooperation is the basis of coordination. Coordination is a matter of motivation and psychology. Coordination keeps various parts of programs in proper relationship to each other (Dimock and Dimock, 1969). Every increase in the size of the operation of a program magnifies the problem of coordination. Productivity becomes limited without coordination among the components of the over-all operation. Coordination belongs to the domain of organization theorists. It has two approaches: the development administration approach and the organizational management approach. 2 Development Administration Approach of Coordination :

According to the organizational management approach, there are intra-organization and interorganization coordination. Both may be horizontal and vertical. Horizontal coordination establishes inter-relationships between one employee and another, between one section and another, between one branch and another, between one division and another and between, one department and another. Vertical coordination is established between one employee and his superior, between a superior and his next superior, and so on, and between one section and a branch, between a branch and a division, and so on. 4 Needs for Coordination

According to the development administration approach, coordination is the orderly arrangement of group efforts to provide unity of action in the pursuit of a common purpose (Mooney, 1963). There are three types of coordination: coordination by standardization, coordination by plan, and coordination by mutual adjustment (March and

Coordination is needed not only to ensure teamwork and cooperation but also prevent conflicts that may arise due to : a) ignorance of the employees, or units, of each others activities; b) a tendency among persons in charge of particular functions and activities to regard their own desk as all-important, unmindful of the needs 155

of others and make encroachments on the latter's sphere of activities; and c) a growing tendency toward greed for power among different units of an organization. No organization, however competent its staff is, can achieve the desired objective without necessary coordination. Intra-organization and interorganization coordination both are necessary vertically and horizontally at all levels of administrative hierarchy from the top to bottom (Bhagwan and Bhushan, 1990) to achieve the desired objectives and thus, the goal. 5 Governance

In the global perspective, transparency refers to the frequency with which economic data are published in countries (Islam, 2003). In the national perspective it refers to the frequency of publicity of the economic and financial policy and data. At the local level, transparency implies the provision of relevant and reliable information to all (Manasan et al. 1999). In other words, transparency is making all information available to all. Transparency comprises all means of facilitating the citizen's access to infor mation and also his/her understanding of decision-making mechanisms (UNDP, 2003). Accountability has political, administrative, legal and moral dimensions, which form a rather complex web relying on clear rules of transparency, and on the threat of sanctions in case of non-compliance (Schneider, 1999). Accountability implies being answerable to people and government for policies and actions. There are several definitions of `accountability': "the ability to call public officials and private employers to account, requiring that they are answerable for their policies, actions, and fund use to beneficiaries" (World Bank, 2002); "accountability is not only beneficiaries a say in official decisions but also the right to hold relevant officials to account" (UNDP, 2002); "accountability is the ability of the villagers to exert pressure on field workers to serve" (Manasan et al. 1999). The concept of `participation' emerged against the failure of traditional `top-down' governance of development projects in less developed countries (Brett, 2003). Thematically `participation' refers to the close involvement of people from all walks of life irrespective of sex, race, group, caste, color, and religion in economic, social, cultural, and political decision-making process of an area (UNDP, 1993).

Governance denotes "how people are ruled, how the affairs of the state are administered and regulated as well as a nation's system of politics and how these function in relation to public administration and law". In other words, governance is "the manner in which power is exercised in the management of a country's ecological and social resources for development" (Aminuzzaman, 2006:12). 6 Good Governance

Good governance is proper exercise of power, rules and regulations in the management and allocation of development supports and services in favor of those who really need them. Good governance has institutional dimension, legal dimension and development dimension. This paper addresses development dimension of the good governance under the given condition of the institutional and legal dimensions. Theoretically, transparency, accountability, participation and integrity in the management and allocation of development supports and services are the major four principles of good governance at all levels of every organization (Blair, 1998 and 2000). 156

Generally, participation refers to close involvement of people in the activities like identification of problem, planning for solution of the problem, implementation of the plan, monitoring of the progress of plan implementation, and impact evaluation of the implemented plan. Thus, `participation' is the process through which stakeholder influence and share control over priority setting, policy-making, resource allocation and access to public goods and services (World Bank, 2002). The first World Ethics forum, held in Oxford during 9-12 April, 2006 concluded that integrity is the missing link in good governance. Poor governance and corruption of the developing countries can be overcome through accelerating ethics and integrity in leadership. Integrity refers to stakeholders' incorruptibility, sincerity and utilization of full potential in work. Thus, integrity is synonymous to the honesty. Integrity is not an end in itself rather a path leading to the effective delivery of development services. Academics and international community frequently opine that lack of good governance results, among others, in the misuse or misallocation of resources, leads to inefficiency, waste, corruption and injustice, violation of human rights, political discontent and social unrest. All those are responsible for endemic poverty, low economic growth and underdevelopment in the rural areas of many developing countries. Therefore, during the last decade academics, UN agencies and international development agencies of the developed countries have been advocating for the establishment of good governance at all levels of central and local governments of Bangladesh. Establishment of good governance in the management and allocation of rural

development supports and services has become a sincere demand of the civil societies and mass people too in Bangladesh. 7 Local Level

In this paper, local refers to rural areas. In the context of Bangladesh, this paper defines local level as the union, ward and village levels. 8 Local Level Good Governance

Local level good governance is the proper exercise of power, rules and regulations in the management and allocation of development supports and services ensuring the four core principlestransparency, accountability, participation and integrity in the delivery of development supports and services in favor of those who really need them. 9 Rural Development Supports and Services

All development supports and services to be delivered by various offices of the government and non-government organizations to the villagers refer to rural development support and services. 10 Local Level Transparency

Local level transparency refers to the villagers' awareness of field workers, development services, use of development services, and the systems of development services delivery and reception. 11 Local level Accountability

Local level accountability refers to the answerability of field workers to villagers (tax payers) for the provision of development services. 157

12

Local Level Participation

15

Formation of UCC, VC and Introduction of UDO

Local level participation refers to the villagers' participation in decision making related to rural development supports and services allocation, project planning, budgeting, project implementation, supervision, monitoring and impact evaluation. 13 Local Level Integrity

The UCC is formed as a legal institutional platform at the union level in accordance with a gazette notification issued by the Ministry of Local Government, Rural Development and Cooperatives. The VCs are voluntary informal forums of the village community formed by consensus at general meetings attended by the majority of the respective villagers. As shown in Fig. 1, the UCC is comprised of UP chairman and members, GO and NGO field workers who work in the respective union, and VC chairperson or a representative thereof from each of the VCs. UP chairman is the chairperson and UDO is the member secretary of the UCC. A VC is comprised of 15-30 village leaders (Matabbars) representing women and the landless as well as hamlets in the village, so that it could represent various strata of the village community as a whole. The number of VC membership is relative to the number of village leaders (Matabbars) recognized by majority of the respective villagers. There is no rigidity regarding position and number of members in forming the VCs. Each VC has a chairman, a vice chairman, a secretary and an assistant secretary. The new position UDO is to act as the linchpin in the local coordination activities of the Link Model by his/ her assistance to the UCC chairperson, and GO/ NGO field workers of the respective union in the implementation of development activities. In other words, a UDO is to act as the linchpin between the development service providers and development service recipients. S/he is to help formation of VCs, assist VCs to plan, budget and implement village development schemes, motivate villagers, GO/NGO field workers and UP to interact with each other for rural development.

Local level integrity refers to the utilization of field workers' full potential (knowledge, skill and efficiency) at work with full sincerity and honesty under the given condition. 14 Link Model : An Experience of Coordination for Governance at Local Level in Bangladesh

Three Key Elements of the Link Model The Link Model aims to promote and institutionalize sustainable linkage among the stakeholders of rural development like Union Parishad (UP), field workers of Nation Building Departments (NBDs) of the government (GOs) and Non-Government Organizations (NGOs) and villagers through formation of a Village Committee (VC) in each village to hold VC Meeting (VCM) every month, form a coordination body- the Union Coordination Committee (UCC) at each union to hold UCC Meeting (UCCM) every month and introduction of a new field worker's position- the Union Development Officer (UDO) at each union to help coordination among all stakeholders of rural development. The VC along with its monthly meeting, UCC along with its monthly UCCM and the UDO along with his/ her activities for coordination are the three key elements of the Link Model. 158

16

Local Coordination Activities in the Link Model

VCM and UCCM are held every month. Household heads communicate their specific needs for development services and the development problems faced by their respective hamlets to the VC members or directly at the monthly VCM, so that the VC can identify community development problems and needs for development services through the practice of coordination and consensus at the monthly VCM. Generally, village community development efforts like construction/ improvement of hamlet roads and very small bridges & culverts along those hamlet roads, repairing of school and mosque/temple houses, raising playground and graveyard, mobilization of social fund for cost sharing in such micro infrastructure improvement, payment of UP tax, diseases of fish and cattle, pest attacks to crops & trees, application of manures & fertilizers, marketing of products, probable sources of micro credit, social security etc., are discussed in the monthly VCM to transform individual villagers' problems into the problems of the village community as a whole. The VC can relay the problems and needs for development services to the monthly UCCM, because on the one hand, the VC chairperson or his representative participate in the UCCM, and on the other hand he/she can disclose information of the monthly UCCM to the respective monthly VCM. The UCC practices coordination among the stakeholders of rural development at its monthly UCCM under the chairmanship of the respective UP Chairman. Participation of the UCC members in the monthly UCCM is obligatory. At the monthly UCCM, first of all, VC chairpersons/ representatives and the UP members individually present current development problems and

villagers' real needs for development services one by one. In their turn, as part of information disclosure, the field workers of GOs and NGOs present the work done in the last month, available development services, and the work plan for the current month. Their presentations serve the function of monitoring the mutual commitments of field workers, as well as those between field workers and village communities. Such presentations can especially help the VCs to motivate field workers to take into account the development needs/problems of village communities in their work. GO and NGO field workers attend and disclose in the monthly UCCM which development services they are responsible for. Afterwards, various stakeholders interact face-to-face and thereby make consensual recommendations to field workers or the VCs concerned. Such recommendations together with other resolutions are circulated to the public through the union notice boards installed in communal areas of each union. As a matter of fact, information on not only field workers' visit schedules but also how much of which development service should be provided to which village, at what time and to whom, are disclosed on the boards. The consensual recommendations are derived from the linkage between the VCs and the UCC: namely vertical coordination. Such linkage is to disseminate development information and extend development services of GOs and NGOs at the villagers' doorsteps. VC members receive development information in the monthly VCM and disseminate to the villagers orally. Again, such linkage helps preparation of villagers for receiving development services from the GO/NGO field workers in the village. GO/NGO field workers advise villagers on development during their visit to VCM and village. 159

17

Outcomes of the Link Model

The expected outcomes of the Link Model are increased transparency of development services to villagers, increased accountability of GO/NGO field workers to villagers, increased participation of the villagers in decision making in the rural development process, and improved integrity of rural development stakeholders in performing their respective responsibilities. A study of Dasgupta (2008) revealed that the Link Model improved transparency, accountability, participation and integrity at the local level. Transparency has been increased by the two-way trafficking of development information between the villagers and GO/NGO field workers via VCM, UCCM, VC members, community notice boards and the UDO. Accountability has been increased via regular monitoring of the performance of GO/NGO field workers, UP and VC, interaction among stakeholders, transformation of individual needs into community demands, demand driven development service provision and uplifting the team spirit through monthly VCM and UCCM. Participation of the villagers has been increased via VC members, VCM, UCCM, cost sharing in micro infrastructure improvement, villagers' collaboration with GO/NGO field workers in the provision of development services and with other stakeholders in the implementation of village development schemes. Integrity has been increased due to encouraging honesty, enhancing social honor and sense of responsibility, effective delivery of development services as much as possible in appropriate type, volume, time, places and persons, ensuring best 160

possible utilization of human and development resources/services, clearing UP tax, and creating sense of ownership of development works among the stakeholders of rural development through local coordination. References 1 Aminuzzaman, M. Salahuddin (2006), "Governance and Development: An Overview" in Aminuzzaman, M. Salahuddin (ed.) Governance and Development- Bangladesh and Regional Experiences, Department of Development Studies, University of Dhaka, Bangladesh. 2 Brett, E.A. (2003), "Participation and Accountability in Development Management" in the Journal of Development Studies, Vol. 40, No. 2, pp. 1-29, Frank Cass, London. 3 Blair, H. (1998), Spreading Power to the Periphery- An Assessment of Democratic Local Governance, USAID Program and Operations Assessment Report No. 21. 4 Blair, H. (2000), "Participation and Accountability at the Periphery: Democratic Local Governance in Six Countries" in World Development, Vol. 28, No. 1, pp.21-39. 5 Bhagwan, V. and Bhushan, V. (1990), Public Administration, S. Chand & Company Ltd, New Delhi. 6 Dimock, M.E. and Dimock, G O (1969), Public Administration, Holt, Rinehart and Winston, New York. 7 Dasgupta, Swapan Kumar (2008), Local Coordination for Transparency, Accountability and Participation in Development in Rural Bangladesh, BARD, Comilla.

8 ESCAP (1986), Operationalizing locallevel planning, Bangkok:ESCAP, United Nations. 9 Gulick, L. (1973), "Notes on the Theory of Organization" in Luther Gulick and Lyndall Urwick (ed.) Papers on the Science of Administration, Institute of Public Administration, New York. 10 Manasan, R.G., Gonzalez, E. T. and Gaffud, R. B. (1999), "Indicators of Good Governance: Developing an Index of Governance Quality at the LGU Level," Journal of Philippine Development, Vol.24, No.48, pp.149-212. 11 March, J.G. and Simon, H.A. (1958), Organizations, John Wiley, New York. 12 Mooney, James (1963), "The Coordination Principle" in Joseph A. Litterer (ed.) Organization, John Wiley, New York.

13 Schneider, H. (1999), Participatory Governance: The Missing Link for Poverty Reduction, OECD Policy Brief No.17, OECD Development Centre, Paris. 14 Thompson. J D (1967), Organizations in Action, McGraw Hill, New York. 15 UNDP (1993), Human Development Report 1993, UNDP, New York. 16 UNDP (2002), Human Development Indicators, New York. 17 UNDP (2003), UNDP Practice Note: Access to Information, New York. 18 World Bank (2002), Promoting Social and Public Accountability - Participatory and Community Based Monitoring and Evaluation, Uganda Videoconference, 2002.

GO field workers

NGO field workers

Union Parishad (Chairman and members)

UDO

Union Level

Union Coordination Committee

Village Level Village Committee Leader/Representative Hemlets Women The landless

Fig. 1 : Formation of the Union Coordination Committee and the Village Committee 161

Annexure 6.1.11

THE GRAMEEN BANK MODEL OF MICROCREDIT IN RURAL BANGLADESH

Mr Md. Ayub Ali Howlader

1 Grameen Bank : Owned by the Poor family assets together do not exceed the market value of one acre of medium quality land in the area can be a member. · Each group elects its own chairman and secretary. · 6-8 groups in a village form a center.

The mission of the Grameen Bank is to alleviate poverty from the lives of the poor people. · Grameen Bank (GB) was initiated by Professor Muhammad Yunus at Jobra, Bangladesh in 1976 as action research project. · This project became a pilot project in 1979 with the financial support of the central bank of Bangladesh. · In October 1983, GB was established as an independent financial institution. · It is a private specialized bank, owned by the borrowers. 2 Group

· Chairman of groups in a center elect a "Center Chief" (CC) and a "Deputy Center Chief" (DCC) from among themselves. · Participatory decision-making management process and responsive behavior. 3 Micro-credit Experience : Grameen Bank

Over three decades of experience has proved the following : · Micro-credit is a very effective instrument to empower the poor, especially women. · It is cost-effective and sustainable.

· Building blocks of GB's receiving and delivery system. · Five men or women form a group.

· The group members are like-minded people and similar economic & social background (homogeneous). · Any person whose family owns less than 0.5 acre of cultivable land or the value of whose 162

· It creates opportunities for the poor to move out of poverty. · It is a system based on mutual trust and co-operation.

· Creates self-employment for the poorest, particularly poor women. · Poor do not have to come to the Bank, the Bank goes to the poor. · GB is dedicated to establishing credit as a human right. 4 Scholarship for GB Member Children in Home and Abroad

5

Financial Management of GB

· Savings products have brought financial self-reliance. · GB stopped accepting new foreign grant and loan since 1995. · Outstanding loan to savings deposit ratio is 100:152 · 67% of total branches have more savings than outstanding loans. · Total deposit (December 2009) : US $ 649.71 million (54%) : US $ 552.69 million (46%) : US $ 1202.40 million

· Grameen Bank provided over 27 thousands per year. Cumulative scholarship recipients 1,18,540. · Grameen Bank Nobel Scholarship

- Members - Non-members Total

· Stanford University: Two Scholarships (Admission under process). · Ewha Womens University in Seoul, Korea : Two Scholarships (Masters Degree). · Khazanah Yayasan Foundation, Malaysia: Five Scholarships every year (Under Graduate, Masters and Post Graduate). · Asian University for Women, Chittagong, Bangladesh: 25 Scholarships (Admission under process). · Higher Education Loan : 44,640 Recipients · GB started higher education loan for talented children of GB borrowers in 1997. · The loans are given covering tuition, maintenance and other school expenses.

·

Loan Insurance Savings Fund

US$ 14.38 million paid off (Unrepaid loan & interest of deceased borrowers) · Borrower deposits Tk. 30 per thousand for herself and Tk. 30 for the husband. · At the death of the borrower or husband, entire outstanding amount of the loan is paid off. · If the borrower withdraws her membership from the group she gets back the amount contributed in the fund. · Case 1: Highest loan paid off: Tk. 5,43,046 (Husband died, his deposit was Tk. 11,900 in the Loan Insurance Fund.) 163

6

Interest Rates of Grameen Bank

· Life insurance for GB members: Borrowers are not required to pay any premium. · Life & Loan insurance for the beggars (struggling members of GB): Life and loan insurance without premium. · Health Insurance through Grameen Kalyan: Yearly premium of Tk. 120 per GB family and Tk. 150 per non GB family per year for different health services (physician consultation, annual health check up, subsidy on pathological test etc). · Established Eye hospital at Bogra: Through Grameen Health Care Services Ltd. 8 Computerised MIS and Accounting System Data Management Center at the area level

· Income Generating Loans : Flat rate -10 per cent · · Housing Loans : 8per cent Higher Education Loan : · cent · · · · On study - 0 per cent After study - 5 per cent

For Struggling Members (Beggars) : 0 per

Center House Construction : 0 per cent Savings : 8.5 per cent Fixed Deposit : 8.75-9.50 per cent Double in Seven Years : 10.40 per cent

·

· Fixed Deposit (5 years) with monthly income : 10.04 per cent · Fixed Deposit (10 years) with monthly income : 10.67 per cent · Grameen Pension Savings (Five Years) : 10 per cent · Grameen Pension Savings (Ten Years) : 12 per cent 7 Insurance Programme in Grameen

99.5 per cent of total branches now have · switched to computerised account and MIS. 9 Ten Indicators to Assess Poverty level

At the end of 2008, 68.10% GB members crossed the poverty line · Family lives in a house worth at least Tk. 25,000. · · Family members drink pure water. All children are going to school. Minimum weekly loan installment Tk.200. Family uses sanitary latrine.

· Loan insurance savings fund for GB borrowers: Borrower deposits Tk. 30 per thousand for herself and Tk. 30 for the husband on loan outstanding at the date of disbursement. 164

· ·

· Family have adequate clothing, clothing for winter and mosquito-nets. · Family has sources of additional income. Annual balance of savings Tk. 5,000. · a day. · 10 · No difficulty in having three square meals

individual researchers from home and abroad, external aid agencies and multilateral agencies like the World Bank. · We may sum up the GB impacts by the following ways : Impact on targeting Capital accumulation Impact on employment Ability to withstand disasters. Impact on rural wage structure. Impact on positive income & assets. Impact on ecology. Impact on housing loan & family size. Impact on socio-cultural status.

Family can take care of the health. Grameen Goals for Year 2015 Membership will reach 15 million.

-

· All beggars in the villages will become members of GB. · Half of the borrowers will have larger micro-enterprise loans. · 100,000 medical, engineering and master's degree will be funded by education loans. · · 11 50,000 scholarships per year. All branches will be computerized. The Grameen Impact

Women's participation and economic potentialities. Impact on poverty situation.

· There is substantial evidence that GB's poverty alleviation strategy through its credit operations have very quickly produced a positive impact on the lives of the poor in terms of higher income and empowerment of the poor rural women. · GB's impact on the socio-economic aspects has been extensively documented by the evaluation studies undertaken by the BIDS (Bangladesh Institute of Development Studies),

Women's participation - situation wise and performance wise deserve. Women are hardworking and stubbornly goal driven. Poor women are bankable.

Women empowered in family and different social part. 165

Better customers and owners than richer counterparts. 12 Future generation reaching better lives. Proved that hard-core poor are bankable. Long Term Vision

for income generation and knowledge · Build assets to pay for the education and marriage of the children, to enable them to create a large asset base, and pay for other long term needs. Prepare the future generation with education and knowledge so that the families do not slip back into poverty. Scholarships Higher Education loan Business loan for graduate students. More income for women & family.

Move Out of Poverty and Stay Far Away From Poverty · Basic loan

· Micro-enterprise loans for big ger investments · Integration of IT and Communications -

166

Group

Area Office

Center

Zonal Office

Branch Office

Head Office

Fig. 1 : Structure of Grameen Bank

Head Office

Zonal Office 40

Area Office 268 Branch Office 2562

s

Centers 144,106 Group - 1,253.160 Members 7.97 million (97 per cent whome are women)

Fig. 2 : Scaling up with GB Structure 167

Head Office

Member (Grass roots lelvel)

Zonal Office

Group

Area Office

Center

Branch Office

Fig. 3 : Credit and Information Receiving & Delivery System of GB

Members 54%

Non-Member 46%

GB members : US $649.71 nillion Non members : US $552.69 million Fig. 4 : Deposit Ration between GB members and Non-members : As of December 2009

168

500 450 400 350 300 250 200 150 100 50 0 67.2 44.3 102.1 140.3 193.5 256.5

(million US dollors)

439.1

330.6

Fig. 5 : Grameen Pension Savings (GPS) Growth Curve

Deps i t Ba l a nce 1400 1200

Loa n Outs ta ndi ng

1202 1000 1029 800 600 400 200 0 July Aug Sep Oct Nov Dec 739 744 747 761 783 793 1044 1059 1081 1091

Fig. 6 : Loan Outstanding and Deposit Balance over last 6 months (July 09 - December 09)

169

Annexure 6.1.12

ISSUES AND CONCEPTS : MILLENNIUM DEVELOPMENT GOALS (MDGs) AND POVERTY REDUCTION STRATEGIES (PRS) WITH EMPHASIS ON GOVERNANCE AND POVERTY

Dr Quazi Mesbahuddin Ahmed

1 Background of MDGs the ways in which they were interpreted, depended on the values and interests of key actors at key events and over longer periods of time. Nation states and multilateral organisations often dominated discussions, but behind their deliberations were the actions of vast networks and individuals. Core components of human development ­ gender equality, child survival, maternal survival and others ­ were argued on and off the evolving lists of UN conference declarations, the IDGs, the Millennium Declaration and the Road Map's MDGs. In a similar fashion, the principles of RBM were applied in different ways to different parts of the MDG listing : specific, time-bound goals for rich countries were assiduously kept off the list. With the wisdom of hindsight, the coherence of the MDGs­economic well-being, social development, environmental sustainability and a global partnership ­ seems remarkable given the processes from which they emerged. Perhaps an `invisible hand', quite different from the one Adam Smith visualised for markets, guides global public policy over the long term1. While the material results of the MDGs are far from clear, we have a partial understanding of the progress so far (UN 2007)2. By contrast, we have

The MDGs are the world's biggest promise ­ committing 189 states and all of the world's main multilateral agencies to an unprecedented effort to reduce multi-dimensional poverty through a global partnership. The MDGs have historical significance retrospectively: they are the first time the international community agreed to such a concrete set of goals and made a serious attempt at implementation. They have historical significance prospectively as their achievement, or lack of achievement, will affect the well-being of hundreds of millions of people. Many ideas have influenced the content and form of the MDGs. David Hulme of the University of Manchester in his paper titled "The Making of the Millennium Development Goals : Human Development Meets Results-based Management In an Imperfect World" has identified two ideas, coming from very different intellectual stables, as being particularly important: human development and results-based management. But, the negotiation of the MDGs was not argued out in a global university seminar room. They were set in many different contexts in the messy and changing agora typical of global public policy making. The promotion and obstruction of specific ideas, and 170

relatively little understanding of the longer term impact of the MDGs in the ideational domain ­ especially concerning the ways in which they have and, may in the future, shape public opinion. Over the recent historical period, since the mid-1990s, Lumsdaine3 and Singer4 believe that these attempts to establish a globally authoritative list have helped the evolution of a `moral vision' guiding the actions of states and a deeper appreciation by millions of people that they live in `one world'. The longer term ideational legacy of the MDGs can only be a topic for speculation. From the available evidence (Hulme 2007)5 one can posit a variety of different impacts. Towards one extreme, in the UK, the MDGs have made a major contribution to establishing a public commitment to national action to promote human development around the world. The government and an activist minority of citizens have systematically used the MDGs to reshape public values. Towards the other extreme, in the USA, with administrations ambivalent to the MDGs and powerful think tanks and media hostile to them, they appear to have had little purchase on changing public views about helping distant strangers. They may even weaken commitment. One opinion6 is that they may lead to US public opinion against global efforts when the MDGs are not achieved in 2015. Only history will show the ways in which the ideas driving the MDGs promote or obstruct the `careers' of other ideas. 2 The Millennium Declaration

as of that period, committed themselves to a series of socio-economic targets to be achieved by 2015. · Known as the Millennium Development Goals (MDGs), they represent a framework for achieving human development and broadening its benefits · The UN Member States in the summit of September, 2000 also declared that they considered certain fundamental values to be essential to international relations in the 21st century. These include : Freedom, Equality, Solidarity, Tolerance, Respect for Nature and Shared Responsibility. These values are essential to attainment of MDGs both nationally and globally 3 The Millennium Development Goals (MDGs)

· All 189 UN Member States in 2000 pledged to make attempts to achieve, by 2015, the following eight goals : i) ii) Eradicate extreme poverty and hunger Achieve universal primary education

iii) Promote gender equality and empower women iv) v) Reduce child mortality Improve maternal health

· The UN General Assembly adopted the Millennium Declaration in its Fifty-fifth session on September 8, 2000. · In the above UNGA session, called the Millennium Summit, all 189 UN Member States,

vi) Combat HIV/AIDS, malaria and other diseases vii) Ensure environmental sustainability 171

viii) Develop a global partnership for development The above are the eight MDGs that we have been hearing so often. There are 18 targets and 48 indicators attached to these goals. Table 1 shows their quick summary. 4 · · Progress of MDGs in Bangladesh : A Broad Summary Bangladesh is "on track" in respect of most social MDGs These include : infant and under five morality reduction primary and secondary school enrolment

development policies for its members. In practice, IMF's reach is all over a client's economy and the Fund/Bank jointly formulate economic policies and provide assistance for their members (A country has to be a member of the Fund first in order to become a member of the World Bank). · IMF always emphasises economic growth with macroeconomic-balance (sustainable fiscal deficit and stable external-balance). · In the Mid-1980s, IMF introduced structural Adjustment Fund (SAF) to support the medium-term adjustment program of its member countries. The same program was later expanded to call Extended Structural Adjustment facility (ESAF) from 1989. · The objective of the adjustment program, in the medium-term, was to correct the deficit in the balance of payments, while maintaining an acceptable rate of economic growth and price stability, without resorting to control manures. The objective of SAF and ESAF programs over the long-run was to maintain viability for economic growth and the balance of payments.

eradication of hunger proxied by child malnutrition and · 5 access to improved sanitation rate of immunization Progress is less than satisfactory in : adult literacy

5.2

primary school completion rate maternal mortality Child malnutrition Roots of PRS : Background Story

Experience of SAF and ESAFSupported Arrangements

5.1

Policies of IMF

Experience of SAF and ESAF programmes carried out by IMF itself showed mixed results. Notwithstanding better economic growth in many countries, several countries incurred heavy debtservice burdens (Review of Experience under ESAF-Supported Arrangements-- Staff Studies, Vols. I & II, IMF July, 1997). · Structural Adjustment Participatory Review Initiative (SAPRI), jointly carried out in 2001 by the World Bank and some major

In design, the IMF (Fund) is the custodian of the global monetary and balance of payments policies while the World Bank (Bank) articulates the overall 172

participatory countries, also found mixed or even deteriorating results : no significant change in social indicators, increase in poverty and income inequality, poor better-off in countries that adjusted with growth, adjustment lending programmes hurt poor, countries that implemented right policies reduced poverty, etc. · Bangladesh entered a SAF programme during 1986/87 to 1988/89 (no programme during 1989/90) and ESAF during 1990/91 to 1992/93.

·

reducing balance of payment deficit and

· to facilitate poverty reduction program taken under PRSP

5.5

Genesis of PRSP

5.3

IMF Policies at Crossroads

· The guiding principles were still drawn from the "Washington consensus" (Please search Washington consensus in the web page for details). · Apprehension of better economic policies being concluded by the international community under the aegis of the United Nation. MDGs were still not born. But the IMF was aware that the MDGs might be the world's biggest promise ­ a global agreement to reduce poverty at historically unprecedented rates through collaborative global action. Many different ideas were shaping their content and form. · After some soul-searching, IMF could design a policy that it thought would address the criticism of its inability to address poverty in its member countries

· There is a committee called the `Development Committee' which advises the Board of Governors of the World Bank. Similarly, the Board of Governors of the IMF is advised by a committee called the `International Monetary and Finance Committee. These two Committees recommended in April 1999 that the low-income countries (GDP per capita income of US$ 735 or less in 2000)7 be advised to adopt respective PRSPs as their central policy planning document.

5.6

PRSP as a Precondition for External Assistance

· Earlier in 2000, the IMF had established the `Poverty Reduction Growth Facility' (PRGF) and contended that the low-income countries would have to align their macro- economic policies to the conditions attached to PRGF in order to be eligible to receive assistance from PRGF. PRGF recognizes respective PRSPs as the main policy document at the disposal of low-income countries that address the concern of growth, stability and poverty reduction.

5.7 5.4 The PRGF Programme, 2000

-

Principles underlying the PRSP Approach

Country-driven Results-oriented Comprehensive Partnerships Long-term Perspective 173

· Objectives of the IMF-supported PRGF Program are · to maintain macroeconomic stability through lowering inflation

5.8

What is a PRSP?

· It was prepared through a broad-based participatory process · An "inclusive'' consultation approach was followed covering all types of stakeholders · PRSP-I was drafted by government officials and local consultants · All expenses for preparation of PRSP were being borne by the Government 5.8.2 Broad Objectives of PRSP-I

As discussed in the process of PRSP, Poverty Reduction Strategy Papers (PRSPs) are supposed to be country-authored, results-oriented and comprehensive road-maps. PRSPs aim to serve as the framework both for domestic policies and progress to reduce poverty, as well as for development aid. The PRSP process is intended to be open and participatory and to include all major stakeholders, including Civil Society Organizations (CSOs), Private Sector Representatives, Trade Unions, Women's Groups, representatives of different stakeholders including development partners. Special efforts are to be taken to reach the traditionally marginalized groups. However, please note that there is no blueprint for participation, the nature of which will depend on local circumstances. Countries, where preparing a full PRSP is likely to take more than one year, may prepare an Interim PRSP (I-PRSP) in order to continue to access concessional funding from the World Bank and IMF. I-PRSP is envisaged to be a short document that describes the current state of a country's poverty and policies and sets out a plan for completing a full PRSP. 5.8.1 PRSP-I of Bangladesh

· Accelerate the process of reducing income-poverty and hunger · Support the process of attaining other MDGs: achieving universal primary education equity and

promoting gender empowerment of women

reducing infant, child and maternal mortality rates improving sanitation and access to safe drinking water; and containing HIV/AIDS, malaria and other communicable diseases focusing on areas of global partnership for development · Ensure necessary conditions for pro-poor growth : Maintaining Macroeconomic Stability

Unlocking the Potential : National Strategy for Accelerated Poverty Reduction (FY 2005-07) · PRSP-I of Bangladesh was a countrydriven, country-owned and results-oriented document 174

-

Promoting Trade Promoting Employment Facilitating Fair and Competitive Business; and Investing in Human Development

16, 2005 "A poverty reduction strategy is as good as it is implemented " 5.8.4 PRSP-II of Bangladesh

· Create sufficient conditions for pro-poor growth by : Boosting Critical Sectors Agriculture and Rural Development

Moving Ahead : National Strategy for Accelerated Poverty Reduction II (FY 2009-11) Contents of PRSP-II Chapter 1 - Past Achievements and Vision for ProPoor Growth Chapter 2 - Current Poverty Situation: Multiple Dimensions and Determinants Chapter 3 ­ Medium-Term Macroeconomic Framework Chapter 4 ­ Roadmap for Pro-poor Economic Growth: Strategic Blocks Chapter 5 ­ Roadmap for Accelerated Poverty Reduction: Supporting Strategies Chapter 6 ­ Indicative Costs of Achieving Goals and Targets Chapter 7 ­ Strengthening Implementation, and Monitoring & Evaluation · Roadmap for Pro-poor Economic Growth: Strategic Blocks Block-I : Macroeconomic Environment for Propoor Economic Growth Block-II : Critical Areas of Focus for Pro-poor Economic Growth Block-III : Essential Infrastructure for Pro-poor Economic Growth 175

Water Resources Development and Management Small and Medium Size Enterprises (SMEs) Informal Sector Infrastructure Development Development of ICT

Combining even necessary and sufficient conditions for accelerating pro-poor growth is not enough: Because of huge number of the absolute poor (>56 million), even after accelerating pro-poor growth many poor people might be left behind. Estimate has it that achieving MDG of halving the number of the poor by 2015 would still leave over 6 million people below the poverty line in 2015 Hence we need effective safety nets and targeted programmes for the hard core poor 5.8.3 Approval of PRSP-I

PRSP-I was approved by the NEC on October

Block-IV : Social Protection for the Vulnerable Block-V : Human Development · Roadmap for Accelerated Poverty Reduction: Supporting Strategies Strategy ­I : Ensuring Participation, Social Inclusion and Empowerment Strategy-II : Promoting Good Governance Strategy-III : Ensuring Efficient Delivery of Public Services Strategy-IV : Caring for Environment and Tackling Climate Change Strategy-V : Enhancing Productivity and Efficiency through Science & Technology 5.8.5 PRSP-II was approved in October, 2008 by the Caretaker Government The present democratically-elected Government has already revised the PRSP II. Some details are shown in the following slides: The present government has placed poverty reduction at the forefront of its development strategy. Elimination of poverty and inequity is central to the development vision laid out in the Election Manifesto of the government. The Manifesto has set specific poverty reduction targets to be attained during the current tenure of the government and identified faster agricultural growth,. broad based rural development, targeted employment generation, and strengthening of social safety nets as some of the major strategies for attaining poverty reduction objectives. 176

A Poverty Reduction Strategy Paper (PRSP) titled "Unlocking the Potential: National Strategy for Accelerated Poverty Reduction (NSAPR I)" was prepared in 2005. The NSAPR I was put into implementation during FY05- FY07 and subsequently it was extended up to June 2008. The second NSAPR (FY2008-FY11) was prepared by the immediate past caretaker government. Because of the unelected and interim nature of the caretaker government, the NSAPR II document prepared by it could not adequately reflect the genuine wishes of the people. The current elected government has carried out a comprehensive evaluation of the NSAPR II document in accordance with its commitments in the Election Manifesto. While retaining policy continuity, the document has been recast in the light of the government's development vision and the Election Manifesto. In line with the aspirations of the people, the thrust has now shifted to making Bangladesh a happy and prosperous nation supported by mutually reinforcing development in social, economic and political front. In accordance with the Election Manifesto, this will entail putting Bangladesh into a trajectory of high performing growth, stabilizing commodity prices, minimizing income and human poverty, securing health and education for all, enhancing creativity and building capacity, establishing social justice, reducing social disparity, achieving capacity to tackle the adverse effects of climate change, and firmly rooting participatory democracy in the political arena. A critical element in bringing about the envisaged social and economic development will be the adoption of advanced and innovative technology. It is stipulated that developments in information and communication technology will take the country to new heights of excellence, giving a new identity branded as Digital Bangladesh.

