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RURAL DEVELOPMENT AND ALLEVIATION IN PENINSULAR - THE EMERGENCE OF AN ALTERNATIVE APPROACH: THE AMANAH IKHTIAR PROGRAMME

MOHAMAD ZAINI OMAR

B. A (Hons) Geography, Master of Science(Planning), Universiti Sains Malaysia.

A Thesis submitted to the University of Sheffield for the Degree of Doctor of Philosophy

Department of Town and Regional Planning

April 1995 ii

ABSTRACT

It is against a background of failure of the conventional development strategiesin reachingpoor rural householdsthat the alternative developmentmodels of alleviating were born. Most of these efforts were initiated mainly by concerned social scientists, academicsand non-government organizations and have put into practisethe concept of "Another Development". One of the most successfulexamples is the GrameenBank of Bangladesh,which is a distinct target-group approach and exclusivelydesigned for very poor rural householdsthrough the provision of credit as an entry point towards combating poverty. Such credit (or loans), it is argued can develop the productive capacitiesof the poor and are provided on reasonableterms and conditions to be used exclusively for financing income generatingactivities. The GB model is very successfuland has spreadfarther afield and has been seizedupon as a potential model for transfer and replication not only in developing countries, including Malaysia,but in the developedworld.

Since the Malaysian New Economic Policy in the early 1970s, enormous resources (physical, institutional and financial) have been committed towards the eradicationof poverty. Despite these efforts, poverty, especially hard-core poverty, remains an inherent problem, notably in rural areas. In view of this, the Ikhtiar Programme, implementedby a private organization modeled after the GrameenBanles approach, stepped in and offered a viable alternative which complementsthe Government's poverty alleviationprogramme.

Basically,the Ikhtiar Programmeseeks to providesmall loans on reasonableterms to very poor rural householdsto financeincome generating activities. It is a targeted, specializeddelivery system, focussing exclusively on the poor, takingloans to the poor throughan approachbased on self-realizationand collectiveresponsibility among the participants.The purposeof this study is to examineto what extent the Ikhtiar Programmehas been effectivein raisingthe incomesafter the utilization of Ikhtiar loans amongits participants,The study is basedon a casestudy in the district of Baling, in the stateof .This studyis basedon householdsurveys of selected respondents,including 254 programmeparticipants and 265 non-participants(control group).It aimsto providesome suggestions which mightbe helpfulin future planning andimplementation of broad-basedpoverty alleviation programmes.

The findings of this study suggestthat the Ikhtiar Programmehas succeededin reachingits targetgroup in the studyarea, which consistsoverwhehningly of members who had a low housingindex and low householdincome. It has also succeededin improvingthe economicconditions of its participants.This has resultedin a further positive impact on the quality of life of its participants,shown through changesin housingconditions, household items owned, household expenditures and savings.The findingsof this study also providevaluable lessons that can be incorporatedinto the planningand implementationof more conventionalrural developmentprogrammes. The implementationof the programmehas some very important implicationsfor nationaldevelopment policy, which includepolicies relating to poverty eradication, promotionof rural industry,national agricultural policy andothers. iii

The experience of the Ikhtiar Programme shows that a well-designed poverty alleviation programme can play a major role in reaching the poor directly and in a preferentialmanner. The birth of the Ikhtiar Programmehas therefore provided some rays of hope for very poor householdsin their battle against chronic poverty and also has the merit of showing the concrete form that an alternative approach to rural developmentcould take and how it could be madeto work. iv

ACKNOWLEDGMENTS

In the nameof God, the Most Graciousand the Most Merciful.

I am truly indebtedto my supervisor,Professor CharlesL. Choguill, for his guidance, commentsand suggestionsduring the course of this study. I would like to thank other staff members,particularly Dr. Heather Campbell,for her advice and encouragement during weekly researchseminars.

Thanks are especially due to Associate Professor Sukor Kasim (of the Ikhtiar's headquartersin ),Mr. ShahidanMerican, Miss Nuralima and other Ikhtiar Trust Assistantsin the District of Baling for being generouswith their time and information on the Ikhtiar Programme.Personal thanks are dedicatedto Mr. SolahuddinAzizan and Mr. Mohd Yusoff for helping me in computer programming;Mr Jamaluddinfrom the District Office in Baling for information on . Many other individuals and organizationshave also beenmost generouswith their information and expertisein the preparation of this thesis. For their invaluable contributions I am forever very grateful.

My deep gratitude goes to the Malaysian government and University of Science Malaysiafor extendingfinancial support for this study.

This studyis speciallydedicated to my parentsand my familymembers who hadvisited mein Sheffieldon a numberof occasions.Finally, I amparticularly grateful to my wife, HaslindaShuib and my son, MuhammadZafril 1zharfor their continuedpatience, understandingand love throughoutmy studies. V

Abstract Acknowledgments Tableof Contents Lists of Tables List of Figures List ofAppenifices Abbreviations

CHAPTER 1: INTRODUCMON

1.1 INTRODUCTION 1 1.2 TIRE CONTEXT OF THE RESEARCH - I INTRODUCING TBE PROBLEM 1.2.1 THE CONVENTIONAL APPROACH TO RURAL I DEVELOPMENT AND POVERTY ALLEVIATION STRATEGIES IN THE DEVELOPING COUNTRIES 1.2.2 THE EMERGENCE OF AN ALTERNATIVE APPROACH 4 TO RURAL DEVELOPMENT AND POVERTY ALLEVIATION 1.2.3 THE PROBLEM IN MALAYSIA 8 1.2.4 ANEW APPROACH TOWARDS RURAL POVERTY II ALLEVIATION - THE AMANAH =LAR PROGRAMME 1.3 OBJECTIVES OF THE STUDY 13 1.4 SCOPEOF THE STUDY 14 1.5 RESEARCH HYPOTHESES is 1.5.1 HYPOTHESES TO BE TESTED is 1.5.2 THE RELATIONSHIPS BETWEEN THE OBJECTIVES 19 AND HYPOTHESES OF THE STUDY 1.6 THE STRUCTURE OF THE THESIS 20 1.7 CONCLUSIONS 22

CHAPTER 2 RURAL DEVELOPMENT AND POVERTY ALLEVIATION STRATEGY IN THE DEVELOPING COUNTRIES - THE CONVENTIONAL APPROACH

2.1 INTRODUCTION 26 2.2 CONCEPT AND EXPLANATION OF POVERTY 26 2.2.1 CONCEPT OF POVERTY 28 2.2.2 IýIEASUREMENT OF POVERTY 29 2.3 CAUSES OF POVERTY 2.4 POVERTY SITUATION IN DEVELOPING 34 COUNTRIES -A GENERAL OVERVIEW vi

2.5 RURAL DEVELOPMENT AND POVERTY 36 ALLEVIATION STRATEGIES IN THE DEVELOPING COUNTRIES 2.5.1 DEFINITION 36 2.5.2 MAJOR APPROACHES AND STRATEGIES TOWARDS 36 POVERTY ALLEVIATION IN THE DEVELOPING COUNTRIES 2.5.3 THE CONRVIUNITYDEVELOPNIENT PROGRAMME 37 (CDP) 2.5.3.1 THE ORIGIN AND RISE OF THE CDP 37 2.5.3.2 DEFINITION OF THE CDP 37 2.5.3.3 CDP AS A COWREBENSIVE DEVELOPMENT OF 38 THE RURAL AREA 2.5.3.4 THE DECLINE OF THE CDP 38 2.5.4 THE GREEN REVOLUTION (GR) 39 2.5.4.1 DEFINITION OF THE GREEN REVOLUTION 39 2.5.4.2 THE EXPANSION OF THE HIGH YIELDING VARIETY 40 (HYV) 2.5.4.3 THE IMPACT OF THE GREEN REVOLUTION 40 2.5.5 THE INTEGRATED RURAL DEVELOPMENT 42 PROGRAMME (UMP) - THE POVERTY FOCUSED PROGRAMME 2.5.5.1 INTRODUCTION 42 2.5.5.2 THE REFORMIST AND WORLD BANK RESPONSE 42 TO POVERTY 2.5.5.3 IRDP AS A CONIPREBENSIVE APPROACH TOWARDS 42 RURAL DEVELOPMENT 2.5.5.4 EVALUATION OF THE IRDP 43 2.5.5.5 IRDP - WEAKNESSES IN THE DELIVERY SYSTEM 46 2.5.6 PREVIOUS EXPERIENCE OF RURAL CREDIT 47 2.5.6.1 GENERALBACKGROUND 47 2.5.6.2 INSTITUTIONAL CREDIT 48 2.5.6.3 ON REACHING THE POOR 49 2.5.6.4 LOAN RECOVERY PROBLEM 51 2.6 CONCLUSIONS 52

CHAPTER 3 THE EMERGENCE OF AN ALTERNATIVE APPROACH TOWARDS 17HE RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN DEVELOPING COUNTRIES - THE "ANOTHER DEVELOPMENT"

3.1 INTRODUCTION 63 3.2 THE EMERGENCEOF AN ALTERNATIVE APPROACH 63 TliE"ANOTBERDEVELOPNMNT" - 3.2.1 NORMATIVE VERSUSPOSITIVIST APPROACH 63 3.2.2 THE ALTERNATIVE TRENDSIN DEVELOPMENT 65 THINKING vii

3.2.3 NON-GOVERNMENT ORGANIZATIONS (NGOS) 66 AS THE PROMOTER OF THE "ANOTHER DEVELOPMENT" CONCEPT 3.3 THE CONCEPT OF THE "ANOTHER DEVELOPMENT" 67 AS PUT INTO PRACTICE 3.4 THE GRAMEEN BANK (GB) 68 3.4.1 GRAMEEN BANK - THE SUCCESSFULMODEL 68 OF RURAL DEVELOPMENT 3.4.2 CREDIT AS A NEW WEAPON IN COMBATING POVERTY 69 3.4.3 ORIGIN OF THE GRAMEEENBANK 70 3.4.4 ORGANIZATIONAL STRUCTURE OF THE GRAMEEN 71 BANK 3.4.5 GRAM[EENPHILOSOPHY ON DEVELOPMENT 71 3.4.6 ON REACHING THE POOR 72 3.4.7 EXCLUSIVE FOCUS ON TIHEPOOR 72 3.4.8 SPECIALIZED DELIVERY SYSTEM 73 3.4.9 SPECIALLY TRAINED AND CONMTTED STAFF 76 3.4.10 SUPPORTIVE NATIONAL POLICY FRAMEWORK 77 3.4.11 OTHER PROGRAMMES WITHIN THE FRAMEWORK 77 OF THE GRAMEEN 3.4.12 THE GRAMEEN PERFORMANCE 80 3.4.13 LEARNING PROCESSVERSUS BLUEPRINT APPROACH 80 3.4.14 WIDER IMPACT OF THE GRAMEEN APPROACH 81 3.5 CONCLUSIONS 82

CHAPTER 4: RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN : THE CONVENTIONAL APPROACH

4.1 INTRODUCTION 90 4.2 DEVELOPMENT PROCESSAND POLICY FRAMEWORK 90 FOR THE RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN PENINSULAR M[ALAYSIA. 4.2.1 PERIOD BEFORE THE NEW ECONOMIC POLICY (NEP) 90 -1957-1970 4.2.2 (NEP) 91 AFTER 1970 - THE NEW ECONOMIC POLICY -1971-1990 (NDP) 92 4.2.3 AFTER 1990 - THE NEW DEVELOPMENT POLICY -1991-2000 4.3 CONCEPT AND MEASUREMENT OF POVERTY IN 93 MALAYSIAN CONTEXT 4.4 CAUSES OF POVERTY 95 4.5 STRATEGY AND RURAL DEVELOPMENT PROGRAMME 97 4.5.1 PERIOD BEFORE THE NEW ECONOMIC POLICY 97 (1957-1970) 4.5.2 DURING TIHENEW ECONONHCPOLICY (1971 1990) 98 4.5.2.1 - INTEGRATED RURAL DEVELOPMENT pROGRAMN[E (IRDp) 98 viii

4.5.2.1.1 LAND AND REGIONAL DEVELOPMENT 99 4.5.2.1.2 INTEGRATED AGRICULTURAL DEVELOPMENT 106 PROGRAMME (IADP) 4.5.2.2 THE NEW APPROACH IN VILLAGES AND 107 RURAL DEVELOPMENT" (NAVRD) 4.5.2.3 AGRICULTURAL BANK AND THE PROVISION 107 OF AGRICULTURAL CREDIT 4.6 PROGRESSIN THE ALLEVIATION OF RURAL POVERTY 108 4.6.1 POVERTY SCENARIO 108 4.6.2 INCOME DISTRIBUTION -A BRIEF OVERVIEW 114 4.7 DRAWBACKS AND INHERENT PROBLEMS IN THE 117 RURAL DEVELOPMENT AND POVERTY ALLEVIATION PROGRAMMES 4.7.1 WEAKNESSES OF THE PROGRAMMES 117 4.7.2 WEAKNESSES AND UNRESOLVED ISSUES IN THE 120 GOVERNMENT'S POVERTY ALLEVIATION MACHINERY 4.8 POVERTY ERADICATION IN THE 1990s- PROGRAM 123 PEMBANGUNAN RAKYAT TERM[ISKIN OR P.P. R-T (DEVELOPMENT PROGRAMME FOR THE POOREST) 4.9 CONCLUSIONS 124

CHAPTER 5: THE EMERGENCE OF AN ALTERNATIVE APPROACH : THE AMANAH IKHTIAR MALAYSIA RURAL CREDIT- POVERTY FOCUSSED PROGRAMME

5.1 INTRODUCTION 132 5.2 THE RELEVANCE OF THE GRAMEEN BANKS 132 APPROACH TO THE ALLEVIATION OF RURAL POVERTY IN PENINSULAR MALAYSIA 5.2.1 GRAMEEENBANK AS A MODEL 133 135 5.2.2 THE INITIAL PROJECT- PILOT PROJECT 5.3 THE AmANAH iKHTiAR MALAYSIA (AIM) 136 5.3.1 INSTITUTIONALIZATION 136 5.3.2 OBJECTIVES 137 5.3.3 ORGANIZATIONAL STRUCTURE 137 5.4 THE EXPANSION AND PROGRESSOF THE IKHTIAR 138 PROGRAMME 5.5 THE IKHTIAR LOANS 143 5.6 INTERNATIONAL RECOGNITION 146 5.7 SUPPORTIVE NATIONAL POLICY FRAMEWORK 146 5.8 FUNDING OF THE IKHTIAR PROGRAMME 147 5.9 ON REACHING THE POOR. - AIM'S "SPECIALLY 149 DESIGNED DELIVERY SYSTEM" 5.9.1 EXCLUSIVELY FOCUS ON THE VERY POOR 150 5.9.2 THE DELIVERY SYSTEM 151 5.10 MAJOR DIFFERENCES BETWEEN AIM AND GB MODEL 155 5.11 COMMITTED STAFF 156 ix

5.12 IMPACT OF HCH[TIAR.LOANS 157 5.13 TBE FUTURE OF TBE IKHTIAR PROGRAMME 158 5.14 CONCLUSIONS 159

CHAIPTER6 : RESEARCHMTHODOLOGY

6.1 INTRODUCTION 164 6.2 RESEARCH STRATEGY 164 6.3 SELECTION OF THE STUDY AREA. 166 6.4 PILOT SURVEY 167 6.5 METHODS OF DATA COLLECTION 169 6.5.1 THEPRIMARYDATA 169 6.5.1.1 INTERVIEWS AND DISCUSSIONS 169 6.5.1.2 PARTICIPANT OBSERVATION 170 6.5.z THE SECONDARY DATA 171 6.6 RESEARCH DESIGN, SAMPLING AND 171 QUESTIONNAIRE 6.6.1 RESEARCH 171 DESIGN: "BEFORE - AFTER" AND "WITH - WITHOUT"APPROACHES 6.6.2 SAMPLINGDESIGN 176 6.6.2.1 BRIEF BACKGROUND 176 6.6.2.2 THE SAMPLING UNIT 176 6.6.2.2.1 THE SELECTION OF THE SAMPLES FROM 177 POPULATION 6.6.3 QUESTIONNAIRE DESIGN 181 6.7 HOUSEHOLD SURVEY: THE ACTUAL EXECUTION 183 6.7.1 ON THE ROLE OF THE RESEARCH ASSISTANTS 183 6.7.2 THE COLLECTION OF DATA 183 6.8 METHOD OF DATA ANALYSIS 185 6.9 LIMITATION OF THE STUDY 186 6.10 SUMMARY 186

CHAPTER 7: THE DISTRICT OF BALING: A CASE STUDY AREA

7.1 INTRODUCTION 197 7.2 BACKGROUNDOF THE STUDY AREA 197 7.2.1 LOCATION 197 7.2.2 DISTRICT ADMINISTRATION 197 7.2.2.1 TliE (SUB-DISTRICT) 197 7.2.2.2 LOCAL GOVERNMENTCOUNCIL 198 7.2.2.3 DEVELOPMENTALLOCATION 202 7.2.3 LANDUSE PATTERN 202 7.2.4 SETTLEMENT PATTERN 203 7.2.5 POPULATION 205 x

7.2.6 INFRASTRUCTURE AND PUBLIC UTILITY 206 7.2.7 STRATEGY AND DEVELOPMENT SCENARIO 209 7.2.7.1 GENERAL SCENARIO 209 7.2.7.2 KEDA: ITS ROLE IN TBE DEVELOPMENT OF TIHE 210 STATE OF KEDAH DEPRESSEDREGION 7.3 THE IKHITAR PROGRAMME IN BALING: THE 212 GENERAL BACKGROUND 7.3.1 TBE IKHTTAR PROGRAMME - ITS COVERAGE 212 7.3.2 Tj[jE nCffrIAR PROGRAMME - ITS GENERAL PROGRESS 213 7.4 CONCLUSIONS 216

CHAPTER 8: SOCIO-ECONOMIC CHARACTERISTICS OF THE SAMPLE HOUSEHOLDS AND BACKGROUND OF IKHTIAR MEMBERS IN RELATION TO LOAN UTILIZATION

8.1 INTRODUCTION 219 8.2 SOCIO-ECONONUCCHARACTERISTICS OF THE 219 SAWLEPOPULATION 8.2.1 AGESTRUCTURE 220 8.2.2 EDUCATIONAL BACKGROUND 221 8.2.3 HOUSEHOLD SIZE 224 8.2.4 OCCUPATIONAL BACKGROUND 226 8.3 GENERAL BACKGROUND OF 711E SAMPLE OF 230 IKHTIAR NIEMBERS IN T111EDISTRICT OF BALING I IN RELATION TO THE UTILIZATION OF IKHTIAR LOANS 8.3.1 ACTIVITIES FINANCED 230 EMIAR LOANS - TYPES OF AND CYCLES OF IKHTlAR, LOANS 8.3.2 OWN CAPITAL AND UTILIZATION OF SKILLS IN THE 236 IKHTIAR-FINANCED PROJECT ACTIVITIES 8.3.2.1 SUPPLEMENTARY CAPITAL 236 8.3.2.2 UTILIZATION OF SKILLS BY MEM[BERS 237 8.4 SUMMARY 238

CHAPTER 9 THE ECONOMIC EFFECTS OF THE IKHTIAR PROGRAMME

9.1 INTRODUCTION 244 9.2 CHANGESIN HOUSEHOLDINCOMES 244 9.2.1 CHANGESIN HOUSEHOLDINCOMES: PROGRAMME 246 PARTICIPANTSVERSUS THE CONTROL GROUP 9.2.2 INCOME DISTRIBUTIONAND ESTABLISHMENTOF 253 POVERTY 9.2.2.1 DISTRIBUTION OF INCOME BETWEENTHE 254 PROGRAUNMPARTICIPANTS AND CONTROLGROUP xi

PROGRAMME PARTICIPANTS AND CONTROL GROUP 9.2.2.2 THE GRADUATION FROM THE "VERY POOR" TO "POOR" 255 AND OUT OF POVERTY 9.3 VARIATION IN HOUSEHOLD INCOMES BETWEEN 257 THE PROGRAMME PARTICIPANTS 9.3.1 THE HOUSEHOLD INCOME: VARIATION BETWEEN 257 THE PARTICIPANTS. 9.3.2 THE TOTAL HOUSEHOLD INCOME: CONTRIBUTIONS 267 FROM THE IKHTIAR-FINANCED PROJECTACTIVITIES 9.3.3 DETERMINANT OF IKHTIAR-FINANCED PROJECT 275 ACTIVITIES INCOME: MULTIPLE REGRESSION ANALYSIS 9.3.3.1 RELATIONSHIP BETWEEN VARIABLES 278 9.3.4 SOME OF THE FACTORS CONTRIBUTING TO THE 279 GROWTH OF INCOME: A GENERAL OBSERVATION 9.3.5 CONCLUSIONS 281 9.4 IMPACT ON THE QUALITY OF LIFE 282 9.4.1 HOUSING CONDITIONS 283 9.4.2 HOUSEHOLD ITEMS 293 9.4.3 HOUSEHOLD EXPENDITURES 294 9.4.4 SAVINGS 298 9.4.4.1 MONTHLY SAVINGS PATTERNS: "BEFORE" AND 299 "AFTER" 9.4.4.2 TYPES OF SAVINGS 301 9.4.4.3 BORROWING HABITS 302 9.4.5 CONCLUSIONS 305 9.5 FINDINGS OF THE ANALYSIS 306

CHAPTER 10 : ON REACHING POOR HOUSEHOLDS AND PERCEPTION OF MEMBERS TOWARDS THE IKUTIAR PROGRAMME

10.1 INTRODUCTION 314 10.2 ON REACHING THE TARGET GROUP IN THE STUDY 314 AREA 10.2.1 ON BECOMING IKHTIAR PARTICIPANTS 315 10.2.2 RESULTS OF THE FINDINGS 316 10.2.2.1 THE PROGRAMME PARTICIPANTS 316 10.2.2.2 THE CONTROL GROUP 3ýO 10.2.3 THE VALIDITY OF THE HYPOTHESIS AND 324 SUB-HYPOTHESES 10.3 ON RECEIVING GOVERNMENT ASSISTANCE 326 10.4 PERCEPTION AND ATTITUDE OF IKHTIAR 328 MEMBERS TOWARDS THE PROGRAMME 10.4.1 INTRODUCTION 328 10.4.2 THE MEASURING INSTRUMENT 328 10.4.2.1 PERCEPTION OF MEMBERS TOWARDS THE 329 IKHTIAR PROGRAMME xii

10.4.2.2 PERCEPTION OF MEMBERS TOWARDS THE 329 IKHTIAR CONCEPTS OF GROUP/CENTRE UNION, RESPONSIBILITY AND SUPERVISION 10.4.2.3 PERCEPTION OF MEMBERS TOWARDS IKHTIAR! S 333 BASIC RULES OF LOAN UTILIZATION 10.4.2.4 THE WORKING RELATIONSHIPS BETWEEN 333 THE PARTICIPANTS AND IKHTIAR STAFF 10.4.2.5 ON THE SUSTAINABILITY OF THE 336 IKHTIAR-FINANCED PROJECT 10.4.26 PROBLEM FACED BY IKHTIAR MEMBERS 337 10.4.2.6.1 IKHTIAR LOANS: WEEKLY PAYMENTS, 338 STAGGERED DISBURSEMENT AND ARREARS PROBLEMS 10.426.2 ON LEAVING THE IKHTIAR PROGRAMME 338 10.4.2.6.3 TRAINING AND TECHNICAL ASSISTANCE NOT 340 PROVIDED BY THE IKHTIAR ORGANIZATION 10.5 CONCLUSIONS 341

CHAPTER 11 : LESSONS TO BE LEARNED FOR THE PLANNING AND IMPLEMENTATION OF BROAD-BASED AND POVERTY- FOCUSSED RURAL DEVELOPMENT PROGRAMME

11.1 INTRODUCTION 345 11.2 ACHIEVEMENTS, LIMITATIONS AND LESSONS 345 TO BE LEARNED 11.2.1 ACHIEVEMENTS AND LIMITATIONS 345 11.2.1.1 ACHIEVEMENTS 345 11.2.1.2 LIMITATIONS 347 11.2.2 LESSON LEARNED 349 OF CREDIT 349 11.2.2.1 FIRST LESSON - THE IMPORTANCE TRAINING AND 350 11.2.2.2 SECOND LESSON - APPROPRIATE ORIENTATION OF FIELD STAFF TARGET GROUP 350 11.2.2.3 THIRD LESSON -A WELL DEFINED DELIVERY SYSTEM 351 11.2.2.4 FOURTH LESSON - EXCLUSIVE BANKING PRACTISE 351 11.2.2.5 FIFTH LESSON - INNOVATIVE 11.2.2.6 SIXTH LESSON- THE IMPORTANCE OF ORGANIZING 352 THE POOR INTO GROUPS OF PARTICIPATION 353 11.2.2.7 SEVENTH LESSON - THE ELEMENT PROCESSAPPROACH 355 11.2.2.8 EIGHT LESSON - THE LEARNING A 355 11.2.29 NINTH LESSON - ON BECOMING SELF-RELIANT RURAL COMMUNITY 11.2.2.10 TENTH LESSON - PROGRAMME'S DURATION SHOULD 356 BE ON A CONTINUING BASIS 11.2.2.11 THREE FINAL LESSONS 356 11.3 CONCLUSIONS 357 xiii

CHAPTER 12 : SUMMARY9 RECOMMENDATIONS AND CONCLUSIONS

12.1 INTRODUCTION 361 12.2 THE ESTABLISHMENT OF THE IKHTIAR PROGRAMME 361 12.3 SUNUkARY OF THE MAIN FINDINGS 361 12.4 POLICY RAPLICATIONS 366 12.4.1 POLICY RELATING TO POVERTY ERADICATION 367 12.4.2 POLICY RELATING TO THE DEVELOPMENT OF 369 RURAL INDUSTRIES 12.4.3 POLICY TOWARDS THE CREATION OF COMMERCLAL 370 AND INDUSTRIAL COMMUNITY AMONG BUMIPUTRA. 12.4.4 NATIONAL AGRICULTURAL POLICY (NAP) 371 12.4.5 POLICY TOWARDS BORROWING PRACTICES IN THE 372 FORMAL BANKING INSTITUTIONS 12.4.6 THE RED BOOK H (BUKU MERAH DUA) AND 373 REGIONAL DEVELOPMENT POLICY 12.4.7 HUMAN RESOURCESAND WOMEN IN DEVELOPMENT 375 12.5 RECOMMENDATIONS 376 12.5.1 FIRST GROUP OF RECOMMENDATIONS: 376 SUGGESTIONS f0R. THE IMPROVEMENT OF THE IMIAR PROGRAMME 12.5.2 SECOND GROUP OF RECOMMENDATIONS: 381 SUGGESTIONSFOR TBE OVERALL IMPROVEMENT OF TliE GOVERNMENTS POVERTY ALLEVIATION EFFORTS 12.5.2.1 INSTITUTIONAL, AGRARIAN AND MARKETING 381 REFORMS: SOME CONSIDERATIONS 384 12.5.2.2 MACRO-POLICY SUPPORTS- SOME RELEVANT ASPECTS 12.5.2.3 OTBERRECOMAIENDATIONS 385 12.6 SCOPEOF FUTURE RESEARCH 385 12.7 CONCLUSIONS 387

Bibliography 394 Appendix 431

LIST OF TABLES

CIERPTER 1

Table1 Povertyalleviation model (based on the provisionof credit) 6 in the developingcountries.

CHAPTER 2

Table2: Explanationof rural poverty. 30 xiv

Table 3: Poverty situation in developingcountries, 1985. 35

Table 4: Sourcesof rural credit by mid- 1970s. 50

CIMPTER 3

Table 5: Surveyresults on the impact of GrameenBank on incomes. 78

CEW?TER 4

Table 6: Poverty Line Income (PLI) in Malaysia, 1977 - 1990. 94

Table 7: Hard-core Poverty Line Income in Malaysia, 1987 - 1990 94

Table 8 MalaysianIntegrated Agricultural DevelopmentProgramme (IADP) : project completedand during implementation.

Table 9(a) 110 : PeninsularMalaysia : poverty by stratum - 1970 - 1990.

110 Table9(b) : PeninsularMalaysia: poverty by target group_ 1970 -1990.

III Table10 PeninsularMalaysia: incidence of povertyand number of poor householdsby ethnicgroups: 1970 - 1990.

TableII PeninsularMalaysia: incidence of povertyand number 112 of poor householdsby states: 1970- 1990.

Table12 PeninsularMalaysia: number of hard-corepoor, 113 1987and 1991: overalland by states.

Table13 PeninsularMalaysia: distribution of householdincome: 115 1970-1990.

Table14 PeninsularMalaysia: average households income by stratum 116 andethnic groups: 1970- 1990(M$/per month).

CHAPTER 5

Table15 Estimatednumber of the very poor householdsby states, 134 1987and 1989.

Table16 Comparisonof consolidatedcumulative statements 139 (3 1st December1989 -31 st December1993) : basedon all of Ikhtiaes34 branches(M$).

Table 17 Estimatednumber of the very poor householdsaccording to 142 district in stateswhich have Ikhtiar branchesin operation (June1992). xv

Table 18 : Achievementsand targeted cost of the Ikhtiar Programme. 149

CHAPTER 6

Table 19 Sampledistribution of Ikhtiar members- original and observed 179 samples.

Table 20 Sampledistribution of the control group - original and 179 observedsamples.

Table 21 Sampledistribution of Ikhtiar members: first-time and 180 second-timeborrowers - original and observedsamples.

Table22 Total numberof respondentinterviewed, the Ikhtiar members 181 andcontrol group - originaland observed samples. CHAPTER 7

Table 23 : Landusepattern in the District of Baling : 1987/88.203

Table 24 : Population in the District of Baling: 1970 - 1991.205

Table 25 : Population in the District of Baling, by ethnic group : 1970 -1988.206

Table 26 : Educational Servicesin Baling (1989). 209

Table 27 : Comparisonof consolidatedcumulative statements: the 214 overall progressin the state of Kedah (by November 1993).

Table 28 Type of activities financedby Ikhtiar loans in the District of 215 Baling I basedon the total borrowers of 1215 (by April 1993).

CHAPYER 8

Table29 Age structure: Ikhtiar membersand the controlgroup female 222 members(wives/women headed households).

Table30 : Age structure:husbands of the Ikhtiar groupand control group. 222

Table31 : Educationbackground of the sampleHouseholds : Ikhtiar 223 membersand control group female members (wives/women headedhouseholds).

Table32 Educationbackground of the sampleof the males(husbands) 223 - the Ikhtiar groupand control Group Table33 Householdsize : the Ikhtiar groupand control group 225 "Before"and "After" situations. xvi

Table34 Employmentpattern: Ikhtiar membersand the control 228 group(wives/women-headed households), "Before" and "After" situations.

Table 35 Employmentpattern: husbandsof the Ikhtiar membere 229 group and control group : "Before" and "After" situations.

Table 36 : The breakdownof loan sizes:first and secondloans. 232

Table 37 Ufilization of Ikhtiar Loans by Types Activities : agricultural 233 versusnon-agricultural.

Table38 : Utilizationof Ikhtiar loans: by activitiesand cycle of loans. 234

Table 39 Own capital injected into Ikhtiar activities as supplementary 236 capital by Ikhtiar members.

CHAPTER 9

Table 40 Paired sampleswest of the "After" situation householdmonthly 247 income and householdmonthly income for the "Before" situation: the programmeparticipants.

Table41 Pairedsamples West of the "After" situationhousehold monthly 247 incomeand household monthly income for the "Before"situation the controlgroup.

Table42 Independentsamples t-test of the householdmonthlY incomes 249 betweenthe programmeparticipants and control group : the "Before"situation.

Table43 : Independentsamples t-test of the householdmonthly incomes 249 betweenthe programmeparticipants and control group the "After" situation.

Table44 : Pairedsample t-test of the "After" situationhousehold monthly 251 incomeand adjusted household monthly income for the "Before"situation: the programmeparticipants.

Table45 Pairedsample West of the "After" situationhousehold monthly 251 incomeand adjusted household income for the "Before"situation: the controlgroup.

Table46 The perceptionsof the very poor householdson their "After" 252 situationliving conditions: the programmeparticipants and controlgroup. xvii

Table47 : Distributionof householdincome per month: "Before"and 254 "After" Situations,the programmeparticipants versus control group.

Table48 : Per capitahousehold income (per month)by group,the 256 programmeparticipants versus control group, "Before" and "After" situations.

Table 49(a) : Analyýisof variance(ANOVA) for the householdmonthly 259 incomesof the programmeparticipants - the "After" situation.

Table49(b) : Multiple comparisonsoutput for the householdmonthly 259 incomesbetween the programmeparticipants: the "After" situation.

Table 49(c) : Multiple comparisonsoutput for confidencelimits for differences 260 in the householdmonthly incomes: the "After" situation.

Table50 Independentsamples t-test of householdmonthly incomes 264 betweenthe first-timeborrowers (FIRST GROUP) and second-timeborrowers (SECOND GROUP): the "After" (1992)situation.

Table51 Independentsample t-test of householdmonthly incomes 264 betweenthe agriculturalactivity (TBIRD GROUP) andnon-agricultural activity (FOURTH GROUP): the "After" (1992)situation.

Table52 : Programmeparticipants above the nationalpoverty line 266 income: agriculturalversus non-agricultural activities.

Table53 : Incomeearned from Ikhtiar andNon-1khtiar sources (M$). 270

Table54 : Contributionof Ikhtiar-financedproject activities (from Ikhtiar 272 sources)towards the total householdincome by groups.

Table55 : Typesof activitieswith Ikhtiar loans: agriculturalversus 274 non-agriculturalactivities.

Table56 : Relationshipsbetween variables. 276

Table57 : Multiple regressionoutput for regressionusing several 277 independentvariables to predictdependent variable (Income).

Table58 : Pairedsamples West of total housingindex score : the 285 programmeparticipants, "Before" and "After" situations. xviii

Table 59 Paired sarnplest-test of total housingindex score : the 285 Control Group, "Before" and "After" situations.

Table 60(a) : Analysisof variance(ANOVA) for the housingindex 286 (total score)between the participantsand control group, the "Before" (1989) Situation (PART 1).

Table 60(b) : Analysisof variance(ANOVA) for the housingindex 286 (total score)between the participantsand control group, the "Before situation" (1989) (PART 2).

Table6l(a): Analysisof variance(ANOVA) for the housing index 287 differences(total score) : betweenthe participantsand control group, the "After" (1992) situations (PART 1).

Table6l(b): Analysis of variance(ANOVA) for the housingindex 287 differences(total score)between the participantsand control group, the "After" (1992) situation (PART 2)

Table62 Crudemeasure of housingindex (total score): between 289 the participantsand control group : "Before"and "After" situations.

Table63 Housingconditions based on 7 indicators: betweenthe 290 participantsand control group, "Before"and "After" situations.

Table 64 Possessionof householditems betweenthe participants 292 and control group, "Before" and "After" situations.

Table65 Monthly householdexpenditures between the participants 296 andcontrol group ("After" situation).

Table66 The overalltotal householdexpenditure (monthly) 297 betweenthe participantsand control group : independent samplesWest.

Table67 Savingsamong the respondents: participants versus the control 299 group, "Before"and "After" situations.

Table68 Averagemonthly savings : participantsand control group, 300 "Before"and "After" situations.

Table69 Typesof savingsamong the participantsand control group 301 the "After" situation.

Table70 Knowledgeabout the interestfree loans from the Bank 302 PertanianMalaysia (Agricultural Bank of Malaysia).

Table71 (a): Knowledge interest of the freeloans and history of applications. 303 xix

Table7l(b): Reasonfor not borrowingfrom the BankPertanian among 303 the participantsand control group.

Table 72 Applied for loansfrom other formal banking institutions, 304 participantsand control group.

Table 73 Borrowing from informal institutions by the respondents: 305 "Before" and "After* situations.

CHAPTER 10

Table74 Crudehousing index score of the Ikhtiar memberhouseholds 316 prior to joining the Ikhtiar Programme.

Table75 Memberhouseholde income per monthprior to joining 318 the Ikhtiar Programme.

Table 76 Member householdeper capita income per month prior to 318 joining the Ikhtiar Programme.

Table77 Land ownershipamong the memberhouseholds, "Before" and 319 "After" situations. 322 Table78 Crudehousing index score of the controlgroup for the "Before"and "After" situations. 322 Table79 Controlgroup household income per monthfor the "Before"and "After" situations. 323 Table80 Controlgroup per capitaincome per monthfor the "Before"and "After" situations. 323 Table81 Land ownershipmnong the controlgroup for the "Before"and "After" situations. 327 Table82 : Respondentsthat receivedgovernment assistance. 330 Table83 : Perceptionof Ikhtiar memberstowards the Ikhtiar Programme.

Table84 : Reasonsfor sayingIkhtiar Programmeis very good or good. 331

Table85 Perceptionof the memberstowards the Ikhtiaesconcepts 332 of group/centreunions, responsibility and supervision.

Table86 Perceptionof the memberstowards Ikhtiaes basic rules 334 on loanutilization.

Table87 Perception of the memberstowards the working relationships 335 betweenthe staff andparticipants. KKI

Table 88 : Perceptionof the sustainabilityof Ikhtiar Projects. 337

Table 89 : Main reasonfor leaving the Ikhtiar Organizationby the 339 ex- members.

CHAPTER12

Table 90 Suggestionsfor the improvementof the Ikhtiar Programme 377 by programmeparticipants.

LIST OF FIGURES

CHAPTER I

Figure I: The structure of the thesis. 21

CHAPTER 2

Figure 2: The poverty trap. 33

CHAPTER 4

Figure 3 Malaysia: Land DevelopmentStrategies. 100

Figure 4 RegionalDevelopment areas in PeninsularMalaysia, 1986.103

Figure 5 Essentialfacilities/services in the Geraktanicomplexes under 105 the Ministry of Agriculture, Malaysia.

106 Figure 6 PeninsularMalaysia : IntegratedAgricultural Development (LADP) schemes,1986.

CHAPTERS

Figure7: AmanahIkhtiar Malaysiaoperational areas in PeninsularMalaysia. 140

Figure8 Activitiesfinanced by Ikhtiar loans(by December1992), based 145 on all of the 34 Branches.

CHAPTER 7

Figure9: The II Districtsin the Stateof Kedah. 199

Figure 10 The 8 sub-districts(mukim) in the District of Baling. 200 Figure 11 TheDistrict : of Baling administrativestructure and officials. 201 2od

Figure 12 : The road networks in the District of Baling. 207

CEUPTER 9

Figure 13 Householdmonthly income of the programmeparticipants: 269 "Before" and "After" Situations.

LIST OF APPENDICES

Appendix 1: The Social DevelopmentProgramme: the SixteenDecisions 431 of the GrameenBank, Bangladesh.

Appendix 2: Beneficiariespledges. 432

Appendix 3: The 9 principles of the AmanahIkhtiar Rural Credit 433 Cum-PovertyFocussed Programme.

Appendix 4: The Ikhtiar membersSocial DevelopmentProgramme 434 (basedon 16 decisions), in PeninsularMalaysia.

Appendix 5: The samplingframes. 435

Appendix 6i : Questionnairefor the programmeparticipants. 438

Appendix 6b : Questionnairefor the control group. 451 461 Appendix 7: Activities at the weekly centre/groupmeeting in Baling - Plate A to D. 463 Appendix 8: Types of activities carried out without Ikhtiar Loans - Plate E to H.

Appendix 9: Housing Index. 465

469 Appendix 10 : Malay housesin the District of Baling : generalscenario - Plate J to Q.

Appendix 11 : Ikhtiaes loan applicationform. 473 xxii

ABBREVIATIONS

ASD AmanahSaham Burniputra (Bumiputra Unit Trust Scheme) ASN National Unit Trust Scheme BCIC! Bumiputra,Commercial and Industrial Community L7PI ConsumerPrice Index DARA PahangTenggara Development Authority GDP GrossDomestic Product GNP GrossNational Product L4,DP IntegratedArea DevelopmentProgramme IFAD InternationalFund for Agricultural Development 1FDA InternationalFoundation for DevelopmentAlternative IELO InternationalLabour Organization IMIP Industrial Master Plan INTAN Institute Tadbiran Awam Negara (National Institute of Public Administration Malaysia) JENGKA JengkaRegional Development Authority JKKK Village Developmentand Security Committee YCADA Kemubu Agricultural DevelopmentAuthority IKEDA Kedah RegionalDevelopment Authority Y,.EJORA TenggaraDevelopment Authority RESEDAR South KelantanDevelopment Authority KETENGAH TerengganuTengah Regional Development Authority MARA Majlis AmanahRakyat (Council of Trust for IndigenousPeople) NAP National Agricultural Policy NEP New Economic Policy NDP New DevelopmentPolicy OPPI First Outline PerspectivePlan OPP2 SecondOutline PerspectivePlan PNB PermodalanNasional Berhad (National Equity Corporation) RDA RegionalDevelopment Authority RISDA Rubber Industry SmallholdersDevelopment Authority SEDC StateEconomic DevelopmentCorporation SERU Socio-EconomicResearch Unit UNDP United Nation DevelopmentProgramme UNEP United Nations EnvironmentProgramme. UNRISD United Nations ResearchInstitute for Social Development UNCTAD United Nation Conferenceon Trade and Development UPP Unit Penyelarasandan Pelaksanaan(Implementation and CoordinationUnit) USAID United StatesAgency for International Development I

CHAPTER ONE : INTRODUCTION

1.1 INTRODUCTION

The purpose of this chapter is to provide the direction of the research.It begins by highlighting a problem that has arisen out of the conventionalrural developmentand poverty alleviation strategies in developing countries in general and Malaysia in particular, pursued in the post-war period. This will then be followed by highlighting the emergence of the alternative approach to rural development and poverty alleviation. This chapter also defines the objectives, scope, hypotheses and organizationof research.These will provide the overall framework of the research.

THE 1.2 THE CONTEXT OF THE RESEARCH - INTRODUCING PROBLEM

1.2.1 THE CONVENTIONAL APPROACH TO RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN DEVELOPING COUNTRIES

The issueof povertyhas long beena subjectof debateand interestamong planners, developing developmenteconomists, academics and policy-makers,not only in countriesbut alsoin developedcountries. The subjectof povertyis nothingreally new, but but what is new is that the poor in developingcountries not only remainwith us, their numbers have been increasingrapidly. The World Banles 1978 World DevelopmentReport estimated that in 1975,around 770 million peoplein developing countrieslived in poverty (for the definitionsof poverty and the extremepoor, see discussionin Chapter 2). The World Bat&s 1992 World DevelopmentReport reportedthat the numberof poor hadincreased from slightlymore than 1,051billion in 1985to 1,133in 1990.World EconomicSurvey's 1992 Report addedthat over 600 million arethe extremepoor. Thusit is evidentthat a significantportion of the world's populationstill lives in conditionsof abject deprivation,especially in developing countries. 2

independence Sincegaining after World War Two, almost every developingcountry irrespective of differences in political ideology or commitment to economic developmentplanning, has been aiming to achieveeconon-de growth, which as noted by Bhagwati(1985) is the necessarycondition for alleviatingpoverty. This is especially so in the rural areaswhere the majorityof the populationlives. As a result numerous measureshave been deployed to combatthis persistentproblem.

During the 1950sand 1960sdevelopment tended to be viewed in economicterms and was generally equated with economic growth and was measuredonly in terms of aggregateGNP (Aziz, 1978; Hollier, 1988; Astle, 1989; Hulme and Turner, 1990; Chakravathy,1990). The most popular thinking during those decadeswas don-dnated by Rostows doctrine of stagesof growth (Conyer and Hill, 1984;Larrain, 1989;Hunt, 1989). In the drive towards economic modernization, most developing countries considered industrialization as the main route to impressive economic growth (Melkotes, 1991) and pursued an import-substitution strategy to some degree.In the rural sector,the emphasishas been-on a programmewhich increasesfarm productivity Qha, 1987) and the centerpieceis the "Green Revolution", being the dominant rural it developmentmodel in the 1960s(Ruttan and Biswanger, 1978). All the above effort, is believed, will then 'trickle dowd to the poor (George, 1988), resulting in more equitabledistribution of incomes,and thus alleviating poverty.

The record of growth in developingcountries in the first two decadeswas quite 3.4 impressive,with annualgrowth rate acceleratingalmost 2 percentin 1950sto despite percent in the 1960s and early 1970s (Morawetz, 1977). However an impressiverecord of overallgrowth, severalmajor studies in the 1970sconcluded that the dominanttrend in the first two developmentdecades is for inequalityand poverty Ahluwalia, to increaseas growth occurs(Adelman and Morris, 1973;Chennery, 1974; 1974) [1].

Clearlythen the early developmentdecades have not managedto make significant This inroadsinto the alleviationof poverty (Mabogunje,1980; Islam, 1990). rather bleaksituation was summedup by Mahbubul Haq (1976:24) asfollows:

"In country after country, economic growth is being accompaniedby rising disparities,in personalas well as in regionalincomes. In countryafter country,the massesare complainingthat developmenthas not touched their ordinary lives. Very often, economicgrowth has meant very little socialjustice. It hasbeen accompanied by rising unemployment,worsening social servicesand increasing absoluteand relative poverty". 3

All the above served as a backgroundwhich led to the rethinking of the whole conceptionof developmentbeginning in the early 1970s.While it is true that economic growth is fundamentalto development,it is not enough on its own. Of equal importanceis the distribution of the benefitsof growth (Haque and Tusneem,1992). Thus developmentshould not only be viewed as the questionof 'economicgrowth', but to look into other indicatorsas well. This concernwas voiced by Dudley Seers, who noted that the real indicatorsof developmentwere decreasesin rates of poverty, incomeinequality and unemployment (Seers, 1969).

By the mid-I 970s,a new approachemerged which shiftedfrom a concernfor "growth" to "growth with equity". Thus, during this period, such terms as "redistributionwith growth" or "growth with justice" appeared(Haffner, 1987; Hettne, 1990; Dixon, 1991). The pervasivepoverty in rural areashas beena continuingconcern of national governmentsand developmentassistance agencies. This concerngave rise to two new programme approaches- integrated rural development (IRDP) and basic needs programme (Hayami and Ruttan, 1985). The "Int6grated Rural Development Programme"for examplebecame a very prominent poverty alleviation programme (Clement,1993) and also becamean increasinglyimportant focus of efforts of bilateral and multilateraldevelopment assistance programmes.

The World Bank, the singlelargest lending agencyin rural development,adopted this "new style" rural developmentproject based on a 'target group approach" (Brara, 1983;Donaldson, 1985). The elementof "basic needsapproach" was adoptedwith a focus on the provision of low-cost essential services integrated into this new programme(Abdullah, 1986). The IRDP is also referredto as the "Poverty Focussed Programme"(PFP).

However, within a few years after they were launched,allegations started pouring in that IRDP approachhad failed to reach the poor (Gibbons, 1988a).A study by the InternationalLabour Organization(ILO) in sevenAsian countries,found that in most regions, the rural income distribution had beenworsening (ILO, 1977). None of this had been the intention behind the rural developmentprogramme, but it had been the result achievedby sustaining,reinforcing and encouragingexisting social and political structuresthat exploited the poor (Holloway, 1989).

It has been argued that for many governmentalagencies in developing countries, Malaysia included, poverty alleviation is perceived merely as a by-product of development.it is supposedto happen (through the much publicized trickle-down effect) as resourcesare funneled through its delivery system (mainly through its 4

various agencies).For example, all farmers are supposedto benefit as rural credit, technology transfer, fertilizer schemesor rural development programmes are set in place(Morato, 1990).

Unfortunately, some of these programmesactually created greater disparities in rural incomes,not to mention greater impoverishmentfor some.This has been demonstrated in the above study by the ILO. Sham (1991) noted the failure of the poverty focussed programmefor the lack of an exclusivedelivery systemthat caters to the needsof the poor. Thus, as arguedby Getubig and Sham(1991: 16):

"The existing poverty programmessupported by the government's delivery system, while injecting large amounts of resources,have proved to be inadequate, inefficient in and many cases quite wasteful... many programmes have been characterized by the development of the bureaucracy rather than their clientele. Delivery systems have apparently benefited the deliverers instead of those who wer6 intended to receivethe deliveries".

1.2.2 THE EMERGENCE OF AN ALTERNATIVE APPROACH TO RURAL DEVELOPMENT AND POVERTY ALLEVIATION

Meanwhile against the backgroundof failure of the conventionaldevelopment strategiesin reachingthe poor rural households,the searchfor more meaningfuland viablealternatives in alleviatingrural povertyhas been begun by someconcerned social scientistsand academics,peoples' movements, religious movements and somenon- These governmentorganizations, especially in SouthAsia in the decadeof early 1970s. non-governmentsectors have devised alternative development strategies to supportthe largely hithertolargely neglected efforts and potentialof the poor to help themselves on self-helpbasis (Holloway, 1990).

There are some similarities in their approach (from whatever movementsor organizationsthey originated)where the primefocus is almostthe same(Alam, 1988). Their mainconcern is to combatthe causesof rural povertywith a speciallydesigned deliverysystem in organizingthe poor with strong emphasison the participationof programmebeneficiaries in ways which will build commitment,exploit community skills and experienceand encouragelocal definition (Haffner, 1987). Most of the programmesimplemented provided low income householdswith small loans for productiveactivities. Such a loan, it is arguedcan alleviatepoverty, develop the 5

productive capacitiesof the 'poor' without making them dependent on handouts or externalhelp and contribute to national economicgrowth (Hulme, 1990).

There are many examplesof models as shown in Table I that have emergedin the developing countries and all these programmes include a significant component of small-scalerevolving credit as a meansto help the poor to help themselvesand more importantly as a device to alleviate poverty. In addition, these programmesalso relate to community development and growth in the micro-sector (Remenyi, 1991). Out of so many examples,one that has been a model for rural development-oriented community development as ivell as poverty-focussedprogramme, is the Gralneen Bank (GB) of Bangladesh 121.

The GrameenBank is so successfulthat it has developedfrom the statusof non- governmental-organizationto that of uniquebank serving exclusively the landlesspoor (Hossain,1988; Clark, 1990;Remenyi, 1991) 131. GB is not merelyoperating a credit programme.Its ultimateaim is the alleviationof rural pov6rty,where credit is seenas a meansto an end of the developmentof rural poor. But what has actually "sparked off'the emergence the GB in Bangladesh? . of

The generalrural scenarioof Bangladeshshows that the poverty situationis very 46 serious and is highly correlatedwith the landless.It is estimatedthat around percentof the rural populationis landless(Hossain, 1986) 141.They do not live on is agriculturealone. So anyprogramme directed for the developmentof agriculture not necessarilydirected towards them.

Agriculturalcredit is for the clientshaving some land. Consideringthis "possessionof land" criteria, landlessand other poor rural householdsare kept outsidethe credit facilities.The requirementof collateralsecurity by commercialbanks has prevented themfrom obtainingformal sectorcredit. With only physicallabour as their economic base base,the rural poor, it is believedcan have a greattransformation in the economic if theyare supplied with somefinancial resources (Yunus, 1982).

Generallythe quickestroute to povertyalleviation would be throughland reforms,but this is not very promising(Haque and Tusneem, 1992). Past experiences have shown that the implementationof land reform (via redistributionof land) in manydeveloping countrieshas not beensuccessful, being a very sensitivepolitical issue(Islam and Lee, 1985;Hulme and Turner, 1990) 151.Thus it has been arguedthat it is possibleto introduce a programmeof providingcredit for the.poor, becausethis will not threaten the by their fear losing elite arousing of controlover land(Getubig and Sham,1991). 6

TableI: Poverty Alleviation Model (Based on the Provision of Credit) in the DevelopingCountries.

Name of the Organization Location

1. GrameenBank (GB). Bangladesh 2. BangladeshRural AdvancementCommittee (BRAC) Bangladesh 3. Caritasand the CreditUnion Leagueof Bangladesh(CULB) Bangladesh 4. SwanirvarCredit Programme (SCP). Bangladesh S. Cooperativefor AmericanRelief Everywhere (CARE) Bangladesh 6. ChristianCommission For Developmentin Bangladesh(CCDB) Bangladesh 7. SaveThe ChildrenFund. Bangladesh S. AmanahIkhtiar Malaysia(ARd) (Peninsular) Malaysia 9. ProjekUsahamaju (). Malaysia 10. MahaBhoga Marga (MBNI) Way of Prosperity(Bali) Indonesia 11. YayasanIndonesia Sejahtera (YSI). Indonesia 12. PhilippinesBusiness for SocialProgress (PBSP). Philippines 13. World Vision Sri Lanka(WVSL). Sri Lanka 14. SavecredScheme. SriLanka 15. JeevaSanwardhanaya Ayathanaya QSA). SriLanka 16. SmallFarmers! Development Project (SFDP). Nepal 17. ProductionCredit For RuralWomen (PCRW). Nepal 18. AccionCommutono Del Peru(ACP). Peru 19. El InstitutoDe DessaraloDe SectorInformal. Peru 20. MalawiMudzi Fund(MW). Malawi 21. KenyaRural Enterprise Project (KREP). Kenya 22. DarajaTrust CompanyLimited, Kenya. Kenya Kenya 23. NationalCouncil of Churchesof Kenya(NCCK) 24. VoluntaryOrganizations in CommunityEnterprise (VOICE) Zimbabwe 25. ZimbabweProject Trust (ZPT). Zimbabwe 26. ZimbabweWomen Bureau (ZWB). Zimbabwe 27. ZimbabweWomen Banking Project (ZWBP)- Zimbabwe 28. TheBridge Foundation, Bangalore. India 29. Divya ShantiTrust, Bangalore. India 30. Oxfam. India for Sources: Remenyi,1991, Where Credit is Due : Income-GeneratingProgramme the Poor in DevelopingCountries. Hulme, 1990, Credit For the Low Income Group: Some Lesson of Experience. Grameen.Dialogue, 1990. Banking with the Poor, 1992. 7

The abovesituation has spurred one man to comeup with a solution.In the wordsof Jazairyet al, (1992:206) "Whatstarted as an innovativelocal initiative,a smallbubble of hope, has thus grown to the -point where it has made an impact on poverty alleviationat the nationallevel" and eventually at internationallevel.

The GB beganinitially as an experimentin rural developmentunder the leadershipof a Professor of Economics at Chittagong University, Professor Muhammad Yunus. Through his initiatives, the Grameen(rural) Bank was launchedas an action-research project, mainly for the purposeof providing loans on reasonableterms and conditions to rural poor households,so that they could fmanceincome generating activities.

The GB has deviseda speciallydesigned delivery system [61 in mobilizingand the organizationof the poor households.The guidingprinciples of the GB havebeen to bringthe bankto the peoplein the villages,to replacecollateral by groupliability and to give borrowersa free handin the use of loansbased on their survivalskills and knowledge,though group supervisionis exercisedover processingand repayment of loans(IFAD, 1984;Egger, 1986; Ghai, 1989; Todaro, 1994).

PD The GB was very successfuland hasgrown from a micro-projectinto country's urth largest bank by providing poverty alleviation loans to a clientele conventionally GB regardedas 'unbankable'and such-experiences are rare (Hulme, 1991). The thus standsout as a unique financial institution not only in Bangladeshbut perhapsthe whole world (Siddiqui, 1984).

