Orangi To Grameen Bank:
An Alternative Route
To Pro-Poor Development
By Md. Saidul Islam
31 October, 2006
difficult to trace the historical fact exactly when "micro-credit"
started. However, at the very inception of human race, i.e., in Band
society, we find the principle of cooperative enterprise. Though the
society was highly "traditional" in the eyes of the modern
world, every single person of a band regardless of age and sex enjoyed
an equal access to property and power. Gradually that notion of egalitarianism
submerged in the wake of a few powerful elite who enjoyed higher power
and control of property, and precluded the powerless masses. This led
to an emergence of class society as well as poverty. From ancient slavery
to feudalism to modern capitalism, the existence of class was justified
and ramified in the mainstream political discourse. To make it more
clear, a small set of controlling elite should enjoy more power and
prestige by having maximum ownership and control over property, while
the majority masses should not, was made an inevitable destiny of human
races. Therefore, historically the enjoyment of a powerful few came
because of the dire exploitation of powerless masses.
Modern capitalist mode of
development, despite having tremendous success and progress, is criticized
because of its bias towards a powerful few. It has generated an enormous
wealth, but made them confined to a few hands. Consequently, the gap
between minority rich and majority poor has widened more than ever,
and this conspicuous phenomenon is within a country and between countries.
Capitalism is thus a system that produces both property and poverty.
Secondly, a west-centric bias is very evident in the discourse of "development".
That is, the west is the one that defines what development is, and takes
the destiny of the world in its own hand. From colonization to globalization,
it's definition of development changes over time, but leaves no room
for a "non-west" perspective of development. Though severely
criticized, this west-centric bias and its racial arrogance are dominating
the "global managers" (World Bank, IMF, WTO, and the US government),
as they have "deployed" developments projects on the "non-western
world", termed as the "Third World" albeit in a derogatory
sense, without taking the local conditions, knowledge, and culture into
consideration. This top-down approach by imposing development resulted
in massive failure in Asia, Africa and Latin America. Ironically, the
blame for failure was attributed to the local poor and their culture,
rather than to the arrogant global managers who ignored local conditions
and failed to include local poor's participation. Hence, a down-up approach
to development consistent with local conditions and culture was of paramount
Bangladesh's Akhter Hamid
Khan was one of the first few who understood the limitation of elite-centric
development and the importance of a grassroots-centric development.
His Orangi Pilot Project (OPP) is still bearing a path-breaking legacy
for an alternative route to pro-poor development. It's a great example
of uplifting the Orangi people, the biggest group of the katchi abadi
(unauthorized urban settlement in Karachi, Pakistan), who, mostly emigrated
from rural areas, were virtually destitute, without any monetary help
at the first place, but by giving them only technical support. Akhter,
invited by the Bank of Credit and Commerce International (BICC) to start
a new pilot project in Orangi, started this project to test and develop
an approach for developing katchi abadis, which flourished around Karachi
and other urban centers, but for which no institutional solutions have
been found within the framework government-run municipal services and
official development agencies.
The unique features of this
project were that it was started with virtually nothing: no preconceived
set of program activities, no preconceived models in mind, and even
with no staff, no office, no connections and no contracts even with
the people who were set out to serve by the project. The whole community
was submerged in acute poverty in terms of basic foods supply, education,
health, nutrition, women participation and status, housings and so forth.
However, the project was launched first with "learning and then
teaching" in a gradual manner with "continuous and active
involvement of the local residents". The basic strategies were
1. To develop, in consultation
with area residents, an appropriate and affordable solutions that is
technically sound and also culturally acceptable.
2. To help in the development
of suitable social organization that builds upon existing political,
social and commercial networks, and that can implement the suggested
3. To support the formation
of autonomous local institutions to deal with each program activity.
As these autonomous institutions have come into being, the project has
gradually withdrawn from its direct involvement in these activities.
These institutions work under the project umbrella, but are autonomous
in their day-to-day functioning.
This grassroots-based development project is based on the active participation
of the local people, creating awareness regarding their own problems
through education and formulating solution from their own capacity,
simple technology and simple engineering skills. The project only guides
people with no notion of enforcement, and therefore goes against the
conventional modernist notion of top-down development strategy.
For the low-cost sanitation,
the OPP took an amazing 4-step process: (a) Social motivation: through
meeting with local people, motivating them to form an organization,
providing technical help, recruiting social motivators to motivate others
in their own community, training them to use low-cost technology and
simple engineering concepts, organizing lane-meetings, avoiding antagonism
with the local political leaders; (b) Formation of Organization and
Selection of Lane-manager: with no monetary help, but just only technical
help and supervision; (c) Data Collection: OPP technical staff surveyed
the lane, established the benchmarks, prepared plans and estimates,
and handed over these data to lane manager; and finally (d) Sharing
money: the lane manager collected money from the people. Each lane organization
was free to device its own arrangements. The result was dramatic. It
virtually solved the sanitation problems, and cost was 5 to 7 times
less than what municipal authorities charged. Gradually OPP got massive
recognition. Later on the project was extended to other problems of
the community. The project was simple, but effective; it was not concerned
about the growth of GDP at the first hand, rather about solving the
basic problems of the community. OPP left numerous lessons for world
First, the genuine development
can not take place by subsidizing the costs of any activity; people
themselves should be prepared to pay for what they want.
Second, the project should
observe and investigate, but it can only advice, not enforce. It can
organize people but only on a voluntary basis.
Third, self education regarding
their problems and solutions is of paramount need for the local people
before any project of development is introduced. This belief has to
be inculcated in the minds of the people that the outcome of the projects
is primarily and eventually for the interest of the local people (and
not for the interest of the capitalists).