The government's commitment to bringing about the above mentioned developments in social, economic, political and technology fields constitute the Charter of Change as enunciated in the Election Manifesto. The NSAPR II prepared in the light of the government's development vision and the Election Manifesto also emphasizes the aspect of policy continuity. In this respect, due considerations have been paid to the Millennium Development Goals (MDGs) and the SAMe Development Goals (SDGs) and the need for sustained efforts towards achieving these goals. The government has also adopted a long term vision for the development of the country. For the purpose, the long term Perspective Plan (20102021), under preparation by the government, would provide goals for the future and chart out the course of action to achieve these goals by 2021. Five goals of the revised second-PRSP are : · Better macro-economic management for pro-poor economic growth; · Higher investment for pro-poor sectors;

The Government placed the above document before Parliament in October, 2009 for discussion and approval The NEC approved the PRSP-II (Steps towards change) on December 29, 2009. A Critique of PRSP : · The PRSP process may be an important opportunity to introduce a new approach to poverty reduction that will focus energies and resources on the poor · However, progress with regard to both the PRSP content and the PRSP process has been disappointing in many countries · In most countries, the PRSP has not led to a truly participatory development process in which the country ownership is central, while it is also still insufficiently poverty-focused. The latter phenomenon has, of course, not been true in Bangladesh. · The problem of PRSP in Bangladesh has been one of implementation · Implementation of PRSP along with the budgetary process has been dismal in Bangladesh, to say the least. Footnotes 1 Meyer, J. W., Boli, J., Thoman, G. M. and Ramirez, O. (1997) `World Society and the NationState', American Journal of Sociology, 103 (1), pp. 144-181. 2 United Nations (2007) The Millennium Development Goals Report 2007. New York, United Nations. 177

· Construction of necessary infrastructure for pro-poor economic growth; · Emphasizing social safety-net programmes for the vulnerable people; and · Higher investment in human resourcedevelopment. Steps towards Change : National Strategy for Accelerated Poverty Reduction II, FY 2009-11

3 Lumsdaine, D. H. (1993) Moral Vision in International Politics: The Foreign Aid regime, 1949-1989. Princeton, Princeton University Press. 4 Singer, P. (2002), One World: The Ethics of Globalization. Yale University Press, New Haven. 5 Hulme, D (2007, forthcoming) `Global Public Policy and the Millennium Development

Goals: A Short History of the World's Biggest Promise', Brooks 6 Clemens, M., Kenny, C. and Moss, T. (2004) `The trouble with the MDGs: confronting expectations of aid and success', CGD W/P 40, Centre for Global Development, Washington DC. 7 $935 or less in 2007

Table 1 : MDGs, Their Targets and Indicators Goals

Goal 1 Goal 2 Goal 3 Goal 4 Goal 5 Goal 6 Goal 7 Goal 8 Total 8

Number of Targets

2 1 1 1 1 2 3 7 18

Number of Indicators

5 3 4 3 2 7 8 16 48

178

Annexure 6.1.13

SOCIAL SAFETY NET PROGRAMME FOR POVERTY REDUCTION

Dr Quazi Mesbahuddin Ahmed

1 The Case for Safety Nets · Safety nets and transfers have an immediate impact on inequality and extreme poverty. · Safety nets enable households to make better investments in their future. · Safety nets help households manage risk.

· Safety nets deserve a role in development policy in all countries. They mitigate extreme poverty through redistribution of resources; they help households invest in their future and manage risks; and they help governments make sound policy decisions in macro-economic, trade, labor, and many other sectors. · Safety nets face-and create-challenges to the implementing government. They compete for fiscal resources, require competent administration, and can result in negative incentives. These challenges demand prudent choices by program designers about the role, design, and implementation of safety nets. Fortunately, there are many options available to help manage the challenges. · Safety nets are never the whole or sufficient answer to poverty reduction or risk management. They must operate within the existing policy context and be balanced with existing or planned safety nets, social insurance, and other social or poverty alleviation policies. No single prescription fits all circumstances.

· Safety nets help governments make beneficial reforms. Safety nets are not the only or even the principal tool for achieving any of the ends they serve, yet they can make a significant contribution. When situations are dire, they can help save lives. When situations are less dire-and programmes are especially good-they can save or help build livelihoods as well.

1.2

What Is a Good Safety Net?

1.1

Why Should Countries Have Safety Nets?

Safety net systems are usually woven of several programmes, ideally complementing each other as well as complementing other public or social policies. A good safety net system is more than a collection of well-designed and well-implemented programmes, however; it also exhibits the following attributes. Appropriate : The range of programmes used and the balance between them and with the other elements of public policy should respond to the 179

Safety nets can help achieve four objectives that are in turn part of larger poverty reduction and risk management goals:

particular needs of the country. Each programme should be customized for best fit with the circum-stances. Adequate : The safety net system overall covers the various groups in need of assistance-the chronic poor, the transient poor, those affected by reforms, and all the various subsets of these groups. Individual programmes should provide full coverage and meaningful benefits to whichever subset of the population they are meant to assist. Equitable : The safety net should treat beneficiaries in a fair and equitable way. In particular, it should aim to provide the same benefits to individuals or households that are equal in all important respects (horizontal equity) and may provide more generous benefits to the poorest beneficiaries (vertical equity). Cost effective : Cost-effective programmes channel most programme resources to their intended target group. They also economize the administrative resources required to implement the programme in two ways. First, at the level of the whole safety net system, they avoid fragmentation and the subsequent need to develop administrative systems without realizing economies of scale. Second, they run efficiently with the minimum resources required to achieve the desired impact, but with sufficient resources to carry out all programme functions well. Incentive Compatible : Safety nets can change households' behavior, for better or worse. To ensure that the balance of changes is positive, the role of safety nets should be kept to the minimum consistent with adequacy. The safety net system often may include programmes that explicitly help build assets or incomes of their individual clients or communities by linking transfers to required or voluntary programme elements. Public works 180

programmes can provide physical assets to communities. Conditional cash transfer programmes build the human capital of households. Links to financial, job search, training, or social care services may help households raise their incomes. Sustainable : Prudent safety net systems are financially sustainable, in that they are pursued in a balanced manner with other aspects of government expenditure. Individual programmes should be both financially and politically sustainable so that stop/start cycles of programmes are avoided, as these result in enormous lost opportunities for efficient administration and the achievement of programmes' promotive aspects. In low-income countries, programmes started with donor support are gradually incorporated into the public sector. Dynamic : A good safety net system will evolve over time. The appropriate balance of programmes will change as the economy grows and changes, as other elements of policy develop, or when shocks occur. The management of specific programmes should also evolve as problems are solved and new standards set. 2 Safety Net and Social Protection

Though some safety nets (SN) have a development component, safety nets are still largely associated with the idea of a short-term buffer. "Social protection" (SP) is a different concept that incorporates safety net programmes but also includes a role for renewed state involvement, emphasizing a longer-ter m developmental approach. SP includes social assistance and social insurance, and is often advocated as a right rather than a reactive form of relief. Social protection policy addresses not only programmes aimed at reducing the impact of shocks and coping with

their aftermath, but also interventions designed to prevent shocks and destitution in the first place.

2.1

Safety Nets Help Governments Make Beneficial Reforms

analysis must be conducted for each case. Policy makers can then determine how broadly or narrowly to focus compensation and how much is required.

· Replacing inefficient redistributive elements in other programmes; · Facilitating changes in the economy aimed at supporting growth; and · Fostering more inclusive growth;

2.3

Challenges to Safety Nets

Despite many arguments in favor of publicly provided safety nets, there are still some reservations in the development community about their feasibility and desirability. Much safety net practice around the world over the last 20 years has not been particularly good, and what works in one setting may not succeed in another. Fortunately, a recent explosion of innovations in safety net programmes makes for many highly promising options, and there are numerous successful programmes from which future initiatives can learn. Managing the challenges is complex, often requiring actions on multiple dimensions of design and implementation.

· Transfers play both direct and indirect roles in reducing inequality. Reducing inequality should help create a "virtuous circle," leading to more inclusive institutions and thus indirectly to better policy and higher growth; and · Making additional empowerment effects.

2.2

How Do Safety Nets Fit in Wider Development Policy?

· Safety nets may ser ve one or a combination of the following groups: · · · Chronic poor; Transitory poor; Vulnerable groups; People with disabilities, Elderly, Orphans.

2.4

Can Developing Countries Afford Safety Nets?

· The reason safety nets are not a headline social policy on the development agenda is a concern over whether countries-especially poor countries-can afford to transfer meaningful resources to their poor. This is a complex issue. For example, to provide adequate food for all the poor who are below the food poverty line in Ethiopia, more than US $800 million or 12 per cent GDP is required (about one-third of all public spending). · To cover all the poor people in Bangladesh under different social safety nets, some 181

Losers in reforms. The number of losers, and the extent of their loss, is very reform specific. Global numbers for this category are thus unavailable, and

estimate would put a figure of about 15 per cent of GDP or US $12 billion. · · There is a high cost of inaction. There are trade-offs and balances.

4

Social Safety Net Programmes in Bangladesh

Bangladesh has a large profile of SSNPs which addresses various forms of risks and vulnerabilities and attempts to reduce poverty through direct transfer of in-kind/cash resources to the poor. · All the SSNPs have immediate economic improvements effects, some development effects as well as empowerment impacts. · The majority of the households benefiting from the SSNPs based on cash transfer have been able to increase household income. With enhanced household income these households also alleviated their food and health insecurity. · Programmes targeted at women have : (a) increased women's participation in household decision-making; (b) improved health conditions of women and their family members; (c) encouraged small investments for income generation in the future; and (d) revived the traditional system of in-family care. · The arguments in favour of SSN in Bangladesh as in anywhere else, are based on the government's policy to : (a) reduce income uncertainty and variability; (b) maintain a minimum standard of living; and (c) redistribute income from the rich to the poor. The basic operational characteristics of an SSN is that it transfers resources in cash or kind directly to a specified group of people (the poor, women, disadvantaged groups, old people) through a delivery mechanism with or without certain condition being binding upon the recipients. · Currently, the Government of Bangladesh has been implementing about 27 social protection

· Safety net spending may replace other less effective spending. · Redistribution to the rich versus redistribution to the poor. · Bottom line is on finding budget for safety nets. 3 Bottom Line on Finding Budget for Safety Nets

Even where safety nets have a place at the table when resources are allocated, they will face budget constraints so tight that policy makers will have to make difficult triage decisions about how to allocate money sufficient to meet reasonable needs. There are typically three approaches that may be taken in different combinations in response to the dilemma : · Keep the role of safety nets small relative to possible statements of need. · Insofar as possible, ensure complementarities with building physical and human capital. This approach will help the poor survive today and reducing causes of poverty in future years. · In very low income countries, international assistance may be used to finance social assistance. 182

programmes, of which 6 are food-based. The remaining 21 programmes are either cash-based or cash-cum-food based

· SSNPs have a limited coverage; given the magnitude of extreme poverty, SSNPs account for less than 1 percent of GDP · The amount of transfer is therefore inadequate · Current SSNPs also lack coverage of specific socially excluded and marginalised groups · SSNPs are often insensitive to geographic and agro-ecology specific poverty · All SSNPs use land ownership and income as criteria which may not be applicable in all cases · The existing SSNPs also bypass genderspecific risks and insecurity in the labour market; and · Most SSNPs do suffer from problems of targeting and leakages

4.1

State of Social Protection in Bangladesh

· The major food-based programmes benefiting about 1.5 million poor people annually are: · Food-for-Work (FFW) Vulnerable Group Development (VGD) Vulnerable Group Feeding (VGF) Gratuitous Relief (GR) Rural Infrastructure Maintenance Programme (Test Relief) The major cash-based programmes: Primary Education Stipend (PES) Female Secondary Stipend (FSS) Rural Maintenance Programme (RMP) Cash for Work

4.3

Development of Effective SSNPs in Bangladesh : Issues of Governance

· Rural Employment Opportunities for Public Assets (REOPA) Cash for Work Old-age pension schemes.

· Given that the expenditure on SSNPs is meager, an increase in resources for them is warranted (but it is difficult to be prescriptive about how big this should be). · Based on the experiences of other countries in implementation of safety net/social assistance programmes, a number of steps have been suggested in Bangladesh's PRSP : first, a coherent and integrated national social protection policy based on a comprehensive mapping of existing and emerging vulnerabilities needs to be developed 183

4.2

Weaknesses in Bangladesh SSNPs

· There is a lack of an integrated national policy

second, coverage of existing programmes which have proven track records can be expanded third, the labour laws of the country that already have provisions for several types of social insurance related to employment need to be reviewed fourth, rigorous evaluation of current SSNPs to identify weaknesses and improve their effectiveness will have to be undertaken fifth, programmes need to be developed which address emerging vulnerabilities such as urban poverty, livelihood loss due to economic integration and policy reforms, and disadvantaged groups not covered by existing SSNPs sixth, a holistic strategy needs to be developed to provide long-term solutions to entrenched problems such as seasonal poverty in northern districts of Bangladesh seventh, more programmes for health and nutrition related assistance towards reducing maternal mortality and improving child nutrition should be introduced; and eighth, introduction of insurance programmes targeted to the poor and vulnerable groups as alternatives for their social protection needs may be facilitated by the public sector and private sector may also be encouraged to undertake such ventures 5 SSN in Africa: Selected Issues

had a developmental component, safety nets are still largely associated with the idea of a shortterm buffer. · An urban programme in Mozambique, for example, gives transfers to many of these groups whose households are poor; South Africa and Namibia have old-age pension systems; and South Africa also has a child support grant and a disability grant. Such programmes provide significant social and economic security. · The potential effectiveness of conditional cash transfer (CCT) programmes in much of Africa is constrained by the numbers of poor people that need to be reached; the small tax base; the shortage of skills in management, logistics, and accounting; and administrative and social barriers to collecting information on income, age, and other characteristics. · Studies have found that these programmes increase school attendance, improve health and nutrition, and increase women's decision-making power within the household. Direct distribution is sometimes combined with other programmes involving nutrition, education, and health services. Common in many poorer African countries, these programmes play a dual role, providing employment for the poor and creating public assets such as rural roads. · A general food price subsidy makes unlimited amounts of the subsidized foods available to all, such as in the case of the bread subsidy in Egypt. Unrestricted subsidies achieve maximum coverage of the population but are therefore generally more costly than targeted programmes. A rationed subsidy, such as the sugar and cooking oil subsidy in Egypt, limits the quantity of food items that can be purchased by an individual or household.

· In Africa and elsewhere, safety nets were promoted in the 1980s as a response to the (presumably short-term) adverse effects of structural adjustment. Though some safety nets 184

· Public works constitute an important type of safety net programme for reaching the poor throughout Africa. They provide emergency relief as well as contribute to economic development. · Research on public works programmes in Botswana, Niger, Zimbabwe and South Africa points to several policy conclusions. Programmes should (i) target infrastructure and resource deficiencies and focus on high-return investments, (ii) be mainstreamed into cross-sectoral public planning, and (iii) be flexible enough to respond to both chronic poverty and crises. · In many African countries, social health insurance is a form of social protection. Social health insurance schemes are typically contributory, with participation by government, the beneficiaries themselves, and donor organizations or international agencies such as the International Labour Organisation (ILO). · Microfinance, which includes both credit and savings, is a form of social protection and enterprise promotion. The worldwide microfinance movement has promoted individual and group-based access to savings and credit, sometimes with insurance and training components. The movement has given millions of poor people access to more formal financial institutions for the first time. · In 2000, the Africa Microfinance Network (AFMIN) was established. Through AFMIN, African microfinance leaders have been working to set up or reinforce country-level microfinance networks geared to strengthening operational performance and building institutional capacity. · Microfinance can protect the poor during large shocks, helping them avoid drastic actions

such as distress sales of land and draft animals that can permanently damage future earning potential. Further, the presence of a microfinance programme in the community can also increase a household's risk bearing ability, enabling investment in more profitable activities. · Studies in Ghana and Madagascar show that, due to the strict collateral requirements and high transaction costs, a significant proportion of the poor are discouraged from applying for loans. 6 SSN in Latin America: Selected Issues

Conditional cash transfer (CCT) programmes aimed at providing social assistance and improving children's human capital have been established in numerous countries of Latin America and the Caribbean in recent years where they were originally developed. The most popular type of programme includes a combination of health, education and nutrition objectives and includes initiatives such as/Mexico's Programmea de Educacion, Salud y Alimentacion (PROGRESA which is called Oportunidades since 2002) launched in 1997, the firstlarge scale CCT program both in the region and globally,' Colombia's Familias en Accion program (FA); Honduras' Programa de Asignacion Familiar (PRAF),' Jamaica's Program of Advancement through Health and Education (PATH) " Nicaragua's the Red de Proteccion Social (RPS) " Bolivia's Beca Futuro,' Ecuador's Bono de Desarrollo Humano; Chile's Subsidio Unitario Familiar; and Brazil's Bolsa Familia program. Other programmes provide education grants only, including Brazil's established Programa Nacional de Bolsa Escola, the Programa de Erradicacao do Trabalho Infantil (PETI), and Agente Joven A third category are focused on health and nutrition objectives 185

including Brazil's Bolsa Alimentayao and Cartao Alimentacao. · Brazil's Bolsa Familia Program (BFP) is the largest conditional cash transfer in the developing world and has attracted significant attention both in Brazil and beyond. · Like other conditional cash transfers (CCTs), the BFP seeks to help (a) reduce current poverty and inequality, by providing a minimum level of income for extremely poor families; and (b) break the inter-generational transmission of poverty by conditioning these transfers on beneficiary compliance with human capital requirements (school attendance, vaccines, prenatal visits). The programme also seeks to help empower BFP beneficiaries by linking them to other complementary services. · Some key features of the programme are:

A review of social protection programmes (safety net programmes are a sub-set of social protection programmes) in many countries including South Asia would clearly show a transition from a purely food-based programmes to food-cum cash and cash-based programmes. This debate has a context in the nature of vulnerabilities that the poor face

7.1

Why In-kind?

· To control or modify or influence behavior of recipients · · · · Food can be self-targeted Less reliance on modern institutional setup Politically appealing as its visible Difficult to convert to demerit goods

This is a reform programme, which consolidated four pre-reform programmes into one; The size and rapid expansion of the programme makes it the largest programme of this type in the world; The targeting accuracy of the programme is impressive also demonstrating impacts on reducing poverty and inequality. 7 An Overview of Debate Regarding Cash and in-kind Options

· To manage emergency when market fails owing to calamities, both natural and human · To overcome constraints when markets may not function in poorly connected pockets of a country · To avert impact of food price increases

· Favors women and children and also increases control on the benefit by the beneficiary · Compared to cash, benefit is not reduced by inflation

There is an on-going debate about the effectiveness of in-kind transfer as opposed to cash transfers in social protection programmes. 186

7.2

·

Why Cash?

Allows beneficiaries choice

· ·

Do not directly influence market prices Encourages production

-

Schools and clinics (Zambia) Money transfer companies (Somalia) Mobile dispensing machines (Namibia) Informal mechanisms (Somalia) In-Kind: Coupon/Voucher (Bangladesh) Card (Bangladesh)

· Less reliance on infrastructure setup (storage, road network, transport, logistic, etc.,) · · · home · · Fungible

· Less expensive to deliver Less expensive to collect and to take -

7.4

Relatively easier to monitor and evaluate

Beneficiaries Cost of Collection

· Generates multiplier effects (employment, trade, etc.) · An entire household can benefit other that just the beneficiary (e.g., pension) · Usable as a "social contract" between provider and recipient · Compared to in-kind, no spoilage and theft loss

· Additional cost is incurred in carrying the in-kind brought to home Sri Lanka : 60% household incurred Rs. 142 per programme cycle Less collection time in cash. Sri Lanka: Cash 2 hrs versus in-kind 3 hours Bangladesh: Significantly higher time for food collection compared to cash

· -

-

7.3

Transfer is Made with Different Methods of Delivery

Cash :

·

Local banks (Bangladesh, Colombia, Georgia) Mobile banking units (Bangladesh) Post offices (India)

· Repeated research and evaluation point that the control of transfer is important for nutrition of a household. If the transfer is controlled by women, well-being of the household (for example, nutrition, health, girls schooling, etc.) mostly is achieved.

7.5

The Context of Emergency

· But in-kind remains important in early stages of emergency when market and 187

communication is disrupted. For example, immediately after flood. Phased Responses Recommended in Response to Floods in Bangladesh · Humanitarian relief, e.g. natural disaster or war, is usually considered to be principal ground for in-kind transfers. Contemporary research finds

that cash can be effective. Examples are: Assisted Return to Afghanistan; Government Shelter Project in Gujarat; Cash in Bam Earthquake; Cash and Vouchers for famine cycle in Ethiopia; and Cash grants in Mozambique following flood. · Entitlement theory also emphasizes cash with Maharashtra drought of 1970-03.

Table 1 : Summary of How to Handle Challenges to Safety Nets Challenge to Safety Net

Affordability

Management Strategy

- Consider the costs of inaction - Keep safety nets lean - Leverage improvements in physical or human capital if possible - Craft eligibility criteria, benefit levels and structures, countervailing conditionalities appropriately - Some is inevitable and not necessarily bad - Some mitigating measures may be feasible - Craft benefit structure to minimize - Build in elements to shift preference for family size - Employ design elements that minimize opportunities for corruption - Develop administrative systems - Use communications and transparency

Reduction in work effort

Crowding out of Private Transfers

Incentives for fertility

Administrative feasibility and accountability

188

Annexure 6.1.14

MICRO CREDIT REGULATORY SYSTEMS IN BANGLADESH

Mr Khandakar Muzharul Haque

1 Introduction (Non-Profit, non-government Microfinance Institutions), having both social development and micro-credit activities; and (iii) Banking sector, through linkage programme with the NGOMFIs. 2 Brief Histor y of Microcredit in Bangladesh

Directly or indirectly 50-60 per cent of our development and non development budget resources are allocated fro poverty reduction activities. These programmes contribute in enhancing entitlement of the poor and at the same time empower them to ameliorate their situation as well as help create awareness. Besides social safety net programmes like food for work programme, VGD programme, construction and maintenance of rural infrastructure etc. are generating employment opportunities for the rural poor. On the other hand, education expansion programme like food for education, special stipend and financial assistance, free primary education are directly contributing in human development. Microcredit programme through different channels, private and public, is an important area to address poverty issue in the country. Government has microcredit operations through different ministries, departments, specialized institutions like BRDB, BARD, Palli Daridro Bimochon foundation etc. However, private sector is the most dominant provider of microcredit services in Bangladesh. Following private institutions are involved in the microcredit market of Bangladesh: i) Grameen Bank as a Microfinance Bank, created by a separate ordinance namely Grameen Bank Ordinance, 1983; ii) NGO-MFIs

During 1970s and 1980s targeted and subsidized rural credit programmes through government owned institutions were dominant to achiever the development goals. Nationalized Commercial Banks (NCBs) and specialized banks including Bangladesh Krishi Bank came forward in microcredit programme with diversified products. But these efforts could not yield positive results. This was due to proper monitoring, right kind of client selection, poor service delivery mechanism and poor recovery rate etc. As a result, government paved the way for private microfinance organizations to penetrate into microcredit operations along with their development activities. 3 Government Institutions Involved in Poverty Alleviation and Micro-credit

3.1

Palli Daridrya Bimochan Foundation (PDBF)

The objectives of the Palli Daridro Bimochan Foundation (PDBF) are to reduce poverty in the 189

rural area and promote socio-economic development. PDBF has been implementing its programmes in 185 Upazilas (sub division) of 28 districts.

allowance programmes under social security programmes. Human Resource Development Programme : To maintain food, lodging, training and rehabilitation of 10,375 orphans, the Government is running 85 children orphanage throughout the country. The government has disbursed TK. 30.74 crore as capitation grant for enlisted non-government orphanages which has been distributed among 42,649 orphans at the rate of Taka 600 per head. Bangladesh Rural Development Board (BRDB): BRDB is working relentlessly for increasing agricultural production and poverty alleviation. Through twotier cooperation model, BDRB is working for agricultural development by organizing and providing credit and other agricultural instruments to the small and marginal farmers. Besides, under its development projects and programmes, BRDB is providing micro credit, skill development training and other production- friendly instruments and service by organizing poor male and female through formal and infor mal co-operative societies and organizations for alleviating poverty. Palli Karma-Sahayak Foundation (PKSF): PKSF with partner organizations played a remarkable role in alleviating poverty through its micro-credit activities. Now PKSF is providing microcredit service through its 257 partner organizations. PKSF also provides training to the employees of its POs for development of their capacity. 4 Private Sectors' Involvement in Microcredit

3.2

Bangladesh Academy for Rural Development (BARD), Comilla

Comprehensive village Development Programme (CVDP) is a national village development model programme of BARD. The academy has been implementing this programme through 300 villages which includes 75 village societies of Comilla, 75 village societies of Burichong, 75 village societies of Sylhet and 75 village societies of Sonargoan Upazila of Narayangang district. The programme is now being implemented through 4 agencies of the local government namely BARD, BRDB, and Department of co-operative and RDA.

3.3

Department of Social Welfare

The Department of Social Welfare is involved in the following programmes : Programmes for social unity development and poverty alleviation: at present, the department of social welfare is functioning at all Upzilas and Urban areas of the country. Some of its programmes are: rural Social Service (RSS) programme, urban community development (UCD) programme, poverty alleviation through Rural Maternal centre (RMC), Rehabilitation programme for acid-burnt women and physically disabled etc. Social Safety Net Programme : Considering socioeconomic condition of destitute, poor and physically handicapped persons, Government has introduced old age Allowance, Acid Burn Women and Physically handicapped and Insolvent disable 190

Grameen Bank along with thousands of NGOMFIs are the main operators in the field of microcredit (in broader term microfinance). The services provided by these organizations to the

economically vulnerable segment of population in the country are given at Table 1.

4.1

Legal Framework of Private Sector MFIs

It has been mentioned earlier that Grameen Bank was established in 1983 under an act known as "Grameen Bank Ordinance' 1983. NonGovernment Organizations or NGOs are registered as social development organizations under legal systems (Table 2). These NGOs have started working as social development organizations other than microfinance, and most of them shifted to microfinance operations sometime in late eighties. Currently, almost all of these NGOs have microfinance operations in their development portfolio. However, the microfinance operations of these NGOs were remain out of any centralized monitoring system till 2006 before the enactment of Microcredit Regulatory Authority Act, 2006. Some basic information of Grameen Bank and three large NGO-MFIs is given at Table 3.

discussion. Increasing role of MFIs in building an inclusive financial market could not be over looked anymore. Bangladesh Bank commissioned a study in December 1997 to examine "the Regulatory Aspects of Microfinance Institutions (MFIs) and linking it with the formal financial Sector". The study was completed in 1998 and the major findings and recommendations were as follows: i) The regulation available in the form of statutory requirement under the existing banking and financial laws will not cater to the special needs of this sector, and ii) Legal recognition of MFIs through enactment of law is required to access formal sources of funds. Subsequently, in the light of the above recommendations, stakeholders raised the issue of regulation for this sector. Consequently, the government formed a Committee under the chairmanship of the governor of Bangladesh bank in October 1999. The TOR for the work of that Committee was to: i) To formulate a policy guideline to regulate the NGOs and MFIs involved in microcredit and financial business and to determine performance standards based on best practices to improve the quality of their operations. ii) To provide recommendations for ensuring transparency and accountability of their activities and uniform accounting procedure iii) To recommend the way of monitoring the activities of the NGOs and MFIs involved in microcredit and financial business iv) To provide recommendations on a suitable regulatory body (MRRU established by 191

4.2

Background of Microcredit Regulatory Authority Act, 2006

Non-government organizations (NGOs) started different social development works in Bangladesh at the beginning of seventies of the last century and gradually they entered into the field of microfinance along with their development activities. MFIs engaged themselves in the process of financial intermediation through providing various kinds of financial services such as credit, savings, insurance etc. In the aftermath of booming expansion of microfinance sector in 1990s, the regulation of Microfinance Institutions (MFIs) came forward as an important agenda for

the Committee or its replacement) for proper management of microcredit activities and foster the growth of financial business and to uphold the faith of people in such activities. This Committee prepared its report after discussing the issue with policy-makers, stakeholders, academicians and other civil society members at national level and finally submitted the report to the government in March 2000. The major recommendations of the committee consist of formulating the following policies and actions: a) Policy for loan classification, provisioning, interest rate, reserve requirement against savings/ deposit, and investment of savings/deposits, b) Policy for uniform accounting standard, internal and external audit, c) Fix up the upper limit of administrative expenses of NGOs, d) e) and Formulation of a prudential guideline, Formulation of performance standard,

the Committee completed the following works by June 2003 : a) Prepared a guideline to assess the performance, b) Prepared a financial guideline,

c) Prepared ToRs of external and internal auditor to ensure financial transparency and accountability, and d) Started collecting information on management, operations and accounts of NGOMFIs on regular basis according to a set of specified formats. Eventually, a draft law was prepared with the help of the sector representatives and lawyers, which was enacted by the government on 16 July 2006 as "Microcredit Regulatory Authority act, 2006" with effect from 27 august 2006.

4.3

Licensing of the MFIs

f) Creation of a separate regulatory body or a subsidiary organization of Bangladesh bank. On the basis of the above recommendations, a unit, namely "Microfinance Research and Reference unit (MRRU)" was established in Bangladesh bank under the supervision of a national steering committee in June 2000. The governor of the Bangladesh bank headed this committee which included members from both government and private sectors. According to the Terms of Referances (ToRs), 192

i) Legal requirement regarding licensing: According to the Act, no MFI can carry out microcredit activities without obtaining license from MRA. Section 15 (2) of " microcredit regulatory authority act, 2006" has made it mandatory for MFIs who had microcredit activities before the effective date (27 august 2006) of the act to apply for license to MRA within six months (February 26,2007) from the effective date of the act. ii) Minimum Criteria for License: According to the provision of the law 4236 NGO-MFIs applied to MRA for license by February 26, 2007. For primary selection, the authority had set a threshold level for the MFIs of having either 1000

borrowers or TK 40 lacs principal loan outstanding, and a little over 600 MFIs were selected primarily under the criteria. Rest of the institutions were given time up to 30 June 2009 to fulfill the aforesaid criteria which was later extended up to 31 December 2009. Recently a circular has been issued among the MFIs, having number of borrower below 800 and loan outstanding below Tk 40 lac to stop microcredit activities and refund the savings (in any) within march 2010. iii) Licensing procedure : Off-site assessment & on-site inspection are conducted. However, PKSF partner organizations (POs), in most cases, are exempted from on-site inspection for licensing purpose to accelerate the process. PKSF's opinion is sought for licensing of their POs. a) Off-site assessment: This function is accomplished on the basis of cross checking the information given by the MFIs in their application for license with their audited financial statement and 8 pages by annual statements developed by MRA. Sometimes MFIs are asked to submit additional documents if required. b) On-site inspection : MRA officials verify data at head office, branch and field level of the MFIs. iv) Present Status of License

Detail Rules to monitor the sector : For sound monitoring of the sector MRA has been delegated Power to frame Rules under section 51 of Microcredit Regulatory Authority Act, 2006. According to this section the Authority may frame rule with prior approval of the government and by notification in the government gazette. Accordingly, MRA has prepared a set of draft regulations after several discussions with the stakeholders, which is now pending with the government for final approval. The regulations have covered the followings: a) i) Governance issue: Appoint of full time CEO by board

ii) Chairman & CEO will not be the same person iii) Chairman & CEO will not be of the relationship of father-mother, daughter-son, husband-wife and brothers-sisters. iv) Maximum tenure of membership of board of directors for 6 years in consecutive two terms. b) i) Financial management Sources and application of fund Utilization of surplus

Serial 1 2 3 4

Status

No. of MFIs 502 1770 1180 784 4236

ii)

Licensed Rejected Under circular to stop operation Under process ( under assessment and inspection ) Total

iii) Liquidity reserve -15 per cent of total savings of which 5 per cent must be in cash. iv) v)

vi)

Acquisition of fixed assets Heads of income and expenses

Accounting and reporting requirements

193

c)

Operational Aspects

iv) Maximum amount of voluntary savings must not exceed 25 per cent of capital fund III Conditions for mobilizing term savings

i) Opening of branch and shifting of head office/branch office ii) Dealings with the clients (transaction procedure, duties & rights etc.) iii) iv) v) d) Operation of bank accounts` Preservation of documents Personnel management etc Savings mobilization

i) Minimum 10 years' experience of microcredit operations ii) Documentations supporting profitable operations of last 5 years iii) Current and cumulative recovery rate not below 95 per cent and 90 per cent respectively in the last 10 years. iv) Maximum amount of voluntary savings must not exceed 25 per cent of capital fund e) Interest rate/service charge :

Generally, savings will not exceed 80 per cent of principal amount of loan outstanding. If it exceeds 80 per cent of principal amount of loan outstanding the additional amount has to be invested in a scheduled bank as FDR. However, in any circumstances the total amount of savings will not exceed the principal amount of loan outstanding. I) i) ii) iii) Categorization of savings: Compulsory savings Voluntary savings and Term savings.

II) Conditions for mobilizing voluntary savings i) Minimum 5 years' experience of microcredit operations ii) Documentations supporting profitable operations of last 3 years iii) Current and cumulative recovery rate not below 95 per cent and 90 per cent respectively in the last 5 years. 194

According to the provision of the proposed regulation MRA will determine the maximum rate of interest rate/service charge of the MFIs. There are different views on the prevailing rate of effective service charge. The MFIs also have logic of charging higher rate of interest in comparison with the banking sector to cover-up their higher operating cost of small loans and door to door service. MRA, InM, PKSF and a USA based research organization named Transparency International are collaboratively conducting research on maximum effective rate of service charge of the MFIs. Until the research is completed, the MFIs have been advised to charge the clients in such a way so that the effective rate of service charge does not exceed 30 per cent. 5 Concluding Remark

It is expected that implementation of the said regulation will accelerate the growth of the sector and at the same time it will protect the interest of the poor clients.

Table 1 : Services Provided by the NGOs-MFIs to Economically Vulnerable Populations Savings

· · · · · · · Regular/Compulsory savings Voluntary savings Flexible Daily Time deposit/ DPS Fixed deposit Risk fund

Credits

· · · · · · · · · · Term loan Entrepreneurs loans Housing loan Health & Sanitation Seasonal Education Disaster Special Education Consumption

Insurance

· · · · · Health Life Credit Property Crop

Table 2 : Legal Framework for Registration Acts

Societies Registration Act of 1860 Companies Act 1913/1994 as a non-profit companies Voluntary social welfare Agencies Ordinance of 1961 Foreign Contribution Ordinance of 1962 Foreign Donation Regulation Ordinance of 1987 Trust Act 1882

Dealing Authority

Joint stock Companies Joint stock Companies Social Welfare Ministry NGO Affairs Bureau NGO Affairs Bureau Ministry of Law

Table 3 : Basic Information of Grameen Bank and 3 Large NGO-MFIs Sl. No. Name of MFIs No. of Clients/ Members

7,970,616 8,359,993 5,912,550 697,644 22,940,803

No. of Borrowers

Loan Outstanding (Amount in Crores)

5,471.45 4,387.96 2,419.48 342.86 12,621.75

Savings (Amount in Crores)

8,295.36 1,839.86 749.8 119.8 11,004.82

1 2 3 4

Grameen Bank BRAC ASA Thengamara Mohila Sabuj Sangha (TMSS)

7,970,616 6,241,328 4,573,222 535,275 19,320,441

195

Annexure 6.1.15

MICRO-FINANCE MODEL AND BANGLADESH EXPERIENCE

Dr Mahabub Hossain

1 What is Micro-finance? dependent on moneylenders for high-interest loans that sustain the vicious circle of poverty. · If credit were extended to these households on easy terms, they could save small amounts at the end of each loan cycle that will facilitate gradual increase equity in the business capital, and set the household on a path of virtuous cycle out of poverty. · But formal financial institutions do not consider the poor households creditworthy, since the size of loan is tiny and the borrower cannot offer any collateral that could be invoked in case of default of loans. · Dr Yunus went to a nearby branch of a Krishi Bank and pleaded to give them loans under his own personal guarantee. · Since the household is engaged in activities which generate regular incomes (cottage industries, petty trade, transport operation, etc.), a weekly loan repayment system was introduced as it suits the circumstances of low-income households. · The loans were all repaid in time to the surprise of the bank officials. But they argued that the loans were paid because of the personal influence of the Professor. · The senior management of the Krishi

A programme for supply of small credit to and mobilization of small savings from households who do not have access to formal financial markets. The term was coined to describe the replication of the Grameen Bank model for micro-credit in the developing world that combines savings mobilization with supply of small amount of loans to low income households for generation of basically self-employment in various types of income generating activities. 2 Origin of the Grameen Bank Model

· A socio-economic study of credit operation in a village near Chittagong University (Zobra) by Professor M. Yunus in 1976 laid the foundation of the micro-credit programme. · The study observed that a substantial number of low-income households operate very small size of economic activities by taking loans from moneylenders with very high rate of interest, often 10 percent per month. · After paying the interest charge on the loan and the cost of subsistence of the family, the households have very little surplus left to accumulate savings to expand business. · 196 The operators are thus perpetually

Bank gave him a challenge to replicate the experience in an area outside Chittangong. · A low-cost loan fund obtained from a grant from IFAD was offered to Professor Yunus to operate his credit programme in the Tangail district. · With repeated experiments, a loan delivery and repayment system was developed. This system is still used in most microfinance organizations in the world. · In 1983, the Ministry of Finance was convinced of the micro-credit model and the Grameen Bank was for mally launched in Bangladesh. · Most other NGOs including those who had been engaged in awareness raising activities and in reducing gender inequality adopted the Grameen Bank credit model as a key activity. 3 Key Features of the Grameen Bank Micro-Credit Model

empower women. Micro-credit would help channel new assets to women that could help reduce gender equality. · The weekly meetings was a venue to use credit as an entry point to all round social development. · Sixteen decisions become the code of conduct for member of the credit programme. The weekly meetings begins with chanting the sixteen decisions. · Members themselves propose economic activities to be financed with the loan. The proposals are scrutinized by the members in the weekly meeting. Repayments are collected and social issues affecting the lives of the members are discussed.