The impactof GB initiativeshas spread farther afield and has been seized upon as a but potentialmodel for transferand replication not only in developingcountries alsoin the developedworld (GrameenDialogue, 1990;Miltin and Satterthwaithe,1992; Gibbons,1990; Hulme, 1990; Ekin, 1992)[7].

it did Credithas thus become an attractiveweapon in dealingwith povertybecause not in involve any prior socio-politicalitructural changeand is being pursued many developingcountries (Hulme and Turner, 1991).On this, Getubigand Sham(1991: 20) argued: 4

"increasingthe productive capacityof the poor through the acquisition of productive assetsvia credit has the advantageof being quick as well as efficient and avoids the kind of problem encounteredin assetredistribution via land reform". 8

Nowadays, credit has also been widely recognized as an entry point towards the poverty alleviation efforts (Remenyi, 1991). Improved accessto credit on a sustainable basisallows the poor to utilize existing productive opportunities (Haque and Tusneem, 1992) and with appropriatecredit institutions and credit policies one can lead a society towards a desired shape.Credit creates entitlement to resourcesand the more credit one can receivethe more resourceshe can command(Kasim, 1992).

1.2.3 THE PROBLEM IN MALAYStA

How did the Amanah Ikhtiar Malaysia, the new poverty alleviation strategy come about? Malaysia is not Bangladesh,and in general rural poverty here is not as severe or widespreadas in that unfortunate country. The per capita GNP of Bangladeshin 1985 and 1988 stood at US$150 and US$179 respectively (World Development Report, 1987; The Economist, 1990). Unlike Bangladesh,Malaysia is not really a desperatelypoor country. According to the World Bank, it is a middle income developing country. Some writers have even labelled Malaysia as a "Newly Industrialized Country". It is also a resource-rich country, being the world's leading producer of rubber, palm oil and tin and possessesadequate reserves of oil and gas. In 1983, the per capita GNP stood at around US$2000 (Mehmet, 1988). it went up to US$2045 in 1988), US$2298 in 1990, US$2444 in 1991 and US$3033 in 1992 (The Economist, 1990;Malaysian Econon-fic Report, 1993).

In the early 1970s,the Malaysia!s governmentintroduced the New EconomicPolicy (NEP) -a 20 year programme(until 1990) which gave specialemphasis to the eradicationof povertyand restructuring of society.During this periodthe government did spentabout M$32.9 billion on infrastructuredevelopment and on direct economic suchas agriculturalinputs, credit and alsoon improvingsocial services in rural areas, especiallyeducation and health services (SERU, 1991;Banking With The Poor, 1992).

Not withstandingthe aboveefforts the incidenceof rural poverty declinefrom 58.7 percentin 1970to 22.4 percent in 1987and further declinedto 19.3percent in 1990. Neverthelessrural povertystill remainsa problem(Gibbons, 1986; Mustapha, 1988a; Siwar and Mustapha,1989; Yahya, 1991; Kasim, 1991; Siwar, 1992; Ministry of Agriculture, 1992; Barret, 1993), especiallythe "hard-core" poverty group of smallholdersand peasant farmers (Kasim, 1991b; Siwar, 1992;Ministry of Agriculture, 1992).Based on the HouseholdIncome Survey (HIS) throughoutMalaysia in 1987,it found was that from 649,000households that receivedincome below the povertyline (M$350in 1987), 173,471 a total of households(26.7 percent)received only half of 9

(M$350 in 1987), a total of 173,471 households(26.7 percent) received only half of the PLI and were classifiedas the "hard-core" poverty group or "poorest of the poor" (Hassan, 1991). It was estimatedthat more than 90 percent of the "poorest of the poor" are to be found in the rural areas(NADA KPIM, 1992). As noted by Mustapha (1988a: 69) "the incidenceof poverty was observedto have remained at a level high enoughto causea seriousconcern".

It is quite obviousthat there havebeen some shortcomings in the governmentsrural developmentprogrammes for the pasttwo decades[8]. For manygovernment agencies in PeninsularMalaysia, poverty alleviation has generally been regarded as a normalby- product of rural developmentprogrammes. As resourcesare funneledthrough the deliverysystem, it is supposedto reachpoor, through the much publicized"trickle down theory".However as noted by Ali and Shari (1991) and Siwar (1991a, 1992) that the "trickle down" mechanismhas not beenvery effective.On this the Ministry of Agniculture(1992: 18) argued:

"The trickle-down effect approachemployed in the developmentprogrammes did not deliverthe backwash developmentbenefits the as was of ...to rural sector desired".

It has been argued that in the Malaysiancontext, programmeslike the "Green Revolution"and the "IRDP" alsobrought about adverse socioeconomic effects, where disproportionatedevelopment benefits continued to be gainedby the largelandowners 1973; ratherthan by the smallproducers, tenant farmers and landless peasants (Bhafl, Lai, 1977;Shari and Mat Zain, 1990;Salleh, 1992) and incomedistribution seems to be worsened(The World Bank, 1975b).On this Jomoand Shari(1986, cited in Siwar, income 1989: 46) argued "rural developmentprogrammes have exacerbatedrural inequality,with rural landedinterests and agrarian capitalists siphoning off most of the benefitsof suchprogrammes". Siwar and Mustaphaalso noted that (1989: 152) the Shari IRDP "hadlimited impact on povertyreduction and restructuring of society"and inequality and Mat Zain added(1990: 115)- "their effectivenessin reducingincome couldbe expectedto be ratherdiluted, or evento worsenthe situation".

Shilarly the governmentowned Bank PertanianMalaysia (Agricultural Bank of Malaysiaor BPM) was establishedto servethe rural areaswith the agriculturalrelated credit schemes.In reality as arguedby Baharudin(1979) and Ali (1983), the credit facilitieshad actuallyexcluded the majorityof the landlesstenants, very smallfarmers from lower or those the strata amongthe poor from accessbecause of collateral [9]. Furthermore, is requirement there no other governmentprogramme for supplying 10

credit on reasonableterms to the poor rural householdsfor investmentin income- generatingactivities (Gibbons, 1986).

The examplesabove clearly show that the government'srural developmentprogramme did not adequatelyor never really.reached the poor rural households.On this Siwar and Mustapha (1989: 148) "The the argued persistence of rural poverty reflects... inability of various rural developmentprogrammes to effectively deliver the benefitsof developmentto the rural poor".

Despite a huge allocationtowards the rural developmentprogrammes and poverty alleviationefforts, there are still somemajor weaknessesand unresolved issues in the government'smachinery, which amongothers include (Mustapha, 1981; UPP, 1988a; INTAN, 1991;Ministry of Rural Development,1991; Ministry of Agriculture,1991a, 1991b; SERU, 1991):

"Possessionof land" criteria in giving aid and subsidyby governmentagencies suchas FELCRA, RISDA, FarmerOrganization Authority andDepartment of a Agriculturewhich has excluded the landlessand other poorest of the rural poor.

2. Effective expendituredirectly to poverty eradication programmesis small comparedto overalltotal expenditure.

3. Most programmesare "povertyrelated"' and not $#povertytargeted" or "poverty focussed",with emphasison generalagricultural development without focussing specificaUyon thepoor.

4. The targetgroup is not clearlyidentified.

5. There are too many agencieswith overlappingfunctions and the executionof policy is not effectivelycarried out. This is the "over government"syndrome. This canadversely affect the deliveryof inputsand servicesto the farmingpopulation.

6. The povertyprogramme is "evolutionary"in natureand focuseson sectors.This tendsto affect the poor and non-pooralike (like the farmer in the rice sector). Becauseof their broadand blanket approach and effects, poverty problems cannot generallybe solved. 11

implementation. 7. Planningand of policy, strategy and programmeon poverty eradicationare mostly"top-down". The targetgroup is not affectedand therefore doesnot providefall support [10].

In view of the problemsdescribed above, the AmanahIkhtiar Malaysia(the Ikhtiar Trust of Malaysia)or ADJ, a non-governmentalorganization, modelled along the GrameenBank approachtowards poverty alleviation,stepped in and offereda viable alternativewhich couldcomplement the government'spoverty alleviation programmes.

1.2.4 A NEW APPROACH TOWARDS RURAL POVERTY LINVIATION - THE AMANAH IKHTLAR RURAL CREDIT- CUM POVERTY FOCUSSEDPROGRAMME

The Ikhtiar Programme[11] is a-totally new conceptand innovativeapproach in eradicatingpoverty amongst the rural poor in PeninsularMalaysia. it is modelledafter the GrameenBank of Bangladeshand adjusted to suit the local context.After about2 1/2years of trying out the approachas a pilot projectknown asProje-kAhliar (Ikhtiar Project),in NorthwestSelangor starting in January1986, it was found to be suitable for implementationand expansionto other poor areasin PeninsularMalaysia. The Ikhtiar Programmewas establishedin September1987 to institutionalizeand expand initial districts the the pilot project - Projek Ikhtiar, to other poor throughout country.

Basicallythe Ikhtiar Programmeseeks to providesmall loans on reasonableterms to the very poor rural householdsto financeincome generating activities. It is a targeted specializeddelivery system focussed exclusively on the poor [12], taking creditto their homes and villages through an approachbased on self-realizationand collective responsibilityamong the borrowers.

is After only 3 yearsof Ikhtiaes operation,many signsindicate that the programme achievingits objectiveof helping'the poor in increasingtheir incomes.The social- thinkers, coupled with plannersand policy makers,are beginningto realize the potentialrole of the Ikhtiar Programme.From a very modestbeginning of only I branchin 1986,it beganto expandvery rapidly.By December1992, there were 34 AIM branchesin moststates in the country. 12

The Ikhtiar Programmeappears to have made headwayin this country. AIM's internal 1131have impact evaluationstudies shown that the poor have experiencedan increase in their incomes after the utilization of Ikhtiar loans and are benefitting substantially from 1khtiarloans.

Governmentpublications and official documents,such as the Nfid-Term Review of the Fifth Malaysia Plan (1986-1990), The Sixth Malaysia Plan (1991- 1995), Outline PerspectivePlan 2 (OPP2 - 1991-2000),The Mid-Term. Review of the Sixth Malaysia Plan and SERU's (SocioeconomicResearch Unit - in the Malaysian Prime Minister's department)report (1991), have acknowledgedAIM as a force to be reckoned with [141.

The Ikhtiar Programme has caught the attention of the government and in the publicationof the GovernmentsSixth Malaysia Plan, covering the period of 1991 - 95, an allocation of M$20 million was made availableto AIM in pursuing its programme (Malaysia, 1991). At the same time, local newspapers'(New Straits Times, Berita Harian and Utusan Malaysia) give very wide coverage to Ikhtiar's successstories. Below is one of the many examplesof the newspaperreports:

BERITA HARUN (the daily Malay National Newspaper),12th March 1991, reportedthe caseof Mrs. Kasmah(aged 24), who was successfulin carrying out income-generatingactivities with the M$500 loan. Shesells biscuits in the local market and managedto earn about M$7.00 a day. The remainingloan was usedto buy 94 chickens,from which moremoney will comeby sellingthe eggs.

The above exampledemonstrated how the Ikhtiar Programmecan and is giving loans to those who, despite their survival skills had never had accessto credit from other Ikhtiar sources to develop their skills for income-generation. The birth of the Programmewith its innovative rural credit cum-poverty alleviation programme as a in new conceptin Malaysia, offers a ray of hope for the poorest of the poor households rural areas.

Thus the above development,that is the emergenceof the Ikhtiar Programmeas new concept towards poverty alleviation, has provided an exciting avenue for the examinationof a new approachand also an alternative strategyupon which the search for a meansof alleviatingrural poverty in PeninsularMalaysia might be based. 13

1.3 OBJECTIVES OF THE STUDY

The Ikhtiar Programmeappears to have made headway in this country and it will be interestingto explore this new phenomenon.As a result this study seeksto explore the intricacies of the operations of the Amanah Ikhtiar Malaysia!s "much acclaimed" programme. In relation to that, the main purpose of this study is also to examine, namely to explore to what extent the Ikhtiar rural credit-cum poverty alleviation programme has been effective in raising the incomes and reducing the incidence of poverty among its beneficiaries,based on a case study in the district of Baling, in the state of Kedah 1151.

The objectivesof this studyare:

The Amanahlkhtiar rural credit-cum poverty focussedprogramme is a totally new concept in PeninsularMalaysia modelled afler the GrameenBank of Bangladesh. The central focus of this programmeis the provision of credit to very poor rural household for financing income generating activities, through its targeted "specially designeddelivery system". In relation to this, it is the intention of this study to explore the working mechanismof the AmanahIkhtiar delivery system.

2. The Amanah Ikhtiar rural credit-cum poverty focussed programme was lift establishedwith the sole purposeof assistingthe very poor rural householdsto themselvesout of poverty, primarily by meansof its benevolentloans to be used for financing income-generating activities. Therefore it is the intention of this in study to examine, to what extent the Ikhtiar Programme has been effective increasing the incomes and reducing the incidence of poverty among the participantsafler the utilization of loans in the study area.

3. Generally,the immediatebenefit that arisesout of an economicintervention is an increasein incomesand is thereforean indicationof an improvedeconomic status. However,an improvementin the qualityof life alsoprovides a good indicationof the benefitsthat stemfrom an economicintervention (Robinson, 1992). Therefore in relationto the secondobjective, it is equallyimportant to explorethe qualityof life amongthe participantsas a resultof their creditutilization in the studyarea. 14

4. As stated in the second objective above, the sole purpose of the Ikhtiar Programme is the provision of credit to the very poor. Thus the Ikhtiar Programmeis a programme targeted to the very poor rural householdsfor the improvement of their economic conditions. It is a general assumptionbased on experiencesin developing countries, Malaysia included that under the existing socio-economicconditions, it is very difficult to reach the poor with resourcesfor development.In relation to this, it is equally important to examine,whether and to what extent the Ikhtiar Programmehas been effective in reachingthe target group in the study area.

5. To explorethe perceptionsand attitudesof the programmeparticipants towards the Ikhtiar Programme.

6. To explore the lessonsthat can be learned from the experienceof the lkhtiar Programmefor the planning and the implementationof broad-basedand poverty focussedrural developmenteffort.

This study has pioneeringand exploratory qualities. It is hoped that this study, among the pioneers will be able to shed some light on AIM's new approach towards fresh combatingpoverty. It is also the belief that this experiencewill yield some and exciting perspectiveson dealingwith poverty, especiallythrough the emergingroles of credit This experiencemay therefore offer a rich field from which to draw lessonswith a view of strengtheningthe quality of rural developmentefforts in Malaysia.

Lastly,the findingsof this study,it is hoped,will be usefulnot only to policy-makers but also to those involved in the rural developmentin Malaysia.This is especially 1991 importantin the light of the New DevelopmentPlan (NDP) (coveringthe period -2000),replacing the NEP, but still putting heavyemphasized on poverty,especially hard-corepoverty.

1.4 SCOPE OF THE STUDY

The ConventionalApproach: In orderto achievethe purposeof this study,the scope thereforecovers mainly the examinationand review of approaches,theories and conceptsrelating to the rural developmentand poverty alleviation strategiesin 15

developingcountries as well as in the Malaysiancontext pursuedby the state or federal govermnentsunder the conventionalapproach.

The Alternative Approach: In relation to the above, the emerging roles of the non- governmentalsectors in putting forward the concept of "Another Development" i. e. the alternativeapproach to rural developmentand poverty alleviation strategy, are also examinedand reviewed. This alternative approachhas witnessedthe emerging role of credit as a new weapon towards the alleviation of poverty in many developing countries.

Main Focus: Within the context of the alternative approach,the main focusesof this study are on:

The Grameen Bank of Bangladesh with its credit based poverty alleviation programme,that has beenwidely replicatedthroughout the developingcountries.

2. The Malaysian'sversion of GB, i. e. the Ikhtiar Programme at the macro level (nation wide) and its overall operationalframework.

3. At the micro level,i. e. BALING, the casestudy area, the mainfocus is specifically on the Ikhtiar Programme!s economic effects on the programmeparticipants. No attempthas been made to investigatethe socialeffects.

4. Lastly, this study will also analyzethe implicationsof the findings on the in alleviationof rural poverty through the Ikhtiar Programme'snew concept for Baling and make recommendationsto improve the existing situation an improvedfuture in connectionwith AIM's new concept.

1.5 RESEARCH HYPOTHESES

1.5.1 HYPOTHESES TO BE TESTED

Thereare 3 mainhypotheses that will be testedin this study.

HYPOTHESIS ONE 16

It is hypothesizedthat:

Credit to the poor rural householdscan be effective in increasing incomesas well as reducingthe incidenceof poverty. From this, a hypothesis related to this study can be generatedas follows:

a) Credit granted to the Ikhtiar Programmeparticipants in the study area has been effective in increasingparticipants' incomes as well as reducing the incidence of poverty among them. The programme participants are generally better off than they were before and comparedwith the control group, they are also generally better off. However, by comparing between the programme participants themselves,there is a significant differencein the level of householdincome based on (t) cyclesof Ikhtiar loans and fli) types of activities they pursuedwith Ikhtiar loans.

The above hypothesis, which consists of six sub-hyp6theses (as listed in i to A below), will be tested in two stages:

StageI includesthe testingof four sub-hypotheses,i.e. sub-hypotheses(i), (ii)ý (iii) and (iv) which compareschanges in the householdincomes and the incidence of poverty betweenthe programmeparticipants and the controlgroup.

Stage2 includesthe testingof two furthersub-hypotheses, i. e. sub-hypotheses(v) and (A), which is solely betweenthe programmeparticipants themselves based on the cyclesof loans andtypes of activitiespursued with Ikhtiar loans.

The six sub-hypothesesto be testedare as follows:

The householdincome of the programmeparticipants has increased as a result of utilizationof credit(loans).

The householdincome of the programmeparticipants is relativelyhigher than that of the local population(control group) who hasnot participated.

The incidence of poverty of the programmeparticipants has also been substantiallyreduced (as a resultof the increasein the householdincome).

(iv) The in reduction the incidenceof poverty amongthe non-participants(control group),on the otherhand, has only beenmarginal. 17

(V) There are sioficant differencesin the household incomes between the programmeparticipants themselves whereby:

fa'ý level income is higher in kaj the of among the participants the second cycle of loansthan those in the first cycle of loans.

(b) the level of income is higher among the participants who have utilized loans in non-agriculturalactivities than in agricultural activities.

(yi) The contribution of income from Ikhtiar-financedproject activity (WItiar sources)towards the participants!total householdincome (i. e. earningsfrom Ikhtiar andnon-lkhtiar sourdes) is significant.

HYPOTHESIS TWO

HypothesisTwo is directly related to HypothesisOne. It hasbeen argued that the increases immediatebenefits arising out of economicintervention are not restrictedto in incomes,even though these are centralto improvedstatus. Other indicators that can interventions providea good indicationof rangeof benefitsthat stemfrom economic includeincreases in expenditureon education,health and non-food items, housing and household amenities(sanitation, lighting, etc) and savings(Robinson, 1992) and also (KEDA, itemssuch as beds and other material possessions such as radios, bicycles, etc 1985;Bhatt, 1991). Formally,it canbe hypothesizedthat:

likely bring 2. An increasein incomeamong the poor rural householdsis also to From aboutpositive impacts on their quality of life and also their saving. this, a hypothesisrelated to this studycan be generatedas follows:

(through the b) An increasein income resulting from the economicventures in utilization of Ikhtiar loans) undertakenby the programmeparticipants the studyarea has had a positiveimpact on their qualityof fife andalso their savings. They are thereforebetter off than the control group (non-participants).This hypothesiswill be testedby the following four sub-hypotheses. 18

(i) The qualityof life amongthe programmeparticipants has improved and this canbe seenin their:

kajf-*% housing conditions; (b) householditems; and (c) householdexpenditures.

The changesin the quality of life amongthe control group, on the other hand, has beenmarginal with respectto their:

(a) housingconditions; (b) householditems; and (c) householdexpenditures.

(iii) A higher level of savingshas also been encouragedamong the programme participants.

(iv) The level of savingsamong the control group,on the otherhand, has undergone only marginalchange.

HYPOTIIESIS THREE

It is hypothesizedthat:

3. The poor are effectivelyreached if the programmefor the alleviationof poverty is designedexclusively for them and implementedthrough a speciallydesigned deliverysystem. From this, a hypothesisrelated to this studycan be generatedas fonows:

C) The 1khtiar Programme,or the Amanah Ikhtiar rural credit-cum poverty alleviationprogramme, has been effective in reachingvery poor rural households (its target group) becausethe programmeis designedexclusively for the very poor and implementedthrough a specially designeddelivery system.This hypothesiswill be testedby the folloVmg two sub-hypotheses.

The Ikhtiar Programmehas reached its targetgroup, consisting of the eligiblepoor rural householdsin the studyarea. 19

The non-eligiblerural householdshave been effectively excluded from the 1khtiar Programmein the studyarea.

1.5.2 THE RELATIONSHIPS BETWEEN THE OBJECTIVES AND HY]POTHESES OF THE STUDY

This study consistsof 6 main objectivesrelated to the effectivenessof the Ikhtiar Programme!s new approachin increasingthe incomeand the reductionof rural poverty in the casestudy area of BALING. In the processof justifying theseobjectives, three mainhypotheses with twelve sub-hypotheseshave been constructed. It is necessaryto mentionhere that:

I. HYPOTHESIS I is related to OBJECTIVE 2. 2 HYPOTHESýS 2 is related to OBJECTIVE 3. 3. HYPOTHESIS 3 is related to OBJECTIVE 4.

The rest of the researchobjectives are related indirectly to all the mentioned hypotheses.It needsto be stressedhere that, as mentioned,it is in the spirit of discoveringthe Ikhtiar Programme,new approachtowards the alleviationof rural povertythat has emergedin Malaysia,that this study is beingundertaken. However sincethe Ikhtiar Programmeis relativelynew, an explorationof the overalloperational frameworkof the 1khtiarProgramme is thereforeneeded to put the Ikhtiar Programme into perspective.This is the purposeof OBJECTIVE 1. i.e. to examineand explore for the 1khtiarProgramme at macro level, which is to serveas the background the Baling, 7 11 analysisof the micro levelcase study from chapters to -

Thus OBJECIM 1 is therefore indirectly related to all the other hypotheses Ikhtiar mentionedabove and will form the backboneof the whole analysisof the Programmeboth at the macrolevel in generaland micro level in particular.In relation to the abovementioned objectives and hypotheses,it is also necessaryto mention herethat:

1. OBJECTIVE I is discussedin ChapterS. 2. OBJECTIVE 2 and.HYPOTHESIS I are discussedin Chapter9. 3. OBJECTIVE 3 andHYPOTHESIS 2 are discussedin Chapter9. 4. OBJECTIVE 4 andHYPOTHESIS 3 are discussedin Chapter10. S. OBJECTIVE 5 is discussedin Chapter10. 6. OBJECTIVE 6 is discussedin Chapter11. 20

1.6 THE STRUCTURE OF THE THESIS

The work is organizedin a further twelve chapters (see figure 1). Chapter I outlines the backgroundinformation pertaining to the overall study, namely,the introduction of the problem, objectives,scope, hypotheses and structure of the thesis.

Chapter 2 reviews the rural development and poverty alleviation strategies in developing countries, pursued under the conventional approach, initiated by the government since the post-war period. It also points to the inadequaciesof the conventionaldevelopment approach in making significant inroads into the alleviation of rural poverty.

Chapter3 attemptsan overview of the alternative developmentparadigm, which unlike the conventional approach, is actively promoted 'by the Non-Government Organizations (NGOs). They are instrumental in putting the concept of "Another Development" into practise. These NGOs are making headway in the alleviation of rural poverty through their credit-based programmes.The main model of this new initiative is the GrameenBank of Bangladesh,a subject of Chapter 3, that has been widely replicatedin many countries,including Malaysia.

Chapter 4, which is very much in line with chapter 2, attempts an overview of Malaysian version of the conventional development approach pursued by the government before and during the New Economic Policy. It also points to the inadequaciesand unresolvedissues in connectionwith the government'smachinery to effectively addressthe problem of rural poverty.

Similarly chapter5, is also very much in line with chapter 3 in exploring the awakening waves of "Another Development" models which are making the development scene throughout the developingcountries. This chapter thus exploresthe Malaysianversion of the GrameenBank model, i. e. the AmanahIkhtiar Malaysia rural credit-cum poverty alleviationprogramme.

Chapter6 to II form the mainbody of the empiricalresearch. Chapter 6 describesthe selectionof the surveyarea and the surveymethod. Chapter 7 describesthe physical, demographicand the socio-economicbackground of the studyarea of BALING. 21

Figure I: The Structure of the Thesis

I CH.kPTER I CHAPTER 6 Introduction Research Methodology

CHAPTER 2 CHAPTER 7 Rural Development and Background of Poverty Alleviation the Study Strategy in the Area - BALING Developing Countries The Conventional Approach THE I CHAPTER8 CONVENTIONAL Socio-Economic APPROACH Characteristics of the Sample CHAPTER3 Households in The Emergence of an the Study Area - Alternative Approach BALING Towards the Rural Development and Poverty Alleviation in the Developing Countries - CHAPTER9 The Another Development The Economic Effects of the Ikhtiar Programme

CHAPTER4 Rural Development and Poverty Alleviation CHAPTER10 Strategy in Peninsular on Reaching the Malaysia - The Poor Households Conventional Approach in BALING I THE ALTERNATIVE APPROACH

CHAPTER5 CHAPTER11 The Emergence of an Lessons to be Alternative Approach Learned From the Towards the Rural Experience of the Development and lkhtiar Programme Poverty Alleviation - The Ikhtiar Prograrmie

CHAPTER12 Summary and Conclusions 22

Chapter 8 describesthe main features of the socio-economic characteristicsof the householdsin BALING. Chapters9 and 10 form the main thrust of the analysiswhere the individual hypothesesare tested. Chapter 11 highlights the achievementsand limitations of the Ikhtiar Programme.This chapter also discussthe lessonsthat can be learned from the experience of the Ikhtiar Programme for the planning and implementationof broad-basedpoverty focussedrural developmentefforts.

Chapter 12 highlights the important findings of the study, considers some policy implications of the Ikhtiar Programme towards the national development policy, recommendsproposals for the overall improvement of the Ikhtiar Programme in dealing with rural poverty in PeninsularMalaysia, suggestsareas for future research, and provides concludingremarks.

1.7 CONCLUSIONS

In this chapter,a researchproblem has been introduced by first discussingthe problem of rural poverty.in relationto this the focuseswere on the approaches,theories and conceptsrelating to rural developmentand poverty alleviation strategies in developing countriesas well as in the Malaysiancontext pursued by the state or federal goverment underthe conventionalapproach.

Thenthe emergingroles of the non-governmentalsectors that havebeen making waves in puttingforward the conceptof "AnotherDevelopment", i.e. the alternativeapproach to rural developmentand poverty alleviation strategy has been examined and reviewed. This alternativeapproach has witnessed the emergingrole of credit as a new weapon towardsthe alleviationof povertyin manydeveloping countries.

The most notablemodel has beenthe GrameenBank of Bangladesh,with its credit basedpoverty alleviationprogramme, which has beenwidely replicatedthroughout many developingcountries. The Malaysianversion of GB, through the Ikhtiar Programme,is the focus of this study, attemptingan alternativeapproach towards addressingthe problemof rural poverty.The mainpurpose of this studyis to examine andto exploreto what extentthe Ikhtiar Programmehas been effective in increasing the incomeof the programmeparticipants through a case study of the District of BALING, in the stateKedah. 23

Finally, the chapteroutlines the organisationof the study in order to show the relationshipbetween chapters and assistthe readerto follow the argumentsin the study systematically. 24

FOOTNOTES

The conclusionsof the three major studiesare as follows: (1) Adelman and Morris work in 1971 which uses data from 74 developing countries during the period 1957 to 1962, came to the conclusion that economic growth was not only associatedwith increasing inequality but with a worsening of absolute poverty (Adelman and Morris, 1973). (2) Hollis Chenery in the Institute of Development Studiesand World Bank sponsoredstudy "Redistribution with Growth" argued that after more than a decadeof rapid growth in developing countries, there has beenlittle or no benefit to perhapsa third of their population (Cheneryet al, 1974) and (3) Ahluwalia, using 1969 data, estimatedthe incidenceof poverty at the end of the first two 'developmentdecades'. His study has shown that 48 percent of the 578 million total population, fell below an arbitrary line of US$75 annual per capita income (Ahluwalia, 1974).

2. GB is the main focus of this study,to be discussedin chapter3, as this is the modelwhich hasbeen replicated in Malaysiasince 1986, known as the IKHTIAR PROGRAMME(see also footnote II below).Malaysia is alsothe first countryin the world to replicatethe GB modeland it representsthe very first seriousattempt outsideBangladesh.

3. Although in a strict sense,Grammen Bank can no longer be consideredas an NGO, the lessonsit puts forward will continue to inspire non-governmental sectorsor private initiativesin the reductionof poverty.Furthermore it still has the NGO style of organization with clientsformed into small groupsand with strongemphasis on socialaspects in additionto its bankingactivities.

4. Availableevidence suggests that the poverty situation in Bangladesh is very serious.In 1973/74there were 42.6 million poor (44 percentof rural population). In 1988/89as much as 51.3 percentof the population(rural 40.5 percentand urban10.8 percent) were below the povertyline. Povertyis alsohighly correlated with the landlessness.In 1983/84period 46 percentof all rural householdshad land of less than 0.5 acres and are classifiedas near-landlessor functionally In landless,since the amountthey own cannotbe a significant sourceof income. the sameperiod 27 percentwas totally landless.The BangladeshInstitute of DevelopmentStudies (BIDS) survey(for 1989/90period) also sustainedthese trendswhere 28 percentwere landlessand 52 percentwere near-landless.The abovestatistics actually portray, that the problemof poverty and unemployment are very seriousamong the landlessand near-landless(Rahman, 1986; Banking With the Poor, 1992).

5. The successstories of land reform are found in Japan,Republic of Korea,China andTaiwan. These examples have not beenreplicated successfully elsewhere. As examples,evidence from the experiencesof India, Bangladesh,Nepal, Pakistan, Indonesia,Sri Lankaand The Philippineshave led to very little redistribution of land amongthe landlessand the poor (Islam and Lee, 1985). Land Reform 25

measureshave taken a numberof configurationsranging from +he seizureof estates,breaking them up for smallfarmers and the 'liquidation!of estateowners; to the settingof and ceilingson how much an individualmay hold; through the milder measuressuch as permittingexisting ownership patterns to continuebut introducingtenancy reforms that limit the rents,or shares,that landlordscan levy. Other measuresinclude the large resettlementschemes in an 'expanded!land "frontier", as in Malaysia,Indonesia and The Philippines.Detailed accountsof land reform in different countriescan be found in the specialistliterature (see Atkins, 1988,for a recentbibliography).

6. Detailed analysisof the GrameenBanles "specially designeddelivery system" is discussedin Chapter3.

7. Perhapsthe most dramaticof the GB initiativesis the role playedby Professor Yunusin establishingsmall-scale credit schemesfor the urbanpoor in Arkansasin the U. S.A. That the leader of a creditprogramme for the impoverishedmasses of one of the poorest countriesin the world shouldbe advisingon establishing similarprogramme in the metropolisof one of the richestin the world is indeeda paradoxof extraordinaryproportion (Ghai, 1989).The establishmentof the South ShoreBank of Chicagoin Arkansas,U. S.A. representsa conceptualbreakthrough in in its fight againstpoverty and being the first developmentvehicle ever created the country,which truly servesthe needsof the poor communities(Ekin, 1992).

A detaileddiscussion of the variouspoverty alleviationprogramme in Peninsular Malaysiais presentedin Chapter4. 4. The requirementof coUateralby the BankPertanian is takenup in Chapter in Chapter4, 10. A detaileddiscussion of all the issueshighlighted above is presented merelyin expandingthe pointshighlighted here.

11. AIM Organizationis know!' as the AMANAH WHTLAR MALAYSIA (UMTLAR TRUST OF MALAYSIA) or in short AIM. In relationto this, the AMANAH 11KHTLARMALAYSIA as an organization has launched a CUM- programmeknown as the AMANAH IIKHTIAR RURAL CREDff POVERTY FOCUSSED PROGRAMME or in short the IKHTIAR PROGRAMME.

12. The Ikhtiar Programme's"specially designed delivery system" tailored exclusively for the very poor is discussedin detailin Chapter5.

13. AIWs internalevaluation impact studies are highlighted further in Chapter5.

14. The statementsof acknowledg*mentby the governmenfsofficial documentsare highlightedin Chapter5.

15. Detailsof BALING asa studyarea and why it hasbeen chosen as a casestudy are givenin Chapters6 and7. 26

CHAPTER TWO : RURAL DEVELOPMENT AND POVERTY ALLEVIATION STRATEGY IN THE DEVELOPING COUNTRIES - THE CONVENTIONAL APPROACH

2.1 INTRODUCTION

This chapter examinesthe conventionalapproaches to rural developmentand poverty alleviation strategy pursued in the developing countries since world war II under the conventionalapproach, initiated by the government (or the state). It includes among others the Community DevelopmentProgramme, Green Revolution, Integrated Rural DevelopmentProgramme and Credit Programme. However, since the central issue of this study is the problem of poverty, therefore it is necessaryfirst to review briefly the following:

(i) Conceptand measurementof poverty.

Causesof poverty.

(iii) Poverty situationsin the developingcountries.

Thesewill serveas the backgroundfor the understandingof the poverty within the overalloperational framework of the variousrural developmentand poverty alleviation strategies,namely the Community DevelopmentProgramme, Green Revolution, IntegratedRural DevelopmentProgramme and the Rural Credit in the developing countries.

2.2 CONCEPT AND EXPLANATION OF POVERTY

Two issueswill be discussedbelow:

Conceptof poverty.

ii. Measurementof poverty. 27

2.2.1 CONCEPT OF POVERTY

A numberof different meaningshave been given to the term 'poverty' and there has been considerablecontroversy about which is the most acceptableway to define it. Townsend (1979: 3 1) for exampledefines poverty:

Individuals, families and groups in the population can be said to be in poverty when they lack the resourcesto obtain the types of diet, participate in the activities and have the living conditions and amenitieswhich are customary,or are at least widely encouragedor approved,in the societiesto which they belong. Their resourcesare so seriously below those command by the average individual or family that they are, in effect, excluded from ordinary living patterns,customs and activities'.

Other views on poverty (sometime overlapping) are briefly summarized as follows: Harrington (1962) defines poverty in terms of denial of some minimal level of health, housing, food and education. Sen (1981) sees poverty as the Niture to achieve certain minimum capabilities and suggests that poverty also relates to the question of entitlements.Rein (1974) associatespoverty with subsistence,inequality and externality, while Lafitte (1970) and Nordhaus and Samuelson(1992) define poverty as low level or inadequateincome. Thernstorm,(1968) sees the poor as those who occupy the lowest level of the social pyramid, while Griffin and Khan (1982) seepoverty as a product of the social system and suggeststhat it reflects differences in access of various groups to sourcesof economic power. It is thus clear that poverty is a very difficult concept to define. However there appearto be two essentiallyand widely used concepts of viewing poverty: the "absolute" and "relative" (Anand, 1983).

1. RelativePoverty: The notion of relativepoverty is basedon the ideathat tile measure of poverty,and consequentlythe numbersof peopledeemed to be living in poverty,can only be determinedin relationto the standardof living of all membersof any particular society(Alcock, 1989).The bestderinition of relativepoverty is summedup by Runcinlan who developsthe concept,relative deprivation, as follows:

"if A, who does not have somethingbut wants it, compares himself to B, who does have it, then A is 'relatively deprived' with referenceto B" (Runciman, 1966: 10).

2. Absolute Poverty: On the other handabsolute poverty, sometimescalled subsistence poverty,describes sufficient or minimallevels of satisfactionof a person's 28

biologicalneeds (like food, shelter,clothing, health and sanitation).Therefore persons who are found to be below those levels are considered'absolutel. V poor and those abovethem are definedas not poor (Drewnoski, 1977; Alcock, 1989; Oppenheim, 1990).

2.2.2 MEASUREMENT OF POVERTY: THE POVERTY LINE

The most common and most widely used poverty measurementis to establish a poverty line, which would serve as a boundary betweenthat which is poverty and that which is not (Sen, 1981; World DevelopmentReport, 1990; Yusoý 1991). There are two approachesto the definition of poverty line, a relative and absoluteone. In its very crude form, a relative poverty fine is sometimesdefined as the level of income beneath which 40 percent of the national population fall (Ahmad, 1983) 111.An absolute poverty line is the level of income required to support a certain minimal living standard in terms of basic biological needssuch as food, clothing, housing, etc. Lipton (1988) hasidentified low incomeas a broad-brushmeasure of poverty.

Generally,once the povertyline hasbeen defined, it is possibleto measurethe extent of poverty.Two typesof indices(World DevelopmentReport, 1990)are used:

Head-count Index: Oncethe poor havebeen distinguished from the non-poor*the way to measurepoverty is to expressthe numberof poor as a proportion of the population.It is also referredto as the 'incidenceof poverty'.This is the mostwidely usedpoverty measurement.

bring Poverty Gap: alsoknown as income shortfall, it is the total incomeneeded to all the poor up to the povertyline.

The greatmerit of usingthe povertyline is that it allowsus to seeimmediately what it is hasbeen happening to the overallincidence of poverty(Griffin, 1981).However, also worth noting that the limitation of using a poverty line has been widely recognized.Consequently poverty points are bound to be differentin variousplaces and at varioustimes. Furthermore, the view that "Povertyis a valuejudgment" has been presentedforcefully by many authors (Sen, 1981). Drewnowski (1977) for exampleargues that as the characterof the poverty standardis unavoidablyvalue- loaded, what is neededto makemeasuring methodology correct is the classificationof the substanceof the variousvalue judgments involved. 29

Physical Quality of Life Index: There is also another attempt of measuringpoverty in terms of social indicators. Thus the physical quality of life index (PQLI) has been developed(Nafzinger, 1990; Hulme and Turner, 1990; Foskett and Foskett, 1991) [2]. Recentlyin 1990, The United Nations DevelopmentProgramme (UNDP) developeda unified Human DevelopmentIndex (HDI), as a measureof humanwelfare (Haque and Tusneem,1992) [3].

2.3 CAUSES OF POVERTY

Different views have been expoundedon the causesof poverty. In most developing countries,efforts to overcomepoverty are varied and to some extent influencedby the analysisof the governmenton the nature and causesof poverty, before embarkingon their anti-poverty programmes.

It hasbeen argued that in the analysisof poverty,there are certainhabits of thought whichseem to obscureits true natureand prevent identification of propermeans for its eradication(Salih, 1977). What is importantto noteis that in devisingan effectiveanti- povertyprogramme, there must first be a clearunderstanding of the causesof poverty. Failingto do so resultsin a wastedeffort andthe poor will remainpoor.

Dixon (1991) statesthat the explanationsof rurai poverty are extremelyvaried. The list that he puts forwardis by no meanexhaustive (See Table 2)- Differentresearchers havegiven different views on the causesof povertyand in most of their analyseswill somehowinclude some of the abovelist of variableswhether singly or in combinations. It is not the intentionhere to reviewevery single variable that causespoverty as listed in Table 2. Thus be a generalreview will attempted.,

Thereare severalviews which placethe causesof rural povertyfirnily on the natureof developingcountries' societies. This is beingassociated with certaincharacteristics or traits found in individualsand their cultures,which are consideredto be negativeand arethe mainobstacles to the achievementof eitherpersonal wealth or socialprogress. 30

Table 2: Explanationof Rural Poverty

Part of underdevelopment/povertyof the Third World are:

1. Due to the extraction of surplusproduction under:

i. Colonialism. ii. Neo-colonialism. iii. International capitalism.

2. Due to unevenexchange between:

L Third World and DevelopedWorld. ii. Rural and Urban Sectors.

3. Pre-modernsocial structuresand attitudes.

4.111-healthand poor nutrition.

5. Poor environments.

6. Natural disasters.

7. Shortagesof resources.

8. Distribution of resources.

9. War anddisruption.

10. Rapid population growth/over-population.

11. Degradationof the environments

12. Inappropriatedevelopment policies.

13. Biasin policiesagainst the rural sector.

14. Inefficient govermnents.

15. Lack of education.

Source:Chris Dixon, 1990"Rural Development in The Third World" 31

Thereforethe poor are being blamed for being poor. They lack initiatives, motivation, innovation, or they are lazy and slow in respondingto challenges.

Most of the accusationshave long been heapedon the poor by writers such as Lewis (1961), McClelland (1961), Hagen (1962), Swift (1965), Wilson, (1966), Parkinson (1967) and Rogers (1969) who portrayed peasants'images as lack of innovation, fatalism, low aspirational values, low empathy, limited world views, feudal and traditional, divine lots,, having low level of achievementsespecially in innovation and entrepreneurshipand acceptingthe poverty situation as given.

In contrast, the modern man's images featured by Inkeles and Smith (1974) are: readinessfor social changes,future orientation, long term planning, calculability and having faith in science and technology. Therefore the basic argument that emerges from the abovediscussions is that all the negativeaspects must be changedif poverty is to be overcome.This implies the needsto absorbthe values of modem man'simages.

Most of the above views are now generally discredited (Dixon, 1991). However, the negativeviews towards the poor still persist and in some cases,it is being perpetuated by any influential or ruling group who want to say that 'poverty is the poor's own fault' (Golbert and Gulger, 1982; Ali, 1986). It is still common to experiencethe poverty cringe, notably among decision makers, when one suggestsworking with the poor. The instant reaction is to label the poor as illiterate, itinerant, unaccountableand dishonest(Bhatt, 1991;Remenyi, 1991). As observedby Schneider(1988: 140): -

"The idea that the poor are themselvesresponsible for the backwardnessand lack of progressin rural areasof the Third World is not only fairly widely acceptedin Westernnations but also reflects a prevalenttrend of thinkingamong the ruling elite".

However,most the aboveaccusations are the way adoptedby ruling groupsto divert attentionaway from policiesand the socialand economic systems which areindeed the more seriouscause of poverty amongrural people(Ali, 1986).Studies in developing countrieshave shown that the poor do not lack empathy nor do they posses ineffectivenessor needachievements (Melkotes, 1991), but haveconsistently showed that the poor are hard working (Peil, 1984; Sada, 1987; Schneider,1988; George, 1988)and also knowledgeable (Chambers, 1983) 141.

Yunus arguesthat poverty is not causedby personalunwillingness to work hard (they lazy). As are not a matter of fact, a poor person works very hard. He remains in 32

poverty becausehe does not receive the full worth of his work (Gibbons, 1988a). Furthermore the existing economic institutions are not designed to accomodatethe poor. This has resulted in the processof grabbing to prolong and went uncheckedso that the earningsof the others, notably the poor can make a handful of people richer everydayand turn a large numberinto paupers.The reality in this view is that the poor are victims of an unfair or one-sided socio-economic system that allows poverty to persist.As observedby Korten (1987: 123):

"in the name of helping the poor, the bureaucracies through which most developmentassistance is dispensed servefirst their own membersand then the local elites"

Lipton (1984: 155) added:

"This is reminiscent of the pseudo-egalitarianschool, where at mealtimes,class B get priority, while class A children get food".

Yunusfurther addsthat a poor personnormally will not be ableto arrangea larger shareof returnfrom his work becausehis econonficbase is paperthin and that'swhy he/sheremains trapped in the vicious ; lack of capital -> low is indeed hard productivity -> low saving-> lack of capital which very to overcome. Howeverif he/shecan gradually build up an assetbase he can commanda bettershare for his/herwork, the abovecycle can be overcomeeventually. Land to the landlesswill is help build his base.Similarly with financialresources at his disposal,an individual freeto build his own fatewith his own labourand thus improve his economicsituation.

It is true that lack of capitalexists in peasantsocieties and this causeslow production but this is not the causeof poverty. Remenyi(1991) thus arguedthat one most neglected"basic need" is accessto financialresources that the poor needto investto their own betterment(Remenyi, 1991). Only with credit will the poor be ableto invest in fixed capitalor obtainlarger working capital(Ahluwalia, 1990).

As mentioned earlier many developing countries during the post-war period emphasizedthe strategy of "industrialization-first"in an attempt to foster rapid economicgrowth. This policy of the governmentis alsoan explanationof the causeof rural poverty. This is evident in the urban bias thesis of Michael Lipton (1977). According to Lipton, even though the proponentsof 'industrial firse strategies perceivedthat there are problemsin the rural-agriculturalsector, the agricultural 33

policies tend to concentrateon increasingproductivity and output of large-scale productionunits. These have benefited mostly the richerfarmers.

An analysisof the causesof poverty that has aroused some interest is that by Robert Chambers.Chambers (1983) describespoverty as an interlocking of five factors: the poverty itself, physical weakness, isolation, vulnerability and powerlessness(see Figure 2 below), In his analysishe argues that the rural poor experienceworsening deprivation rapidly after the initial onset of poverty, which eventually creates increasingvulnerability which in turn produces powerlessnessand so on. These have madethe fife of the poor increasinglyvery difficult. For example,being powerlesshas made it easier for the rural elite not only to secure all or most of the benefits of development advance, but also makes the poor an easy prey of exploitation by powerful local elites (Burkey, 1993;Barke and O!Hare 1991).

Figure2: ThePoverty Trap

Source: Chambers, R. (1992).Rural Development: Putting the Iast First,

The discussion above seemsto suggestthat the socio-econon-desystem operating in ruralareas is oftenhostile to the objectiveof rural development,serving to reinforce 34

rural poverty and to frustrate the effort of the poor to move up. Thus a critical step will have to be taken to destroy the condition that can and does make a poverty trap.

2.4 POVERTY SITUATION IN THE DEVELOPING COUNTRIES -A GENERAL OVERVIEW

As mentionedbriefly in Chapter 1, the World Bariles 1978 World DevelopmentReport estimated that in 1975 around 770 million people in developing countries lived in absolute poverty. The World Banles 1990 World Development Report, which has 'poverty' (definesas the inability to attain minimal standardof living) for its theme, has adoptedtwo measuresof poverty for internationalmeasurement and comparison:

I- The general measure, using the 'poverty line' of per capita annual income of US$370.

2. The 'extremelypoor' 151at US$275. (both measuresare in 1985 purchasingpower parity-PPP-dollars).These two are a universal poverty lines used by World bank to permit cross-crosscountry comparisonand aggregation.These global poverty lines are somewhatarbitrary [seefootnote 6 for elaboration].

Basedon the first measure,it was estimatedthat in the mid-1980s1116 billion people, i.e. roughly one-third of the total population,were poor. According to the World Bank's1992 World DevelopmentReport, the povertysituation in developingcountries from 1985 to 1990 period is in the region of 1.1 billion 171.Table 3 showsthe distributionof povertyin developingcountries.

The resultsfor the higherpoverty line of US$370show that povertyincidence is at its worst in SouthAsia and Sub-SaharanAfrica, at aboutone half of the total population, comparedwith about20 per centin EastAsia andLatin America.In termsof numbers, Southand East Asia accountfor two thirds of the total poor in developingcountries. The secondmeasure of using the US$275a year, yielded633 million peopleor 18 percentof the population,who were below this 'extreme'poverty line. Out of 633 million,300 million were in SouthAsia and 120million in EastAsia. Socialindicators are strongly associatedwith poverty incidence(see Table 3) 181. 35

The rural poor often accountfor approximately80 percent of an the poor in Africa and Asia, though somewhatless in the more urbanizedcountries of Latin America (Walton, 1990). Thus poverty is primarily a rural phenomenon and is especially very acute amongthe landlessand near-landless,which constitute the largest single poverty group (Griffin, 1974,1989; Esman, 1978;FAO, 1988;Jazairy et al, 1992) [9]. A 1978 survey in 20 Latin American and Asian countries, has shown that the landless and near- landlesscomprise 50 to 90 percentof the rural population (Lappe et al, 1980) [101.

We have seenabove that poverty hasbeen a problemof developingcountries since world war H. It is especiallyprominent in the rural areasand will continueto be a major problemthroughout the 1990s.With this generalscenario, we now turn to examinethe rural developmentstrategies and approachesin combatingpoverty in the developingcountries since world war H.

Table3: PovertySituation in DevelopingCountries, 1985

Region Extremelypoor Poor(including extremeý poor) Socialindicators Under-5 mortality Life NetPrimary Number Headcount Poverty Number Hoodcount Poverty (per expectancy enrolment Imillions) index gap Imillions) index gap thousand) [years) rate Sub-Scharon 120 30 4 180 47 11 196 50 56 Africa EastAsia 120 9 0.4 280 20 1 96 67 96 China 80 8 1 210 20 3 58 69 93 SouthAsia 300 29 3 520 51 10 172 56 74 India 250 33 4 420 55 12 199 57 EasternEurope 3 4 0.2 6 8 0.5 23 71 90 MiddleEast and AO 21 1 60 31 2 148 61 75 NorthAfrica LatinAmerica 50 12 1 70 19 1 75 66 92 andthe Caribbean All developing 633 18 1 1116 33 3 121 62 83 countries

Thepoverly line In 1985 dollars is US$275 per capita a year far the extremelypoor and US$370 per capita a year for " Poor. Thehitodcouni Index is definedas the percentageof the populationbelow the PM" line. The "Fly gap is defined as the aggregate income shortfall of the poor as a percentage of aggregate consumption (we I*xQ. Under-5 mortality rates are far 1980-85, except for China and South Asia. where the period is 1975-80. Source: World Bank (1990) World Development Report 1990, Oxford University Press, Now York, p, 29. 36

2.5 RURAL DEVELOPMENT AND POVERTY ALLEVIATION STRATEGIES IN THE DEVELOPING COUNTRIES

2.5.1 DEFINITION

The World Bank (1975c: 3) definesRural Developmentas:

"a strategy designedto improve the economic and social involves life of a group of people - the rural poor. It extending the benefits of development to the poorest amongthose seekinga livelihood in the rural areas.The group includes small-scale farmers, tenants and the landless".

This definitionreflects the way in which views of developmenthave changed since the early 1970s.The focus of developmenthas shifted from a concern of 'growth maximization!to 'redistributionwith growth' or 'growth with justice!,where focus is more on the issuesof poverty, inequalityand unemploymentwithin the context of growingeconomy (Todaro, 1985; Dixon, 1991).

The above definition by the World Bank may sound very promising (i. e. helping the poorest among the poor), but they frequently bear little resemblanceto the perception of those in making decisionsand to the practice of development.It is also worth noting is that there is no universally acceptabledefinition of rural developmentand the term usedin differentways by manyauthors or institutionsII I].

2.5.2 MAJOR APPROACHES AND STRATEGIES TOWARDS POVERTY ALLEVIATION IN THE DEVELOPING COUNTRIES

After gainingindependence, most of the developingcountries have adoptedvarious socialand economic development programmes aimed at raisingthe living standardsof their populations.

In general,rural developmentstrategies may be groupedunder three broad headings, namelythe technocratic,reformist and radical approaches (Griffin, 1974;Haque et al, 1977;Cheema, 1984)1121. Development officials of the technocraticapproach tends low equaterural povertywith productivity,arising from imperfectionin the economic organizationand reinforcedby traditional values (Mehmet, 1988). Therefore,the 37

vicious cycle that has trapped the rural poor could be broken by government intervention. As a result, the government'sadministrative machinery is utilized as the main instrumentin the developmentactivities.

It has been argued that most poverty alleviation programmes are interlinked with agricultural and rural development programmes (Haque and Tusneem, 1992). The three strategiesthat have dominatedthe rural developmentpoverty alleviation effort of developingcountries in the 1950s, 1960sand sincethe 1970s(Abdullah, 1986) are:

1. The Community DevelopmentProgramme (CDP).

2. The GreenRevolution (GR).

3. The IntegratedRural DevelopmentProgramme (IRDP).

To these3 canbe addedone other strategy:

4. Rural credit, either as a specializedprogramme or as a componentor part and parcel of a broaderrural developmentstrategy.

2.5.3 THE COMMUNITY DEVELOPMENT PROGRAMME (CDP)

2.5.3.1 ORIGtN AND RISE OF THE CDP

The communitydevelopment approach is usually seenas emanatingfrom a Ford- fundedpilot projectin the EtawahDistrict of Uttar Pradesh,India in October1948 and was adoptednationwide in 1952(Korten, 1980;Hulme and Turner, 1990).The Indian CDP servedas a prototypefor nationaldevelopment programmes in other developing countriesand spread nearly worldwide. By 1960over 60 developingcountries in Asia, Africa and Latin America had CDP programme(Dunham, 1967; Holdcroft, 1984; Hogendorn, 1987) 1131.

2.5.3.2 DEFINITION OF COMMUNITY DEVELOPMENT

Holdcroft (1984: 48) definesCommunity Developmentas follows: 38

11 institution, ...a process, method, programme, and/or movement which (a) involves people on a community basis in the solution of their common problems (b) teachesand insistsupon the use of democraticprocesses in the joint solution of community problems, and (c) activatesand/or facilitates.,the transfer of technology to the people of a community for more effective solution of their common problems. Joint efforts to solve common problems democratically and scientifically on a community basis were seen as essential elements of Community Development."

2.5.3.3 CDP AS THE COMPREHENSIVE DEVELOPMENT OF RURAL AREA

Generally in the CDP approach government is the main provider of social service, physicalinfrastructure and institution building. In generalthe Community Development programmes were designed as a comprehensiveself-help movement covering all aspects, such as development of agriculture, village industries, health, sanitation, education and drinking water. It also includes the establishment of farmers' associationsand co-operatives, community centres and others (Kartar Singh, 1986; Haque et al, 1977; Abdullah, 1986; Wallis, 1993). All these were meant to improve their standards of living as well as to create stable and self-reliant communities (Hayami and Ruttan, 1985) and also act towards the alleviation of poverty (Holdcroft, 1984).

Communitydevelopment was customarilyinitiated by speciallytrained civil servants, commonlyknown as "multi purposevillage workers", actingas catalyststo stimulate the activities among the villagers (Hulme and Turner, 1990; Holdcroft, 1984). However there was little involvementor participation from the rural peasants (Remenyi,199 1).

2.5.3.4 THE DECLINE OF THE COMMUNITY DEVELOPMENT PROGRAMME (CDP)

As earlyas 1960,some CD programmeswere alreadyfaltering and by 1965most had beenterminated or drasticallyreduced and were no longer consideredto be major national rural developmentefforts and were seen to have had typically limited accomplishmentor were outright failures(Ruttan, 1975; Johnstonand Clark, 1982) [141.CDPs were for failing improve criticized to the economicand social well-being of 39

the rural people, especiallythe lower strata. Many observationshave shown that the beneficiaries main were the more affluent farmers. However, the rural poor - the artisansand the landless agricultural labourers, were largely bypassed(Dube, 1958; Myrdal, 1968; Long, 1977; Mathur, 1978; Korten, 1980). The CDPs therefore, as noted by Hulme and Turner (1990), failed to alleviate the problem of poverty, but insteadpromoted the disparitiesbetween the rich and poor farmers.

It was rather unfortunate that the CDP was launchedin an era of the "trickle-down" mechanism.Thus CDP was not intended, nor did they affect, the basic structural barriersto equity and growth in rural communities.The existing power structureswere acceptedas given (Holdcroft; 1984).

It was also arguedthat the failure of the CDP in generalwas also becauseof the marginalsignificance attached to rural developmentin preferencefor industrialization, the imageof modernizationduring the decadeof the 1950sand early 1960s(Oman and Wiganaraja,1990). Development for the peoplehas thtis lost out in favour of growth of averageGNP per head,increased domestic savings rates to financethe pursuit of modernity(Remenyi, 1991). The implementationof the CDP was done through conventionalbureaucratic structures, formulated centrally 1151 with little regardto the capability of the people (Korten, 1980). It was generally assumedthat local communitiescould only be developedby central developmentstrategies (Melkotes, 1991).As a result, the poor peopledid not respondto the CDP approach(Myrdal, 1968; Korten, 1980).