Fourth, a strategy for development
that relies on the strengths and resources of the residents is needed
to be developed. For that, the residents will have to be convinced of
the need to act for themselves, and of their ability to do successfully.
Fifth, development can be
pursued with simple technology and simple engineering skills, easily
understandable by the local residents. The local people have to be trained
to use them. High level of technical skills and technology can worsen
the project and they might displace the labors from their jobs. The
technology should not be regarded as an "alien" and "inimical"
to them. It removes the veil of technical sophistication.
Sixth, rather than depending on, or enforcing, the 'models of development'
and preconceived programs of development projects, the development can
be pursued slowly. One advantage of starting slowly is that mistakes
can be identified, and solutions be developed and then monitored for
Seventh, development can
be pursued without donors help. In case of OPP, the Orangi shared the
total cost of the low-cost sanitation.
Finally, it takes time to
convince the people to make them aware of their own problems. OPP took
3 months to convince the residents, and three years to get recognition.
Along with OPP of Akhter
Hamid Khan, micro-credit enterprise popularized and institutionalized
by revenant Nobel Peace Laurent Dr. Muhammad Yunus, left a path-breaking
legacy for the development planners all over the world. Though the idea
of micro-credit is largely traced back by some authors to the Kabuliwala
who came from Kabul and lend money to villagers in Bangladesh and subsequently
collect with an interest, Dr. Yunus gave an institutional shape and
use it to fight poverty albeit differently.
Dr. Yunus uses "Grameencredit"
different form other micro-credits, and claims:
(a) It promotes credit as
a human right;
(b) Its mission is to help
the poor families to help themselves to overcome poverty. It is targeted
to the poor, particularly poor women;
(c) Most distinctive feature
of Grameencredit is that it is not based on any collateral or legally
enforceable contracts. It is based on "trust", not on legal
procedures and system;
(d) It is offered for creating
self-employment for income-generating activities and housing for the
poor, as opposed to consumption;
(e) It was initiated as a
challenge to the conventional banking which rejected the poor by classifying
them to be "not creditworthy". As a result it rejected the
basic methodology of the conventional banking and created its own methodology,
(f) 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;
(g) In order to obtain loans
a borrower must join a group of borrowers;
(h) Loans can be received
in a continuous sequence. New loan becomes available to a borrower if
her previous loan is repaid;
(i) All loans are to be paid
back in installments (weekly, or bi-weekly);
(j) Simultaneously more than
one loan can be received by a borrower;
(k) It comes with both obligatory
and voluntary savings programmes for the borrowers;
(l) Generally these loans
are given through non-profit organizations or through institutions owned
primarily by the borrowers. If it is done through for-profit institutions
not owned by the borrowers, efforts are made to keep the interest rate
at a level which is close to a level commensurate with sustainability
of the programme rather than bringing attractive return for the investors.
Grameencredit's thumb-rule is to keep the interest rate as close to
the market rate, prevailing in the commercial banking sector, as possible,
without sacrificing sustainability. In fixing the interest rate market
interest rate is taken as the reference rate, rather than the moneylenders'
rate. Reaching the poor is its non-negotiable mission. Reaching sustainability
is a directional goal. It must reach sustainability as soon as possible,
so that it can expand its outreach without fund constraints;
(m) Grameencredit gives high
priority on building social capital. It is promoted through formation
of groups and centres, developing leadership quality through annual
election of group and centre leaders, electing board members when the
institution is owned by the borrowers. To develop a social agenda owned
by the borrowers, something similar to the "sixteen decisions",
it undertakes a process of intensive discussion among the borrowers,
and encourages them to take these decisions seriously and implement
them. It gives special emphasis on the formation of human capital and
concern for protecting environment. It monitors children's education,
provides scholarships and student loans for higher education. For formation
of human capital it makes efforts to bring technology, like mobile phones,
solar power, and promote mechanical power to replace manual power.
Grameencredit is based on
the premise that "the poor have skills which remain unutilized
or under-utilized". Poor should not be blamed for their poverty,
but rather "it is created by the institutions and policies which
surround them" Dr. Yunus thinks. Grameen believes that charity
is not an answer to poverty, but only helps poverty to continue. It
creates dependency and takes away individual's initiative to break through
the wall of poverty. "Unleashing of energy and creativity in each
human being is the answer to poverty" he added.
Currently, there are around
7 million clients of grameencredit, of which 97% are women. By breaking
the traditional barriers of poverty and culture, these poverty-ridden
women "chose not to remain poor" with the help of grameencredit.
The recovery rate of the Grameen Bank is astonishingly good. Grameen
Bank has grown into over two dozens enterprises represented by Grameen
Family of Enterprises including Grameen Trust, Grameen Fund, Grameen
Communications, Grameen Shakti/Energy, Grameen Shikkha/education, Grameen
Telecom, Grameen Knitwear Ltd., and Grameen Cybernet Ltd.
Currently more than 100 million
people all over the world are fighting poverty by replicating Dr. Yunus's
"Grameencredit" model. This model is also extended to Islamic
banking system by installing the principles of mudaraba, and bi-muazzal.
Aside from Islamic Bank Bangladesh Ltd., many cooperative societies,
including Kapotakhha Cooperative Society Limited (KCSL), are giving
loans to small entrepreneurs by using aforesaid Islamic principles.
Both Grameencredit and the OPP have left ground-breaking legacies for
both poor and development planners all over the world. There are questions
as to whether both are congruent or different, but there is no question
that both are alternative route to "pro-poor development",
models devised by the poor themselves.
Md. Saidul Islam
is a PhD candidate in Development Sociology at York University in Canada,
and an IDRC (International Research Development Centre) research fellow.
He can be reached at: email@example.com
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