3.1

Features of the Grameen Bank Credit Model

· Small loans at the beginning without any collateral security, with successive larger size loans after the end of each credit cycle. · Loans are offered for a year with a schedule of repayment with 50 equal weekly installments, and the repayment of interest in the remaining two weeks. · The rate of interest varies between 12.5 to 15 percent per year at a flat rate. The effective rate of interest becomes 25 to 30 percent. · The rate of interest is high due to the high cost of loan servicing due to small size of loans and intensive paper work. · Two members of the Group are offered 197

· Formation of a five member group with like-minded people to act as peer pressure to ensure utilization of the loan and repayment in time. · A number of groups in the village formed a village Organization that meet once a week at a fixed time . The meeting is attended by the bank worker to conduct bank business. · The credit was offered to households through a women member. It is believed that women are responsible with money and are agents of social change. · The control over money could also help

loans in small amounts. Other members receive loans when the first two members maintain the repayment schedule. The Group becomes ineligible for a new loan if one member defaults. · Five percent of the loan amount is deducted at the time disbursement of each loan and deposited in a savings fund along with the personal weekly savings. The accumulated savings could be withdrawn at times of emergency and when the member leaves the Group. · An Emergency Fund was also instituted as an insurance against loss of capital due to unforeseen circumstances

internationally. The World Bank set up a consortium (CGAP) to support this effort of international replication of the micro-credit movement. · Since the mobilization of savings was a part of the objectives of micro-credit organizations, micro-credit was renamed as microfinance by academic institutions that introduced a new course for students in developed country organization. 4 Role in Poverty Reduction

· Unemployment and under-employment of the labor force and low wage rate are the root cause of poverty. · At low levels of income, the size of the formal sectors ­ manufacturing and services ­ is small. Even a double digit growth rate cannot absorb all additions to the labor force. · Those who cannot find employment in the formal sectors are absorbed in agriculture and infor mal sectors, creating massive underemployment and disguised employment. · Credit is a capital support. The unemployed worker can combine capital with his/ her labor to produce goods that can be sold in the market. · Access to credit can lead to gradual reduction in poverty if the rate of return on capital in the self-employed enterprise is higher than the rate of interest charged on the loan. · The speed of the process to poverty reduction depends on a) the demand for goods and services produced with the loan, b) the size of the loan, and c) the propensity to save the additional income.

3.2

Transition from Micro-credit to Microfinance

· The grameen bank model was accepted by many NGOs in Bangladesh engaged in empowering the poor through community development and awareness raising programme. · Some NGOs were established with sole purpose of providing credit to the poor and making micro-credit as a self-sustaining business, like Association for Social Advancement (ASA). · ASA developed a simple method of credit delivery that does not require formation of organization to reduce the cost of credit operation. · The Palli Karma Sahayak Foundation (PKSF) was established by the government (with support from the World Bank) to encourage local NGOs support generation of self-employment with micro-credit. · Professor Yunus set up Grameen Trust to replicate the Grameen Bank model 198

· The payment of weekly installments made it easy for the borrower household to save the income from the loan. It would have been difficult to accumulate the small savings and repay the loan at one installment. · At the end of the loan cycle, the loan becomes equity. With a repeat loan the size of the capital grows. · The larger the difference between the rate of return on capital and the rate of interest charged on the loan, the faster the income grows. · If the demand for goods and services produced by the enterprise is limited, competition in the market with new enterprises and larger size of existing enterprise will drive down prices and the rate of return on capital, thereby depressing the poverty reduction effect of microfinance. Sustainable expansion of microfinance depends on the growth of the economy 5 Critique of the Microfinance Model

that it has become an institutionalized form of usurious money lending business. · In order to reduce cost, there has been a gradual de-emphasize on social development activities that accompanied microfinance movement in the early years.

5.1

Present Position of Microfinance in Bangladesh

· Microfinance has become a business with many financial institutions interested in lending money to microfinance organization. · Microfinance business has expanded vastly reaching market saturation. Over the last few years microfinance business has been expanding at a rate of over 30 percent per year. · Grameen Bank, ASA and BRAC alone extends credit to nearly 20 million households. PKSF funds nearly 240 local NGOs that may cover anther four to five million households. · Bangladesh has only 30 million households, 25 million in rural areas where most of the microfinance business is conducted. · Studies from household side however shows that not more than 55 percent households have been reached with credit services. · Overlapping has become a big problem. One household or different members of the same household are served by a number of microfinance organizations with adverse impact on credit discipline and loan recovery. · Over supply of credit and too much competition among microfinance borrowers have 199

· The rate of interest charged on the loan was on a declining balance, the real rate of interest on micro-finance is very high, over 25 percent per year. · Not all borrowers have entrepreneurial capacity. There are many cases of failure in business. · Coercion is used by bank workers to get repayment from unsuccessful borrowers. They often had to sell assets to repay that deepens their poverty. There are cases of migration to other areas. · A common critique of microfinance is

led to reduction in the rate of return on credit, leading to difficulty in maintaining repayment schedule. · Frequent natural disasters leading to loss of capital and disruption of economic activity exacerbated the problem of maintaining repayment schedule. · Coercion on getting the repayment in time has created a negative image for microfinance among the civil society in Bangladesh. · Older microfinance organization have established better competitive edge in the market due to accumulation of savings which is now used as a low cost loan fund. · Many older microfinance organizations with high accumulated savings now allow savings to be used to show regular repayment of installments and excellent recovery on paper. · The critique of the microfinance model as a strategy for poverty reduction has been growing. Table 1 shows expansion of microfinance operations in Bangladesh till December 2007. · By 2008 the microfinance programme has reached 22 million households extending credit services to 18 million borrowers. · The programme disbursed Tk 20,000 crore with outstanding loan of TK 9,000 crore, and mobilized savings of TK 2,800 crores. · The size of business has been expanding at nearly 20 to 30 percent in recent years. It provides employment to 140,000 educated labor force. 200

Comparative performance of large MFIs as of December 2007 is given in Table 2. · The programme is dominated by three major institutions, Grameen Bank, BRAC and ASA, together accounting for nearly 90 percent of total business. The other significant actors are TMSS and BURO Bangladesh. · The efficiency of operations can be measures by the amount of outstanding loan per member. With regard to this indicator, Grameen Bank is at the top followed by BRAC. · The other important indicator is mobilization of savings which is a low cost loan fund. Grameen Bank has comparative advantage over others with regard to this indicator also. Table 3 shows coverage of NGOs in rural Bangladesh till January-March 2008. · A national level sample survey conducted during January to March 2008 found that almost half of the households have never been member of microfinance organization and another 10 percent were members but dropped out later. Thus only 40 percent were currently members. · The coverage estimated from the demand side is thus much lower than the number estimated from the supply side. It indicates that there is substantial overlap in coverage, i.e., one household is covered by a number of institutions. · Six percent of the households reported that they are members of more than one MFIs. Table 4 shows the extent of coverage and overlap with other organization by specific NGOs during January- March 2008.

· The coverage of membership is the highest for the Grameen Bank which covers nearly 15 percent of all rural households; BRAC covers only nine percent. · The extent of overlap with other organizations varies from 20 to 34 percent. · The incidence of overlap is the highest for ASA and the lowest for local NGOs supported by PKSF. · The overlap breaks credit discipline and appears to be the major weakness in microfinance operations. Table 5 shows achievements of BRAC microfinance programme from 2006 to 2008. · The expansion of microfinance programme slowed down in 2008. The average outstanding loan increased by 28% in 2008 compared to 43% in 2007 · The expansion of credit under Dabi, the microfinance product for the poor has almost stagnated. · Most of the expansion of loan has been on account of Progoti, the loan product for microentrepreneurs. · The accumulation of savings also slowed down (12%) substantially during 2008, which has increased the cost of loan fund.

· The surplus from operation of the microfinance programme was substantially lower in 2008 compared to 2006. 6 Concluding Remarks

· We must recognize that traditional microfinance products (annual loans with weekly repayments) can reach market saturation if the rate of expansion is not in conformity with general growth of the economy. · Unplanned expansion can lead borrowers to poverty deepening than to poverty reduction. · The microfinance organizations must seek vertical expansion with larger loan size with different loan products and different delivery and recovery mechanism. · The expansion of micro-credit for generation of self-employment in non-farm activities has led to tightness in the rural labor market and rapid increase in rural wages. The micro-credit movement thus has indirectly helped increase income for labor selling households not reached by micro-credit. · There is an unmet demand for credit for many other economic activities in rural areas not yet served by formal financial institutions. Traditional micro-credit model of delivery and recovery of loan is not suitable for servicing these loan demands. Thinking "out of box" in necessary to extend supply of credit to these directions.

201

Table 1 : Expansion of Microfinance Operations in Bangladesh, till December 2007 Indicators Increase 2005 2006 2007 Per cent 2005 to 2006

Number of employees (000) Number of members reached (million) Number of borrowers (million) Loan outstanding (Tk crore) Net Savings (Tk crore) Average loan size (TK) 96 17.3 12.82 5,166 1,845 17, 081 110 19.1 14.96 6,777 2,252 16,672 139 21.8 17.67 8,693 2,764 18,732 14.6 10.4 16.7 31.2 22.1 2.4

2006 to 2007

26.9 14 18.1 28.3 22.7 12.4

Table 2 : Comparative Performance of Large MFIs, December 2007 Indicators Grameen Bank

25,283 7.41 3,634 14,37 4,904 135

BRAC

ASA

TMSS

BURO

Number of Staff Number of borrowers (millions) Loan outstanding (crore taka) Loan outstanding per staff member (000 TK) Loan Outstanding per borrower (TK) Savings as % of loan outstanding

34,841 6.41 3,632 10,36 5,643 38

25,125 5.42 2,470 9,83 4,558 19

4,414 0.538 284 6,44 5,286 35

2,460 0.308 194 7,90 6,311 42

Table 3 : Coverage of NGOs in Rural Bangladesh, January-March 2008 Indicators

Never members of NGOs Members earlier but dropped out Members of Grameen Bank alone Memebers of BRAC alone Members of ASA alone Memebers of other NGOs Member of more than one NGOs Total

Percent of Households

51.5 10.6 10.8 6 6.3 9 5.8 100

202

Table 4 : Extent of Coverage and Overlap with other Organizations by Specific NGOs, JanuaryMarch 2008 Organization Coverage (per cent)

14.8 8.9 9.7 11.3

Extent of Overlap (per cent)

27 31 34 20

Grameen Bank BRAC ASA Other NGOs

Table 5 : Achievements of BRAC Microfinance Programme, 2006 to 2008 Indicators

Number of staff Number of loans made (000) Loans Outstanding (Tk million) Dabi Unnati Pragoti Accumulated savings (Tk million) Service charge received (Tk million) Net surplus (Tk million)

2006

17,484 3,815 21,141 13,462 2,806 4,873 10,595 6,081 1,700

2007

23,533 4,873 30,328 16.879 4,742 8,708 13,467 7,913 510

2008

15,728 5,057 41,537 18,659 5,925 16,953 15,765 10,331 1105

203

Annexure 6.1.16

NON-FARM ECONOMY IN BANGLADESH : NATURE, DETERMINANTS AND IMPACT ON POVERTY REDUCTION

Dr Mahabub Hossain

1 RNFE (Rural Non-farm Economy) in Development Process

"From relatively a minor sector, often largely parttime and subsistence oriented at the early stages of development, the rural non-farm economy (RNFE) develops to become a major motor of economic growth in its own right, not only for the countryside but for the economy as a whole." - Rosegrant and Hazell, 2000 "The growth of rural non-farm economy also has important implications for the welfare of women and poor households, sometimes helping to offset inequities that can arise within the agricultural sector." - Rosegrant and Hazell, 2000

3

Data Source

· Sample households survey 1987-88 and 2000 multi-stage random sampling Selection of 64 unions One representative village per union Census of households in the village random sampling of

Stratified households

20 samples per village in 1987-88 and 30 in 2000-01 · Household Stratification

2 · · limit

Importance of RNFE for Bangladesh No scope for expansion of land frontier Increase in cropping intensity approaching By land ownership and land tenure in 1987-88 By wealth ranking in 2000-01 using PRA method 1987-88 sample households covered in 2000-01 4 Rural Non-farm Activities Manual labour based

· Low employment elasticity for agricultural growth · Continuing growth in population and labour supply · RNFE - a key sector for employment generation 204

·

Artisans, transport operator, construction worker, wage labour in business enterprises · Human Capital based

and key, tiles making, lathe machines for light engineering · Transport operation related : Vehicle renting, operation of ferry ghat, vehicle renting, repairing rickshaw/ vans, boat and cart making Restaurants an teastalls, peddling tea and biscuits · Others : Cloth shop, phone and fax machines, electronics, utensils cookeries, beautification saloons 6 Linkages with Agriculture

Public sector employees, teachers, imams, village doctors and midwives, personal services, financial services · Physical and Human Capital based

Rural industries, peddling, shop-keeping, petty trading and retailing, large trading, contracting 5 Rural Business Enterprises

· Backward linkage: supports operation of agriculture by providing inputs · Forward linkage: Marketing and processing of agricultural products · As farm income and market expands with agricultural growth, activities develop to support consumer demand · Importance of different business activities and the average size of capital during 2000-01 (Table 1). 7 Share of Non-farm Activities in Rural Capital Formation (Table 2)

· Agricultural input related : Irrigation pumps, power-tillers, threshing machines, agricultural implements, fertilizers, pesticides, seeds, seedlings, spare parts · Crop output related : Paddy and jute storage and trade, vegetable and fruit stalls, rice and wheat stalls, oilseeds, pulses and spices stores · Livestock and fisheries related : Milk trading, sweetmeat and card stalls, cattle and goat trading, Fish trading, fish drying and trading · Forestry related : Timber trading, firewood trading, saw milling, bamboo and cane trading, hogla leaves (for mat making) trading · Agro-processing : Rice and floor mills, oil mills, gur (raw sugar) making, weaving, tailoring, mat making, fishing net making, boat and cart making, goldsmith, pottery, bamboo fixtures, furniture making · Construction materials related : Brick fields, hardware shops, cement and still rod shops, lock

· Growth of agricultural productivity is the source of rural capital formation · But surplus from agriculture is often invested for accumulation in rural non-farm activities · Increase in the scale of business is limited in agriculture, and agricultural products have lowincome elasticity 205

· There is no limit to expansion of business in non-agricultural enterprises Duration of employment and labour productivity in off-farm and non-farm activities (Table 3) · Non-farm activities are relatively full time occupation · Productivity in RNFE higher than the wage rate in agricultural labour market · Expansion of RNFE due to "pull" factors · Structure and growth of rural income during 1987 and 2000 (Table 4) RNFE has become a dominant source of rural income Recent growth in rural income almost entirely from expansion of non-farm activities 8 Determinants of participation

· Sources of initial capital and investment made in the last year (Table 8) 8 Impact on Reduction of Poverty and Inequality

· Estimates of poverty by primary occupation of the household head and the size of land owned by the household (Table 9) · Impact of non-farm economy on the distribution of rural incomes: results of gini decomposition during 2000 (Table 10) 10 Conclusions

· Limited capacity of agriculture to generate productive employment · Households investing agricultural surplus for human resource development and capital accumulation in non-agriculture to facilitate occupational mobility · RNFE has become a vibrant sub-sector contributing to productivity growth and reduction of poverty · Employment opportunity in RNFE is taken up by households better endowed with education and capital, leading to greater income inequality · Public sector investment for universal secondary education and physical infrastructure needed to support expansion of RNFE and better distribution of incomes

· Factors affecting participation in rural non-farm activities: Estimates of a TOBIT Model expressed in t-values (Table 5). · Determinants of Rural Non-farm Incomes during 2000 (Table 6) · Major occupation for workers with different levels of education (Table 7)

206

Table 1 : Importance of Different Business Activities and the Average Size of Capital, 2000-01

Type of Business Share of Enterprise (n=566) Agricultural inputs Crop products Livestock products Fisheries products Forestry products Agro-processing Construction materials Transport business Restaurants Garments Grocery stores Other non-agriculture Total 14.1 20.7 6.0 4.8 6.4 6.2 4.9 4.1 6.7 3.7 13.8 8.7 100 Share of Capital (Per cent) 8.5 8.2 7.2 2.1 3.8 5.3 10.1 10.5 2.1 15.8 11.2 15.3 100 Share of Investment (last yr) (per cent) 6.6 16.8 15.0 2.8 4.7 1.7 12.5 3.5 0.9 9.9 19.9 5.6 100 Average Size of Capital (Tk) 28,384 18,646 56,980 20,726 28,347 40,434 96,321 122,604 14,483 200,810 38,365 83,439 47,262

Table 2 : Share of Non-farm Activities in Rural Capital Formation (Per cent of total) Sector

Agriculture Transport Industry/ processing Total Value (US$)

1988

53.3 13.5 33.2 100 196

2008

29.9 33.8 36.3 100 470

Table 3 : Duration of Employment and Labor Productivity in Off-farm and Non-farm Activities Activity Employment (d/yr) 1987-88

Agricultural labor Industrial labor Rickshaw pulling Construction labor Shop keeping Trade & business Services Total 200 211 218 92 299 216 310 217

Productivity (US$/day) 1987-88

0.89 1.16 1.42 1.13 1.21 1.97 1.67 1.41

2000

175 209 259 50 351 244 242 224

2000

1.09 1.09 1.40 1.51 1.32 2.69 2.17 2.03

207

Table 4 : Structure and Growth of Rural Income, 1987 and 2000 Source of Income Annual Income (current US$) 1987

Agriculture Rice farming Non-rice agriculture Agricultural wage labor Non-agriculture Trade and business Services Non-agricultural labor Total 543 264 176 102 388 123 194 71 931

Share of Income (per cent) 1987

58 28 19 11 42 13 21 8 100

Growth of Income (per cent/year)

2000

565 250 265 50 667 287 299 81 1,232

2000

46 20 22 4 54 23 24 7 100 0.3 -0.4 3.2 -5.2 4.2 6.7 3.4 1.1 2.2

Table 5 : Factors Affecting Participation in Rural Non-farm Actvities : Estimates of a TOBIT Model Expressed in t-values Factors

Size of land owned (ha) Area under tenancy (percent of holding) Age of the household head (years) Household workers (number) Dependency ratio (consumer/worker) Average education of worker (years of schooling) Value of non-land fixed assets (thousand Taka) Coverage of modern rice varieties (percent of cultivated area) Status of infrastructure development (Villages with developed infrastructure =1) Constant term Sigma Log likelihood function

Business Enterprises

-1.44 -1.86 -3.59* 5.07* 3.67* 1.57 7.31* 1.29 3.47* -4.90* 30.57* -4158

Services

-4.39* -3.80* 3.38* -1.39 -2.82* 10.63* 0.86 -3.48* 0.83 -5.02* 27.85* -3548

Non-farm Labor

-7.19* 0.73 -4.81* 7.49* 1.09 -5.86* -5.24* -4.28* 1.63 -0.85 25.91* -3000

Note: The dependent variable is measured as the share (percent) of the non-farm activity to total household income. Figures are asymptotic `t" values where * denotes statistical significance at 1% probability error Source: Estimated from household level data from the BIDS-IRRI surveys

208

Table 6 : Determinants of Rural Non-farm Incomes, 2000 Factors Regression coefficient t-value Elasticity with regard to the factor

-0.08 0.27 0.12 0.13 0.10 0.04 0.04 0.17 0.06 -N=1,888

Agricultural worker Non-agricultural worker Agricultural Capital Non-agricultural Capital Education of Workers Households with a member Abroad Foreign Migrant* Capital Electricity*non-farm worker Quality road*non-farm worker Constant term

-70 212 0.55 0.22 15.82 253 0.29 384 85 -27.58 R2=0.69

-2.90 8.02 7.00 35.39 3.55 5.31 17.38 10.51 3.09 -0.61 F=415

Table 7 : Major Occupation for Workers with Different Levels of Education Education Level and period of info. First

No formal schooling: 1987-88 2000-01 Primary school: 1987-88 2000-01 Secondary school: 1987-88 2000-01 SSC & above: 1987-88 2000-01 Cultivation (37) Cultivation (38) Cultivation (48) Cultivation (39) Cultivation (52) Cultivation (35) Services (48) Services (56)

Occupation (per cent of worker) Second

Agri-labor (34) Agri-labor (25) Agri-labor (19) Trading (13) Services (17) Services (23) Cultivation (33) Cultivation (20)

Third

Trading (7) Rickshaw (9) Services (8) Agri-labor (10) Trading (11) Trading (16) Trading (9) Trading (14)

209

Table 8 : Sources of Initial Capital and Investment made in the last year Source of Capital

Commercial Banks NGOs Money Lender Friends & Relatives Own Savings Disinvestment of Assets Total

Initial Capital

10.9 2.6 3.7 6.0 71.6 5.2 100.0

Investment in the last year

9.3 4.4 6.1 2.2 76.2 7.9 100.0

Table 9 : Estimates of Poverty by Primary Occupation of the Household Head and the Size of Land Owned by the Household Land owned (ha) Head-count index a) Agric.

70.1 40.5 11.1 48.3

Poverty-gap index a) Agric.

32.2 14.4 3.1 20.3

Squared poverty gap index a) Agric.

18.5 7.3 1.2 11.2

(Occupation)

With up to 0.2 ha 0.2 to 1.0 ha Over 1.0 ha All household

Non-agric.

46.0 11.2 0.0 30.9

Non-Agric.

13.0 2.9 0.0 8.7

Non-Agric.

5.5 1.1 0.0 3.6

Source : Own estimates based on household level data from IRRI sample survey Note : a) = For methodology of estimating poverty, see Foster et al, 1981

Table 10 : Impact of Non-farm Economy on the Distribution of Rural Incomes: Results of Gini Decomposition, 2000 Sources of Income Income Share (per cent)

Rice farming Non-rice agriculture Agricultural labor Trade and business Services Other non-agriculture Total 20.3 21.5 4.1 23.3 24.3 6.5 100.0

Concentration of Income Absolute contribution from the source of the Source to (Pseudo Gini) Income Inequality

0.435 0.471 -0.308 0.606 0.551 0.025 0.454 0.088 0.101 -0.013 0.141 0.134 0.002 0.454

210

Annexure 6.1.17

CONCEPTS AND ELEMENTS OF GOOD GOVERNANCE

Prof. Nazmul Ahsan Kalimullah

"Good governance" is a normative conception of the values according to which the act of governance is realized, and the method by which groups of social actors interact in a certain social context. In the last twenty years, the concepts of "governance" and "good governance" have become widely used in both the academic and donor communities. These two traditions have dissimilar conceptualizations. First, there is the academic approach, which focuses mainly on the study of the different ways in which power and authority relations are structured in a given society. Second, there is the donor community's approach, which puts emphasis on the role state structures play in ensuring social, economic and policy equity and accountability through open policy processes. According to the academic approach, the generic understanding of governance is the management of resources and policy-making by means of exercising authority (power). Thus, it entails all instruments through which different policy stakeholders exercise legal rights with the aim to achieve political, economic, cultural and social objectives. In this sense, the term "governance" appears to be more and more used in order to denote a complex set of structures and processes (at the public as well as at the private level), which are generally associated with national administration. However, its definitions offer a rather broad horizon of interpretation: wherever we can find this term, its definition varies slightly. 1 The Development of Concept

The concept of good governance emerged mainly because practices of bad governance, characterized by corruption, unaccountable governments and lack of respect for human rights, had become increasingly dangerous, and the need to intervene in such cases had become urgent. Good governance has become an important element of the political and economic agendas, and has meanwhile been better specified along with the proliferation of good practices that take the concept into consideration. Beyond entailing just multiparty elections, a judiciary and a parliament, which have been identified as primary components of Western-style democracies, good governance goes on to address several other central issues: Universal protection of human rights; nondiscriminatory laws; efficient, impartial and rapid judicial processes; transparent public agencies; accountability for decisions by public officials, devolution of resources and decision making to local levels from the capital; and meaningful participation by citizens in debating public policies and choices. 2 One Concept - A Variety of Contexts

"Good governance" is a normative conception of the values according to which the act of governance is realized, and the method by which groups of social actors interact in a certain social context. When talking about good governance, 211

what is generally referred to is the ability to perform efficiently, effectively and responsively, guided by principles that are feasible and desirable at all levels of the society, not just at the political one. As noticed in research material, reports and studies on the subject, good governance is a notion that refers to, and is functional in, a number of domains, going from institutional development to non-state actors' involvement. The principle of good governance covers different ideals for a better society. First of all, there's a technical dimension of the concept, which refers to "the economic aspect of governance, namely the transparency of government accounts, the effectiveness of public resources management, and the stability of the regulatory environment for private sector activity" Secondly, the social dimension, i.e. "to build, strengthen and promote democratic institutions as well as tolerance throughout society." And thirdly, the political dimension refers to "the legitimacy of government, the accountability of the political elements of government and respect for human rights and the rule of law." 3 Contemporary Concepts of Good Governance

accountable, lawful, and legitimate in the way they govern, stagnating and poorly performing countries will not experience the kind of vigorous, sustained development that transforms levels of human development and permanently lifts large segments of the population out of poverty. E-Governance: E-governance is about the use of information technology to raise the quality of the services governments deliver to citizens and businesses. Basically, it is beyond the extent of egovernment. As e-government is distinct as a simple delivery of government services and information to the public using electronic means, e-governance allocates direct involvement of citizens in government activities. Saxena (2006: 501) mentions the following dimensions of egovernance: E-services : the electronic delivery of government information, programmes, and services; E-commerce : the electronic exchange of money for goods and services, such as citizens paying taxes and utility bills, renewing vehicle registration, and paying for recreation programmes, or government buying office supplies and auctioning surplus equipment; and E-management : the use of ICTs to improve the management of government (from streamlining government processes to improving the flow of information within government offices). 4 Corporate Governance

Democratic Governance: Like the concept of `good governance', democratic governance seeks efficient institutions, and a predictable economic and political environment necessary for economic growth and effective functioning of public services. But the concept of democratic governance concerns political freedom and human rights, and removal of discrimination as central objectives (Abdellatif, 2003:10). Basically, democratic governance is the key to development. Except states can be made more responsible, competent, efficient, participatory, open, transparent, 212

Corporate governance is generally referred to as a system by which organizations are directed and controlled. Khan (2006:200) indicates, corporate governance deals with laws, procedures, practices and implicit rules that determine a Company's ability

to take informed managerial decisions vis-à-vis its claimants-in particular its shareholders, creditors, customers, the state and employees. Rossouw (2009:7) thinks the locus of control in corporate governance can be located either inside or outside of corporations or in a combination of inside and outside control. Corporate governance control located inside corporations will be referred to as ``internal corporate governance'' and outside control will be referred to as ``external corporate governance''. 5 Global Governance

on the elements of good governance, and on their relation to development. As the experiences of these organizations vary, so, too, do their perceptions of what constitutes good governance. Generally Good governance has 8 major elements. It is participatory, consensus oriented, accountable, transparent, responsive, effective and efficient, equitable and inclusive and follows the rule of law. It assures that corruption is minimized, the views of minorities are taken into account and that the voices of the most vulnerable in society are heard in decision-making. It is also responsive to the present and future needs of society. 7 Characteristics of Good Governance

James Boughton and Colin Bradford published an article in the IMF-Magazine "Finance and Development" in December 2007 entitled "Global Governance: New Players, New Rules". They define ideal global governance as such: "The ideal of global governance is a process of cooperative leadership that brings together national governments, multilateral public agencies, and civil society to achieve commonly accepted goals. It provides strategic direction and then marshals collective energies to address global challenges. To be effective, it must be inclusive, dynamic, and able to span national and sectoral boundaries and interests. It should operate through soft rather than hard power. It should be more democratic than authoritarian, more openly political than bureaucratic, and more integrated than specialized." 6 Elements of Good Governance

Participation: Participation by both men and women is a key cornerstone of good governance. Participation could be either direct or through legitimate intermediate institutions or representatives. Rule of law: Good governance requires fair legal frameworks that are enforced impartially. It also requires full protection of human rights, particularly those of minorities. Transparency: Transparency means that decisions taken and their enforcement are done in a manner that follows rules and regulations. It also means that information is freely available and directly accessible to those who will be affected by such decisions and their enforcement. Responsiveness: Good governance requires that institutions and processes try to serve all stakeholders within a reasonable timeframe. Consensus oriented: There are several actors and as many view points in a given society. Good governance requires mediation of the different 213

Good governance has long been a topic of discussion in the international arena, and particularly in the field of development assistance. Indeed, good governance is pivotal to the development process. A number of multilateral organizations including the United Nations Development Programme and the World Bank have reflected

interests in society to reach a broad consensus in society on what is in the best interest of the whole community and how this can be achieved. Equity and inclusiveness: A society's well being depends on ensuring that all its members feel that they have a stake in it and do not feel excluded from the mainstream of society. Effectiveness and efficiency: Good governance means that processes and institutions produce results that meet the needs of society while making the best use of resources at their disposal. Accountability: Accountability is a key requirement of good governance. Not only governmental institutions but also the private sector and civil society organizations must be accountable to the public and to their institutional stakeholders. 8 "Governance: The World Bank's Experience"

c) Legal framework for development. Appropriate legal systems should be created that provide stability and predictability, which are the essential elements in creating an economic environment in which business risks may be rationally assessed. d) Transparency and information. The themes of transparency and information pervade good governance and reinforce accountability. Access to information for the various players in the market is essential to a competitive market economy. 9 International Development Association (IDA)

In the 1994 report entitled "Governance: The World Bank's Experience", the recent progress made by the Bank in this area is set out under four different aspects, which provide a template against which its governance work can be assessed: a) Public-sector management. This is the most readily identified dimension of the World Bank's governance work. The language of public-sector management is predominantly technical, changing the organizational structure of a sector agency to reflect new objectives, making budgets work better, sharpening civil-service objectives and placing public-enterprise managers under performance contracts. b) Accountability. Governments and their employees should be held responsible for their actions. 214

IDA's governance discussion has centred mainly on governance as an element to be taken into account in determining the size of the resource allocations to be allotted to any given country.They emphasized that sustainable poverty reduction depends on sound policies, effective partnerships and systematic inclusion of the poor, affected groups and women in the development process. Good governance was seen as being critical to the development process and to the effectiveness of development assistance, and thus merited a specific inclusion in the institutions performance assessment methodology. They emphasized six elementsa) b) sustainability of structural reforms; property rights and rule-based governance;

c) quality of budget and public investment process; d) efficiency and equity of revenue mobilization; e) efficiency and equity of public expenditures; and

f) accountability and transparency of the public service. 10 The Asian Development Bank (ADB)

The ADB has identified four basic elements of good governance: a) Accountability. Public officials should be answerable for government behavior and responsive to the entity from which they derive authority. The accountability of public sector institutions is facilitated by evaluation of their economic performance. The suggested specific areas of action would be in the building of government capacity through, for example, publicsector management, public-enterprise management and reform, public financial management and civilservice reform. b) Participation. Government structures should be flexible enough to offer beneficiaries and others affected the opportunity to improve the design and implementation of public programmes and projects. The specific areas of action would be in the development of participatory development processes through, for example, participation of beneficiaries, a public/private-sector interface, decentralization/empowerment of local government and cooperation with nongovernmental organizations (NGOs). c) Predictability. Laws and policies should exist that regulate society and that are applied fairly and consistently. Predictability requires the state and its subsidiary agencies to be bound by and answerable to the legal system in the same way as private enterprises and individuals. The specific area of action could be the development of predictable legal frameworks for private-sector development.

d) Transparency. Information should be made available to the general public and there should be clarity as to rules and regulations. Access to timely information on the economy can be vital to economic decision-making by the private sector and can also serve to inhibit corruption. All the above elements are interlinked, and mutually supportive and reinforcing. Accountability is often related to participation and is also the ultimate safeguard of predictability. Transparency and predictability in the functioning of a legal framework would ser ve to ensure the accountability of public institutions. 11 The United Nations Development Programme (UNDP)

The United Nations Development Programme's (UNDP) definition of good governance is set out in a 1997 UNDP policy document entitled "Governance for Sustainable Human Development". The document states that governance can be seen as the exercise of economic, political and administrative authority to manage a country's affairs at all levels.Good governance comprises the existence of effective mechanisms, processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations and mediate their differences. Its essential elements are: a) Participation. All men and women should have a voice in decision-making, either directly or through legitimate intermediate institutions that represent their interests. Such broad participation is built on freedom of association and speech, as well as on the capacity to participate constructively. b) Rule of law. Legal frameworks should be fair and enforced impartially, particularly the laws on human rights. 215

c) Transparency. This concept is built on the free flow of information. Processes, institutions and information should be directly accessible to those concerned, and enough information should be provided to render them understandable and monitorable. d) Responsiveness. Institutions and processes should serve all stakeholders. e) Consensus-orientation. Good governance should mediate differing interests in order to reach broad consensus on the best interests of the group and, where possible, on policies and procedures. f) Equity. All men and women should have equal opportunity to maintain or improve their well-being. g) Effectiveness and efficiency. Processes and institutions should produce results that meet needs while making the best use of resources. h) Accountability. Decision-makers in government, the private sector and civil-society organizations should be accountable to the public as well as to institutional stakeholders. This accountability differs depending on the organization and whether the decision is internal

or external to an organization. i) Strategic vision. Leaders and the public should have a broad and long-term perspective on good governance and human development, together with a sense of what is needed for such development. There should also be an understanding of the historical, cultural and social complexities in which that perspective is grounded. From the above discussions, it is clear that the concept of good governance can play a role at two different levels of the international development process. On the one hand, it can be considered a potential area of cooperation between the relevant international development institutions and beneficiary states through goodgovernance-linked project activities. On the other hand, good governance can be invoked in the preinvestment assessment process as part of the criteria to be taken into account prior to allocating resources to a particular member state. International development institutions have broad, multi-sectoral mandates and are often key players in the overall economic development of beneficiary countries. Consequently, through continuous dialogue, they can cooperate with a government towards the internal adoption of good-governance principles.

216

Annexure 6.1.18

GOOD GOVERNANCE IN RURAL DEVELOPMENT: CHALLENGES AND OPPORTUNITIES

Dr. Iftekharuzzaman

1

The Context : Bangladesh Remarkable Recent Progress

2

Rural Development

2.1

· Steady economic growth: 5-6% since 1990s ­ GNI $463 in 2004/5 to $690 in 2008/9 ­ Middle Income status. · HDI : 0.365 (1980) 0.422 (1990) 0.547 (2005) · Population growth : 2.5 (1980s) (1990-2004) · 1.7

Governance

Exercise of political, economic and administrative authority in the management of rural development (add social and intellectual)

2.2

· · ·

Key Actors/Institutions

Political authority/public representatives Public Service Private Sector

Gross primary enrollment: 72% (1980) 98% (2001) 69/

· Child mortality: 239/1000 (1970) 1000 (2003) · Population in poverty : 59% (1990) (2000) 40% (2005)

· Researchers/RD practitioners, NGOs/ cooperatives/Civil Society · People

50%

· Development Partners, Consultants, Foreign Investors

· Vibrant private and non-government sector · People have always given their voice loud and clear for democracy and good governance · All these in spite of well-known governance failures and pervasive corruption.

2.3

Rural Development Projects

Formulation of rural development projects and their efficient and timely implementation need: ­ Honest and capable leadership for strategies and policies 217

­ Participatory implementation of homegrown project ­ Motivated & honest professionals for the execution ­ Efficient administrative structures & institutions ­ Innovation & adapting capacity to changing situations and new challenges ­ Decentralized administration, strengthened the local governments ­ Goal-oriented management, capable of promoting national interest above anything else ­ Capacity to generate resources ­ internal & external, and transparent & accountable use ­ ­ 3 · Disclosure People's right to Information Corruption : Governance Failure

·

Collusive corruption

3.3

· · · · · 4

Types of Corruption - by key actor

Political Corruption Public Sector Corruption Private Sector Corruption Intellectual Corruption Institutionalized/Systemic Corruption Impact of Corruption in Bangladesh

· Key challenge against development, democracy and rule of law - more than CPI ranking · Opportunity Cost ­ 3 percent higher GDP growth · Key institutions of democracy (NIS) rendered ineffective · The poor are most adversely affected social justice denied

A global problem -

· Abuse of power for private gain - power in the government and outside; economic, political, social

3.1

· ·

Types of Corruption by size/volume

Grand corruption Petty corruption

­ access to public services like education, health, justice, utilities and individual safety became a function of the capacity to make unauthorized payments. 5 Governance Failure ­ Factors

5.1

Structural/Institutional Factors

3.2

· 218

Types of Corruption ­ by process

Coercive corruption

· Range of discretion - absence of checks and balances

· Inadequate and ineffective rules, laws and institutions · Lack of, or low level of, transparency, disclosure, accountability

· 6

Scope of denying access to information Entry Points in Non-Government Sector

5.2

Personal Factors

· Governing Body (GB) hand-picked by chief executive (CE) ­ rubberstamp, lack of understanding of GB role · Low checks and balances against powers of the CE resulting in unlimited discretion including financial powers · No or low participatory management

· Incentives, Compulsion, Opportunities Need-based versus Greed-based · Cost-benefit calculation - Benefits of corruption higher than risks/costs · ­ ­ Low citizens awareness, involvement Sense of Disempowerment Lack of forum & channel way of life culture

· Weak/influenced auditing, low internal control · Arbitrary or inequitable salary and benefits structure, irregularities in payment · 7 · Culture of Secrecy Donors & Other Foreign Actors Prescriptions, conditionalities and dictates

· Ethics erosion of impunity

5.3

Entry points of Governance Failure

· Political/personal influence in decision making, embedded collusion · Inadequate legal, ethical and anticorruption standards and weak enforcements · Embedded collusion in procurement ­ tailor-made tender process, project design, budgeting, sanction commissions/kickbacks, tender-jacking · Appointments, promotions, postings and transfers not based on performance or merit but on political influence and bribery · Low salaries and benefits, lack of performance incentives in public sector

· Collusion in project design and implementation · · Frequent change of policies and priorities Low/ritualistic monitoring

· Lack, or low enforcement, of policy of zero tolerance to corruption · Low inter-donor coordination

· Limited disclosure, low level of institutional transparency & accountability 219

8

Governance Integrity-Opportunities

· · · ·

Citizens Charter Participatory Budget Budget tracking FtP ­ Face the Public Island of Integrity - Integrity Pledge What have we Learnt?