Finally the declineof CDP was also fuelledby global food crises,triggered by crop failuresin SouthAsia in the mid 1960s.This forcedboth the nationalgovernment and developmentassistance agencies to shift focus on a programmedesigned to enhance agriculturalproduction (Hayami and Ruttan, 1985).The shift was further reinforced with the emergenceof the "greenrevolution" in the early 1960s.

2.5.4 THE GREEN REVOLUTION (GR)

2.5.4.1 DEFINITION OF THE GREEN REVOLUTION

In general,the GreenRevolution can be definedas the applicationof modernwestern- basedagricultural technology to traditionalfarming systemsin developingcountries, which includes new high yielding variety (HYV) seed, fertilizers, insecticide, implements andwater control andothers (Barke and O'Hare, 1984; Dixon, 1991)The "Green Revolution" as a production led strategy, being technocratic in nature 40

(Corbridge, 1986), was adopted in many developing countries and becamethe dominantagricultural development model in the 1960's(Ruttan and Biswanger, 1978).

In principle, the Green Revolution approach has many attractions and the main ones are (i) increasesfood production (ii) "scale neutral", a technology that could raise the yield and income of all farmers regardlessof their scale of operation and (iii) a good provider of employment opportunities (Griffin, 1989; Bernstein, 1992; Staazt and Ericker, 1984; Blackwood, 1988). The GR strategy is therefore regarded by its advocatesas fostering faster overall growth, a reduction in the incidence of poverty and a more equitabledistribution of income.

2.5.4.2 THE EXPANSION OF IlYV IN THE DEVELOPING COUNTRIES

The introductionof the HYV hasindeed resulted in muchhigher production based on evidencein severalAsian countries.India: The productionof rice and wheat during the 1966to 1977period had increasedsubstantially, by 62 percentin the caseof rice and by an extraordinary179 percentin the caseof wheat. ]Philippines:By 1968, by hybridrice accountedfor 21 percentof the total rice area.The percentagedoubled The 1970to 43 percentand rose to 78 percentby 1980 (Grift 1989).Malaysia: in HYV rice hasspread rapidly from an estimated10 per centof the plantedarea 1966 to 36 percentin 1971-1972(Dixon, 1991).]Pakistan, Indonesia, Bangladesh, South in Korea, Taiwan and Japan: All thesecountries also experiencedgrowth their agriculturalproductivity (Ruttan and Biswanger,1978; Mahfooz, 1979; Herdt and Capule,1983).

2.5.4.3 THE IMPACT OF GREEN REVOLUTION IN GENERAL

its Under the GR strategy,it is the HYV new seedswhich form the thrust of foundation.The higher yields have typically been obtainedunder certain optimum intensified conditions(Glaeser, 1987) [161 and have generallybeen associatedwith mechanizationand agricultural equipment(FLuttan and Biswanger, 1978; Todaro, 1991).In order to adoptthe HYV, local farmershad to purchaseall requiredinputs (Abraham,1991).

It wasthus arguedthat thosefanners with the advantagesof land and capitalwere the first to adaptto the new seedsand benefited the most.Basically they arethe richerand larger scalefarmers (Barke and O'Hare, 1984; Oman and Wiganaraja, 1991). With new

oViEFFIELD 41

found enthusiasmand potential profitability of the HYV by large landowners, the tenants are being pushed off their lands in order for the landowners to farm it themselves(Bardhan and Bardhan, 1973; Ghatak and Ingersent, 1984; Barke and O'Hare, 1984,Lappe and Collin, 1982).

The other way that the large scale farmer gained from this new technology was by increasingthe rents (Bharadwaj and Dass, 1975; Lappe and Collin, 1982; Ghatak and Ingersent, 1984). Rapid mechanization has also contributed to unemployment and poverty (Byres, 1981). The inevitable result is the rise in the number of the landless (Lappe and Collin, 1982; Griffin, 1989) 1171. One of the consequencesof the dislocation of the landlessis the increasein number of migrants to urban areas,with manyjoining the ranks of the unemployed(Glaeser, 1987; Hayami and Ruttan, 1985; McWilliams and Piotrowski, 1990;Dixon, 1991).

Thus, it appearsthat the GR has brought about, according to many observations,a further widening of the gap between the rich and the' poor and also the increased consolidationof agricultural land in the hands of the very few, so-called progressive farmers - large scale farmers and rich land-owners. GR is therefore a landlord-biased form of agriculture (Pearse,1980; Singh, 1980; Byres and Crow, 1983; Baylis-Smith, 1984; Chambers and Ghildyal, 1985; King and Schneider, 1991; Webster, 1991; Bernstein, 1992; Rondinelli., 1993). Similarly, The United Nations ResearchInstitute for Social Development,in its world wide study of the socio-economicimpact of the GR, also concludedthat while the increasein yields had been substantial,at the same time it has aggravated the social and economic inequalities in the rural sector (UNRISD, 1979).

Even though the new technologypromised to be scaleneutral, public policiesand its social institutions (e.g. land tenure and credit arrangements)that accompany introductioninto the rural economyoflen are not scale-neutralas they tend to serve only the rural elites(Todaro, 1981)1181. Sadly, the GR whichwas originallydesigned as a "developmental"innovation with great potential for alleviatingpoverty, has becomesan instrumentfor the impoverishmentof the rural peasantclass.

The general conclusionsof the GR have shown that accessto land and other productiveresources stood as a commonplatform in influencingthe flow of benefits. Hettne(1990: 57) thus sumsup the GR experienceas follows: 42

"The Green Revolution the 1960s ...of ...confirmed the universalobservation that what was takingplace in many countriesduring the developmentdecade was "growth without development- but with poverty".

The shortcomingsof the Community Development Programme and Green Revolution served as a background to the emergenceof the new approach towards poverty alleviation in the early 1970s,i. e. the "Integrated Rural DevelopmentProgramme" -a poverty focussedstrategy.

2.5.5 THE INTEGRATED RURAL DEVELOPMENT PROGRAMME (1RDP): THE POVERTY FOCUSSED PROGRAMME

2.5.5.1 INMODUMON

As mentionedin Chapter1, it was Seer'swidely publicizedlecture that signaledthe shift from developmentbeing related mainly to economicgrowth to a broaderconcept encompassingreductions in poverty, unemploymentand inequality.Thus the early its 1970ssaw the emergenceof a movementknown as reformist which through literaturehas contributedto the processof rethinkingof developmentfrom merely economicgrowth to a broaderconcept as mentionedabove. However the reformist approachtended to placeemphasis on the role of state.

2.5.5.2 THE REFORMIST AND THE WORLD BANK RESPONSE TO POVERTY

The reformistresponses to increasingconcern with poverty in the 1970sessentially comprisedthree planks:

1. Employment-orientedstrategies, 2 Redistributionwith growth and I Basic human needsstrategies.

The overallreformist responses during the 1970sshould be viewedas a major period of internationalco-operation [191 directed at one centralissue: attacIdng poverty. This increasingconcern with povertyissues was visiblein the 1970sin the policy of World Bank, especiallyunder its President,McNamara, who pledgedthat his organization would put greateremphasis on problemsof absolutepoverty [201and would direct its 43

resources towards the small farmers/small rural producers as the "target group" (Ayres, 1983;Hayami and Ruttan, 1985; Oman and Wiganaraja, 1991) 121].

Although a strategy for a particular rural development approach evolved and was shapedby the internal dynamicsof the socio-economicforces in particular developing countries, it is important to note that in many instancesthe donor/lending agencies were instrumental in pushing, for example, 'Integrated Rural Development' as a strategyof rural development(Siwar and Mustapha, 1989). The World Bank, therefore is the largest lending agencyin rural developmentand has tremendousinfluence on the developmentof many developingcountries (World Bank, 1975) 122].

2.5.5.3 IRDP AS A COMPREHENSIVE APPROACH TOWARDS RURAL DEVELOPMENT

As the benefits of developmentdid not trickle-down fast enough to the lower income rural groups, developmentexperts and theorists alike have come up with a consensus in favour of a much more comprehensiveapproach to agricultural development. Integration was, therefore necessaryand it was also generally perceived that the poverty of rural small farmers emanatedfrom a host of problems from literacy to health,to access,to credit, land, marketing, educationand technology. Hence the main idea was to attempt to solve all problemsall at once (Bothomoni, 1991).

The centerpieceof this new emphasisby the World Bank was the emergenceof what McNamara termed Integrated Rural Development or the "IRDP" (Melkotes, 1991). The IRDP as it is popularly known is also being referred to as the 'poverty-focussed in rural development programme', and contains the basic reformist ingredients combating poverty, namely employment-oriented strategies, redistribution with growth and the basic needs strategies.

This poverty-focussedprogramme is alsolabelled "new style" as it tries to moveaway from the traditionalfocus on growth, to the inclusionof socio-economicfactors in the analysesand formulation of strategies (Brara, 1983) and also being more comprehensive(Hayami and Ruttan, 1985), with multiple objectives (Lea and Chaudhri,1983; Bothomoni, 1991; Drakakis-Smith, 1992) 1231. Being a'target group' approach,the rural poor are definedand identified,their principalcharacteristics are determined.It also incorporatesthe elementsof the "Community Development", "GreenRevolution" and also the "BasicNeeds Approach", except with a specificfocus on a certainpre-determined target population(Abdullah, 1986). In relationto that, it takes place at many different locationsand scalesvarying from local communities, 44

administrativedistricts or geographicallydefined areasor regions such as river basins (Ayres, 1983;Lea and Chaudhri, 1983;Friedmann, 1992).

The IRDP programmeshave taken a variety of approachesin reachingthe target group which include area developmentschemes, irrigation and land settlementschemes. The World Bank in its 1975 publication "Assault on World Poverty" (p. 41-56) has convenientlyor generally categorized 3 main approachesof attacking rural poverty, namely (i) Minimum PackageApproach, (ii) The ComprehensiveApproach and (iii) The Specificand SectoralProgramme 1241.

Thus, since the 1970s, the IDRP has become the dominant concept in the contemporary development literature and is a very prominent model. It has been introduced in many developing countries and started to gain credence in the early 1980s (Momin, 1987; Siwar and Mustapha, 1989) and has become an increasingly important focus among other aid agenciesas well 1251.

As comparedto the previous programme, IRDPs are also administratively complex. Generallythis "neW integrated approach requires the coordination of effort of many agenciesor ministries operating in the target area (Friedmann, 1992; Janeand Wiggle, 4 in Chapter 1987).(This will be shown in the Malaysiads IADP complex - seeFigure 4).

2.5.5.4 EVALUATION OF THE IDRP

Studieson rural developmentin 7 Asiancountries (ILO, 1977)and 9 African countries haveshown that there were increasinginequalities in incomesand assetsamong the by rural households(Ghai and Radhwan,1983). Similar conclusionswere reached in Bothomoni(1991), whose critical review of the IRDP in Zambia and Malawi SouthernAfrica, haveshown that the programmeshave ignored the vast majority of the poorestsections of the rural population.

The IDRP was also been criticized on its concept of the 'target group, which was definedby World Bank and other proponentsof the IDRP as being the "small farmer". In this connection some general observation on the conceptual vaguenessof 'small farmer'will be reviewed briefly.

Conceptual vaguenesshas done great damagein the formulation of these poverty- focussed Yunus(Gibbons, programmes. 1988a)argues that whena basicconcept lacks 45

sharpnessin its definition, it can lead to a strangesituation. It is common to talk about %small' or 'marginal' farmers with the firm belief that small-marginal farmers are a synonymfor the poor. Poor may not include the small farmer as it includes much larger collections of people than small-marginalfarmers alone. In Bangladesh,for example, half of the total population are poorer than the "small" farmer, they are the landless.

In relation to the aboveargument, therefore, by focussing on the "small farmer" per se as the main target group, the IRDP is bound even from the start to leave out a substantialportion of the rural population who require the most attention (Abdullah, 1986).In reality, as arguedby Ayres (1983), in most of the World Banles development projects, the principal beneficiarieswere the "small-scale" farmers who owned and operatedtheir own properties. However, none of the projects were designedwith the rural landless, sharecroppers,squatters and the poorest of the poor in mind. The owner-operatorswhile still poor were still comparativelybetter off.

A good exampleof this can be illustratedby a study df the Indian IDRP, where 20 percentof the actualbeneficiaries had incomesabove the poverty line and hence,in principle,were not eligiblefor participationin the scheme(Griffin and Knight, 1989). have Furthermore,Dreze (1990) noted that the vulnerablegroups, i. e. the landless, practicallyno involvement.

Anotherweakness is the way the World Bank identifiedits target group under the IRDP. The identificationwas conductedbasically in spatial terms. Where an area consistsof a majority of the poor who are being identify for the development programme,it was assumedthat the majority of the poor would benefit, i.e. still couchedin the magic of the "trickle down" mechanism.On this Lappe, Collin and Kinley (1980: 56) argued:

"How do agenciesproduce so many poor beneficiaries when touting their projectsbefore the public?It is quite simple.They often counted everyone living in the project area.The rationaleis that both large and smallfarmers can profit from modernfarming inputs in proportionto their land ownership.And the landless?The theory goes that they will havemore work sincethe farminginputs generategreater productivity".

limitation The of the World Bank!s rural developmentprogramme stems from the fact the IDRP is that essentiallyand merelyan extensionof the "GreenRevolution% still but preoccupiedwith raising productivity the inequitabledistribution of power and 46

resources(mainly land) have not been given a consideration (Dixon, 1990; Mon-tin, 1987). The Bank thus as McNamara said, "will put primary emphasis not on redistribution of income and wealth... but rather on the increasing productivity", which obviously is not meantfor the poor (Lappe et al, 1980). Equity is not the Bank's directs policy goal (Frederick, 1978). This is naturally a very common feature of the non-socialistdeveloping countries that are "technocratic" in their nature.

2.5.5.5 IRDP - WEAKNESSES IN THE DELIVERY MECHANISM

Yunus arguesthat the so-calledpoverty focussedprogrammes (as discussedabove) are in fact "omnibus programmes"(Gibbons, 1988a) offering a ride to both poor and non- poor, in which the poor are elbowed out. "Mixed" programmesare only a misnomer for the poverty focussedprogrammes. In the name of the poor, the non-poor reap the benefitsand therefore it is rather strangeeven from the start to label the "IRDP" as a povertyfocussed programme.

It has been argued that in a highly unequal rural structure, it is necessaryto seperate the poor and it is also necessaryto have a poverty alleviation programme which is separateand exclusivelytailored for the poor as a target group, supportedby exclusive programmesif the poverty alleviation programme is to have some encouragingresult (Bhatt, 1991; Sham, 1991). On this Yunus, has stressed strongly at some length (Gibbons, 1988a:63):

"Exclusivenessshould not limit itself only at the clientele level. It should extend up to the implementation level A delivery which is ,machinery too. mechanism entrustedwith the responsibilityof deliveringall kindsof goods to all kinds of peoplewill alwayscater to the richest and powerful among the clienteles.This is anotherinexorable law of Nature. If one hasto deliver anythingto the poor, the deliverymechanism has to be designedand operated exclusively for the poor - thereis no two ways about it... specializeddelivery mechanism for the PFPs (Poverty FocussedProgrammes) will require specializedpeople from the planning and designinglevel down to the person-to-person contact level in the field. If one acceptsthe propositionthat the PFP's(Poverty Focussed Programmes) are a new breed of programmes,one hasto agreethat they needa new breedof peopleto put themtogether and manage them". 1261 47

The experienceof the IRDPs in manydeveloping countries has shownthat it hasno specificor singleagency or implementingmachinery to specificallyor exclusivelycater only for the poor. As a result it is not surprisingfor the IRDP did not reach its expectation.

A general observation also shows that the IRDP suffered from a weak organization and managementstructure and tended to be large, multi-sectoral and administratively complex (Cassen,1986; Cohen, 1987;Blackwood, 1988; Rondinelli, 1993) 127]. Thus we can sum up that the general conclusionsfrom the IRDP experiencesuggest that it has failed to effectively tackle the problem of poverty, inequality and unemploymentof the poor.

2.5.6 PREVIOUS EXPERIENCE OF RURAL CREDIT IN THE DEVELOPING COUNTRIES

2.5.6.1 GENERAL BACKGROUND

Governmentpolicies on rural credithave been pursued in mostdeveloping countries as a toot for supportingone or a combinationof the following goals:poverty alleviationg (Agabin, increasing production, and other socio-economicand political ends 1988).

In manydeveloping countries, Malaysia included, rural credit haslong beenregarded 1986). as a key element in agricultural/rural developmentstrategies (Egger, Agricultural credit is an elementthat has been included in all the agricultural developmentstrategies, either as a specializedprogramme or as a componentof a broaderrural developmentstrategy (Tinnermeier, 1983). As an example,most of the IRD Programmesare linked with institutionalcredit and this clearly showsthat rural creditis a majorplank of rural development(Ramesh, 1990).

The successof the agriculturalsector is heavilydependent on the adoptionof new technologiesplus the use of better seeds,fertilizers, pesticides, and farm machinery. Thereforewithout effectivefinancial facilities, growth is thus retarded(Egger, 1986). Rural credit hasbeen engaged as an importantand powerful policy instrumentto deal with the problemof rural developmentin developingcountries (Padmanabhan, 1988). It was generallyaccepted that credit providesthe only meansperhaps, of acquiringall other productiveinputs availablein the market. As such, economicdevelopment of rural populationengaged in agricultureand livmg in rural areascould be acceleratedby increasein a rapid the supplyof institutionalcredit to sucha sector. 48

For quite a long time, an attempthas been madeto increasethe supply of formal agriculturalcredit in general,and to the rural poor in particular,in many developing countries(Adams and Ladman, 1979). In fact, sincethe decadesof the 1950sto the 1970s,financial resourceshave expandedsubstantially in the rural areas of the developingcountries and the internationaldonors (such as the World Bank and USAID) havegranted or lent in excessof 15 billion U. S. dollarsfor agriculturalcredit (Adarn, 1982). Padmanabhan(1988) further noted that formal institutions in developingcountries themselves have provided approximatelyUS$40 - 50 billion annuallyas rural credit. Not less than 5 percent of this comesfrom international agencies.If one reckonsthe credit extendedby the informal sector,the figure would go up by severaltimes.

During the 1970s, in fine with the new approachknown as "poverty focussed programmes"(as discussedearlier) rural credit has gaineda wider currencyas there wasan increased emphasis on the "smallfarmer" as a targetgroup. This was evidentin the speechof World Bank PresidentRobert McNamana.In his 1973 addressto the Boardof Governorsof World Bank in Nairobi, he said:

"For the smallholder operating with virtually no capital, access to credit is crucial. NO matter how knowledgeableor well motivatedhe may be, without such credit he cannot buy improved seed, apply the necessaryfertilizers and pesticides,rent equipmentor develophis water resources." (McNamara, 1973, cited in Bathrick, 1981:13).

its Thus, sincethe 1970s,the Bank has allocatedcumulatively about 13 per cent of Bank "agriculturaland rural developmentfund" to agriculturalcredits. In 1975,the " also statedthat almosthalf of suchfunds over the next 5 yearswould go to small farmers" (Lappe et al, 1980) [28].

2.5.6.2 INSTITUTIONAL CREDIT

In an effort to increasethe supplyof formal agriculturalcredit to rural sectors,several types of credit institutionswere established- somenationwide and othersregionally based[291. However, the two maintypes of formal credit institutionsthat operatein the rural economyof developingcountries are (Von Pischke,1983; Tinnermier, 1983; Deveraux,1987; Padmanabhan, 1988; Remenyi, 1991): 49

1. Commercial Banks: These banks are establishedin rural areas firstly to obtain depositsby encouragingthe opening of some accounts and secondly to make loans they find borrowers. where can sufficiently creditworthy Their existence in the rural areasare partly an account of government compulsion and mandate and thus do not lending take to rural whole-heartedly and the financing of farmers, particularly small farmers, left received only a - handedtreatment becausethey believe it would be bad for their profitability.

And:

2. Specialized Agricultural Credit Institutions (SACI's): Most of these banks were establishedin the past 20 to 25 years for dealing exclusively with farmers and other rural communities. There has been an increasing concern towards promoting the of the rural poor. They are set up in responseto the perceived failure of commercialbanks to servefarmers adequately1301.

The establishmentof the abovementioned institutions is to overcomethe problemof borrowing from the non-institutionalsources, which usually chargedastronomical interestrates (Schneider, 1988; Siwar, 1988a;Dixon, 1991;Jazairy et al, 1992)1311.

2.5.6.3 ON REACHING THE POOR

Many evaluationsof the rural credit programmethrew up somedisturbing conclusions andthe findingsshow that credit hasnot reachedthe smallrural producer.The study andreview done by the United StateAgency for InternationalDevelopment concluded that most evaluationshave shown rural credit programmesin many developing countriesdid not reachthe smallrural producer(USAID, 1973).In most developing countries,formal credit has not reachedmore than 20 percentof all farmers.Roughly 5 percentof borrowershave received 80 percentof institutionalloans (Padmanablian, 1988).It hastherefore been argued that smallfarmers are not favouredby the rural creditsystem (Lipton, 1976;Berry, 1989).

Studies in certain selecteddeveloping countries have shown that most of the institutional credit went mainlyto largelandowners. This was evidentin Morocco. In Bolivia,70 percentof loanswent to easternregions where large farmers dominate, but the farmers small who live on the high plains and mountainvalley regions were (FAO, untouched 1986). In India, only 27 percent of institutional credit went to 50

farmers cultivating land areas below two hectares or less in 1970 (Lele, 1974). In Indonesialarge scalefarmers are the main beneficiaries(World Bank, 1988).

As mentionedearlier, the World Bank has stressedthe need to concentrate on small rural producers. In "Assault on World Poverty" (1975), the Bank states that it was allocating "almost half' of its rural credits to small farmers. However, in reality, as noted by Lappe and Collins (1982), more than half of the World Banles rural credit went to medium and large landownerswho at most constitute only 20 per cent of all landholdersin developingcountries. Rural credit did not reach the poor and the small producersbecause of the conceptualvagueness in the definition of "small farmer" P2].

Padmanabhan(1988) also arguesthat one of the factors of why institutionalcredit doesnot reachthe poor is becauseinformation relating to various credit schemes, formalitiesand obligationsdo not reachthem, particularly when they are illiterateand if they areliterate and do haveaccess to information,they find it hardto complywith the severalloan formalities, Eke filling in applicationsor obtaining the required guarantor.Furthermore, as notedby Deverauxet al (1990),the flexibilitiesneeded by small rural producersfor repayingloans have also not been instituted by formal institutions.

As a result,it is not surprisingthat in most developingcountries, the shareof the non- in 4 institutionalcredit in total agriculturalfinance is still very high as shown Table (Hayami and Ruttan, 1985;Padmanabhan, 1988).

Table 4: Sources of Rural Credit by Mid-1970s

US$ (Billions) Funds Provided by Aid Agencies 5 - World Bank. - Inter-American Development Bank - USAID.

2. Funds Provided by the National Government. 10

3. Funds Provided from Informal Lenders 75

TOTAL 90

Source: Padmanabhan, K. P. (1988). Rural Credit Lessons For Rural Bankers and Policy Makers, Intermediate Technology Publications Ltd, London. 51

2.5.6.4 LOAN RECOVERY PROBLEMS

Loan recovery problems are widespread everywhere.I-Iigh rates of default (50 to 95 percent)have been reported in small farmers' credit programmesin Mrica, the Middle East and Latin America. Most South and South-East Asian countries also have had similar experienceswith loan recovery rates (Sanderatne,1983).

Severalstudies have failed to find any conclusive evidencethat repaymentrecords of small farmers are worse than those with larger holdings (Sanderatne,1983). In fact, somestudies concluded that a higher default rate occurred among the affluent farmers (Tinnermeier,1983, Cassen,1986). Poor repaymentrecords amongstlarge landowning farmersare observedin Colombia, Costa Rica, Ethiopia and also in the United States of America (Lappe and Collins, 1982), Bangladeshand Sri Lanka (Lipton, 1976) and Ghana(Fiona, 1992).

Experiencein severalAfrican countriesalso indicatesth*at small farmers have a much betterrecord of repaymentas comparedto their richer counterparts.In Ethiopia,as muchas 97 percentof smallfarmers have repaid credit (Lele, 1974).Similarly, in India a larger proportionof farmersthat repaid loans are amongthe marginal,small and mediumfarmers rather than the largescale farmers, both in 1961to 1962and 1971to 1972(Avhadani, 1979). Fiona (1992) alsonotes that poor peasants,rural womenand workersare rarely mentioned, if at all, amongthe list of loan defaulters.

Someof the wealthierand larger scalefarmers, the main defaulters,often view their it overdueloans as a grant or sometimesassume the welfarerole of a loan or see as a markof socialand political power (Lipton, 1976;Tinnermeier, 1983; Adam and Vogel, 1988; Ramesh,1990). Furthermore,the richer farmers greater control of village organizationsmay also account for their ability to avoidrepayment (Sanderatne, 1983) 1331.Experiences also show that rural credit programmesdid not reach the poor becausecredit is generallydelivered through the traditionaldelivery system. As noted it is by Webster(1990), so long as aid capitalis given initially to local bureaucrats, very likely that the moreaffluent farmers will be its primebeneficiaries.

Generalconclusions from rural credit experiencesin developingcountries have again concludedalong the similarline to that of the GreenRevolution and the IRDP, with the very familiarcliche: the rich aregetting richer and the poor aregetting poorer. 52

2.6 CONCLUSIONS

The Community Development Programme, Green Revolution, Integrated Rural DevelopmentProgramme and Credit Programme, as discussedabove have failed to make a significant inroads into the alleviation of rural poverty. The benefits of development,however, have generallybeen siphonedoff by the richer farmers or rural elites.

In generalmost of theseprogrammes are basically land-based agricultural programmes. As the poor peoplelack the productiveassets, particularly land, they cannotderive any benefit from them. Under the conventionalapproach, a speciallydesigned delivery systemthat exclusivelyfocuses on the poor hasnot beeninstituted. In general,"mixed" or generalprogrammes have been resorted to. This is donein the beliefthat aslong as resourcesare funneledthrough the govenunent'sdelivery system, it will trickle down to the whole spectrum of the rural population, the poor and the very poor. Unfortunately,this hasnever materialized effectively.

In view of the extentand growth of rural poverty,a distincttarget-group approach and exclusivedesign for the poor is thereforenecessary. Several innovative programmes, initiatedmostly by the non-governmentsectors in putting alternativestrategies of rural developmentand poverty alleviationby meansof credit as an entry point towards combatingpoverty have emerged in differentcountries, thus promotingthe rural poorýs accessto institutionalsources of finance,which we are now turning to in the next chapter. 53

FOOTNOTES

The figure 40 per cent was actually adopted from the pledge made by Robert McNamara - the ex-Presidentof the World Bank, that special policies must be initiated to increasethe incomes of the lowest forty per cent of the people in developingcountries (McNamara, 1972).

2. The standardindicators of the PQLI are life expectancy,child mortality and adult literacy. The two latter variablesrepresent the effects of nutrition, public health, income and the general environment. For example, infant mortality reflects the availability of clean water, the condition of the home environment, and the mother'shealth. Literacy is a measureof well-being as well as a requirementfor a PQLI has been -country's economicdevelopment (Nafziger, 1990). However, the criticized in relation to the narrownessof the indicators that are used to compute the index. It has also been questionedon the rationale for treating each indicator as being of equalimportance (Rulme and Turner, 1990).

3. The Human Development Index incorporates indices of life expectancy, educationalattainment and incomeper capita to give a compositemeasure of humandevelopment. However, it has someweaknesses. The UNDP in its 1992 HumanDevelopment Report reminds us that the HDI doesnot measureabsolute is levelof humandevelopment. Haque and Tusneern (1992) stated that the HDI an ordinalmeasure which ranks countries in termsof the humandevelopment of their in people, which doesnot necessarilycorrelate with their rankings termsof per better capita income.But neverthelesson an overall basis the HDI provides HDI perspectivesas a measureof humanwelfare than per capitaincome. The will haveserved its purposeif it helpsexpose where poverty is cruelest.

4. One of the writers, Schneider(1988: 140), for instance,argued that there are "being lazy' growing numbersof peoplewho rejectedthe contentionof and follows: vigorouslyrefuted it. He citedan exampleof a Filipino peasantas

"They saywe! re poor becausewe're lazy, but havethey ever seenus sitting down to our breakfast?If they see what we havefor breakfastand were obligedto eat the if samething every morning, they would go crazy someonesaid they were lazy. Think of the long and backbreakinghours we spendin the field from dawntill duskunder the burning sunor pouringrain, just to stay alive. This is life we lead in the sugarcane, where even our pregnantwomen work ten to twelve hours a day cutting and carryingfor a daily wage of less than 55 cents.Enough of this nonsenseabout laziness" 54

5. Other popular terms for the 'extremely pooe that are also being widely used include the 'hard-core poverty, 'poorest of the pooe and 'disadvantagesof the disadvantaged'.

6. When discussingpoverty within country, the World Bank 1990 report uses country specific poverty lines. This range of poverty line was chosen to span poverty lines estimatesin recent studies for a number of countries with low averageincomes - Bangladesh, the Arab Republic of Egypt, India, Indone ia, Kenya, Morocco and Tanzania. The lower limit of the range coincides with poverty line commonly used in India. See World Development Report 1990 for detail.

7. TheWorld Bank's1992 World BankDevelopment Report, unlike its 1990 report, did not havedetails on the povertysituation. However, on pages29 and30, the reportmentioned briefly that the numberof poor haveincreased from 1015billion in 1985to 1133billion in 1990.Thus, the estimatefor 1985has beenupdated from its 1990report to incorporatenew data.

8. As mentioned, the World Development Report 1990 defines the Poverty Line according to consumption expenditure of US$275 - US$370 per capita per for annum.This range is based on the poverty lines estimatedin recent studies a number of countries with low average incomes, viz. Bangladesh,Egypt, India, Indonesia,Kenya, Morocco and Tanzania.In recognition of the limitations of in intemationally-calculatedpoverty lines analysisof the condition of the poor any domestically- one country, generally an individual country will have its own determinedpoverty line.

in developing 9. In general there are two major groups of the rural poor countries 1986: 50 within the context of the "landless"and "near landless"(Abdullah, -52):, (1) 1. Marginal Farmers and Marginal Tenants: There are two sub-grOUPS holdings, Marginal farmers:are cultivatorswith customarytenure of that are of Tenants: inadequatesize to providea subsistencelivelihood and (H)Marginal are of cultivators operatinguneconomic plots of land obtainedthrough a variety tenurialarrangements. in form In bothof the abovecases, the household members have to engage some In of labouringactivity to supplementtheir otherwisemeagre incomes. most their cases,marginal farmers also rent in additionalsmall plots of landto augment by farmers income.Thus, with an equivalentfarm size owned and operated the andrented by thetenants, the tenant tends to be worseoff for theburden of rent better theyhave to pay.While the marginal farmers may also be poor, they are off thanthe tenants.

2. LandlessRural Labourers: Thereare generallytwo sub-grouPS: C1i) L anthe S s AgriculturalWorkers: they surviveprimarily by sellingtheir labour on farms.(fi) LandlessNon-Farm Workers: thesegroups of rural poor stay in rural areas derivingincomes from a variety of odd and temporaryvocations. They do not havea permanentjob andare constantly changing jobs. 55

Unlike the marginal farmers and tenants, as in the first group, the landlessrural labourers,as in the secondgroup, are worst off.

10. A recent study by IFAD (based on 1988 data) shows that the rural poor in developing countries (Africa, Asia and Latin America) comprises the following (Jazairyet al, 1992):

1. Smallholderfarmers (52.0%). 2. Landless(24.5%). 3. Nomadic/pastoralists(6.3%). 4. Ethnic indigenous(7.3%). 5. Small and artisanalfishermen (3.7%). 6. Internally displaced/refugees(5.6%). 7. Householdsheaded by women as percentageof rural households(12.01/6).

Smallholderfarmers (as mentionedabove) are being definedas those operating lessthan 3 hectaresof crop land in the abovestudy (JazairY et A 1992).Griffin less (1974) also notedthat the majority of smallfarmers who possessland have than 1 hectare,a sizewhich is just too small.IFAD alsonoted that as in the case in of the landless,the incidenceof householdsheaded by womenand the growth been their numberhas emergedas an important indicator of poverty. It has 76 estimatedby the IFAD that thereare (in the mid-1980s)an estimatedfigure of 16 million householdsheaded by womenin 114 developingcountries, of which millionis estimatedto be landless.World EconomicSurvey (1992) also noted that "extremely" landlesslabourers are generallythe largestrural categoryof the or "hard-core"poor.

1. In connectionwith the emerginginitiatives of the NGos in puttingthe conceptOf "Another Development"into practice in the 1970s, which is the subjectof be Chapter3, two definitionsof Rural Development'that seemto ratherclosely connectedwith theNGOs initiatives are as follows:

Definition 1, by The UnitedNation DevelopmentProgramme (cited in Silitshena, 1982:105):

"a process of socio-economicchange involving the transfomation of agrariansociety in order to reach a common set of developmentalgoals based on the capacitiesand needs of the people.These goals includes a nationally determinedgrowth process that gives priority to the reductionof poverty,unemployment and inequality, and the satisfaction of minimum human needs,and stressesself-reliance and the participationof all people, particularlythose with the lowest standard of living". 56

Definition 2, by Robert Chambers(1983: 147):

"a strategy to enable a specific group of people, poor rural women and men, to gain for themselvesand their children more of what they want and need. It involves helpingthe poorest amongthe those who seeklivelihood in the rural areas to demand and control more of the benefits of rural development.The group includes small scalefarmers, tenants and the landless".

12. The three approachesare describedas fbHow (Griffin, 1974: 204; Cheenia,1984: 2):

1. Technocratic approach: In this approachrural developmentis designedto accelerateagricultural actwities. The provision of required servicessuch as infrastructureand agriculturalinputs necessitate active stateintervention. Private sector participationis strongly encouraged.The government'sadministrative machineryis utilized as the maininstruments in developmentactivities. However, big and medium sized farmers were the main beneficiaries.Representative countriesare: Brazil, Ivory Coastand Philippines.

2. Reformist approach: Its main objective is to increaseproductivity and communitysolidarity. Bureaucracy, rural local governmentand cooperativesare the maininstrument in the implementationof developmentactivities. Land refon'n is the main policy instrument.However, the main beneficiariesare the middle peasantryand other urban residents.Representative countries are Egypt and Mexico.

I Radical Approach: This approachaims at rapid socialchanges and introduces radicalland reform.Only then cana redistributionof wealthand incomecan be obtained.The rural poor and disadvantagedgroups are the main beneficiaries. Representativecountries are Algeria, China, Cuba and Vietnam.

However, Abdullah (1986) remindsus that the above approachesare merely analyticaldistinctions and do not constitutea taxonomyupon which operational strategiescould be convenientlyclassified, mutually exclusive of oneanother.

13. After the programmein India wasinitiated in 1952with massivesupport from the ford Foundationand the US foreignassistance agency, the United Statesassisted in launchingmajor programmesin Iran and Pakistanin 1953,the Philippinesin 1955,Jordan in 1956,Indonesia in 1957and Korea in 1958.Smaller programmes were alsolaunched with U. S assistancein Iraq in 1952,Afghanistan and Egypt in 1953,Lebanon in 1954,and Ceylon(Sri Lanka) andNepal in 1956.At its zenith in 1959, the Americanforeign assistanceprogramme assisted 25 nationsin the implementationof the CommunityDevelopment Programme (CDP) (Holdcroft, 1984). 57

CDP did disappear 14. not totally as it is still encounteredalmost everywhereunder other names.It was either being oriented almost towards social work in urban areas or merged with other rmini'stries(Hogendorn, 1987; Hulme and Turner, 1991). In India, for example,the CDP was absorbedby the Ministry of Food and Agriculture, mirroring the shift to the Green Revolution approach to rural development.Similarly in Africa, CDP struggled on but always played "second fiddle" to high status ministries, and its role was neglected on tasks which those ministries would not handle, i. e. improving the status of women (Jane and Wiggles, 1987).

15. In general it was very common for a nation in Africa, Asia and Latin America during the 1950s and 1960s to set up national development and planning commissionswhich are central in nature and comprised mainly of prominent economistsand bankers(Melkotes, 1991).

16. Optimumconditions refer to: 1. optimalirnigation; 2. intensiveuse of fertilizer, and 3. the usageof chemicalpesticides for pest control.

17. The numberof landless,as notedby Lappe and Collins(1982: 113),has actually increasedbased on a numberof countries.In all non-socialistdeveloping countries 30 to 60 percentof rural adult malesare landless.In Mexico between1950 and 1960 the numberof landlesslabourers increased much faster than the general population,from 2.3 to 3.3 million. Between 1964 and 1970 the numberof landlessfamilies in Colombia more than doubled. During the fifteen years beginningin 1951,the numberof landlesslabourers in Bangladeshhad increased by two and a quartertimes. In India, between1961 and 1971, the numberof agriculturallabourers increased by over 20 million (by 75 percent).In the same period the number of cultivators decreasedby 15 million (by 16 percent). However none of thesefigures includethe millions of landlessrefugees who, findingno farmwork, join an oftenhopeless search for work in the urbanareas.

18. The promisethat GreenRevolution is "scaleneutral" has thus been questioned. As arguedby Bernstein(1992: 57):

"Scaleneutrality promised equal access to the benefitsof the new technology to compensatefor persisting inequitiesin land distribution:a "dream scenario"for policy-makersseeking rapid agriculturalgrowth without increasingrural inequity and its potential for social unrest".

SU*M*IarlyRuttan and Biswanger (1978: 397) argued: 59

"A technology that is essentiallyneutral with respect to scalehas been introduced into an environment in which the economic,social and political institutions have varied widely with respectto neutralityll.

19. In 1969, the International Labour Organization (ILO) set up the World Employment Programme as a means of dealing with the employment side of poverty. In 1974, the World Bank unveiled its policies of Redistribution with Growth' (RWG), developedwith the Institute of Development Studies,University of Sussex.The focus of the RWG was on reducing inequality through the raising the income share of the poorest 40 percent. (Oman and Vvrignaraja,1991; Hunt, 1989). The concept of basic needsapproach to development(which is a finther refinementof the idea of RWG) cameto the scenenext. It was developedby the ILO and was formally adopted at the 1976 World Employment Conference,as a strategy for tackling the fundamental problem of underdevelopment(Harrison, 1980). 'Basic needs'according to ILO include two elements(i) certain minimum requirementsof a family for private consumption: adequate food, shelter and clothing. (H) essentialservice such as drinking water, sanitation, public transport and health and educationfacilities (Oman and Wignaraja, 1991).

20. Having discoveredthe seriousnessof rural poverty, the World Bank has made for pronouncedchanges in lendingwithin the agriculturesector itself Lending irrigation and other projects in the early 1970s for agricultureinfrastructure declined in relative importance,while lending for poverty oriented rural 75 developmentincreased. Between fiscal year 1974 and 1978, approximately by percentof the 363 agricultureand rural developmentprojects approved the Over 50 Bank containedwhat is calleda Ismallfarmer elementor component'. in 1974 per cent of the Banleslending for agricultureand rural development and by bank 1978was accountedfor by 210 rural developmentprojects defined the as to 'thoseprojects in which more than half of the direct benefitsare expected in his 'Addressto the accrueto the rural pooe (Ayres, 1983).McNamara (1975) US$7billion Board of Governors'had asserted that overthe next five years would be investedin rural developmentand approximately100 million peoplewere expectedto benefit. basedon 21. The increasedemphasis on small farmers/smallrural producerswas largefarmer. evidencethat they are capableof producingmore per acrethan the For Studiesfrom all over the world seemsto supportthis recognition. example, in on the World Bank reportson analysisof the differences the value of output Ecuador large and small farms in Argentina, Brazil, Chile, Columbia, and Guatemala,concluding that the smallfarms were 3 to 14 times more productive India, per acrethan the largefarms. Similar results were also evident in the caseof to Taiwanand (Lappe and Collin, 1982).The "targetgroup" according World Bank are: smallfarmers, landless labourers and sub-marginalfarmer, and the urban: unemployedand under-employed.Generally they are referredto as "SmallFarmers"

22. The World Bank was the mostinfluential organization and largest single external sourceof funds for direct investmentin agricultureand rural developmentin 59

developingcountries. However, there were also other organizationsin the field of development,that had undergonea seaof changeduring the SecondDevelopment Decade. The organizationsinclude the United Nations Conferenceon Trade and Development, UNICEF, the World Health Organization, the United Nations Environment Programme and UNESCO. Each came out with their own brand new blueprints for the millennium. The multiplication of models and the plethora of new slogans was bewildering : the New International Economic Order (NMO), growth with distribution, basic needs,basic services,participation, eco- development,endogenous development. Each had a slightly different emphasis, but all had common values based on the idea that growth pursued regardlessof who benefitedfrom it, was making little impact on the poverty of nations and of people. Other organizationsthat also focussed on the need to shift the priorities towards poverty-oriented rural development projects included the FAO, ADB, ESCAJP,APDI and APDAC (Harrison, 1980;World Bank, 1975a;Brara, 1983).

23. The multiple objectivesof the IRDP are as follows (Lea and Chaudhri, 1983: 12 - 13): 1) To improve the living standardand ensuring accessto basic needsamong the rural people. 2) To make rural areas more productive and less vulnerable to natural hazards, poverty and exploitation. 3) To ensurethat developmentis self-sustaiding. 4) To ensure local autonomy and promoting administrative and political decentralization.

3 24. The World Bank in its 'Assaultof World Poverty' (1975: 4146) categorized mainapproaches of attackingrural poverty.They were:

1. The Minimum Package Approach: The aim of this programmeis to provide in a generalimprovement in the level of living through an increasedin production agriculture of a targeted communities.The great advantagesof this approachare 'the promised of low-cost, extensive coverage with comparatively simple is the objectives and operating procedure!(p. 41). One exampleof this approach Chilalo Agricultural Development Unit (ADU) in Ethiopia. However, this basic to approach may not be viable in a situation when there are a obstacles in highly increasingproductivity, as for example, accessto land a concentrated is least land ownership situation. It is againstthis background that this approach despite its attractive and not as widespreadin South Asian countries, advantages for the situation of limited resourcesand massiverural poverty.

2. The ComprehensiveApproach: It is directly oppositeto the first approach by above in that the target group is defined by region and accompanied a maximumdelivery of developmentinputs. In the comprehensiveapproach there aretwo types: a) The CoordinatedNational Programme:It is nationalin scopeand generally addressedto a wide spectrumof rural people.This programmeis characterized"by careful definition of needs and resourcesof the target population, detailed planningor preparationand implementation; phasing of multisectoralcomponents; and extensiveadjustments on completerestructuring of related institutione (p. 60

42). The successof this programmeis also highly dependenton the role of fanner associations.Some of the notable examplesof such programmesincludes those in Japan,Republic of China andKorea. b) 77seArea Development Scheme: This strategy refers only to areas with complex target groups or unique physical conditions. Such programmescan be a single product or it can concentrateon area developmentas a whole. The single product project include the developmentof a certain crop in an area and it also include the settlementschemes (such as the promotion of groundnuts or tobacco in Tanzania and the Gezira Scheme in Sudan). The main advantagesof a comprehensivearea developmentscheme is 'the opportunity to focus directly on the needsof the rural poor through diversified crop and integratedfarming system! (p. 44). This schemeis also very attractive to recipients and donor governments alike, as the rural people in most cases are not involved directly with such a programme.However 3 main limitations of this schemeinclude (i) it may provide benefit to a limited number of people (or settlers) (H) programmedesigns that are too ambitiousand complex and (iii) the schememay distort allocation of resources amongsectors.

3. Sectoral or Special ]Programme: It is speciallydesigned to meet the needsof the poorest in a specific areasor specific groups by a specializedagencies. They for might include rural public works, education, health and training programmes rural communities and also the establishmentof small industries. However, income sectoral programmesdo not constitute a total programme aimed at or productivity increases,since by their very nature they are more complementaryto a total rural developmentprogrammes. Bank, The 3 main approachesas reviewed above, accordingto the World confirmsthat no single packageor formula is likely to be either necessaryor sufficientfor effectiverural development. Canadian 25. Besidesthe World Bank, other lendingagencies include the USAID, InternationalDevelopment Agency, UNDP, GermanAid Agency the GTZ and (Rondinelli,1993) NORAD - theNorwegian Assistance Organization be 26. The statementby Yunusobviously calls for radicalmeasures and can regarded as not likely to be implementedand is merelyto borrow Bernsteilfsphrase, a by Yunus has "dreamscenario". In actualfact it is not. The word put forward becomea reality with the establishmentof GrameenBarks approachto poverty alleviationin Bangladeshwhich is the subjectof Chapter3.

27. V&le the IRDP itself is notedfor not havingan exclusiveor separateprogramme for the poor. It also sufferedfrom weak organizationand managementstructure sinceit relieson manyparticipating government agencies to provideagricultural, social and productive services.Co-ordination between diverse participating agenciesis limited, most of which give higherpriority to projectsfor which they were fully responsibleor "preferringtheir own project" over others.Difficulties in managingand supervisingteams of multidisciplinarytechnical and admi'mistrative staffneeded to carryout the "IRDT projectsare its mainshortcoming. 61

28. The credit component which constitutes 20 per cent of the total lending to agriculture rose to 56 per cent up to 1973 (from 1968) In the most recent period, agricultural lending to the poorest countries exceededUS$ 1000 millions of which more than half was for farm credit. Approximately one-fourth of all credit financedby the World Bank was intendedfor small-scaleproducers (World Bank, 1975a). Lappe (1980: 53) also noted that the World Bank has allocated cumulatively about 13 percent of its "agriculture and rural developmentfund" to agriculture credit.

29. Several types of credit institutions include: National Development Bank, Commercial Bank, Credit Union, Credit Co-operative, Postal Saving Bank, Savingad Loan Bank and various Government'sSupported Project Authorities.

30. The SpecializedAgricultural Credit Institution goes under a varietyof namessuch as AgriculturalDevelopment Bank, AgriculturalFinance Corporation and Rural DevelopmentBank.

3 1. The rangeof interestrates based on someexamples are (Jazairy et al, 1992): (a) 24 - 60 percentin Honduras. (b) 36 - 240 percentin DonuirdicanRepublic. (c) Over 100percent in Nigeria,Sudan and Bangladesh. (d) Over 50 percentin Bolivia, Chile, Ethiopia, Ghana,Malaysia, Mexico and SierraLeone

32. Whether or not "almost half' of the rural credit went to small farmers still dependedon how the banlesdefines "small". What might soundlike a small farmer to North American, may well include much of the landed elite in many developing countries.Two examplesto illustrate this issue are provided by Lappe and Collin (1982):

1) In Philippines, in 1977,the World Bank emphasizedthat there hasbeen an increasingshare of credit for small rural producerswith 30.6 per cent of the Banlesfund being loanedto ownersof lessthan 17 acres.17 acresmay sound smallto Bank officialsin Washington,but for thosewho arefamiliar with the rural Philippines,it is not small. A Comell University study suggeststhat the vast by majority of rural Filipinos are landlessor near-landlessand can only survive sellingtheir labourand that of their familiesto largelandholders.

2) In Guatemala,ajoint FAo/World Bank rural credit programmeallocated one- half to the top 3 percentof landholders:those owning 112 acresor more. The otherhalf would go to what the Bank callsfarmers owning less than 112acres of land.But in reality,a full 97 percentof all farmershave less than even an acreand many are without land at all. Thus, even though the statedpurpose is for the " small farmee or smallholders,it actually ended up in the hands of large landholders.

33. Ramesh (1990: 347) has provided a good account of the way the wealthier farmers higher or statusvillagers avoid repayment of loans.He argued: 62

H defaulters higher ...major are the wealthier and status villagers, who often view their overdue loans as grants, or as a mark of social and political power. In some cases,village influential have been known simply to dare local cooperativesociety to take action to collect a loan, relying on local political and social influence to get the society to back down. In other cases,local records have beenblatantly altered and rules bent beyond recognition to accommodatethe errant lending habit of a village potentate". 63

CHAPTER THREE : THE EMERGENCE OF AN ALTERNATIVE APPROACH TOWARDS THE RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN THE DEVELOPING COUNTRIES -THE "ANOTHER DEVELOPMENT"

3.1 INTRODUCTION

This chapter examinesthe alternative approach to rural development and poverty alleviation strategy in developingcountries, which unlike the conventional approach is initiated by the non-governmentalsectors. The alternative approach representsreaction to the unsatisfactoryefforts associatedwith the centrally planned, top-down strategies for rural developmentunder the conventionalapproaches.

This chapter will also focus specifically on the Grameen Bank (GB) of Bangladesh, being the model of such an approachwhich will be examinedin detail to serve as the background to the version of the GB model - known as the IKIITIAR PROGRAMME or Amansh 1khtisir Malaysia Rural Credit-Cum Poverty Focussed Programme(in Chapter 5). However, Chapter 3 begins by examining the concept of "Another Development" which forms the conceptual framework of the Alternative Approach.

3.2 THE EMERGENCE OF AN ALTERNATIVE APPROACH - THE "ANOTHER DEVELOPMENT"

3.2.1 NORMATIVE VERSUS POSITIVIST APPROACH

As mentionedin Chapter 3, the early 1970s was marked by the emergenceof concertedefforts in dealingwith the growing problemsof poverty, inequality and unemployment,especially in the developingcountries. However, this does not mean that there was a single consensusin relation to the approachesand strategiesin combatingthe aboveproblems.

In fact therewere theoreticaldebates among some concemed development specialists with the question of hoiP developmentshould take place rather than limiting 64

discussionabout how development actually takes place. This is termed a normative approach in contrast to the positivist approach exemplified in the modernization- growth paradigm.Thus, there was a distinction between what 'is taking place' and what'Ought to take pl"e' (Burkey, 1993;Hettne, 1990) 111.

In relation to the 'conflict! between the "normative" and "positivist", the period beginning around the mid-1970s was marked by the emergenceof numerous self- proclaimed 'alternative' developmentconcepts and strategiesin putting forward the idea of 'how developmentshould takeplace' [2].

The call for 'alternativelife stylee was first mooted by the "green movement"of WesternEurope, in responseto a variety of problems,especially pollution of the environment(Abdullah, 1988). It was Schumacher'sthesis "Small is Beautiful" (1973),which, as noted by Webster(1991), became the virtual bible for the alternative movement[3].

While the abovewritings were instrumentalin promotingthe ideasof an 'alternative concept',they generallyremained highly idealistic and were labeledutopian. Ekin (1992),however, noted that nowadaysthe ideasput forward from thosewritings are universallyacknowledged to play an importantrole. Generallythe major initiatorsto bring this 'alternative'trend in the developmentapproach to the centre stagewere scholarsand developmentprofessionals through their writings and international conferences(Friedmann, 1991).

Amongthe most influentialwere The Limits to Growth (Club of Rome),Reshaping InternationalOrder (Tinbergen and 20 distinguishedscholars from all over the world, (Bariloche 1974)and Catastropheor New Society?A Latin AmericaWorld Model Institute,Argentina, 1976) (Abdullah, 1988).

Two Apart from these, there were various meetingsin the internationalarena. landmarkmeetings were the Stockholm Conferenceon the Human Environment (1972),which led to the establishmentof the United Nations EnvironmentProgram (UNEP), and the Cocoyoc (Mexico) seminar on "Patterns of Resource Use, Environmentand Development Strategies" in October1974 held under the auspicesof UNCTAD andUNEP (Friedmann,199 1).

The Cocoyocmeeting brought two major strandsto the alternativemovement W that priority shouldbe given to satisfyingthe 'basicneeds' of peoplerather than to simple growth maximizationand (ii) the needfor the rich to reconsiderover-consumptive 65

modes of living. The declarationthus placed emphasison development as a state of human well-being or 'people-centered'rather than merely the state of the national economy(Conyer and MI, 1984;Hettne, 1990;Friedmann, 1992; Burkey, 1993).

3.2.2 THE ALTERNATIVE TRENDS IN THE DEVELOPMENT THINKING

Alternative trends in developmentthinking have been actively promoted. In 1975 the Swedish Dag Hammarskjold Foundation published a pamphlet with the provocative title 'T'hat Now? Another Development" (Dag Hammarskjold Report, 1975). In 1976 the International Foundation for Development Alternatives (IFDA) was establishedin Switzerland to push the alternative concept further (Friedmann, 1991). Mainstreammodels of developmentand policies were challengedfor failing to address the questionof masspoverty and sustainability.

The 'alternativists',for the lack of a better term, were convincedthat 'Another Development'could be initiated. The concept of "Another Development" was popularisedby the Dag HammarskjoldFoundation and its major vehiclesfor the elaborationof alternativeshas been the periodical'Development Dialogue' (Oakley and Marsden, 1984). Meanwhile the IFDA popularisedthe concept of "Alternative Development"The journal by Institutesfor World Order * "Alternatives"published the is onesuch example of promotingthe alternativesviews and ideas (Hettne, 199 1).

Oakley (1991) stated that the conceptof "alternative Development"or "another development"is also variously referred to in literature as "people-centered development" "counter development" and "participatory development" and "developmentfrom within" as suggestedby Fiona (1992). One single idea that emergedfrom the conceptof "Another Development" is the need for a greater participationof rural peoplein the developmentprocess.

"Another Development"theorists believe that developmentshould be (flettne, 1991; Burkey,1993):

1. need-oriented,geared to meetingboth materialand non-material human needs. 2. endogenous,stemming from the heartof eachsociety. 3. setf-reliant, implying that society relies primarily on its own strengths and resources. 4. ecologicallysound, utilizing rationallythe resourcesof the biosphere. 5. based on the structural transformationas an integratedwhole 141. 66

The searchfor "Another Development" made further inroads, in 1983 when the United Nations GeneralAssembly appointed the World Commission on Environment and Development to 'propose long-term environmental strategies for achieving sustainabledevelopment by the year 2000 and beyond'. The fruit of the World Commissionwas the publication of "Our Common Future", which was hailed as a landmarkand stimulatedrenewed discussion of afternativeness,this time with a focus on sustainability. Environmental issues have become a global concern (Friedmann, 1991; Abraham, 1991).

Thus the spirit and concept of "Another Development" is very much alive. It has placed stress on the issuesof participation, 151sey4eliance, 161 sustainability 171 and basic-needs181.

3.2.3 NON GOVERNMENTAL ORGANIZATIONS (NGO) AS THE PROMOTER OF THE "ANOTHER DEVELOPMENT" CONCEPT

In all developingcountries, the definition of 'development'is madeby governments. Thegovernment states the aims,makes the policy andsets the pace.In manycountries, however,it hasbeen recognized that developmentas definedby the governmentis not have exclusive- that there are bodies other than governmentswhich a useful contributionto maketo the developmentof that countryand that governmentdoes not havea monopolyon ideas,policy or practice.So long as thesebodies supplement or complementthe government'sprogrammes and do not activelyoppose them, they will be supported(Holloway, 1990) 191.

In fact, sinceearly 1970's,there has been growing world wide recognitionof the vital roles that the non-governmentdevelopment organizations can play in development, attemptingalternative approach to rural development,especially in the alleviationof poverty (Ray, 1982; Esteva, 1987; Sen, 1987; Schneider,1988; Gill, 1991; World Bank, 1990; 1101Singh, 1991; Gill, 1991; IFAD, 1992;AARO, 1992).