Key strategic elements · Highly challenging because of links with power · Needed a comprehensive strategy having 4 main inter-related elements: ­ ­ ­ ­ 9 Political will ­ without fear or favour Making corruption a punishable offense Strengthen the national integrity system Citizens awareness and demand Non-Conventional Opportunities

· 10

· Highly challenging - firing line, threats vulnerabilities - resilience · Changes are possible ­ integrity, excellence, courage, cultivate support/champions · Involve the people at large - capture the conscience, creativity and energy of the youth · Create Forums/Channels for communicating voices/inputs - local?local, local?national, national?local · Multi-stakeholder engagement - anticorruption institutional capacity, networks and alliances ­ local and national

Set of Multiple tools · · · CRC ­ Citizens Report Card Advice & Information Desk Street Theatre

220

Accountable Consensus oriented Transparent

Participatory Follows the rule of law

GOOD GOVERNANCE

Responsive

Effective and Efficient Source : UN-ESCAP

Equitable and inclusive

Fig. 1 : Characteristics of Good Governance

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Middle Income (72,000140,000) Income category by annual income in Taka Low Income (<72000) High Income (140,000+) Total

(Bribery in Education, health, land administration, police, justice, income tax)

Fig. 2 : Corruption - Bias Against the Poor : Ratio of Household Income lost Bribery

Source : TIB National Household Survey 2007

221

Sustainable Development

Quality of Law

Rule of Law

National

Auditor General

Integrity System

Watchdogs - ACC

Election Comm.

Citizens' Voice & Demand Political will

Core values ­ Democracy, Justice, Integrity, honesty ...

Fig. 3 : National Integrity System : The Structure of Good Governance

Fig. 4 : CCC-YES Voice & Demand Coverage as of January 2010 (36) April 2010 (45) 222

Int'l Coop - UNCAC

Public Service

Private Sector

Civil Society

Legislature

Executive

Judiciary

Media

Table 1 : Impact - Social Accountability at Work Before Intervention

Low service quality Misappropriation of allocated funds Corruption in distribution of safety net & hum assistance Corruption in procurement

Intervention Tools

CRC- release Media and public discourse

Impact/After Intervention

Public reps and officials commit to engage Improved services: roads, bridges, tube-wells

CCC-YES mobilize AI-Desk

Accountable use of budget

CCC-YES engage reps & officials to catalyze change

Transparent distribution of safety nets & humanitarian assistance Corruption in procurement, construction reduced

Misuse of LG development funds

Open Budget

Unauthorized payments stopped Media interest raised

Low level of public trust in LG

Budget tracking People are empowered & demand change Face-the-public Citizens Charter, Complaint boxess Representatives are accountable ­ from "Island of Integrity" to "Integrity Pledge"

223

224

6.2 COUNTRY PAPERS

225

blank

226

Annexure 6.2.1

MICRO CREDIT AND GOOD GOVERANCE IN BANGLADESH*

1

Bangladesh Profile

Bangladesh, officially, the Peoples Republic of Bangladesh, is a developing country located in South Asia sharing border with India and Myanmar, emerged as a sovereign state after a nine-month long war of liberation in 1971. Geographically, the country is located between 200 -34' and 260 ­ 38' north latitude and between 880 -0' and 920 -4' east longitude. With respect to geographical boundary Bangladesh lies in the north-eastern part of south Asia and is surrounded by India on all sides except for a smaller border with Myanmar to the far south-east and the Bay of Bengal to the South. The total area of the country is 147,570 sq. km. while the population density is 1016 persons per sq. km. Majority are Muslims. The percentage of Muslim people is nearly 88.3 while that of Hindu, Buddhist and Christian is 10.5, 06 and 0.3 respectively. Ninety eight percent of the population speak Bangla. People living in the rural areas are more than 75 per cent. The population growth rate and life expectancy at birth are 1.42 per cent and 6 per cent respectively. Currently the literacy rate of Bangladesh is 60 per cent. The total population is 150 million. Per capita income is US$ 600, literacy rate is 68.3 per cent (Adult literacy) and 63 per

cent (5 years +). Population below poverty line is 45 per cent, which was 58.8 per cent in 1991/92. The economy of Bangladesh is predominantly agriculture based. Agriculture contributes 19.9 per cent, industry contributes 20.6 per cent service sector contributes 59.50 per cent of GDP Agriculture generates two thirds of total employment (GOB 2005, 2007). Bangladesh enjoys generally a sub tropical monsoon climate. Winter (November ­ February) temperature ranges from minimum of 7.22 ­ 12.77 Celsius to maximum 23.88 ­ 31.11 Celsius. The maximum temperature is recorded in summer (March ­ June) ranging from 36.66 Celsius to 40.55 Celsius. The monsoon (July ­ October) period accounts 80 per cent of the total rainfall (GOB, 2002). Bangladesh is predominately an agricultural country. Agriculture still dominates the economy in terms of generating income and employment opportunities for the vast rural populace. Study shows that nearly 80 per cent of the rural people depend on agriculture and that agriculture generates 60 per cent of the total employment opportunities in the country. Currently Bangladesh has been experiencing some positive macro-economic developments especially in the areas like increasing income per-capita

* The paper has been jointly prepared by Bangladesh participants, namely, Mr A K M Khairul Alam, Dr Md. Shafiqul Islam, Mr Mohammad Abdul Quader, Ms Nasima Akhter, Mr Md. Abu Salek, Mr Md. Kamruzzaman and Mr Narayan Chandra Sarkar. Complete affilitation of the authors is given under `List of Delegates'.

227

(US$600.00), rising foreign exchange reserve and declining dependency on foreign aid components. During 2005-06, the GDP growth rate was close to 6.6 per cent, which was 4.2 per cent in 199095, and 3.8 per cent in 1990. Despite development in its macro economic status, poverty is still pervasive in Bangladesh. Though varies in different estimates about 44 per cent of the rural population live below poverty line of which about 22 per cent is referred to be as hard-core poor. The urban areas on the other hand have more concentration of people living below poverty line. Rapid population growth, scarcity of land, lack of access to means of production, malnutrition, literacy, lack of skill, socio-political unrest, mismanagement and such other factors are the causes of perpetuated poverty in Bangladesh. The overall incidence of income poverty has been declining and nationally the head count ratio has gone down from 46.2 per cent in 1999 to 40.9 in 2004 under the Direct Calorie Intake (DCI) method while it is 47.71 in 1991 to 40.4 in 2005 (Household income and expenditure survey 2005). In the social development front there has been significant progress despite moderate income growth and modest pace of income poverty reduction which includes reduction in population growth from 1.48 per cent in 2004 to 1.43 per cent in 2006, life expectancy at birth goes up (both sexes) from 56.1 years in 1991 to 64.9 years in 2003 (Male 64.5 years and Female 65.4 years), access to safe drinking water user 96.3 per cent and sanitary latrine user 52.6 per cent in 2004, decrease in infant mortality (both sexes) from 58 per thousand in 1998 to 53 per thousand in 2003, improvement in child nutrition, reduction in maternal mortality from 4.7 per thousand live births in 1991 to 3.8 per thousand live births in 2003, expansion of primary and secondary education, literacy rate of population (both sexes) 15 years 228

and above is 67.1 per cent (male 72.71 per cent and female 61.1 per cent) reduction of gender inequality and empowerment of women. According to UNDP's Human Development Report 2009, Bangladesh is now medium human development countries. Out of 182 countries, Bangladesh ranked 146 (HDR 2009). The problems facing Bangladesh are still enormous. HDR, 2009 reveals that, 48 per cent of children under 5 are underweight and 45 per cent of children are stunted. Despite marginal improvements in poverty situation, the problem is still basic. Poverty is widespread and endemic. About 45 per cent of the population is still below poverty line. Pace of poverty alleviation is rather slow. This suggests the need for not only targeting a much higher and sustained growth rate in average incomes, but also making the growth process sufficiently broad based i.e. facilitating the active participation of the poor as agents of growth. Secondly, progress in poverty alleviation on the basis on income measure has not been matched by improvement in crisiscropping capacity, access to health care, nutrition, sanitation, education and job opportunities, etc. 2 Issues Relating to Rural Development

2.1

Rural Development: The Concepts

Rural development is seen by the World Bank (1975) as "a strategy designed to improve the economic and social life of a specific group of people.....the rural poor". Rural development can be defined as `change' towards a desirable direction. Rural development is the whole range of institutional, social, economic, political and technical interventions make by the government and non-government agencies in order to increase

the well being of rural people of a country (Quddus, 1996). According to the South African Rural Development Framework/SARDF (1997), rural development can be defined as: "Helping rural people set the priorities in their own communities through effective and democratic bodies, by providing the local capacity; investment in basic infrastructure and social services. Justice, equity and security; dealing with the injustices of the past and ensuring safety and security of the rural population, especially that of women".

2.2.3

Pakistan Period

2.2

Brief History of Rural Development of Bangladesh

Pre-British Period

2.2.1

According to historians, "India in the eighteen century was a great manufacturing as well as a great agricultural country" (Madison, 1971). During Mughal period the rural Bengal was bountiful; but at the same time, there was exploitation by the rural elites. There was no organized or institutional approach to rural infrastructure like roads and madrasas (religious school) and relief in kind during famine and flood. Thus in the midst of abundance, the rural people were living at subsistence level with loincloth and khichuri in their mud house (Obaidullah, 1995). 2.2.2 British Period

In the initial years of Pakistan, the country saw a busy period of setting things in order, including administration on the right track, rehabilitation of refugees from India and a war with India on Kashmir. The agro ecological conditions of the two wings of Pakistan (East Pakistan and West Pakistan) were different which created problems to the planners in formulating same policy for both the parts. West Pakistan was gray land of deserts and mountains while East Pakistan was flat alluvial plain of humid with rivers, green jute fields of paddy. But the interesting thing was that the agricultural output in West Pakistan was growing much faster than East Pakistan (now Bangladesh) probably due to some irrational agricultural policy adopted in East Pakistan. "East Pakistan's ag gregate growth has been higher since independence than before, but its per capita record has been the same as in the colonial period, it seems virtually certain that the average income level in East Pakistan is lower now then in 1757, for at that time Dacca (Dhaka) was the Capital of Bengal and the great center of the luxury handicraft industry of Mughal India" (Madison, 1971). However, some of the most important rural development programmes initiated and implemented by the then government of Pakistan are highlighted as below: 2.2.4 Village Agricultural and Industrial Development (V-AID) Programme

The British government became the real ruler of the Indian subcontinent. They ruled the country through service system called Indian Civil Service (ICS). However, instead of remaining within the steel frame of service boundary, the first ICS official Gurusaday Datta came out in the open to try some of his ideas for village organisation and initiate activities to promote welfare of the rural people.

Rural development was no means on the agenda of the government of Pakistan in the initial years of its independence as the country had to build new capital cities, new administrative structure, new military cantonments and other hundreds of things addition to refugee problems. So the portfolio of rural development went into hibernation for nearly 229

one half of a decade. The first ever concrete step toward rural development was the Village Agricultural and Industrial Development (V-AID) programme, initiated in 1953 under the umbrella of American sponsored Community Development Creed. The aim of the programme was rural development and improvement of socio-economic condition of the people of rural areas of the country. One of the great achievements of this programme was the establishment of the Bangladesh Academy for Rural Development (BARD), Comilla that made and is still making valuable contribution to rural development for the people of Bangladesh. 2.2.5 Comilla Approach to Rural Development

iv)

Two tier Cooperative System

The key word of the Comilla Approach to rural development is institutionalization of the whole process of rural development. All the four components of Comilla Approach to rural development made significant contributions towards national development in Bangladesh. In fact, many agencies and organizations in Bangladesh have adopted these methodologies in their programmes afterwards. 2.2.6 The Integrated Rural Development Programme (IRDP)

After 1960, organizational work of traditional cooperatives started with new vigour with government patronage. The Bangladesh Academy for Rural Development (BARD), Comilla, which was established in 1959 took the leadership of this movement. It evolved out of a series of experimental projects designed and executed by BARD in its laboratory area, the Comilla Kotwali Thana. The four basic projects that were designed, experimented and replicated throughout the country as national programmes whose interrelationship is very much important to achieve the desired results are commonly known as Comilla Model or Comilla Approach, or Comilla Programme, or Comilla Experiment. The four components of Comilla Approach to rural development include the following : i) Thana Training and Development Centre (TTDC); ii) iii) 230 Rural Works Programme (RWP); Thana Irrigation Programme (TIP); and

The Integrated Rural Development Programme (IRDP) was initiated in Bangladesh (the then East Pakistan) in 1970 and its implementation was started in 1971 to replicate the Comilla approach to rural development of BARD. The most components of IRDP are the two-tier cooperative structures ­ Krishak Samabaya Samity (KSS) and Thana Central Cooperative Association (TCCA). In 1980/81 a review of the programme was made by the Government of Bangladesh and the World Bank, which recommended the establishment of Bangladesh Rural Development Board (BRDB). BRDB came into existence in 1982 with the responsibility of promotion rural development through Comilla-type two-tier cooperatives. "IRDP was very successful in the spread of modern irrigation" (Hye, 1996). 2.2.7 Other Rural Development Programmes

The various programmes that are implemented in Bangladesh for rural development both by the government and non-government organizations (NGOs) can broadly be classified into two categories (i) class or target group-based, and (ii) problem or purpose-based. Some mentionable

examples of class-based programmes are: Small Farmers and Landless Labourers Development Project; Women Development Programme; Youth Programme; Fishermen's Development Programme; Artisans' Programme etc. Examples of problem-based programmes are: Health and Nutrition Programme; Rural Education Programme; Production and Employment Programme; Food for Works Programme; Expanded Programme in Immunization (EPI); Child Care and Literacy Programme; Family Planning Programmes etc. The lacking of these programmes is that these are the programmes in which parents are bypassed to reach the children, husbands are bypassed to reach the wives and the family is bypassed to reach the youth. In addition to multiple government programmes in the agriculture sector, there are hundreds of NGOs with different types of approaches, often overlapping, which have been confusing and confounding the farmers. The effects of such programmes can be looked as the rural masses are being agitated against the urban, the landowners are being identified as enemies of the landless and the young are being incited to defy the traditional norms and customs of parental authority (Obaidullah, 1996). Rural households in Bangladesh are the heterogeneity in asset positions, in technologies available to them, in exposure to credit constraints and insurance market failures, in access to public goods and services, and in access to agrarian institutions. Considering the aspects of heterogeneity of rural people BARD undertook a rural development project in 1975 in the name of Total Village Development Programme (TVDP), which later on was renamed as Comprehensive Village Development Programme (CVDP). The view of the project was to develop a package programme for an integrated and total

development of the villages by bringing all classes of people within one institutional framework. The project aimed at all round development of the heterogeneous rural people. The purpose of the project was to make better the socioeconomic condition of the rural people by mobilizing all the available local resources. In 1995, the government has accepted CVDP as successful sustainable model for comprehensive development of rural areas of Bangladesh. Government has involved BRDB and Cooperative Department along with BARD and RDA to expand the programme all over Bangladesh. 2.2.8 · Hurdles to Rural Development Lack of basic amenities at rural areas

· Rising rural population and pressure on agricultural land · Illiteracy and lack of quality education

· Lack of voluntarism and dependent on the outside help/assistance for simple matters · Rural toutism and corruption

· Multiplicity of organizations and the lack of coordination · Lack of people's participation

· Lack of commitment on the part of local level bureaucracy · · 2.2.9 · No egalitarian land reform Concern of Social Security Prospects of Rural Development Food security should be major concern 231

for rural development; because of Bangladesh is traditionally an agrarian country · Development is possible without land reform · Housing, health and quality education ­ citizen rights under constitutional obligations should be implemented · Growing connectivity

· Mobility both male and female has been increased, but women in development need more emphasis · · Spreading education Self employment

· Inclusion process by the NGOs and GO agencies · Protest and mobilization capability of the people (Kansat or Phulbari cases), that shown the rural pressure groups. 3 Issues Relating to Microcredit

of "very small scale financial services, including savings, loans for emergencies, day-to-day living, and investment in productive activities". Microcredit refers to programs that are poverty focused and that provide financial and business services to very poor persons for generation of self-employment and income. Broadly microcredit can be classified as: i) Traditional informal microcredit (such as, moneylender's credit, pawn shops, loans from friends and relatives, consumer credit in informal market, etc.); ii) Micro-credit based on traditional informal groups (such as, tontin, su su, ROSCA, etc.); iii) Activity-based micro-credit through conventional or specialized banks (such as, agricultural credit, livestock credit, fisheries credit, hand loom credit, etc.); iv) Rural credit through specialized banks; v) Cooperative microcredit (cooperative credit, credit union, savings and loan associations, savings banks, etc.); vi) Consumer microcredit; vii) Bank-NGO partnership based microcredit; viii) Grameen type microcredit or Grameen credit; ix) Other types of NGO microcredit; and x) Other types of nonNGO non-collateralized microcredit.

3.2

Genesis of Microcredit

3.1

Concepts and Types of Microcredit

The word "microcredit" did not exist before the seventies. Now it has become a buzz-word among the development practitioners. Microcredit may be defined as "a small loan size with collateral free, short processing time, reasonable delivery cost, easy installment repayment to the advantage of the loanee, disadvantaged target members preferably distressed women, supervised institutional structure, culture of sympathy and compassion, etc". According to Oxfam, microcredit consists 232

The concept of collateral free microcredit to rural borrowers originated from Rabindranath Tagore's philanthropic act when he founded the Kaligram Krishi Bank in 1905 in village Patishar in the district of Naogaon in north-eastern Bangladesh (Mondal 2002). However, the microcredit of today in Bangladesh has its roots in 1960s. The pioneer in this sector is Akhtar Hameed Khan, a worldrenowned social scientist and the founder Director of Bangladesh Academy for Rural Development (BARD), Comilla. He initiated the Comilla cooperative programme and proved to the world that it was indeed possible to provide credit to the poor with great success. Microcredit provides

collateral free financial support to the very poor persons and mobilizes savings for self-employment and income generation. Since sixties Bangladesh Academy for Rural Development (BARD) introduced micro-finance through farmers cooperative association. In mid seventies, the academy started an experimental project named Small Far mers and Landless Laborer Development Project where collateral free micro finance distributed to landless farmers' groups through a commercial schedule Bank. Another pioneer of micro-credit is Dr. Prof. Mohammad Yunus, the founder of Grameen Bank of Bangladesh, who started and shaped the modern industry of micro financing in seventies. At that time a new wave of microfinance initiatives introduced many new innovations into the sector. Though micro-credit institutions around the world trace their origins back more than 50 years but it took Prof. Yunus to give an institutional shape in Bangladesh and turn it into a development philosophy. Many pioneering enterprises began experimenting with loaning to the under-served people. Prof. Yunus began distributing small loan in Jobra village, "the Dheki Rin Prakolpa" initiated by Bangladesh Bank in collaboration with the Swanirvar Bangladesh. But it was not until 1983 that he could institutionalize it. At that time, it was difficult to conceive that these initiatives would lead to major microcredit movement, which would make Bangladesh known to the rest of the world and emerge as a model. The most conspicuous event in this regard was Microcredit Summit of February 1997, attended by 2900 delegates from 137 countries where Prof. Yunus said, "We believe that poverty does not belong to a civilized human society, it belongs to museums".

3.3

Microcredit in the Government Sector

In Bangladesh, (the then East Pakistan) the Village Agricultural and Industrial Development (V-AID) programme was launched in sixties to generate a spirit of self-help among the villagers. The program helped to adopt modern techniques of farming, livestock rearing, cottage industries etc. It was followed by "Comilla Model" developed by the Bangladesh Academy for Rural Development (BARD) in 1960. This model was also largely based on a group approach and providing microcredit to the cooperators. It was expanded throughout the country in 1970 as the IRDP. Farmers were organized into two-tier cooperative groups. Credit and other development inputs were mobilized through these cooperative groups. In 1982, the IRDP reconstituted as Bangladesh Rural Development Board (BRDB) which continued and strengthened its initiatives to organize marginal and landless farmers and poor women in formal and informal cooperatives for their empowerment through microcredit interventions. This has institutionalized the microcredit in a big way in the GOB sector. Almost 13 Ministries/Divisions have taken projects for expansion of microcredit facilities and are intensively involved with multi-disciplinary activities in rural areas of the country. The Government distributes microcredit through different ministries, departments and agencies. These include the following ministries and their agencies: Finance Division; Ministry of Social Welfare; Ministry of Women and Children Affairs; Prime Ministers' Office; Ministry of Labour and Employment; Ministry of fisheries and Livestock; Ministry of Industries; Ministry of Textile; Ministry of Agriculture; Ministry of Local government, Rural Development and Cooperatives; Ministry of Land; Ministry of Youth and Sports; and 233

Cabinet Division. Up to 1999/2000, disbursement was estimated at Tk. 20,350 (US$ 407) million. Some of the major programmes are as follow: 3.3.1 Ministry of Women and Children Affairs

3.3.3

Department of Social Services

The poverty alleviation programs of the ministry aim to reach the poorest segments, e.g. the assetless women and female-headed households, develop their capacity and create self-employment opportunities through microcredit and vocational training. During 1999/2000, 10 microcredit programs were implemented by different agencies of the Ministry with distinct target groups, e.g. rural and urban poor women, adolescent drop out school girls, Vulnerable Group Development (VGD) cardholders, rural destitute women in reproductive age, poor women earning less than Tk. 10 (US$ 0.20) per day or owning less than 0.5 acre of land, female headed households and educated but unemployed and abandoned women. The total credit disbursement was Tk. 1,064.3 (US$ 21.28) million and the numbers of poor women who received credit and training were 0.16 million and 0.24 million respectively. 3.3.2 Department of Youth Development

The Department of Social Services (DSS) has been implementing poverty reduction programs through Rural Social Services (RSS), Urban Community Development (UCD) program and Rural Maternity Center (RMC) in all upzilas and towns. Under these programs revolving funds are used for initial investment and reinvestment. The initial total investment for these three programs amounted to Tk. 1524 million. The cumulative disbursement of these three programs stood at Tk. 5207.8 million up to June, 2003. The total number of beneficiary families through these three programs was 23,58,003. 3.3.4 Bangladesh Rural Development Board (BRDB)

The Department of Youth Development (DYD) trained 21,14,939 young men and women during 1991-92 to FY 2002-03 under different programs. Of the total trained youth 11,80,798 have got selfemployed. A program is being implemented for reducing poverty of rural landless and poor people under the title "Family Based Employment Program" in 82 upazilas. Since the commencement of the program up to June, 2003 a total number of 5,00,293 youths has been trained for the purpose of self-employment. Since the inception of the credit program of the DYD till June, 2003 Tk. 5158.6 million has been disbursed to 5,91,638 beneficiaries as credit. 234

BRDB has been working in the field of rural development, especially, towards poverty alleviation through cooperatives and non-formal group network throughout the country with the financial and technical support of the Government of Bangladesh and development partners. The target groups of the program include small farmers (holding up to 0.50 acre of land), and asset less women and men. Family planning, health and education programs are also included in the credit and training activities. During the period from 1990-91 to 2002-03 (up to June, 2003), 1.6 million members under 58,389 societies of 449 upzilas have borrowed Tk. 24302.9 million, of which, Tk. 21710.8 million has been recovered under the projects implemented for poverty alleviation (with microcredit component) notably: Rural Development ­ 5 in 27 upzilas, Selfemployment Project for Women in 21 upzilas of Jessore district, Integrated Women Development Project in 200 upzilas, Social Development Project: through the Participation of Local People for Poverty Alleviation in 7 upzilas of Sylhet, Rajshahi and Patuakhali districts aided by UNDP.

3.4

Grameen Bank

Though this bank was established in 1983 by an ordinance, it started its activities in 1976 as an experimental project. Later it expanded the operation by organising the asset less people and providing them credit support for income generation and capital and asset building. An amount of Tk. 180209.3 million has been disbursed as credit by June, 2003 to about 2.8 million members in 390 upzilas to 60 districts through 1,182 branches. The amount of recovery is Tk. 165955.8 million during this period. The bank's operation reached 42,611 villages in the country. Grameen Bank members had saved more than Tk. 8438.4 million in their savings accounts. A total of Tk. 7789.7 million for housing loan has been disbursed up to June 2003. With these housing loans Grameen borrowers have build 5,69,690 houses. Grameen model has been replicated in several countries around the globe. Borrowers of Grameen Bank at present own 90 percent of its shares while the remaining 10 per cent owned by the government. There are four interest rates for loans from Grameen Bank: 20 per cent for income generating loans, 8 per cent for housing loans, 5 per cent for student loans, and 0 per cent (interest free) loans for Struggling Members (beggars). All interests are simple interest, calculated on declining balance method. Loan recovery rate is 96.55 percent. General features of Grameen credit are: i) It promotes credit as a human right; ii) It is targeted to the poor, particularly poor women; iii) It is based on "trust", not on legal procedures and system; iv) It is offered for creating self employment for income generating activities and housing for the poor; v) It was initiated as a challenge to the conventional banking which rejected the poor by classifying them to be "not creditworthy"; vi) It provides

service at the door step of the poor based on the principle that the people should not go to the bank, bank should go to the people; vii) In order to obtain loans a borrower must join a group of borrowers; viii) Loans can be received in a continuous sequence. New loan becomes available to a borrower if her previous loan is repaid; ix) All loans are to be paid back in instalments (weekly or biweekly); x) Simultaneously more than one loan can be received by a borrower; xi) It comes with both obligatory and voluntary savings programmes for the borrowers; xii) Generally these loans are given through non-profit organisations or through institutions owned primarily by the borrowers. It must reach sustainability as soon as possible, so that it can expand its outreach without fund constraints; xiii) Grameen credit gives high priority on building social capital; xiv) It gives special emphasis on the formation of human capital and concern for protecting environment. For formation of human capital it makes efforts to bring technology, like mobile phones, solar power and promote mechanical power to replace manual power; and xv) It monitors children's education, provides scholarships and student loans for higher education. Grameen Bank built a network with different companies. These are: i) Grameen Phone Ltd.; ii) Grameen Telecom; iii) Grameen Communications; iv) Grameen Cybernet Ltd.; v) Grameen Solutions Ltd.; vi) Grameen Information Highways Ltd.; vii) Grameen Bitek Ltd.; viii) Grameen Uddog (Enterprise); ix) Grameen Shamogree (Products); x) Grameen Knitwear Ltd.; xi) Grameen Shikkha (Education); xii) Grameen Capital Management Ltd.; xiii) Grameen Byabosa Bikash (Business Promotion); xiv) Grameen Trust; xv) Grameen Health Care Trust; xvi) Grameen Health Care Service Ltd.; xvii) Grameen Danone Food Ltd.; and xviii) Grameen Veolia Water Ltd. 235

3.5

Microcredit and Big NGOs

In Bangladesh, most of the NGOs are engaged in credit operations. At present nearly 700 NGOsMFIs are working with microcredit programmes. BRAC, ASA and Proshika are few big NGOs who have become more visible in the micro-credit operations. The apex body of the Micro-Finance Institutions (MFI) is called Palli Karma Shayak Foundation (PKSF). They subcontract smaller NGOs for reaching out the microcredit. The profile of above mentioned big NGOs are briefly highlighted here. The profile of PKSF, as the wholesaler of micro-credit are also highlighted below: 3.5.1 Bangladesh Rural Advancement Committee (BRAC)

a holistic viewpoint, transitioning individuals from being aid recipients to becoming empowered citizens in control of their own destinies. Over the years, BRAC has organised the isolated poor and learned to understand their needs by piloting, refining and scaling up practical ways to increase their access to resources, support their entrepreneurship and empower them to become active agents of change. It has microcredit projects in every economic sector of Bangladesh. Micro Enterprise Lending and Assistance Programme (MELA) is one of the successful programmes of BRAC. MELA is offered in the range of Tk. 20,000 to Tk. 200,000 to an existing microenterprise with high growth potential. BRAC's loan recovery rate in this segment of the market remains the same as the overall recovery rate at 98.6 percent. In 1986 BRAC started its rural development programme that incorporated four major activities ­ institutions building including functional education and training, credit operation, income and employment generation and support service programmes. In 1991 the Women's Health Development programme commenced. The following year BRAC established a Centre for Development Management (CDM) in Rajendrapur. Its' Social Development, Human Rights and Legal Ser vices Programme was launched in 1996 with the aim to empower women with legal rights and assist them in becoming involved with community and ward level organisations. In 1998, BRAC's Dairy and Food project was commissioned. BRAC launched an Information Technology Institute the following year. In 2001, BRAC established a university call BRAC University with the aim to create future leaders and the BRAC Bank was started to cater primarily to small and medium enterprises.

BRAC was established in 1972 by Fazle Hasan Abed as a relief organization to help settle the refuges who were returning from India at the conclusion of the Liberation War of Bangladesh. BRAC works with people whose lives are dominated by extreme poverty, illiteracy, disease and other handicaps. With multifaceted development interventions, BRAC strives to bring about positive change in the quality of live of the poor people of Bangladesh. BRAC firmly believes and is actively involved in promoting human rights, dignity and gender equity through poor people's social, economic, political and human capacity building. BRAC is committed to making its programmes socially, financially and environmentally sustainable, using new methods and improved technologies. As a part of its support to the programme participants and its financial sustainability, BRAC is also involved in various income generating enterprises. BRAC retains the largest market share of the microfinance industry in Bangladesh. BRAC tackles poverty from 236

In 2002, BRAC launched a programme called Challenging the Frontiers of Poverty Reduction ­ Targeting the Ultra Poor (CFPR-TUP) designed specifically for those that BRAC defines as the ultra poor ­ the extreme poor who cannot access conventional microfinance. Up to December 2002, a total amount of Tk. 88610.2 million has been disbursed as microcredit to about 3.5 million beneficiaries (female 99 percent) in 460 upzilas of 64 districts and the recovery rate is 99.27 percent. The amount of savings of the beneficiary groups is Tk. 5294 million up to December 2002. 3.5.2 ASA (Association for Social Advancement)

business Loan is usually given to men, although women are sometimes eligible, if they have already demonstrate a competence in business, but lack the needed capital for expansion. The initial loan is Tk. 15,000 with yearly increase of Tk. 4,000 to Tk. 6,000. The term of loan is one year and the service charge is 15 per cent of total loan. Due to ASA's simple, standardized and flexible approach to its microfinance programme, ASA reduced its operational cost significantly and was able to achieve its goal of increasing income. ASA has started a compulsory savings programme known as the micro-savings programme. The micro-savings programme allows its clients an earning capacity while learning to save for the future. It has two types of savings programmes: i) weekly savings where group members have to deposit a fixed amount of Tk. 10 for small loans and Tk. 20 for small business loans; and ii) voluntary savings where group members are allowed to save any amount they wish, in addition to their mandatory savings. ASA also introduced life insurance policy. Similarly to savings mobilization, the insurance reaps rewards not only for the clients and their families, but for the organisation as well. Clients pay 0.03 per cent per loan, insuring that their loan will be forgiven, after outstanding balance has been adjusted with outstanding savings in the event of death. ASA attracts trainees from all over the world, Due to high level of interest from people and organisations abroad, ASA has created the ASA Micro Finance Training Institute, which offers special training and workshops on ASA's microfinance model. The reputation of ASA as the most efficient MFI has led to replication of its model in a number of countries. ASA has been able to offer its services to countries in which microfinance may already exist, but where effective MFIs are scare. 237

ASA was established in 1978. Today it is simply known as "Asha", a Bengali word meaning hope. ASA started the microfinance programme in 1991 and has specialised in this activity. Its recovery rate of 99.93 percent is the best in the industry. Its cost per unit of money lent at 4.1 percent is also the best in the industry, making it the most efficient MFI of the world. ASA's mission from the beginning has been to develop the standard of living of the poor people of the country. ASA's management revisited its mission in 1991 and decided to focus on economic empowerment of the poor people, particularly the rural women. It has provided consultancy services for adoption of its model to seven other countries: Afghanistan, Ethiopia, India, Jordan, Pakistan, Tajikistan and Yemen. ASA provides two types of loans: Small loan and small business loan. ASA's Small Loan is given to women whose monthly income does not exceed Tk. 2,000 and who own less than 50 decimals of cultivable land. The initial size is Tk. 4,000 to Tk. 6,000 and may increase by Tk. 1,000 to Tk. 2,000 per year. The term of loan is one year and service charge is 15 per cent of total loan. ASA's Small

ASA has been operating microcredit program since 1992. The cumulative credit disbursement and recovery are Tk. 59361.6 million and Tk. 50109.8 million respectively up to December 2002. The recovery rate is 99.96 percent. The number of beneficiaries is 2.1 million of which 95.71 percent are women. In 2002, the average loan disbursed per member was Tk. 7507.00. 3.5.3 Proshika

communication, development management, leadership and participatory planning. Practical skills training courses provide the skills that are required for making efficient use of the resources and for effective implementation of economic projects. Proshika extends credit and technical assistance to the groups to take up income and employment generating projects in various fields such as agriculture, irrigation, pond fishery and open water fishing, sericulture, bee keeping, cattle and poultry rearing, homestead gardening, social forestry, handicrafts and cottage industry, etc. Other programmes that Proshika has initiated include: popular theatre; participatory research; development support communication through video medium; health and nutrition education; literacy and women's programmes. In 1990, Proshika was involved for the first time in urban areas with the Urban Poor Development Programme. 3.5.4 Pally Karma-Sahayak Foundation (PKSF)

The name `Proshika' is a Bengali acronym made of initials of three words: Proshikhan (training), Shiksa (development education) and Kaj (action). Since its inception in 1976, Proshika's aim has been to create a self reliant development process among the rural poor by extending support for getting themselves organised, becoming critically conscious of their situation and making united and collective efforts to improve their socioeconomic condition. The promotional organisation of the rural poor is recognised as the core activity of Proshika. The activity extends from the formation of primary groups to the creation of groups' broader organisational structures at the village, union and thana levels. The beneficiaries of Proshika are men and women of the two large sections of the rural population, i.e., the landless labourers and marginal peasants and some rural professional groups, e.g. fisher folk, weavers, potters, etc. Training plays a crucial role in the Proshika process and through this activity development education is imparted to the people to raise the level of their awareness, confidence, capacity and skills. Two categories of training are organised: human development and practical skills. The subject areas of human development training courses include: social analysis, development concepts and approaches, analysis of development constraints, techniques of building organisation, 238

PKSF is the wholesaler of micro-credit was created in 1990-91 fiscal year as a company not for profit under the Companies ACT of 1913 (amended later). PKSF, in English, means "Rural Employment Support Foundation". However, PKSF has expanded its operation to urban areas also. Regulation of microfinance activities was the principal motive for creating the PKSF. Since its inception, PKSF has undergone several changes in its structure and has assumed the role of wholesaler of microcredit to its partner organisations (POs). When the three large MFIs (BRAC, Proshika and ASA) started lending to the smaller MFIs, PKSF saw their operation as actors of cartel. The separate wholesale programme of the large MFIs or the "Bipool" had the potential of dominating the

micro-credit market and driving the smaller MFIs of business. By not allowing the "Bipool" to wholesale micro-credit, PKSF has been able to break the formation of a cartel in microfinance industry in Bangladesh. PKSF's vision is to alleviate poverty and improve the quality of life of the poor ­ the landless and the asset less people by providing them with resources for creation of employment for enhancing economic conditions. The basic operational strategies of PKSF are: a) PKSF reaches its target groups ­ the land less and asset less people ­ through its POs, it does not directly lend money to its target people; b) It provides greater thrust to institutional development to both PKSF and its POs; and c) It favours no particular model; instead, innovations and different approaches based on experience are encouraged. PKSF mandate authorizes PKSF management to mobilize funds in the forms of grants, loans and contributions from a wide variety of sources which include the Government of Bangladesh (GOB), private individuals and organisations, foreign governments, international donors and lending agencies and capital markets. So far PKSF has received funds from the GOB, the IDA/World Bank, the USAID, the Asian Development Bank (ADB) and the International Fund for Agricultural Development (IFAD). As an apex institution involved in the long-run financing of organisations with microfinance services, PKSF puts utmost emphasis on attainment of both financial and institutional sustainability of these organisations. In order to achieve the objective of sustainability, PKSF performs the major functions expected of an apex organisation. These include, among others: i) Provision of

microcredit funds to POs; ii) Developing best practices for the microcredit sector; iii) Institutions/capacity building support to POs; and Advocacy for appropriate policies and regulations useful for the microcredit sector. PKSF provides loanable funds to its 199 POs ­ 10 big, 189 small and medium, POs ­ under its mainstream credit programme as well as under some projects. PKSF's mainstream credit programme, now, includes five components viz., Rural Microcredit; Urban Microcredit; Micro enterprise credit, Ultra-poor Credit and Seasonal Credit. PKSF gives special emphasis on microenterprise development with the goal of making microcredit more growth-oriented. PKSF provides loans to three categories of POs ­ Organisations operating in Small Areas (OOSA); Big Partner Organisations Operating in Large Areas (BIPOOL); and Pre- PKSF Pos. PKSF funds five categories of microcredit programmes of its POs under its mainstream credit programme; i) Rural microcredit ii) Urban microcredit iii) Microenterprise credit iv) Ultra Poor Credit and v) Seasonal Loan. PKSF charges 4.5 per cent service charge per year from its OOSA and Pre- PKSF category POs and 7 per cent service charge per year from its BIPOOL category Pos. Loans received by OOSA and Pre-PKSF category POs from PKSF are repayable within a period of 3 years. First 6 months are considered as a grace period and loans along with service charge are to be repaid in 10 quarterly instalments within the rest 30 months. Loans received by BIPOOL category Pos are payable in 4 years in 12 equal instalments with a grace period of 12 months.

3.6

Microcredit is a Means for poverty Reduction and Rural Development

There are views that credit alone on its own is 239

inadequate to fight poverty. The need for other services is also important in this respect. Most of the practitioners believe that credit plays a vital role as an instrument of intervention for a poor person to discover his/her potential and to stride for better living. Micro-credit is itself a very powerful tool. But if it is combined with others, it is definitely more empowering. It is known that poor people live in a high risk and vulnerable conditions. Their ability to take advantage of opportunities that will lead to increasing their income or economic status, to protect themselves against risks of crises and to cope with these when they occur is very important. Reduction of poverty is partly a process of increasing income and economic stability which enables fulfillment of basic needs and access to different kinds of services. This may also be understood in the form of developing a range of assets that will reduce the vulnerability of the poor to physical, economic and social shocks. These assets may be defined as financial (income size, regularity and security, savings, loans or gifts), human (skills and knowledge, ability to work, good health, selfesteem, bargaining power, autonomy and control over decisions), physical (housing, land, productive and non-productive possessions etc.) and social (networks, group and centre membership, trust based relationship, facing violence and wider access to society and social institutions). Poverty reduction may also be considered from both short term and long term perspectives. In the short term it can be understood with reference to individual borrowers, their households and also the society at large. Different studies conducted in Bangladesh and elsewhere show that there is positive correlation between micro-credit programs ad their accrued benefits in terms of employment, income generation and promotion of social indicators. 240

3.7

3.7.1

Microcredit Impact

Finding of Impact Assessment Studies (IAS)

Microcredit impact can be seen from different Impact Assessment Studies (IAS) in different ways. Some of the microcredit impact can be seen briefly from Table 1. 3.7.2 Some Other Findings of Impact Study by BIDS

Palli Kar ma-Sahayak Foundation (PKSF) commissioned a survey (1997-2001) through the Bangladesh Institute of Development Studies (BIDS) covering 3026 sample households from 91 villages under 13 POs of PKSF. A Census was administered in late 1997, covering 19151 households in 91 villages. Some of the major findings are given below: 3.7.2.1 Economic Impacts of Microcredit a) Income: The 1998 survey found the average annual income of participant households to be higher than that of the non-participants. Selfemployment activities had more than 50 per cent contribution to total income for the participants as against 43 percent in case of non-participants. The second BIDS survey suggests that nominal household income increased by 19 percent in program villages and by only 13.5 percent in control villages. Compared to non-participants the participant households were better able to cope with flood, sustain their income, and achieve higher purchasing power and consumption level. b) Food Security: The BIDS study finds the program participants, due to greater access to sharecropping, had better food security and about 26 percent of rice consumption out of own production (after sale), which was also marginally higher than the non-participants.

c) Wage: Wage earning contributed about 23 percent of total annual income for the land-poor households. Microcredit helped participant households to earn about 8 percent higher income than that of the non-participants. d) Employment: The participant households are better able to ensure more employment on own farms due to their better access to the land rental market. Wage and self-employment in nonagricultural sector is also higher for the participants households due to their access to microcredit. e) Assets: Average size of land owned by participant households is lower than the nonparticipants; 91 decimals compared to 149 decimals. The BIDS study however suggests that the eligible participants mortgage or rent-in more land than the non-participants and therefore, have larger operational holdings. Higher percentage of program participants own poultry, goat/sheep and cows compared to non-participants. A higher percentage of the participants won bicycles (12.5 per cent compared to 8 per cent), boat (3.7 per cent compared to 1.6 per cent), irrigation equipment (1.23 per cent compared to 0.23 per cent), radio (17.9 per cent compared to 12.6 per cent) and rickshaw/van (8 per cent compared to 2 per cent) thus showing higher asset ownership of the participants. 3.7.2.2 Social and Other Development Impacts a) Health and Nutrition: There is positive program placement effect on Nutrition status. b) Sanitation and Drinking Water: The BIDS study finds small positive influence of participation on waste disposal and use of sanitary toilets among the land-poor households with no clear evidence of programme impact on hand-washing. The use

of pure drinking water from hand tube well was found universal. c) Literacy and School Enrolment of Children: Adult literacy rate is significantly higher among the eligible participants. The BIDS study also found that program participation increases the chance of both boys and girls to be enrolled in schools. d) Empowering Women: Microcredit programs' main target is women. There are strong evidences that, microcredit programs contribute to women's empowerment. One consistent finding is the increased self-confidence and increased selfesteem. Another is women's increased in decision making in the areas of family planning, children's marriage, buying and selling of properties and sending daughters to school. There have been some evidences that members of microfinance institutions are able to stop domestic violence due to personal empowerment and through group action. In Bangladesh, microcredit programs have also increased women's participation in the activities of local government. Some women microcredit clients have been elected as chairpersons and members of various Union Parishads, the lowest and most vibrant tier of local government. Now women microcredit clients take greater roles in community activities and organising for social change. e) More Dignity: Microcredit has attained extraordinary recognition as an instrument that facilitates the transformation of people's lives, of communities and even of some countries. It has a deep philosophical basis and in relation to citizenship, a wide reach, as it is both simple and intuitive. With regard to the fundamentals of 241

microcredit, the principal idea is that people can have a new and more dignified life if, through their own will and their own initiative, they wish to achieve self-employment instead of remaining dependent on employed work, social welfare benefits or private charity. This new way of life is more dignified for them as human beings, and provides added value to the entire society. More wealth is created, the volume of revenue increases and public and private funds can be used for purposes other than social welfare benefits. There are also demonstrable multiplier effects in that entrepreneurship promotes a denser and more robust society, both in economic and in social terms. f) Coping Capacity: The experiences of microcredit programs show that microcredit members are in better positions to cope with such situations. During two and a half months of devastating floods that hit Bangladesh in 1998, it was found that Grameen borrowers were relatively less vulnerable and more capable to deal with the situation both during and after the flood. They had their savings, institutional back-up and peer support. Grameen, as a provider of microcredit, had a key role in ensuring not only the survival of its borrowers and their family members during flood but also during their rehabilitation after it. The crisis management capacity of Grameen borrowers was found to be higher than others. The summary of the Study by BIDS is shown in Table 2.

members of the United Nations. The first objective of the MDGs is to "eradicate extreme poverty and hunger" by 2015. The Economic and Social Council of United Nations declared the year 2005 as the international Microcredit Year. The International year of Microcredit consists of five goals as: (i) Assess and promote the contribution of microfinance to the MFIs; (ii) Make microfinance more visible for public awareness and understanding as a very important part of the development situation; (iii) The promotion should be inclusive the financial sector; (iv) Make a supporting system for sustainable access to financial services; and (v) Support strategic partnerships by encouraging new partnerships and innovation to build and expand the outreach and success of microfinance for all. The UN Secretary General Kofi Anan told "Microfinance can play and is playing good role in reaching Millennium Development Goals". The former president of the World Bank James D. Wofensohn has said in 2004 in a letter to 700 parliamentarians, "Access to financial services for the poor is a critical condition for the attainment of the United Nations' Millennium Development Goals". Many governments have set up apex facilities (PKSF in Bangladesh) that channel funds from multilateral agencies to development organisations. Governments can also get involved in microfinance programs through a Microfinance Regulatory Body. Regulators can examine the regulations of the NGOs/MFIs to make the institutions more successful in poverty reduction. These regulations include limits on the rate of interest along with the percent of a loan portfolio that can be lent on an unsecured basis, limits on group guarantee mechanisms, reporting requirements, limits on branch office operations, requirements for the

3.8

Role of Government in Microfinance to Meet MDGs

The Millennium Development Goals (MDGs) was unanimously adopted, in September 2000, by the 242

contest of loan files, etc. This is very praiseworthy news that the Bangladesh government has already taken initiatives regarding this. The government should also ensure proper participation of the national NGOs leader in the Regulatory Board to make it more effective. It would also be better to exchange ideas with foreign donor agencies as they are also directly or indirectly related with NGO/ MFIs sectors. 4 Issues Relating to Good Governance

increasing to ensure that political, social and economic priorities are based on a broad societal consensus and that the poor and vulnerable people can directly influence political decision-making, particularly with respect to the allocation of development resources. Good governance has some other attributes. It is equitable and effective in making best use of development resources. It promotes democracy, the rule of law, includes the state, civil society and the private sector. Transparency, accountability, participation and integrity are the intertwining principles and accelerate all the attributes of good governance at all levels of the central government, local government, NGOs and civil societies for the pursuit of sustainable development. In the global perspective, transparency refers to the frequency with which economic data are published in countries (Islam, 2003). In the national perspective it refers to the frequency of publicity of the economic and financial policy and data. At the micro level, transparency implies the provision of relevant and reliable information to all (Manasan et al. 1999). In other words, transparency is making all information available. Transparency comprises all means of facilitating the citizen's access to information and also his/her understanding of decision-making mechanisms (UNDP, 2003). Accountability has political, administrative, legal and moral dimensions, which form a rather complex web relying on clear rules of transparency and on the threat of sanctions in case of non-compliance (Schneider, 1999). Accountability implies being answerable to people and government for policies and actions. There are several definitions of accountability: "the ability to call public officials and private employers to account, requiring that they are answerable for their policies, actions and 243

4.1

Concepts and Dimensions

Good governance is proper exercise of power, rules and regulations in the management and allocation of development supports and services in favour of those who need them. Good governance has institutional dimension, legal dimension and development dimension. This section of the paper addresses development dimension of the good governance under the given condition of the institutional and legal dimensions. Theoretically, transparency, accountability, participation and integrity in the management and allocation of development supports and services are the major four principles of good governance at all levels of every organisation. Good governance is management of a country's resources and affairs in a manner that is transparent, accountable, equitable and responsive to peoples' need (World Bank). In other words governance is good when it serves not just only public interest but also the interest of the most poor and vulnerable of the society. Good governance is among other things, transparent, accountable, participatory and integrity

fund use to beneficiaries" (World Bank, 2002); "not only beneficiaries a say in official decisions but also the right to hold relevant officials to account" (UNDP, 2002); "the ability of the villagers to exert pressure on field workers to serve" (Manasan et al. 1999). The concept of `participation' emerged against the failure to traditional `top-down' governance of development projects in less developed countries (Brett, 2003). Thematically `participation' refers to the close involvement of people from all walks of life irrespective of sex, race, group, caste, colour and religion in economic, social, cultural and political decision-making process of an area (UNDP, 1993). Generally, participation refers to close involvement of people in the activities like identification of problem, planning for solution of the problem, implementation of the plan, monitoring of the progress of plan implementation and impact evaluation of the implemented plan. Thus, `participation' is the process through which stakeholder influence and share control over priority setting, policy-making, resource allocation and access to public goods and services (World Bank, 2002). Integrity is the missing link in good governance. Poor governance and corruption of the developing countries can be overcome through accelerating ethics and integrity in leadership. Integrity is defined as incorruptibility, an unimpaired condition or soundness and is synonymous to honesty. In terms of public service, integrity requires that holders of public office should not place themselves under financial and other obligation to outside individuals or organisations that may influence them in the performance of their official 244

duties. Integrity is not an end in itself rather a path leading to the effective delivery of the services and performance of functions which the public is entitled to receive from those who govern them.

4.2

Good Governance in Rural Development

Academics and international community frequently opine that lack of good governance is the core cause of endemic poverty, low economic growth and underdevelopment in the rural areas of many developing countries. Bangladesh is such a typical developing country in South Asia surrounded by India from three sides, the Bay of Bengal from the south and Myanmar from the southeast. Lack of good governance results, among others, in the misuse or misallocation of resources, leads to inefficiency, waste, corruption, injustice, violation of human rights, political discontent and social unrest. All governments of Bangladesh, all agencies of the United Nations (UN) and international development agencies of the developed countries mobilized lot of development supports and services in Bangladesh during the last 3.9 decades. Unfortunately, an increasing trend in mismanagement and misallocation of development supports and services in rural Bangladesh was observed until the last Caretaker Government due to lack of good governance, a core problem of the country. For the above reason, during the last decade academics, UN agencies and international development agencies of the developed countries have been advocating for the establishment of good governance at all levels of central and local governments of Bangladesh for reducing mismanagement and misallocation of

development supports and services. Establishment of good governance in the management and allocation of rural development supports and services has become a sincere demand of the civil societies and mass people too in Bangladesh. 5 Conclusion

Government through creation of opportunity for income generation and human resource development, which are obligations for a responsible Government like ours. Microcredit alone is not a panacea for eradicating poverty. Equal attention must be given to social capital development to attain the millennium development goals. The current microcredit NGOs contend that poverty is created through social processes. Moreover, practitioners must consider integrating other development programmes with their microcredit operations, whenever possible. Lack of good governance is the core cause of endemic poverty, low economic growth and underdevelopment in the rural areas of Bangladesh. Lack of good governance results in the misuse or misallocation of resources, leads to inefficiency, waste, corruption, injustice, violation of human rights, political discontent and social unrest. Academics, UN agencies and international development agencies of the developed countries have been advocating for the establishment of good governance at all levels of central and local governments of Bangladesh for reducing mismanagement and misallocation of development supports and services. References 1 Addressing paper of Dr. Salehuddin Ahmed, Managing Director, PKSF in International Seminar on Attacking Poverty with Microcredit, Inaugural Session, January 8, 2003. 2 ASA-Annual Report (Internet).

There are different dimensions and approaches to rural development. For reduction of poverty in Bangladesh the Comilla Approach to Rural Development played important role in increasing the agricultural production. These days, different programmes are being implementing by the government as well as NGOs for poverty reduction and enhancing rural development. There are some crucial problems relating to rural development are: (i) Rising rural population and pressure on agricultural land; (ii) Lack of voluntarism and dependent on the outside help/ assistance for simple matters; (iii) Multiplicity of organisations and the lack of coordination; and (iv) Lack of commitment on the part of local level bureaucracy. The world community has appreciated the contributions of Bangladesh in the field of microcredit. Bangladesh government has also placed adequate emphasis on microcredit programs. The policy makers have recognised the importance of microcredit in Bangladesh and the present government has pledged its support to this programme. Microcredit interventions for poverty reduction, income generation and rural development are not without challenges and constraints. Notwithstanding these constraints, Bangladesh has achieved significant gains in using microfinance to reach the poor and marginalised segments of society. The real benefit is provided by the

3 Assessment of Microcredit Programme in Government Sector in Bangladesh by Dhiraj 245

Kumar Nath, 71/4, V.I.P. Circuit House Road, Kakrail, Dhaka (Internet). 4 Bangladesh's Microcredit: Millennium's recipe for poverty alleviation by Jyoti M. Pathania (Internet). 5 BRAC (NGO) Wikipedia, the free encyclopedia (Internet). 6 Dr. Akhter Hameed Khan, the Pioneer of microcredit by Nasim Yousaf (The Independent, 24.10.07). 7 Effectiveness of Micro Finance on Poverty Reduction and Future Challenges: A Case of Bangladesh (Unpublished) by Dr. Tapash Kumar Biswas. 8 Financing the poor: Can microcredit make a difference? Empirical obser vations from Bangladesh, Farhad Hossain and Tonya Knight, February 2008 (Internet). 9 Grameen Bank At a Glance, December 2009 (Internet). 10 Haq, M.N. and Husain, A.A. (2001). Rural Development in Historical Perspective, Rural Development Academy, bogra, Bangladesh. 11 Islam, M.S. (2007). Sustainable Livelihoods of Rural Community through Comprehensive Village Development Programme of Bangladesh Academy for Rural Development. 12 Looking Ahead: Microcredit Bangladesh by Sajjad Zohir (Internet). in

14 Microcredit as a way of giving people more dignity by Manuel Brandao Alves (Internet). 15 Microcredit in Poverty Eradication and Achievement of MDGs: Bangladesh Experience by Dr. Mahbubur Rahman (Internet). 16 Microfinance and Microcredit principles, Microfinance news and information, History of microfinance, Feb 2, 2008 (Internet). 17 Microcredit: Path to Prosperiety in Georgia (Internet). 18 Microfinance NGOs in Bangladesh: Growth, impact and challenges by Fazle Hasan Abed, founder Executive Director, BRAC (Internet). 19 Microcredit and Rural Poverty ­ An analysis of empirical evidence by Pallavi Chavan, R. Ramakumar (Internet). 20 Microcredit and Poverty Reduction by H.I. Latifee, Grameen Trust, Paper presented at the International conference on "Poverty Reduction through Microcredit" held at Ceylan InterContinental Hotel, Taksim-Istanbul, Turkey from June, 9-10, 2003 (internet). 21 Microcredit: Development devantation by Farida Akhtar (Internet). 22 Microfinance Initiatives for Housing by Regina Galang, MBA candidate at the Kellogg School of Management (Internet). 23 Microcredit is one of the means of poverty eradication: It is not a panacea by Dr. Md. Shafiqul Islam (Unpublished draft article).

13 Madison, A. (1971). Class Structure and Economic Growth, W.W. Norton and Company Inc., New York, USA. 246

24 Microcredit and microentrepreneurship, Collateral free loan at work in Bangladesh by Wali I. Mondal. 25 Microcredit Fair 2007, March 5-8, 2007 Pally Kar ma-Sahayak Foundation, Dhaka Bangladesh. 26 Obaidullah, A.K.M. (1995). Rural Development in Bangladesh views and reviews, Joint Study on Rural Development Experiment, Bangladesh Academy for Rural Development (BARD), Comilla, Bangladesh, Japan International Cooperation Agency (JICA), Dhaka, Bangladesh. 27 PKSF A brief profile (Internet).

5/2 Iqbal Road, Mohammadpur, Dhaka 1207, Bangladesh (Internet). 30 Pros and cons of microcredit by Sylvia Mortoza (The Independent 25.11.2009). 31 Report of the Asia Pacific Region Microcredit Summit Meeting of councils (APRMS) 2004, Dhaka Bangladesh, 16-19 February 2004, PKSF. 32 Quddus, M.A. (1996). Rural Development in Bangladesh strategies and experiences. Bangladesh Academy for rural Development, Comilla. 33 What is Microcredit? By Prof. Dr. Muhammad Yunus, September 2004 (Internet). 34 World Bank (1975). Rural Development: Sector Policy paper, Feb 1975. The World Bank, Washington, D.C.

28 PROSHIKA, Cyclone (Sidr) 2007 relief and rehabilitation programme (Internet). 29 Proshika Manobik Unnayan Kendra (Bangladesh) by Qazi Khaze Alam, Deputy director, Proshika Manobik Unnayan Kendra,

247

Table 1: A Summary of the Findings of Impact Assessment Studies

Source Economic Indicators Type of Change

+ + + + + ? + + + ? + + + Social Investment +

Social Indicators

Type of Change

Hossain 1985

Return on investment Household Income Employment Working Capital Non-agricultural investment Agricultural Investment Labour force participation rate Income Income Expenditure Employment Land Purchase Economic Empowerment

Hossain 1988

BIDS 1990

Child Women ratio School Enrolment

? +

IMEC 1995 Pitt & Khandker 1995 Rahman 1996

Social Empowerment

+

Various labour supply Men's labour supply Household Expenditure

+ +

Girl's schooling Contraceptive use Women's non land asset

+ ? +

Household expenditure on + consumption Human Capital and fixed investment + Employment +

Number of meals taken by men ? Number of meals taken by women School enrolment rate Attitude to education Pure drinking water ? + ? +

248

Table 2: Impacts of Microfinance (compared to non-participants)

Broad Category Indicators Type of Change Cause of Change

Income Food Security Wage (land poor)

+ + +

Self employment activities Greater access to cultivable land through rental market Transport and other non-agri activities Support by microcredit - better access to the land rental market - wage employment in non-agri sector - av. low land size than non-participants - larger operational holdings - impact of MF (poultry livestock, bi-cycles, Rickshaw/van) - programme participation - female methods dominate program placement effect program participation

Economic Impact

Employment (land poor) Assets (land poor)

+ +

Fertility and contraceptive Use Health & Nutrition Sanitation & Drinking Social and other Development impacts water Literacy and school Enrolment of children Social mobility Women participation And HH welfare

+

+ +

+ ? +

program participation do not vary significantly - participation in a microcredit program - increasing women's income

249

Annexure 6.2.2

THE R O CHINA EXPERIENCE IN INTEGRATING THE AGRICULTURAL FINANCE SYSTEM AND ACTIVATING RURAL ECONOMY

Mr Chih-Pei Lin

1 Introduction Republic of China, benefiting the rural constructions and improving the welfare of the farmers. The credit departments, particularly, have been offering their services in agricultural finance since the early days when the economic environment was less developed and most of the banks were located in cities only. Providing services and small loans to the members, the credit departments have made significant contributions to the rural economic development, which is no doubt unrivalled by the banks in general. With their widely-spread service spots and branches, including those in the very outlying areas, the credit departments of farmers' and fishermen's associations play a role in serving the needs of the rural and fishing villages and activating the local economics. It would be definitely impossible for the commercial banks, which are highly profit-oriented, to establish branches extensively in small towns for services. Even at the present stage, about one third of the 319 towns and cities in the Republic of China have to rely on the credit departments of farmers' and fishermen's associations for banking services, having no other banking facilities available in the place. The credit departments of farmers' and fisher men's associations, furthermore, are the key functions for the business development of the associations. Pursuant to the Act of Farmers' Association and Act of Fishermen's Association, the overall profits of a farmers association, except for those used to make up previous losses, if any, shall be allocated

Farmers and fishermen's associations are the most widely-spread and influential farmers' organizations in the Republic of China, providing the most comprehensive and diversified services. The first farmers' and fishermen's association of the R.O.C. was established in 1900, with a history of more than a century. The services provided by farmers' and fishermen's associations include credit, supply and marketing (procurement, sale and utilization), agricultural extension and insurance. The Credit Department is responsible for the deposit and lending of funds. The Supply and Marketing Department handles both the business owned by the farmers' and fishermen's association itself and the business entrusted by the government. The Extension Department is in charge of the production guidance and life quality improvement. It supervises the administration of the model farmers and the agriculture research teams and is specifically responsible for the promotion of the agricultural production technology. The Insurance Department handles the insurance products relating to the agricultural and fishery industries, as well as the labor insurance, farmers insurance and national health insurance, etc. Over the past years, the farmers' and fishermen's associations have outstanding achievements in facilitating the agricultural development of the 250

in the following way: 62 per cent for agricultural extension, training, cultural and welfare business; 8 per cent for inter-organizational training, culture and welfare business; and another 5 per cent for public interests. More than 90 per cent of the profit made by the farmers' and fishermen's associations, in most cases, is contributed by their credit departments. During the period between 1981 to 2000, the total profit made by the credit departments of farmers' and fisher men's associations is NTD 109.941 billions, of which about NTD 68.2 billions were allocated for business extension, training, cultural and welfare business, and NTD5.5 billions were set aside for public interests. In other words, the credit department has contributed more than NTD 70 billions to the farmers' and fishermen's associations over the past 20 years for various purposes including agricultural extension, training, supply and marketing, insurance, rural cooperation, promotion of rural culture, establishment of medical, health and emergency facilities, improvement of farm land utilization, prevention/remedy of agricultural disasters, etc. Impacted by the financial liberalization in the Republic of China and the trend of internationalization, the credit departments of farmers' and fishermen's associations have faced great challenges since the year 1996. Being restricted in their business scopes, they are gradually losing competitiveness in the market. The situation is worsened by the series of disasters experienced by the farmers in the recent years, including the foot-and-mouth diseases which caused sudden and tremendous loss to most of the pig farmer, financial crisis in 1997, the 921 Earthquake in 1999 which has placed the rural villages in the affected areas in a miserable situation, and the agricultural reorientation policy implemented by the government forcing the pig farmers to move away

from the agricultural industry, etc. The country's entrance into WTO in 2002 has further caused the disorder in the industry. All these have not only adversely impacted the rural economy, but also impaired the capability of the farmers in the repayment of interests. On the other hand, the outflow of funds has caused the deterioration of the country's economy, and the dramatic drop of farmland prices. Having difficulties to dispose the farmlands used as collaterals, credit departments of farmers' and fishermen's associations are experiencing rising NPL ratio and increasing difficulties in continuing the business. The net profit was decreasing year by year. The net profit (Chart 1) of all farmers' and fishermen's associations has dropped from NTD 10.917 billions in 1996 to NTD 155 millions in year 2001. In 2002, they even reported a loss of NTD 1.711 billions, with a high NPL ratio of 18.62 per cent which has far exceeded the average NPL of all financial institutions in ROC during the same period, i.e., 6.84 per cent. The net worth (Asset minus liabilities) of some of the credit departments of farmers' and fishermen's associations has also dropped to nearly a negative figure, facing an extremely difficult situation in managing the business. 2 Establish an Integrated Agricultural Finance System

Agricultural finance plays a critical role in the process of agricultural development. With a purpose to solve the above crisis in agricultural finance and improve the business structure of the credit departments of farmers' and fishermen's associations, thereby protecting the rights and interests of the depositors; promoting the agricultural policies; improving the life quality of the farmers and fishermen and facilitating the economic development in the rural and fishing villages, the government of the Republic of China 251

has completed the legislation process and implemented the Agricultural Finance Act on January 30, 2004; and further established the Bureau of Agricultural Finance under the Council of Agriculture, Executive Yuan. The central competent authority for agricultural finance has since been changed from the Financial Supervisory Commission (which was in charge of the financial institutions in general) to the Council of Agriculture, Executive Yuan (which was in charge of the agricultural policies). The local competent authority for the business has, as a result, been moved from the Finance Bureau (Department of Finance) of municipal or county governments to the Agriculture Bureau (Department of Agriculture). For its agricultural finance system, the R.O.C. government follows the 3-tier structure of Japan (Agricultural Cooperative <JA> or Fishery Cooperative <JF> for municipals, communities or villages at the basic level; Prefectural Unions of Agricultural Cooperatives and Prefectural Credit Federal of Fishery Cooperatives for metropolis, counties, or prefectures, at the level of local governments; and National Federation of Agricultural Cooperative Associations and National Federation of Fishery Cooperative Associations at the National and top Level. The Council of Agriculture and all the farmers' and fishermen's associations, acting as the joint convener, have paid out a total capital of NTD20 billions (49 per cent from the government and 51 per cent from the farmers' and fishermen's associations) and established the Agricultural Bank of Taiwan on May 26, 2005 as the superior institution of all the credit departments of farmers' and fishermen's associations. A two-leveled basic structure for the agricultural finance institutions of R. O. C. has since been constructed. On January 1,

2006, the Agricultural Credit Guarantee Fund was changed to be under the supervision of the Council of Agriculture, Executive Yuan. The various measures are implemented to facilitate an integrated management, thereby constructing a safe and sound agricultural finance system (Chart 2). The core value of the government policies is to protect the rights and interests of the farmers and fishermen and fulfill the goals of "support the healthy development of the agricultural industry through a sound financial system; maintain the stable financial growth with the agricultural development", so as to provide a solid financial foundation for the sustainable agricultural development of the country. The functionalities of the different units in the agricultural finance system of the Republic of China are briefed below:

2.1

The Central Competent Authority

The Council of Agriculture (COA), Executive Yuan is the central competent authority of the agricultural finance system. The Bureau of Agricultural Finance under COA is in charge of the supervision of the agricultural finance business, responsible for:i) Planning and development of agricultural finance systems and supervision policies. ii) Research, development, implementation and interpretation of regulations in connection with agricultural finance. iii) Review and approval on the establishment, annulment, suspension and resumption of business for the principal offices and branches of agricultural finance institutions, as well as the relevant rehabilitation and reorganization affairs. iv) Control, super vision, examination,

252

coaching and evaluation of the business operation, financial and personnel management of the agricultural finance institutions. v) Prohibition, punishment and handling of any violations against the regulations relating to agricultural finance. vi) Collection, consolidation and analysis of information in connection with the supervision, management and audit of the agricultural finance business. vii) Handling of merger and acquisition of agricultural finance institutions. viii) Planning, supervision and coaching of the agricultural loan business. ix) Providing guidance on the application and utilization of agricultural loans; development and supervision of the policies on interest-difference subsidies. x) Planning and supervising the communication, coordination and cooperative measures among the agricultural finance institutions and other financial institutions. xi) Planning and supervising the communication and cooperative measures among the agricultural finance institutions and other agricultural agencies. xii) Other issues relating to the management and supervision of agricultural finance.

the special municipalities. For counties (municipalities), the local competent authorities shall be the respective county (municipal) governments. The local competent authorities will assist the central competent authorities to coach the farmers' and fishermen's associations, responsible for the following business : 2.2.1 Coach the farmers' and fishermen's associations on the administration of the associations, including: a) Election of officers for the farmers associations. b) Conveyance of major laws and regulations

c) Manage the employee turnover in the farmers associations. d) Decision-making on major cases/projects.

e) Assignment of coaching personnel/ advisors. f) Review and approve the meeting minutes required by law. g) Conveyance of general laws and regulations. h) Approve and transmission of statistical information. i) Guidance and supervision of the business of farmers associations. j) Audit on the properties of farmers associations. 2.2.2 Assist the farmers' and fishermen's 253

2.2

Local Competent Authorities

For the special municipalities, the local competent authorities shall be the respective governments of

associations to handle the health insurance for farmers and fishermen, application for the allowance for old farmers and educational subsidy for farmers' children, etc. 2.2.3 Assist the farmers' and fishermen's associations to handle the 4-H (Head, hands, heart, and health) business, home economics, rural life improvement and other items for promotion in the industries. 2.2.4 Provide guidance on the lending business under the Agricultural Development Fund Project.

competent authority after consulting the competent authority of the Banking Act of the R.O.C. and other relevant institutions. 2.3.2 Business Items conducted with the Credit Departments of Farmers and Fishermen's Associations: a) b) Receiving Re-deposits. Providing funding services.

c) Providing coaching services and conduct financial audits. d) Evaluation on banking business and performance appraisal. e) Shared information utilization.

2.3

Agricultural Bank of Taiwan

Pursuant to the "Agricultural Finance Act", the Agricultural Bank of Taiwan is the superior institute of the credit departments of farmers' and fishermen's associations, responsible to guide the business development of the latter and to provide finance for the agriculture, forest, fishing and livestock farming industry, at the same time stabilize the agricultural finance. The business scope of the Agricultural Bank of Taiwan is as follows: 2.3.1 Business Items handled by the Agricultural Bank of Taiwan: a) Finance constructions. for major agricultural

2.4

Agricultural Credit Guarantee Fund

The Agricultural Credit Guarantee Fund is a credit guarantee institution established with the government approval. It plays a bridging role for credit guarantees; contributes to the steadiness and effectiveness of the agricultural finance system; and improves the performance for the agricultural finance institutions. Its major responsibilities are as follows: 2.4.1 Assists the farmers with insufficient collaterals to achieve better credit standings and obtain the funds required for running the agricultural business, so as to improve the operational efficiency in the agricultural and fishing business and increase the income of the farmers and fishermen. 2.4.2 Encourages the agricultural finance institutions to aggressively promote the agricultural

b) Finance for agricultural projects sponsored by the government. c) Finance for the agriculture, forestry, fishing and livestock farming industries to support the relevant government policies. d) f) 254 General commercial banking business. Other business approved by the central

loans and play an active role in financing the farmers and fishermen. 2.4.3 Assists the farmers and fishermen participating in the agricultural development projects to obtain the funds required, thereby improving the effectiveness of agricultural policies implemented by the government.

agencies. viii) Acting as an agent for the township (municipal) treasury. ix) Handle business entrusted by the Agricultural Bank of Taiwan. x) Other business approved by the central competent authority. 3 Development Strategies for Agricultural finance Institutions

2.5

Credit Departments of Farmers and Fishermen's Associations

Credit departments of farmers' and fishermen's associations form the basis of the agricultural finance system. After the supervision and coaching process of the competent authority, there are now 264 credit departments of farmers' associations and 25 credit departments of fisher men's associations, totaled 289 in the country. Also, there are 815 and 40 branches respectively of the farmers' and fishermen's associations. In other words, the credit departments of farmers' and fishermen's associations are operating in total 1,144 business locations. The business scopes of credit departments of farmers' and fisher men's associations are as follows: i) ii) Receiving deposits. Handling loans.

The agricultural finance system of the Republic of China is built on basis of the agricultural finance institutions, which include all the credit departments of farmers' and fishermen's associations and the Agricultural Bank of Taiwan. The credit departments of farmers' and fisher men's associations provide the first-line service to a massive number of farmers and fishermen; while the Agricultural Bank of Taiwan provides a supervisory and coaching role to all the credit departments of farmers' and fisher men's associations, helping them to provide accurate and efficient banking services to the members. The major development strategies are as follows: 3.1 Receiving re-deposits from credit departments of farmers' and fisher men's associations and providing funding services All surplus funds in credit departments of farmers' and fishermen's associations are required to be redeposited to the Agricultural Bank of Taiwan. All applications for credit facilities, unless specifically approved by the Agricultural Bank of Taiwan for emergency purposes, should be filed to the Agricultural Bank of Taiwan. As at the end of

iii) Lease of agricultural production and marketing equipments to members (or member families registered in the same household.) iv) v) vi) vii) Domestic remittance. Collection of various fees. Lease of safe deposit boxes. Various service items on behalf of other

255

December, 2008, the total re-deposits received by the Agricultural Bank of Taiwan from credit departments of farmers' and fisher men's associations have reached NTD376 billions. Agricultural Bank of Taiwan not only plays an effective role in disposing the surplus funds from credit departments of farmers' and fishermen's associations, but also has created for them an interest income of approximately NTD3 billions over the past two years. 3.2 Responsible for the review and approval of credit applications above a specific amount for the credit departments of farmers' and fishermen's associations. To gradually improve the asset quality of credit departments of farmers' and fisher men's associations, the government has stipulated in paragraph 4, article 32 of the Agricultural Finance Act that all credit applications above a specific amount (when the amount of a single application or on an accumulated basis has exceeded three fourths (3/4) of the maximum limit for the credit customers in the category) made to the credit departments of farmers' and fisher men's associations should be submitted to the Agricultural Bank of Taiwan, either for their approval or follow-up actions. 3.3 Promoting the Agricultural Loan against Policy-Based Projects. The central competent authorities will develop and promote agricultural loans against policy-based projects. The agricultural finance institutions are required to support the government policies by providing priority services to such applications. For farmers or agriculture-related enterprises that are unable to provide sufficient collaterals for the loan, 256

credit departments of farmers' and fishermen's associations should assist the customer to obtain guarantee from the Agricultural Credit Guarantee Fund. Since year 2006, the Council of Agriculture, Executive Yuan has entrusted the Agricultural Bank of Taiwan to take charge of the Agricultural Development Fund. The demand and supply of agricultural loan against policy-based projects have since been incorporated into the agricultural finance system to achieve a centralized management, mutual supports and integrated utilization of funds, thereby optimizing the synergized effects. Through the collaborative efforts of the Agricultural Bank of Taiwan and credit departments of farmers' and fisher men's associations in developing the business, up to the end of December 2008, a total of NTD37.3 billions have been processed. The achievement rate is about 93.3 per cent. 3.4 Providing coaching services to credit departments of farmers' and fisher men's associations. Pursuant to Article 23 of the Agricultural Finance Act, the Agricultural Bank of Taiwan is responsible to provide coaching services to credit departments of farmers' and fishermen's associations and conduct audits on their business and financial operations. The Agricultural Bank of Taiwan has appointed more than 30 designated advisors to provide onsite services at five locations around the country. They are responsible to assist the credit departments of farmers' and fisher men's associations to develop advanced management concepts, build up adequate management systems, enhance the business structure and improve their competitiveness in the market.

4

Achievements

With the collaborative efforts from the central and local competent authorities, the Agricultural Bank of Taiwan, the Agricultural Credit Guarantee Fund and the farmers' and fishermen's associations, significant business growth have been achieved in all business units since the completion of the integrated management and supervision systems for the agricultural finance industry of the R.O.C.

establishment, it has successfully coached the credit departments of the farmers and fishermen's associations to promote the agricultural finance business; increase the agricultural development funds; and support the "New Agricultural Movement" of the government to expedite the construction of rural villages and activate the economic development in rural and fishing villages.

4.2

Agricultural Credit Guarantee Fund

4.1

4.1.1

The Agricultural Bank of Taiwan

Deposit Business

4.2.1 Performance of Guaranteed Agricultural Loans against Policy-Based Projects The number of guarantees issued has increased from 4,006 pieces in 2004 to 41,045 pieces in 2008, marking a growth of 925 per cent (or 9 times). The amount of guarantees issued has also increased from NTD1.915 billions in 2004 to NTD18.883 billions in 2008, marking a growth of 886 per cent (or 9 times). The rapid development of the Agricultural Credit Guarantee Fund has considerably benefited the farmers and fishermen, the relevant enterprises and the agricultural economy of the country, which are facing great difficulties in business operations after the country's entrance into the WTO. The guarantees issued under the fund are mostly for the micro loans applied by the farmers and fishermen for seasonal reasons. (The average guarantee amount is about NTD500,000). The agricultural credit guarantee resources have been effectively used for the development of the rural economy.