But the term NGO has come to signify not only a legal and formal status: their way is generallythought of today as an alternativeway, a new approachto rural development (Singh, 1991),being at the forefront of activities (Khondker, 1992). NGOs are believed to work effectively at the grass-root level (van der Heijden, 1987; Williams, 1990) and have good record in rural development(OECD, 1988) 1111. 67

The Non-Government Organizations 1121 were instrumental in pushing the 'Another Development' concept further. In 1984 they began to meet annually for what they called "The Other Economic Summit", at which issues such as "the international disorder", "putting "in "working economic peoplefirst" , search of self reliance", like a woman" and "local economic regeneration" were passionately debated. Tile impact made by the NGOs in promoting the above mentioned concept are tremendous. The result was seen in 1990 when the World Bank put poverty back on the development agenda 1131 and created special offices on the environment and women (Friedmann, 1991). This unexpected shift of position by the Bank is observed by Hewitt (1992: 236) when he argued:

too.. Eventhe World Bank hasbeen forced to rethinkwhere it is going.Its steadfastattachment to rigid policiessuch as market-led structural adjustment programme throughoutthe 1980shas weakened.Its emphasison povertyin the 1990World DevelopmentReport was, for the Bank, an unexpectedshift of position....An emphasis on relievingpoverty and improvingeducation, nutrition andhealth care is a welcomestep from sucha powerful internationalinstitution'

In 1992,the World Bank, in its 'World DevelopmentReport 1992', after reviewing its previous belief in growth as the solution to poverty, had concededthat even though someproblems are associatedwith the lack of economic development,other problems are madeworse by the growth of economicactivity. The Bank also stated that ppverty is increasing and its main overaching objective is therefore sustainable poverty reduction (World DevelopmentReport, 1992).

3.3 THE CONCEPT OF THE "ANOTHER DEVELOPMENT" AS PUT INTO PRACTISE

There are many examplesof an explosionof popular organizationsand activities, especiallyin developingcountries seeking consciously or not to put the conceptof 'Another Developmem"into practise(Schneider, 1988; Ekin, 1991). Most of these activitiesare initiatedby the non-governmentsectors. Ghai (1989), has conveniently groupedthese activities or organizationsinto four categoriesin accordancewith their centralcharacteristics: 68

1. Efforts in organizing poor women working in urban slums as vendors, home-based workers and casual labourers into trade-union type associations.Two of the most prominent examplesare (i) The SeIr-Employed Women's Association (SEWA) in India and (ii) The Working Women's Forum (F"VP) in India.

2. Initiatives to promote peasant groups and rural workers' organizations to struggle for their rights and to undertake collective initiatives to appropriate a larger share of the surplus generated by their economic activities. The best examples are that of (i) Sarikalas in the Philippines and (ii) PIDA (Participatory Institute for Development Alternatives) in Sri Lanka.

3. The third category, comprisingSLx-S (Se servir de la saison secheen savaneet au Sahel)in Burkina Faso, ORAP (The Organization of Rural Associationsfor Progress) in Zimbabwe and ADRI (Action pour le development rural integre) in Rwanda, representseffort to promote social and economic developmentthrough mobilization and pooling of labour and other resources,drawing inspiration from traditional self- helpand mutual aid groups.

4. The fourth categoryis the initiativethat exclusivelyand solelyextends credit to the rural poor. It is upon this fourth categorythat this study will be focusing.There are manyexamples of suchprogrammes throughout the developingcountries (see Table I in Chapter 1). Programmesthat havebeen launched incorporate a revolving credit (loan) fund as the basisfor their lendingcapacity. Out of so many programmesfor extendingcredit to the poor householdsthat have been implemented,the most successfulis the GrameenBank (GB) of Bangladesh,discussed in the next section.

3.4 THE GRAMEEN BANK OF BANGLADESH

3.4.1 GRAMEEN MODEL BANK - THE SUCCESSFUL DEVELOPMENT

The Grameen Bank (GB) of Bangladesh has been widely acclaimed as the most successfuldevelopment effort in the 1980sand early 1990s (Hossain, 1984 and 1988; Siddiqui, 1984; Hossain and Rahman, 1988; Fugelsang and Chandler, 1988; Ghai, 1989; Hulme, 1990; Deveraux et al, 1990; Clark, 1991; Remenyi, 1991; Ekin, 1992; Jazairyet at, 1992; Uphoff, 1993; Rondinelli, 1993; Mascarenhas,1993; Todaro, 1994; Riedinger, 1994). Some observationsare as follows: 69

'The GB in Bangladeshis perhaps the most prominent and successfulexample"' (Ghate, 1992: 169).

"Their statistics are impressive and few can deny that they have helped to channelbenefits to large sectionsof have broken in rural poor... new ground terms of establishing, on a scale, links between existing services and resources and previously excluded rural people" (Oakley, 1991: 32).

Even the World Bank acknowledgesthe GB,positive role:

"Nowadays Grameen Bank is ... successfully reaching farmers and other small-scale operators while maintaining financial viability. But such an institution is rare" (World DevelopmentReport, 1991: 76).

3.4.2 CREDIT AS A NEW WEAPON IN COMBATING POVERTY

As briefly mentionedin Chapter 1, the importanceof credit has now been widely recognizedas an entry point towardspoverty alleviationefforts. This hasbeen noted by ProfessorJoe Remenyiwho headedthe study entitled "Where Credit is Due: Income-GeneratingProgramme For The Poor in DevelopingCountries" (1991). This studyconcludes that manyof theseprogrammes have shown positive results in terms of generatingincreased incomes. In his words, Remenyisaid "the impact of credit to the poorestof the poor on their livelihood and prospectsis dramaticrather than marginal" [141.

IFAD (Jazairyet al, 1992) in its generalreview of the role of credit argued that credit itself may not be sufficient for alleviating poverty. As such it has to be combinedwith improved technologies, access to market and improvement of infrastructures. But targeted credit for the poor which has already taken place in many developing countriescan be regardedas a key step in openingthe door to such improvements.

3.4.3 ORIGIN OF THE GRAMEEN BANK

The GB was started as a small action-researchproject in Chittagong district, by ProfessorMuhammad Yunus, whose intention was to explore the possibilitiesto design framework a comprehensive which would bring the rural poor into viable 70

financial institutions. So in 1976, the action research project which he called "Grameen Bank Project" (Grameenmeans Rural) cameinto being with the following objectives(Yunus, 1982: 11):

1. To extendthe bankingfacilities to poor men and women. 2. To eliminatethe exploitation of moneylenders. 3. To create opportunities for self-employmentfor the vast un-utilized and under- utilizedmanpower resources. 4. To bring the disadvantagedpeople within the folds of someorganizational format which they canunderstand and operateand can find socio-politicaland econon-dc strengthin it throughmutual support. 5. To reversethe age-oldvicious circle of'low income,low savings,low investment! into an expandingsystem of 'low income,credit, investment,more income,more credit,more investment, more income!.

The project demonstratedits strengthin somevillages during the 1976- 79 period - Finally in June 1979, the GrameenBank Project was launchedto replicate the achievementand experiencein a wider area.Since 1983,the GB has had the formal statusof a'specialisedcredit institutiore for the rural poor (Hossain,1988).

from In 1980,the GB beganto scaleup its activitiesafter receivingsome funds the IFAD (Hulme, 1990) [151.By March 1991,the GB had expandedto include 854 branchesoperating in 21,114villages and the membershiphas increased tremendously from fewer than 15,000in 1980 to 1,149,435by March 1992 (JazairYet al, 1992), taking out averageloans of US$ 5.6 n-dllioneach month for 400 differenteconomic activities(Ekin, 1992).

3.4.4 ORGANIZATIONAL STRUCTURE OF THE GRAMEEN BANK

The ChiefExecutive of GB is the ManagingDirector. Activities of the bank are run 9 underthe directionof the Board of Governors,,consisting of 13 membersof whom are selectedfrom amongstthe borrowers-shareholders1161. Various activitiesof the bank are organizedand implementedby four tiers of the administrativeset-up, viz, branchoffices, area offices, zonal officesand headoffice. The branchoffices are the lowestoperational unit of GB andare located in the villages.The staff of the banklive in the villagesand work with the poverty-strickenmembers (Mohammad Siddiqur et al. 1991). 71

GB is not a centralized decision-making organization. It has grown horizontally. Managementfunctions and decision-makingpowers are continuously being delegated to the lower units of operation- zonal, areasand branch levels (ibid, 1991).

3.4.5 GRAMEEN PHILOSOPHY IN DEVELOPMENT

Yunus in his paper'Credit For Self-Employment:A FundamentalHuman Right' argued that "... poverty createsa condition in the society which negatesall human rights. A poor personhas no right at all". Yunus's philosophy of developmentis that, it should be regardedas human right issue and therefore there should be a positive changefor the bottom 50 percent of the population, not simply a question of growth. It has been the casewhere conventionally,growth is equatedwith the GNP per head. Yunus thus argued(1987: 142):

"In otherwords if oneis looking for the measurementof economicdevelopment one would be looking at the per capitareal incomeof the bottom half of the population, not the nationalper capitaincome".

income The above statementis true as higher GNP does not indicate equity in by distributionof the population.According to Remenyi(1991) incomedistribution householdsis not the sameas wealth distribution by households,but it is generallytrue is that the wealthiesthouseholds also have the highestincomes 1171. The reverse also GNP is the true - the pooresthave the lowestincome earnings. Similarly per capita not sameas average household income.

Attemptsto secureeffective realization of humanrights for the poor cannotproceed far becauseof economic,social and political manipulation.Yunus felt that a great by transformationin the economicbase would be possibleand can be done easily base ensuringtheir right to credit.To the poor, credit can graduallybuild up an asset in so as to commanda better return to their tabour and can contributeto growth income.

However,the traditionalbanking system ffiled to deliver credit becauseof collateral requirements.It is thereforenecessary to haveprogrammes designed exclusively for the poor and undertakenby a speciallydesigned delivery system.On this, Yunus (1987:143) explains: 72

"To argue that banking cannot be done with the poor becausethey do not have collateral to offer is the same as arguing that men cannot fly becausethey do not have Today do fly, fly wings... not only men they at thus to that this innovative speed... argue animal cannot design a banking system which does not rely on collateral is simply an insult to human dignity".

3.4.6 ON REACHING THE POOR

Prof MuhammadYunus noted that social scientists have been trying to identify the factors which are responsiblefor bypassingthe poor by all national and international development efforts. Their findings seem to be varied with different degrees of emphasisbut a majority of them seemto have almost a similar conclusionthat:

"The existing socio-economic and political power structure in these countries puts such a- strong shield around the poor that it is nearly impossible to pierce through it" (Yunus, 1984: 5).

The problemwith the conventionalpoverty-focused programmes according to Yunus is that they arewrongly addressedor their deliverymechanisms are not well designed for the task and generallybeing intercepted along the deliveryline beforethey reach their destination.Therefore he emphasizedthat the strengthof a poverty-focussed has programmecomes from it exclusivenessand thereforethe deliverymechanism to be designedand operated exclusively for the poor.

Thegeneral principles of the GB in reachingthe very poor areas follows:

L Exclusivefocus on the poor. ii. A speciallydesigned delivery system. iii. Speciallytrained and committed staff. iv. Supportivenational policy framework.

3.4.7 EXCLUSIVE FOCUS ON THE POOR

While the definition of the 'pooe has brought about some conceptualconfusion, Yunus,(Gibbons, 1988a: 59) providessome useful definitions: 73

"It would be analytically useful to have, say, three definitions of the poor, each broader than the other, for examplePI (hard-corelabsolutepoor in many countries which means the bottom 20 to 25 percent), P2 (the bottom 35 - 40 percent) and P3 (bottom 50 - 55 percent)".

The GB is a bank meant only for the poor. Membership of GB is restricted to persons whose family own less than 0.5 acre of cultivable land, and the value of all the family assetstogether doesnot exceedthe market value of one acre of medium quality land in a particular area (Alam, 1988).Kropp (1990) seesGB as a an outstandingnew type of bank that is being organizedspecifically for the poor.

3.4.8 SPECIALIZED DELIVERY SYSTEM

A numberof requirementsmust be met if the very poor rural householdsare to be able to participateand succeedin the credit programme.Therefore loans must be granted underthe right and suitableconditions (Kasim, 1990a).In the GB modelno collateral is required. The group as a whole standsguarantee for the individual members (MohammadSiddiqur et al, 1992). Thus group liability is being substitutedfor collateral[181. On recognizingthat the majority of rural peopleare illiterate and too shyto cometo a bank,GB takesbanking services to the villageswhere the poor live (Ahmadand Hossain, 1985). Someof the basic characteristicsof the GB delivery systemare discussed as follows:

1. The Five Member Group

The group of five is the starting point or basic building block around which this programmeis organized.Groups are formed of like-mindedpeople of similareconomic status.Only onefamily member can join a group, andgroup formationamong relatives is discouraged.The processof group formationis guidedby bank workers (Gibbons andKasiniý 1990; Jiggins, 1985).

On formationof a groupby prospectiveborrowers, they undergointensive training for familiarizationwith banlesrules and discipline.Each group electsits own chairperson andsecretary and to ensurethat groupsare not dominatedby an individual,leadership must be rotated (yearly basis)so that every membercan learn about responsibility (Hulmeand Turner, 1990). 74

Severalgroups are federatedinto a 'centre! (5 per group x6 groups = 30 participants which constitute a centre), elect a 'centre chief and a 'deputy centre chief among themselves. Male and female members form separate groups and centres. The chairperson in the group and centre-chief (also on a rotational basis) ensures attendance (which is compulsory) at the weekly meetings, payments of loan installmentsand overall discipline (Jiggins, 1985; Muzameel Huq, 1988; Mohammad Siddiqur et al, 1991). As of September199 1, there were more than 42,207 centresand 241,242 groups (Yaron, 1993).

2. Loan is Disbursed in a Staggered Manner

Loan disbursementto the group is staggered:the first loan goesto the pooresttwo amongthe group. Oncethese two are doing well, the next two then receiveloans. Subjectto recoveryof loans,the group chairman(chairwoman) is the last to receive the loan (MohammadSiddiqur et al, 1991;Mascarenhas, 1992). Borrowers who have a perfectpayment record of their loansare immediatelyconsidered for biggeramounts in anysubsequent loan [191.

Borrowers choosetheir own loan activities, basedon their knowledgeand skill. However,it is subjectto unanimousapproval of their group and centre,who will scrutinizethe choice of such activity and the potential of repayment(Gibbons and Kasim, 1990). GB membersare reported to have taken loans for more than 400 different activities which are grouped into eight broad categoriessuch as (1) processingand manufacturing,(2) agricultureand forestry, (3) livestockand fishery, (4) services,(5) trading,(6) peddling,(7) shop-keepingand (8) collectiveenterprises (MuzameelHuq,1988).

3. Open Transactions

All the bank transactionare conductedin public view, during the weekly meeting. Nothing is confidential and no information is kept secret. This is to minin-dze opportunitiesfor malpractice.The opennessof all financial and other transactions raises confidenceamong the membersin the bank (Hulme and Turner, 1990; MohammadSiddiqur et al, 1991).

4. Highly Supervised

GB does not give'any subsidy.It must get its moneyback. The credit programmeis thus closely The field supervised. staff closelymonitor the progressof the borrowers 75

and take corrective measuresif necessary(ibid, 1991). On this Yunus (1987: 143) argued:

"Credit without discipline is nothing but charity. Charity in the name of credit will destroy the poor, not help them".

The highly supervisednature, however, does not dictate the decision making process, where borrowers are free in making decisions on the economic ventures to be undertaken through discussions with their peers. A study by the Agency for International Development (AID) on 36 rural development project in eleven Mrican and Latin American countries show that there was a clear connectionbetween projects successand the farmers'decision making process(AID, 1975).

5. Discipline of Repayment

There are 2 main ways in which disciplineis enforced.First, the borrowers,even thoughutilizing loansas individualsand responsiblefor repayment,are the group that is responsiblefor ensuringthat the loans are repaid. A kind of group pressureis brought to bear upon borrowersby stipulationthat default by one memberof the groupis penalizedin denyingaccess to further credit to all membersuntil the problem is rectifiedor mutuallyresolved. As Yaron (1994: 55) points out, members"cannot gain accessto credit until the debts of the groups are discharged".Second, the repaymentsare to be madein weekly instalmentsin the weekly meetings,which are attendedby all the borrowers in the respectivecentre. This again acts as group pressure.

(Osmani, As a result,the borrowersare carefulin seekingout the truly viableactivities 1989).On this Yunusexplains (Gibbons and Kasim, 1990: 63):

"Formation five of the small member group ...and federating the group into centres, helps create the right kind of pressure at a time when a member tries willfully to violate GB rules and peer support at times when a member falls into any difficulty" 1201

Group Fund

The group fund is a very successfulinnovation of the GrameenBank. As per the conditionof a loan,every group member deposits one Taka each(for the conversionof Taka US$, to seeFootnote 20) week as personalsavings, plus five per cent of the 76

amountborrowed which is deductedat the time of its disbursement.The savingsfrom the fund can be borrowed at time of emergency (Ahmad Qazi and Hossain, 1985; Streeflandet al. 1993). The importanceof the group fund, as Fuglesangand Chandler (1988: 121) put it:

"immediately allocates people vital resource only they make use through a collective decision-makingprocess that is entirely independentof the bank".

Ahmad Qazi and Hossain(1985) also stated, in addition to the 'Group Fund', an EmergencyFund' is createdwith contributionsfrom members,which can be usedto repayloans of a memberif he/shebecomes unable to repay due to any unforeseen circumstances.By March 1991,group savings(both funds) had reached698 million taka (approximatelyUS$ 23 million), out of which 570 million (approximatelyUS$ 19 million) are savedby women(Jazairy et al, 1992;Streefland et al, 1993).GB hasthus inculcatedthe habitof savingamong the very poor rural households.

From abovedescription of the specializeddelivery system,it is clear that Grameen Bankhas actually created a sort of uniquedelivery and recovery mechanism, which are very innovative.

3.4.9 SPECIALLY TRAINED AND COMMIT D STAFF

The specializeddelivery system developed by GB requiresfor its effectiveand efficient field operation,staff who understandand agreewith it fully. All staff receivebasic trainingfor six months,and remain probationary for anothersix months(Gibbons and 75 Kasim, 1990).GB currentlyemploys 12,000 people, training 2000 more in 50 - batches each year (Ekins, 1992). Since the training process is strenuousand challenging,it weedsout thosewho are not physicallyand mentallyprepared to work in the rural areas(Mohammed Siddiqur et al, 1991).

The GB training methodologyis speciallybased on 'learningby doing' approach. During training,staff are requiredto observecritically the working mechanismof the rural economyand societyand the plight of rural poor. It is theseexposures that help themto understandthe philosophyand approach of the bank and to developqualities requiredfor inspiringtrust andconfidence among the GB borrowers(Hossain, 1988). 77

3.4.10 SUPPORTIVE NATIONAL POLICY FRAMEWORK

Yunus arguesthat the developmentprogramme should not work at cross-purposes, and warned that "One agencyof the government may try to build something for the poor while another agency may be destroying it all without even realizing it". Thereforethe governmentmust ensurethat none of its actions cancel-out the impact of a Grameen-typeprogramme (Gibbons and Kasim, 1990). In the GB case,they receive a very strong governmentbacking.

3.4.11 OTHER PROGRAMMES WITHIN THE FRAMEWORK OF THE GRAMEENBANK

In 1984, the GB evolved a social development programme called The "SIXTEEN DECISIONS" and with this has moved into an overall developmentprogramme for the poor. These sixteen decisions motivate membersto raise their aspirations for a better life and instill in them values of discipline, unity and hard work. (see Appendix 1). The Sixteen decisionsare chanted as slogans during their weekly centre meeting (Rossain, 1988). In addition the GB has also moved into a housing programmefor the funded by UNDP had rural poor with long term loans (Taka 7000 - 12,000) the and 85,500borrowers by September1990, an increasefrom only 317 in 1984 (Mohammad Siddiquir et al, 1991; Islam et al, 1989; Ekins, 1992).

3.4.12 THE GRAMEEN PERFORMANCE

PART ONE - THE ECONOMIC EFFECT

The GrameenBank economiceffects on its borrowersare discussed as follows:

1) Effect on Income

A numberof independentstudies undertaken on the GB borrowershave come to the conclusionthat GB loanshave contributed to a significantimprovement in the income levelsof the borrowers.These results are summarizedin Table S. Other studies:Man and Quitana,(1982), Ghai, (1984), Hossain(1984), Siddiquir (1984) and Rahman (1986a) haveshown that GB loanshad a positive effect on incomes.Hossain (1988) also confirmedthe aboveconclusion and his study concludedthat the incomesof a 78

sampleof GB memberswere 28 percent higher than non-membersin the samevillages. Islam and Lee (1985) noted that between 1980 and 1982, GB's member per capita income had increasedby 32 percent, when the per capita income in Bangladeshas a whole increasedby only 2.6 percent.

2) Effect on employment.

The Hossain(1988) studyalso concludedthat aboutone-third of the borrowerswere unemployedbefore joining the bank. Thus the bank has helped to generatenew employmentfor about one-fifth of its members.

Table 5: Survey Resultson Impact of GB on incomes

Project Detail Result

L* BangladeshInstitute of Bank Surveyon 50 womenborrowers found Management. that their incomeshad increased by 73 percent(1980 - 81).

2.* BangladeshBank. Surveyon 175members found that their incomeshad increased by 58 percent (1980-82).

3.* BangladeshInstitute of Surveyon 600 membersfound that their of DevelopmentStudies. incomehad increased by 68 percent (1980-81).

4.# GrameenBank Independent Surveyof 825borrowers found that Studies. their incomeshad increased on average,by 66 percent(1980 - 81).

5.# GrameenBank Independent Surveyof borrowersfound that their Studies. averageper capitaincome had increased in realterms from Tk 1762to Tk2697- 53 percentin 1982prices (1982 -85).

Sources Ghai, D, 1984, An Evaluation of the Impact of the Grameen Bank Project, p. 21. # Remenyi,J, 1991, Where Credit is Due: Income Generating Programmesfor the Poor in Developing Countries, p. 107. 79

3) Reaching the target group.

Hossain (1988) concluded that the bank is successfulin reaching the target group, where only 4.2 percent of the loans go to borrowers with more than 0.5 acres of cultivable land. Many studies also suggest that there was a reduction in rural indebtedness,particularly to money-lenders as a result of Grameeresintervention (IFAD, 1985; Mascarenhas,1992).

4) Alleviation of poverty

Tff- Ilossain (1984,1988), has concluded that credit has resulted in the alleviation of poverty while at the sametime improving the nutritional status of households.Hossain (1988), for example,found that only 6 percent of GB memberswere living in poverty, while amongnon-members, it was 84 percent.

5) Repayment Performance.

Official records of the GB stated that repayment performance is excellent or near perfect, around 97-98 percent. This has been confirmed by other studies as well. Hossain (1988) concluded out of 975 loans surveyed only 0.5 percent were overdue Rahman beyond one year and only 3.3 percent had an overdue weekly premium. But (1986) and Jazairy et al, (1992) have also noted the excellent repayment rate. among the commercial banks in Bangladesh,their repaymentrate was only 50 to 60 percent(Devaraux et al, 1990). The Industrial Bank of Bangladeshas noted by Todaro in default. (1994) is famousfor having almost all of its loans to the relatively wealthy

The mainfactors that contributetowards the successof GB programmeand also the in excellentrepayment are: (i) directly attributableto borrowers!groups effectiveness ensuringthe productiveutilization of credit, (ii) due to group pressureand moral or socialsecurity of cohesiveself-help groups which providesa very effectivecollateral substitute,and as noted by Deverauxet. al (1990) that "group liability is a better guaranteeof financialresponsibility than property" (iii) an additionalfactor is the close supervisionof bankworkers and the procedureof collectingweekly repayments 1211.

Accordingto many observers(Lele, 1975; Adam and Ladman, 1979, Mosley and Dahal 1985; IFAD, 1985; Bratton, 1986;Huppi and Feder, 1990; Getubig, 1991; Jazairyet al, 1992), group lending schemeshave a better repaymentrecord than individual schemesin developingcountries [221. An observationon most of the NGO based credit programmesalso has shown that women make better development 80

partnersand are more creditworthy than men (Elcoat, 1988; Cham and Poulton, 1991). Studies have found that projects are most likely to elicit the cooperation of women when resourcesare placeddirectly under their control (Todaro, 1994). In the Grameen model, women constitute more than 75 percent of the membershipand have proved to be creditworthy (Hossain,1984,1988) 1231.

PART TWO - THE SOCIAL EFFECT AND COMMUNITY DEVELOPMENT

Virtually all the GrameenBank Programme and other similar programmesas listed in Table I in Chapter 1, put a heavy emphasison community developmentin addition to poverty alleviation.The "Community DevelopmentProgramme" of the 1950sand early 1960s failed tragically becausethe practitioners in those days did not realized the importance of empowerment.However today's community development through the micro-enterprisecredit programmeis different, since emphasisis given to the process of empowerment(Remenyi, 1991) 1241.

In relation to this, GrameenBank has also brought about the participationof the membersin its programme(Oakley, 1991). The membersparticipate in decision- makingand decide on all matterspertaining to their economicactivities. Furthermore, power sharingis evident as out of its 13-memberBoard of Directors, 9 are the borrowersthemselves (Mohammed Siddiqur et al, 1991; Rondinelli,1993) 1251.

There is also a growing element of self-reliancein the GB programme, and the most important element is the growing control over economic resources and social dependence environmentresulting in greater confidenceand reduction in insecurity and (Ghai, 1989).

3.4.13 LEARNING PROCESS VERSUS BLUEPRINT APPROACH

David Korterfs (1980) studiesof five Asian successstories 1261were analysesof what in he called the "learning process approach". In relation to this he suggestedthat order to achieve development goals, it is more appropriate to adopt the 'learning processapproach! rather than the "bineprint approach". On this he argued (1980: 497): 81

'These five programme were not designed and implemented - rather they emerged out of a learning process in which villagers and programme personnel sharedtheir knowledge and resourcesto create a programme which achieved a fit between needs and capacitiesof the beneficiariesand those outsiders who were providing assistance.Leadership and team work, rather than blueprints, were the key elements. Often the individuals who emerged as central figures were involved at the very initial stage in this village experience, learning at first hand the nature of the beneficiaryneeds and what was required to addressthem effectively".

Awarenessis becoming widespread as Korten (1984: 182) noted in his later work, "that the blueprint approachis an inadequateresponse to rural development".Similarly the GB does not resort to any blueprint (Ghai, 1989). It actually emergedout of the "learning process approach" in which research and action were integrally linked (Hulme, 1991) and signifies "go to the people, live among the people and learn from the people" (Panda, 1991). Starting initially as a small-scaleexperiment in testing the proceduresand structuresof the banking framework for the poor, it was then gradually scaledup from feedback and responseto the dynamic needs of its clientele (Sham, 1991). It has also been argued that projects which are likely to be sustainable(Elliot, 1994) and with encouragingresults (Friedmann, 1992) are those that are continually modified during their course,an essenceof "learning processapproach". Goulet (1992) also noted that the above successstories (the GB and other similar programmes)are, however,"microsuccesses" in an environmentof "macrofailure".

3.4.14 WIDER IMPACT OF THE GRAMEEN APPROACH

The GB approachhas been widely imitatedand its impactsare spreadingfarther afield andis makingan impactnot only in Bangladeshbut alsoat internationallevel. most of for thesereplications are groundedon the propositionthat GB is taken as a basis a small scale experimentalproject. They are normally very closely monitored and modified during implementation.Only when the researchproject shows that it is achievingits goals,it is institutionalizedand expandedin its operation(Hulme, 1990). By 1990,there are 12 examplesof Grameenreplication throughout Asia, Africa, Latin Americaand North America(Gibbons, 1990) 1271. Meanwhile the IFAD was actively promoting the GB experiencein its projects throughout Asia, Africa and Latin Americain the 1980sand 1990s(Jazairy et al, 1992). 82

3.5 CONCLUSIONS

One basic problem confronting the poor is the lack of productive assets,particularly land and as a result they derived very little or nothing at all from land based agricultural/credit and rural developmentprogrammes. The preoccupation of the state plannerswith agricultural production per se tended to miss out the bulk of the rural poor.

In relation to this, around the early 1970s,a "quiet revolution" has begun in the way in which rural developmentwas viewed. This alternative approachrepresents reaction to the unsatisfactory efforts associatedwith centrally-planned,top-down strategies for rural developmentunder the conventional approach.These 'revolutionaries'put stress on the "learning process" rather "blueprint" strategies,in creating programmeswhich achieveda fit between needsand capacitiesof the beneficiaries,along with a separate andexclusive programme meant only for the poor.

The practitionersof this 'revolution!are the non-governmentsectors, that are using creditas a meansof reachingthe poor directlyand preferentially. One suchexample is the GrameenBank that hasbeen providing credit to the landlessand near-landless poor without collateral,but stressedthe joint liability of groupsamong the poor as a basic building block of the programmeto facilitate a wide range of income generating activities.

The GrameenBank hasthus demonstratedthat the poor are bankableand also shows that credit is one of the critical noissinglinks in the rural developmentmodel. Throughoutthe 1980sand early 1990s,the GB hasserved as an inspirationfor many has developmentworkers. Its successhas led to internationalreplication and encourageda renewed interest in credit strategiesamong the nationalgovernments and alsothe majorintemational funders. 83

FOOTNOTES

The significanceof normative approachesis that they focus on the content of development rather than the form. Such an approach is concerned with the purpose and meaningof developmentrather than limiting discussionto questions relating to the mobilization of the productive forces of development such as labour, capital and trade.

2. Sincethe mid-1970sand continuingto the 1980sand 1990sthere were some writings that fall squarelywithin the frameworkof "AnotherDevelopment'ý A detailedsurvey of thesework is beyondthe scopeof this study.Among them are (Abdullah,1986; Ekin, 1992):

1. The SaneAlternative - JaneRobertson, 1978. 2. The Third Waves - Alvin Toffler, 1980. 3. The Living Economy: A New Economy in The Making, 1986. 4. Towards a Theory of Rural Development- De-Silva et al, 1988. 5. Future Wealth - Robertson, 1989. 1989. 6. Human ScaleDevelopment: An Option For The Future - Max-Neef et al, 7. For Common the Good - Daly and Cobb, 1990. 8. Real Life Economics- Paul Ekin, 1992.

3. Schumacherwas especiallyconcerned about the rural poor andunemployed in the He developingcountries who were by-passedby the developmentprocess. local favoured technology which could improve labour producti,Iviti y, use resources,minimized the use of non-renewableresources and producedgoods intendedfor the local market.It was in essencesmall-scale, self-help and self- reliant development.The movementhas had considerablesuccess in developing and introducing appropriate and intermediate technologies in developing countries.By the mid-1980sthe sight of locally-madewind pumps,water tanks, roofing sheets,threshers and shellershad becomecommon in Africa, Asia and Latin America(Webster, 1990; Melkotes, 199 1; Anderson,199 1; Burkey, 1993). but 4. All the abovefive componentswere further developed,explored and refined, none have been made redundant,nor have any others been added. "Another Development"has thus emergedas a clearand coherentsystem of developmental analysisto contrastwith top-down,finance-oriented econon-dsm of conventional developmentstrategies (Ekins, 1992).

5. While this studydoes not put primaryemphasis on the finer detail of the concept of participation,it is usefulto brieflyhighlight its meaning.Participation defies any singleattempt at definitionor interpretation.Since the late 1970sthere hasbeen an enormousliterature on participationand the concept of participation has become anumbrella term for a supposedlynew styleof developmentintervention. There are a wide rangeof interpretationson the conceptof participation.With regardto rural development,Oakley (1991) arguedthat participationincludes 94

involvementin decision people!s making processes,in implementing programmes, their sharingin the benefits of developmentprogrammes and their involvement in efforts to evaluatesuch programmes.Burkey (1993) (in a similar interpretation to that of Oakley but in slight detail) concluded that the meaningful participation of ruralpoor in developmentis concernedwith direct accessto resourcesnecessary for development and some active involvement and influence in the decisions affecting those resources.To participate meaningfully implies the ability positively to influence the course of events. Through participation, the poor will have a greater control over their own life situations. Through the acquisition of knowledge and awarenessthey become better able to understand the causesof their poverty and are in a better position to mobilize and utilize the resources availablein order to improve their situation.

6. While this studydoes not put primaryemphasis on the finer detail on the concept self-reliance,it will be usefulto highlightits meaningin general:Self reliancehas becomeanother piece of jargon in developmentcircles. We cannotmake people self-reliant;people becomeself-reliant. Self-reliance requires a wide variety of knowledgeand skills.People must haveconfidence in their own knowledgeand skill, in their ability to identify problemsand find solutionsin order to make improvementsin their own lives. Self-relianceis doing things for one!s self, maintainingone! s own self-confidence,making independent decisions - either as an individualor within the contextof collectivegroup to which eachmemberhas voluntarilyallied himselfor herself.Decisions and actionstaken at all levelsare based on self-confidenceand self-determination.No government and no developmentagency is ever goingto 'develop'a rural region;it can only be done by the peoplethemselves perhaps with the assistanceof governmentand other developmentagents (Burkey, 1993).

7. Similarlythis studydoes not put primaryemphasis on the conceptof sustainable it idea development.However it is usefulto highlightits meaningin generalas the of sustainabledevelopment that will becomean importantconcept and practical frameworkfor all the developmentactivities in the 1990sand beyond (Melkotes, Future 1991), and especiallyso amongthe alternativemovements. Our Common World usually referred to as the Brundtland Report, is the report of the Commissionon Environmentand Development, set up by the UnitedNations and chairedby Gro HarlemBrundtland, Prime Minister of Norway.It was publishedin 1987. A specific concern is that those who enjoy the fruits of economic developmenttoday may be making future generationsworse off by excessive The degradingof the eartWsresources and polluting the earths environment. is generalprinciple of sustainabledevelopment adopted by the Commission that the currentgeneration should "meet their needswithout compromisingthe ability Offuture generationsto meettheir own needsý This definition of sustainable develOPmenthas sincebeen widely quoted(World DevelopmentReport, 1992; Woodhouse,1992). The 1992 "Earth Summit"in Brazil, the largestassembly of the headsof governmentin history has succeededin alertingthe consciencesof the world to the urgencyof achievingenvironmentally sustainable development and where issuessuch as poverty,participation in the developmentprocess and rights of womenwere being discussed(Seralgadin, 1993; Johnson, 1993; Elliot, 1994). 85

For the "BasicNeeds" issue,refer to footnote 19 in Chapter 2.

9. Most developingcountries have to a greater or lesser degree, a mixture of both governmentand non-governmentalresources in the developmentprocess. In most casesdevelopment groups are tolerated. However, Burma is an extreme example where only the State can carry out development projects. The Red Cross/Red Crescent in many countries has shown that significant development can be achievedby non-governmentgroups (Holloway, 1990).

10. The World Bank has recognizedthe roles of the NGOs which are becomingan importantforce in the developmentprocess. On this the Banles has officially stated:

"Experience 1970s the since the shows... that reaching poor with targetedprogrammes can be difficult. Non- governmentalorganizations have made an important contribution here. Self-selectingprogrammes, which excludethe non-poor by offering benefitsthat are of interest only to the poor, are another promising approach"(World DevelopmentReport, 1990:4).

Furthermorethe World Bank is not alonein its receptivityto the concernof an alternativedevelopment. UNICEF, The World Health organization,The United NationsDevelopment Programme and Food and Agriculture Organization,have begun to pay attention to questionsof gender equality, sustainabilityand communityparticipation (Friedmann, 1991). The 1990sare also likely to see While further expansionof NGOs due to official funding(Robinson, 1992). the NGOs World Bank continuesto work primarilywith membergovernments, are increasinglyinvolved in the Bank-financedactivities. During the fiscal year 1990, in developing NGOs were collaboratingin some 50 Bank-supportedprojects NGOs' countries.Bank interestsin working with the NGOs is largelytied to the abilities to elicit participationby the poor and official programmesare more have responsiveto the needsof the poor (Morgan, 1990).The NGOs also grown from developed in their strength,financially and in influence.In 1983,NGOs By countriesprovided a grant of US$3.6 billions to the developingcountries. from 1987,such NGOs were providingabout US$5.6billions, more than credit InternationalDevelopment Association in 1988(William, 1990).There are now some4000 developmentNGOs in OECD membercountries, dispersing around 10,000to US$6.4billions worth of assistanceevery year. They work with around 20,000 NGOs of developingcountries, who assistup to around 100 million people(Edward and Hulme, 1992).

11.The recentevaluation of NGOsundertaken by the DAC of the OECD (1988: 114- 115)comes out with the followingconclusions:

"In general,evaluations conducted so far by the official agenciesof DAC members,-many of them relatingto rural developmentand social services,conclude that NGOshave a goodrecords in ruraldevelopment". 86

12. The category of the 'non-governmental organization! is a residual one which potentially includes every formal association and informal network which is not governmental. However, economic enterprises from peasant households to transnational corporations, and commercial banks to moneylenders,which are primarily profit-motivated are generally excluded. So too are formal political parties, and the associationsand informal networks which represent religious, ethnic and classinterests. In the field of development,the term'non-governmental organization!has come primarily to meanvoluntary groups without any particular interest or political affiliation, that work for poverty alleviation and economic growth (Crow, 1992). Thus in relation to this study, basedas it is in rural area,the term Non-GovernmentOrganization (NGO) can be defined as those private non- profit organizationsthat addressthe social concerns,promote the interests of the poor and most of all seekto alleviate of rural poverty. The NGO is also generally referredto as the "Third System".

13. The concernof the World Bank towards reducingpoverty can be seenin the "World DevelopmentReport 1990",when it introducedthe conceptof "poverty reducinggrowth". The style of growth can be suchas to reducepoverty rather thanto increaseit, andthe report recommendsa two-prongedstrategy: (i) broad- basedeconomic growth which generatesefficient incomeearning opportunities for the poor; and (ii) improvedaccess to education,health care, and other social serviceswhich helpsthe poor take advantageof theseopportunities. The strategy alsoincludes a socialsafety net for the vulnerable(Jazairy et al, 1992).The World BanVsincreasing concern towards the "AnotherDevelopment" efforts can be seen in (Cernea,1985) Rural two of its publications- Putting People First and Development: Putting The Last First (Chambers,1983) (Thomas and Porter, 1992).

in 14. This study is basedon 26 credit-basedpoverty alleviationprogrammes seven Remenyi, countriesof Asia and Africa (some of which are listed in Table 1). however,reminds us that the dataon which his studywas based remains anecdotal andbut a smallsample of total activityin the field.Nonetheless, they clearlypoint for in the right direction credit-basedpoverty programmeswork many. - bankers, Remenyi!s study was well receivedby more than 100 economists, United theologiansand developmentprofessionals who gatheredin Oxford, Kingdomin January1990. The Conferenceaccepted the findingsof the studyand affirmed the urgent need to increasethe global commitmentto credit-based to poverty alleviation programmesfor the poor. The participantsresolved commendand promote the value of such programmesto all governments, financial institutions, organizationsand individuals concernedwith poverty alleviation(Remenyi, 199 1).

15. GrameenBank has beenreceiving help from someinternational organizationsover the past decade besides getting help from the Government of Bangladesh,the major providers being the international Fund for Agricultural Development (IFAD), which since 1984 has provided over US$30 million. Other major funders are the Asian DevelopmentBank (ADB) and the Ford Foundation. Other major funders for the NGO-based credit programmes throughout the developing countries are the USAID, Rockefeller Foundation, Canadian International 87

DevelopmentAssistance (CIDA), International Development Assistance,uNDP, and UNCDF (BankingWith The Poor, 1992).

16. After a considerablenegotiation with the Government of Bangladesh, since 1986, borrower-shareholdershave controlled 75 percent of the issued shares and the other 25 percentare held by the government(Hossain, 1988).

17. Similarly Blackwood and Lynch (1994: 572) argued that:

"GNP is consequentlymore a measureof the welfare improvementof roughly the richest 40 percentwhose shareof total incomeis greatest,than it is measureof the welfareimprovement of the poorest,whose share of the total incomeis the smallest".

18. On the issue of collateral, Rhyne and Otero (1992, cited in Riedinger 1994: 302) noted that there is increasing recognition that the poor borrowers most value convenient and reliable accessto small, short term loans, simplified procedures which can reduce lender transaction cost and repaymentincentives - in the form for of group guaranteesor the promise of repeat loans - which can substitute traditional loan screeningactivities and collateral requirements.

19. The GB chargesan interest rate of 16 per cent on its loans. There is no dole or subsidy at any stage of the credit operation. Loan size varies from Taka 2000 (approximately US$67.00) to Taka 5000 (approximately US$167.00). The Taka 2800 averagesize of loans are estimatedat Taka 3040 - 3250 for men and for women. (Taka 32 = US$ 1). has 20. Ghai (1989: 229) further addedthat group membershipamong the poor certainadvantages, in that:

"...membership in groupsreduces individuality, security dependence builds the and and confidence... group provides a mechanismfor discussion, choice and elaborationof social and economic activities to be their individual into undertaken... transforms weaknesses collectivestrengths"

21. Deverauxet al. (1990: 31) observe,concerning the repaymentof viable credit project, that:

'Ispecific measures to discourage default can be incorporatedin credit schemes,but viableproject design and good administration are the most important safeguard.Otherwise, the most successfulway of avoiding default are: group guarantees,serial loans where new loans are only availableto thosewith good repayment record, and good supervision and monitoring". 88

22. Repaymentrates of over 90 percent have been reported in the credit programmes, by field confirmed experienceof IFAD, which are summarizedbelow (Jazairy et al, 1992):

Programme Country Year of Repayment Reference Rate

1. BadanKredit Kecamatan Indonesia 1982 94 2. Maha Bhorga Marga Indonesia 1987 80-90 3. YayasanIndonesia Sejahtera Indonesia 1987 99 4. BRAC. Bangladesh 1987 92.3 5. GrameenBank. Bangladesh 1992 97 6. Production Credit for Rural Women Nepal 1989 90 7. SEWA. India 1982 90 8. WWF. India 1989 90-95 9. World Vision SriLanka 1987 98

Note: BRAC : Bangladesh Rural Advancement Committee; SEWA : Self- EmployedWomeres Association; WWF : Working Women!s Forum.

23. The emergingrole of women as an importantpartner in developmenthas been widely recognizedespecially in the credit basedpoverty alleviationprogramme. Elcoat (1988) also arguedthat "educatea man, and you are helping one man; educatea women,and you arehelping a wholegeneration". This summarizeswhy womenmust be includedin the developmentprocess. FAD (1984) noted that women in the GrameenBank Programmehave made an important economic contributionto fan-tilywelfare. Poulton and Cham(199 1) meanwhileargued that "womengenerally make better development partner than men. They are quickerto seize an opportunity and easierin organizationand cooperation-womenare ambitiousfor their family, while men are ambitiousfor themselves.Women are also more than trustworthy with money", (MuhammadSiddiquir et A 1991) "more responsiveto self-discipline"and Hulme, 1991) "less problematicthan men".Burkey (1993) also arguedthat "womenare frequentlyamong those who aremost willing to defytradition and try new ideas,learn new skills andtake new chances.We shouldencourage new linesof endeavorfor womenand for men".

24. Empowering: People!s participation has been recognizedas an important element in rural developmentprogrammes (Padmanabhan, 1988) and especiallyso among the practictioners of the "Another Development". In connection with people's Participation, there has been a call for empowering process. Ghai (1989) thus views Participation as a process of empowerment of the deprived and the excluded masses (see also Footnote 5 above). Remenyi (1991) argued that empowermentrecognizes that it is folly to rely on one group to take decisionson behalf of another and expect them to eschew their own self-interest. The Community Developmentprogrammes of the 1950s and 1960s did exactly this by seeking to work through traditional village leaders. Community Development gave power over development resources and authority for the distribution of patronageto those had who already power - the literate and the non-poor. It was 89

in their intereststo support programmesthat would see them, their families and ffiends the primary beneficiariesof development.Today's community based-credit programmesare different (which is empowerment-linked) in that they harness economic self-interest at an individual level and reject patronage in any form. instead, individual self-interestplus community and peer-group pressureare used. Mascrenhas(1993) also noted that the GB has actually seeksto encouragegreater democraticparticipation, thus empowering rural people with greater control over their activities.

25. Women!s participationis quitean achievementin the GrameenBank. More than90 percentof GB membersare women.They can decidetheir plan of action and voicetheir opinions.GB organizesworkshops and training programmes especially for them.These have in a way increasedtheir socialmobility, their knowledgeand organizational skills.

26. Thesefive exampleswere: 1. Indian National Dairy DevelopmentBoard. 2. The SarvodayaShramadana in Sri Lanka. 3. BRAC - BangladesWsRural AdvancementCommittees. 4. The CommunityBased Family Planning Servicesin Thailand. 5. The National Irrigation Administratiotfs Communal Irrigation Programme in Philippines.

27. The 12 examplesof the on-going replicationin 1990 as identified by David Gibbons(1990) are as following:

ASIA. 1. AmanahIkhtiar Malaysia(AM (Malaysia). 2. ProjekUsahamaju (Sabah, Malaysia). 3. MSS (Bangladesh). 4. Savecred(Sri Lanka). S. Ahon SaBirap (Philippines). 6. Dungganoan(Philippines). 7. KaryaUsaha, Mandiri (Indonesia).

AFRICA. ' 8. In Bukina,Faso (nameunknown). 9. Mudzi FUND (Malawi). NORTHAMERICA. 10. Full Circle (Arkansas).

Hulme(1991) has identified two furtherexamples:

LATINAmmucA. 11 AccionCommutono (Peru). - del Peru 12.El Instituto deDessa rallo de SectorInformal (IDESI) (Peru). 90

CHAPTER FOUR : RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN PENINSULAR MALAYSIA : THE CONVENTIONAL APPROACH

4.1 INTRODUCTION

This chapterexamines the rural developmentand poverty alleviation strategy under the conventionalapproach, initiated by the Malaysian'sGovernment before and during tile New Economic Policy (NEP) period. This chapter begins by highlighting the overall national policy framework, that governed the strategy and concept of development during and before the NEP and tile new developmentplan, replacing NEP namely tile NDP. This chapter will also be highlighting measurements,concepts and causes of poverty in the Malaysiancontext.

Finally 3 main issuesin the NEP context which form the main backboneof this Chapter, namely (i) the overall strategy of rural developmentand the poverty alleviationefflorts that havebeen executed, (ii) overall progressof poverty alleviation and (iii) the weaknessesof the strategytowards poverty alleviationwill be examined. This framework will provide a clear backgroundin explainingthe needsfor the emergenceof the q1ternativeapproach in the following chapter.

4.2 DEVELOPMENT PROCESS AND POLICY FRAMEWORK FOR RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN PENINSULAR MALAYSIA

4.2.1 PERIOD BEFORE THE NEW ECONOMIC POLICY (NEP) - 1957 - 1970.

The evolutionof rural developmentpolicies in Malaysiastem from the needto tackle the variousaspects of rural povertywhich includelow productivity,low income,lack of an adequateand proper rural infrastructureand rural-urbandisparities that existed prior to independence(Ismail, 1989). 91

Prior to the introduction of the NEP, there were three Five Years Development Plans, (1) Plan (1956 1960), (2) namely First Malaya - Second Malaya Plan (1961 - 1965) and (3) First MalaysiaPlan (1966 - 1970) (introduced after the incorporation of Sabah and Sarawakwith Malaya for a greaterMalaysia in 1963).

The formulation and implementationof the First Five Year Development Plan (1956 - 1960) marked the origin of rural development planning in Malaysia QvIinistry of Agriculture, 1992). Programmes implemented during those decades were (i) industrialization, mainly import-substitution, (ii) economic diversification, (iii) the developmentof infrastructureand (iv) developmentof rural areas.However, in the late 1960's disappointment began to set in with respect to growth-oriented strategy. Malaysia took its lessonsfrom the traumatic experienceof racial riots in 1969; hence was born the Malaysia New Economic Policy (NEP) in the early 1970s (Ghazali, 1990).

(1971 1990) 4.2.2 AFTER 1970 - THE NEW ECONOMIC POLICY (NEP) -

NEP During the First Outhe PerspectivePlan (OPPI) (1971 - 1990)over which the dominates,the Governmenthas implemented four developmentplans, namely (1) The Second Plan (1976 1980),(3) MalaysiaPlan (1971- 1975),(2) The Third Malaysia - MalaysiaPlan (1986 The Fourth MalaysiaPlan (1981 - 1985) and (4) The Fifth - 1990).

fl The changein focus of developmentpolicy was expressedwi th the inau gu ra ion of a in new developmentorder calledthe New EconomicPolicy, which was introduced the Second Malaysia Plan with two main objectives of poverty eradication and restructuringof society.Development programmes in the decadeof the 1970swere in basedon the growth with equity principals(INT^ 1991).But, it was only the mid-1970s Cm the Third Plan) that specific anti-poverty strategies were comprehensivelyspelt out as the extent of poverty was fully recognized(Malaysia, Malaysian 1976). The Treasury Economic Report of 1974 - 75 was the first Governmentdocument to outline'the extent of poverty and thus the core of the Povertyalleviation programmes were only beingformulated with the emergenceof the Third MalaysiaPlan in 1976(Peacock, 1979).

Besidethe NEP, two other policies that govern the overall developmentpolicies concerningrural developmentare the: 92

(i) The National Agricultural Policy (NAP), enunciatedin 1984 which is the main and specificpolicy relating to agricultural developmentof the country [1]. (ii) The Industrial Master Plan (IMIP), introduced in 1986, which provides the policy support and stressesamong other things the development of agro-based and small-scaleindustries (including cottage or rural industries).

4.2.3 AFIER 1990 - THE NEW DEVELOPMENT POLICY (NDP) - (1991 - 2000)

The Prime Minister of Malaysia, Dr. Mahathir, in launching the New Development Policy (NDP) [21 to replacethe NEP has openly stated:

"We have maderemarkable progress but we still have more to do. The objectivesof the NEP have not been fully realized. Poverty still remains, although the magnitude of the. problem has been substantially OPP2 1991-2000has reduced... the coveringthe period been formulatedbased on a new policy called New DevelopmentPolicy (NDP). This new policy will maintainthe basic strategiesof the NEP of eradicating NDP the povertyand restructuring societies ... the will set pace to enable Malaysia to become a fully developednation by the year2020" (Mohamad,1992: 5) [3].

Thusas mentionedabove, The SecondOutline Perspective Plan (OPP2)covering the New period 1991 - 2000, has been formulatedbased on a policy known as the DevelopmentPolicy (NDP), which stressesthe 'grojpth with equity' principal.Under the OPP2,Government has implemented the Sixth MalaysiaPlan (1991 - 1995).The NDP retainsthe basic strategiesof the NEP of the last 20 years - eradicatingof povertyand restructuringof society.In terms of poverty eradicationwhich contains somenew dimensions, Mahathir (Mohamad, 1992: 5) further added:

"The new dimensionsof the NDP will be to put greater emphasison the anti-povertystrategy with a view to eradicatinghard-core poverty while at the sametime reducingrelative poverty".

In 1991,hard-core poverty accounted for 4 per centof the householdsand the targetis to reducethis to 2 percent by 1995 (Malaysia, 1991a). The governmentfurther envisagesthat the problem of hard-core poverty in Malaysia will be practically eradicatedby the year2020 QdHstry of Agriculture,1992). 93

The Governmentalso clearly stated in the NDP that it will encourage any poverty eradicationprogramme based on the concept of self-reliance(Malaysia, 1991b). Thus the role and contribution of non-governmentinstitutions in eradicating poverty will be continuously supported as a strong complementary package to existing pure Governmentalprogrammes (Ministry of Agriculture, 1992). In this connection, it will provide further financial support to non-governmentalbodies (Malaysia, 1991b). The emergenceof the Amanah IKhtiar Malaysia (ALW, a non-government organization since 1986,with its totally new concepttowards poverty alleviation has receiveda very strongsupport from the government.

4.3 CONCEPT, MEASUREMENT AND CAUSES OF POVERTY IN THE XIAIAYSIAN CONTEXT

1. AbsolutePoverty

In Malaysia,the absolutepoverty conceptis usedin planningfor the formulationof policiesand programmes for the alleviationof poverty(Ministry of Agriculture,1992; Hassanand Salleh,1988; Johari, 1991;Yahya, 1991).The absolutepoverty concept seeksto describepoverty as lack of incomenecessary to acquireminimum essentials of fife andis measuredon the basisof povertyline income(PLI) [4].

Currentlyin the Malaysiacontext, PLI, is consideredthe most practicaland suitable is measureof povertyespecially for nationalplanning purposes (Hashim, 1991) and the for most widely used (Yusof, 1991).Table 6 below showsthe poverty line income variousyears [5]. The differentIPLIs for ]PeninsularMalaysia, Sabah and emphasizethe variationsin living costseven within a smallcountry like Malaysia.

2. Qualityof Life

9nIzIng Ui3onAV reco *' the limitationof the PLI, the quality of life hasbeen officially used as a supplementaryconcept in the analysisof povertyin Malaysia.The quality of life hasbeen related to certainbasic facilities such as electricity and water supplysschools) clinics, transportand communication facilities (Hashim,1991). There are also other indicators of quality of life that have been widely used and among others these include housing conditions, household equipment, assets and household 94

(SERU, 1991). However, in Malaysia expenditures the Physical Quality of Life Index (PQLI) is still not being used.

Table 6: Poverty Line Income in Malaysia: 1977 - 90

Peninsular Sabah Sarawak

1977/78 M$252 M$401 M$332 1987 M$350 M$533 M$429 1990 M$370 M$544 M$452

Source:Hashim, (1991: iv)KonsepdanPengukuran Kerniskinan [61

3. Relative Poverty

In Malaysia,the inequalityapproach in the analysisof povertydoes not usethe PLI. In this approacha poor householdhas been defined as one with a total incomethat falls in the bottomforty percentof the nationalincome distribution. Generally, a comparisonis madebetween the lower 40 percent(poor people) and the upper 20 percent(rich people).

4. Hard-core Poverty

During Fifth has been the MalaysiaPlan (1986 - 1990),another concept of poverty introducedin Malaysia,known as hard-corepoverty (INTAN, 1991).It is definedas thosehouseholds receiving less than half of the povertyfine income(Malaysia, 1991b). Table 7 belowprovides the PLI for the hard-corepoverty.

Table7: Hard-corePoverty Line Incomein Malaysia

Peninsular Sabah Sarawak

1987 M$175 M$267 M$215 1990 M$185 M$272 M$226

Source:Malaysia, 199 1 a: 100 [7] 95

4.4 CAUSES OF RURAL POVERTY

It has been widely accepted that, based on a variety of research findings and organizations,rural poverty in Malaysia is basically caused by (Aziz, 1964; Ayob, 1969;Malaysia, 1976; Snodgrass,1980; World Bank, 1980; Ghose, 1983; Kasim et al, 1983; Kasim, 1984; Ali, 1986; Tamin, 1986; Tan, 1987; Siwar, 1988; Mustapha, 1988a; Mehmet, 1988; Orin, 1989; Ismail, 1990; Hashim, 1991): (i) uneconomic or small farm size and tenancy, (ii) population growth, (iii) low accessibility to capital, technology and expertise, (iv) economic characteristicsof the poor, (v) imbalanced rural/urban growth, (vi) market exploitation by middlemen (vii) rising costs of living, (viii) insufficient employmentopportunities outside agriculture, (ix) being neglected(X) low productivity (xi) policy-induced determinants(xii) low accessibilityto capital and (xii) deteriorating terms of exchangefor agricultural producers. We have discussed someof the general causesof poverty in the developing countries in Chapter 2. It is not the intention here to review every single variable that causesrural poverty in the Malaysiancontext as listed above.Thus a generalreview will be attempted.

The persistenceof poverty in the Malaysianrural/agricultural sector has alwaysbeen explainedin termsof structuralanalysis. In general,uneconomic or smallfarm sizehas been acceptedas the major causeof poverty amongrural households(Siwar and Mustapha,1987; Mehmet, 1988; Onn, 1989).A generalobservation indicates that the averagesize of farm in PeninsularMalaysia is lessthan 2.0 hectares,and abouttwo- thirdsof all farmholdings are below this size(Mustapha, 1988a) 181.

Oneof the characteristicsof land in the smallholdingsector is rentaltenure. Thus the problemof uneconomicsize is madeworst when they are tenantoperated (Frederick and Wells, 1978).The World Bank (1981) noted that small farms, whether owner operatedor tenanted,represent an intractablepoverty problem, one which neither currentpolicy nor institutionalarrangements are likely to affect.In generaluneconomic farm holdings have further reinforced the low productivity and income of the agriculturalhouseholds. A recentstudy by SERU (1990a)191 has shownthat among the poor rural households,the percentageof the landlessis quite high, which on averageaccounted for around30 to 55 percentof all households.SERU's study thus clearlyshows that landlessnessand near-landlessness (those with inadequateaccess to land) arevery commonamong the poor households1101. 96

Rural development programme in the IADP granary areas, without taking into consideration the existing structure of land ownership have had the effect of reproducing poverty through increased landlessness.On this Mehmet (1988: 40) argued "Under the 'Green Revolution! the poverty impact was particularly accelerated by to farmers a new tenurial pattern whereby tenancy gave way owner-operator ...as owners increasinglybecame operators and the larger landownersbegan to accumulate padi lands, marginal households sank further into poverty or joined the ranks of landlessness".

Another important cause of persistent rural poverty stems from the policy mismanagementof subsidyor credit programmes(i. e. policy-induced determinants).It hasbeen argued that the managementof subsidyprogramme is filled with abusesthat it tends to benefit more middlemen,millers, traders as well as officials themselvesthan producers (Mehmet, 1988). The same form of mismanagementoccurs in the credit facilities of the Agricultural Bank, where in theory, poor farmers are entitled to grants and loans. However, in reality the borrowers were mainly the wealthy and influential rural elites and not the genuinefull-time or poor farmers (ibid, 1988). Thus large-scale governmentintervention such as credits and subsidieshave not manageto make any significantinroad towards the alleviation of masspoverty in rural areas.

Povertyis alsocause by the lack of productiveemployment opportunities. On this the Third Malaysia Plan (1976: 27) stated "The lack of productive employment opportunities is the major causes of poverty. Open unemployment and underdevelopmentof human resourcesresulting from the lack of complementary inputssuch as land, capital and entrepreneurship underlie poverty in everysector of the economy".

Poverty is also associated(Hashim, 1991) with the economicboom of the other sectorsresulting in increasedwages and higher prices of goods.The priceincrement of agriculturalproduce tends to be muchlower comparedto the rate of increaseof non- agriculturalproducts. This has the effect of reducing the purchasingpower of agriculturalproducers, thus worseningtheir real income.It hasbeen argued (Ministry of Agriculture, 1992) that the persistenceof rural poverty can also be explainedin terms of an externaleconomic factors such as recessionswhich have the negative effect on the pricesof agriculturalcommodities. However, these factors are beyond the controlof the governmentand the poor households. 97

4.5 STRATEGY AND RURAL DEVELOPMENT PROGRAMME

In discussingthe strategiesand rural developmentprogrammes in PeninsularMalaysia, discussion be divided into the will two periods namely, before (1957 - 1970) and during the New Economic Policy period (1971-1990). Some of major strategies and programmes, relating to the poverty alleviation in rural areas that have been implementedduring the abovementioned periods will also be highlighted.

4.5.1 PERIOD BEFORE THE NEW ECONOMIC POLICY (1957 - 1970).

In the 1950sand 1960s,much emphasisof developmentplanning was on achieving a reasonablyhigh rate of economic growth through the diversification of the economic base and infrastructure development (Muhd Salleh, 19§1). The rural development strategies were basically an infrastructural approach, with the provision of social amenitiesand economic infrastructure 1111seeking to provide linkages to the rural economyby the creation of rural employmentand raising productivity and income of the poor (Chee, 1979;Kassim, 1987; Siwar and Mustapha, 1987; Mustapha, 1988b).

Accompanyingthe aboveextension of infrastructure,strong emphasiswas placedon socialmobilization through Community Development (CD), as an instrumentof village progress.Various forms of CommunityDevelopment were launchedbetween 1953 and 1958,much in the spirit of its Indians counterpart.However, shortage of funds and personnelbrought the programmeto a halt. By 1960the villagesinvolved had reverted virtually to their original state(Rudner, 1975; Ness, 1967;Abdullah, 1986).CD thus failedto makeany significant long-lasting impact (Ahmad and Nik Yusoff, 1984).

The mostimportant of the organizedactivity in an attemptto stimulaterural economic developmentwas throughthe creationof FELDA establishedin 1956.It was involved chieflywith the largescale development of new landsand also in providingland to the landlessthrough a settlementscheme (Peacock, 1981). From a modeststart of ten schemescovering a total of 4901 hectarescatering for 791 families, the figure increasedto 74,459hectare and 11,865families by 1970(Ng, 1987)1121.

Another important component of rural development strategies in the 1960S that coincides closely with the government's aim towards rice self-sufficiency and also influenced by strongly the then fashionable 'Green Revolution! strategy, was the 98

drainage facilities in provision of and imigation all the major rice growing areas Shari Shaari, 1991). The biggest (Mehmet, 1988; schemeand a huge technical success was the MUDA imigation scheme, gazetted as Muda Agricultural Development Authority (MADA) (Kasim, 1983; Collin et al, 1980; Peacock, 1981) [131.

It is important to note that when one analysesthe development achievementsof this period, there were some.Cho (1990) noted that between 1950 and 1960 the growth of GDP was only 3.5 percent,but it increasedto 4.5 percent in the decadeof the 1960s. However there was no growth in the peasant sector (Esman, 1978). The reality was, that in 1969-70, poverty still remained high and posed a serious problem in the rural and agricultural sectors(Faaland et al, 1991; Ismail, 1989; Siwar and Mustapha, 1989; Ismail and Abu Samah1992). Furthermore the income disparities between traditional agricultural sector and the rest of the economy in PeninsularMalaysia increasedfrom about 1:2.5 to more than 1:3 in 1970 (Awang, 1990).

The situationbetween 1957 to 1970 was summedup by Lee (1977) and Snodgras (1980) as an increasein the number of the absolutepoor, despitethe growth in agriculturaloutput and the nationalincome. Calson (1976, cited in Awang, 1990), arguedthat the Malaysianrural developmentprogramme during the aboveperiod was ratherineffective, except in a symbolicway.

4.5.2 DURING THE NEW ECONOMIC POLICY PERIOD (1971 - 1990)

4.5.2.1 INTEGRATED RURAL DEVELOPMENT PROGRAMME (IRDP)

Plan As mentionedearlier, by early 1970following the start of the SecondMalaysia facing (1971- 75), it was clearthat rural poverty still persistedas a seriousproblem 1970s the rural and agriculturalsector. The high incidenceof poverty in the early promptedthe governmentto introducethe New EconomicPolicy (NEP) which gave specialemphasis to eradicatingpoverty.

It was arguedthat past rural developmentstrategies have not managedto trickle the benefitof developmentto the poorestsection of the rural population.Past strategies felt werealso regarded as not comprehensiveenough. To get moreimpact, it was that a more integratedapproach to rural developmentwas needed(Siwar and Mustapha, 1987). As a result and strongly influencedby the then fashionableconcept of the IntegratedRural DevelopmentProgramme (IRDP) in the early 1970s in many developing countries,the sameapproach was adoptedin Malaysia. 99

In Malaysia,the core of the IRDP strategy,being a multi-sectoral approach [141, lies in the'area development orin-situ development, which focused on (ibid, 1987; Siwar, 1992):

(i) Land and RegionalDevelopment (4.5.2.1.1). (H) IntegratedAgricultural DevelopmentProgramme (4.5.2.1.2).

4.5.2.1.1 LAND AND REGIONAL DEVELOPMENT

Land developmentin PeninsularMalaysia began as mentioned earlier with the formationof FederalLand DevelopmentAgency (FELDA) in 1956 and was (Majid and Majid, 1983)essentially concerned with colonizationof new land. It was never intendedto be conceivedas part of regionaldevelopment. When regional development per se becamean importantcomponent of Malaysiadevelopment strategy be 9MM9 ii in the early 1970s,some of the major land developmentand settlementprogrammes becamepart andparcel of that strategy(Abdullah, 1986).

FELDA!s early successled to the formationof other governmentagencies in the late 1960sand early 1970swho further spearheadedand diversifiedland development. Theseincluded the variousRegional Development Authorities (RDAs), The Federal Land Consolidationand Rehabilitation Agencies (FELCRA) andThe RubberIndustry SmallholderDevelopment Agencies (RISDA). Various other land development frameworksin Malaysiaare shownin Figure 3. In our generaldiscussion below, we will dividethe experiencesof land andregional development in PeninsularMalaysia as follows:

(1) LandDevelopment by FELDA.

(2) In-situLand Development by FELCRA andRISDA.

(3) LandDevelopment by the variousRegional Development Agencies (RDAS).

1. FederalLand DevelopmentAuthority (FELDA) 1151

During the NEP, FELDA was regardedby the governmentas the main project to alleviaterural poverty(Salleh, 1989). In line with this new role, allocafionsfor FELDA projectshave beenby far consistently the largestcomponent of the agriculturaland 100

Figure 3: Malapia : Land Development Strategies

LAND DEVELOPMENTSTRATEGIES IN MALAYSIA (Ministry of Land and Regional Development)

DEVELOPMENT DEVELOPMENT WITH SUBSIDY WITHOUT SUBSIDY I I I - --I I I -- I BLOCK Fringe Controlled PRIVATE PRIVATE/PUBLIC DEVELOPMENT Alienation Alienation DEVELOPMENT DEVELOPMENT I (Smallholders) (Smallholders) i I r-- ---I Nucleus Joint Private Cor. itions I Estates Venture Estates Public Enterprises Schemes With Schemes Without Settlement Settlement

Federal state Controlled Controlled Schemes Schemes I I I III I FELCRA FELDA RDA RISDA SADC Youth State Sarawak SEDC Schemes Settlement SALCRA Schemes FELCRA FederalLand Consolidationand RehabilitationAuthority II FELDA FederalLand DevelopmentAuthority Other KSLDA States ' RDA RegionalDevelopment Authority (TAKDIR) RISDA Rubber Smallholder'sIndustry DevelopmentAuthority Schemes SADC State Agricultural DevelopmentCorporation State Corporation SEDC EconomicDevelopment Sar (TAKDIR) State Land DevelopmentAuthority ah KSLDA SLDB SLDB SI.DB SarawakLand DevelopmentBoard SPB SPB Sabah Padi Board SLDS Sabah Land DevelopmentBoard SALCRA Sarawak Land Consolidationand RehabilitationAuthority

Source : Cho, G. (1990). The Malaysian Economy : Spatial Perspectives 101

rural developmentbudget, accounting for around half of the total (Mehmet, 1988) [16].

The FELDA schemehas been acclaimedas the most successful land schemein the world by the World Bank (Berita Harian, 1988, cited in Abdullah, 1990). Two of FELDA! s main achievementscan be seenin the amount of land developed and number of families settled as well as the economic aspectsof the settlers themselves.By the end of 1990,FELDA had managedto develop an overall total of 871,446 hectaresof land and resettled119*3 00 settlersQMDA KPLB, 1992).

On the whole the econon-dcachievement of FELDA settlers is also very encouraging. Severalresearchers have come to a imilar conclusion that the income of the settlers has increased(Lim, 1976;Khera, 1976;Mehmet, 1988; Hashim, 1988; Md Nor, 1992). Talib (1992) also noted that FELDA! s rate of achievementsare very encouraging[17].

2. In-situ Land Development- FELCRA and RISDA.

The main componentof the in-situ land development,also a major anti-poverty programme,are rubberreplanting undertaken by RISDA and the consolidationand rehabilitationof landby FELCRA.

Under RISDRs approach,smallholders are provided with replantinggrants for the purposeof either individual replanting,block replanting, or in bigger areas,the establishmentof mini-estates(Nordin, 1991), which incorporatethe elementof estate- type operationinto smallholderfiLrm development (Ho andLam, 1986).

MeanwhileFELCRA concentratedits activitiesinto two main programmes,namely land consolidationand rehabilitation (Mustafa, 1986; Frederick and Wells, 1978).The countryhas identified the e)dstenceof idle land which amountedto 890,000hectares (12 percentof agriculturalland) (Abdullah, 1990) [18]. FELCRA!s goal is to integrate fragmentedand scatteredpieces of land which have been left idle into large-scale farmingunits or minii-estates[191. 102

3. Regional Development by various RDAs

Among the institutional frameworks introduced to implementthe regional development strategywere sevenRegional Development Authorities (RDAs) and these are shown in Figure 4. Five RDAs were given the main task of developing the resource frontiers, which are a'spin off from the FELDA model of land development.Two other RDAs were responsiblefor the In-situ Agricultural Development 1201. i. Resource Frontier Development: The development of resource frontier regions involves large-scaleagricultural developmentand also new settlement schemes(UPP, 1988a;Mat, 1983; Ismail and Muhammad, 1992). New townships were establishedin theseregion to serve as secondaryand local growth centres(Johari and Chong, 1990) and also to provide urban facilities and servicesto rural areasas well as to attract the growth of agro-basedand resource-basedindustrial development(Nik Ibrahim, 1988; Kasim, 1988;Choguill, 1989; Johari and Chong, 1990; Mohamad, 1990; Ali, 1991).

ii. In-situ Agricultural Development:Two other RDAs, PERDA (in the State of Penang)and KEDA (in the Stateof Kedah),formed in early 19809were not prompted by the need for the developmentof new resourcefrontiers. Their operationsare basicallyin-situ, with the main function of bringing about balanceddevelopment betweendeveloped urban areas and the depressedunder-developed non-urban areas. Basicallyit involvesthe developmentof rural growth centresand the upgradingof existingtownships (UPP, 1988b).The primaryrole of theserural growth centresis to stimulatedevelopment at local levelsand to inducespread effects to the surrounding villages(Malaysia, 1991 a). KEDA!s role in the developmentof the depressedregion in the Stateof Kedahis discussedin Chapter7. The district of Baling (the studyarea) is underthe jurisdiction of KEDA.

4.5.2.1.2 INTEGRATED AGRICULTURAL DEVELOPMENT PROGRAMME (IADP)

The agriculturalcomponent of the IRDP is the IADP, 1211which is basicallya "reformative" strategy, designedto revitalize and rehabilitatein-situ or existing agriculturalareas faced with the problemsof poverty and low productivityassociated with the uneconomicsize of holdings and poor farming methods (Arshad and Mustapha,1986; Siwar andMustapha, 1987). To ensureIADP success,an integrated packageof infrastructural.and support facilities, as well as agriculturalsupport services were provided to existing areas (Malaysia, 1991) through the co-ordination and 103

Figure 4: Regio Developmentin Peninsular1ýfalaysia, 1986

THAILAND 0 20 60 100xqM

\ ...... g. A N ...... v Kota Bharu 1CEDAM: ...... Geogetown ...... PULAU ;. PINANG t...... -- Kuala ...... TERENGMANU ngpnu (PERD ýES ED A] ý4::-) IT, ...... :: ýi:7'zýc ...... lpoho :; f

PAMkNG

SELANGOR

...... CLUMPIUR ibARA:::::...... I ::: ShahAlm NEGERI .... SEM13IT-M Scremban

3END CCA JOHOR RegionalDevc1opmentAudiority 0 OF 'RDA YW HECTARES. ORAI

JENCKA 1966 1215 33% ...... DARA 1971 1.012.145' 6 ..... johor BalvU MORA 1972 303' ii 16% KETENGAII 1973 445j3§ 34% XBSEDAR 1978 1,240,000 83% SINGAPORE MA 1981 840,000 88% PERDA 1982 73.70 0 '73%

Source : Md Nor. (1992). Regional Development Planning in Peninsular Malaysia : Empirical Analysis of Resource Frontier Region, JENGKA. 104

integration [221 of all agenciesand departmentsunder the Mnistry of Agriculture (Abdullali, 1992) (SeeFigure 5).

Basically, there are two types of LADP (Ismail and Abu Samah, 1992; Ali and Idris, 1992), namely:

Ci) thosebased on predominantlyrice producingagricultural areas. (ii) thosebased on n-jxedcrops (rubber, coconut, oil palm,cocoa and others).

Howeverthe IADPs are generallymore directedtowards the padi areasand currently thereare 25 IADP projects.12 havebeen completed, 7 still beingimplemented and 6 be implemented(see Figure 6 Table 8) 1231. .more will and

4.5.2.2 THE "NEW APPROACH IN VILLAGE AND RURAL DEVELOPMENT" (NAVRD)

In 1984the NationalAgricultural Policy was launched.It stressedmaxinuizing income 1984 from agriculturethrough effective utilization of resources.In line with that, also "New Approach sawthe introductionof a new approachto rural developmentcalled in Killage and Rural Developnwnt",or fINAM", which is a rural urbanization "growth strategythrough the groupingand regroupingof existingvillages to create centres".The emphasisis on traditionalvillages as opposedto the "frontier" regions (INTAN, 1991;Nik Ibrahim,1988). The NAVRD is a nationwide exerciseinvolving form all the 11 states. Scatteredvillages are being amalgamatedto organized to settlementsand whereappropriate, these villages are turned into viable townships permitthe provisionof betterficilities and servicesand wherepossible to encourage rural industrial and commercialdevelopment [241. Apart from amalgamationof integrated villages,it involvesthe developmentof agriculture,whereby padi fields are Apart from into estatesto be managedby co-operatives(Ismail, 1989;Salleh, 1992). padifanning, other crop landswere also involved.

4.5.23 AGRICULTURAL BANK AND THE PROVISION OF AGRICULTURAL CREDrr

Bank PertanianMalaysia or BPM (AgriculturalBank of Malaysia) is a state bank establishedto provide agriculturalloans and credit and to act as the nucleusof Malaysia!s institutional agricultural system. 105

Figure 5: EssentialFacilities and Servicesin the Geraktani Complexesunder The Ministry of Agriculture, Malaysia.

DID I MARDI I FOA

FAMA DOA FOA BasicInfra. FOA Research structural

Agricultural Seedand Marketing & Planting Cold Storag M-tterl-.0 Facilities le, I FOA Coop. Dept. GERAKTANI DOA MAJUIKAN Cooperative Subsidy Service COMPLEX Fisheries FDA Dept.

Extension II lAgriculturil I Service credit

FCommunity griculturat Development Mech2nisa- Bank, DOA Pertanl; n Veterinary Dept. AR I KEMA S Fisheries Dept.

III FOA -KEMAS DID DOA

FARMERSILIVESTOCK REARERSIFISHERIES

Source : Osman, et al. (1980). Extension Services of the Department of Agriculture in Peninsular Malaysia 106

Figure 6: PeninsularMalaysia : Integrated Agricultural Development Schemes (LADP), 1986

THAILAND =500--oz L 0 20 60 10QKm

orsetar FjAt Bahru DA KEDAH r-I A (;7G)DCofgcto Kuala Tc(enggoLnu FENANGD I KELANTAN

SG. lpoh j

PENINSULARMALAYSIA( -lJ kuantancý

a ShahAlInt 0 V NEGERI SEM13ILAN I Scscmban i \. , --, .,3 CCAA m JOHOR LEGEND cc&

Internationalboundary I WEST Stateboundary

0 State caotal SOUTH Fedcr3l tLni(ory SINGAPORE Integrated Agriculture M1111AProgrammes "

Source : Md Nor. (1992). Regional Development Planning in Peninsular Malaysia : Empirical Analysis of Resource Frontier Region, JENGKA. 107

Integrated Table 6: Malaysian Agricultural Development Programme (IADP) : Projects Completed and During Implementation

Vine Period No. Name of Project Size (hectares) Type of Crop

A. Completed

0 1. MADA 1 1965-1970 95,985 Padi 2. KADA 1967-1973 57,522 Padi. 3. Besut 1971-1979 14,175 Padi and mixed 4. West Johor 1 1974-1985 133,948 Mixed* 5. North Kelantan 1976-1983 307,600 Padi. and mixed 6. North West 1978-1985 110,119 Padi and mixed 7. MADA 11 1978-1987 5,946 Padi. 8. Krian/Sg. Manik 1979-1987 30,613 Padi and mixed 9. East N. Sembilan 1981-1987 513,000 Padi, and mixed 10. Rompin-Endau 1981-1987 4,374 Padi and mixed 11. Kemasin-Semarak 1981-1987 28,670 Padi and mixed 12. Lembah Kedah 1983-1987 851,000 Padi and mixed

B. During Implementation

13. Melaka 1982-1988 93,150 Padi and mixed 14. 1982-1990 49,000 Padi and mixed 15. Balik Pulau/ Seberang Perai 1983-1990 95,532 Padi, and mixed 16. West Pahang 1983-1990 2,270,000 Padi and mixed 17. Kalaka-Saribas 1986-1992 157,000 Oil Palm 18. Samarahan 1986-1995 86,000 Mixed* 19. West Johor 11 1986-1995 210,000 Mixed*

Note :* Mixed refers to other mixed crop minus padi.

Source : Ali and Idris, (1992). Peranan Programm- Program Pembangunan (JADP) Dalam Konteks Pemodenan Luar Bandar. 108

In the rural developmentof Malaysia, some of the agricultural inputs and services,such as the use of machinery were not provided or subsidized by the state. Therefore farmers had to purchasethem from the market (Abdullah, 1992). This led to the demandfor production credit and especiallyso in the 'Green Revolution! areaswith all the featuresof integration.

Prior to the BPM emergence,the main sourcesof credit were mainly from non- institutionalsources. A surveyin PeninsularMalaysia in 1986 found that about 62 percentof all loans grantedto farmerswere from informal sources(Nieuwkoop, 1986).On the otherhand Rural Cooperativesand Farmers Associations were the only formalinstitutions to provideloans prior to BPM formationbut accountedonly a tiny proportionof loans(less than 1 percent)made out to smallfarmers (Selvadurai, 1978).

Startingwith only two branchesin 1970,BPM has rapidly expandedto 49 branches throughoutthe country by 1985 (Abdullah, 1992). Credit disbursedby BPM has increasedfrom $58,000in 1970to M$4.5 million in 1974(Padmanabhan, 1988) and up to M$500 million by 1980(Kidam, 1984).The deliveryof loansto the farmersis donethrough a network of intemediateryinstitutions called local credit centressuch asthe Rural Cooperativesand Farmers Organizations (Lim, 1973; Wells, 1983).

We have seen above that during the NEP period various rural development programmeshave been launched to eradicatepoverty with a hugeallocation of around M$32.7billion (SERU, 1991).This callsfor the exan-dnationof the overallprogress of povertyalleviation, which we areturning to next.

4.6 PROGRESSIN THRALLEVIATION OF RURAL POVERTY

4.6.1 POVERTY SCENARIOS

1. Absolute Poverty - Overall Incidence of Poverty

It was not until the pronouncementof the Third MalaysiaPlan in 1976 that explicit povertyestimates and targetswere introduced.In addition,the Governmenthad also identified andmade estimates for several'target groups! in the early 1970s(Bhalla, and Kharas, 1992). The progressin poverty alleviation is shown in Table 9A. The 109

incidenceof poverty in PeninsularMalaysia has declined from 49.3 percent in 1970 to 15 percent in 1990, better than the First Outline Perspective Plan (OPP1) target of 16.7 percent (Malaysia, 199lb).

2. Rural Poverty and the Target Groups

In PeninsularMalaysia, poverty is mainlya rural phenomenon.In 1970out of a total of 1,203,000rural householdssurveyed, 705,900 householdsor 58 percent were in poverty.Out of these,582,400 households or 82.5 percentwere in the agricultural sector(Ministry of Agriculture,199 1: 11). The incidenceof povertydecreased fiirther to 24.7 percent(402,000) and 19.3 percent(371,000) in 1984and 1990respectively. By 1993the figure stood at 18 percent(Utusan Malaysia, March, 1994).However rural povertystill remaineddominant. In 1990,the numberof poor householdsin rural areascomprised 85 percentof the total households.

Table 9B showsdata on the rural target groups.An encouragingresult is that all the major poverty target groups have shrunk enormouslyin size. For example,the incidenceof povertywhich was highestamong paddy farmers in 1970(88.1 percent) declinedto 43 percentin 1990.Sinuilar results can be seenin anothermajor poverty 64.7 group,i. e. the rubbersmallholders where the incidenceof poverty declinedfrom percentin 1970 to 35.8 percent in 1990.

Despitethese achievements, poverty amongpaddy farmers,, coconut smallholders and rubber smallholdersremained relatively high in 1990 at 43,39.2 and 35 percent respectively.In absolutenumbers two of the majortarget groups,rubber smallholders andpaddy farmers are the highestat 73,000and 40,900 respectively.

3. Poverty Incidenceby Ethnic Group

Table 10 showsthe incidenceof povertybased on ethnicgroups. In 1970the absolute being povertycan be seenas an all-ethnicphenomenon with the incidenceof poverty 65 percent(Malay), 39.2 percent(Indian) and 26 percent(Chinese). However in 1990, it seemsthat absolutepoverty is a Malay phenomenon,which accounted20.8 percent of the Malay population,while that of Chineseand Indian are 5.7 and 8 percent respectivey. 110

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4. Geographical Distribution of poverty households

This is shown in Table 11, which revealed that there was an overall reduction of poverty incidencein all statesfrom 1976 to 1990. The statistics also show that Kedah, Terengganuand Kelantan have the highest incidence of poverty of around 30,30 and 31 percentrespectively. However in terms of absolutenumbers, Kedah has the highest, which standat 82,500.

5. Hard-core Poverty

Table 12 provides the statistics of the hard-core poverty groups in Peninsular Malaysia.It is also estimatedthat around 90 percent of this group residedin rural areas (NADA KPLB, 1992). It is also very prominent in the states of Kedah, Kelantan, Terengganuand Perak.

Table 12 : Peninsular Malaysia - Number of Hard-core Poor, 1987 and 1991, Overall and By States

State 1987 (1) 1991 (2)

Kedah 25,588 23,063 Perak 23,053 20,916 20,689 17,083 Kelantan. 16,689 25,124 Johor 10,192 6,418 P. Pinang 8,704 9,096 Selangor 8,485 5,213 N. Sembilan 7,524 3,500 Pahang 4,626 8,562 Melaka 3,927 8,486 Perlis 3,062 5,576 W. Persekutuan 2,275 N. D

Total 134,888 133,037

Source : Salleh, 1991, "Poverty, Equity and Growth : Some Empirical Perspectives. 1. Estimated no. of hard-core poor are based on the Household Income Survey (HIS), 1987. 2. No. of hardcore poor as provided by the State Development Offices. Note : N. D = No Data. 114

The statisticsin Table 12, reveal that in absolute numbers,the hard-core poverty has undergonea small reduction from 134,888 in 1987 to around 133,037 in 1991. This level of poverty is low by international standardsand is not comparableto the extreme forms of poverty found in somecountries (Malaysia, 1991 a).

4.6.2 INCOME DISTREBUTION -A BRIEF OVFRVIEW

The OPP2(Waysia, 1991b:100-101) has provided a useful summaryof the income distributionin PeninsularMalaysia for 1990as follows:

L The incomegaps and socioeconomic imbalances are still wide in termsof incomeand ethnic groups as well as betweenrural and urban areas.The income shareof the bottom 40 percentof householdswas 14.5percent (an increasefrom 11.5 percentin 1970)compared to 50.3percent (a decreasefrom 55.7per centin 1970)for the top 20 percentof the householdsin 1990. In terms of income differences,this meansa monthly householdincome of M$421 for the bottom 40 percent comparedwith M$2924for the top 20 percent.

ii. In ethnicterms, the inter-ethnicincome disparities are still high, specificallyin the agriculturesector, where the meanhousehold income of and non-Malaysin 1990 was M$609 and M$959 respectively.The overall picture of the income distributionalso showsthat, on average,the monthlyincomes are higher amongthe non-Malays,with the figures for Chineseand Indians at M$1582 and M$1201, respectively,while that of Malaysis M$931.

ill. Althoughrural-urban income differentials have narrowed, the averagerural income representsonly about 58 per centof theurban income in 1990.The overall picture of theincome distribution is shownin Tables13 and 14 respectively.

The aboveanalysis indicates that improvementsof incomedistribution in the last two decadeshave not occurredevenly for all the three major ethnic groups. The main reasonis basicallydue to the differencesin humanskills andownership of assets. 115

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Table 14 : Peninsular Malaysia : Average Household income By Stratum and Ethnic Groups : 1970 - 1990 (M$/ per month)

1970 1976 1985 1987 1989**

By Stratum

Rural 202 385 824 N. D N. D

Urban 432 843 1541 N. D N. D

By Ethnic Group

Malays 177 345 852 868 931

Chinese 399 787 1502 1430 1582

Indians 310 538 1094 1089 1201

Overall 267 514 1095 1074 1163 .

Sources : Various Malaysia's Five Year Plan, 1976,1981,1986. ** Department of Statistics, Malaysia, (July) 1992.

The overall picture of the incomedistribution and poverty statisticsdiscussed above clearly showsthat despitethe overall reductionin the incidenceof poverty, it still remainsrelatively high. The overall picture of income distribution also shows that disparitiesremain between the upper and lower spectrumof the population,inter- ethnicand also betweenurban and rural areas.However, as arguedby SyedHussin Alhabshi(1991: 3):

11 this* does that the ... not mean government efforts were not effective. On the contrary poverty has been the hasbeen highly but reduced... succes's commendable, of course,a lot moreneeds to be done". 117

4.7 DRAWBACKS AND INHERENT PROBLEMS IN RURAL DEVELOPMENT AND POVERTY ALLEVIATION PROGRAMMES

On theseissues., we will divide the discussioninto two parts:

(i) The specificweaknesses of eachof the programmesdiscussed above, such as the FELDA, FELCRA, RISDA, IADP, RegionalDevelopment, NAVRD and credit provisionby the AgriculturalBank.

(ii) We will thenbe touchingon someof the weaknessesand unresolved issues in the governmenfspoverty alleviation machinery.

4.7.1 WEAENESSES OF 17HEPROGRAMMES

1. FELDA-.

While the FELDA schemesprovide a good exampleof successfulland development, the cost of this achievementis high in terms of financial investment(Onn, 1989; Nolten, 1990)which amountedto M$5.49billion by 1987(Abdullah, 1992). While it is has alsotrue that settlershave enjoyed higher incomes, the cost of resettlinga family increasedfrom $49,700in 1986to $55,000in 1990 comparedwith only $26,500in 1976(Malaysia, 1991a). The high financialcost is justified if it reachesthe majorityof the rural poor. Howeverit did not, sinceit benefittedonly a smallnumber of the rural population(Tan, 1981;Mustapha, 1981; Abdullah, 1986; Arshad and Mustapha, 1986; Cho, 1990;Shari, 1990) [25]. Comer (1983) noted further that while Felda settlers gain,the traditionalagricultural sector from whichthey aredrawn falls furtherbehind.

The extremely capital intensive nature of FELDA, as well as its effect on nature, (1991- suggestedthat it could not go on for too long. Under the Sixth Malaysia Plan 95), land development has been de-emphasized.No new land development will be undertakenby FELDA, except for replanting in its existing schemes(Malaysia, 1991a) [261.

2. RISDA, FELCRA and The "NAVRD"

The main weaknessesin RISDA!s replantingscheme is the lack of participationof smallholdersand Abdullah has stressed this point whenhe argued(1986: 229): 118

"The fact that quite a sizeable number of the smallholdings have not been replanted, and that the peasants' holdings were under-represented in the replanting activities signifies conclusively that the replanting programmeshave not yet adequatelyreached the smallestholdings in the rubber sector". 1271

On the other hand,FELCRA! s approachwhich operatesthrough a "share system" basedon amountsof landcontributed, would obviouslyfavour landownerswith bigger plots over the smallerplot holdersand virtually nothingfor the landless(Jomo, 1989; Abdullah, 1990). Probablythe poorest, namelythe renters and landlesslabourers, could benefitif they are hired to work in the mini-estates.But FELCRA!s schemes seemto leanmore towards modern machinery, which essentiallymakes these workers redundant(Shari and Mat Zain, 1990).

Similarly the "NAVRD" concept of group farming does not take into considerationtile reformation of land (i. e. redistribution of land) is not likely to cater for every spectrum of the population and will obviously benefit the land owners more (Kasim, 1984). The "NAVRD" approachalso did not openly clarify the position of the landlessand the use of excesslabour expectedfrom the modernization of agriculture (Awang, 1991) and will thereforeis likely to create structural unemploymentproblems (Barrett, 1993).

3. Integrated Agricultural Development Programme (IADPs)

The IADPs, based on a 1983 study (Kasim.et al, 1983), stated that the programmes have had considerable impact on poverty reduction, but substantial numbers and proportions of agricultural householdsremained below the poverty line as of 1982. The incidenceof poverty in the main IADP areasremained as high as between 70 to 75 percent. The major cause of poverty in the IADP areasis due to the uneconomic size of farms. Thus the IADP programmehas exacerbatedrural income inequality, with rural landedinterests benefitting more Qomo and Shari, 1986).

Siwar (1992) further argued that under the existing institutional socio-economic structure, any further poverty reduction is not very encouraging and (Siwar and Mustapha, 1989) Malaysiatfs IRDP has not developed a mechanismto deliver the benefits to the poor. PerhapsQuazi (1982) is right when he argued that the Malaysian's integrated agricultural development programme was another item of "fashionable terminology". 119

4. Regional Development - by the RDAs

Efforts to create new centralizedtownships have achievedvery limited success.Only 32 out of 60 new towns were successfully,created. However only 15 percent of the target population were settled in the new townships out of 686,444 (Nik Ibrahim, 1991) and meetingpopulation targets has been a major and common problem for these township programmes (Salleh, 1992). As for job creation, only 17 percent of the 270,349 targeted employment were successfully created (Nik Ibrahim, 1991). The progress of industrial development also lagged behind (Malaysia, 1991) because of very limited participation among the investors or industrialists (Ali, 1991). Choguill (1985), for instance,argued that the new towns have not reachedthe stageto promote self-generatedgrowth.

Muda (1989), Salleh (1991) and Mobamad (1992) have also noted the weaknessesof the regional developmentprogrammes in achieving the developmentgoals. RDAs did not manageto promote growth and contribute in uplifting the overall standardof living to the level that was expected (UPP, 1988a; Hadi, 1989). The Fifth Malaysia Plan (Malaysia, 1986), for, instancenoted that the developmentof the new townships have only provided a marginal impact in upgrading the quality of life and generating employmentopportunities for the hinterlandpopulation.

5. Agricultural Bank and its Credit Programmes

Even thoughthe BPM can waive the requirementfor collateral(such as land) when lendingto the rural poor, the potentialborrowers must obtaintwo guarantorswhose incomemust be aboveM$500 per month or a collateralsuch as land (INTAN, 1991: 80). Not manyof the rural poor householdscan meet this requirement.

In 1983,only 39,278 farmers applied for loans totalling M$33.6 millions but this figure is very small in relation to the number of farmers in PeninsularMalaysia (Wan Daud, 1988). Credit is disbursedmainly to the above-averagefarmers, whose averagesize of farm is 4.4 to 5.2 acres,more than the national averageof 3.1 acres(Wells, 1983). The World Bank 0 98 1) also noted that many of the credit recipientswere farmerswho live abovethe poverty line. The Agricultural Bank (minus the poor householdsas its client) had manageda cumulative repaymentrecord of only around 52 percent and suffered a high rate of defaults(Wells, 1983;Understanding AIM, 1990). 120

4.7.2 WEAKNESSES AND UNRESOLVED ISSUES IN THE GOVERNMENT'S POVERTY ALLEVIATION MACHINERY

Some of the weaknessesand unresolved issues that are still prevailing in the government'machinery are as discussedbelow:

1. Effective Expenditure is Small Compared to Overall Total Expenditure

During the NEP, about M$33 billion, which accounted for around 29 per cent of the total allocation, had been allocatedto poverty eradicationprogrammes (SERU, 1991). Even though the allocation was very big, its effects towards arresting the poverty problem was very limited. On this SERU (Socio-Economic Research Unit) in the Prime Minister's Departmentargued:

"Effectiveexpenditures that are beingdelivered directly to povertyeradication programme are smallcompared to overalltotal expenditures"(SERU, 1991:3).

In practice,much money has actually been expended on institutionbuilding and large bureaucracies(Siwar and Mustapha, 1987) 1281.What is more disturbing is the tendencyto equateevery rural developmentproject as a povertyproject and evengolf coursesor expensivebuildings that were built havealso beencategorized as poverty projects (INTAN, 1991).

2. Target Groups and Goals of Poverty Eradication are not Clearly Defined.

As observedabove, not only wasthe effectiveexpenditure small (and even this went to the wrong projects), it also did not reach the target groups. On this UPP (Implementationand Coordination Unit) in the PrimeMinister's Department explained:

'Target groups are not clearly distinguishedin terms of their actual number, who are they (with a complete socio-economic profile) and where they are" (UPP, 1988b: 10). 1291

It hasbeen argued that not only havethe government'sagencies seldom identified the targetgroup clearly,the 'goalsof povertyeradication! have also not beenmade as the specificgoals of the agenciesconcerned (INTAN, 1991; Abdullah, 1992). Some governmentagencies have openly admitted that "eradicatingpoverty is not even amongtheir goals" eventhough their roles towardseradication of poverty under the NEP areclear (INTAN, 1991). 121

A good exampleto illustrate this is the case of the LADP, whose goal is to reduce poverty, but no specificor specialprogramme has beeninstituted to attack the problem of poverty itself It was always generally assumedthat rural areas are backward and there are many poor households.The IADP programmewas based on the idea that as long as developmentexisted and was effectively executed,the benefit would 'trickle- down!to all the poor andvery poor in the receivingareas (Abdullah, 1986). But these 'carpetbombing! approaches being broad in nature,seldom or never hit their targets effectively(INTAN, 1991; Abdul Rahman,1992) and generally focussed on the wrong group(ILO, 1979).

The IADP's programmewhich is basically'land-based, has brought more benefit to rural landed classes,but minimum benefit for the landownerswith uneconomic holdings(Goldman, 1975; Ministry of Agriculture, 1991). Subsidiesand agricultural aidsfrom agenciessuch as RISDA, FELCRA,LPP andDepartment of Agriculture,to namea few, havemade ownership of land as a platform of giving and calculationof aid. Thosewithout landhave automatically been eliminated (Ali, 1983;INTAN, 1991) andthose benefitted were the non-deservinggroups (Goldman, 1975; Gibbons et al, 1981)[301.

3. The 'Evolutionary' Nature of the Poverty Eradication Programme

It has been argued that a big part of the poverty eradication programme is 'evolutionary'in nature. Programmesare. targeted to sectors like rice farmers, fishermen,coconut smallholders, and agricultural labourers. This strategyhas not been effectivebecause development benefits not only flow to the poor but also non-poor groupsas well, within eachof the sub-sectors(ibid, 1991).

4. Too Many Agencies

In Malaysia,there are 6 ministriesand 40 agenciesthat are directly involvedwith rural developmentand the poverty eradicationprogramme [311. In relation to this, the proliferationof agencieshas resultedin the increaseof the operationalcosts and overlappingfunctions (SERU, 1991).On this, the UPP (1988b:10) added:

"...there are overlappingagencies, functions and areas all seen-dnglydirected towards alleviating poverty resulting in 'over-government'and dilution of finance and manpower.And yet sadlytoo, the incidenceof poverty andhard-core poverty is still relativelyhigh". 122

It has been arguedthat the government agenciesalso tended to compete for the same target clients (Salleh, 1992). By virtue of having many agencies and departments involved in poverty alleviation programmes,one might have assumedthat all the poor households in rural areas will be well-served. There are, for example, agencies representingor acting as 'guardian!to the padi farmers (MADA and KADA), rubber smallholders(RISDA) and fishermen (Department of Fisheries), to name a few. But what about the landlessand poorest of the poor? On this Abdullah (1986: 262) argued:

"... but none of agenciescreated, explicitly caterfor the interestsof landlessor near-landlesswithin the groups whosemain preoccupationhave not beenin the sphere of agriculturalproduction, rather in the subsistenceand wagelabour markets"

It hasalso been argued that until now there is not evena singleagency that hasbeen establishedto "attack the problemof poverty" as its "main and priority role". The poorest of the poor havenot beendirectly representedby any Agency and Ministry (Abdullah, 1992). It seemsthat the governmenthas essentiallydisregarded the heterogeneouscharacteristics of the rural population.It can be arguedthat having manyand varied agencies has actuallytended to createan illusion of merelycatering for all the poor groups.

5. Structural Problem Issue

The architectsof the Malaysiansrural poverty eradicationprogramme have also chosento ignorethe structuraldeterminants of the problem(Mehmet, 1988). Thus, the government,instead of attackingthe structuralcauses of rural poverty and inequality headon, preferreda more simplisticalternative, leaving the patternof land ownership unchanged,while concentratingon maneuveringwithin the existing structure via technological,administrative and pecuniarymeans (Abdullah, 1986). This is the essenceof the "technocratic"approach.

In Malaysia,no radicalstrategy such as land redistributionwas evenattempted, which asobserved by ShamsulBaharin (1971: 22) was dueto the fact that:

"the interestsof the land-owninggroup andthose of the politiciansare so closelyconnected as to nullify land- reform legislation or to render its implementation impossible".[321 123

Furthermore the consolidating of uneconomic sized farms into minii-estatesis the government'salternative to land redistribution, which obviously favours landowners, especially those with bigger holdings (Jomo, 1989). This is not at all surprising, especially in Malaysian context, as every programme that is to be implemented, especially those which involve overall adjustment of national policy, can only be assuredof successif it is technically feasible, economically viable, socially acceptable and politically desirable(Mahmud, 1988).

ThereforeMalaysian! s rural developmentstrategies are ain-dngto satisfyeverybody and as far as possiblethe statusquo is not to be disturbed,at the expenseof the most deservingrural poor who are not effectivelyreached. As noted by Baharudin(1983: 455-456)"policies directed at poverty eradicationhave actually worsened the overall state of income distribution,although officially the incidenceof poverty has been reduced".

4.8 POVERTY ERADICATION IN THE 1990S - P.P. R. T -'DEVELOPMENT PROGRAMME FOR THE POOREST'

Althoughthe incidenceof povertyhas beenreduced from 49.3 percentin 1970to 15 percentin 1990,hard-core poverty still remainsan inherentproblem. Based on the HouseholdIncome Survey (11IS) throughout Malaysia in 1987,it was found that from 649,000households that receivedincome below the poverty line ($350 in 1987), a total of 173,471households (26.7 percent)received only half of the PLI and were has been classifiedas the 'hard-core'poverty group or 'poorestof the pooe and this notedin Chapter1 (Hassan,199 1).

Upon recognimingthe aboveproblem, the governmenthas launched a new packageof programmesknown as Trogram PembangunanRakyat Termiskin! (PPRT or DevelopmentProgramme For The Poorest!) which is a 'povertyfocussed programme, for the first ever,which was launchedin early 1989with an allocationof $391 million the periodof 1989/go(Malaysia, 1991a, Ministry of Agriculture, 1992).Based on the initial implementationin 1989/90,an allocationof a further $600million hasbeen made under the Sixth MalaysiaPlan, tailored to meet the specific needsof the poorest (Malaysia,1991a) [331. 124

The PPRTs programme is still relatively new as efforts are still being made p4l through the compilation of a comprehensiveregistry of the poorest households in every district to ensure that the targeted groups or individual will get access to government aid for self-help opportunities to increase their production capacity and standardof living PSI.

WhilePPRT look very promising,it is not without weakness.As notedby the Ministry of Rural Development(1991), a special survey should have been conducted throughoutthe nation before the implementationof the PPRT. Neverthelessthe governmenthas made the right move in pursuingat long last the first ever "poverty focussedprogramme" and also emphasizingon the hard-core poor. Apart from eradicatinghard-core poverty, existingstrategies will be continued.However, since landdevelopment has been de-emphasized, the mainfocus under the Sixth Planwill be the IADPs,land consolidation and rehabilitation as well asagricultural support services (Malaysia,1991a).

4.9 CONCLUSIONS

We have seenthat under the NEP, the governmenthad allocatedaround M$32.9 billion towardsthe rural developmentand poverty alleviationefforts. Accompanying this hugeallocation were a varietiesof strategiessuch as the IRDP, regionaland land development,the NAVRD and many others that dominatethe rural scene.These effortshave resulted in the reductionof povertyfrom around49.3 percentin 1970to 15 percent in 1990. Despite such efforts there are still many weaknessesand unresolvedissues related to government'simplementing machinery and the delivery system.Poverty has still continuedto be a problem,especially the hard-corepoverty. The abovesituation suggests that governmenfseffort towardsthe rural development effortwas not successfulsimply because, as Courtnay (198 8: 251) put it:

"The essentiallytechnocratic approaches that havebeen followed in all Malaysia!s previousplans, and which are continuedin the Fifth, are seenby many as offering at mostonly partialsolution"

The abovegeneral rural scenariosthus providea justificationfor the implementationof development somenew rural programmeswhich can be more effectivein addressing 125

the problem poverty especiallythe hard-core poverty. In view of the problem discussed at some length in this chapter, the Ikhtiar Programme, modelled along the Grameen Banles approach towards poverty alleviation, stepped in and offered a viable alternative, which however does not compete, but instead complements, the govermnent'spoverty alleviationprogrammes, which we are now turning to in the next chapter. 126

FOOTNOTES

1. Further aspectsof the NAP is discussedspecifically in Chapter 12.

2. The New DevelopmentPolicy (NDP) was announcedin the Malaysian Parliament on the 17th June, 1991, by the Prime Minister, Dr. Mahathir.

3. Vision 2020: The prime Minister, Dr. Mahathi; in his addressto the Malaysian BusinessCouncil on February1991, presentedsome thoughts on the need for Malaysiato attainthe objectiveof becomingan industrializedcountry and a fully developedsociety by the year 2020.On this he said(Mohamad, 199 1: 1):

"...the ultimate objectivethat we should aim for is a Malaysiathat is a fully developedcountry by the year 2020 it be is fully developed ... must a nation that along all the dimensions: economically, politically, psychologicallyand culturally'

4. The PovertyLine Income(PLI) takesinto accountthe minimumrequirement for food, clothing and footwear and non-food items such rent, fuel and power, transportand communication, health and education.The PLI is alsoupdated over time using the ConsumerPrice Index (CPI) to reflect changesin price levels (Malaysia,1989; Malaysia, 1991b).

5. The PLI asused in Malaysiais relativelyhigh (Abdullah,1992). In fact, it is the highest comparedto countries like Brazil, Colombia, Costa Rica, India, Indonesia,Pakistan, Singapore,Sri Lanka, Taiwan and Thailand (at 1985 internationalprices) (13hallaand Kharas, 1992). However in Malaysia, only throughthe Mid-Terra Review of the Fifth MalaysiaPlan (p. 45), Government has publishedthe official PLI for the first time. Prior to this, the actual PLI remainsunspecified in official governmentpublications, but it is generallytaken to be between$150 and $200 per month(or more)(Cho, 1990).The Third Malaysia Plan,for example,only revealedthat PLrs "...minimurn nutritional or other non- food requirementsof each household sustaina decent standardof living" (Malaysia,1976: 160). -to

6. Averagehousehold size in Malaysia,on which thesePLI figuresare based,are as follows(Hashim, 1991: iv):

1977n8 1987/89 PeninsularMalaysia. 5.4 5.16 Sabah. 5.4 5.36 Sarawak. 5.6 5.24 127

Averagehousehold size is the sameas above.

8. In Malaysia, a farm is regardedas uneconomic in size if it is less than 4 hectares (10 acres) in area. This is the size of the farm generally allocated to settlers in FELDA!s land schemesand as such serves to indicate the standard size of operationfor small scale- scalefarn-dng in Malaysia (Buang, 1991).

9. The districts involved are: Kota Baru and Bachok in Kelantan, Besut, Kemaman and Hulu Terengganuin Terengganu,Padang Terap in Kedah, Kerian in Perak, Kuala Pilah in Negri Sembilanand the whole State of Perlis (INTAN, 1991).

10. SERUsstudy in 10 districtsof PeninsularMalaysia also showsthat for thosewho ownedland, the sizeis just too small.On averagearound 61 percentowned less than 1 hectare.In extremecases, such as in the district of Kota Baru, the figure stood at 98.3 percent of the rural population. Around 30 percent of the householdsowned between 1 to 2.99hectares of land (SERU, 1990a).

1. The provisionof socialand economicinfrastructure in the form of rural roads, drainageand imigation facilities, electricity, water, schools,health, community and religiouscentres and also through the creationof functionalrural institutionsto facilitateproduction and marketing and also credit needs of rural peasants.

12. FELDA was establishedby the Federalgovernment as an independentbody under the LandDevelopment Ordinance, 1956, with the mandateto promote and assist the investigation,formulation and realization of programmes, and the developmentof new areasfor land settlementin Peninsular Malaysia. During the 1956to 1960period, FELDA took no direct part in land development.Under the Federal constitution, land is a state matter and state governmentsare particularlysensitive on their prerogativesregarding land. During this period progresswas ratherslow. After 1960,impressive progress was madeby FELDA. Its progressduring the NEP periodwill be takenup in a later section. Malaysia 13. MUDA is locatedin the stateof Kedah,in the North-Westof Peninsular andis alsoknown asthe modemrice bowl of Malaysia,producing 44 per cent of nationaloutput and has an areaof 213,320hectares. but 14. The IRDP is a multi-sectoralapproach that not only focussedon agriculture alsoon: I. social developmentprogrammes which include the provision of social amenities,community development and rehabilitation of traditionalvillages. 2. rural industrialization,which is basically agricultural resource based and handicraftindustries. 3. in form agricultural support services the of extension, research,credit, processingand marketing plus otherrelated services (Siwar, 1992).

15. Conceptually,the FELDA programmeaims at bringing together the plantation sector and socio-economicneeds of the smallholdingsector. In general,the FELDA conceptinvolved the openingof new and previouslyuncultivated land. 128

In relation to that it also involved the transfer of individuals or families from poor statesin the country, who were previously economically handicappedas pioneers in the new settlementschemes. On averageeach FELDA schemewas larger than 1600 hectares and as an 'integrated' land settlement project, each scheme is packaged as a new, self-sufficient community, complete with roads, water, dwellings, schools, clinics, transportation, marketing and processing fitcuities, (Perumal, 1991; McAndrew, 1977; ShamsulBahrin and Perera, 1977; Hashim, 1988;Ng, 1987; Cho, 1990;Mehmet, 1988).

16. The allocationfor FEIMA from the Secondto the Fourth MalaysiaPlans were 52.9p49.0, and44.4 percentof the total developmentbudget for agriculturaland rural developmentrespectively (Mehmet, 1988).

17. Talib (1992: 126) has estimated the FELDA settlers! average monthly income from 1980to 1987 as shownbelow:

Type of Crops

Year OUPalm (M$) Rubber(M$)

1980 709 472 1981 643 492 1982 624 402 1983 765 484 505 1984 .1231 1985 889 421 1986 376 405 1987 552 532

been 18. Idle agriculturalland officially refersto arableplots of land which havenot land cultivatedfor three consecutiveyears. It also pertainsto parcelsof with temporaryoccupation licenses (TOL) which are not cultivatedand agricultural (Buang, landwith facilitiesfor doublecropping but usedonly for a singlea crop 1991).Crudely, idle land can be referredto as land that is neglected,unused or under-utilized,which has been alienated for cultivationbut left unproductive.

19. The activitiesof land rehabilitationinclude planting of commercialcrops. Apart from oil palm and rubber,FELCRA has successfullyinitiated a rehabilitationof 16,437hectares and involved 4000 participants in the plantingof padiunder estate management(mini estate)known as the SeberangPerak schemein the State of Perak(Nordin, 1991).

20. Five of the RDAs responsiblefor the resourcefrontier land developmentare (1) Central Terengganu.Development Authority - KETENGML (2) Southern Kelantan Development Authority (KESEDAR), (3) Johore Tenggara Development Authority - KEJORA, (4) Pahang Tenggara Development Authority and (5) Jengka.Regional Development Authority (JENGKA). Two 129

Regional other RDAs are the Penang Development Authority (PERDA) and Kedah RegionalDevelopment Authority (KEDA).

21. When regional developmentwas given prominence in the 1970s, in-situ agriculturaldevelopment took new directionsand was strongly influencedby the then fashionableconcept of IRDP. Out of IRDP, thus was born the iADP. In actual fact, IADP was "first" introducedin 1965 with the implementationof MADA (Muda AgriculturalDevelopment Authority), in the State of Kedah.By definition,it is the first regionaldevelopment project to be implemented,apart from theFELDA landand resettlement schemes. However, during those periods it was only lookedupon as an 'irrigation and drainage!programme. Together with KADA in the Stateof Kelantan,these two mainrice-growing areas were alsothe first IADPs in Malaysia,in the early 1970s(Abdullah, 1986,1992).

22. Chambers(1974) has argued.that amongthe obstaclesin rural developmentof developingcountries (among others) are the lack of co-ordination,and co- operationamong the implementingagencies and unorganized structure among the machineryexecuting the programmes.This seemsto have been noticed by the MalaysianIADP planners.

23. The total expenditureon IADPs amountedto M$1,020 million during the Fifth infrastructure Malaysia Plan (1986 - 1990), with drainage and irrigation constitutingabout three quartersof the expenditure(Malaysia, 1991a). The rice growingareas under the IADP areMADA in Kedah,KADA in Kelantan,Besut in Terengganu,North-West Selangor, Krian-Sungai Manik. The rice growing areas haveall the essentialfeatures of an integratedapproach and "GreenRevolution" technology.The mixed crop areasare in West Pahang,West Johoreand Negri Sembilan.

24. Under the "NAVRD" approachthe governmenthas implemented25 Village and Rural DevelopmentProjects, which involve 45 traditional villages, as pilot projectsof the rural urbanizationprogramme. However, under the Fifth Malaysia Plan the governmenthas not revealedthe target for the implementationof the NAVRD approach([smail, l9sq).

25. A good exampleto show FELDA!s limited impact is that of Nair and Frederick (1981cited in Abdullah,1986) who notedthat by taking the country as a whole over the 1970to 1980period, the labour force in Malaysiaincreased from 3.7 million to 5.4 million while 286,500were unemployed.During the sameperiod, the numberof settlerstaken by FELDA was only 43,000.In 1980,the FELDA Populationconstituted only 11.3 per cent of total poor populationin the rural areas.