Total deposit balance has increased from the 317.08 billions as at the end of 2006 to 383.35 billions as at the end of 2008, marking a growth of 120 per cent (or 1.2 times)? 4.1.2 Credit Business

The total outstanding loan has been increased from NTD13.47 billions as at the end of 2006 to NTD86.37 billions as at the end of 2008, marking a growth of 641 per cent (or 6.4 times). 4.1.3 During the two and half years since its establishment, the Agricultural Bank of Taiwan has assisted the farmers' and fishermen's associations to make a profit from the interest difference of re-deposits amounting to about NTD3 billions, as well as a pre-tax profit of about NTD380 millions. 4.1.4 Integrate the Resources of Agricultural Finance and Promote the Economic Development in Rural Villages The Agricultural Bank of Taiwan is the superior institution of agricultural finance. Since its

4.3 The Credit Department of Farmers' and Fishermen's Associations

4.3.1 Improve the Business Structure to Protect the Benefits of the Farmers and Fishermen 257

With the powerful supervision of the competent authorities, the active coaching by the Agricultural Bank of Taiwan, the full support from the Agricultural Credit Guarantee Fund and the collaborative efforts from all the farmers' and fishermen's associations, the business structure of the farmers' and fishermen's associations has been significantly improved. During the period from 2004 to 2008, the total lending from all farmers' and fishermen's associations has been increased from NTD558.7 billions to NTD736.9 billions, a growth of NTD178.2 billions or 32 per cent. The amount of non-performing loans for the same period has been reduced from NTD80.8 billions to NTD38 billions, marking a reduction of NTD42.8 billions or 53 per cent. The NPL ratio, as a result, has been significantly reduced from 14.46 per cent to 5.16 per cent. The number of credit departments with an NPL ratio of more than 15 per cent has also been reduced from 107 to 36. 4.3.2 Reinvest the Revenue for Rural Constructions The credit departments of farmers' and fishermen's associations have created a revenue of more than NTD17 billions over the past five years, which has been reinvested into the farmers' and fishermen's associations to assist the government to facilitate various rural construction tasks including agricultural extension, supply and marketing, insurance and improvement of farmers' welfare. 5 Conclusion

by step, built up an integrated agricultural finance system. Over the more than five years time, the agricultural finance institutions have, as a whole, achieved significant improvement and growth in various aspects including the asset quality, risk undertaking abilities, profitability and business scopes. They contributed to the effective protection of the deposits from the farmers and fishermen. By providing the agricultural loans against policy-based projects, they have also improved the welfare and life quality of the farmers and fishermen, activated the economic environment in the rural and fishing villages and established a solid basis for the sustainable development of the industries. The agricultural finance system of the Republic of China is yet in its preliminary stage of construction. There are still great rooms for further improvement in terms of the relevant financial regulations, supplementary measures and infrastructure constructions, etc., including : 1 A shared information system for the agricultural finance institutions is yet to be established to effectively use the competitive advantages of channel distribution through the 1,138 branches of the credit departments of farmers' and fishermen's associations. 2 Restricted by the government policy, the Agricultural Bank of Taiwan is yet unable to establish branches to meet its business requirements. This has confined the development of the Agricultural Bank of Taiwan and impaired its capability to provide effective service to the credit departments of farmers' and fisher men's associations. 3 Due to regulatory restrictions, the Agricultural Bank of Taiwan is not allowed to entrust the farmers' and fishermen's associations

Agricultural finance is the foundation of agricultural development. After the implementation of the Agricultural Finance Act on January 30, 2004 for the integrated management of the agricultural finance industry, the R.O.C. government has, step 258

for money trust products. The credit departments of farmers' and fishermen's associations are therefore unable to expand their business scope to satisfy the customer requirements for diversified financial services, which has adversely impacted their competitiveness in the market.

4 The low net worth of the Agricultural Credit Guarantee Fund and the insufficient power of guarantee are all issues to be addressed by the relevant government authorities to further improve the management efficiency of the agricultural finance systems.

259

Unit: NT$100 millions

Chart 1: Business Performance of all Farmers and Fishermen's Associations during 1981-2003

260

Fig 2. : Structure of the Agricultural Finance System

261

Table 1 : Deposits in the Agriculture Bank of Taiwan 2006-2008 Date

Item Balance

2006/12/31

Per cent Growth Rate Balance

2007/12/31

Per cent Growth Rate

2008/12/31

Balance Per cent Growth Rate

Redeposit from 3,150.55 General Deposits 20.34 Total 3,170.89

99.36 0.64 100

-

3,713.51 206.59 3,920.10

94.7 5.2 10

18% 916% 24%

3,776.29 7,07 3,833.55

98.69 1.84 100

1.7% (3.9)% (2.2)%

Table 2 : Loans from the Agricultural Bank of Taiwan 2006-2008 Date Item 2006/12/31 Balance Growth Rate

-

2007/12/31 Balance Growth Rate

214%

2008/12/31 Balance Growth Rate

204%

Total Outstanding

134.75

423.19

863.77

Table 3 : Loans from the Agricultural Bank of Taiwan 2006-2008 Date Item Balance 2005 Growth Rate

-

2006 Balance Growth Rate

117%

2007 Balance Growth Rate

10%

Pre-tax Profit (Loss)

6,819

14,801

16,312

262

Table 4 : Guaranteed Agricultural Loans Against Policy-Based Projects, 2004-2008 NTD100 millions

Year Number of Guarantees Issue Annual Growth Rate (Per cent) Amount of Guaranteed Loans Annual Percentage of Growth Rate Loan Against (Per cent) All Products 66 289 39 32 29 17.64 39.15 44.25 68.10 77.24

2004 2005 2006 2007 2008

4,006 24,088 28,687 35,488 41,045

450 501 19 24 11

19.15 74.44 103.49 137.1 188.83

Table 5 : 2004-2007 Business Profile of All Credit Department of Farmers and Fishermen's Associations

Cutoff Date

2004 12/31

2005 12/31

2006 12/31

2007 12/31

2008 12/31

2004-2008 Change Rate of Growth

All Farmers/Fishermen's Associations Total Deposits Total Loans Loan/Deposit Ratio Amount of NPL NPL Ratio Number of Credit Departments with NPL Ratio? Coverage Ratio 13,320 5,587 39.25% 808 14.46 13,690 5,949 40.79% 650 10.92% 13,739 6,619 45.38% 538 8.13% 13,573 7,217 50.26% 451 6.25% 13,664 7,369 53.93% 380 5.16% 344 1,782 14.68% -428 -9.3% -53% 2.6% 32%

15%

107

88

63

43

36

-71

24.18%

28.26% 28.63 805

35.07% 36.76 840

42.79% 45.36 886

54.72% 38.15 916

30.54% 16.77 146 78% 19%

Profit/Loss for the Period 21.38 Net Worth 770

263

Annexure 6.2.3

MICRO CREDIT DELIVERY SYSTEM AND GOOD GOVERANCE IN RURAL DEVELOPMENT IN INDIA

Mr Chandra Kumar Jamatia

1 Introduction process, converging all development programmes. At present, a large number of Self-Help Group Promoting Institutions (SHPIs), all the banking agencies and MFIs are pursuing this programme for the upliftment of the poor. This is also recognized as a part of priority sector lending and normal banking business by Reserve Bank of India. Thus, it is synonymous with microfinance programme of the country. As on 31 March 2009, there are more than 61 lakh saving-linked SHGs and more than 42 lakh credit-linked SHGs and thus, about 8.6 crore poor households are covered under the programme. Microfinance sector has covered a long journey from micro savings to micro credit and then to micro enterprises and now entered the field of micro insurance, micro remittance, micro pension and micro livelihood. This gradual and evolutionary growth process has given a great boost to the rural poor in India to reach reasonable economic, social and cultural empowerment, leading to better life of participating households. Financial institutions in the try have been playing a leading role in the microfinance programme for nearly two decades now. They have joined hands proactively with informal delivery channels to give microfinance sector the necessary momentum. It has been encouraging the voluntary agencies, bankers, and socially spirited individuals, other formal and informal entities and also government functionaries

A series of research studies conducted by NABARD during the early eighties showed that despite having a wide network of rural bank branches, a very large number of the poorest of the poor continued to remain outside the fold of the formal banking system. These studies also showed that the existing banking policies, systems and procedures, and deposit and loan products were perhaps not well suited to meet the most immediate needs of the poor. Thus began search for alternatives. Many research studies, done inhouse as well as sponsored to professional institutions, and some action research projects funded out of the Research and Development Fund of NABARD, led it to develop the Self Help Group [SHG] - Bank linkage model as the core strategy that could be used by the banking system in India for increasing their outreach to the poorest of the poor who were hitherto getting by-passed by them. 2 Micro finance in India

Microfinance has made tremendous strides in India over the years and it has become a household name in view of the multi-pronged benefits reaped/ receivable from microfinance services by the poor in our country. Self Help Groups (SHGs) have become the common vehicle of development 264

to promote and nurture SHGs. The focus in this direction has been on training and capacity building of partners, promotional grant assistance to Self Help Promoting Institutions (SHPIs), Revolving Fund Assistance (RFA) to MFIs, equity/ capital support to MFIs to supplement their financial resources and provision of 100 per cent refinance against bank loans provided by various banks for microfinance activities.

2.1.1.1 Evolution of SHGs - Bank Linkage Programme What is Self-Help Group? A Self-Help Group [SHG] is a small, economically homogeneous and affinity group of rural poor which comes together to: · · fund · · save small amounts regularly mutually agree to contribute to a common

2.1

Models of Micro - Credit

The following are the micro-credit models involving credit linkage with banks: · Self Help Groups (SHG),

meet their emergency needs have collective decision making

· Swarnjayanti Gram Swarozgar Yojana (SGSY), · · Micro Finance Institutions (MFIs), Banking Correspondent Agent (BCA),

· resolve conflicts through collective leadership and mutual discussion · provide collateral free loans on terms decided by the group at market driven rates The SHG-Bank Linkage Programme is the flagship micro finance intervention of NABARD. The launching of its Pilot phase of the SHG Bank Linkage programme in February 1992 could be considered as a landmark development in the banking with the poor. The informal thrift and credit groups of poor came to be recognised as bank clients under the Pilot phase. The Pilot phase was followed by setting up of a Working Group on NGOs and SHGs by the Reserve Bank of India in 1994, which came out with wide ranging recommendations on internalisation of the SHG concept as a potential intervention tool in the area of banking with the poor. The Reserve Bank of India accepted most of the major recommendations and advised the banks to consider lending to the SHGs as part of their mainstream rural credit operations. 265

· Non Banking Financial Companies (NBFCs), · Financial Corporations (FCs),

· Tripura State Support Project on SHGs (TSSPS). 2.1.1 SHG - Bank Linkage Model

This model involves the SHGs financed directly by the banks viz., Commercial banks (Public Sector and Private Sector), Regional Rural Banks (RRBs) and Cooperative Banks. The SHG - Bank Linkage Programme was launched by NABARD in 1992, with the policy backup of the Reserve Bank of India.

2.1.1.2 Important milestones in SHG-Bank Linkage Programme NABARD has been playing the role of propagator and facilitator by providing conducive policy environment, training, and capacity building besides extending financial support for the healthy growth of the SHG linkage programme. Over the years, various steps taken in this regard may be listed as under: · Conceptualisation of Pilot Programme in February 1992 for linking 500 SHGs with banks after consultations with Reserve Bank of India, Banks and NGOs; · Developing a conducive policy framework through provision of opening Savings Bank Accounts in the names of SHGs, relaxation of collateral norms, simple documentation; · Training and awareness building among the stakeholders; · Mainstreaming the Programme as part of normal business activity of banks in 1996; · Encouraging banks (RRBs and SCBs/ DCCBs), NGOs and Individual Volunteers for promotion of SHGs; · Constitution of a High Powered Task Force to suggest policy, legal, regulatory measures for smooth, unhindered growth of micro finance sector; · Setting up a Micro Finance Development Fund (MFDF) in NABARD for meeting the promotional costs of up scaling the micro finance interventions; 266

· Support to SHG Federations for training and capacity building of SHG members; · Setting up of Microfinance Development and Equity Fund in NABARD; · Capital/ Equity support to MFIs to enable them to leverage commercial funds from banks; · Revolving Fund Assistance to MFIs for on-lending to SHGs or individuals; · Setting up of Financial Inclusion Fund (FIF) to support development and promotional activities for greater financial inclusion; and · Setting up of Financial Inclusion Technology Fund (FITF) for enhancing investment in Information and Communication Technology for financial inclusion; 2.1.1.3 Impact of Programme SHG-Bank Linkage

The SHG-Bank Linkage Programme has far reaching impact on the lives of the poor people. In order to assess in detail the socio-economicpolitical impact as well as the challenge, issues and bottlenecks facing the programme in enhancing credit flow to the poor, many state level and national level studies were conducted during 200809. A major national level study on `Impact and Sustainability of SHG Bank Linkage Programme was got conducted by the National Council of Applied Economic Research (NCAER). The study conducted was aimed to assess the impact and sustainability of SHG-Bank linkage on the socioeconomic conditions of the individual members and their households in the pre- SHG and postSHG scenarios. The study was conducted for India in six States (Andhra Pradesh, Karnataka,

Maharashtra, Orissa, Uttar Pradesh and Assam) from five regions viz. the south, west, east, central and north-east. The overall findings of the study suggest that SBLP had significantly improved the access to financial services by the rural poor. The major findings of the study were as under: · Net household income between pre-SHG and post-SHG registered a significant growth per year at 6.1 per cent; · The annual growth rate in per household consumption expenditure on food and non-food items recorded 5.1 per cent and 5.4 percent, respectively;. · Per household annual expenditure on education and health recorded 5.6 per cent and 5.5 per cent growth, respectively; · Net increase in the value of consumer durable assets per household was Rs.4,329 between pre-SHG and post-SHG periods and the annual growth of assets recorded a high growth between the two periods at 9.9 per cent; · The average loan amount per household grew at an annual rate of 20.5 per cent between the pre-SHG and the post-SHG periods; · About 93 per cent of households reported that loans had been taken in the postSHG situation as compared to that of 46.5 per cent during pre-SHG; · On the issue of repayment of loan by SHG members, the findings showed that 96.4 per cent of households had reported regularity in repayments of loans; · The share of households living below the

poverty line reduced from 58.3 per cent in the pre-SHG period to 33 per cent in the post-SHG situation. The average annual poverty reduction rate was 10 per cent. About 92 per cent of households reported that the social empowerment of women had increased after joining membership in SHGs over a period of time; · More than 60 per cent of the households indicated that there had been an increase in the ownership of productive assets in post-SHG situation as compared pre-SHGs situation; and · The findings showed that 22.5 per cent of women SHG members in the households had taken decision in the post-SHG period as compared to 9.1 per cent in the pre-SHG period with respect to children's education. Starting with the NABARD led limited scale Pilot Project in 1992 that aimed at promoting and financing 500 SHGs across the country, the SHG Bank Linkage strategy has come a long way. More than 32 lakh SHGs were provided bank credit of over Rs. 16,818 crore by March 2009. More than 85 per cent of groups are women groups. 55 commercial banks, 86 Regional Rural Banks (RRBs) and 402 cooperatives were involved in financing these groups. The highlights of SHG-Bank Linkage Programme are given in Table I.

2.2

SGSY Model

One of the critical factors responsible for wide spread rural unemployment and poverty in the central, eastern and north-eastern regions in India is inadequate access to the formal credit for the poor. Tripura being a North Eastern state has further disadvantage of geographical isolation which makes institutional credit facilities more difficult to reach to the poor. Microfinance through 267

group approach is emerging as a potent tool for meeting the financial needs of the poor. Swarnjayanti Gram Swarozgar Yojana (SGSY) started in 1999 was an initiative to address the credit needs of rural poor in more systematic manner. Organizing the rural poor, particularly the women, into Self Help Groups, encouraging them to pool their individual thrift and savings as common fund and utilizing the same to leverage institutional credit for consumption as well as productive investment, leading to the creation of sustainable livelihood and micro-enterprises was the central objective of the programme. Financial assistance to Swarozgaris comprises of two components viz. loan and subsidy. SGSY is a credit-linked scheme and credit is the key element. Subsidy is only a minor and enabling component. The major part of the investment consists of bank credit from financial institutions comprising commercial banks, cooperative banks and regional rural banks. SGSY seeks to develop close linkage with credit mechanism in such a manner as would promote multiple credit rather than a one time credit injection. Multiple doses of credit would mean assisting a Swarozgari over a period of time with a second and subsequent dose(s) enabling him/ her to access higher amount of credit. It was decided that all the left out BPL families would be brought under the fold of SHGs by 2015, and financially assisted.

Model has been launched by NABARD as a pilot project on Financial Inclusion with ICT solutions in Tripura Grameen Bank in the country in collaboration with World Bank, LIC and M/s Source Trace System. Two branches of TGB viz. Khowai (West Tripura) and Ambassa (Dhalai) have been selected for the project. Five villages per branch would be covered by a business correspondent appointed by the bank. All technology related to ICT based solutions (i.e. Biometrics Smart Card, Point of Sale, Mobile for communication of data, Registration devices - like laptop, Agent Card, etc.) have been provided to TGB. The project has been launched in Khowai on 7 August 2009. Based on the experience of two branches, the Project would be extended to other branches. A business correspondent appointed by the bank would cover five villages per branch through hand held model. The BCs carry hand-held devices, which are smart card readers. The information captured is transmitted to a central server where the accounts are maintained. These devices are used for making payments to rural customers and receiving cash from them at their doorsteps.

2.5

SHG-Post Office Linkage Programme

2.3

MFI - Bank Linkage Model

This model covers financing of Micro Finance Institutions (MFIs) by banking agencies for onlending to SHGs and other small borrowers covered under microfinance sector.

2.4

Banking Correspondent Agent (BCA)

The implementation of Business Correspondent 268

The Pilot Project for SHG-Post Office Linkage programme was initially launched in 5 selected districts of Tamil Nadu, viz, Sivaganga, Pudukottai, Tiruvannamalai, Thanjavur & Tiruvarur with the objective of examining the feasibility of utilizing the vast network of Post Offices in rural areas in disbursement of credit to rural poor, through SHGs, on agency basis. The progress under the project has been encouraging. As on 31 March 2009, 2,835 SHGs have opened zero interest savings accounts with select Post Offices in Tamil Nadu and 889 SHGs have been credit linked with loan amounting to Rs 213.11 lakh. In addition to

Revolving Fund assistance (RFA) of Rs. 3 Crore sanctioned to Department of Posts, Tamil Nadu, NABARD has sanctioned RFA of Rs.5 lakh to Post Offices in Meghalaya for on-lending to 50 SHGs in East Khasi Hills. 3 SHG Federations

5

Promotion of Self Help Groups

Recognizing the emerging role of the SHGs' Federations in nurturing of SHGs, enhancing the bargaining powers of group members and livelihood promotion, NABARD introduced during 2007-08, a flexible scheme to support such Federations, on a model neutral basis. The broad norms prescribed for supporting SHG Federations stipulate that the federations should be need-based, member-owned/driven, democratically managed with members at liberty to join, become selfmanaged over three years, etc. Support to the Federation is extended by way of grant for training, capacity building, and exposure visits of SHG members, etc. 4 Far mers' Clubs Facilitators as Business

NABARD has been providing grant assistance to the reputed NGOs for formation, nurturing and linkages of SHGs. Grant assistance have been earlier sanctioned to 6 NGOs , two farmers clubs and Tripura Grameen Bank for promotion and linkage of SHGs. The progress made by these agencies is presented in Table 3. · Non Banking Financial Companies (NBFC) - Industrial houses, TATA Finance, etc. · Corporations/ Societies- Like SC, ST, OBC, and RM Development Corporations etc. 6 Tripura State Support Project on SHGs (TSSPS)

NABARD has sanctioned Project to Tripura Grameen Bank for appointing Farmers Clubs as Business Facilitators. The project envisages coverage of 25 Farmers Clubs of 3 Districts- West Tripura, South Tripura and North Tripura to provide Kisan Credit Card to 7500 farmers who have so far not received the same from any of the banks and to provide agricultural term loans to 3750 farmers. The project has been kick started in August 2009 by providing training to 25 Business Facilitators from 5 Farmers' Clubs. · Non Banking Financial Companies (NBFC) - Industrial houses, TATA Finance, etc. · Corporations/ Societies- Like SC, ST, OBC, and RM Development Corporations etc.

Designed by the Government of Tripura, this initiative was launched in December 2008. The project aims to credit link 11,500 existing SHGs, forming and credit linking 35,000 new SHGs and promoting livelihood activities among the 3 lakh members up to 2012. Under this project, the poor families would be provided facility of soft loan by the state government funds on payment of a marginal interest. It aims to bring all the households in the rural areas and the poor households of urban areas like Agartala Municipal Council and the Nagar Panchayets under its fold by 2012. It also involves to support members in improving their quality in products and running their groups effectively through different line departments. 7 Impact of Micro Credit Delivery System

The SHG-Bank Linkage Programme has far reaching impact on the lives of the poor people. In order to assess in detail the socio-economic269

political impact as well as the challenge, issues and bottlenecks facing the programme in enhancing credit flow to the poor, many state level and national level studies were conducted during 200809. A major national level study on `Impact and Sustainability of SHG-Bank Linkage Programme was got conducted by the National Council of Applied Economic Research (NCAER). The study conducted was aimed to assess the impact and sustainability of SHG-Bank linkage on the socioeconomic conditions of the individual members and their households in the pre- SHG and postSHG scenarios. The study was conducted for India in six States (Andhra Pradesh, Karnataka, Maharashtra, Orissa, Uttar Pradesh and Assam) from five regions viz. the south, west, east, central and north-east. The overall findings of the study suggest that SBLP had significantly improved the access to financial services by the rural poor. The major findings of the study were as under: · Net household income between pre-SHG and post-SHG registered a significant growth per year at 6.1 per cent. · The annual growth rate in per household consumption expenditure on food and non-food items recorded 5.1 per cent and 5.4 percent, respectively. · Per household annual expenditure on education and health recorded 5.6 per cent and 5.5 per cent growth, respectively. · Net increase in the value of consumer durable assets per household was Rs. 4,329 between pre-SHG and post-SHG periods and the annual growth of assets recorded a high growth between the two periods at 9.9 per cent. · 270 The average loan amount per household

grew at an annual rate of 20.5 per cent between the pre-SHG and the post-SHG periods. · About 93 per cent of households reported that loans had been taken in the postSHG situation as compared to that of 46.5 per cent during pre-SHG. · On the issue of repayment of loan by SHG members, the findings showed that 96.4 per cent of households had reported regularity in repayments of loans. · The share of households living below the poverty line reduced from 58.3 per cent in the pre-SHG period to 33 per cent in the post-SHG situation. The average annual poverty reduction rate was 10 per cent. · About 92 per cent of households reported that the social empowerment of women had increased after joining membership in SHGs over a period of time. · More than 60 per cent of the households indicated that there had been an increase in the ownership of productive assets in post-SHG situation as compared pre-SHGs situation. · The findings showed that 22.5 per cent of women SHG members in the households had taken decision in the post-SHG period as compared to 9.1 per cent in the pre-SHG period with respect to children's education. 8 Conclusion

The microfinance movement has been widened, deepened and diversified with continued promotional focus on SHG­Bank Linkage Programme. The SHG­Bank Linkage Programme

has transformed the whole range of institutions ­ Government, banks, NGOs and development institutions, in their approach towards development of poor. The socio-economic aspect on rural poor is enormous. The programme is growing steadily and it is likely that coverage of 100 lakh SHGs would be accomplished much before 2015 as envisaged. There have been sea changes in the policy environment for SHGs in the recent years. Many State Governments and Government of India agencies and international bodies have launched several livelihood programmes with SHGs as delivery channel. MFIs are expanding their horizon of ser vices, inter-alia, through SHG route. Federations of SHGs under different models are coming up by leaps and bounds to provide financial and non-financial services to SHGs. Several variants of SHGs including Joint Liabilities Groups (JLGs) are operating in different parts of the country. Financial Inclusion is being advocated/ focused with SHGs as core center for providing the whole range of services ­ micro saving, micro credit, micro insurance, micro pension, business counseling, and financial literacy with technology options. Matured SHGs are facilitated to carry out the wide spectrum of value chain in farm and nonfarm sectors and looking for support for forward and backward linkages. In addition, matured SHGs are likely to assume the role of Business Facilitators (BF) and Business Correspondents (BC). With these developments, SHG­Bank Linkage Programme with a flexible and responsive approach has coped

up and has risen to the changing times. SHGs have been encompassing the myriads of roles envisaged in the dynamics of times. It has faced several challenges and stood the test of time and would likely to meet the emerging challenges in future. The issues of regional imbalance, micro-enterprise promotion, maintaining the quality of SHGs, recovery performance, etc. are being addressed through various promotional and nurturing efforts. All the stakeholders in their up scaling process are however, expected to champion the core values, visions, principles and philosophy of SHGs and SHG ­ Bank Linkage Programme for orderly growth of microfinance movement. There is a need for recalling, reiterating and reinforcing those fundamentals for sustenance of the movement. NABARD has been the conscience-keeper in this regard and has been focusing the same in every fora. It is expected that all would preserve these values e.g. savings with credit, gradual increase in credit, group dynamics and autonomy of SHGs in decision-making, peer pressure, healthy relationship between SHGs and SHPIs including banks, etc. at any cost. As in the solar system, with Sun at the center and all stars moving around remain in balance when centripetal and centrifugal forces are kept in balance. Similarly, Microfinance ecosystem with the Sun of SHG ­ Bank Linkage Programme at the center, could remain in balance if all the players and programmes revolve round the central value system in the changing times ahead.

271

Table I : Highlights of SHG ­ Bank Linkage Programme (As on March 2009)

Bank Loan outstanding against SHGs (Nos) Bank Loan outstanding against SHGs (Amount in Rs.crore) Per cent of women groups Average bank loan outstanding per SHG (Rs.) Number of participating banks Per cent of NPAs to total bank loans outstanding against SHGs 32,47,451 16,818 85 51,786 543 2.9

Table 2 : Position of SHG Linkages in Tripura Sl. No.

1 2 3 4 5 6 7 8 9 10

Particulars

Total SHG Formed SHGs completed 1st gradation Revolving Fund placed CC Account opened SHGs completed 2nd gradation SHGs sponsored for bank loan Credit disbursed to SHGs (Rs. in crores) Subsidy disbursed to SHGs (Rs. in crores) Subsidy Credit Rario Per SHG investment (Rs. in lakh)

Position

30,670 19,348 14,705 11,426 7940 7117 138.77 76.16 1:1.82 2.31

Per cent

63 76 79 41 80

Table 3 : Agencies Supported for Promotion of SHG Agency Number of SHGs

100 100 100 200 13 14 50 200 50 150

Grant Assistance Sanctioned (Rs. lakh)

2.00 1.75 2.00 1.00 0.11 0.12 1.50 5.83 1.41 4.43

JUST TAMS Borok Mothers Society Tripura Gramin Bank Arabinda farmers Club Naimung Thansa Farmers Club Nari Kalyan Samiti Tribac Tripura Jute Mill Play Centre Khumpui Boroi Bodol

272

Annexure 6.2.4

MICRO CREDIT DELIVERY SYSTEM AND RURAL GOVERANCE IN LEBANON

Ms Mona Asaf

While the coastal and mountainous areas are characterized by abundant rainfall distributed over the winter season, the Bekaa Valley has a semi-arid to continental climate with unpredictable rainfall and recurrent drought. The Northern range of anti-Lebanon mountains has a typical continental Mediterranean climate. Concerning the land formation, there are four distinct morphological units (Appendix 3), namely, · The narrow coastal plain,

1

Area and Topography

Lebanon is located on the eastern shore of the Mediterranean Sea, consisting of a narrow strip of territory approximately 217 km. long from north to south and 32 to 88 km. from east to west. With an area of 10,452 square kilometer, Lebanon is one of the world's smaller sovereign states. It is surrounded by Syria from the northern and eastern side, Palestine from the southern side and the Mediterranean from the western side. (Appendix 1). The national Meteorological Service defined eight eco-climate zones. The principal criterion for demarcation of these zones is rainfall. According to their geographical situation, the ecoclimatic zones are distributed as follow (Appendix 2): · The coastal strip, including northern, central and southern coastal zones; · The mountains, or the Mount-Lebanon, which are divided into two zones: northern and central; (the western range) · The inland divided into three zones: northern, central and southern Bekaa valley; and · The eastern range of Anti-Lebanon Mountains.

· The elevated mount Lebanon or western chain (which receives snow and the most intensive rainfall), · · The inner Bekaa valley, and The inner or eastern Mountain chain.

The short distance over which the topography changes (exceeding 3000 m elevation within 60 km horizontal distance) makes the general character of the terrain quite steep and prone to instability. The result is a generally high local relief, which, in itself, enhances notably differential degradation operations, i.e. weathering and erosion. 2 Population and Socio-economic Context 1

Lebanon, considered a medium developing country, is one of the richest countries of the entire 273

Arab world, with a GDP per capita of $5,000. The reconstruction process, that followed the very long civil war (1975-1991), has rebuilt the economic infrastructure of the country, but it hasn't been able to give Lebanon the prestige and international importance it had in the pre-war years. The great impoverishment of the country, resulting from the civil war, and a limited economic growth at the end nineties has widened the huge gap between rich and poor. In 2005, one fourth of the population, around 1,330,000 people, is estimated to be in poverty: a large basin for the micro credit activity2. Nevertheless, in 2004, only 18 per cent of the potential market was served by the micro credit institutions (MFIs)3. Despite the presence of a large poverty, the Lebanese population has one of the best average profiles of the North Africa and the Middle East: high education and life expectancy at birth, good sanitary conditions and generalized access to basic services (Chart 1). The population is concentrated in urban areas (92 per cent) and counts a relevant presence of Palestinian refugees and Syrian immigrants. The driving sector of the local economy is the service sector (84.3 per cent of GDP), in particular banking, tourism and commerce. Agriculture and industry contribute to create the internal domestic product respectively for 6.2 per cent and 9.5 per cent. In fact, the Lebanese industrial structure is made up of mainly enterprises with less than 5 employees (90 per cent), most of whom are not formally registered. The micro dimensions of the entrepreneurial activities, in Lebanon as in general all over the world, involve big difficulties in gaining access into the banking system that seems to be specialized in macro financing. In fact, 1 per cent of borrowers seem to benefit from more than 274

50 per cent of the total loans. Capital funding is not the sole problem of Lebanese microenterprises, which also suffer a low competitiveness of the market, due to insufficient infrastructures, that make transportation costs grow up, and due to production costs that are higher than those of neighboring countries ­Syria, Turkey and Egypt ­ from whom Lebanon imports raw materials. In such a context, micro credit seems not only to have the chance of playing a fundamental role in the informal sector, to which it is usually addressed in developing countries, but also to become an alternative financing channel for micro and medium enterprises, insufficiently assisted by the banking system and the government7. 3 Implementation of Agriculture as well as Rural Development Programmes

3.1

Agricultural Development Project (ADP)

Through the work of the Ministry of Agriculture, ADP shows the Lebanese Government, cooperating successfully in partnership with the European Union (EU) and with Lebanese nongovernment organizations to improve the productivity, the export potential, and the prosperity, for farmers groups and Co-operatives throughout the vital fruit and vegetable sector of Lebanon's agriculture. ADP ­ a pilot Project ­ started in 2004 and ended on December 2008. Its achievements show great promise for future partnerships in the sector. Working closely with the Lebanese Agriculture Research Institute (LARI) and the Ministry of Agriculture, ADP prepared up-to-date technical and "Good Agricultural Practice" manuals in user

friendly format and Installed a comprehensive country wide system of metrological stations to provide "early warning' systems for farmers using modern computer based models. Working in partnership with the Federation of Chambers of Commerce, Industry and Agriculture of Lebanon (FCCIAL), ADP established Farm Accounting and Management Centers to help farmers manage their farm businesses using an entrepreneurial approach, provided regular and commercially relevant market and technical information to Farmers and Farmers Groups through News Letters and Web Sites, provided assistance to farmers groups and cooperatives in implementing good management and accounting techniques based on computer systems, Installed for the first time in Lebanon traceability and barcode system for farm produce, assisted 40 farmers groups and cooperatives to make productive capita investments. Each group received on average a grant of around 80,000 Euros, helped farmers groups and Cooperatives learn modern business methods and trained farmers groups and co-operatives on applying these methods to ensure high standards of service and produce quality consistent with export markets (Eurep GAP, Global GAP) requirement.

launched a project in 2007 that seeks to improve financing opportunities for existing and newly established micro and small enterprises in South Lebanon that are involved in agriculture and agrobusinesses, and to build the capacity of local entrepreneurs. 3.2.1 Project Components

A revolving micro-credit fund was established with an initial size of US$ 210,000. Loans were disbursed at a flat interest rate of 12 per cent, a rate considered to be competitive in comparison with micro-credit initiatives operating in Lebanon and other developing countries. Furthermore, a subsidized interest rate of 8 per cent was offered to farmers who have been directly affected by the war in Lebanon during 2006. No capital guarantees were required, which constitutes a major advantage over bank financing. 3.2.2 Achievements

· Up to January 2008, 69 loans totaling more than US $200,000 had been given out with loan sizes varying between US $600 and US $6,000 and loan terms varying between 12 and 40 months. · Loans benefited various age groups, with young entrepreneurs (less than forty of age) receiving 29 per cent of the loans given out in 2007. · Loans benefited all regions in South Lebanon 3.2.3 Success Stories

3.2

Revolving Micro-Credit Fund for Agriculture and Agro-businesses in South Lebanon : An Overview

Agriculture and agro-businesses in South Lebanon tend to be family-owned micro and small enterprises with low productivity and competitiveness due to numerous technical and financial constraints. With a highly cyclical income, they generally finance their business expenses through their own savings and informal borrowing due to lack of access to bank financing. In response, UN-ESCWA and the Arab Authority for Agricultural Investment and Development

As a result of the loans disbursed up to January 2008, 37 new work opportunities were created in South Lebanon while 97 jobs were sustained. In 275

addition, a near 100 per cent loan repayment rate has been achieved. 3.2.4 Primary Partners

percentage (18 per cent) of the potential target is nowadays served by the micro credit institutions in Lebanon. The indicator used to measure the depth of outreach is given by the average loan divided by the GDP per capita. It estimates the poverty level of the client: the lower the loan related to the average income per capita, the poorer the borrower. As a consequence, the lower the indicator the deeper the outreach of micro credit activity in the social and economic context. Lebanon is one of the Arab countries with the highest indicator of outreach, coming only after Syria and Jordan. Thus, if the trend is focusing on a medium target, between micro and poor entrepreneurs and those just below the "bankable" line, it is easy to comprehend and justify the other characteristics of micro credit in Lebanon, that are: (i) dominance of male clients: women represent only 35 per cent of the total clientele, exactly the contrary of what generally is found in developing countries, the Arab world included; (ii) dominance of individual lending: the group lending methodology is not so widespread, in fact less than 20 per cent are group guarantee loans against more than 80 per cent of bigger individual loans; (iii) frequent use of collateral: individual loans are obligatory assisted by a co-guarantor or sometimes, even if it is rare, by real assets like goods owned in the house or in the enterprise; and (iv) high concentration in urban areas: micro credit is carried out for more than 80 per cent in the cities and suburbs, where micro entrepreneurial activities are concentrated. Other typical features of the Lebanese MFIs can be added to those described above, such as (i) focus mainly on credit: credit is the sole financial instrument offered by local MFIs, almost only to

AAAID: The Arab Authority for Agricultural Investment and Development funded the project. ESCWA: United Nations Economic and Social Commission for Western Asia oversees and monitors the implementation of the project. ADR: The Association for the Development of Rural Capacities operates the micro-credit fund. 4 Micro-credit in Lebanon

The8 micro-finance sector in Lebanon, born in the late nineties, seems to be going through its first period of stalemate, despite its young age, relative to the more consolidated international experiences. In fact, the high market growth ran out only in few years and since 2002 further improvement or significant changes have not been registered. This is essentially due to the very high market concentration in the hands of two big institutions ­Al Majmoua and AMEEN (Access to Microfinance and Enhanced Enterprise Niches)­and to the insufficient attention of the local government in promoting and financing new micro credit initiatives9. There are no laws governing micro finance industry nor is there a national policy The micro credit industry in Lebanon, measured by the number of active clients, is one of the smallest of the Arab world: in fact, its 13,500 clients represent only 2 per cent of the total market. Besides, its growth rate doesn't seem to be so positive as it registers a slow growth, involving mainly the sole market leaders10. Another extremely significant data is that only a relatively modest 276

finance working capital and not consumptions11. In Lebanon, as well as in the entire Arab world, the sector suffers a lack of diversification. The offer of saving, deposit and micro insurance is limited not only by regulation, that doesn't allow the MFIs to collect savings (this option is reserved to banks), but also by the prevalent mentality, i.e., consumption and not capital accumulation oriented12. Application of the international "best practices": the recent development of micro credit in the Arab countries, compared to other advanced developing areas, makes the local institutions adopt advanced organisational models that try to equilibrate sustainability and outreach. In fact, the two market leaders, Al Majmoua and AMEEN, have reached both operational and financial sustainability, have gained repayment rates of 94-98 per cent and an efficiency in costs (measured by the number of clients per credit officer) that is the best after Morocco. Help by donors: the Lebanese micro credit sector receives an important support by the international cooperation in particular by UNDP and USAID funds, by the Spanish Government and, more recently, by the European Union, through the creation of the EU-funded agency, the Economic and Social Fund for development (ESFD). The approach adopted by the European Union is particular, as it doesn't give subsidized loans to reduce poverty and create employment, but it wants to contribute to ameliorate the efficiency of the MFIs, which often apply very high interest rates, over 40 per cent, to cover their internal inefficiency. Thus, the fund of about 1.2 million Euros is given to those MFIs which offer the lowest interest rate, after covering all operative and financial costs.