26. Due to constraintsin the availabilityof new land and growing depletion of forestry,land and regional developmentare being given a lower allocation of approximatelyM$2.38 billion under the Six Malaysia Plan (1991 - 95), as comparedto approximatelyM$2.9 billion underthe Fifth Plan. In relationto this FELDA will concentrateall its efforts on replantingprogrammes rather than openingup new land. In the Sixth Plan, FELDA has been allocateda sum of 130

around M$1.31 billion, which is much lower than the allocation in the Fifth Plan ofM$2,129,700 (Malaysia, 1991a).

27. Generally,the replantingof the new rubber trees takes 6 to 7 years to mature. The main reason for the non-participation amongst the smallholders is because of subsistenceincome foregone during replanting. Government grants are not geared to compensatefor income but only to provide cash outlays required for replanting.On the other hand the larger producers are capableenough to diversify their crops and interspacereplanting in order to minimize foregone income to an acceptablelevel of risk (Baharudin, 1979; Ali, 1983; AIjunid, 1984; Abdullah, 1986). Mehmet (1988) also noted that a comprehensivesurvey in 1977 showed that there were a total of 490,460 registered rubber smallholders in Peninsular Malaysia. Of these 124,590 had new trees due to their participation in other agenciesprogammes (FELDA, FELCRA or own account replanting). But out of the remaining265,870, no less than 107,636 (29.4 percent) with old trees did not participate. Over 80 percent of the non-participantswere Malays and about half had holdings of lessthan two hectares.

28. EvenMalaysiares Minister of Financeseems to supportthis observation,when he stated(New StraitsTimes, 12th April, 1993)as Mows:

"Central agencieswhich were formed to assist the public,particularly the poor, haveclearly neglected their functionsbut insteadplaced importance on facilitiesfor their executivesand officers".

29. Anotherweakness in connectionwith the issueof target groupsis relatedto the be budgetaryprocess which as practisedin Malaysia,did not allow allocadonto directedtowards targeted groups but ratherthrough implementing ministries and agencies.On this UPP (1988a: 10) argued:

"The budgetaryprocess in Malaysiadetermines that the allocation for poverty redressalbe channelledto the Ministry and agencyand its proposedprojects and not directly to the targetedpoor or to areasthat are poor. Because target groups are not clearly distinguished for ...allocations poverty redressalprojects of implementingagencies, including RDAs could easily be siphoned-offfor non-deservinggroups, projects or areasol.

30. Onegood exampleto illustratethis is the caseof the state'sagricultural aids and programmesthat are createdfor padi farmers in Malaysia. On this Goldman (1975)argued that: 131

*part of the benefit from the programme will flow into the hands of landlords as benefits are capitalized into land (benefit) is least values... at skewed as that of holdings Although disproportionate operated ... amounts of gross farm programmebenefits are acquired by large farm operations, a larger proportion of these benefits may be ultimately governedby landlords than is the case for small farms, which tend to be relatively more owner- operated".

31. The 6 mi'mistrieswith 40 agenciesare given as follows (with only 1 exampleto representeach Mnistry): (1) Ministry of Agriculture - The Agriculturd Bank (BPAV,(2) Ministry of Land andRegional Development - FELDA, (3) Ministry of National and Rural Development - FELCRA, (4) Mnistry of Primary Industries- RubberResearch Institute (WRI),(5) Ministry of PublicEnterprises - State EconomicDevelopment Corporation (SEDQ and (6) Mnistry of Home Affairs- SecurityProject.

32. Cheeand Hong (1978: 213) also arguedthat:

Neventhough there was an emphasison the urgencyof the task of redressing rural poverty and equally important,an unstatedreluctance to disrupt the socio- politicalsystem too much".

33. The packageof PPRTput mainemphasis on projectssuch as: 1. plantingof cashcrops and rearing of livestock; 2. food andnutritional requirements of the children; 3. providingdecent shelter in the form of housesfor the hard-corepoor group; 4. assistanceto school going childrenin the form of scholarships,text-books, hostelaccommodation and supplementary food programmes,and 5. provisionof basicinfrastructure facilities. 6. In addition,government has recently allocated a M$500 million revolvingfund to promotesaving among the hard-corepoor peopleto investin the ASB scheme andthis will be discussedin Chapter12.

Prior to this programme,earlier programmeswere mainly "poverty-related programmes".

34. The registrywill take accountof incomeplus other informationsuch as housing conditions,educational and healthstatus of family membersin the selectionof hard-corepoor into the programme.

35. While doing in the fieldwork for this study Baling (December1992 - May 1993), theDistrict Officein Baling is still activelypursuing the registryof hard-corepoor andis yet to arrive at completeand up-to-date data. This registryprocess is part of nationwideexercise in an effort to comeup with the most comprehensiveand data up-to-date on the generalprofile of the poor in line with the "PPRT" programme. 132

CHAPTER 5: THE EMERGENCE OF AN ALTERNATIVE APPROACH - THE AMANAH IKIIITIAR MALAYSIA RURAL CREDIT CUM-POVERTY FOCUSED PROGRAMME

5.1 INTRODUCTION

This chapter examines,as a means of exploring the emergence of the alternative approach,a new initiative towards the rural developmentand poverty alleviation effort in PeninsularMalaysia by a non-government,agency. This is in line with the emerging phenomenonthroughout the developing countries in putting the concept of "Another Development" into practice. The central focus of this chapter is on the AMANAH IKHTUR MALAYSIA (AIM), an agency that implemented the rural credit cum- poverty alleviation programmeor the IKHTIAR PROGRAMME. Specific emphasisof this chapter is on the needs of exploring the working mechanism of the 1khtiar Programme "specially designeddelivery "for the very poor rural - . system reaching householdsin Peninsular Malaysia (as stated in objective 1).

This needsto be analyzedwithin the contextof the overall operationalframework of the Ikhtiar Organization.As such this Chapterwill also highlight the origin of the Ikhtiar Programme,its expansion,objectives, progress, organizational aspects, funding of operationsand its future plans. Only with this generalbackground material can Ikhtiar Programme!s "specially designeddelivery system", be put into a clearer perspective.This Chapterthus focuseson the Ikhtiar Organizationat the macrolevel, whichwill then provide a sufficientbackground for the analysisof the casestudy of BALING at the micro level (in Chapters6 to 11). The last part of this Chapter highlightsbriefly the majordifferences between the GB andAIM models.

5.2 THE RELEVANCE OF THE GRAMEEN BANWS APPROACH TO THE ALLEVIATION OF RURAL POVERTY IN PENINSULAR MALAYSIA

By reviewingthe scenarioof rural developmentin PeninsularMalaysia (Chapter 4), it wasclear that towards last Outline the quarterof the PerspectivePlan (1971 - 1990)in the NEP dominated which the institutional developmentand developmentgoals, 133

poverty remained an inherent problem despite a huge allocation of M$32.7 billion towards rural developmentand poverty alleviation efforts. This did not mean that the governmentwas ineffective.On the contrary, poverty incidencewas reduced from 49.3 percent in 1970 of the population to 15 percent in 1990. This has been highly commendable,but more neededto be done, especiallyabout hard-core poverty.

It has been estimatedby AIM, using official government statistics, that there were, as of the end of 1986, about 155,000 it] rural households with an average monthly income of lessthan M$50.00 per person. Thesewere distributed throughout the states as indicated in Table 15. Such householdsare deemedto be very poor by AIM and needto be helped.The persistenceof hard-core poverty requires a new developmental strategy,not a changein the emphasisof the developmentgoal.

5.2.1 GRAMEEN BANK (GB) AS A MODEL

The successof the GrameenBank hasshown the vital importanceof credit as an entry point for povertyreduction programmes in a context like rural Bangladesh(Gibbons, 1986).

In Malaysia,just like the Bangladesh,the initial IKHTIAR PROJECT was initiated by concernedsocial scientistsfrom Universiti SainsMalaysia in Penang,Professor DavidGibbons and Associate Professor Sukor Kasim, who hadbeen doing research on povertysince 1970 and 1975respectively. Before startingthe project they questioned whetherthe GB modelcould be successfuland viable in the contextof rural Malaysia. It was felt that only by trying the programmein a representativerural area and by monitoringand evaluatingits impact and viability (the essenceof action, as distinct from academicresearch), would they then be able to reachdefinitive conclusions on the concernedmatter. In a truly GB fashiona "learningprocess" rather than "blueprint process"approach was adopted.In 1985,Professor Gibbons was in Bangladeshto learnabout the GrameenBank. 134

Table 15: Estimated Number of the Very Poor Households By State, 1987 AND 1989 *

STATE 1987 1989

1. Kedah 36,440 26,902 2. Perak 23,533 18,815 3. Terengganu 21,020 14,161 4. Kelantan 20,943 19,241 5. 11,017 1,466 6. Selangor 10,933 9,035 7. Johor 10,143 5,390 8. Pahang 9,201 2,649 9. Pulau Pinang 5,385 2,186 10. Perlis 3,692 1,457 11. Melaka 2,958 1,275

TOTAL 155,265 1000,577

Estimates made by AMANAH IKHTIAR MALAYSIA based on the government's Household 'Income Survey (HIS) sample statistics of 1987 HIS and 1989 HIS to the estimated number of rural income households in each state based on M$250 monthly household or M$50 monthly per capita income.

Sources : Gibbons and Kasim, 1990, Banking on the Rural Poor, p 73. Kasim, 1992, Financial Capital and Development of Local Resources, p 6. 135

5.2.2 THE INITIAL IKHTIAR PROJECT - PILOT PROJECT

Ikhtiar is freely translated as a project to help the poor strive to overcome their poverty. The Ikhtiar Project 121is conceptualizedas an applied researchprogramme to ascertainwhether credit on reasonableterms, acceptableto the rural poor, could be an effective meansof reduction of extreme rural poverty in Peninsular Malaysia. It was launched as a two and a half years pilot project in an extreme poverty area in Northwest Selangor,commencing in January 1986 and running to June 1988 [3].

Householdsearning incomes of less than two-thirds of the government'spoverty line, monthly household income of M$350 (based on 1986/87 poverty line - PLI), are regardedas poor 141.Therefore to be eligible to becomeIkhtiar beneficiaries,the basic requirementis that the household monthly income must be less than M$250 or per capita income of every household must be less than M$50-00 15], when the programmemade its debut in Selangoras mentioned earlier. In the period of 1992/93, when this study was being carried out, the government'S'PLI stood at M375.00, but the Ikhtiar Organization has still stuck to the original formula, i. e. the M$250.00 householdincome as the basic requirement for the poor householdintending to join the programme.

BasicallyIkhtiar believesthat the poor could be helpedto improve their economic positionif they are given capital(Gibbons, 1988b). This is possiblebecause the poor do possesssurvival knowledge and skills (Kasim, 1992).Further aspects of skills and knowledgeof Ikhtiar membersare discussed in Chapter8.

This pilot project (known as the Ikhtiar Project or in Malay Proiek Ikhtiar) was initiallybeing targeted to only 300 very poor borrowerswith a repaymenttarget of at least 90 percent.However, by the end of June 1988, this pilot project had 448 membersand had greatly exceeded the target.

Preliminaryresults from an "in house' impact evaluation study (also known as Impact Stu(ly 1) of the first and third 100 loans during the pilot project period have shown that most borrowers (70 percent) experiencedan increasein their monthly household incomesbecause of Ikhtiar loans. The increasewas from M$173 (before they entered the programme)to M$328, or by a 90 percent rise (after the utilization of the Ikhtiar loans).

Femaleborrowers, on average,had donemuch better than their matecounterparts. 84 percentof had women experiencedan averageincrease of M$113 per householdper 136

hand, month. On the other only 65 percent of the male borrowers experienced an overall average increaseof M$65 per household per month (Gibbons and Kasim, 1990).

Men from very poor rural households were not able to match the excellent performanceof the women in the pilot stage. Repayment among the men stood at 72 percent, and fell short of the project target of 90 percent. This compared badly with the repaymentrate among women borrowers at 95 percent. Grameen Bank too has experiencedmuch better performanceby women borrowers. Thus, women have been regardedas saviours of the lkhtiar project(Gibbons, 1988b).

TheIkhtiar Projecthas been declared a success.On this Gibbonsand Kasim (1990: 18) argued:

"Thereis little doubt now that smallloans on reasonable terms can be an effective means of reducing rural in Peninsular Malaysia Bangladeshit poverty as ... supportsthe ideathat thereis an elementof universalism in the GrameenBank approach".

Sin-dlarstudies in 7 otherAsian countries (India, Indonesia, Nepal, Pakistan, Sri Lanka, Bangladesh(other than Grameen) and The Philippinesalso concluded that givenaccess to credit, the poor are willing and able to help themselves(Banking with the Poor, 1992).

5.3 THE AMANAH IKHTIAR MALAYSIA (AUNI)

5.3.1 INSTITU ONALIZATION

The IMMIAR PROJECT (the initial pilot project) endedsuccessfully on 30 June 1988.AMANAH HMTIAR MALAYSIA (UMTIAR TRUST of MALAYSIA) or AIM was establishedon 17th September1987 to institutionalizeand expandthe khtiar Project to other areasof PeninsularMalaysia. AIM is a private trust (non- government)and a non profit organizationregistered with the Ministry of Justice.The optionof the Trust beingabsorbed by the governmentwas rejected,as past experience (such asthe AgriculturalBank) showsthat governmentrural credit programmeshave not been in (Gibbons successful reachingthe poor and Kasim, 1990). Therefore,a 137

private organization was needed to play a complementary role to the government poverty reduction programmes.

As mentioned earlier, women have been a saviour of the initial pilot project (projek Ikhtiar). Thus when the Ikhtiar Programme was institutionalized, the memberships, from then on, were mainly given to woman (i. e. the female in the household as the main priority). The majority of the Ikhtiar membersare Malays (Muslim), rural based and 99.3 percentare women. Only the pioneer branch, i. e. the Northwest Selangorhas somemale members,being the pioneer memberswith the initial Ikhtiar Pilot Project. However in the other 33 branches,the membershipsare 100 percent women. In the Malaysian context, the problem of mass poverty is and has been a Malay problem (Anand, 1983;Faaland et al, 1990). Therefore it is not surprising that an overwhelming majority of the Ikhtiar membersare Malays.

5.3.2 OBJECTIVE

As.mentioned earlier AIM was establishedby Deed of Trust on 17 September1987 andtook over all operations,assets and liabilities of Ikhtiar Projectfrom Ist July 1988. AmanahIkhtiar or the Ikhtiar Programmeis actuallya poverty alleviationprogramme andaccording to the AIM Deedof Trust (AIM, 1987:15):

"The AMANAM IKHTL4R is establishedfor the sole purpose of assisting very poor households to lift themselvesout of poverty primarily by means of benevolentloans [61 to be usedfor financing income generatingactivities. "

To AMANAH =IAR, credit is seenas a vehicleto help the poor in raisingtheir incomesand also towards the alleviationof poverty. Kasim (1992) also noted that AIM hasstressed credit asa fundamentalhuman right.

5.3.3 ORGANIZATIONAL STRUCTURE

AIM's operation is generally decentralizedinto zonal and regional offices with supportingservices from head-office(which is responsiblefor auditing, research, monitoring, logistics, secretariat,publications, finance, planning and training). Generally then,the Ikhtiar Organizationis comprisedof 4 maincomponents, namely:

I. Headquarters(in Penang). 138

2. Coordinatingoffice (in ).

3. Zonal offices : There are two main zones:

(i) TheWestern Zone, which is comprisedof Kedah andPerak regions,and

(ii) The EasternZone, is Kelantan Terengganu N-J. which comprisedof and regions.

Thesezonal offices are further divided into 4 mainregions:

Kedahregion and its vicinity (9 branchesin Kedah,including I branchin the state of Perlis).

I Perakregion and its vicinity (6 branchesin Perak,including I brancheach in the stateof Penangand Selangor).

M. Kelantanregion and its -6cinity(7 branchesin Kelantan,including I branchin the stateof Pahang). iv. Terengganuregion (7 branchesin Teregganu,including I in Pahang).

4. A Trainingcentre in Baling in the stateof Kedah.

The chief executiveof the Ikhtiar Organizationis the Managing Director at the headquarters.The branch offices located in the 34 districts,the lowest operationalunit, arethe maincentres of AIMs activities.Each branch is run on averageby nine staff (a manager,a seniorTrust Assistantand sevenTrust Assistants).As of December1992, AIM hada total of 411 staff with Trust Assistants(its field officers)comprising nearly 80 percent(AIM AnnualReport, 1992).

5.4 THE EXPANSION AND rROGRESS OF THE M31TUR rROGRAMME

Table 16 providesthe consolidatedcumulative statement for the period of 1989 to November 1993of the wholeoperation of the Ikhtiar Programmeand shows its overall progress. 139

16: Consolidated Table Comparison of cumulative Statezrents of ta 31st ,h Ikhtiar Progra=ne, December 1989 - 31st November 1993, Based an all of Ikhtiar 34 Branches (m$).

Particulars 1990 1991 1992 1993 Cum. Total

1. Total Loans 1,308,217 2,835,748 6,676,662 12,143,290 22,963,917 Disbursed.

2. Total Repaid 720,470 1,620,587 4,250,649 8,338,290 14,930,613

3. Total loans 587,619 1,215,289 2,426,013 3,804,383 8,033,304 outstanding

4. Arrears M 0.13% 0.18% 0.12% 0.01% 0.01%

5. Total Savings in 201,979 426,583 972,381 1,487,745 3,088,688 Group Fund

6. Total Loans From Group 105,566 298,998 885,558 1,297,678 2#587,800 Fund

7. Total No. of Members 3220 6181 9517 5916 24,834

8. Total No. of Groups 694 1262 1728 1437 5121

9. Total No. of Centre 207 378 485 224 1294

10. Total Number of 2215 Villages

11. Total Adminis- trative 67,155 144,361 339,485 624,369 1,175,370 Charges Collected

Sources : Ikhtiar Consolidated cumulative Statements, 1990 - 1993. 140

Figure 7: AmanahIkhtiar Malaysia (AM Operational Area in Peninsular Malaysia.

1. Kulim/B. Baharu 2. Baling 11 3. Kuala Muda 4. Baling I Kunla Kirni. 5. Sik r - 21 6. Pendang -Minah Mer.A. 22 7. Ildg.Terap -Pasir Mas. 23 8. - Tumpat. 24 9. Kbg. Ilasit Kola Bliarti. 25 10.1'erlis Bachok. 26 -Pasir Ilutch. 27 Hulu Terenggaim. 28 Bestit. 29 Setiti. 30 K. Terenggmiu. 31 Dungun. 32 Marang. 33

-, I I. Sbrg. Perai %i C' %. . Keniaman.34 If )KELANTAN -, r 12.Ketian --J 13.1lulu Perak JAK

WIANG

GOR(14

... -. 4ý AIAt"',

14. Rompin 15. Barat Laut Sclangor 16. Lipis 17. Ifilir Pcrak 18.M .111jung 19. Kuala Kanpar 20. Latut Matalig

Source: AIM Annual Report, 1"J. 141

1. The Ikhtiar Programme Coverage

From only I branch in 1986 (in North West Selangor), the 1khtiar ]Programmehas made a very rapid expansion. As of November 1993 there were 34 districts in PeninsularMalaysia under its operation. Three other states,Negeri Sembilan,Melaka and Johor haveyet to be coveredby AIM.

Figure 7 showsthe Ikhtiar Programmeoperational areas and Table 17 shows the estimationof the hard-corepoor for eachdistrict in which the programmeis operating. Baling districtwith the highesthard-core poor of 6556,is the only district which has2 AIM branches,namely BALING 1 andBALING 2 [7].

2. The Programme Participants

Ikhtiar members(or participantsor borrowersor benificiaries)are calledsahabat in Malay.By the endof 1992,AIM had originallyplanned to get only 15,635participants but managedto get 18,918participants, exceeding its targetby 21 percent.Compared to an estimateof about 100,578hard-core poor, AIM hadby December1992 covered 18 percent of the hard-core total population. Such an achievementby a non- governmentalorganization is quite remarkable.

This achievementhas to be seenin the contextof government'sprogrammes, which we haveseen in Chapter4 were not effectivein reachingthe target group. Even its latest PPRT (DevelopmentProgramme For The Poorest)is programme, the still struggling in comingup with the inventoryof the poor. As notedby Siwar (1991b),even though the PPRTwas instituted to overcomethe problemof governrnent'sdelivery system, the implementingmachinery at the districts,states and federallevels still appearto have problems.

By November1993 (the latestavailable data), the numberof Ikhtiar membershas risen to 24,834,being organised in 5121groups and federated into 1294centres in a total of 2275 villagesin all its branches(see Table 16) (AIM Annual Report, 1992; AIM OfficialData, 1993).In 1993,AIM hasresorted to a temporaryshift in emphasisaway from fully recruiting new memberstowards monitoring and ensuring successof projectsundertaken by first timeborrowers. 142

Table 17 : Estimated Number of the Very Poor Households According to District in States Which Have AIM Branches in Operation (June 1992)

No. AIM Branch/ State Date Hard-core District Established Poor

1. Barat Laut Selangor Selangor Jan 86 3381 2. Seberang Perai Penang July 88 1913** 3. Baling 1* Kedah Mac 89 3556 4. Sik Kedah Mac 89 2634 5. Pendang Kedah July 89 2371 6. Pasir Putih Kelantan Oct 89 4468 7. Tanah Merah Kelantan Nov 89 2916 8. Besut Terengganu Nov 89 1765 9. Setiu Terengganu Dec 89 1054** 10. Hulu Terengganu Terengganu Feb 90 3259 11. Kerian Perak Feb 90 2283** 12. Pasir Mas Kelantan Feb 90 4207 13. Padang Terap Kedah Jul 90 2459 14. Hilir Perak Perak Aug 90 2566 15. Manjung Perak Aug 90 1416 16. Marang Terengganu Sep 90 1232 17. Baling 2* Kedah Sep 90 3000 18. Hulu Perak Perak Sep 90 2566 19. Kuala Muda Kedah Sep 90 2462 20. Kubang Pasu Kedah Sep 90 4302 21. Perlis Perlis Sep 90 1457 22. Bachok Kelantan Sep 90 2010 23. Kuala Krai Kelantan Sep 90 1414 24. Tumpat Kelantan Sep 90 1105 25. Lipi3 Pahang Sep 90 1490 26. Rompin Pahang Sep 90 1227 27. Dungun Terengganu Sep 90 914 28. Kemaman Terengganu Feb 91 2287 29. Langkawi Kedah Feb 91 821 30. Larut-Matang Perak Feb 91 4475 31. Perak Feb 91 2923 32. Kulim/Bandar Baru Kedah Nov 91 1916** 33. Kuala Terengganu Terengganu Nov 91 3121 34. Kota Bahru Kelantan 1992 1368**

Baling is the only district in Peninsular Malaysia with 2 AIM'S branches - Baling 1 and Baling 2. The overall total of the very poor in Baling district is 6556, the highest in the country. Based on 1989 estimates.

Sources : AIM Annual Report, 1991; AIM Official Datar Jun 1992. 143

5.5 THE IKHTIAR LOANS

In generalthe Ikhtiar Programmeprovides 5 types of loans namely:

(1). Benevolentloans; (2). Semi-Commercialloans; (3). Near-Commercialloans; (4). Educationloans; and (5). Housing loans.

1. Benevolent loans - Iklitiar Loan Scheme I (ILS 1).

ILS I is the mainbackbone of the Ikhtiar Programme.A new membercan borrow a maximumfirst loan of M$500. Memberswho have a perfect repaymentrecord are immediatelyconsidered for a secondloan of M$1000, followed by M$1500 for the third loanand M$2000 for the fourth andsubsequent loans. For everyloan givenout, a fixed administrativefee of M$25 (Ist loan), M$50 (2nd loan) and M$75 (3rd and subsequentloans) are levied. Every loan must be repaidin almost equal instalments over 50 weeks181.

Available data (as of September, 1992) showed that 12,214 participants have taken first loans and 2130 secondloans. In the older branches(Selangor and SeberangPerai) there were participants who have taken the third loans (271), fourth loans (75), fiflh loans (25) and sixth loans (8). By the end of November 1993, a total of about M$22.9 millions had been disbursedin loans to the members(see Table 16).

2. Semi-Commercial Loans - lklitiar Loan Scheme 2 (ILS 2)

By 1992, AIM had realized that some members were keen to borrow more than M$2000. This has resulted in the creation of ILS 2, with loans ranging from M$2000 to M$5000 and repaid in 2 years. The administrativefee for the ILS 2 is similar to the ILS 1. By November 1993, a total of around M$2.4 million has been borrowed from the ILS 2 schemeby a total of 812 members(AIM Official Data, 1993). 144

3. Near-Commercial Loans - Ikhtiar Loan Scheme 3 (ILS 3)

In 1993 AIM again madefurther progress by creating ILS 3, with loans ranging from M$5000 to M$10,000 to be repaid in 5 years. However ILS 3 is open to members who, after some experiencewith ILS I are earning more than M$600 per month (Utusan Malaysia, March, 1993). For the ILS 3, the administrative charge is a flat chargeof M$200 for the first year and M$ 100 for the subsequentyears.

Both the ILS 2 and ILS 3 are made possible through AIM formal linkages with the local financial institutions, namely the Islamic Bank (BIMB) and Credit Guarantee Corporation (CGC). In this connection, AIM stands as a corporate guarantor for its members(AIM FinancialStatements, 1992). This developmentseems to suggestthat a rather revolutionary direction for conventional banking practise is slowly taking place andis discussedfurther in Chapter11.

4. Education and Housing Loans

In 1989,Ikhtiar introducedan educationloan of up to M$500 to memberswho have provedtheir credit worthinessby settlingtheir first loans in full on time. From only M$405 disbursedin 1989,it had increasedto M$705,748to a total of 1608members by December1992 (AIM AnnualReport, 1989,1990,1991,1992). Educationloans arein line with Ikhtiar members7th decisionof the "Social DevelopmentProgramme - The Sixteen Decisions",which statedthat " We shall educateour children and ensurethat they can earn to payfor their -education" 191.

Housingimprovement loans, were launchedin October 1992. Under this scheme,a memberwho, after 3 yearsas a memberand with a perfectloan performanceis eligible for a housingloan of up to M$2000.The loan is to be repaidweekly over a period of four years. By December1992, a total of M$85,500 had been borrowed by 43 members(AIM Annual Report, 1992).

5. Activities Financed by Ikhtiar Loans

In addition Figure 8 (at December 1992) shows the main activities financed by Iklitiar loans in all its 34 branches.It shows that agricultural activities occupy 58.5 percent of fund. The popular activities are animal husbandry (20.3 percent), padi cultivation (10.61 (mainly percent), tree crop cultivation rubber - 9.7 percent), other crops (9.3 percent)and fishing (3.3 percent). 145

Figure 8: Activities Financedby Mhiar Loans (by December 1992), Based on AU the 34 Branches

10.61% 22.8 29/o 9 31% .

ol All

9 71% . . 3 60% ...... % ...... 1.60% ...... 4.50% ...... 3 30% %:......

12.61% 20.32% 1.60% ......

Paddy Cultivation

Tree Crop Cultivation

Other Crops

Ei Fishing activities

12 Animal husbandary

13 Repair/Services vehicles

1Z2 Hawking/Distribution of Foods öf Hawking Agricultural Products Other Non-Agricultural Activities

Purchase/Repair Own Vehicles

Hawking Non-Agricultural Products.

Source: AIM Annual Repoft, 1992. On hand the 41.5 percent of all loaned the other , non-agricultural activities occupy money. The popular ones includes hawking and food distribution (12.6 per cent), hawking of agricultural products (4.5 percent), hawking of non-agriculturalproducts (22.8 percent)and repair and servicesof vehicles(1.6 percent).

5.6 INTERNATIONAL RECOGNITION

While GrameenBank hasbeen widely acclaimedas the mostsuccessful development effort, the Ikhtiar Programmein Malaysiarepresents the very first seriousattempt to replicateit outsideBangladesh. It hasbeen the subjectof studyby foreigners.

India, Nepal, Thailand, Sri Lanka, The Philippines and Indonesia have sent their officials to study (study tour) the whole operation of the Ikhtiar Programmein various districts. Meanwhile Zimbabwe, Somalia and Egypt are the most recent countries showing an interest in the programme and planning a study tour (Utusan Malaysia, has September,1993). This is not surprising as the GB founder, Professor Yunus, acknowledgedthe Ikhtiar Programme as the best replication of GrameenWay (New Straits Times, April 1993).

5.7 SUPPORTIVE NATIONAL POLICY FRAMEWORK

The Malaysiangovernment has recognizedthe potential contribution of the lklitiar Programmeto the further reductionof extremerural poverty in the Peninsular,and has its stated willingnessto providefinancial support and cooperationfor the expansionof first the programmethroughout the country. The ever official indication of this appearedduring the New EconomicPolicy period, and was stated in the Mid-Term Reviewof the Fifth MalaysiaPlan (Malaysia, 1989: 76):

"...the implementation Projek Iklitiar of will continue as a non-governmentalproject in statesother than Selangor with continued co-operation from government agencies". 147

AIM has received further support, and this time financial support, from the recently announcednew National Development Plan (NDP) which replaced the NEP where emphasishas shifted to the eradication of hard-core and relative poverty. In this connection,AIM's role was officially recognized. The official indication and support of this appearedin the Sixth MalaysiaPlan covering the period of 1991 - 1995 (Malaysia, 1991: 44):

go to the ...government will continue support efforts of NGO's and other private institutions, such as the credit scheme by AMANAH =IAR (AM designed to provide income earning opportunities for the poor. As part of the support, the government will provide a loan of M$20 million to AIM during the plan period".

Recentlythe Prime Minister, in presentingthe Mid-Tenn Review of the Sixth Malaysia Plan in Parliamenton the 16 December 1993, stated (New Straits Times, December, 1993):

"The implementation of PPRT together with non- governmental organizations such as the AIM has contributed much towards the reduction of hard-core poverty".

In Malaysiathere is not a strongNGO tradition, nor are there establishedpractises of NGOs and governmentworking together(Banking with the Poor, 1992). AIM has been able to work with the governmentbecause its designerargues that poverty alleviationin Malaysiais possiblewithout prior socio-politicalstructural change. This is understandablebecause the technocraticnature of the governmentmakes it necessaryfor AIM to maneuverwithin the existingstructure and not to confrontit.

5.8 FUNDING OF THE IKHTIAR PROGRAMME OPERATION

In the Ikhtiar Programme,the memberspay or cover their cost of development.Being a non-governmentorganization, AIM main sourcesof income are (i) through the fixed administrativecharge from it various types of loans its disbursed as discussedearlier (ii) and return on investment or unused loan capital (but this is only a temporary phenomenonthat will ceaseto be possibleonce the number of borrowers has increased branch). (see at each By November 1993 Table 16) AIM has managedto eam a total 148

of aroundM$1.17 million from its administrativecharges. It has to be noted that incomeearned through the administrativecharge depends on its amounts,number and typesof loansdisbursed and thereforevaries from time to time.

Two types of funds are required by AIMý namely (i) revolving loan capital which can be used for disbursingIkhtiar loans and (ii) the annual operating expenditures/costs [101. Being a new programme, AIM has yet to be able to meet its total cost of operation. AIMs supply of loan fund capital is not sufficient to satisfy its objectives of lifting the poor permanentlyfrom. poverty and increasing its coverage of the target group. As a result AIM was initially heavily subsidized by the Federal government by an annualgrant through the Malaysia Islamic Economic Foundation (YPEIM).

1khtiar'srequest for M$18.2 million from the Federal Governmentfor the Sixth MalaysiaPlan was divertedto YPEIM, wl-dchwhile converting it into a grant also extendedthe disbursementperiod from 1991 - 1995 (as in the original request),to 1991- 2020 (30 years).This hasresulted in seriousshortfall of loan funds for 1991- 1995(Kasim, 1992). Currently the FederalGovernment is committedto providing 60 percentof AIWs total annualshortfall in loan funds. Governmentsof the 7 Statesin which AIM is operatingpay varyingamounts and over-all this amountedto 22 percent of the shortfallin 1992(AIM FinancialStatement, 1992). These loan funds are given becauseAWs objective of helping the poor to lift themselvesout of poverty is consistentwith governmenfspolicy objectivesof eradicatingpoverty. However, the State and Federalgovernments play no role in AWs management(Understanding AIK 1990).

As The remainingshortfall of loan fundshas to be soughtby AIM from other sources. a result AIM has also establisheda linkagewith three local financialinstitutions to obtain loan funds.The three financialinstitutions are Credit GuaranteeCorporation (CGC),The Islamic Bank (BIMB) andthe MalayanBanking. By July 1993,these three loan local financialinstitutions have contributed around M$3.37 million to the Ikhtiar funds(AIM FinancialStatement, 1993) [111. AIM had alsoreceived a sumof M$1.39 [121. million from the Malaysiangeneral public through its "Project Ikhtiar Fund" Table 18 showsthe estimatedoperating cost and projectedshortfall of incomeof the Ikhtiar Programme. 149

Table 18: Achievements and Targetted cost of the Ikhtiar Programme

Year Estimated CIbution CIbution Wbution CIbution Projected Operation From From From From Shortfall Cost Federal State Adminis- Other of GIment GIment trative Sources Income Charges

1991 3,507,657 1,269,632 2,625,544 145,619 0 ND

1992 4,791,368 1,202,615 2,500,000 349,102 739,651 ND

1993 5,905,342 1,169,995 2,800,000 697,173 1,238,173 5,208,169

1994 6,358,679 1,235,000 3,083,280 1,219,880 820o, 519 5,138,800

1995 6,688,655 1,225,000 2,878,193 1,891,667 693,795 4,796#736

Note : ND denotes no data. Sources: AIM Financial Statement, 1993.

From the abovediscussion it is clearthat AIM is currentlynot in the stateof financial self-relianceand this issueis discussedin Chapter II under "The Limitation of the Ikhtiar Programme".

5.9 ON REACHING THE POOR - THE IKHTLAR PROGRAMME'S "SPECLAILY- DESIGNED DELIVERY SYSTEM"

AIM is runninga credit programmefor the very poor and thereforeits programme designmust be good andviable. This hasprompted AIM to stresstwo main elements, namely:

1. Tofocus exclusivelyon the verypoor householdsand

To 2. designa deliverysystem that willfacilitate the genuine participation of the verypoor. 150

Based on the tried and tested model of the GB's approach but slightly modified to suit the local context, the Ikhtiar Programme!s delivery system has a number of main design features (Kong, 1989; Ahmad, 1989; Gibbons, 1988b; Gibbons and Kasim; 1990; Kasim, 1990a; AIM Annual Reports, 1990,1991,1992; Banking with the Poor, 1992):

5.9.1' EXCLUSIVE FOCUS ON THE VERY POOR

Using samplestatistics as a guide [131,the Organizationsent its BranchManagers on their own (generallyfor 3 to 6 months)into the 34 districts to evaluatethe expected numberof very poor rural householdsusing 'crude!measures of poverty basedon housingconditions: size, materialsused and generalconditions, which gives a fairly accurateindex of the economicconditions of the family. This was only the first step andthe beginning.The "HousingIndex", as calculatedunder the Ikhtiar Programme,is discussedin detailin Chapter9.

Sincethere has been much publicity by AIWs seniorofficials and village headmen,so usually the householdswould have heard about this new programme.Once the potentialborrower agrees to join the programme,AIM staff will applythe 'meanstest' to ascertainthe levelof povertyin termsof total householdincome, sources of income, householdsize plus operation of all land,surplus labour and satisfactionof basicneeds. The informationand calculationsare recordedin a structuredquestionnaire known as theM3 Form [141.

AIM givespriority to femalesof the householdto becomerepresentatives and does not precludethe husbandfrom utiliziingthe loan.For all casesdeemed eligible through the abovemeans test, a re-interviewis carried out by the Branch Manager.This is to preventleakage of loan funds to' ineligible households.Through a processof re- interviewcarried out (by end of June 1992) on 57,178households, 6556 households are disqualified,leaving an effective eligible poor of only 50,162. However these 50,162households are againbeing 'filtered out' during the group formation stage(as will be discussedlater).

We haveseen earlier that while governmenthad resorted to a 'blanketapproach! and 'trickle-down! mechanismin providingdevelopment inputs to the poor andnever really reachedthe poor effectively,AIM has institutedvarious mechanisms of checkto delivery ensurethe of developmentinputs only to the deservinggroups. 151

5.9.2 THE DELIVERY SYSTEM

The following are the distinctive featuresof the programme's delivery system:

1. Loans Are to be Taken to-the Very Poor

The poor are rightly intimidated by banks for usually they would have little chance of obtaining loansif they enteredone. Credit is therefore taken to the poor in their homes and villages. Members need not travel to town, they do not incur any expenditure in gettiingloans.

Simple rrocedures

Many of the very poor have no formal schooling and cannot read and write. Complicatedforms [151 to fill in will turn them away to informal lenders.AIM provides simple training to the point where potential member understandthe requirementsof AMs rulesand procedures. Understanding of the loan conditionsand an agreementwith thembecomes a partial substitutefor collateral.

3. Suitable Loan Conditions

The standardrequirements for collateral,such as land, a house, stock or investment certificatesand guarantorsare amongthe factors excludingthe poor from accessto credit in the formal financialsector. Upon recogni'zingthis problem,Ikhtiar loans are providedwithout interest,without collateralor guarantorand no legal action will be takenif borrowersfail to repay.Loans outstandingwill be written off for borrowers with a goodoverall record who passaway before repaying fully.

4. The Five Member Group.

Just like its counterpart,the GB, the five membergroup is the basic building block aroundwhich the Ikhtiar Programmeis organized.Potential borrowers have to form a group of five like-mindedindividuals, all peers,all women, being neighborswith at least3 yearsof residencein the village but more importantly,those they cantrust and believein. The conceptof group formationalso provides an opportunityfor the branch managerto verify further the householdand income information of eachhousehold from the other membersand this may even weed out undesirableor 'unqualified! persons. 152

Once groups are formed, membershave to undergo compulsory group training for 7 days to learn the simple philosophy, procedures and rules of AIM and it includes the "Beneficiaries Pledge" (see Appendix 2), the 9 "Governing Principles" (see Appendix 3) and "Social Development Programmes - The Sixteen Decisions" (see Appendix 4). Duties and responsibilitiesof members are included in the curriculum in the training programme.

After training, eachmember is tested on their understanding of training content. If one memberof the group fails, then the whole group failed. The group then has to decide to find a replacementor go through re-training and re-sit the group recognition test.

5. Creating a Centre

Once a potential memberpasses the test, they then join other groups to form a Centre (5 per group x6 groups = 30 participants which constitutes a centre). Each group has its own chairwoman and a secretary. This job is held on a yearly basis and everyone is given a chance to hold office. The Centre also has its center-head, assistant,secretary and treasurer, also on a rotationalbasis.

A centreis a placewhere weekly meetingsare conductedand the businessof AIM takes place.Loan proposalsare discussed,approved or even turned down by tile centre.Loans are also disbursedand repaymentscollected at the centre by Iklitiaes field officer. Problemsand other related matters are discussedhere. Attendanceis compulsoryand attendance records are consideredwhen loan applicationscome in.

6. Group and Centre Guarantees as a Substitute for Collateral.

In the Ikhtiar Programme,the hurdles which affect commercialbanks, collateral, guarantorsand legal action for loan recovery,have been removed and replacedby tile conceptof the group and centre liability. However, the most important and basic requirementsare that each group member is to stand guarantor for every other member(for eachgroup of 5) andalso credit discipline.

Thesegroups and the centreconcept can be regardedas either socialcollateral or as a mechanismof bringing together disadvantagedpeople into (i) the folds of some organizationalformat which they can understandand operate and (ii) by federating groupsinto centresthus developingan ingenious"sociological phenomenon of multi- layeredfilters" of peer support and pressure,with the role of the group fund 153

strengtheningthe group relationship. Collective responsibility is therefore the most important aspectof the Ikhtiar Programme.

In the AIM model, the group and centre play a very prominent role. On this Kasim. (1990b: 18) arguedthat they:

11 interest to ...constitute an group so as ensure continous credit facility on the one hand, also act as pressuregroup on the other, i. e. processingof member loan applications and ensuringcompletion and prompt repayment". 1161

From the abovediscussion, it can be arguedthat the Ikhtiar Programmehas actually instituteda sort of speciallydesigned 'Welivery-recovery" mechanism for the purpose of grantingand collecting loans. In the 'Welivery"context, AIM hasdisbursed M$22.9 million in loansto 22,000borrowers, while eliminating6556 non-eligiblehouseholds who tried to becomeAIM member.In the "recoi,ery" context, Table 16 showsthat loanrepayment rates are near perfect, at 99.9 percent.

7. Small Loans and Weekly Repayments

lkhtiar loans 1171are strictly for any income generating activity purposes, except money-lending.AIM stressesthat it is essentialthat the amount of loan be kept small, especiallythe first and secondloans and that they be repaid weekly over no more than I year. This is in line with AIM's fourth principle "We nsay borroliv according to 1rhat is requiredfor ourproject and our ability to repay weekly " (See Append ix 3).

In relationto that the memberis free to undertakeactivities with which sheis familiar basedon knowledgeand skill. Suchselection of activitiesare, however,as mentioned earlier,discussed at lengthat centremeetings. AIM doesnot provide any training for activitiesundertaken., but provideslinkages to marketing,professional and technical servicesprovided by variousgovernment agencies at the requestof participants(see ChapterII for furtherdiscussion).

8. CoInpulsory Weeldy Savings in the Group Fund

AIM stressesthe importanceof saving.All membersmust depositM$1.00 per week into their GroupFund (GF), whetherborrowing or not. On receivinga loan, 5 percent of the principalborrowed must alsobe depositedinto the Group Fund. By November 1993, a total cumulativesaving of M$3.08 million had beencollected by Group Funds, whichis a The GF very encouragingphenomenon. maybe borrowedby any memberof 154

the Group for emergencysmall credit needs subject to the unanimous approval of tile other 4 members.

9. Loans are Disbursed in a Staggered Manner

All members do not get loans simultaneously. Loan disbursement to the group is staggered:the first loan goes to the poorest two. After two months of perfect weekly repayment records, two other members will be eligible. Again two months later, subject to recovery of loans, the group chairwoman is the last person to receive a loan. However, if the discipline (violating of rules and defaulting on repayment) in the group and centre deteriorate,the disbursementof subsequentloans is suspendeduntil things are back to normal. AIM also recognizes that one small loan is rarely enough,,but is good enoughas a starting point. Thus, all participants are entitled to subsequentloans once they have settled the current loan according to schedule and fulfil other conditions.

10. Loan Utilization is Intensively Supervised

It has beennoted that Ikhtiar is taking a different path from tile governmentwhich usuallydoles out of fundsor materialsto the poor. Ikhtiar doesnot subscribeto tile subsidymentality, but stressesself-reliance to 'endeavour'for a better life. All loans mustbe repaid.This requiresstrict disciplineto ensurethat loansare properlyutilized. As a resultclose supervision by field staff is necessary.Like in GB, however,members are free to make decisionsregarding their economicventures through their peer discussions.In generalloans are to be utilized within 7 daysafter disbursementon any income generatingactivity. Ikhtiar field officers conduct a thorough check and constantlymonitor the performanceof the participants.Field officers also attend the weekly meetingsto receiverepayments. Meanwhile, Group and Centre chiefs also check on any absenteesand defaulters.In this way, membersare motivated and requiredto keeptheir commitments.

It. All BusinessTransactions are Conducted Openly

The weekly centre meeting is the main avenue where staff-member meet for conductingall the businesstransactions, ranging from loan proposals, repaymentsand other related matters. It is believed that nothing is confidential and everyone has the right to voice opinions and the right to get information without the need of being 'secretive'. This opennessis merely to promote members trust and confidence in tile Ikhtiar Programme as an'organization meant only for the pooe. 155

12. Other rrogramme Within the Framework of the Ikhtiar ]Programme

AIM has also adoptedthe GB approach in promoting the socio-economic programme componentknown as the "Social Development Programme - The Sbdeen Decisions" income-generating This has been anchoringthem with their project . used as a catalyst in promoting the social values. These 16 decisions stress discipline, hard work, group solidarity, improvement of living conditions through better drinking water, sanitation and cultivation of vegetables.It also encouragesmembers to promote healthy living conditionsand aim for a betterhousing (see Appendix 4).

5.10 MAJOR DEFFERENCES BETWEEN AIM AND THE GB MODEL

The schemeoperated by AIM has beenvery closelymodelled on the GB. However, somemodifications were madeat the outsetof the Ikhtiar Programmeto adaptGB to the local context(APDC, 1988).Some of the major differencesinclude (Flulme, 1990; Gibbonsand Kasim, 1990; Banking with the Poor, 1992):

In deferenceto Islamicvalues, an administrativecharge of S percentis levied on eachloan disbursed,rather than interestrate (as mentionedin Footnote 8). GB on the otherhand charges an interestrate of 16 percentper annum.

2. Unlike GB, AIM is not a bank andVill neverbe one.Banking licences in Malaysia havebeen frozen and will remainso for the foreseeablefuture.

I In ARd, thereis no emergencyfund.

4. Physicalexercise at centre meetingsand saluting were seen to be culturally inappropriatein the rural context of Malaysia.

5. In rural Bangladesh,most villagersare eligible for GB loans and do not need a rigorous'means,test'. This hasto be done in the Malaysiacontext, where various mechanismsto screenthe poor arebeing instituted to preventleakage of loan funds to ineligiblehouseholds.

6. Although AIM does not have an emergencyfund, it gives out emergencyloans takenfrom the generalloan fund (GroupFund). 156

down 7. Unlike GB, AIM is computerized to the branch level for the general administrationand the keepingof borrowers' records and loan transactions.

S. Unlike GB, AIM membershave much more intensive and coordinated use of the government'ssupport services,particularly agricultural and technical extension and administrativeinfrastructure. *

9. In contrast to GB, AIM does not emphasizethe exploitative nature of linkages betweenrich and poor. Ratherit has a conciliarly stance and stressesthat the rich (the generalpublic) have an obligation to help the poor [181.

5.11 COMMITIED STAFF

The specializeddelivery system developed by AIM Oustlike its counterpart- the GB) requiresfor its effectiveand efficient operation,staff who understandand are fully committedto the poor. On tMs Gibbonsand Kasim (1990: 103) explain:

"It hasbeen Grameen's experience, and ours too under the initial Projek IKHTLAR and AML that required degreesof commitmentand diligenceon the part of the field staff arise out of the work, not as a result of lecturesand supervision.It is seeingfor themselvesthe good and rapid results of their work, that field staff becomecomn-dtted and diligent". [19]

It hasbeen suggested from Grameedsexperiences, that there must be 4 inter-related principlesif the poor are to be reachedand participatein a poverty programme.The principlesare (i)focus exclusivelyonly on thepoor, (H) designa deliverysystem that meetsthe needsand conditionsof the poor and (iii) staff that are trained to carry out the abovedelivery system. These 3 principleshave been created in the AIM model. The 4th principleis stronggovernment backing. This is an externalfactor to AWL but we haveseen that the Malaysiangovernments' (both the Federaland States)backing havebeen very strong,both financiallyand verbally. 157

5.12 THE IMTACT OF IKIEITLAR LOANS

Accordingto ADA, its expansion,which proceededahead of scheduleand with the maintenanceof near perfect repaymentrates, are good indicators of the overall effectiveness.AIM regularlyconducts its own internal impact evaluation (in-house evaluation)studies for managementinformation and has so far 3 impact studies.

Lnpact Study 1: This study(in 1988)was the evaluationconducted during the huitial Ikhtiar project,which hasalready been mentioned earlier. The findings show that the averagemonthly income of the memberhad increased(in constantprices) from M$173 (beforejoining Ikhtiar) to M$328 or a rise of 90 percent,after the utilization of loans (Gibbonsand Kasim, 1990).

Lnpact Study 2: The averageinciease in incomeis evenmore impressivein impact study 2 conductedin 1990 in its two branchesof Selangorand Penang.The study concludedthat the averagemonthly total incomehad increased(in constantprices) from M$142 (beforejoining the programme)to M$570 after joining the programme, with mostof the increasebeing due to Ikhtiar loans(Gibbons, 1991).

Impact Study 3: In 1992 AIM conductedan impact study 3 in its 13 branches. Preliminaryfindings concluded that 51.7 percentof membershad income abovethe government'spoverty line of M$375. The monthlyincome of the householdhas also on averageincreased (in constantprices) from M$223 (before joining 1khtiar) to M$540 afterthe utilizationof its loans(Kasim, 1993a) [20].

Repaymentof loans: AIM repaymentrates of loanshas been a nearperfect 99.9 per centover the past4 years(see Table 16). As mentionedearlier, a Exedadministrative charge is being levied instead of interest. In relation to Islamic values, AIM emphasizesmembers spiritual obligations to repaytheir loans.Thus, it hasbeen argued that "Islamis an additionalfactor to ensurecommitment to AIM and foster high rates of repayment"(Banking with the Poor, 1992).

As mentionedearlier, AIM hasreceived strong government backing. While AIWs own "in-house"evaluations concluded that its programmehas brought about a positive impact on the incomeof its member,an independentstudy to confirm AIMs allegation is thus necessary.This has SERU (Socio prompted EconomicResearch Unit - in the MalaysianPrime MinisteesDepartment) to carry out a surveyin late 1990in 5 districts 158

t2l]. SERU's report has confirmed AIM's early success in meeting its basic objective. SERU's report shows that the participants income on average has increased from M$198 (before joining the programme) to M$466 (after the utilization of Iklitiar loans).

SERU also arguedthat the averagecost of bringing Ikhtiar members out of poverty is around M$7000, which is very much lower than the experience of FELDA (SERU, 1991). We have seenin Chapter 4 where the cost of resettling a family in the FELDA model was M$55,000 in 1990. SERU's report further added that AIM is a unique and effective poverty reduction programme that merits continuing support from government.

5.13 THE FUTURE OF AIM

Kasim (1992) has provided the AIM general scenariountil the year 2000 as follows:

By the year2000,6 moreAIM brancheswill be in operation,bringing the total to 40.

AIM plansto reach42,000 poor householdsby 1995and a cumulativenumber of 92,000by the year2000.

iii. By 1995,AIM will be disbursingcumulative loans of M$70 million and up to M$230million by the year2000.

iv. Through the linkage with conventionalbanks, semi-commercial(ILS 2, near- commercial(ILS 3) and commercialloans (future plans)will ultimatelytake over from Ikhtiar "benevolentloan" (ILS 1). With the muchbigger loan the rural poor may be able to become"grass-root entrepreneurs", able to answerthe call of OPP2and Vision 2020.

v. Both the educationand house improvement loans will be playingtheir roles more prominently. 159

5.14 CONCLUSIONS

AIMs povertyreduction model is basicallya simple one, that is, through the infusion of financialcapital to the very poor rural households,so as to enablethem to finance their incomegenerating activities. Even though somemodifications were being madein AIMs model,the fundamental"ESSENTIALS" of the Grameenprinciples are being closely followed, especiallythe direct delivery system,group and centre concepts, weekly centremeetings and weekly repaymentsof loans, which suits the needsand conditionsof poor rural households.

The Ikhtiar Programmeis relativelynew but alreadyappears to havemade headway in Malaysia. The governmenttook an immediate notice of its emergenceand has recognizedits potentialas a forceto be reckonedwith alongwith financialsupport.

Mvt thus,has a major challengingrole to play alongwith other governmentpoverty alleviationprogrammes, in fine with OPP2 and Vision 2020. The birth of AIM has offereda newray of hopefor the very poor rural householdsas a meansof overcoming poverty. 160

FOOTNOTES

Subsequentchecking on the ground by AIM has revealedthat the estimatesfor Negri Sembilanand Pahang are probablytoo high. It was generallyassumed that there were about 150,000very poor householdsin the Peninsularas of the end 1987(Gibbons and Kasim, 1990).

2. The word WMIAR, which meansendeavor, is the key philosophybehind this project.It is beingimplemented by 4 main agents,namely (1) The Universiti Sains Malaysia, which provides the academic expertise, (2) The Selangor State EconomicPlanning Unit which providesthe overall backing, becausethe pilot project is in Selangor,(3) The Islamic EconomicDevelopment Foundation of Malaysia(YPEIM) that providedthe launchinggrant of M$300,000and (4) The Asian andPacific Development Centre, a regionalbody that identifiesthe model caseand brings togetherthe expertise,the concernedand individualsof similar interests.

3. The North-West Selangor area was chosen for the pilot project because accordingto the availablestatistics at that time, more than half of the households in the area were living under the governmentpoverty-fine income. This was despite completion of the Northwest Selangor Integrated Agricultural DevelopmentProject LADP) in 1985,and closeproximity of the areato the Mang ValleyIndustrial complex and the Kuala-Lumpur metropolitanarea. Clearly a new developmentinitiative was neededin the NorthwestSelangor area to complement existinggovernment poverty-reduction programmes (Gibbons, 1988).

4. AIM defines"VERY POORHOUSEHOLDS" as a personsor groupsof persons, usually related by blood or marriage, who normally share the same is accommodationand food, andwhose current total monthlyincome per person lessthan two thirds of the currentgovernment poverty fine income.For the period of 1986/87,the governmentspoverty line was M$350 per householdof five members,maldng the per person poverty fine M$70. Two thirds of this is M$46.90,but AIM hasrounded this off to M$50 per personper month.

S. AIM defines"POVERTY" as a stateof living in which the householdhas a total per-capitamonthly household income of lessthan that definedfrom time to time by governmentas requiredfor a minimallevel of living in the Malaysiancontext, and/orwhich someor all of the basic humanneeds of its membersfor health, educationand housingare not satisfied.

6. "BENEVOLENTLOAN" is a sumof moneylent for a specifiedperiod of time without requiringcollateral. This is discussedin detail in sub-section 5.10.2.3. Any administrativecharge levied on such loan must not exceedthe costs of disbursingit (includingany costs on loan capital). 161

7. In PeninsularMalaysia, there are 11 states which are further subdivided into 78 main districts. Most of the districts covered by AIM so far (34 districts) are amongthe poorest districts with a high number of very poor households.

8. It needs to be mentioned here that in line with government poverty alleviation goals, state and federal governmentssubsidize the rural poor (Ikhtiar borrowers) at M$50.000 for the first loan and M$25.00 for the second loan while the members cover the full administrative charge of M$75.00 on the third and subsequentloans. In deference to Islan-dc values, a fixed admiHistrative or managementfee is levied on borrowers rather than an interest rate.

9. The Ikhtiar members' "Social Development Programme - the SWeen Decisions" is discussedin sub-section 5.9.2 and for the "16 Decisions", see Appendix 4.

10. The Ikhtiar Programme!s annual operating costs include those of the Branches(34),Area offices(4), TrainingCentre (1), Co-ordinating Office (1) and theHeadquarters (1).

11. Recentdevelopment suggests' that there are 3 other local financial institutions, namelyBank Burniputra,Development & CommercialBank and IVIBFFinance which have indicatedtheir interest in providing the loans capital to the Ikhtiar Programme (without interest) in pursuing its lending activities (Dewan Masyarakat,April 1993;Utusan Malaysia, March, 1993).However it is not clear at presenthow this will be doneas there is little indicationhow the bank intends to go aboutdoing it.

12. In March 1990, the Islamic Economic DevelopmentFoundation of Malaysia (YPEIM) and the Berita Harian (a national daily newspaper)launched a fund raisingexercise (on an annualbasis) for the "ProjectIkhtiar Fund" to be usedas a capitalin the Ikhtiar Programme.Helping the poor by the better off Malaysians (generalpublic or any privateorganization) was put to the test herewith a very encouragingresults, receiving M$1.39 millions.