4.1

Al-Majmoua ­ Lebanese Association for Development

Al Majmoua was born in 1994 as a micro credit activity of a development program launched by Save the Children and became an independent nongovernmental organization four years later. Its mission is to lend micro credit to Lebanese entrepreneurs who are excluded from the formal banking system. In other words, it finances the working capital of micro and small businesses that are informally organized and where the enterprise and the entrepreneur are one and the same. The organization believes in the social value of its activity: offering to more disadvantaged micro entrepreneurs the chance of accessing sustainable financial services permit them to generate more profit and, as a consequence, to have more resources to spend on their family (richer and a more diversified diet, better hygienic-sanitary conditions, more comfortable housing). At the beginning, from 1994 to 1999, Al Majmoua offered women only solidarity group loans, in accordance with the parent-company direction. After having become independent and passing through a minimum period of time necessary to re-organize, the institution started changing its strategy from onwards and focused on individual lending, mainly for male micro entrepreneurs. At the end of 2004, its credit portfolio was made up of one quarter individual loans and three quarters group loans, a proportion that tends to progressively decrease. What can the reasons for this change be? It seems logical to affirm that it is a natural development of the activity towards a larger target market. In fact, limiting the clientele to women involves a series of implicit and explicit costs: higher administrative 277

costs of so many and little short time loans, difficulties in expanding more in that small niche of the market, obligatory abandonment of the best female clients, who have matured substantial financial needs over time, and the automatic exclusion of the male clientele interested in becoming clients of the institution. The tendency of the institution to specialize in individual lending is confirmed by the data of following table, that shows a progressive increase of the average loan size and, as a consequence, a gradual abandonment of the poorer and female clientele. In fact, the appreciable growth of the credit portfolio is due, in the first years of the activity, to the conquest of the solidarity loan market leadership, whereas from 2001 onwards to the expansion in the individual loan market. These movements are confirmed by numbers, i.e. by the recent lower increase of the number of the total clients in comparison with the credit portfolio growth and by the inversion of the trend in focusing female-male clientele. The new positioning and the matured experience seem to benefit the institution which, since 2003, has showed positive indicators of profitability and a full, operative and financial sustainability, thanks also to several cuts in the operating expenses and to a reduction of the credit risk. 4.1.1 Current Problems and Development Plans for the Future

The alleged but never really investigated reasons are various: no more credit need, preference for the competitor, deterioration of the general economic conditions and the presence of a huge number of emigrants who send money to their families, to the detriment of their business development. To face this situation, between 2001 and 2004 Al Majmoua opened six new branches to ensure herself a larger coverage of the territory. Then, starting from 2005 until the present, it has been trying to reduce interest rates and diversify the product range, offering seasonal individual loans for tourism activities, micro insurances and business training services. In this way it might gain a competitive advantage, being the first and sole micro credit institution in Lebanon selling financial products alternative to credit and non financial services, that are essential to create a class of micro entrepreneurs prepared to realize a more efficient, professional and stable management of their business. This could also contribute to reach the social mission of the institution: to transfer capital and knowledge to the micro and small enterprises as a lasting instrument of development and socialeconomic redemption.

4.2

Access to Microfinance and Enhanced Niches (AMEEN)

Moving towards an upgraded market, Al Majmoua has entered in a more direct competition with the second institution AMEEN, which snatched the leadership. In this new and more competitive context, the main problem that hovers over the institution is the very high abandonment rate of the clientele, equal to 28 per cent in 2004. 278

AMEEN13 started its activity in 1998 as a project funded in Lebanon by the Cooperative Housing Foundation (CHF), an international organization engaged in the field of promoting human development and microfinance. AMEEN proposes a non conventional micro credit model in the developing countries: in fact, it is not a real micro credit institution, but a company offering financial services to banks which lend credit of very small amount. Thus, AMEEN doesn't side

with the micro credit institutions as an alternative of the traditional banking system, but is an important partner of banks to operate in the semiinformal context. Agreements between AMEEN and all the most important local banks provide a clear separation of rules, even in a very strong collaborative and synergic view: · the bank puts its branch network at AMEEN's disposal to facilitate contacts with clients and manages all the technical aspects of the lending process, from the contract underwriting, to the loan disbursement, to the installment collection and finally to the credit recovery; and · AMEEN takes care of the client management, from the micro credit working explanation, to the application filling, to the eligibility evaluation and finally to the monitoring until the end of the contract. Once a week, two representatives of both institutions meet to approve the loan applications, which is quite similar to that of retail banking (disbursement and successive reimbursement consist in fact in banking operations). However AMEEN, differently from a bank, sometimes and without notice, visits the enterprise and the house of its client, just to verify the business and family health status and guarantee the regular installment repayment. Respecting the distribution of tasks described above, AMEEN offers, as well as client management, also financial services. These differ in accordance with the partner bank agreement, but can be classified into two principal categories: · Co-financing : AMEEN brings the liquidity for micro credit together with the bank and is reimbursed by the periodic installments, in

proportion to the lent capital. This form of collaboration was the first experimented in 1998 with Jamal Trust Bank, which bore 25 per cent of the loans and their relative delinquency risks. The lack of experience and the traditional banking system conviction that a profitable lending activity to poor borrowers without guarantee was not possible, made partner banks very cautious. However, positive outcomes and very high repayment boosted confidence and opened the doors to such and so interesting new business that, since June 2000, Jamal Trust Bank has augmented its participation share to 50 per cent. Guarantee: the bank is the sole financer, while AMEEN offers only the collateral service in a predefined percentage of the disbursed loan. This is for example the case of the 2001 agreement with Credit Libanais and the 2004 with Libanese Canadian Bank which both receive only 10 per cent of the total loan AMEEN guarantee. Thus, AMEEN's involvement in the micro lending activity is in effect radically reduced, making the most of its adherence and knowledge of the new social context. AMEEN, as a partner of the banking system in this phase of downgrading, addresses itself to the micro and small entrepreneurs with difficult access to credit, giving them only individual loans. In order to apply for the loan, it is indispensable to be a Lebanese citizen or to have permanent residence in Lebanon, to own a business or to have been an employee for more than one year and to find a co-guarantor. Thus, the target market is partly coincident with the Al Majmoua one in the individual lending sector. The following table, that compares the two competitors, shows AMEEN and Al Majmoua offer loans with almost the same characteristics, 279

but AMEEN, even charging a considerably higher interest rate, has an activity volume five times bigger and a number of clients that is more than the total clientele, group and individual, of Al Majmoua. A structure with bigger dimensions and especially the precious bank partner collaboration (fifty branches in all the territory) are the strengths of AMEEN. In fact, thanks to that, AMEEN has become the market leader and is still nowadays expanding, without handling the price lever. The success of the institution leads to the question whether AMEEN is proposing a sustainable and replicable model. While it has to be said that the institution has reached the full operational and financial sustainability, it is wondered how log this profitable partnership with the banking system can last. In time banks could, in fact, get the necessary experience, professionalism and closeness to the target clientele to be able to do without AMEEN's intermediation and services. Nevertheless, this hypothesis is only suitable when the bank considers micro credit as a prior objective of its strategic plans. This objective is moreover not reachable in a short time, because it means changing the current image of the bank as a bank for the rich into a bank that supports the poor, adapting traditional mentality and internal procedures to the language and needs of micro and small entrepreneurs. This process requires huge investments in human capital and time. More realistically, in presence of banks wishing only to diversify their business without distorting them, AMEEN model works perfectly. The bank earns profits from an activity that it could never manage alone and AMEEN takes advantage of the bank infrastructure to reach a larger number of clients and economies of scale. 280

This model is, in effect, interesting and easy to replicate in those contexts where traditional banks intend to approach the micro finance world, without becoming micro credit institutions. In fact, in industrialized countries, the banking system have often adopted forms of cooperation similar to that of AMEEN, in order to expand it business into more weaker sectors of the population which would be impenetrable directly by the traditional financial intermediaries. 5 Final Considerations

As emerges from the previous pages, the micro credit market in Lebanon presents two dominant characteristics, one positive and one negative. Its main weakness is the very high concentration that means low competitiveness and, in general, operative inefficiency and lack of incentive to innovation. The entrance of new players is made difficult not only by the market conditions, but also by the government's indifference in supporting micro credit development. On the contrary, the winning AMEEN model is the main strength of the sector. In fact, if the road to outreach expansion seems to be excessively impassable, the banking sector involvement in the financing of micro and small traditionally excluded enterprises could become an excellent instrument of economic and social development of the country, given the very high number of micro entrepreneurial activities and the significant role of the informal sector.

5.1

Cooperatives

The Cooperative Law framed in 1964 provides the legal framework of cooperative institutions in Lebanon. The Directorate of Cooperatives, under the Ministry of Agriculture, is responsible for promotional and support functions, legal incorporation of cooperatives, supervision, and

audit and liquidation of the cooperative institutions. The cooperatives in general, except some in the non-rural sector, did not gain strength because of civil war and disturbed conditions in the country. With the increasing participation of civil society in the post-war regeneration of the rural economy, there is increased attention towards strengthening the rural cooperatives. The cooperative institutional framework comprises primary cooperatives in the housing and consumer sectors in urban areas and over 400 rural cooperatives including some regional societies. National Union of Cooperative Credit (NUCC) was established under a separate Law of 1968 to accept savings from primary member cooperatives and for providing credit services to members. The National General Union of Cooperatives (GUC) is a federation of cooperatives in Lebanon for promotional and service functions. The institutional framework more or less follows the traditional pattern of a cooperative set-up observed elsewhere except that the financial cooperatives have not come up and the framework is weak by any standard. There are over 400 rural service cooperatives including agricultural (316), bee-keeping (39), livestock (32) and fishermen (30) cooperatives. Most village-based cooperatives started with a small group of members of 10 to 15, often belonging to a well-knit family or ethnic group, and expanded in membership over time. Yet, the coverage of most cooperatives is low. Nearly 39 per cent of cooperatives (180) have less than 20 members and another 33 per cent (150) consist of a member base of 20 to 50. Only 13 per cent of cooperatives (60) have more than 100 members. Another interesting feature is that nearly two-thirds of cooperatives were formed in the 90s after the end of civil war reflecting the potential

for the role of rural cooperatives in the regeneration of the rural economy. A large proportion of members are smallholders indicative of the fact that any assistance to these cooperatives would indirectly benefit low-income households. The main objective in the incorporation of many cooperatives was to access grants and subsidies form Government, NGOs and any other donors. Since such assistance is ad hoc, most cooperatives are non-functional without any regular services to members and sustainable activities. Some, however, are actively engaged in input supply, provision of equipment services (tractors, sprayers, etc.) on hire and operation of processing facilities (Olive oil processing units). As the Directorate of Cooperatives and the apex organizations (GUC and NUCC) are weak, the grass root cooperatives did not receive any systematic orientation, training and institutional development support. Most cooperatives do not have any paid staff or office space. Thus the rural cooperatives suffer from major weaknesses: · Absence of institutional dynamics and a cooperative culture; · Passive member participation and domination by a few; · · Weak management and leadership; Under-capitalization;

· Lack of commercial and business orientation; · A dependency, grant and a subsidy syndrome; and above all · Lack of vision and goal. 281

Yet the rural cooperatives have potential to develop into strong, broad-based (expanding coverage of membership) and self-reliant institutions, capable of organizing more effective and diversified services to members. They need a paradigm shift in their orientation and capacity building inputs. They are also in need of financial services, both short-term for input supply services, etc. and investment loans. Though the cooperative law envisaged financial cooperatives, they did not come up in Lebanon for various reasons: · Prolonged civil war and disturbed conditions in the country, · Weak institutional capacity of the Cooperative Directorate, and · Lack of initiative by NUCC which was responsible for promotion of savings and credit cooperatives. With virtually underdeveloped RFMs, there is good potential for establishment of rural savings and credit cooperatives which can also build linkages with the Lebanese financial system for retail intermediation. NUCC was established in 1968 under a separate law to provide financial services to its member cooperatives. As of 2000, NUCC had a membership of 203 cooperatives, both urban (37 per cent) and rural (63 per cent). The member cooperatives had a total of 66 000 individual members. NUCC has not been able to mobilize any savings from member cooperatives. It has extended credit services, till early 90s, from out of government budgetary allocations and bilateral lines of assistance through government. Apart from lending to consumer and housing cooperatives which has benefited thousands of 282

members, NUCC lending to rural cooperatives helped them to own and operate many kinds of assets such as: well drilling machines, olive presses, land graders, tractors, harvesters, refrigerators, egg grading and packing centers, vegetable grading and packing center, irrigation equipment and distribution of inputs. NUCC used to provide subsidized credit as part of a rehabilitation strategy to mitigate war damages. With the cessation of budgetary support, NUCC lending operations have stopped since 1992. It has reduced its staff from 21 to 6. NUCC does not have now even a chief executive. Its surplus funds are kept with banks. Its capital base has been depreciated because of phenomenal depreciation of LBP from 2.5 to a USD in 1975 to 1508 in 2000. However, it has been able to collect and meet its repayment obligations. Its financial picture is not bad. Thus, NUCC provides very little services to members now. There is a need to revisit NUCC mission and prepare a restructuring plan. NUCC was provided a grant of USD 90 000 by IFAD to build its capacity of rural finance delivery. This would play a catalytic role in revitalizing NUCC. GUC, comprising all cooperative societies including the specialized unions, is responsible for promotional functions and expansion of the cooperative movement to various economic subsectors, training and education of cooperatives and is expected to play an advocacy role. GUC has also remained weak and has a manager assisted by two staff members. The management, i.e. elected Board of Directors, did not evince interest in building GUC to play its envisaged role. The Directorate of Cooperatives is understaffed and ill equipped to play the role assigned to it: promotion, support and development services, supervision and regulation. The staff lacks the necessary knowledge and skills. In the absence of

a national cooperative policy, the Directorate lacks the necessary operational and directional framework. 6 Relevant NGO and Other Donor Activities

The NGO sector in Lebanon became active during the prolonged civil war and provided social services and other forms of humanitarian relief. Several of these NGOs have remained and reoriented their activities to emphasize a more traditional economic and social development role. In addition, local NGOs have been created, often with the assistance of expatriate Lebanese. YMCA, the Rene Moawad Foundation, Mercy Corps, Jihad Albinaa, Imam Al-Sadr Foundation and AlMajmoua are some of the larger NGOs in Lebanon, ADR, a specialized Micro finance service institution is operating in South Lebanon.

has a small micro finance component. The Community development projects would be implemented through NGOs and local communities. The rural service cooperative societies would be eligible to access the "project grants" subject to their capability and conforming to the eligibility criteria. 7 Conclusion

The Ministry of Agriculture, through its updated strategy (2010-2014) for the agricultural sector, aims at strengthening the institutional capacity of the Directorate of Cooperatives. Besides, it aims at assigning programs and mechanisms to give funds for small and medium enterprises in collaboration with banks and other institutes.

Footnotes 1 The micro credit sector in Lebanon: Al Majmoua , experience Eleonora Isaia University of Turin 2 See UNCDF, Microfinance in the Arab States, September 2004, p. 31-32. 3 In the paper mentioned in the previous note, the methodology used to measure the potential target market and its depth of outreach is articulated in the following steps: (1) estimate of the poor population (poverty line + 20%); (2) subdivision of the population in households (7 people on average per family) assuming that no more than one member per household should have a loan; (3) identification of the potential target made up by 40% of poor families, on the basis that not everyone is a good entrepreneur or has a good project to finance; (4) comparison between the number of potential and active clients. Following these steps, starting from an initial number of 1,332,300 poor people the potential target market is 76,131, of whom only 18% are clients of local micro credit institutions. It is clear the estimation is quite rough as it is founded on few realistic hypotheses. In fact, the percentage of eligible clients (40%) is not justified and, as it is the same for all the analysed Arab countries, probably it is not based on an empirical test of the social and economic conditions

6.1

Donor Programmes

The donor assistance is directed mostly to the rehabilitation of socio-economic infrastructure, resettlement of the displaced persons and regeneration of the rural economy covering different sub-sectors. USAID, EU and other international NGOs have actively assisted the growth of micro-financial services through provision of grants to NGOs. There is no donor activities directed to building rural financial cooperatives or building institutional capacity or rural service cooperatives. The rural cooperatives are used only to channel some grants in-aid. However, some of the activities of the UNDP, EU and USAID have both synerg y and complementarity with the proposed activities of CRFP. The World Bank: The proposed Community Development Project of World Bank in pipeline

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of the poor families, on their managerial skills and on their interest for micro credit. The informative validity of the market estimation can however be considered acceptable, if it is used as a starting point for more accurate measurements and considerations. 4 Statistical Yearbook, 2007, Central Administration of Statistics. 5 Human Development Index (HDI) is a composite index that measures the average achievements in a country in three basic dimensions of human development: health, education and standard of living. For more information about the composition and the calculation methodology of HDI, see UNDP, Human Development Report 2005, 6 tatistical Yearbook, 2007, Central Administration of Statistics. 7 The main initiative of the Government to support the small and medium enterprises consists of the creation of a guarantee institution, called Kafalat. It covers 75% of loans disbursed by banks to enterprises that respect the following conditions: (1) number of employees less than forty; (2) submission of a business plan or feasibility study; (3) being part of specified sectors, i.e. industry, agriculture, tourism, handicraft and high technology. Thus, it is evident that the exclusion of some sectors and the obligation of managing so complex enterprises with a business plan or a feasibility plan make micro and small business out of Kafalat guarantee, compromising their entrance into the formal banking system once more.

8 The micro credit sector in Lebanon: Al Majmoua experience Eleonora Isaia, University of Turin. 9 The two mentioned mega players have 94% of the total local market together with a third institution called Mu'assassat Bayt El-Mal and practising Islamic micro credit activity. The left percentage is managed by developing programs, promoted by NGOs, governments and international entities. This paper will analyse only Al Majmoua and AMEEN, because they cover almost the market, and also because of analysis homogeneity, as they are the only two independent micro credit institutions. 10 UNCDF, Microfinance in the Arab States, September 2004, p.30 11 Can consumption credit be considered a form of micro credit? The answer of the academic and operative world is not univocal, as the Grameen definition of micro credit is a little amount of money given to start or develop a micro entrepreneurial activity. Money must generate more money. However, a minority trend considers even consumption credit a form of micro credit, because it is finalised to ameliorate the social and economic status of borrowers, creating a necessary condition that gives them the chance of starting a micro business. 12 In 2003, even the ratio between the gross domestic saving and GDP was negative, equal to -9%. 13 See ASSRAWI F., Microfinance in Lebanon, September 2005, http://www.saa.unito.it/meda/cases.htm

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Chart 1: Social and Economic Characteristics of the Population (data 2003)

Population4 GDP per capita (USD) Human development Index5 Annual population growth rate (2003-2015) Average life expectancy at birth Adult literacy rate Young literacy rate Poverty (poverty line + 20%) Population with access to sanitary services (2002) Population with access to an improved water source (2002) Rural population Unemployment rate6 3,759,137 (of whom 50.6% are females) 5.074 0.803 1% 72 86.50% 99% 28% 98% 100% 8% 9.2% for both males and females for age bracket 15-64 years

Source: Human Development Report 2005, UNDP.

Table 1 : Al Majmoua in Numbers

Indicator 2004 Outreach No active clients Credit portfolio (thousand USD) Average loan size (USD) Loan less than or equal to 300 USD Clients under the poverty line Female clients 6 5.15 855 8% 10% 45% 5.8 3.02 523 29% 11% 61% 3.5 840 244 47% 18% 100% 2001 1996

Financial Performance Sustainability Total active (thousand USD) Share capital (thousand USD) Return on assets (ROA) Return on equality (ROE) Operative sustainability Financial sustainability 60930 6.36 5.77% 6.08% 121% 119% Operative Efficiency Operative expenses/loan portfolio Cost per client (USD) No clients per credit officer 27.60% 224 97 41.70% 218 96 53.40% 115 5.71 5.22 -1.33% -1.43% 81% 80% 3.44 3.41 71% 54%

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Table 2 : Individual loans of AMEEN and Al Majmoua (2004) Characteristic/Data

Credit portfolio volume (thousands USD) N° active clients Percentage of male clients Loan period Loan size Instalment Interest rate Collateral Repayment rate

Ameen

6.7 7.886 79% 4-18 months 300-5.000 USD monthly 22-28% 1 co-signer 100%

Al Majmoua

1.29 90% 6-12 months 500-5.000 USD monthly 20% 1 co-signer o real guarantee 89%

Appendix 1 : Map of Lebanon

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Annexure 6.2.5

MICRO CREDIT IN SULTANATE OF OMAN

Ms Badra Rashid Saeed Al-Qutaiti and Mr Nasser Mubarak Al-Alawi

1 Introduction on agriculture and fisheries. It was not until the discovery of oil in commercial quantities in 1964 and its production in 1967 that the country was able to embark on its development. Even so, after the initial construction phase is completed, an oil industry is not labor intensive. Over half the total Omani population is still engaged in the agricultural and fisheries industry. 787,300 people hold cultivable land, according to the most recent survey, and the total number of agricultural workers is around 187,820. A large percentage of the Omani population lives in rural villages. However, the stimulus to the national economy derived from the exploitation of oil and gas has also benefited the development and modernization of agriculture, so that the Ministry of Agriculture and Fisheries was enabled to achieve nearly 50 per cent selfsufficiency in food production by the end of last year, with a goal of 100 per cent by the year 2000. The value of agricultural and fisheries production rose from RO 17 million in 1970 to RO 156 million by 1994. Agriculture and fisheries are Oman's main non-oil exports, representing 70 per cent of the country's non-oil exports. Last year, agricultural production totaled around 802,000 tones, of which livestock was about 23,000 tones and fish production 114,300 tones. The Sultanate of Oman lies in an arid region of the world, but owing to its size and topography it has considerable variations of climate. The backbone of the country is the Hajar range of mountains extending from the tip

Oman, the second largest country in Arabia with an area of 300,000 square km, occupies the south eastern part of the Arabian Peninsula. To the North, it borders the Strait of Hormuz, and to the East the coastline stretches 1700 km along the Gulf of Oman and the Arabian Sea to the Yemeni border. In the West, Oman borders Saudi Arabia and the United Arab Emirates along the eastern fringe the Rub Al Khali (also known as the 'Empty Quarter'). The northern region of the Musandam Peninsula is separated from the rest of the country for 70 km by the UAE. The highest point in Oman is Jebel Shams at 3010 meters. The most notable feature of Oman is the range of imposing mountains running North West to South East across the Northern third of the country. These mountains are the result of tectonic forces which pushed them up from ocean beds some 800 million years ago. The 1700 km long coastline is a showcase of varying terrain from the deep fjords in the Musandam, long sand beaches between Sohar and Muscat, mangrove lagoons, coral reefs, rocky islets and coves from Muscat to Sur around Ra's Al Hadd, Eastern most point of the Arabian 2 Agriculture in Oman

In 1970, the Sultanate's economy, which was virtually a subsistence economy, was entirely based 288

of the Musandam Peninsula in the north to the south east corner of the Arabian Peninsula in the south. The northern end of the range is largely porous limestone rock, which is the source of water used for irrigation purposes on either flank of the mountains. The southern part of the range is of igneous or volcanic rock. The Hajar range, rising to over 10,000 ft. at its highest points, attracts the most rainfall of the Sultanate, much of it as heavy localized thunderstorms during the summer months, and from depressions crossing the Arabian Peninsula from the west during the winter. However, as elsewhere in the Sultanate, except in the extreme south, it is very sporadic, and is subject to considerable annual variations. The coastal plain and sea ward-facing slopes of the mountains in Dhofar in the extreme south receive regular light monsoon rains from June to September. Much of the Interior of the country is desert or semidesert. 3 Micro-credit System and Good Governance experience of Oman

per cent and costumer pays 3 per cent. Financing projects with total investment not exceeding RO 250,000. ODB's upper limit of financing for a single project is RO 165,000. · Small units with investment of RO 5,000 and below are exempted fully from interest · Government Soft Loans above RO 165,000 for projects with investment of more than RO 250,000 were handled by the Ministry of Commerce and Industry and disbursed through selected commercial banks Sanad Programme : The Sanad programme was established in 2001. Sanad provides fund for the support and development of small projects and for the finance of subsistence Projects. Sanad finances projects with total investment not exceeding RO 5000. Sustenance Resources : It is supervising by Ministry of Social Development with Sanad Programme. It is interest-face loans up to R.O.3000. The Ministry of Agriculture Programmes Public Authority for Marketing Agricultural Produce (PAMAP) The generous gestures of His Majesty Sultan Qaboos

There are many commercial banks in Oman providing loans to Omani people but with high interest rate. However, the Government provides Omani small scale entities with interest free loans subject to having a capital not exceeding RO 5,000. Such loans are provided through Oman Development Bank (SAOC) Oman Development Bank (SAOC): Oman Development Bank (SAOC) was formed in 1997 by merging the then existed ODB and Oman Bank for Agriculture and Fisheries (OBAF) with a paid up capital of RO 20 million by the Government of Oman. By the Royal Decree referred above the bank was financing within the framework where gross rate of interest is 9 per cent per annum in which the Government provides subsidy upto 6

3.1

Oman Development Bank (SAOC)

The Oman Development Bank throws the following points: · · History of ODB Highlights of Royal Decree No. 18/ 2006 289

· bank · · · · · · · 3.1.1

Objectives and Scope of Finance of the

· Small units with investment of RO 5,000 and below are exempted fully from interest · Government Soft Loans above RO 165,000 for projects with investment of more than RO 250,000 were handled by the Ministry of Commerce and Industry and disbursed through selected commercial banks 3.1.2 Highlights of the Royal Decree No. 18/2006

ODB's Loan Structure Introduction to strategy Bank's Strategy On going projects under implementation Achievements The Challenges Perceived Areas of Cooperation History of ODB

In March 2006, the Royal decree No. 18/2006 was issued replacing the old Royal Decree No. 18/ 1997, converting ODB into an SAOC (Societe Anonyme Omani closed), with the following changes: · Increased the capital to RO 40 million

By the Royal Decree No. 18/ 1997, ODB in its present form was formed in 1997 by merging the then existed ODB and Oman Bank for Agriculture and Fisheries (OBAF) with a paid up capital of RO 20 million by the Government of Oman. The two banks were specialized in financing various development projects in different economic sectors; but excluding commercial (trading) activities. In tune with the government policy on future plans, the interest rates were continued to be subsidized by the government. In some cases, the government is subsidizing the interest in full. By the Royal Decree referred above, the bank was financing within the framework as below : gross rate of interest is 9 per cent per annum in which the Government provides subsidy upto 6 per cent and costumer pays the remaining 3 per cent. · Financing projects with total investment not exceeding RO 250,000. ODB's upper limit of financing for a single project was RO 165,000. 290

· The lending limit increased to RO 1 million for a single borrower. · For companies whose shares are offered to the public for subscription to the extent of at least 40 per cent, the total loans limit is RO 3 million · Maximum repayment period: 10 years with initial grace period not exceeding half of the total repayment period 3.1.3 Objectives and Scope of Financing of the Bank

· To provide term loans to individuals/ Omani companies in the fields of: Agriculture, Animal Husbandry, Fisheries, Industries, Tourism Projects, Education (Schools/ Training, Institutions/ Colleges/ Universities), Healthcare Institutions, Professional Offices, Handicraft units/ workshops. To provide interest- free loans up to RO 5,000 to small investors.

¨ To manage loan programmes and grants provided by the Government to youths/ handicrafts units. 3.1.4 ODB's Loan Structure

Strengths Government Entity · Has first priority on rights on projects financed. · Financial support from Ministry of Finance · Government guarantee to borrow up to 4 times capital of ODB Experienced in the activities for the past 20 years Detailed knowledge about customers Competitive Interest rates

Studying, preparing and approving of: · Corporate loans which are above RO 500,000 (US $ 1.3 Mn) · Loans to SMEs which are between RO 50,000 to RO 500,000 (US $ 130,000 to US $ 1.3 Mn) · Loans to small units which are up to RO 50,000 (US $ 130,000 ) 3.1.5 Highlights of Strategy

By the end of year 2003, ODB started to formulate an overall strategy for the bank to be followed. The highlights of the strategy: · · · Re-organising the departments Re- deploying the managers Preparing loan procedure manual

Geographical Coverage with a network of 12 branches Specialisation in development loans Own fixed assets

Good coverage of provision for nonperforming loans Loyalty from successful project owners

· Streamlining procedures to non-credit departments · Updating job description

Weaknesses A number of weaknesses have surfaced in the past and currently under rehabilitation by the management : Developing human resources by training

· Redefining the functions of different committees · Laying down the preliminary delegation of authority.

Changing the way of thinking to "commercial thinking" 291

Simplifying procedures Improving productivity Updating IT

Threats · · Economic Environment Small domestic market Open economy without tariff protection

Improving marketing and promotional activities Improving quality of loans sanctioned Improving financial position

· Fierce competition from imported products · · High infrastructure cost Lack of industrial plots for expansion

Opportunities Increased lending limits with the latest Royal Decree No. 18/ 2006 Flexible mechanism to add new loan schemes Opportunity for funding Working Capital Loans Government's thrust towards privatization- will provide more projects for financing Reluctance of commercial banks to finance small and medium projects loans Possibility of financing non-subsidised

· Domination of large companies (weakens opportunities for SMEs) · Domination of large companies in government contracts · Weak database on market and on small enterprises · Low market share for small companies in investments Social Environment

· Conservative dealings of some investors with regard to payment and receipt of interest (due to religious beliefs) · Rigid labour laws restricting efforts on improving Omanisation Administrative Environment

Political and social stability of the country

Well managed national economy, achieving high growth rates 292 Low tax rates

· Tough administrative procedures to set up projects

· Complex legal procedures in closing down or liquidation of companies · Lengthy and complex procedures in executing court verdicts Human Elements

· Lack of financial statements and maintaining accounts for small companies · Lack of coordination government & private establishments Financing between

· Lack of skilled manpower and qualified workforce · · · · · Weakness of entrepreneurial qualities Attractiveness of government sector jobs Weak market studies and feasibility studies High level of personal loans Fear and embarrassment of bankruptcy

· Reluctance of commercial banks to finance SMEs · Lack of availability of information on SMEs (past performance, debt burden, etc.) · High risk on SMEs ­cannot be covered by raising interest · Absence of venture capital funds

· Lack of personal savings with majority of population · Modesty of financing for SMEs (less than 20 per cent against more than 70 per cent in developed countries) · Weakness of lender's rights

· Absence of vocational training for Omani nationals in SMEs · Shying away from joint ventures / partnerships · Mentality of people on treating loans from ODB and government as grants · Dependence on total borrowings (without induction of capital) SMEs

· Strict procedures / policies stipulated by international organizations like Basel II 3.1.6 ODB Strategy

· Smaller share of export compared to neighbouring countries · Lack of reliable information on export market

Based on the results of SWOT Analysis, the framework of strategy and priorities were specified for smooth flow of work. The major highlights of strategy laid down by the end of year 2004 are: Mission of the Bank 293

Enhancing development in various sectors of the economy, in line with the goals of the government that aim to diversify the sources of national revenue. Our mission will be possible through our services that satisfy the financial needs of our clients. Vision of the Bank

· Improvement of loan portfolio (Net loan portfolio of RO 60 million with Non Performing Loans with less than 15 per cent of the portfolio by the year 2010). · Update IT structure and simplify procedures (By Mid 2007) · Customer satisfaction through improved services and infusion of TQM culture · bank Provide competent employees to the

A sustainable development bank, which finances corporate, medium and small projects along with handicrafts. A bank characterized by the professionalism of its employees in servicing clients and characterized by its success in its development mission. 3.1.6.1 Objectives of the Strategy · Goals Economic Development

· Satisfactory operating results (operating ratios comparable to other development banks) 3.1.6.2 Competitive Strategy The strategy is outlined with 3 dimensions Customers, Products and Geography Customers

· Create employment opportunities for the nationals. · Availability of competent staff at the service of the bank · · · · 2010. Customer satisfaction (technical support)

The market is divided into different segments based on needs of each segment and size of projects: · Individuals with loans less than RO 5,000

Financial independence framework Diversification Main Strategic Objectives Reach full financial independence by year · Corporate with loans more than RO 500,000 Products · Small entities with loans between RO 5,000 and RO 50,000 · Medium sized companies with loans between RO 50,000 and RO 500,000

· Contribute to economic development and create employment opportunities 294

· ODB is currently having a single product, which is long term loans with repayment period ranging from 5 to 7 years. · It is suggested to introduce new products in the future to serve our clients. · · · Working Capital Loans Bill Discounting Financing Government Contracts

3.1.6.3 Diversification Strategy In addition to the new products and a wider coverage of the Sultanate, raising the ceiling of lending enables the Bank to advance loans to bigger companies with lower risks than to small and medium size companies. The attraction of a higher share in the government loans reduces the concentration of risks, which were earlier caused by the limitation of lending limit. The bank will look for new fields of lending in view of the saturation of the sectors which the Bank has financed. 3.1.6.4 Functional Strategy

· Financing Raw Materials and Equipment through Letters of Credit (LC) · Lease Financing

· Financing Venture Capital in coordination with Youth Fund · Deposits/investments for self-financing activities · All the above products will be subjected to thorough studies prior to launching. Geography

Since the critical strategic points were identified to overcome the weaknesses a detailed action plan was undertaken at the operational level for all important functions of the bank which was translated into the framework of the annual budget and performance management system. 3.1.7 On-going Projects under Implementation

Based on the results from setting strategic study during year 2005 and 2006 the bank has carried out a number of projects as follows: Restructuring of Branches

Due to the importance of small scale loans to individuals and craftsmen the bank maintains a strong network of branches, provided that they function as separate profit centers. In addition, the bank will study the possibility of opening new offices in coordination with government authorities like the Ministry of Commerce and Industry and organizations like Chamber of Commerce and Industry for geographical areas that are not yet easily covered by the bank, but has reasonable marketing potential at affordable costs to function as profit centers.

· Enhanced power (empowerment) for branches for sanction of loans · · Standardized and simplified procedures Training of employees

· Administrative restructuring of branches -setting up regional offices and small branches 295

IT Development

· Since customer satisfaction comes first in priorities and considered as one of the objectives the bank seeks to achieve, ODB has procured an advanced IT package that constitutes the following modules: · · · · Credit System Finance Package Customer Information System (CIS) Supporting Systems

· Group courses in leadership skills for departments, branch mangers and department heads · Courses abroad to enrich staff knowledge in the latest practices of credit and risk management · On the job training

· Courses to be held in local training institutes, etc. · Courses in English Language Marketing and promoting bank's services

· The bank also procured updated system to create connections between the different branches and the Head Office. · Human Resources Development Review of Job Description

· Redesigning the bank's logo to convey its objectives · Encouraging marketing and promotion by distributing printed brochures, creating awareness of the bank's products and services to potential investors · Face-lifting of the branch offices by redesigning them in a modern way to convey a friendly atmosphere by introducing customer care desks (front office services). The changes also include the signboards of the branches in terms of logo, colour, etc. · Sponsoring of economic forums/ functions in Oman related to various sectors of the economy that the bank financially supports. Risk Management

· Evaluation of jobs and setting salaries and allowances for each job · Specifying the abilities required for each job and then trying to study and narrow the gap between job requirements and the capability of employees so as to set the career path and then provide refresher training courses along with pay scales as per objectives of the strategy. · Prepare a study of performance management · Adopt programmes to reward and encourage employees (Incentives Programmes) 296 Training Programmes for year 2007

Sound management of risk necessitates the availability of a good risk management system and therefore the bank will utilize the services of consulting offices and experts from similar

development banks to set up a database system for internal rating. 3.1.8 The Challenges

o Complete transformation into commercial activities o Merge with other establishments

3.1.8.1 Future Challenges · Will the bank be able to increase the lending portfolio- fourfold from RO 15 million to RO 60 million? · Control and reduce number of Non Performing Loans (NPL) from 50 per cent to less than 15 per cent during the coming 4 years? · Can the activities of the development bank be found viable financially while 95 per cent of development banking experiences in the world failed? 3.1.8.2 Addressing the challenges

o Joint venture with commercial banks and international establishments specialized in the field (such as IFC, KFW, ING) Perceived Areas of Cooperation · · · · · Core Business: Working Capital Feasibility Study Model Rehabilitation of Sick Projects Technical Support for Start- ups Opening Current Accounts for Customers Project Appraisal Software Risk Management: Internal Rating Credit Review Forms Scoring for Small Credit Legal Aspects (Corporate Governance):

In the short run : · · Marketing and promoting working capital loans (quantitative measures) · Update and develop risk management (qualitative measures). In the long run : · A plan has to be prepared to exit the bank from the development activity and look for other alternative strategies (exit strategy). · The possible available alternatives which similar development banks have undertaken are as follows: o Combine commercial and development activities · · ·

· Duality of Supervision of Central Bank and Ministry of Finance · Strategy: Assets and Liabilities Management 297

· · · · · · 2

Subsidy Policies Deposits/Funding Human Resources Training of Oman Development Staff Performance Management Information Technology Banking Systems used Work Flow Sanad Programme

2.2

History

The Sanad programme was established in 2001 at the directives of His Majesty Sultan Qaboos to provide job seekers among citizens with opportunities to gain their living and to support self-employment projects and develop small businesses.