13. AIM selectsits target groups from among families classifiedin the national householdincome survey as falling below the poverty fine (the nationalpoverty line is M$375.00). AIM then carries out its own direct survey of those householdsin poor villages,in order to target only fan-dfieswith less than two- thirdsof the national'poverty-line! income.

14. For detailsof the M3. seeChapter 6 on METHODOLOGY,

15. For an exampleof the Ikhtiar Loan Applicationform, seeChapter 11.

16. The peerpressure and support are generally put to the test in the following ways: In the Ikhtiar Programme,if a membersfails to repayloans, every memberof a particularcentre is penalized.Furthermore every memberof the group in which defaulter the belongsmust contribute M$2.00 and all other centre members M$1.00 for per week overdueloans to the penalty fund. If membersresume 162

making repayments,the penalty fund is returned to the members. If a member defaults, AIM takes the penalty fund. Thus, "pressure" comes in, where a particular group and centre can decidewhether to keep or boot out the defaulters and those who are likely to violate the rules and procedures. Every member Will be 'policing! each other and reminding them to keep their commitment. This is in line with memberspledges in accordancewith the 14th principle of the "Borrower Social Development Programme", (Appendix 5) which goes "if we come to know of any breach of discipline in any centre, we shall go there and help restore discipline". In time of need when a member falls into any difficulty, other memberswill provide a helping hand. This is one of the reasons why the "Group SavingsFund" has been emphasizedby ARvt where member can borrow in times of difficulties and need.Discipline has been an important factor in the AIM model. AIM penalizespoor attendanceat centre meetings and tardy loan repayments are also penalized.In the Ikhtiar Programme as shown in Table 16, loan repayment rates are a near perfect 99.9 percent, which reflects good supervision, monitoring and training of the membersby Ikhtiar staff on one hand and "peer pressure" and "peer support" on the other. . 17. In the ILS 1, thereare 2 typesof loansnamely "AL-QAIRDHUIL HASSAN" for the Muslim membersand "BERDEKARI" for the Non-Muslim. Basically they arethe samein termsof rulesand procedures and the only differenceis in the way of their pledging.For the wording of the pledges(see Appendix 3).

18. Helping the poor by the better off Malaysians(general public or any private organization)can be seenin Footnote 12 above,through the annualfund raising exercisefor the "ProjectIkhtiar Fund".

19. At the branchlevel (district-based)of the Ikhtiar Programme,it is the Field Officerand Branch Manager that form the backboneof suchprogrammes and play a very significantrole in dealingwith the targetgroups through their daily contact. As suchthey were trainedfor suchduties. Initially the Field Officer and Branch Manager undergointensive courses that provide proceduresand the philosophy of AIM. Field trainingis being stressedin AIM. The exposureof its staff to the plight of the poor throughfield training is to build up their dedication.AIM staff alsofive in the villageamong the poor rural householdsbeing the target group. In the Ikhtiar Programmewe haveseen the roles playedby BranchManagers under the sub-heading"Exclusively Focused on the VeryPoor" - in sub-section5.9.1. Equally importantis the roles of Ikhtiar Field Officers, generallyknown as the "Trust Assistants",who are the "live wires" of the Ikhtiar Programme(more than 80 percentof the total staft) who are directly involved with the participantsin their daily routines Each of the Trust Assistantswould work independentlyin their sub-block,undertaking 'meanstests' of potential members,motivating towardsgroup formation, handling centre meetings, loan disbursementchecks and othervarious members activities.

20. TheImpact Study 3 is basicallyAIMs preliminaryanalysis. 163

21. SERUs survey in late 1990 covered the districts of Barat-Laut Selangor, SeberangPerai Tengah, SeberangPerai Utara, Sik and Baling. However, its is survey in Baling (which the subject of the present study) was conducted when this branch was just very slightly over one year old. SERUs samples for Baling comprisedof only 6 borrowers who at the time of the survey have completed their (of first loan cycle (whereasthe other 332 the total 338) members have either not completed or taken their first loans). FAO (1984), in its impact evaluation exerciseof the GrameenBank, suggestedthat it was more appropriate for a study of this nature to cover areaswhere the project "has been implemented for a least The has reasonableperiod of at 3 years" 0 present study thus met the FAO suggestion.In fact when the field work was conducted, Baling I branch was about 3 years and 7 months. This has given the advantage of having the samples of not only the first time borrowers but also its second time borrowers as well. Unlike SERU, the present study has also made use of control groups for comparison purposeswith the programme'sborrowers. Furthermore, AIM (1993) has strongly argued the needs of having control groups. The present study has made use of much bigger and representativesamples (detail on this is discussedin Chapter 6). 164

CHAPTER 6: RESEARCH METHODOLOGY

6.1 INTRODUCTION

This chapter discusses the central aspects of this study, i. e. research methodology. It highlights in detail the research process. In relation to this the method and design involved in the collection of data is discussed, together with the method of data analysis.

6.2 RESEARCH STRATEGY

A plan of researchhas to be formulatedbefore any study is undertaken,which, as noted by Bulmer and Warwick (1993: 27), "requiresa researchstrategy, a plan in termsof which particularstudies are carried out embodyingideas about tile task of socialresearch, the researchdesign to be used,and the choiceof particularmethods of data collection".It is necessaryfirst to highlight the outlinesof the mearch process whichincorporate the basicsteps generally involved in a particularstudy.

Hussein (1990) identifies eight phases in a research process: (1) ideritification of problem (2) review of literature (3) background of the problem and formulation of conceptualframework (4) hypotheses(5) collection of data (6) analysis of data (7) summary (8) presentation of findings. Meanwhile Nachmias and Nachrnias (1991) proposed a seven step model: (1) problem (2) hypotheses (3) research design (4) measurement(5) data collection (6) data analysis and (7) generalization. Howevcr Bailey (1984 cited in Idid, 1992) identifies only a five step model: (1) researchproblem and formulation of hypotheses(2) researchdesign (3) data collection (4) data analysis and (5) testing of hypotheses.

Despitehaving a variety of stepsranging from five to eight as indicatedabove, the most commonfeature of the researchprocess is that it usually starts with problem identificationand is immediatelyfollowed with literature reviews and ends in a presentationof findingsalong with the conclusions.In relationto this, the formulation 165

of the researchmethodology in this study,which containssome of the above features, is dividedinto four stages:(1) literature review (2) data collection, (3) data analysis and (4) conclusions,and into these four stages, the elements of the problem identification,formulation and testing of hypotheses,research design and measurement havebeen incorporated. Each of the four stagesis briefly discussedbelow:

1. Literature Review: formulationof researchobjectives, scope of the study and hypotheses.The relevantconcepts such as the concept of poverty, the conventional conceptof development,such as CommunityDevelopment, Green Revolution and Integrated Development,the "alternative" or "another development" concept, definitionof rural developmentand the credit-basedpoverty alleviationconcept were studiedand reviewed as tools to explainthe researchissues (see Chapters 2 and3).

2. Data Collection: This involved the discussionof the various approachesin collectingprimary and secondarydata. The primary data are obtainedthrough the technique of interviews, discussions,a questionnaire survey and participant- observationwith the selectedrespondents. Secondary data, mainly in the form of printeddocuments and official statistics,were collectedfrom varioussources.

3. Data Analysis: The primarydata collectedwere then processedby meansof SAS (StatisticalAnalysis System) [1], in which frequenciesand tabulation have been obtained.Primary data were also subjectedto detailedanalysis and interpretationin orderto testthe hypotheses.

4. Conclusions:This is the final stageof the researchwhere the main findings are summarizedalong with the suitablerecommendations and where conclusionsof the researchare presented.

With the abovebrief accountwe now turn to describein detailthe executionof the overallresearch strategy. 166

6.3 SELECTION OF THE STUDY AREA - THE DISTRICT OF BALING

The detaileddescription of the studyarea is discussedin the next chapter.However, it is necessaryat this juncture to highlight briefly: (1) which specific area in Baling is involvedin the studyand (2) why Baling is selectedas a casestudy area?

In the Stateof Kedah,the Ikhtiar Programmestarted its operationwith the openingof two branchesin the District of Baling andSik simultaneouslyin March 1989.By virtue of havingthe highestnumber of very poor rural households,AIM has divided the District of Baling(with its or Sub-Districts)into:

BALING 1: Includes the 5 Mukims of. (l) Baling, (2) Bongor, (3) Kupang (4) Siong and (5) Pulai, and, as mentioned, has received the Ikhtiar Programme in March 1989. These5 Mukims also have approximately 60 percent of the total population of Baling.

BALING 2: Includesthe 3 Mukims of (1) Tawar, (2) Telui Kanan and (3) Bakai. Unlike BALING 1, AMs branchin BALING 2 was openedonly in September1990 (aboutone andhalf year later than BALING 1). These3 Mukims haveapproximately 40 percentof the Baling population.The establishmentof 2 separatebranches in the District of Balingis merelyfor easymanagement.

In this studythe areaof studyis confinedonly to BALING 1, beingthe older branch. The selectionof the District of BALING in particularhas to be seenin the contextof the Stateof Kedah.The selectionof Baling is dueto the fact that BALING, together with the Stateof Kedah,have the distinctionof having"6 numberones". These are:

1. Kedahis the poorestState in the Peninsular,with the highestnumber of the hard- corepoor.

2. Balingis the poorestdistrict not only in Kedah,but also in the countryalong with highestnumber of hard-corepoor.

3. Baling,by virtue of beingthe poorestdistrict in the country (accordingto AIM data), is the only districtthat has2 AIM branches.

4. Kedah is has also the statethat the highest number of AIM branches,i. e. 9 in total. 167

5. On the whole Kedah is also the state with the highest number of AIM beneficiaries.

6. Baling, on the other hand, has also emerged as a district with the highest number of AIM beneficiariesnot only in Kedah but also throughout the country.

Another additional characteristicof Baling is that it is not only a poverty stricken area, but also one of the least developed parts of the Peninsular, especially in terms of infrastructure and other amenities.It also has a "black history", as noted by Ahmad (1983). In December 1974, there was a student demonstration aimed at highlighting the problem of rural poverty in Northern Kedah where 3 people died of starvation in Baling [2].

With the aboveexplanation, the selectionof BALING I in the overall context of the District of Balingas a casestudy area is thusjustified.

6.4 PILOT SURVEY

In a questionnairebased study, it is necessaryto conducta pilot surveyon a smallscale in virtually all circumstancesand should never be omitted in order to identify weaknesses,ambiguities, and omissionsbefore the questionnaireis finalized for the surveyitself (Dennisand Kumar, 1988; McNeil, 1990; Glastonburyand Mackean, 1991;Ayob, 1992;Robson, 1993). Pilot surveysare widely used in researchsurveys (Moser and Kalton, 1978) as a trial investigation(Black and Champion, 1976). Hoddinot (1992: 81) has related his experienceof trying to avoid pilot survey as follows:

"Having spent hours in Oxford devising the perfect questionnaire,I was temptedto skip this in order to savetime. This would havebeen a false economy.Pilot testing made a huge difference.It leads to substantial amendments and improvements to all the questionnaires". 168

Thus as rightly arguedby de Vaus (1986: 46):

" Do not take the risk. Pilot test first".

In this study, a pilot survey was conducted in December 1992 on 35 households prior to the actual survey (January to mid-May 1993). During the pilot survey a few meetingshad been arrangedby the author with the key informants, especially to get some preliminary information about the hard-core poor rural households and general backgroundof the study area. The key infon-nantsincluded the District Officer and his staff, Ikhtiar OrganizatioresBranch Manager and Field Officers, Penghulu (Read of the Mukim or sub-district) and Ketua Kampong (village headman). These few early meetingswere to establish good relations with the key informants to insure further assistancein the survey proper.

The pilot surveywas found to be very usefuland its maincontributions were:

One: becoming familiar with the study area and also in establishing good relationshipswith the local peopleand potential respondents.

Two: improvementof the questionnaire,especially to questionsthat might cause ambiguity,embarrassment, were too technicaland difficult to understand.

Three: a generalincrease in the efficiencyof the inquiry.

Fourth: determiningthe probable cost and duration of themain survey.

Fifth: helpin preparingthe detailedplan of executionof the intensivedata collection in the actualsurvey.

Sixth: detenniningthe nature and characteristicsof the target population to be interviewed. 169

6.5 METHODS OF DATA COLLECTION

Data for this study came from two sources: primary and secondary sources. Consideringthe extensivenature and scope of the study, a variety of researchmethods have been used. On this Patton (1987: 60) argued that "using more than one data collection approachpermits the evaluator to combine strengths and correct some of the deficienciesof any one source of data". Denzin (1978), for example, suggeststhe use of multiple methodssuch as interviews, observations,questionnaires and documentsin conducting a study of a particular problem. Yin (1994) adds that the strength of case studies using multiple sources of evidence were rated more highly in terms of their overall quality than those that relied on single sourcesof information.

6.5.1 THE PRIMARY DATA

6.5.1.1 INTERVIEW AND DISCUSSION

The primarydata for this studyfall mainlyinto 5 categories.First: interviewswith the programmeparticipants and the non-participants(control group), by using a questionnairesurvey (this is discussedin detail in Section 6.7). Second: personal interviewswith key respondentssuch as the Penghulus(Mukirn headmen)and the KetuaKampong (Village headmen)on the generalbackground of the povertysituation and developmentin their respectivemukims and villages. Third: interviews and discussionson an informal basis with personnelof the Governmentand semi- governmentagencies at the (i) District level - with the officers from District Office, AgriculturalBank, KEDA, FAMA, AgriculturalDepartment, FELCRA andRISDA (ii) Statelevel - with the officers from Departmentof Town and Rural Planning.The interviews and discussionscentered around the general issues of development implementation in Baling. (iii) Federallevel -a generaldiscussion was conductedwith the Head of Poverty Section of the ICU (Implementationand CoordinationUnit) under the Prime Minister's Departmentwho provided the general scenarioof the povertysituation under the NEP andNDP [3]. Fourth: long informaldiscussions with Ikhtiaespersonnel ranging from its BranchManager and 6 Field Officersin the Baling branch and the acting ManagingDirector at the headquartersin Penang.These discussions centered on the overall functioning and performanceof the Ikhtiar Programmein the alleviationof rural povertyboth at the macroand micro level 141. 170

6.5.1.2 PARTICIPANT OBSERVATION [51

Fifth: The author also stayedin a village in the study area for most of the study for observationof the communities,particularly the households!under study in their daily social and economic activities. The value of being a participant observer lies (Becker, 1958) in the opportunity that is available to collect rich detailed data based on observations in natural settings. The researcher also mixed with members of the community, thus eating, living and conversing with households and the community is part of the process of participating and observing. In this sense, as McCall and Simmons(1969: 1) note, participant observation is less a single method, but more:

"a characteristicblend or combinationof methodsand involves techniques...that some amount of genuinely social interactionin the field with the subjectsof the study,some direct observationof relevantevents, some formal and a great deal of informal interviewing,some systematiccounting, some collection of documentsand artifacts,and open-endednessin the direction the study takes".[61

Furthermoreby directly observingthe Ikhtiar Programme,the author was able to understandthe context within which the programmeactivities and operationsoccur and function.This direct experienceacted as a resourceto aid in understandingand interpretingthe programmebeing observed. On this Patton(1987: 74) arguedthat:

ND Reflection- and introspection are importantparts of field these become important in research... understandings analyzingthe data and in making recommendationfor improvement. Recommendationsderived programme ... from firsthandprogramme experience and observations ought to be especially valuable because they are groundedin directunderstanding of programmerealities, not pie-in-the-sky,abstract ideals".

And Warwick andLininger (1975: 12) summedup the aboveobservations when they argued"A designwhich combinesparticipant observation or other qualitativemethods with a samplesurvey provides opportunities for cross-checkingand for a much more completepicture of the situationbeing studied" 171

6.5.2 THE SECONDARY DATA

The secondary data mainly came from sources such as seminar papers, censuses, official publications and data gathered by various govemment agencies on various aspectsof their respectivefields. In addition, library research (in Malaysia and United Kingdom) was used to carry out content analysis of reports and related literature on rural development and poverty alleviation programmes either involving studies in Malaysia or other parts of the Developing World.

A considerableamount of data camemainly from Ikhtiar OrganizatioWsoffice, both from the District office in Baling and the headquartersin Penang.Most of the data seemto be very valuableas they directly and indirectly relatedto this study. Similarly, secondarydata, relating to poverty and other generalstatistics on rural development were also collectedfrom other various governmentalagencies as mentionedearlier. The secondarydata used in this studywill be cited asand when they are referredto.

6.6 RESEARCH DESIGN, SAMPLING AND QUESTIONNAIRE DESIGN

"WITH 6.6.1 RESEARCH DESIGN : "BEFORE - AFTER" AND - WITHOUT" APPROACHES

The aim of the field surveywas to collect data to test the hypothesesconcerning the effects of Ikhtiar loans to its participantsand also on the effectivenessof the programmewith its. speciallydesigned delivery systemon reachingthe very poor householdsin the studyarea.

In order to examinethe effectivenessof the Ikhtiar Programmein increasingthe income(or changesin other variables)among the borrowers'households, incomes for at leasttwo different time periods are required.A starting point for this would be comparisonof householdincomes (or other variablesunder consideration)before and afterthe taking(utilization) of Ikhtiar loans.

It hasbeen suggested that the fundamentalmethodology for this type of studyis to estimatethe differentialof "BEFORE"and "AFTER" changesin termsof specified variablesfor the recipientgroup (WITH the programme group) versus the 172

(WITHOUT comparablenon-recipient group the programme group) (Black and Champion, 1976; IFAD, 1984a; Hossain, 1984 and 1988; Kartar Singh, 1986; Bolninck and Nelson, 1990). In relation to these suggestions, this study thus required the involvement of both the participants and the non-participants, and therefore both the "BEFORE - AFTER" and "WITH - WITHOUT" approacheswill be used.

The "Before-After" approachis also variously referred to in literature as the "pretest- posttest" design (Graham and Raulin, 1989; Robson, 1993). Manly (1993) has provided a useful suggestionon the "Before-After" design as follows:

Point 1: It was notedthat in the "Before-After" approach,it is possibleto use only one group (i.e. group given a particular treatment),when assessingchanges on a certain specifiedvariable between two different time periods, without using the comparablecontrol group (i.e. group not given a particular treatment). However, without a comparablecontrol group there is no way one can be sure what might happenin the absenceof treatment.

Thus it is necessary to use the control group ("With - Without" approach) incorporated (1982) "With into the "Before - After" design. Gittinger adds that the benefits project - Without project" approach will enableus to identify the associated with a project. Black and Champion (1976) noted further that in general the experimental variable or treatment is introduced to the "programme group" and withheld from the control group. This Vill enableresearchers to argue more effectively about the causal relation between experimental variables or target variable changes, becausechanges in measuresfor both groups are comparedbetween two separatetime periods.

Point 2: The control group is of little use unlessit is clearly comparablewith the project group and this can be achievedthrough a random approachof selecting subjects.On this Moore andMcCabe (1989: 29) arguedthat "the act of randomizing guaranteesthat the behaviorof statisticsis governedby the samplingdistribution".

Bolninckand Nelson (1990) lend further supportto point 2 aboveby suggestingthat the two groups (With and Without programme)must be as far as possiblefacing similareconomic conditions, apart from gettingthe treatment.They further notedthat an "impactperiod" of longerthan I year is generallyneeded to get a meaningfultest. In this studythe "treatment" (or variablesunder consideration)is referredto as the Ikhtiar loans. 173

In this study:

(i) The "Before-After" comparisoninvolved establishing the household incomes (or other variablesunder consideration) before joining the programme and assessing changesafter the utilization of Ikhtiar loans. "With" and "Without" comparison requires selecting a "control group" (a "without the programme" group or the non-participants) comparable to the "with the programme" group (programme participants) and making before and after comparisons for changes occurring in both groups.

(ii) The Ikhtiar Programmeparticipants is therefore a "With the programme" group, which was subjectedto the Ikhtiar intervention through the provision of Ikhtiar loans.

(iii) The non-participants or the control group is therefore a "Without the programme" group, which on the other hand, was not subjectedto Ikhtiar loans.

The conceptualdesign, as suggestedby Kartar Singh(1986), that is normallyused for this type of studyis presentedas follows (taking for instanceone particularvariable t6 be measured- income, which is centralin this study):

Beforethe Programme After the Programme Group

Beneficiary Group (With the ProgrammeGroup) Eal Ebl

Non-BeneficiaryGroup (Withoutthe ProgrammeGroup) Ea2 Eb2

Where:

Eal Level of incomefor the beneficiarygroup (Ikhtiar members)before the programmebegan.

EbI Levelof incomefor the beneficiarygroup (Ikhtiar members)after the utilizationof Ikhtiar loan(every loan cycle is 50 weeks). 174

Ea2 Level of income for the non-beneficiary group (control group) before the programmebegan.

Eb2 Level of income for the non-beneficiary group (control group) being comparedwith level of income (Ebl) of the beneficiary group (Ikhtiar members) afterthe utilizationof loan.

The net effect of the programmeis given as:-

Net Effect = (EbI- Eal) - (Eb2- Eb2). or alternatively

Net Effect = (Eb I- Eb2) - (Eal - Ea2).

level due to (EbI - Eal) will give estimatesof the gross effect of the of income the programme activities (after the utilization of loan) and also due to non- programmeactivities undertaken by the participants.

income due 2. (Eb2 - Ea2) indicatesthe changein the level of to non-programme activitiesalone.

Ideally, changesin income(or other variables)can best be obtained'by comparing presentincome status (or other variables)with the base-linedata availablefrom some time immediatelyprior to the programmecommencement (Riddel, 1990).Riddel adds is that the methodof obtainingcurrent and past income levels (or other variables) likely to includeone or all of the following:

1. directobservation, 2. interviews, 3. discussionwith projectstaff andparticipants, 4. goingthrough the secondarydata/materials already available, 5. reviewof programme!s records, and /or 6. examinationof existingdata.

Besides income, other selected variables, such socio-economic backgrounds, householdassets and others, can also be obtained through the above methods. Throughthis way we can actually cross-checkthe validity of particular data or, as Patton(1997: 105)puts it, "cross-validateand triangulateby gatheringdifferent kinds 175

interviews, of data - observation, programme documentation, recordings and photographs".

In this study, the socio-economicdata of the 1khtiar participants prior to joining the Ikhtiar programmeare available from the Ikhtiar Programme's project records in its Baling branch. In the Ikhtiar Organization, all the participants registered as its members have their socio-economic data recorded in a specially constructed questionnaireknown as the W [7].

The M3, which provides base-line data on the Ikhtiar Programme!s individual participantsprior to the provision of loans, is taken as the bench mark condition (which is referredto in this study as the "BEFORE" situation) which is to be used for comparisonwith their conditionat a later point of time (which is referred to in this study as the "AFTER" situation) for assessingthe effectivenessof the Ikhtiar Programmecredit intervention. The periodsof "Before" and "After" situationsused in this studyare discussed as follows:

1. The "Before" Situation (1989):

The term "Before" situation is referred to the period of 111989".Thus the terms "Before" and"1989" havesin-dlar meaning. However, the term "Before" situationis widelyused and is applicableto both the programmeparticipants and non-participants (controlgroup) (See Sub-Section 6.7.2 and the accompanyingFootnote 14, for the detail elaboration).

2. The "After" Situation (1992):

The term "After" situation is referred to the period of 111992".Thus the terms "After" and "199211have similar meaning.However, the term "After" situationis widelyused and is applicableto both the programmeparticipants and non-participants (controlgroup) (see Sub-Section 6.7.2 and the accompanyingFootnote 15, for the detail elaboration). 176

6.6.2 SAMPLING DESIGN

6.6.2.1 BRIEF BACKGROUND

In a survey,it is impracticalto interview all possiblerespondents (the "population"), unlesstheir numberis small.In general,inferences based on a subsetof the whole aggregatemay nevertheless be fairly accurate.

Nachmiasand Nachmias (1981) have stated that when the data are partial and usedto characterizethe whole, the subsetis called a sample, and the whole is called a population. A specificvalue of the population,such as the averageincome is calleda parameter,its counterpartin the sampleis termeda statistic. in generalthe chief aim of samplingis to make inferencesabout a parameterthat is unknownfrom a samplestatistic that can be measured.Sampling is thus defined as (Blackstromand Harsh, 1963)a procedureby which a researchanalyst can infer the characteristicsof a large body of respondents,commonly referred to as universeor population,by examiningor interviewing a selectedgroup of them. To arrive at accurateestimates of parameters,the researchershould deal effectivelywith the (1) definitionof population,(2) the sizeof sampleand (3) the sampledesign.

With this brief review,we now turn to put the samplingdesign in the casestudy of Baling into perspective.In this study the samplingframe is defined as the total number of the hard-core poverty householdsthat reside in the S Mukims of BALING Households earning a monthly income of less than M$2SO.00 are regardedby the Ikhtiar Organizationas the "hard-core poor" or "poorest of tile poor" (seeChapter 5).

6.6.2.2 MEUESAMPLING UNIT

In this studythe householdsserve as the samplingunit, while the unit of inquiry is the head of householdwho was usually male. However in reality the author usually resortedto interviewingboth the headof householdsand their wives, unlessthe heads of householdwas headedby the female member.In the case of Ikhtiar member households,priority of the interviewwas given to the femalemembers by virtue of beingthe programmeparticipants, usually accompanied by their husband(for detailed surveyresponses of the householdsinvolved, see sub-section 6.7.2 and footnote 16). 177

Householdis thereforedefined in this study "as persons living under the same roof relatedby blood or maniage, sharing a kitchen, food and a major part of income and expense'ýThis definitionis quite close to the definition adopted by the United Nations,"a householdis a group of peoplewho live and eat together". Ahmad (1983) notedthat from a policy viewpoint,a householdis taken as a basicincome sharing unit andis usedas a unit of measuringpoverty in Malaysia.

In this study the starting point for determining the sampling frame prior to the householdsurvey, was based on the most readily available and up-to-date list of the hard-core poor rural householdsin the District of BALING 1. As such 31st, October 1992 was taken as a starting point. The pilot survey was conducted in December 1992 and followed by the actual survey from January to mid-May 1993. The detailed accountof the samplingframe is given in Appendix 5.

6.6.2.2.1 THE SELECMON OF THE SAMPLES FROM THE POPULATION

1. FactorsThat Influence the SampleSize

In generalthe requiredsample size dependson two factors, namelythe degreeof accuracy desired(de Vaus, 1986) and the degree of variation in the population (Hussein, 1990).According to many observersthe larger the samplethe lower the likely error in generalizing(Dennis and Kumar, 1988; Grazianoand Raulin, 1989; Robson,1993) and thus the greaterthe accuracy(Nicols, 1991;Bryman and Cramer, 1990).It has been arguedthat generalizationis in fact the greateststrength of the samplesurvey (Bulmer, 1993 a).

2. Homogenous Versus Heterogeneous Population

It has been argued that if the population being studied is honjogenous in their characteristics,then the samplesize need not be necessarilylarge (Idid, 1992). In contrast,if the populationis heterogeneous,then the samplesize must be large enough to representthe diversityaccurately (Graziano and Raulin, 1989;Cohen and Manion, 1994). 178

3. Financial, Manpower and Time Constraints

Taking all the above suggestions(as in items I and 2) into consideration, it has beef] the aim of this study to have the largest samplefinancially possible and, as reminded by Bryman and Cramer (1990: 103):

"the researcher almost always works within time and resourceconstraints, so that decisions about sample size must always recognizethese boundaries".

Therefore a balancehad to be struck and within the given financial, manlyoner and tinte constraints.A total of 550 householdswere included in this survey. As discussed in detail in Appendix 5, this study therefore has two separate sampling franies as follows:

(i). The total population of the 1khtiar Programme participants consisting of 613 memberhouseholds.

(ii). The total populationof the control group consistingof 1490member households (estimated).

4. Simple Random Sampling: The selection of the respondentsfrom both groups or householdswere based on simple randons sampling. Random sampling is tile widely known probability procedure (Philips, 1976), where representativeselection is ensured (Bulmer, 1993b), since every individual in the sampling frame has an equal chance of being included in the sample(Blalock, 1972; Nachmias and Nachmias, 1981; McGrew and McCabe, 1989).

5. The Samples of the Study: The two groups involved in this study are as follows:

a) 1khtiar members: From the total population of 613 members, a total of 270 householdswere included in our survey. These total samples (270) represented approximately44 percent of the total Population of the Iklitiar members.

b) Control Group (Non-Participants): From the total population of around 1490 in respondents the control group, a total of 280 households were included in our These survey. total samples (280) represented approximately 19 percent of the total population of the control group.

It hasbeen noted by Ikhtiar in Baling officials that both the 1khtiarmembers and the respondentsin the control group share similar socio-econornicconditions. This 179

suggeststhat the two groups were homogenous in their characteristics. The sample sizes (as mentioned above) for the two groups were therefore appropriate and representative.The original and observed sample sizes for the Ikhtiar members and control group based on the actual household survey are shown in Tables 19 and 20 respectively.

Table 19: SampleDistribution of Ikhtiar Members - Original and Observed Samples.

Total Population Original SampleSize Observed Sample Size Missing Sample]

613 270 254 16 (94%) (6%)

Table20: SampleDistribution of the Control Group - Originaland Observed Samples

Total Population OriginalSample Size ObservedSample Size Missing Sample

1490 280 265 is

(94.6%) (5.4%)

As mentionedin Appendix 5, there was a total population of 613 ikhtiar member householdswho had completedtheir loan cycles and were therefore eligible to be includedin this surveyas shownin Table 19. It needsto be mentionedhere that, this figureof 613,actually consisted of 567 and46 members,who had completedtheir first and secondcycles of loans respectively.There are thereforetwo groups of Ikhtiar borrowersbased of the cyclesof loans. ISO

Thus from the observed samplesof 254 Ikhtiar member households, as indicated in Table 19, the breakdownsof membersbased on the cycles of loans as shown in Table 21 are as follows:

1.215 Ikhtiar memberswho had completedthe first cycle of loans and are referredas the first-time borrowers and

2.39 Ikhtiar memberswho hadcompleted the secondcycles of loans and are referred to asthe second-timeborrowers. This two groups of borrowers will be discussed in detailin Chapters8 and9.

Table21 : SampleDistribution of Ikhtiar Members : First-Time and Second-Time Borrowers- Originaland Observed Samples

Total Original Sample Observed Sample Mssing Sample Size Size

1. Total Population 613 270 254(94.0%) 16(6.0%)

2. First-Time Borrowers 567 224 215(95.9%) 9(4.1%)

I Second-Time Borrowers 46 46 39(84.7%) 7(15.3%)

Note: *= The second-timeborrowers were based on the total population.

By combiningTables 19 and 21 (Ikhtiar members!figures) with Table 20 (control group'figures), we get the followingsactual number of householdsbeing surveyedin the studyarea which are shownin Table 22. 181

Table 22: Total Number of RespondentsInterviewed, The Ikhtiar Members and Control Group - Observedand Original Samples.

Total Original Sample Observed Sample Missing Group Population Size Size Samples

1. Ikhtiar Members 613 270 254(94%) 16(6%)

(a) First-Time Borrowers 567 224 215(95.9%) 9(4.1%)

(b) Second-Time Borrowers ** 46 46 39(84.7%) 7(15.3%)

2. Control Group 1490 280 265(94.6%) 15(5.4%)

31(5.7%) 3. Total --- 550 519(94.3%)

Note: ** = The Second-timeborrowers were basedon the total population

The responserat es of the surveywere rathergood both from the Ikhtiar membersand * the control group. While the percentagecovered for Ikhtiar second-timerswere only around85 percent,they were taken from the whole populationand thus were more representativethan the Ikhtiar first-timers (96 percent) and the control group (95 percent).The non-responsewas mainlydue to missingrespondents, because they could not be contactedrather than refusal 181.All the householdsdescribed above were subjectedto interviewby meansof the questionnairediscussed in the next section.

6.6.3 QUESTIONNAIRE DESIGN

A questionnaireor an interview scheduleis generallyreferred to as a standardform containinga list of questionsused to record a survey interview which is usually conductedin a faceto face situation(Goode and Hart, 1957;Haralambos and others, 1987;Mcneil, 1990;Nichol, 1991).The purposeof the questionnaireand the surveyas is a whole measurement(Oppenheim, 1968). The interview schedulewhich was used asthe surveycomponent of this studyconsisted of: 82

1. Fixed-alternativeor precodedquestions which accounted for around 93 percent of the total questions.

2. Open-ended questions which accounted for less than 5 percent of the total questions. Certain opinion questions were also put forward where respondents (McNeil, 1990) could freely say what they really feel and could thus provide thoughtful and reflective responses.Schumen and Presser (1979) state that this avoidsbias that may result from suggestingresponses to them [9].

3. Scaleitems, where respondentsperception on certain issueswere tappedusing a simple3 stagecontinuum scale (e. g. "acceptable',"not acceptable"and "unsure"). Thesescale items were limited to only threemain questions(about I percentof the total questions).

For the purposeof this study two sets of questionnaireswere designed110] (see Appendix 6A and 6B). The first set was for the householdsurvey of the Ikhtiar memberhouseholds and the contentsof the questionnaireswere divided into 6 major headings:

1. The socio-economicbackground of the households. 2. Backgroundrelating to participant membershipand activities pursued through Ikktiar loans. 3. Backgroundinformation on housingconditions, assets, household items, incomes, expendituresand savings. 4. Views andperceptions of life. 5. Views andperceptions towards the Ikhtiar Programme. 6. Views on the government'sassistance/aid.

The secondset of questionnaireswere for the non-participants(the control group). The contentswere similar to the above,with the exceptionof items 2 and 5 which weremeant only for the Ikhtiar members.

As mentionedearlier the draft questionnaireswere pretestedon 35 households(20 Ikhtiar membersand 15 control group with 100 percentcoverage) for correctionand othernecessary amendments and the resultswere used in preparinga final versionof the questionnaires.The interviewschedule, originally written in English,was translated into Malaylanguage, that is BahasaMalaysia. 183

6.7 HOUSEHOLD SURVEY - DATA COLLECTION OF THE IKHTIAR MEMBERS AND THE CONTROL GROUP

6.7.1 ON THE ROLE OF RESEARCH ASSISTANTS

The field survey was conducted by the author with the help of 4 research assistants, during the months of January to mid-May 1993. The main reason for taking local researchassistants was to overcomethe time constraintsII I].

The research assistants had been previously employed as interviewers for the DevelopmentProgramme for Poorest Group (PPRT or Program PembangunanRakyat Termiskin) or PPRT's survey in Baling conducted by the District Office on behalf of the Malaysian Government in 1992, prior to the present survey. They were also subjected to an intensive training by INTAN for the PPRT's survey. Their recent experienceproved to be a valuable asset in this study 112]. However, they were re- trainedso asto suit to the needsof this survey1131.

Sincethis studyinvolved a pilot survey,the respondentsbeing interviewed in the pilot were alreadyspreading the news about the proposed survey. However, in every village, communityleaders (Penghulus and Ketua Kampong)were first approached beforeconducting interviews. This was to ensuresmooth running of the interviewsand full cooperationfrom the respondents.At the start of the interview the research assistantswere againtold to remind the respondentsthat the information gathered from themwould be usedpurely for academicpurposes. On this, Christensen(1992: 124)argues that:

"Potentialinformants must thus be convincednot only that the informationhas a wider value, but also that it will not be usedagainst their wishesand interests".

6.7.2 THE COLLECTION OF HOUSEHOLD DATA - THE ACTUAL EXECUTION

Obviously therewas a wide rangeof informationthat could havebeen collected. In this however, study, the questionswere confinedto the variablesmentioned earlier in the contentsof questionnaires.The collectionof data from both the Ikhtiar membersand based controlgroup on their "Before" and "After" situationsare discussedbelow: 184

1. The "Before" or "base-line" data (1989) a) The Ikhtiar Members: M3 (the base-line data of Ikhhtiar members, collected by 1khtiar Organization)was taken as bench mark conditions (for the "Before" situation or the period of " 1989") of the lkhtiar memberswhich was used for comparison with their conditions at a later point in time, i. e. the "after" situation (collected during the survey of this study by the author). b) The Control Group: Unlike the lkhtiar members which have their base-line data recorded in the M3, it was not available for the control group. Thus data for the "Before" situation ("1989") in the absenceof base-linedata for the control group were collectedby the author and his assistantsthrough the field survey. However, it needsto be noted, that the pilot survey conducted prior to the actual survey has made an important contribution here, where initial discussionby the author with lkhtiar staff in Baling led to the suggestionthat the information for the "before" situations among the control group can be collected through question based on "recall" but there was a need to use M3 as a guide 1141.(See Footnote 14 for the detailed discussion on data collectionfor the "before" situation).

2 The "After" Information (1992).

The "After" situation("1992") data and informationfor both the participantsand the control group were collectedby the researcherand his assistantsat the time of the survey 1151.(See Footnote 15 for the detailed discussion on data collection).

3. Additional visits to certain household

Thedata collected from the mainsurvey were carefullyscrutinized and additionalvisits were madeto certainhouseholds where necessaryin order to (i) checkcontradictory information,(ii) pursueunclear responsesand (iii) completeunanswered questions. This has also indirectly resultedin the eliminationof the "missing"samples. On this Youngman(1979: 21) arguesthat "the most acceptablesolution to the problem of missinginformation is not to haveany" 185

4. Survey response [161

The responserates of the survey as mentioned earlier in this chapter, were rather good with 94.3 percent (519) of the total questionnairescompleted from the target of 550 households.The non-responsewas mainly due to missing respondents, because they could not be contactedrather than refusal.

6.8 METHOD OF DATA ANALYSIS

The main unit of analysis in this study, particularly the survey component, is the households. In describing the characteristics of the respondents and households, descriptive statistical measures such as the mean, median, standard deviation and correlation were used.

In makingcomparisons between the Ikhtiar membersand the control group, various parametrictests which, as suggestedby Marascuiloand McSweeney(1977), Weiss (1991) and Cone and Foster (1993), include the West, analysisof variance and correlationanalysis, were used, as described below:

1. In the differenceof meanstest, we are interestedwhether two or more population meansare equalin a statisticalsense based on samplemeans and therefore%

a) To comparehousehold incomes for the "Before" and "After" the utilization of Ikhtiar loans amongthe Ikhtiar members,paired sampleNests were used for significancetesting.

b) To comparehousehold incomes for the "Before" and "After" situationsfor the Ikhtiar membersand the control group, independentsamples t-tests was used in testingfor significance.

c) To comparehousehold incomes for more than 2 groups, analysisof variance (ANOVA) wasused.

In order to determinethe variablesthat may affect the income of the Ikhtiar Programme! s participantsthrough the utilization of Ikhtiaes loans, a multiple regressionanalysis has been used. 186,

Correlation analysis was also used to test the relationship between variables.

4. Other data in the form of official and unofficial reports, files and related documents on poverty and other related matters were generally content-analyzed and are reported in the form of tablesand where relevant in the form of quotations.

6.9 LIMITATIONS OF THE STUDY

The base-linedata for the "Before" (1989) situation of the Ikhtiar members (through M3 questionnaire)was collected by the Ikhtiar Organization. Whatever shortcomings, if any, in the collection of thesedata are consideredas given for the present study.

Althoughmaximum care was takento havethe datafree from errors,they may not be consideredas absolutelyaccurate. However, since most of the questionsin tile questionnaireswere precoded,the responseswere limited to specific choiceswhich helpedreduce the bias and other non-samplingerrors. On the whole, the author regardsthe surveyas havingbeen competently conducted and data to be reasonably consistentand of high quality.The methodof additionalvisits and havingwell-trained andexperienced research assistants, among others, was a contributingfactor.

While the findingsmay representthe characteristicsof the Ikhtiar participantsin the District of BALING I and to a certain extent BALING 2, it may not necessarily representthose of the other 7 districts in the State of Kedah who have a similar programme.On the positiveside, however, this study has pioneeringand exploratory qualitiesand the authorbelieves the Ikhtiar Programmeto be an interestingsubject of researchboth at presentand in the future. The stagehas thereforebeen set for other futureresearchers.

6.10 SUMMARY

In this chapter the researchstrategy, the justification of the District of Baling in the State Kedah of being selectedas a study area and also the method of collecting primary 187

initially and secondarydata were described.This study got off the ground with a pilot survey of the households.

Two types of surveyswere conducted involving the Ikhtiar participants and the non- participants (control group). The information collected from these two groups were similar with the exception of the Ikhtiar participants, who were subjected to extra variables, by virtue of having participated in the Ikhtiar Programme. The research involved design of this study thus the "Before - After" and "With - Without" approaches.The householdsurvey was supplementedwith interviews and discussions with somekey informants at the village level and key personnel from the government and from non-governmentalorganizations. The technique of participant-observation was also used. Data from the available secondary sources were collected to complementthe primary data.

The primarydata from the householdsurvey were fully scrutinizedand additionalvisits were madeto villageswhere necessaryto check contradictoryinformation or pursue unclear responses.The data were then analysed using appropriate statistical techniques,such as the Wests,analysis of varianceand multiple regressionanalysis, to test the significanceof the hypothesesconcerned with the populationcharacteristics. Descriptivestatistics were also used to summarizethe data. The chapter concluded with the limitationsof the study. Iss

FOOTNOTES I

Standardstatistical software programmes such as SAS and SPSS will calculate most tests of statistical analysis, which include the t-test, ANOVA and others (Cone and Foster, 1993). In this study the author has used the SAS package.

Ahmad (1983) cited a report from The New Straits Times Malaysia and two statementsfrom the Far EasternEconomic Review as follows:

New Straits Times, December, 1974:

"Studentdemos: 1169 held. "

Far EasternEconomic Review, December, 13,1974:

"...aimed at highlightingthe problemsof rural poverty, high prices, inflation and low prices for rubber, and following hungermarches by smallholdersin the towns of Baling, Sik, Selama and Changlon in Northern Kedah district ...smallholders... marched on a officer's headquartersin Baling the for ...this was starting gun a bigger demonstrationwhich eventuallysaw a crowd of nearly 30,000 in a mass rally held in the town on December1".

And FEER,December, 27,1974:

"...the student claims, repeatedly denied by the government,that at leastthree peopledied of starvation in Baling".

3. It needsto be mentionedhere that unlike the questionnairesurvey or the structuredinterview with the householdsin the study area, the interviews and discussionswith the goverrimentand semi-goverrimentagencies and also with the non-governmentorganizations, were mainly in the form of unstructuredinterviews or informal discussionsas there was no formal questionnaireused. Responses weregenerally noted down and scrutinizedafter the interviews.Some people may not classifythe abovementioned method as an interview as suchbecause it did not follow the prescribedinterview format. Nonethelessit has provided very usefulinsights. 189

4. The author was given full accessto local administration file records both from the District Office and Ikhtiar Organization (both from its Baling Office and the has been headquartersin Penang). It a general tradition and practice for any researcherwho sought to conduct a study in a particular locality to approach the local chief - Penghulus(Mukim headmen)and Ketua Kampong (village Headmen) not only as a mark of respectbut also to get permission. A similar approach was used in this study when dealing with the officers from the Balings District Office and the Ikhtiar Organization.Ikhtiar's field staff and its Branch Manager can be regardedas technicalexperts who are very well-versed with the village situations. The field staff work in a particular block comprised of several villages throughout the 5 Mukims in BALING 1. They are thus very close to the very poor rural households (both the participants and the potential participants). In general, preliminary information and suggestionswere sought from them. The same was also applied to all the Penghulusand Ketua Kampongs. It needs to be mentioned here that one particular person, i. e. the officer in charge of the preliminary survey of the ""PPRIs" programme from the District office of Baling, was very instrumental in giving suggestions and information as well as assistance throughout the preliminary part of this study. It was through his office that much of the needed information about Baling was obtained. All the key informants mentionedabove were also responsiblefor taking the researcheron various visits of the villages, prior to and during the pilot survey. However, the final decision of selectingsamples and the method of executing the fieldwork were done solely by the author, but not without reviewing the various ideas from the above key informants.

5. It hasbeen suggestedthat in effect the survey and the period of participation- observationincreasingly can complementeach other (McNeil, 1989). On this Black andChampion (1976: 211)arguethat:

"Researchersseldom accept information from a single sourceas the final word on any social observation.In other words, the questionnaire as a measuring instrument maybe usedas a part of a particular design. As another part of it, the investigator may employ participant observation and interviewing to collect informationabout the samephenomenon. Later, he collatesthe informationobtained by the various data collectionmethods as a meansof increasingthe validity of the explanationof the socialphenomenon".

In general,a participant-observer(Jorgensen, 1989) commonly gathers data throughcasual conversations, in-depth, informal, and unstructuredinterviews, as well throughformally structured interviews and questionnaires. 190

6. Denzin (1978: 183) states:

"Participant observation is an omnibus field strategy in that it "simultaneously combines document analysis, interviewing of respondents and informants, direct participation and observationand introspection".

7. (a) M3 containsthe following socio-economic data and other related information on membersand it reflects their "before" situation Ct.e. not yet subjected to Ikhtiar loans to financetheir various income generating activities):

1. Address,sketch map showing the location of their house. 2. Generalremarks of the re-interviewprocess. 3. Housingindex (using a crude measureof allocating points. If less than 10 points,it is regardedas meeting Ikhtiar basicrequirement). 4. Householdmember profiles. 5. Informationon family membersnot staying with head of householdand no longer dependents. 6. Householdhistory (migration, previous income earning activities). 7. Land ownership. 8. Crop production. 9. Information on livestock/freshwater culture. 10. Income from various sources(based on a period of 12 months or I year). 11. Value of householdassets. 12 Informationon the motivationby Ikhtiar staff. 13.Field staff preliminaryviews of its members. 14.Brief reviewof the mernber'sgroup formation.

8. (a) The mainreasons for the following 31 casesof "aissing" respondentswere as follows:

Reason Number 1. Illness 2 2. Couldnot be contactedeven after secondand II third attempts(all from the controlgroup) 3. Questionnairehalf-completed as it was conducted in late eveningand attempt to re-continuewas not 6 successfulas respondents could not be contacted 4. Emptyhouses, but not abandoned 9 5. Headof the householdnot at home,but wife was 3 in confinementafter giving birth.

Total 31 cases 191

(b) There were also some problems encountered during the course of the fieldwork:

1. Rain hamperedthe smooth running of the survey. 2. Somerespondents were away attending wedding feast, a very common feature in the Malay villages not only in Baling but throughout the country. This was especiallyso during the weekends. 3. Some villages are quite remote and are only accessible over very narrow bridges.It was quite a time-consumingaffair to get to these villages. 4. One of the researchassistants was sick for about 10 days during the course of the householdsurvey. Upon recovery he continued with his survey.

9. Cohenand Manion (1989: 13) provide someof the positive aspectsof the open- endedquestions:

"they are flexible;they allow the interviewerto probe so that he may go into more depthif he chooses,or clear up anymisunderstandings; they enablethe interviewerto test the limits of the respondent'sknowledge; they encouragecooperation and rapport; and they allow the interviewer to make a truer assessmentof what the respondentreally believes.Open-ended situations can alsoresult in unexpectedor unanticipatedanswers which may suggest hitherto unthought of relationships or hypotheses".

Tff- However upon recognizingthat thesewould be more difficult to analyzethan closed-endedones, this studyhas limited the open-endedquestions to lessthan 5 per centof the total so asto be moremanageable.

10. (a) The designof the questionnairebenefited mainly from:

1. Pilot testing. 2. Review of the Ikhtiaes in-housequestionnaire used by the Ikhtiaes in-house evaluationstudies and through discussion with its Acting ManagingDirector who providedthe generaloverview of their recentsurvey's experiences. 3. The brief overviewgiven by the District Office!s staff on their recentPPRT's survey(PPRT or DevelopmentProgramme for the Poorest Households)in the district.However, the PPRTs surveyquestionnaire and report were not provided to the author(as explainedbelow in 10b).

However the final design of the questionnaireof this study was the sole responsibilityof the author himself,after taking into considerationsome of the suggestionsas stated above, plus the brief experienceof the pilot survey.

(b) An attemptwas initially beingmade to get the PPRTs surveyreport from the District Office.However, it was notedby the officer that the detailedreport was not availableat that point of time. This was becauseall the recently completed surveyquestionnaires were being further scrutinizedby the Implementationand 192

(ICU) Co-ordination Unit at the Prime Minister's Department at the Federal capital. This was confirmed when the author visited the ICU twice and had two long informal discussions Head with the of the Poverty section, who also gave a detailed overview of the general issues of poverty and the rural development scenarioin Malaysia.

11. On this Deveraux and Hoddinot (1992: 26) argue that:

"delegating data collection is necessary when a large is help is survey undertaken... working entirely without not feasible unless the field workers fully comprehend the local language,and have good understanding of the local doing interviews limits culture... also, all personally the sample that the researcherscan conceivably work with, even if it adds depth and colour to the data collected".

They further add that it is a good idea to get researchassistants for the above purpose.Initially the author felt a bit awkwardwith the local dialect, but by the end of the pilot surveythe authorhad begunto pick up the local dialect and had becomequite well-versedwith it, thus able to conduct the interviews smoothly throughoutthe fieldwork. After all, the respondentsspeak the samelanguage as the author,i. e. ,except for the dialect.

12. (a) INTAN or Institut TadbiranAwam Negara,or the National Institute of Public AdministrationMalaysia, through its branch in , in the State of Kedah,was responsiblefor the training of its field assistants(on a temporary basis)duringthe recentPPRTs surveyin the district of Baling. (b) It hasbeen suggested that the selectionof the researchassistants should be made in referenceto some interview principles, such as honesty, interest, accuracy,adaptability, personality, temperament and generalintelligence, with the objectiveof minimizingthe non-samplingerrors due to enumerators(Mosher and Kalton, 1974).This suggestionwas taken into considerationin the selectionof the assistants.The 4 assistantsinvolved were (i) I with 0 level qualification,(ii) I with A level qualification,a local schoolteacher and (iii) 2 with social science degreesfrom a local University. All 4 assistantswere bom and brought up in Baling.Initially it was decidedto employ8 assistantsso as to completethe survey muchfaster. However, at the suggestionof the Penghulu(in chargeof recruiting andsupervising the researchassistants involved in the recentPPRTs survey),only 4 assistantswere finally selected.These 4 assistantshave a good track record (basedon Penghulu'sobservation): easy to cooperatewith, hard-working and honest.All the 4 assistantsinvolved in this study provedto be very valuableand the authorbelieves that had it not beenfor them,many of the isolatedhouseholds would havebeen left out.

13. All 4 researchassistants were given a detailedbriefing and some training before theyembarked on theirinterviewing. The research assistants were also supervised 193

from time to time as a meansof checkingand making the required infonnation to be capturedduring the interviewpositively clear.

14. The "Before Situation" (1989): Bolninck and Nelson (1990) have suggested a number of steps that must be taken to handle the well-known problem of recall data which includes:

a. The time frame must be restricted to a fairly recent estimates (around 3 years). However, it needsto be mentioned that this will nevertheless depend on the type of questionbeing asked. b. Interview methodsmust be designedto facilitate recall. c. Always start asking for the current situation before putting forward the questionon conditions during the previous years. d. If possible ask the respondentsto refer to any written record or other related documents.

The abovesuggestions were kept in mind when the author conductedthe survey in the collectionof datafrom the control group (for the "Before" situation).Some othermeans were alsoresorted to andare discussedbelow:

a. The base-linedata derived from M3 (speciallyconstructed questionnaire) of the 254 sampleshouseholds of the Ikhtiar memberswere about two and a half to threeand a half yearsold at the time, when this studywas carriedout (December 1992to May 1993).In general,members started to join the Ikhtiar Programme from around middle 1989 onward, after the programmemade it debut in the District of Baling in March 1989. Based on the 254 samplesof the Ikhtiar members,it was foundthat most of themhad joined the programmein 1989and 1990.As indicatedfrom the M3, the majority of the memberssocio-economic datawere that of 1989and 1990.FOR THE SAKE OF SIMPLICITY, THE TERM "BEFORE" SITUATION AS USED IN THIS STUDY IS TAKEN AS "1989". This period of time was also applicableto the control group, wherebytheir socio-economicdata of the "before"situation, collected through the survey,were basedroughly on the situationsof mid 1989to 1990.For instance, data on householdincomes for the control group were based on 12 months, similarto the Ikhtiar memberhouseholds' incomes as indicatedin their M3 and this is discussednext.

b. One variablethat is worth mentioninghere is data on the householdincome andhow the M3 contributedto estimatingthis. As mentionedearlier in Footnote 7, M3 containedinformation on income,occupation and manyothers. Let us take the variablesincome and occupationas an illustration. A good exampleto illustratethis is the caseof rubber cultivation,which has beenthe most popular occupationamong Ikhtiar memberhouseholds. To be specific,respondent A (as oneexample) was a rubbercultivator and was earninga certainamount of income prior to joining the Ikhtiar Programme.Thus by reviewingseveral other casesof rubbercultivators from M3, a generalpattern of incomesnormally earned through such an occupation can be clearly seen. This has given the author some backgroundof what to expectfrom the control group.M3, howeveralso contains variousother casesof members'household occupationsfincomes. As mentioned, 194

1 income. M3 gives a monthly and year estimate of In general the very poor rural householdsin the study area share almost similar socio-economic conditions. While M3 provides a good "literature review" for the author, the role of the "local boy", i. e. the research assistants,was also important and they have been very instrumentalin getting fairly accurate data on income and various other required data by virtue of being residentsof Baling and still fresh from their recent PPRI's household survey, (PPRT or Development Programme for the Poorest Household) which had also collected the socio-econon-dcdata on the very poor rural householdsin Baling.

c. The "recall data" requiredin this study were also limited to "easy to recall types of data" such as data on housing conditions (eg. electricity, piped water supplyand roofing materials),household items (eg. radios and cupboards)and assets(land) and also some of the socio-economicbackground (eg. age, occupationand householdsize). A good exampleis the question when did you buy this televisionset? If the answerwas 4 yearsago, it indicatedthat it was the sameset "Before" and "After" and thus there was no changefor this particular variable.The samecan be appliedto other householditems. A little probing was also required,such as "Do you plan to get a new televisionset soon?". Another good exampleis the questionrelated to the housing conditions "Is there any differentin the size of your housebetween 1989 and 1992?If the answerwas YES9it indicatedthat the sizehad increased. A further probing was also required, suchas "Whenand what haveyou addedto the house?" It may be an extended kitchen,new verandah,new bedroomor living room being extendedfrom the "parent" building. The samecan also be applied to other related variableson housingconditions. Similarly a further relatedquestion was also necessaryto ask themto relatetheir recentaccount of the houseupgrading exercise.

d. However,"recall data" were supplementedby (i) direct observationas most of the interviewswere conductedmostly in the respondents'houses and (ii) informal discussionsafter the interviewwere alsopursued for anyunclear responses. These supplementarymethods were meantfor cross-checking.

e. In generalthe M3 was only usedas a guide as it providessome of the general socio-economicpatterns of the very poor householdsin the district of BALING. The actual data were collectedbased on what the control group had to say. NeverthelessM3 providesa good sourcefor the purposeof checking.

15. The "After" Situation (1992): The collection of data for the "After" situation for the two groups is discussedbelow:

a) Ikhtiar Members Unlike the M3 which was collected by the Ikhtiar Organization, data and other related information for the "AFTER!' situation were collected by the author and his researchassistants. In generalit was found that: (i) most 1khtiar membershave their own written or other types of records and (H) in some other cases,there was the M8, which is a record on Ikhtiar loan utilization kept by members(and also by Ikhtiar office in Baling 1) and monitored 195

by Ikhtiar staff. M8 is another innovation of the Ikhtiar Progranune as it has inculcatedthe habit of record keeping by its participants.