2.3

Objectives

· Contributing to the employment of the national labor force. · Encouraging and supporting individual initiatives and self-employment programmes. · Contributing to qualifying individuals and preparing them to actively contribute to the labor market. · Developing individual projects and drafting required programmes and plans to spread them. · Establishing incubators to provide individuals who wish to establish small projects with required care and support.

2.1

Introduction

Under the direction of H.M. Sultan Qaboos Bin Said, the Ministry of Manpower launched `Sanad` programme with focus on Omanisation and a vision to enhance business opportunities for the Oman nationals. The ministry of Manpower focus on the following points to make Sanad programme a success: Maximum employment of Oman nationals in all sectors. · To encourage and sponsor, develop and popularize self-employment initiatives. · Training and development of the citizens.

2.4

Strategy

· To establish nursery committee to support nationals with self-employment objective. There are some points that I'm going to talk about the Sanad Programme. The points are: 298

The programme attempts to contribute to tackling the phenomenon of increasing job seekers among citizens, through two successive and integrated lines which are: i) ii) Urgent horizontal line. Long term strategic line.

2.5

Components of Sanad Programme

Sanad Fund for the Support and Development of Small Projects (Ministry of Manpower): This fund supports job seekers among the skilled and craftsmen to establish individual and family self- employment projects by offering required finance and guidance, according to the terms and regulations drafted for this propose. The fund also trains applicants who seek finance to establish private projects, in the training and qualifying establishments available in the country. Sanad Fund for the Finance of Earning Living Projects (Ministry of Social Development): The fund supports job seekers among the families of social security and persons with special needs to establish their own productive projects which help them secure an appropriate income to meet their life requirements. Sanad Offices: These offices spread all over the Sultanate's regions and governorates and affiliate to the directorates of the Ministry of Manpower which hosts the executive body of Sanad programme. Sanad Offices Exercise the Following Tasks: · Receiving applications of job seekers and individual initiatives and transferring these applications to the main office and guide them on the steps taken in connection with their applications. · Providing those who wish to establish small projects with vocational guidance. · Contributing to the implementation of required procedures to establish individual and small projects.

· Regular follow-up of individual and small projects owners and assisting them in minimizing the difficulties facing their projects. · Supervising the small investment projects whose management is awarded to Omanis with individual initiatives. Sanad Incubators: Sanad incubators are set up with the purpose of providing small projects with transitional care. Such incubators are established with the participation of government authorities, private associations and the private sector. These authorities provide the premises for the projects along with required equipment for establishing the incubators and training candidates who will work in these incubators, offering advice and technical and administrative support, drafting required terms and regulations and following up and assessing the incubators` activities.

2.6

Projects Financed Programme

by

Sanad

The categories targeted by this fund are capable of identifying the projects which fit them. Nevertheless, there are certain sectors which could be mentioned as promising if they are offered required technical and financial support. Such sectors include: Activities financed by Sanad Programme : i) ii) iii) iv) Foodstuff selling Vegetables and fruits selling Fish, meat and poultry selling Vegetable and fruit distributing cars 299

v)

Car wash and oil change outlets

xxiv) Transport of Breakers such as sand, bricks and graves (5 tonne trucks) xxv) xxvi) xxvii) Mobile phones selling and maintenance Lady garment tailoring Calligraphist

vi) Readymade garments and cosmetics selling vii) viii) Fabrics and textiles selling Flower selling equipment selling and

ix) Cooling maintenance x) xi) xii)

xxviii) Electrical appliances selling and supply

2.7

The Challenges

Photography Car spare parts selling Car maintenance and spare parts selling

xiii) Selling and rent of wedding costumes and their accessories xiv) xv) xvi) xvii) xviii) xix) xx) xxi) xxii) xxiii) 300 Sweets and nuts selling Nurseries Sports costumes and tools selling Library Coffee shops Sanad offices for citizens services Ladies` beautification saloons Internet cafes Boats maintenance workshops Used cars selling

· Spreading awareness with the importance of self- employment and the role of free labor and self reliance in improving living conditions of individuals and the society and pushing forward social and economic development in the country are faced by a number of difficulties in the light of an inappropriate labor market and the prevalence of the concept of salary guaranteed job. · Lack of the minimum limit of expertise among new entrants to the labor market which results in curbing their capabilities to identify investment opportunities assess economic feasibility and the ability to successfully implement and manage these investment opportunities. · Dominance of expatriate labor which owns manages and markets small enterprises under the umbrella of what is called hidden trade.

2.8

The Aspirations

· Sustainability of projects financed by Sanad programme remains a pivotal objective which should be achieved through the following: Enhancing awareness with the importance of selfemployment and the role of free labor in

improving living conditions of individuals and the society and pushing forward the social and economic development in the country. · Availing protective support to those in charge of projects, by imposing appropriate Omanisation policies to remove unequal competition with a highly experienced expatriate labor. · Promoting the skills, capabilities and knowledge of job seekers to transform them from wasted energies into productive ones which actively contribute to enhancing the Sultanate's GDP. Sanad Programme aims to enhance its activity, increase the number of its beneficiaries and apply a number of policies as a requisite to achieve success. These policies include: · Enhancing organizational and human capabilities of the programme. · Activating the role of social upbringing establishments. · Promoting the programme.

· The project must provide new job opportunities. · It must have technical and economic feasibility. · It must use available local crude materials.

· Its products must be of high quality and easy to market. · It must use appropriate modern technology. · It must have the ability to continue and expand. · It must not violate environment conservation terms and requisites. · It must meet the society needs for internationally high quality and competitive price commodities. · Must be 100 per cent Omanised

Ministry of Social Development/ Livelihood (RizGH) Resources Projects: The projects aim to: i) Establish an income source for the beneficiaries to raise the standard of their living. ii) Enhance the sense of the importance of earning living, and deepen the concept of private business and assist the beneficiaries to rely on themselves and build a productive family capable of coming out of the Social Insurance umbrella in the future. 301

· Establishing a comprehensive electronic database. · Holding exhibitions.

· Preparing feasibility studies of individual projects.

2.9

Terms for Utilizing Sanad Programme

Approval of projects depends on meeting all, or some of the following terms:

Groups that deserve support: i) Holders of the social security pension or prove their entitlement to this pension. ii) Belonging to the families of social security is not eligible for the pension. iii) Disabled able to manage and operate the project. The projects are restricted to:

i)

Pay the loan installments in time.

ii) Mortgage the assets of the project or provide a surety to guarantee payment of the loan. iii) Work with due seriousness to guarantee the success of the project. iv) Join the training programme in implementing and managing the project in cases determined by the competent department. v) Not employ foreign labor.

i) Productive projects of trade on investment nature in agriculture, animal wealth and fisheries etc. ii) Service projects depending on the beneficiary's efforts and skills in, for instance, tyre repair, hair-dressing, tailoring, printing, transaction clearance etc. iii) Commercial projects that depend in their income on sale and purchase such as sale of foodstuffs, meat and fish, ready-made garments, cosmetics etc. Conditions and Guarantees: i) The applicant does not have another project or satisfactory income source. ii) The applicant must be competent to shoulder the responsibility for the implementation and management of the project. iii) The idea of the project must belong to the applicant or based on guidance of the competent department. The beneficiary shall : 302

vi) Not sell the project or mortgage or lease it to a third party, and shall not assign the project management to a third party, except for the beneficiary's spouse and first class relatives. 3 The Ministry Programmes of Agriculture

The Ministry has recently carried out a programme to improve, develop and diversify the cultivation of field crops and fodders, with the aim of identifying the best local strains and improving them. Under the programme, new types of field crops and fodder were evaluated and introduced to the Omani environment. Other objectives included the preparation of programmes aimed at increasing the grain production of the field crops and improving field crop cultivation methods. The programme covered wheat, barley, fodder, lucerne and silage. Research has been advanced in the study of pests and of plant diseases. Particular attention has been given to diseases which attack limes, date palms, coconuts, bananas and tomatoes. Programmes have also concentrated on biological prevention methods. The Ministry provides the Omani farmer with a number of services which he is unable to undertake

on his own, and which require high technical and other facilities. Spraying teams from the Ministry have been operating over large areas of date gardens against a damaging date palm grub (mataq). They have also been assisting farmers in protecting their fields with the use of general pesticides. The Ministry also offers farmers ploughing services for nominal hire charges at its agricultural development centres. New regulations on agricultural and livestock subsidies were is sued in 1992. The Ministry subsidises the cost of agricultural mechanical equipment to encourage farmers to use it. Items covered include ploughs, reapers, binders, chemical sprayers, mechanical saws and small agricultural implements. Other subsidies cover chemical fertilisers, seeds, pesticides, fruit seedlings, plastic covers, cloches and compost. The Government has also reduced unit prices of electricity and diesel used for farming and agricultural industry projects. The policy of the Oman Agriculture and Fisheries Bank is to provide loans for all categories of farmers, with priority being given to small farmers and productive agricultural projects. The Bank also ad ministers some agriculture and fisheries loan programmemes, and grants loans in cooperation with the relevant departments of the Ministry. Until responsibility was transferred to the Ministry of Water Re sources at the beginning of last year, the Ministry of Agriculture was responsible for the maintenance of aflaj and the construction of recharge dams. The Ministry continues to work closely with the Ministry of Water Resources in making the best use of available water resources. 4 The Generous Gestures of His Majesty Sultan Qaboos

His Majesty's conviction in the constructive role of Omani women in promoting sustainable development at all levels. Women have won His Majesty's confidence since the dawn of Oman's renaissance. This confidence offers women wide scopes, self-esteem, productivity and determination to overcome all difficulties and benefit from all possible opportunities to invest their full potential in the nation-building process. Omani women look forward to more participation in the next stage of the country's development because they are capable and empowered with education and knowledge. Women in Oman have always been aware of their capabilities as partners in economic activities, even in the past, when they worked in the fields of agriculture and animal rearing. The support provided now will contribute to women's participation in, for example, technical modernisation of the agriculture sector. The Royal gesture to allocate this fund to women shows His Majesty's wise vision and his awareness that rural women play a basic role in increasing the family's income and its economic, cultural and intellectual standing in general .

4.1

Fund For Development of Youth Projects "Sharakha":

His Majesty's directives to establish a 7 million R.O fund to support rural women's projects reflects

The Fund for Development of Youth Projects (Youth Fund) was established in 1998 by Royal Decree as a private company dedicated to Promotion, Development and Financing of Small & Medium Enterprise. His Majesty in His address said, "The main aim of the Fund is to encourage the Omani youth to establish and own small and medium projects that will provide them and other citizens with career opportunities, thus contributing to the creation of a potent sector of these industries ­ industries which have become major factors in the growth of the global economy." 303

4.1.1

The Main Services Fund supported Projects have 5 years Tax exemption; Flexible approach, schemes and dedicated team; and 4.1.4 Fulfills the social commitments. Procedure

To achieve its Mission, the Fund provides the following services: · Equity and Loan support to existing and proposed Small & Medium Enterprises (SME Sector); · Provide guidance through mentoring and consultancy services for entrepreneurs in financial, legal, administrative, legal, marketing, technical, etc. either directly or through other support agencies; · Acting as a catalyst in Cluster Development, Technology up gradation and making the units globally competitive & viable. 4.1.2 Eligibility or Proposed Omani

Enquiry forms and applications are to be filled out which can be collected from the office or downloaded from the website.

4.2

Intilaaqah Programme

Existing Entrepreneurs;

Projects that have a total capital outlay not exceeding RO 1,000,000; Rate of Interest for Loan depends on Rating of the Project; Minimum Promoter's contribution for loan ranging between 25 per cent - 35 per cent. Equity Participation by Sharakah will be minimum 25 per cent and maximum 40 per cent. Sharakah may consider increasing portion based on the project achieving certain deliverables; 4.1.3 Benefits of "Sharakah"

Intilaaqah is one of Shell's social investment programmes in Oman that has been modeled on Shell-funded initiative called "Live Wire", running in 26 countries. The purpose of Intilaaqah is to stimulate and encourage unemployed Omani youth to consider the option of setting up their own business, and to provide assistance to those who aspire to seek this opportunity be providing them with training and counseling. 4.2.1 Intilaaqah Services

Intilaaqah provides 3 main services for young Omanis, all free of charge as follow: · Training: in all aspects of setting up, managing and provide proficient skills to run a business. · Professional guidance: and business counseling. · Awards: Intilaaqah organizes an annual awards function to recognize the best young entrepreneurs in Oman.

The only Venture capital Fund for SMEs in Oman; 304

4.2.2

Participations Criteria

Intilaaqah is targeted towards the Omani youth and the following is the criteria for participation: · The applicant must be an Oman Nationals (both- males and females). · years). The applicant must be between (18-32

Nature of business: GroFin Oman is the fund manager of the Intilaaqah Enterprise Fund established by Shell. Through the Fund, GroFin will provide business development and financing to small and medium sized enterprises. 4.3.2 Available Services

· The applicant must be general education certificate holder class twelve. · The applicant must be unemployed or self-employed (for 3-month course only). · The applicant must be enthusiasm to start own business.

4.3

GroFin Oman

GroFin Oman is a specialist business developer and financier focused on providing support and risk capital to small and medium enterprises, underserved by traditional sources of capital. GroFin focuses on the high-risk underserved market of start-up and early-stage small-and medium-sized businesses and overcomes the constraints of insufficient expertise, track record, own contribution and/or collateral through the provision of business development assistance (BDA) and appropriate medium term financing of (3 to 5 years). 4.3.1 Objective

The strategy of the company is to provide appropriate finance together with the required business development assistance as identified in the business plan and throughout the implementation thereof. this integrated approach reduced the risk of the transaction significantly increase the business success rate, develops the local skills base and increases financial and development returns. GroFin structures appropriate solutions for Small and Medium Enterprises through a range of finance instruments. These include any combination of term loans, performance based incentive payments, equity and shareholders loans. The financing amount provided ranges from RO 20,000 to RO 380,000. By analyzing projected cashflow stream of the business, GroFin will structure a facility to reflect the individual needs of the business. Business proposals are assessed based on the following essential criteria: i) Credibility capability and commitment of the entrepreneur and management team. ii) Financial and technical viability of the business. As a viability-based financier, GroFin considers applications with a lack of sufficient collateral. The availability of collateral will however have an influence of the structure of the financial transaction. 305

To generate returns for our investors, shareholders and employees and to create sustainable wealth, employment, economic growth and social development in the markets in which we operate.

4.4

Bank Muscat (Al Wathbah)

Al Wathbah, BankMuscat's comprehensive suite of programme lending solutions for the small and medium scale sector: Taking into consideration the importance of SME's to the national economy, BankMuscat has dedicated a full-fledged SME Finance Department to cater to the needs of this sector. The department grants loans up to RO 250,000/- to small and medium size enterprises. Professional Account Relationship Managers working in the department assess the needs of customers, evaluate the related risks, structure finance, take care of certifications, monitor and supervise the credit facilities provided in different branches of the bank. The department is mainly divided into two finance units as follows: 4.4.1 Programme Lending Unit (Al Wathbah)

the bank has recently established Business Banking Unit, a department dedicated for handling and catering to the banking needs of SME's in Oman, in order to help them grow. 4.5.1 Business Nature & Activities

Business Banking Units is split into two business segments namely: 4.5.2 Business Finance Solutions

A dedicate team of relationship managers and credit analysis handle the needs for loans & trade facilities of new and existing customers; and Direct finance services: A highly trained team of business development officers and customer's services representatives to assist company account opening & operation related needs. 4.5.3 Application Procedures

Al Wathbah offers up to RO 100,000 in terms of funding for small commercial establishments with an annual turnover less than RO 250,000/-, subject to certain requirements stipulated by the Bank. Al Wathbah currently offers 6 product categories, namely- Equipment Finance, Receivables Finance, Credit Card Receivables Finance, Working Capital Finance, Contract Finance and Import Finance SME Finance Unit: If the client does not meet the requirements of the Programme Lending Unit (Al Wathbah), or if his/her credit needs exceed RO 100,000/-, the client can resort to SME Finance Unit, which provides credit facilities up to RO 250,000/-. The above-mentioned financing solutions are marketed through all BankMuscat branches.

Business Finance Solutions: customers may apply for credit facilities through a letter to the bank support by the required details. Direct Financial Services: for opening an account and transactional banking services, customers may call Business Banking call center at 800 7477, email at [email protected] or visit Business Banking Website at www.oman. hsbc.com/ omanbusinessbanking. A business Development Officer would visit the company once the information is received through any of the above channels. 4.5.4 Conditions & Requirements

4.5

HSBC Bank Middle East Limited

Supporting SME's in the Sultanate is one of the key strategic priorities for the Bank. For this purpose 306

Business Finance Solutions: The request letter for credit facilities should be supported by company

profile, last 3 years audited accounts, copy of company's commercial registration certificate and last 12 months bank statements from existing banks. The bank determines the required collateral based on the nature of the company's business & financial standing. Direct Financial Services: Duly completed account opening forms are required along with the required supporting documents. The forms and checklists of the documents required are listed on Business Banking Website at www.oman. hsbc.com/ omanbusinessbanking.

i) A copy of commercial register and computer papers. ii) A copy of the certificate of Oman Chamber of Commerce & Industry. iii) The company profile.

iv) Details of the owners of the company and copies of their ID's. v) Audited financial statements for the last three years and future prospects. vi) Information about credit facilities with other banks, if any. vii) Bank statement for the last six months. viii) A letter stating the required facilities, and proposed guarantees, if any. Additional Services: The Bank provides borrowers with financial advice, supports him and trains him in preparing internal balance sheets.

4.6

Bank Sohar

Bank Sohar is a national bank recently inaugurated in the Sultanate. It provides a wide range of banking services to both individuals and businesses, including development projects finance, consumer credit, real estate finance, consultancy services and investment banking. 4.6.1 Requirements

Bank Sohar adopts simple procedures for SME's finance. Applicants are to provide the following:

307

Annexure 6.2.6

MICRO CREDIT IN SYRIA

Ms Sahar Abdin

1 Micro-Credit in Syria : Government Initiatives · The lack of specialized NGOs in financing micro-enterprises. · The lack of sufficient staff to implement this programme. 3 Limit-spread of these NGO's in the country

The Public Corporation for Employment and Enterprise Development (PCEED) was established by virtue of decree no. 39 dated 2006 have the following basic objectives: · Implementing small and medium enterprises that the decree classified them for the first time. · Supporting and encouraging setting up incubators which provide a suitable environment for entrepreneurs. · Implementing micro-finance programmes by non-governmental organizations; and the corporation will provide supporting programmes to the Non-Governmental Organizations (NGOs) to reinforce its ability to implement financing enterprises in order to achieve a wide spread especially in outlying areas as well as in the areas with high indicators of unemployment and poverty. 2 Implementation of micro enterprises finance programmes through NGOS

As the first lady of Syria, Asma Akhras al-Assad initiated the programmes, designed to foster economic development and improve the quality of life for all Syrian people. She focuses her energies on issues concerning rural development technology. In July 2001, she established Syria's first rural development NGO, known as the Fund for Integrated Rural Development of Syria (FIRDOS). The fund aims to play a leading role in advancing comprehensive and sustainable human development through the direct participation of the Syrian population. During her frequent visits to villages and local communities throughout the country, Mrs Assad stresses the importance of strengthening and enhancing the capacity of communities, whilst respecting the positive values of local culture and heritage. The First Micro Finance Institution Syria (FMFIS) is the leading private-sector micro-finance service provider in Syria. Originally established in

Most customers prefer to get benefit of micro finance programme, but implementing this programme through NGO's faces many difficulties such as: 308

2003 as a micro-finance programme under the umbrella of AKF, FMFI-S completed its transition to a deposit taking institution in October 2008. It was the first to do so under new Syrian legislation for the micro-finance sector, one of a number of economic reforms undertaken by the government including cutting lending interest rates, opening private banks, consolidating all of the multiple exchange rates, and raising prices on some subsidized items. This transformation process will conclude with the entry of new shareholders into FMFI-S in 2009, consisting of the International Finance Corporation (IFC), KfW Bankengruppe and the European Investment Bank. Their participation and investment of a combined total of US$ 7 million in equity (plus additional grant funding) will provide FMFI-S with the financial resources and technical assistance required for rapid growth in the years ahead. According to studies undertaken by KfW and IFC, there are an estimated 260,000 to 420,000 households in Syria requiring access to micro-credit for business purposes and one million households requiring credit for non-business purposes such as housing, education and medical care. The existing micro-finance institutions operating in Syria serve just 3 percent of all needs; total supply is estimated at just 18,000 loans, FMFI-S being the largest provider with 14,000 loans. At the end of 2008, FMFI-S had an outstanding portfolio of almost US$ 14 million, a 14 percent increase over 2007. Providing loans to female clients and rural borrowers remained a central focus; 40 percent of outstanding loans in 2008 were held by women, while about 32 percent of the loans were provided for agricultural purposes including loans for cereal crops and olive trees. With seven branches

and 175 employees FMFI-S has been able to achieve a high productivity ratio of 216 loans per loan officer, even though its loans are delivered using individual lending methodologies. The implementation of the new AKAM IT system will allow for further improvements in efficiency. FMFI-S works closely with other AKDN programmes in Syria to maximize the local development impacts. AKF is helping farmers develop water-saving techniques in Salamieh, an arid region in the northeast, and this initiative is being paired with FMFI-S loans for drip and sprinkler irrigation equipment. FMFI-S is also providing advisory financial services for group lending to farming projects in that region, and exploring ways to support AKTC's built environment activities in the northern city of Aleppo. As part of a health promotion, FMFI-S has partnered with AKHS to provide over 600 loans for motorcycle helmets. Development needs in rural Syria differ according to geography and social context. For this reason FMFI-S is capitalizing on the experience of the Healthy Villages Programme (HVP), a programme in partnership with the World Health Organization and the Syrian Ministry of Health. The objectives of HVP include equipping the village with a potable water supply, sanitation, solid waste removal and village cleanliness. Economic development and productivity are a strong determining factor in the ability of villages to achieve this broad set of objectives, which is where the credit provided by FMFI-S is most valuable. FMFI-S is already working in close to 70 villages and in 2009 will expand its participation in the programme within the framework of Syria's national development plan. 309

Following the receipt of the new license, savings products will also be piloted in the beginning of 2009 and fully deployed in April 2009. Small to medium enterprise (SME) products will be introduced in the third quarter of 2009. Social loans, primarily housing loans, will increase to 4,400, representing nearly 23 percent of total loans by year-end. FMFI-S has the largest housing loan portfolio of any AKAM institution. As elsewhere within the AKAM network, a construction standards component is gradually being introduced, which also takes into account the historical importance of some of the neighborhoods in Damascus and Aleppo. It is expected that over the next three years FMFIS will expand from seven to 20 branches, providing coverage in all of Syria's 14 governorates. FMFI-S intends to serve up to 46,000 clients by 2011.

4

The Village Business Incubator

The Village Business Incubator (VBI) is a service centre for the development of female entrepreneurship in rural areas of the Lattakia Governorate ­ Syria. It operates within the framework of a development cooperation Project implemented by the Fund for Integrated Rural Development Of Syria (FIRDOS) one of the Syria Trust for Development projects, with the technical assistance of the Italian Association for Women in Development (AIDOS) and with funding from European Union (EU), FIRDOS and AIDOS. Based on the successful results achieved during the first phase of the VBI project, the VBI was secured another milestone in April 2009 for three years. Five new villages are entitled to get the VBI services along with the villages targeted in the first phase.

310

Annexure 6.1.7

ROLE OF NGOs IN POVERTY ALLEVIATION IN BANGLADESH

Dr S K Singh

1 NGOs have Emerged as: 3 NGOs are Engaged in a Process:

· one of the most effective institutions in poverty alleviation interventions in the country · initially engaged in relief and rehabilitation work after Independence in 1971 · expanded activities enormously since then

· Social mobilisation to develop them and their institutions · Enhance their ability and capability to mobilise and arrange resources for sustainable development · Improvements in the quality of life of the poor people consistent with their own aspirations · Since 1961, more than 19,000 NGOs have been registered with the Department of Social Welfare · The registration does not reveal the number of active NGOs as it does not involve periodical renewal of registration · Till August 1997, the number of foreign funded NGOs registered with the NGO Affairs Bureau was 1,176. These can be regarded as active NGOs · In December 1995, 754 NGOs were listed as members of the Association of Development Agencies in Bangladesh, which is the apex body of local, national, and international NGOs engaged in development activities.

· proved to become effective change agents in the society 2 These Organizations are now an Integral Part of the Institutional Structure for Addressing : Poverty alleviation Rural development Gender equality Environment protection Disaster management Human rights Other social issues (health and education)

· · · · · · · 110

Within the broad spectrum, the NGOs have pioneered and successfully experimented with a number of innovative approaches to poverty alleviation in the country. Some of the notable examples include the following: 4 Group-Based Mobilisation and Beneficiary Participation

·

strips, are accessed by NGOs for various aforestation programmes with landless groups · Landless people are organised and given assistance to own modern irrigation equipment to emerge as a stakeholder in the water market in agriculture. Landless groups are also organised to collectively lease `khas' lands and dry river-beds for fish cultivation, protect the fish released into the open water, production of seedlings in villagebased nurseries etc. (ADAB 1994);

A group-based or target group mobilisation strategy to : i) ensure economic improvement through direct targeting and beneficiary participation, and ii) social and institutional development through strengthening the organising capability of the poor. Such group mobilisation is considered as a key element in ensuring the success of credit programmes through strengthening financial discipline and peer responsibility (BIDSWorld Bank 1995)

4.2

Health education

Promotion of primary health-care concerns, notably immunisation and diarrhoea control, and effective dissemination of health messages through innovative media campaigns

4.3 4.1 Microcredit

Non-formal Primary Rducation

The identification of credit as a critical need and design of efficient and cost-effective credit delivery mechanisms (e.g. Grameen Bank and other NGO models of micro-credit) · Targeting women as beneficiaries

Introduction of a system of primary schools based on non-formal education principles with parent and community involvement

4.4

Non traditional Extension

Agricultural

· Successful targeting of women as the principal beneficiary group · Access to common property resources

Innovative programmes of technology transfer e.g. ground-breaking farm-level innovations in fertiliser-use and pest-management, training of local people and national advocacy campaign, and extension system for appropriate technology transfer to homestead agriculture

· Innovations which allow poor to access land in non-traditional ways in the fields of social forestry and formation of landless and irrigation groups · Government-owned lands (commonly referred to as `khas' lands), in particular roadside

4.5

Development of Appropriate Irrigation Technologies

Low-cost irrigation technologies through research and experiment e.g. treadle pump and bamboo tubewell, Rower pump, and Tara pump to extract water from deeper aquifers. 111

Table 1 : Range of Activities Group formation Microcredit Formal and non-formal education Training/capacity building Health and nutrition Maternal and child health Family planning and welfare Women's development Agriculture Fisheries Forestry Poultry and livestock Environment Water supply and sanitation Advocacy Human rights Legal aid, land and asset distribution Other areas

112

7. PROGRAMME SCHEDULE

Date & Day Time Topic(s)/Event(s) Resource Person(s)/ Guide(s) 4

1

2

3

06 February 2010 17:00-19:00 Arrival at BARD Saturday 07 February 2010 09:30-10:00 Registration Sunday 10.00-10.30 Introduction to BARD (Video Show and Discussion)

DG, BARD, Director (Administration) and Workshop Directors Chief Guest, Special Guest DG, BARD Director (Training) Faculty Members AARDO Representative and Participants

10:30-11:45 Inaugural Session and Presentation of Key Note Paper on "Micro Credit Delivery System and Good Governance" by Director General, BARD

11.45:12:00 Tea Break 12:00-13:00 Discussion on Key Note Paper 13:00-14:15 Lunch and Prayer Break 14:15-15:30 Rural Development: Concepts and its Different Dimensions 15:30-16:30 Dimensions of Poverty 16:30-17:30 Visit to Banakutir and Nilachal 08 February 2010 09:00-11:00 Rural Development and Poverty Monday Reduction Linkages Dr M. Solaiman Hasnat Abdul Hye Discussant: Dr. Salauddin Aminuzzaman

Hasnat Abdul Hye

311

1

2

3

4

11:00-11:30 Tea Break 11:30-13:00 Comilla Approach to Rural Development (5) 13:00-14:15 Lunch and Prayer Break 14:15-15:30 Third Generation Cooperatives/ Mr A K Fazlul Bari Groups : The Experiences of CVDP and SFDF 15:30-16:30 Government Service Deliveries Dr M. Solaiman for Rural Livelihoods 09 February 2010 09:00-11:00 Rural Development Policies, Tuesday Programmes and Strategies of Asia 11:00-11:30 Tea Break 11:30-13:00 Role of NGOs for Poverty Alleviation in Bangladesh 13:00-14:15 Lunch and Prayer 14:15-15:30 Impact of Foreign Trade on Local Economy with Special Reference to Bangladesh 16:00-18:00 Visit to Mainamati Museum Commonwealth War Cemetery 10 February 2010 9:00-11:00 Wednesday Meso/Micro-Finance Institutions: Role of PKSF(12) Dr. Shah Mohammad Farid Dr S K Singh Dr S K Singh Mt Mohd. Mir Kashem

Dr. Abdul Hakim

11:00-11:30 Tea Break 11:30-13:00 Micro Credit and Entrepreneurship Development 13:15-14:15 Lunch and Prayer 312 Dr. Abdul Hakim

1

2

3

4 Dr. Swapan Kumar Dasgupta

14:15-15:30 Coordination for Governance at Local Level: An experience of Bangladesh

15:30-16:30 The Grameen Bank Model of Micro Mr. Md. Ayub Ali Credit in Rural Development Howlader 11 February 2010 09:00-10:30 Presentation of Country Paper on Chairperson: Thursday "Micro Credit Delivery System Mr Md. Ataur Rahman and Good Governance in Rural Development of respective countries by the participants 10:30-11:00 Tea Break 11:00-12:00 Presentation of Country Paper on Chairperson: Micro Credit Delivery System Mr Mohd. Mir Kashem and Good Governance in Rural Development of respective countries by the participants 12:00-13:00 Presentation of Country Paper on Chairperson: Micro Credit Delivery System Dr.Sanjeeb K. Behera and Good Governance in Rural Development of respective countries by the participants 13:00-14:30 Lunch and Prayer Break 14:30-15:30 Group Discussion 16:00-17:30 Friendly Volleyball Match Between Faculty Members and Participants 12 February 2010 09:00-11:00 Group Discussion Friday 11:00-11:30 Tea Break 313

1

2

3

4 Mr Md. Ataur Rahman

11:30-13:00 Presentation of Group Discussion and Recommendations 13:00-14:30 Lunch and Prayer Break

14:30-17:00 Visit to Bamoil Society: Practices of Good Governance at the Grassroots Level (21) 13 February 2010 09:00-11:00 Issues and Concepts on Millennium Dr. Qazi Mesbahuddin Saturday Development Goals (MDGs) and Ahmed Poverty Reduction Strategy (PRS) with Emphasis on Governance and Poverty 11:00-11:30 Tea Break 11:00-13:00 Social Safety Net Programmes to Dr. Qazi Mesbahuddin Encounter Poverty in Asia and Africa: Ahmed Different Approaches 13:00-14:30 Lunch and Prayer Break 14:15-15:30 Micro-Credit Delivery System in Bangladesh 15:30-16:30 Micro-credit Regulatory Systems in Bangladesh 14 February 2010 09:00-11:00 Microfinance: Model and Sunday Bangladesh Experiences 11:00-11:30 Tea Break 11:30-13:00 Non-farm Economy in Bangladesh: Nature, Determinants and Impact on Poverty Reduction 13:00-14:15 Lunch and Prayer Break 314 Dr. Mahabub Hossain Mr. Khandakar Muzharul Haque Mr. Khandakar Muzharul Haque Dr. Mahabub Hossain

1

2

3

4 Prof. Dr. Nazmul Ahsan Kalimullah Dr. Iftekharuzzaman

14:15-15:30 Concepts and Elements of Good Governance 15:00-16:30 Good Governance in Rural Development: Challenges and Opportunities 15-16 February 2010 Monday-Tuesday

Study Tour at Chittagong and Cox's Bazar

17 February 2010 09:30-11.00 Poverty from Gender Perspectives Wednesday and Micro-Credit Intervention 13:00-14:30 Lunch and Prayer Break 15:30-19:30 Visit to Ranir Kuthi and Comilla Town

Ms. Shirin Banu Mitul

19:00-22:00 International Night and Workshop Dinner 8 February 2010 Thursday 10:00-11:30 Concluding Session Valedictory address by H E Abdalla Yahia Adam, Secretary General, AARDO Concluding Remarks by Mr Ataur Rahman DG, BARD 11:30-12:30 Tea Break 12:30-13:30 Lunch and Prayer Break 14:00 Departure from BARD Workshop Directors and Participants

315

8. LIST OF PARTICIPANTS

A PARTICIPANTS Oman 4 Mr Nasser Mubarak Al-Alawi Director of Business Development Directorate General for Small & Medium Enterprises Ministry of Commerce & Industry Muscat Ph : 00968-24781102 (Off) Fax : 00968-24781141 E-mail : [email protected] Miss Badria Rashid Saeed Al-Qutaiti Rural Industries Specialist Directory of Agricultural Development Al-Khabourah Ph : +96826801644 (Off) +96899355225 (Mobile) Fax : +96826802644 E-mail : [email protected]

R O China 1 Mr Chih-Pei Lin Chief, Bureau of Agricultural Finance 15, Sector 1, Hangjhou S. Rd. Taipei 100, Taiwan Ph : 886-2-33935855 (Off) 886-2-27269830 (Res) Fax : 882-2-23926882 E-mail : [email protected]

5

India 2 Mr Chandra.Kumar Jamatia Project Director, DRDA West Tripura Old Secretariat Complex Agartala 799 001 Ph : 0381-2324227 (Off) 0381-2224644 (Res) 9436129573 (Mob) Fax : 0381-2324227 E-mail : [email protected]

Syria 6 Mrs Sahar Abdin, Supervisor Development of Rural Women Project Training and Development Department Agriculture Directorate in Latakia Ph : 00963412470100 (Off) 0096341415383 (Res) 00963932863768 (Mobile) Fax : 00963412470101 E-mail : [email protected]

Lebanon 3 Engr. (Ms) Mona Assaf Ministry of Agriculture Ambassies' St. Facing Henry Chehab's Barack Beer Hassan, Beirut Ph : +9611849600/11 (Off) +9619790028 (Res) Fax: +9611824100 E-mail : [email protected], [email protected]

Bangladesh 7 Mr A K M Khairul Alam Deputy Director Rural Development Academy (RDA) RDA Campus, Bogra ­ 5842

316

Ph :

05178602 (Off) 8801715385352 (Mobile) Fax : 08214451659, 08214451612 E-mail : [email protected] 8 Dr Md. Shafiqul Islam Joint Director (Project) Bangladesh Academy for Rural Dev. Kotbari, Comilla Ph : 081764248 Extn. 326 (Off) 01711481550 (Mobile) Fax : 08168406 E-mail: [email protected] Mr Mohammad Abdul Quader Joint Director (Rural Administration) Bangladesh Academy for Rural Dev. Kotbari, Comilla Ph : 08176424 Extn. 333 (Off) Fax : 08168406 01711111782 (Mob) E-mail : [email protected] Ms Nasima Akhter Deputy Director (Rural Education) Bangladesh Academy for Rural Dev. Kotbari, Comilla Ph : 081764248 Extn. 346 (Off) 01819152169 (Mob) Fax : 08168406 E-mail : [email protected] Mr Md. Abu Salek Upazila Rural Development Officer (BRDB) Upazila Complex Sreenager Munshiganj Ph : 0692565003 01711229972 (Mobile)

12

Mr Md. Kamruzzaman Assistant Director (Credit) Bangladesh Rural Development Board Palli Bhabon, 5- Kawrnan Bazar Dhaka Ph : 01716137161 (Mobile) E-mail : [email protected] Mr. Narayan Chandra Sarkar Joint Registrar Directorate of Co-operative Agargoan, Civil Sector Dhaka Ph : 0088029141038 (Off) 01711201332 (Mobile) SPECIAL INVITEE Dr Sanjeeb Kumar Behera Head of Research Division, Afro-Asian Rural Development Organization (AARDO) 2, State Guest Houses Complex Chanakyapuri, New Delhi India E-mail : [email protected]

TRAINING WORKSHOP MANAGEMENT

13

9

B 14

10

C

15

Dr S J Anwar Zahid Director (Training), BARD E-mail: [email protected] Mr Anwarul Azim Assistant Director (Administration) BARD E-mail: [email protected] Kazi Sonia Rahman Assistant Director (Development Communication), BARD E-mail: [email protected] 317

11

16

17

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