In generalM8 containsthe following information: 1. Income derived from activities generatedfrom Ikhtiar loans. 2. Income derived from any other sourcesnot related to AIM activities 3. Householdegeneral expenditure. 4. Savingsand financial borrowing records from various sources. 5. Other records related to the above4 items. b) The Control Group Unlike the Ikhtiar members,only some of the respondentsin the control group havetheir own written records.However, the information obtainedwere fairly accurate.A similarapproach as mentioned in Footnote 14 (above)was used,such asthe questionon the possessionof the televisionset for the "Before" and "After" situations.Similarly for data on income,it was cross-checked(where necessary) with the Ikhtiar memberhouseholds trend of income derived from non-1khtiar sources(for explanation on the sources of income earned by Ikhtiar membersand control group, see Footnote I in Chapter 9). In generalthe estimateof the currentincome was computeddirectly from the respondent'sown information.This was also supplementedwith direct observationand informal discussion(as mentionedin Footnote 14). Uncertaintyover incomefor instance, canbe reducedas noted by Riddel (1990:25):

" visualinspection of newly purchasedgoods-may also indicate enhancedeconomic status ... cross checking of differentdata sources should be donewhenever possible, and this shouldmake a major contributionto reducing suchbias". c) The ReferencePeriod for the collection of socio-economicdata:

(i) As noted in Chapter5, loan disbursementto Ikhtiar membersbased on the group of 5 was staggered.The samplesof the 254 memberssurveyed show that theirpetiods of loan utilization (definedas the period wherebymembers pursue their variousincome generating activities and is basedon 12 months)were mainly in the yearsof 1991and 1992.Let us take two examplesand somebrief points below:

(a) Example 1: membersI and 2 from GROUP 15 had receivedtheir loans in February1991, utilized and completedthe loan cycles 12 months later, Le in January1992. The other 3 fellow membersin the GROUPmay get their loansin abouttwo or monthslater.

(b) Example2: membersI and2 from GROUP27, receivedtheir loansin August 1991,utilized and completedthe loan cyclesin July 1992 (12 months),Similarly fellow their membersmay get their loans later. This is also applicableto many othermembers in variousother groups. 196

(c) As mentionedin the text, the starting point of this study was 31/10/1992 (i. e. in determiningthe samplingframe). By then all the 254 sample households from various groups had already for some time prior to this starting point completed their loan utilization (and repaid their loans).

(d) Basedon the aboveexplanation, the "after" situationfor Ikhtiar memberswas therefore approximatelyfrom early or mid-1991 onward. Thus upon the completionof their respectivecycles of loans, we will therefore be able to determinewhether members householdincomes have increased or not.

(ii). FOR THE SAKE OF SIMPLICITY, 17HE TERM "AFTER" SITUATION, AS USED IN THIS STUDY, IS TAKEN TO MEAN AS "1992". This period was similarly applicable to the Ikhtiar member households and householdsin the control group. Information on household incomes were basedon a 12 month periods. While the period for the collection of information on incomes among the Ikhtiar members were based approximately from early 1991 to sometimeprior to the starting point of this study (as discussedabove), the period for the control group for this purpose was based approximately from around mid-1991 to mid-1992. Thus both groups have more or less a similar referenceperiod on incomes,i. e. 1991/1992.

16. As mentioned,households serve as the samplingunit, while the unit of enquiry was the head of households,usually male. Since there are 2 groups, i. e. the participantsand non-participants, the following was the outcomeof the household survey:

Participants: The author usually resorted to interviewing both the head of household,usually male, along with their wives by virtue of being the participant of the Ikhtiar Programme(as noted Ikhtia? s membershipis for women).While the husbandprovided a generalanswer, priority was given to their wives who usually providedspecific answers relating to questionson the Ikhtiar Programmme.The authoralso managed to interview:

1.76 percent of the heads of the householdstogether with their wives simultaneously. 2.24 percentwere the (i) wives of the headsof the householdsand (ii) those householdsheaded by femalemembers.

Non-participants: Similarly,the authorresorted to the sameapproach as that of the Ikhtiar memberhouseholds, i. e. by interviewingboth the husbandand wives. The femalehouseholds (or wives) were given priority, especiallyon questions relating to the possibility of joining the Ikhtiar programme.We managedto interview:

1.65 percent of the heads of the households along with their wives simultaneously. 2.22 percentof the headsof the households,all male. 1 17 (i) percentwere the wives of the heads of householdsand (H) those householdsheaded by femalemembers. 197

CHAPTER 7: THE DISTRICIr OF BALING: A CASE STUDY AREA

7.1 INTRODUCTION

An analysisof the lkhtiar Programmeeffectiveness in increasing the income as well as reachingthe very poor rural householdsin the study area is the subject of chapters 8,9 and 10. First, however, there is a need for some understandingof the study area.

Thus a general background of the study area will be given and this includes: the location, the district administrative framework, the settlement pattern, the landuse pattern, population, availability of infrastructure and public utilities and tile general strategy and development scenarios. This chapter will also highlight briefly tile progressof the lkhtiar Programmespecifically in Baling, which supplementsthe earlier macro-leveldiscussion in Chapter5.

7.2 BACKGROUND OFTHE STUDY AREA

7.2.1 LOCATION

Balingis one of the elevendistricts in the Stateof Kedah(See Figure 9). It is located roughlybetween latitudes 50 25'N to 6 YN and longitudes100 WE to 101 E in the South-easternpart of the State.The total areaof the District accountsfor 1502 per squarekilometers and is the secondlargest district in the Stateafler the District of Sik.

7.2.2 DISTRICTADMINISTRATION

7.2.2.1 THE MUKIM (SUB-DISTRICT)

Baling is divided into eight mukinis:

1. Siong (having an area of 543.9 per square kilometer). -, -, I

198

2. Kupang (having an area of 199.4 per square kilometer). 3. Pulai (having an area of 155.4 per square kilometer). 4. Bongor (having an area of 44.0 per square kilometer). 5. Baling (having an areaof 38.9 per square kilometer). 6. Telui Kanan (having an area of 126.9 per square kilometer). 7. Bakai (having an area of 266.8 per square kilometer). .8. Tawar (having an areaof 126.9 per square kilometer).

Howeveras mentionedin Chapter6, the study area is confined to only the first five muldmsas listed above(See Figure 10), but the study areais discussedin the overall contextof Balingdistrict.

7.2.2 2 LOCAL GOVERNMENT COUNCIL

Baling has 1 Local GovernmentCouncil, namelythe Baling District Council which encompassesthe areasnamely: Baling town (having an area of 1.399 per square kilometers),Kuala Ketit (an areaof 0.218 per squarekilometer), Kupang (an areaof 0.622 per squarekilometer), (an area of 0.21 per squarekilometer), Tawar(an areaof 0.337per squarekilometer), Kampung Lalang (an areaof 0.414 per squarekilometer), Pulai (an area of 1.787per squarekilometer), Malau (an area of 0.681per squarekilometer) and Kajai (an areaof 0.440 per squarekilometer). (See alsoFigure 12 for the locationof eachof the areas).

Baling has a total of about 220 villages (Ahmad, 1983), together with 148 JawatankuasaKemajuan dan Keselamatan Kampong QKKK) or Village Development and Security Comn-dttees(UPP, 1989). Generally the Districts administrative structuralframework and its key officials[11 are asshown in Figure 11.

The generalplanning and implementationmachinery of the District of Baling is coordinatedthrough the JawatankuasaPembangunan, dan TindakanDaerah QPTD) or District Developmentand Action Committee.It is chairedby the District Officer and the committee members consist of government officers representing various departmentsand agencies in Baling andalso Baling! s memberof Parliament121. 199

Figure 9: The II Districts in the State of Kedah 200

Figure 10 : Study Area in the District of Baling: The Mukims of Siong, Pulai, Kupang, Baling and Bongor

Study's Area - The 5 Mukims under AIM's Baling 1 Branch.

Other 3 Mukin-s under AIM's Baling 2 Branch. 201

Figure 11 : Baling!s District Administrative Structure and Officials

II DAERlU3 (DISTRICT 2) District I PEGAWAI DAERAH District n (DISTRICT OFFICER)

II MUKIX (SUB-DISTRICT 2) - II Mukim I PENGHULU Kukim n (M=IM HEADMAN)

II rimoNc; (VILLAGE 2) - II Rampong I KETUA MWPONO Kampong n (VILLAGE HEADMM)

------

Village Development and Security Committee (JKKK 1) 202

7.2.2.3 DEVELOPMENT ALLOCATION

In general the development allocations for the District of Bating (as of November 1992) are shownbelow (Baling District Office, 1993):

1. Allocation for rural development= M$1,595,276.

2. Affocation for TPRT" = M$270,000.

3. Allocationfor roadnetwork development = M$2,860,364.

4. Affocation for the upgrading of viHageeconomies = M$77,000.

5. Allocation for the DevelopmentProject (for New Village)= M$85,500.

6. Allocationfor other Socio-EconomicRural DevelopmentProgrammes = M$55,000.

Thus, in total, approximatelyM$4.9 n-dllionwas being allocated for the overall developmentof Baling.

7.2.3 LAND USE PAITERN

The land use pattern in Baling is characterizedby agriculturaluse and forest (see Table 23). Approximately32 percentof the land areais underagriculture, with rubber being the most important crop. Rubber alone occupiesnearly 77 percent of the agriculturelanduse, followed by padi (19 percent) [31 and horticulture (almost 2 percent).

xr- Ilowever the largestsingle land use is the forest reserve,accounting for half of the area.In addition,about 14.6 percentof the District's land is under land reserve.The other important land use is the settlementarea which is comprisedmainly of the villages,settlements and towns. 203

Table 23: : Land use Pattern in the District of Baling, 1987/88

Land use Hectares Percent

Agriculture:

Rubber 38,561 25.29 Padi 9,574 6.27 Dusun (Horticulture) 992 0.65 Oil Palm 689 0.45 Coconut 27 0.017 Other crops 110 0.072

Kampong land (Village land) 5,277 3.46 Residential 95 0.062 Commercial 11 0.007 Industrial 10 0.006

Forest reserves 74,773 49.04

Land Reserves:

Dairy land 437 0.28 Firewood 572 0.37 Aborigines 173 0.11 Hot spring 14 0.009 Public reserves 311 0.203 Other reserves 20,835 13.66

TOTAL 152,461 100

Source: Unit Penyelarasan dan Pelaksanaanj Jabatan Perdana Menteri, 1989.

7.2.4 SETILEMENT PATTERN

Two distincttypes of settlementcan be found in Baling, namelythe traditionalvillages [41and small towns.

1. Traditional Villages

Thevillage settlements are mainly located along the narrow river valley and spinalroad network.The settlementpattern within individualvillages is diverse,but the threemost commonpatterns are dispersed,nucleated and linear (Ahmad, 1983). Thesepatterns areas follows: 204

i. Nucleatedsettlement pattern: In theseviUages, houses are built very close to one another, so much so that the whole housing area can be formed into one generalizedbuilt-up area.

I Dispersed settlement pattern: the houses in these villages are found to be more widespreadover the village territories. This pattern is brought about by the practise of setting up home on individual pieces of land. In general residents! houses are surroundedby their holdings or orchards.

iii. Linear settlementpattern: this pattern of settlementcan be seenoccupying the stretchof the narrow river valley, alongsidethe padi fields on one side and the mainaccess road on the other.

iv. It is also commonthat everyvillage has at least one village shop,which generally acts as a focal point for disseminatingnews under the Rural Development Programme.

v. Much of the north-eastemand south-eastemparts of Baling are uninhabiteddue to mountainousregions.

2. SmaUTowns

Unlike rural settlements,small towns (local businesscentres) in Baling sprangup mainlyalong the main road network. There are 9 suchtowns, namelyPekan Baling, KualaKetil, Kupang,Kuala Pegang, Tawar, Kampong Lalang, Pulai, Malau andKajai [5]. The locationof these9 towns canbe seenin Figure 12. Thesesmall towns serve all the nearbyand surrounding villages and act asa local businesscentre.

HoweverPekan Baling is the "CentralBusiness" area for this District and acts as an administrative,commercial, social and cultural centre.Most of the servicessuch as banking,most government offices. and agencies, cinema, supermarket, bus terminal and othersare only found in PekanBaling [6]. Ahmad (1983) also noted that the small towns in the districtsare very lively during the weekly market 171when traderssell their goodsranging from food, clothingto hardware,in the "open" eitheron the space providedor alongthe roadside.

Theseweekly market activities are currently a very commonfeature not only in Baling, but also throughoutthe country. In addition there is a new concept of "Farmees Market", very similarto the weekly market, exceptthat most of the goods sold are 205

generally farm produce and sold mainly by the rural farmers 181. In addition to the above settlements, there are also planned settlements, chiefly confined to large plantation estatesand housing schemesestablished by FELDA, FELCRA and KEDA t9j.

7.2.5 POPULATION

In 1991, Baling had a total of 114,489 population (Department of Statistic, 1992), which accounts for approximately 9 percent of the total population of tile State of Kedah. The trends of the population change are shown in Table 24, which shows that population has increased from 104,118 (1980) to 114,489 (1991) or around 10 percent. In terms of the ethnic composition (see Table 25), approximately 82 percent are the Malays, 8.3 percent Indian and 8 percent Chinese (UPP, 1989). Generally tile Malays are mainly confined to the traditional villages, with the Chinese concentrated mainly in the local small towns. The Indians are found mainly in the rubber estates.

Table 24: Population in The District of Baling : 1970 -1990

123 Mukim 1970 1980 1991

1. Baling 8,359 8,190 12,552 2. Bongor 4,769 4,901 5,584 3. Kupang 21,103 21,607 23,442 4. Pulai 17,669 17,345 19,972 5. Siong 10,324 11,117 11,842 6. Tawar 18,363 16,899 18,284 7. Telui Kanan 10,657 12,255 14,647 8. Bakai 12,874 12,482 12,552

TOTAL 104,118 104,858 114,489

Sources: 1: Asmah, 1983 2 and 3: Population and Housing Census of Malaysia for 1991, Department of Statistic, 1992. 206

Table 25 : Population In the District of Baling, By Ethnic Group : 1970 - 198a

3 1970 1980 1987/88

Ethnic No. Percent No. Percent No. Percent Group

Malay 81,701 78.5 83,164 77.0 106,776 82.10

Chinese 10,448 10.0 11,608 10.8 10,906 8.04

Indian 10,446 10.0 11,351 10.5 10,456 8.39

Others 1,523 1.5 1,803 1.7 1#915 1.47

Total 104,118 100 107,926 100 13.0,053 100

Sources :1 and 2: Asmah Ahmad, 1983. 3: Unit Penyelarasan dan Pelaksanaan, Jabatan Perdana Menteri, 1989.

7.2.6 INFRASTRUCTURE AND PUBLIC UTILITIES

Ahmad (1983), UPP (1989) and DOA (1990) have provided summariesof the infrastructureand public utilities asfollows:

1. Road Network (seerigure 12).

Thebreakdown of roadnetworks are asfoRows: 1. Federalroads 52.7 kilometers. 2. Stateroads 267.243 kilometers. 3. FELDA roads 13.26 kilometers. 4. FELCRAroads 2.14 kilometers. 5. Agriculturalor roadsleading to estates 67.1 kilometers. 207

Migure 12: The Road Network in the District ofBaling

Source: Ahmad,A. (1983). TheNature of Poverty in PeninsularMalaysia. 208

Generallythe interior road network in Baling is characterizedby roads that lead to dead-endssuch as the road up to the valley north of Baling town. It also acts as the spineroad of the regionas it links all the mainlocal businesscentres with one another. Most of the villages are also linked with one another by secondary surfaced and unsurfacedroads. In somecases footpaths and "mini-tarred roads" serve as intra.and inter-villagelinkages and are the mainform of network that connectsthe more isolated villagesto the accessroads. The proposedEast-West highway is also expectedto pass throughKuala Pegang (a smalltown as shownin Figure 12) in Baling.

2. Electricityq ]PipedWater Supply and Toilet Facilities

In 1990,87 percentof the fanner householdshad accessto electricity. On the other hand,53.7 percentfarmer households had accessto piped water supply. In terms of toilet facilities,approximately 58 percentof the householdsused the "flush-pourtype".

3. Health Service

Thebreakdown of healthservices are shownbelow: 1. District hospital 1 (140 beds) 2. Main health centres 2 3. Smallhealth centres -4 4. Rural clinics -13 5. Maternity clinics -12 6. Mother and child clinic 7. Goverment doctors S. Private doctor/clinics 9 9. Doctor to population ratio -1: 6j502 (Baling) -I: 49277 (Kedah) - 1: 2,560 (Malaysia)

The health servicesthat cater to the needsof Baling!s population are regardedas averagebut needto be improved.

4. Educational Services

Table 26 showsthe overaHsituation of the educationalservices in the District. It hasa total of 79 schools.This doesnot include the private schools.Most schoolsin the District alsoprovide aids in the form of food/drink underthe "supplementaryFood and Milk Scheme",plus a freetextbook scheme for the poor studentsin school. 209

Table 26: Educational Services in the District of Baling (1989)

Type of school No. of Number of Number of Number of Primary Students Teachers Classrooms Schools

1. Primary 62 17,533 1,223 723

2. Secondary 10 8,422 573 233

3. Religious 7 3,417 138 74

Teacher : Student Ratio (Primary) 1: 14 Teacher : Student Ratio (Secondary) 1: 15 Classroom : Student Ratio (Primary) 1: 22 Classroom : Student Ratio (Secondary) 1: 36

Source: Baling's District Office File, 1989.

5. Telephone Service

Telephoneservices in Baling are generallyseen as below averageand are not sufficient to catereven for the investorsor businesspeople. Only a tiny portion or around 1.74 percentof farm householdshave access to a privatetelephone. In general,most people still resortto the publictelephone.

7.2.7 STRATEGY AND DEVELOPMENT SCENARIO

7.2.7.1 GENERAL SCENARIO

Theeconomic development of Balingis basedon agriculture,especially rubber and to a lesserextent padi. The developmentstrategy is basicallyin-situ improvement, provisionof supportservices and basic infrastructure.

In the field of land development,FELDA hasestablished two schemesin Teloi Kanan (since1962) and Teloi Timor (since 1976).These schemes have benefitted only 702 settlers.FELCRA on the otherhand developed a fiinge allenationscheme in Kampong Iboi Tiak I andKampong Iboi Tiak 2 andalso in Ulu Sedim1 andUlu Sedim2 in the early 1970s and in 1980s (KEDA, 1985). These two programmesare a sort of "enclave"economy which touches only a smallportion of the population. 210

KEDA, one of the 7 RDAs (as mentioned in Chapter 4), only entered the development scenein the State of Kedah in the 1980s, which is in line with the regional policy as stated in the Third Malaysia Plan 1976 t101, mainly to supplement and complement tile on-going developments,while at the same time creating and promoting other sectors have been left and also involving the rural households that untouched. Thus it is necessaryto highlight briefly the role of KEDA.

7.2.7.2 KEDA : ITS ROLES IN THE DEVELOPMENT OF KEDAH DEPRESSED REGION

Kedah is one of the poorest states in Malaysia. However within the State itself there are marked differences between the Muda Agricultural Development Authority (MADA) (which makesup 10 percent of the State area) and the non-MADA regions in terms of socio-economicdevelopment (See Figure 9).

In the MADA region, the standard of living and incom6 of about 60,000 families are twice as high as those in the non-MADA region, which has more than 80,000 families (Bakar, 1991). It was estimatedthat about 70 to 80 percent of rural householdsin the non-MADA region were below the poverty line and mainly confined to landless labourers, small padi farmers, marginal/rubber smallholders and fishermen (KEDA, 1985). In general,the averagemonthly income for farming householdsin the MADA region was around M$365.00 in 1986 (Mat, 1991), which was above the poverty line for the 1986/87 period which was M$350.00. On the other hand the average monthly income for householdsin the KEDA region was around M$25 1.00 (KE-DA, 1992). However, this level of householdincome, in KEDA region was well below the Kedah average household income of M$860.00 (SEPU, 1991) and the national average incomeof M$1163.00(as mentioned in Chapter4).

Developmentsover the past decadeshave unfortunatelytended to accentuateratlicr thanameliorate the regionaldifference in Kedah.In order to correctthis imbalance,to eradicatepoverty and to acceleratedevelopment in the non-MADA region II 11,which coversalmost 90 percentof the areaand 60 percentof the populationof the State, which as noted by KEDA, is "probably the poorest area of its size in the whole country" (ibid, 1985), led to the establishmentof KEDA or Kedah Regional DevelopmentAuthority in 1981(mentioned briefly in chapter5) (KEDA, 1992)1121.

KEDA developmentstrategy, which aimed at the restructuring of its regional drawn in KEDNs Operational economy,was up Master Plan (1985 - 2000) that put emphasison diversification,strengthening of the economicbase and enhancingthe 211

development. progress of the local population towards the By 1989, an allocation of M$128,434,064 had been given to KEDA to pursue its programmes (Bakar, 1991) 1131. Unlike the regional development authorities of KEJORA, KETENGAII, KESEDAR and DARA which have been involved in developing resource frontier regions (as mentioned in Chapter 4), KEDA! s role is mainly in the upgrading of existing villages and promoting growth centres from amongst the established settlements. Amongst the programmes generally implemented by KEDA that are expectedto creategrowth impulsesin the region, Baling included, are:

1. Developmentof local resources.

2. The creation and upgrading of townships and rural growth centres.

3. Agricultural development, basically in-situ through an integrated development approach.

4. Industrialdevelopment, especially small and medium-sized industries.

In 1992,KEDA spent about M$30,111,600 on various projects and activities in all the area under its jurisdiction, which includes Baling. Among the projects were (KEDA, 1992):

1. Housingschemes in 4 villages,two of which are in Baling.

2. Developmentof traditionalvillages, in which 447 houseswere built.

3. Variousinfrastructure development, such as improving the rural road networks.

4. Socialand institutional development.

5. Agriculture development in which 8 projects have been implemented. These includes among others, mixed horticulture, padi, rubber, animal husbandry and durianorchards.

6. Entrepreneur development through the provision of basic facilities such as workshops, stalls, small shop-housesand arcades. 212

7. The most recent and still on-going is the "Development Programme For the Poorest" (Program PernbangunanRakyat Termiskin or PPRT - as mentioned in Chapter4), which are in various preliminary stagesof implementation.

7.3 THE IKHTIAR PROGRAMME IN BALING: THE GENERAL BACKGROUND

Table 27 provides the general background progress and coverage of the lklitiar Programmein the State of Kedah in general and the District of Baling, in particular. This sectionhas to be linked to the context of the overall operational framework of the Ikhtiar Programmeat macro-levelwhich has been discussedin Chapter 5.

7.3.1 THE IKHTIAR PROGRAMME - ITS COVERAGE

In Kedah(as mentioned in Chapter 6), the Ikhtiar Programmestarted its operationby openingtwo branchesin the District of Baling and Sik simultaneouslyin March 1989. By virtue of havingthe highestnumber of the very poor rural households,the lkhtiar Organizationhas divided District of Baling into Baling I andBaling 2.

The Ikhtiar Programme'sother branchesin Kedahare in the District of PadangTerap, the District of KualaMuda, the District of PulauLangkawi, the District of Kulim and the District of BandarBaru, which are 100 percentin the KEDA region (See Figure 9). It also includestwo districts that are largely in the KEDA region namely the District of KubangPasu and the District of Yan. However the Iklitiar Programmehas not establishedits branchesto serve the two rather prosperousdistricts in Kedah, largelyin the MADA region,i. e. the District of Yan andthe District of Kota Setar(See Figure 9). It seemsthat Ikhtiar Programmein Kedah tendsto concentratein poorer areaswithin the Stateof Kedah. 213

7.3.2 THE InITLARPROGRiOdME -ITS GENERAL PROGRESS

The Ikhtiar Members

Baling 1, as shown in Table 27, has the highest number of Ikhtiar members not only in Kedah but also throughout the country. Its membershave increased from 765 in 1991 to 1331 in 1992 and up to 1428 by November 1993. The increase from the 1992 period to 1993 has been quite slow. This was because,as mentioned in Chapter 5, the Mtiar Organizationhas in 1993 resorted to a temporary shift from fully recruiting new memberstowards monitoring projects undertakenby new borrowers in order to ensure success,where quality rather than quantity was stressed.

The District of Sik, on the other hand,has the secondhighest number of participants not only in Kedah but also throughout the country, with 1359 members(as of November1993). The District of Pendang,with 1119members is the third highestin Kedahand fourth in the country after the District of Barat-Laut Selangor(the oldest and first branchin the country).However, by combiningBaling 1 and Baling 2, the numberof Ikhtiar membersincreased to 2274 (as of November 1993). This figure is not likely to be overtakenby any other branch.Thus, in general,the State of Kedah alsohas the highestnumber of 1khtiarparticipants, which stood at 7730 in November 1993,followed by Kelantanwith 5914members.

2. Group, Centre, Repayments and Savings

In Baling 1, there are a total of 299 groups which were federatedinto 63 centres, locatedin someof the 89 villages.Approximately 37 percentof the 63 centresare full centres,i. e. having 30 members(5 per group x6 groups = 30 members,which constituteda centre). However, in the Ikhtiar approach, each centre does not necessarilyhave 30 members.On average,each centre in Baling I has 22 members and this figure is the highest in the country. Kuala Terenganu!s AIM branch, for example,only has5 membersper centre.

Baling I has, over the last 3 years,been able to maintaina near-perfectrepayment recordof around99.9 percent(see Table 27). The group savingsfund on the other handhas registered a total savingsof M$208,791as of November1993 (as indicated in Table 27), savedby aUits 1428members. 2 CD

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Table 28 : Types of Activities Financed By Ikhtiar Loans in the District of Baling 1, based on 1215 borrowers (by April 1993)

Name of activities No. Percent Amount(Mfl Percent

AGRICULTURE ACTIVITIES

Agricultural Related 737 58.6 408,504 63.6 (i. e as in items 1 to 4) 1. Padi cultivation 120 9.5 74,513 11.5 2. Tree crop cullvation 347 27.6 211,970 33.1 3. other crops 265 21.1 119#141 18.5 4. Fishing activities 5 0.4 2#880 0.5 5. Animal Husbandary 521 41.4 231,357 36.4

Total 1,258 67.1 639#861 68.1

NON-AGRIC. ACTIVITIES

6. Selling/distribution of foods 175 28.1 81,817 27.3 7. Selling of agricultural goods 85 13.8 48,043 16.0 8. Selling of non-agricultural goods 281 45.5 134,021 44.7 9. Repair/services of vehicles 39 6.3 21,, 208 7.1 10. Workshop/services activities 9 1.5 4,880 1.6 11. Other non- agricultural 29 4.7 9,610 3.2

Total 618 32.9 299,, 579 31.9

Total Activities 1,876 100%

Total Loans 939,440 100%

Total Borrowers 1,215

Note : Some borrowers may have two types of activities# i. e both in the agricultural and non-agricultural activities. Source : AIM Official Data, 1993: District Of Baling 1 Branch. 216

3. Activities Financed by Ikhtiar Loans in Baling 11141

Table 28 showsthe main activities financed by lkhtiar loans in Baling 1. It shows that the agriculturally-relatedactivities and animal husbandry are the most popular, which account for around 67.1 percent of the total activities. On the other hand, the non- agricultural activities account for around 32.9 percent. However, as noted by Iklitiar staff in Baling, non-agricultural activity is slowly becoming popular and is expected to increasein the very near future.

7.4 CONCLUSIONS

This chapterhas generally highlighted the backgroundof BALING I as tile study area, which was describedin the overall context of the District of Baling. The background reviewsranged from the locationalaspects to the strategyand developmentscenarios of the District. It also describedthe progressof the 1khtiarProgramme in BALING I in particularand Kedahin general.With the benefit of this generalbackground, it is now to turn to the analysisof the findingsin the next few chapters. 217

FOOTNOTES

The Penghulu (Mukim, Headman) is directly under the supervision of the District officer and responsible for the general development of the Mukim. Ketua Kampong (VidlageHeadman) is appointed generally to assist the Penghulu for the overall developmentof the village. However, the District Officer and Penghulu are directly under the control of the Menteri Besar of the State of Kedah (Chief Minister).

2. Amongthe membersare: Balings memberof Parliament,district engineersfrom variousdepartments and agencies,The educationofficer, The information officer, The KEDA officer, The RISDA officer, The district Council Secretary, The agricultureofficer, The FE4CRA officer, The FELDA officer, Penghulusand otherofficers or relatedmembers appointed by District Officers.

3. Padiwas traditionallygrown as a singlecrop and it was not until sometimein the 1970sthat Baling was able to double crop its first 81 hectaresof rice land in KampongTawar (Ahmad, 1983). Recently,UPP (1989) stated that 5 irrigation systems,involving 435 hectaresof land have been plannedin Baling District to further increasethe doublecropping areas (like that of the IADP's in the MADA region)and these includes:

1. Kampong Banggol Berangan. 2. Kampong PadangGeh. 3. KarnpongBongor. 4. KampongAsam Jawa. 5. KampongTanah Periok.

However,these planned programmes have been scrappedoff becauseaccording to UPP (1989), the IADP's authority has placed more emphasisin the rice MADA growingareas of the region.. 4. Traditionalkampongs (village) are the original settlements,mainly found alongthe narrowriver valleys,the spinaland mainroads. This is a very commonfeature of theMalaysiares rural villagepattern.

5. Thesesmall towns havea populationranging from 1053 (Tawar) to 4986 (Pekan Baling).Thus in general'smalltown! refersto those smallbusiness centres with a populationsize ranging between1000 to 10,000(KEDA, 1985).

6. Pekanis a Malayword for smalltown.

7. Someof the examplesof the weeklymarket days are asfollows:

1. KampongLalang (every Tuesday). 2. Malau(every Friday) 218

3. Kupang (every Saturday) 4. PekanBaling (every Sunday)

The main Farmers' Market is in Pekan Baling, every Wednesday, near the IntegratedFarmer's Complex (Komplek Geraktani).

9. There are 47 rubber estatesbelonging to private companies or individuals, mainly Chineseand European.None belong to the Malays (Ahmad, 1983).

10. For details of the main elementsof the Malaysiads regional policy, see pages 209 PI (1976). In - 214, The Third Malaysia an general, within the broad fi-amework of the regional policy, there arei four main strategies: resource and new land developmentstrategy; in-situ rural development; industrial dispersal strategy, and rural urbanization and growth centre strategy. These have been discussed in Chapter4.

11. MADA and EEDA regions: The State of Kedah is divided into eleven AdministrativeDistricts within the context of the KEDA and MADA regions as follows:

(i) Sevendistricts: Pulau Langkawi, Padang Terap, Sik, Baling, Kulim andBandar Bahru- all of which are 100percent in the KEDA region. (ii) Two districts:Kubang Pasu and Pendang- largely in the KEDA region and only somesmall parts are in the MADA region. (iii) Two districts- Kota Setarand Yan - largelyin the MADA region

12. The mainfunctions of KEDA are (KEDA, 1992)as follows: a. To promote, stimulate, facilitate and undertake economic and social development. b. To promote, stimulate,.facilitate and undertake residential, agricultural, industrialand commercial development. c. To controland co-ordinate the performanceof the aforesaidactivities.

13. Bakar (1991) noted that there is yet no empirical study on the impact of the KEDA performance

14. (a) For activitiesin the weekly group/centremeeting of the Ikhtiar participantsin the studyarea, see ]PLATE A to D in Appendix 7.

(b) For the types of activities financed by Ikhtiar loans among the member households,see PLATE E to H in Appendix 8. 219

CIIAPTER8: SOCIO-ECONOMIC CHARACTERISTICS OF THE SAMPLE HOUSEHOLDS AND BACKGROUND OF IKIITIAR MEMBERS IN RELATION TO LOAN UTILIZATION

8.1 INTRODUCTION

As the title suggeststhis chapter is divided into two main sections. Section One gives a general picture about certain socio-economic characteristics of tile sample population (including both the Ikhtiar members and the control group) as mentioned in tile Chapter 6. Section Two highlights specifically the background of the lkhtiar members in relation to tile utilization of loans: size of loans, level of loan cycle, type of activities carriedout andother related matters.

With this background,the reader can understandthe samplepopulation better, but more importantlyit also providesthe backgroundof the Ikhtiar memberswith regard to the generalpattern of loan utilization, which will be subjectedto detailedanalysis andto the testingof hypothesesin tile next two chapters.

8.2 SECTION ONE: SOCIO-ECONOMIC CHARACTERISTICS OFTIIE, SAMPLE POPULATION

A. SOCIAL CHARACTERISTICS

As mentionedin Chapter5, the Ikhtiar Programmememberships was mainlycomprised of women(female households). In the District of Baling, 100 percentof tile Ikilliar membersare women. In discussingthe socialcharacteristics of the samplehouseholds, we will therefore:

(i). First and foremost focus on the Ikhtiar members(i. e., the female households)and comparethem with the control group female members(i. e. the potential or future membersof the lklitiar Programme) III in terms of each of the following variables (a) age structure, (b) educationalbackground and (c) occupational background. 220

(ii). Secondly,we will highlights the Ikhtiar households'male members (i. e. the husband)and compare it with the control group male members(i. e. the husband) for similarvariables. it is interesting to note that AIM prefers to give priority to the adult females of the householdsto becomeits members,but this does not preclude the husbands from using the loan money (but only for income generation purposes). Female members or wives can become its representativesand take loan on their husband's behalf Out of 2S4 1khtiar membersinterviewed in the household survey, 96.5 percent (24S respondents) were married and IS percent (9 respondents)were widowed. Thus 96.S percent of the Ikhtiar memberswere not the head of a household, since they have a husband as the head (i. e. men headed household). This also suggests that 3.5 percent of Ikhtiar memberswere women headedhouseholds.

On the otherhand, from the 265 samplesof the control group femalemembers (Ikhtiar potential/futuremembers) involved in the survey,93 percent(248 respondents)were marriedand 7 percent(17 respondents)were widowed.Thus 93 percentof the control groupfemale members were not the headof a household,since they also havehusband asthe head.This suggeststhat 7 percentof the femalemembers in the control group weretherefore women headed households.

The aboveanalysis shows that:

1. The malemember of a householdin the Ikhtiar group and control group was the husband(i. e. asthe headof a household)and

2. The femalemember of a householdin the Ikhtiar group and control group were the (a) wives and (b) from householdsheaded by women (i. e. widowed households).The femalemembers in both groups were thereforemade up of the Ikhtiar current and future/potentialmembers.

8.2.1 AGE STRUCTURE

1. Ikhtiar Members and Control Group FemaleMembers (wives /women headed households)(see Table 29)

Table29 givesthe age structureof the Ikhtiar membersand comparesit '%kiththat of the control group femalemembers at the time of the householdsurvey. As indicated 221

the averageage of the Ikhtiar memberswas 39.3 years and the control group female Further membershad an averageage of 38.4 years. analysis shows that 89.4 percent of the Ikhtiar memberswere below 50 years old and the figure for the control group female membersstood at 92.8 percent. on averagethe combinedage of the two groups was around 38.8 years. Thus the two They in fact, in groups of householdswere not within the older age groups. were, the 121.They econon-dcallyvery active or active age groups are thus able to contribute to the householdeconomy not only at the present time but for many more years to come.

2. Male (husband as the head of household)

Table 30 gives the age structure of the headsof householdsof the Iklitiar group (usuallyhusbands) and comparesit with that of the control group. As indicatedthe averageage of the Ikhtiar headsof householdswas 42.6 years.On the other hand tile controlgroup heads of householdshave an averageage of 41.3 years.Further analysis showsthat 80 percentof the Ikhtiar headsof householdswere below 50 yearsand the figure for the control group stood at 82.9 percent.

On the whole,the combinedaverage age of the two groupswas around41.9 yearsold (i.e. derivedfrom the total ageof the samplepopulation divided by samplesize of the two samplehouseholds). Thus the two groupsheads of householdswere in their early 40s in terms of their age and, like their female partners, they were also in tile economicallyvery active and active age groups (and as will be discussedin sub- section8.2.4, also play a majorrole in the householdeconomy).

8.2.2 EDUCATIONAL BACKGROUND

1. Ikhtiar Members and Control Group Female Members (wives/woinen headed households)(see Table 31)

Table 31 givesthe educationalbackground 131 of the lkhtiar membersand compares it with that of the control group femalemembers. As indicated,61.8 percent of the lkhtiar membershad receivedformal primary educationcompared to 49.4 percent amongthe control group femalemembers. With this level of education,respondents coulddo little morethan read and write. 222

Table 29 Age Structure : Ikhtiar Members and The Control Group Female Members (Wives/Women Headed Households)

Age Group Ikhtiar Members Control Group (Year) ------N Percent NP ercent

20 - 29 32 12.6 38 14.3 30 - 39 107 42.1 129 48.7 40 - 49 88 34.7 79 29.8 50 - 59 24 9.4 18 6.8 60 and Above 3 1.2 1 0.4

Average age 39.3 38.4

Total (N) 254 265

Source : Field Data

Table 30 : Age Structure : Husbands of the Ikhtiar Group and Control Group

Age Group Ikhtiar Group Control Group (Year) ------N Percent N Percent

20 - 29 14 5.7 8 3.2 30 - 39 83 33.9 89 35.9 40 - 49 99 40.4 108 43.6 50 - 59 39 15.9 35 14.1 60 and Above 10 4.1 8 3.0

Average age 42.6 41.3

Total (N) 245 248

Source : Field Data 223

Table 31 : Education Background of the Sample Households : Ikhtiar members and Control Group Female Members (Wives/Women Headed Households) (Percent)

Level of Ikhtiar Members The Control Group Education (potential members)

1. Never attended school 28.4 43.7 2. Primary school 61.8 49.4 3. Lower secondary 5.1 4.5 4. L. C. E 3.5 2.4 5. Upper secondary 1.2 - 6. M. C. E -

Total (Percent) 100 100

N 254 265

Source : Field Data

Table 32 : Education Background of the Sample of the Male3 (Husbands) : Ikhtiar Group and The Control Group (Percent)

Level of Ikhtiar Group Control Group Education

1. Never attended school 20.4 30.2 2. Primary school 73.5 66.1 3. Lower secondary 4.1 2.5 4. L. C. E 2.0 1.2 5. Upper secondary - - 6. M. C. E

Total (Percent) 100 100

N 245 248

Note: L. C. E Lower Certificate of Education denotes those who had passed the lower secondary level exam. M. C. E Malaysia Certificate of Education, equivalent to 0 level, denotes those who passed the exam. 224

Further analysisshows that 43.7 percent of the control group female membersdid not receive any form of formal education compared to 28.4 percent among the Ikhtiar members.71.6 percent of the Ikhtiar membershad therefore been educated compared to 56.3 of the control group femalemembers.

2. Male (husbands as the heads of households) (seeTable 32)

Table 32, on the other hand, gives the educational background among the husbands for both the Ikhtiar group and control group. The analysis of the education level revealsthat approximately73.5 percent and 66.1 percent of the husbandsin the Ikhtiar group and control group had primary education. The findings of this study also show that, husbandswho never attendedprimary school madeup a larger part of the control group (30.2 percent) comparedto only 20.4 percent among the husbandsin the Ikhtiar group. This finding is quite similar to the study conducted by Md Nor (1992) who noted that 88 percent of the JENGKA Felda settlers (who prior to joWng Felda!s schemewere also from poor rural households) and 67 percent of the traditional kampong heads of households(mainly husbands)had received some formal primary education.

Basedon the abovediscussion, it is clearthat the incidenceof literacyis slightlyhigher amongthe Ikhtiar households.This situationperhaps can lead us to suggestthat the very poor rural householdswith some educationalbackground are keen to take advantageof the opportunitiesprovided by the Ikhtiar Programme.Hossain (1988), in his study of the GrameenBank in Bangladesh,found that more people with some functionaleducation were coming forward to take the income earningopportunities providedby the GB comparedto the illiterates.Thus we can concludethat education seemsbe one of the variablesfor making peoplemore receptiveto new ideas and opportunities. In general, education (Lipset and Bendix, 1967; Kasim, 1986; Ahluwalia, 1990) is regardedas a powerful instrumentfor reducing poverty and (Naffinger, 1990)a major indicatorof skill and(Burki, 1990)can improveagricultural productivity.It is also noted (Golingi and Chua, 1989) that educationcan enablethe rural communityto becomerational, help to create changesin attitude and is one driving forcebehind the nationseconomic development.

8.2.3 HOUSEHOLD SIZE

Table 33 providesinfomation on the respondents'household size. As indicated,the averagehousehold size for the Ikhtiar membersand the control group, are 6.3 and6.1. 225

from respectivelyfor the "after" situation (1992), representinga slight rise the situation before (1989) joining the programme. These figures are higher than the national householdsize, which is 5.2 membersper household.

Control Group Table 33 : Household Size : The Ikhtiar Group and "Before" and "After" Situations (Percent)

Size Ikhtiar Group Control Group of Household

"Before" "After" "Before" "After" (1989) (1992) (1989) (1992)

1 2 2.0 1.6 - 3 4.3 4.3 0.4 - 4 11.8 11.8 15.5 11.3 5 14.2 13.8 29.4 29.1 6 23.2 20.5 21.5 21.9 7 18.5 20.1 20.4 18.9 8 17.3 17.3 9.1 10.2 9 6.7 6.7 1.9 5.7 10 2.0 3.1 1.5 2.3 0.8 11 - 0.8 0.4

Mean Size of Household 6.22 6.34 5.90 6.17

254 265

Source : Field Data

SERUs (1990a) study on the socio-economicprofile of the poor found that the averagehousehold size of very poor householdsin the District of Pcndangand Sik (Baling'sneighboring districts) were also large (5.8 and 6.4 respectively).Tile figures are evenhigher for the Districts of Kernaman(in the State of Trengganu)(7.0) and Kota Bahru (in the State of Kelantan)(7.5). Two other studiesthat also showed a similar Patternwere: Md Noes (1992) who found that the householdsize aniong JENGKA Felda settlerswas 6.2 personsand Abdul Ghafaes(1992) in the case of KESEDARwhere settlers household size was 7 persons.

The abovefindings seem to suggestthat in general,the very poor households(poorest of the poor) in MalaysiaWsrural sectorhave a large family size. A large family is seen asproviding a good sourceof family labour. 226

B. ECONOMIC CHARACTERISTICS [41

8.2.4 OCCUPATIONAL BACKGROUND

1. General Pattern in Malaysia

in the In 1970,49.6 percent of the labour force in Malaysia was engaged agriculture, In 1990, single largest employmentsector. However the situation has now changed. decline from 31.3 27.8 percent of the labour force was engaged in agriculture, a broadly based, percent in 1985. As the economy becomes more industrialized and including: more employmenthas been available in other sectors which, as of 1990, manufacturing(19.5 percent of the labour force), construction (6.4 percent of the force) labour force), non-government services (32.9 percent of the labour and government services (12.8 percent of the labour force). Thus, the employment by ILO contribution of the agricultural sector is declining (Malaysia, 1991). A study increasing (1988) shows that rural employment in the non-farm activities has been it basedon evidencein Aftica, Latin America and Asia (including Malaysia). However has been noted that despite the relative accent on industrialization, the agricultural sector has continuously been accorded a high priority in the Malaysian's national developmentplanning (Abdul Rahman, 1992).

The Farmers!Census in 1990revealed that there were 63,851 farmersin the Stateof Kedah.Out of this number96 percentwere Malays, who thus form the majority of (or 20 farmersin Kedah.In the District of Baling, there were 12,869farmers about percentof all farmersin Kedah).The figure of 12,869is also the highest,in terms of the numberof farmersin Kedahas a whole (JabatanPertanian, 1990). Thus agriculture still formsthe backboneof Kedahseconomy.

2. Ikhtiar Members and Control Group FemaleMembers (SeeTable 34)

Looking at the figures among 1khtiar members,as indicated in Table 34, quite significantchanges in termsof employmenthave occurred. About 64.6 percent of tile memberswere found not to haveany productiveemployment prior to joining Iklitiar. After joining the programme,the proportionwho were unemployedhas been reduced to 35.4 percent.On the otherhand, it was found that 62.7 percentof tile control group femalemembers did not have any productive employmentfor both tile "before" and "after" indicatedin Table 34. This situations, as suggeststhat there were no major changesin termsof employmentfor the control group. 227

Further analysisamong the Ikhtiar members (see Table 34) also indicated that the increasein the employmentin both sectors has been quite impressive. The figure for non-agricultural employment (non-farm employment) went up from 4.3 percent ("before") to 15.4 percent ("after") and from 36.2 percent ("before") to 49.2 percent ("after") for the agricultural employment. Thus as new members are added to the labour force, total family income is also likely to go up by the extent of the earningsof the new members. This finding thus gives an indication of the generation of employmentfollowing 1khtiar loans for female members.This has also been confirmed through informal discussionswith the Ikhtiar memberhouseholds. Ikhtiar has therefore provided a mechanismof drawing women out of their traditional female confinement within householdsand providing a changed social organization capable of providing by opportunitiesfor female self-employment.In general Ikhtiar loans were also taken the wives on behalf of their husbands.

3. Male (husbands as the heads of households) (seeTable 35)

An analysisamong the Ikhtiar headsof households(husbands) and control group heads of households(husbands), based on Table 35 revealed,the following situations:

in The majority of the headsof householdsfor both groups were employed the "before"and "after" situationsand the figuresfor both groupswere quite similar, approximately99.5 percent [6].

I The figuresamong the Ikhtiar headsof householdssuggests that there was a changingpattern of employmentwith regardto the "before"and "after" situations. Whilethe agricultural employment for theIkhtiar heads of householdshad declined from 86.9 percent("before") to 77.5 percent("after"), the non-agriculture employmenthad increased from 12.7percent ("before") to 22.1 percent("after*). Informaldiscussions with the Ikhtiarheads of householdsrevealed that oneof the factors that has contributed to the changingpattern of employmentwas tile availabilityof Ikhtiar loansthat enabledheads of householdsto switch to non-farm, employmentactivities. In generalIkhtiar loansas mentionedearlier were also taken by the wives (by virtue of beingIkhtiar members)on behalfof their husband.AINI doesnot precludethe husbandfrom using loan moneyfor any incomc-gencration Purpose(see also Footnote 9) 228

Table 34 : Employment Pattern : Ikhtiar Members and the Control Group (Wives /Women-Headed Households) Members, "Before" and "After" Situations (Percent)

Ikhtiar Members Control Group

"Before" "After" "Before" "After" (1989) (1992) (1989) (1992)

Unemployed 59.5 35.4 62.7 62.7

Employed 40.5 64.6 37.3 37.3

Employed in Agric.

- Animal Husbandry 0.8 8.2 0 0 2. Padi Planting 6.7 7.5 2.3 2.3 3. Rubber Tapper 27.5 25.6 31.3 31.3 4. other Crops 1.2 7.9 3.7 3.7 5. Labourer (Agriculture) 0 0 0 0

Sub-Total 36.2 49.2 37.3 37.3

Employed in Non-Agric.

6. Business * (such as petty 3.5 14.2 0 0 trading/hawking) 7. other Non-agriculture 0.4 0.8 0 0 activities B. Services 0.4 0.4 0 0 9. Labourer(Non- agriculture) 0 0 0 0

Sub-Total 4.3 15.4 0 0

Total Employed 40.5 64.6 0 0

Overall Total 100% 100% 100% 100%

ote: * Business is taken to include (i) selling/di3tribution of food, (ii) selling of agricultural goods and (iMselling of non agricultural goods.

,te N= 254 for the Ikhtiar members and 265 for the control group female members 229

Table 35 : Employment Pattern : Husbands of the Ikhtiar Members' "After" Group and Control Group : "Before" and Situations(Percent)

The Ikhtiar Group The Control Group

"Before" "After" "Before" "After" (1989) (1992) (1989) (1992)

Unemployed 0.4 0.4 0.8 0.8

Employed 99.6 99.6 99.2 99.2

Fxployed in Agric.

1. Animal Husbandry 2.4 5.4 0 0 2. Padi Planting 5.7 7.0 2.4 2.4 3. Rubber Tapper 73.5 63.0 66.1 64.5 4. Other Crops 0.4 0.4 1.7 1.7 5. Labourer (Agriculture) 4.9 1.7 10.5 12.1

Sub-Total 86.9 77.5 80.7 80.7

Ezqployed in Non-Agric.

6. Business * 12.0 (such as petty 7.4 15.2 12.0 trading/hawking) 7. Other Non-agriculture 0.4 0.8 0.8 0.6 activities 8. Services 0.4 1.6 1.2 1.2 9. Labourer (Non-agriculture) 4.5 4.5 4.5 4.5

Sub-Total 12.7 22.1 18.5 18.5

Total Employed 99.6 99.6 99.2 99.2

Overall Total 100% 100% 100% 100%

Note Business is taken to include M selling/distribution of food, (ii) selling of agricultural goods and (iii) selling of non-agricultural goods.

Note :N- 245 for Ikhtiar group and 248 for the control group

Source : Field Data 230

Hi. On the other hand, the employmentfigures for the control group heads of householdssuggests that no significantchanges had taken place among them either in agriculturaland non-agriculturalemployment for the "before" and "after" situations(see Table 35). The employmentfigures remained unchanged and stood at 80.7 percentfor the agriculturalemployment and 18.5 percent for the non- agricultural(or non-farm)employment for both periods,i. e. "before"and "after". iv. An analysisbased on Table 35, reveals that agricultural -related activities have been the main occupation for both the Ikhtiar and control group heads of householdsfor the "before" situation, where the figures stood at 86.9 percent for Ikhtiar heads of households and 80.7 percent for the control group heads of householdsrespectively. Three of the most popular occupations were rubber cultivation, padi farming and agricultural labourers, among both groups of the households.However, with the emergenceof the Ikhtiar Programme intervention, the pattern of occupations has changed slightly among the Ikhtiar heads of households. They have switched their occupationsfrom agricultural employmentto non-farm.employment, as discussedin item (ii) above.

8.3 SECTION TWO: GENERAL BACKGROUND OF THE IKIITIAR PROGRAMME MEMBERS IN RELATION TO THEIR LOAN UTILIZATION

This sectionfocuses only on the generalbackground of the Ikhtiar membcrsin rclation to their utilizationof Ikhtiar loans,based on the typesof activity andlevcls of loans.

8.3.1 IKHTIAR LOANS: TYrE OF ACTIVITY FINANCED AND CYCLE OF ]KHTIAR LOANS

Derinition

In this study:

(a) The type of activityfinanced by Ikhtiar loansis takento mean:

agriculturaland non-agriculturalactivity. 231

(b) The cycleof Ikhtiar loansis taken to mean:

(i) first loan(first-time borrower) and (ii) secondloan (second-time borrower).

(c) Ikhtiar Loans:By type of activity and cycle of loan are further describedas follows:As mentionedin Chapter6,254 Ikhtiar memberhouseholds were interviewed in the householdsurvey.

By furtherbreaking down the 254 Ikhtiar membersbased on the types of activities in and cyclesof loans, the categoriesare as follows and will be discussedin detail Chapter9:

Ikhtiar Loans : By Types of Activities (See also Table 37)

I. Agriculture activities = 160 members. 2. Non- agriculture activities - 94 members.

Oi) Ikhtiar Loans : By Cycles of Loans (See also Table 38)

1. First-TimeBorrowers/first cycle of loan = 215 members [7] 2. Second-TimeBoffowers/second cycle of loan M 39 members.

(iii) Ikhtiar Loans : By Types of Activities and Cycles of Loans (Seealso Table 38)

I. Agriculturalactivities/First-time borrowers 136 members. 2. Non-agriculturalactivities/First-time borrowers 79 members.

3. Agriculturalactivities/Second-time borrowers = 24 members.

4. Non-agriculturalactivities/Second-time borrowers m 15 members. 232

2. Sizesof Loans

The breakdownof loan sizes is provided in Table 36. As indicated the average loan sizefor the first loan is M$484.23 and M$937.00 for the secondloan.

Table 36 : The Breakdown of Loan Sizes : First and Second Loans

A. First Loan

Loan Size (M$) N Percent

300 and Below 2 1.0 301 - 400 25 11.6 401 - 500 188 87.4

Sub-Total (First Loan) 215 100

B. Second Loan

500 and Below 2 5.1 501 - 600 2 5.1 601 - 700 1 2.5 701 - 800 1 2.5 801 - 900 1 2.5 901 - 1000 32 82.3

Sub-Total (Second Loan) 39 100

Overall Total (215 + 39) 254

Source : Field Data

I Actual Activities Financed by Ikhtiar loans

Table 37 andTable 38 providethe detailedbreakdown of the actualactivities (such as rubbercultivation, padi farming,petty trading,hawking and others)carried out by the Ikhtiar memberhouseholds within the context of agricultural and non-agricultural activities(Table 37) and by the levelsof loan (Table 38). Tables 37 and 38 provide the following summaries: 233

Table 37: Utilization of Ikhtiar Loans By Types of Activities: Agricultural Versus Non-Agricultural

A. Agricultural Activities

Actual Activities Percent

1. Animal Husbandry 43 16.9 2. Padi cultivation 17 6.7 3. Tree crop (rubber) 48 18.9 4. Other crops 37 14.6 S. Mixed agriculture is 5.9

Sub-Total (Agriculture) 160 63.0

B. Non-Agricultural Activities

Actual Activities N Percent

6. Selling/distribution of food 18 7.1 7. Selling of agricultural good 14 5.5 8. Selling of non-agricultural good 50 19.7 9. Other non-agricultural activities 6 2.4 10. Services 4 1.6 11. Mixed non-agriculture activities 2 0.8

Sub-Total (Non-agriculture) 94 37.0

Overall Total (All Activities) 254 100

Note :N is the number of participant in each of the activities 1 to 11.

Source : Field Data 234

Table 38 : Utilization of Ikhtiar Loans : By Activities and Cycle of Loans

Agricultural Activities

First Loan Second Loan

Actual Activities N Percent N Percent

1. Animal Husbandry 38 27.7 5 20.8 2. Padi Cultivation 14 10.6 3 12.6 3. Tree Crop Cultivation 43 31.6 5 20.8 (Rubber) 4. Other Crops Cultivation 31 22.8 6 25.0 5. Mixed Agriculture 10 7.4 5 20.8

Sub-Total (160) 136 100 24 100 (136 + 24)

Non-Agricultural Activities

First Loan Second Loan

Actual Activities N Percent N Percent

6. Selling/ distribution of Food 14 17.7 4 26.7 7. Selling of Agricultural Good 12 15.2 2 13.3 8. Selling of Non- Agricultural Good 41 51.9 9 60.0 9. Other Non- Agricultural Act. 6 7.6 10. Services 4 5.1 11. Mixed Non-Agric. Activities 2 2.5 -

Sub-Total (94) 79 100 15 100 (79 + 15)

Overall Total (254) 215 39 (215 + 39)

Note :N is the number of participants in each of the activities 1 to 11.

Source : Field Data 235

63 percentof the memberhouseholds used loans to finance agriculturally-related activitiesand can be grouped under five broad sectors (a) animal husbandry,(b) padi cultivation, (c) tree crop cultivation (rubber), (d) other crops (such as vegetableand tobacco) and (e) mixed agriculture.

On the other hand,37 percentwere in the non-agriculturally-relatedactivities andsin-Alarly can be groupedunder six broad sectors:(a) selling/distributionof (d) food, (b) sellingof agriculturalgoods, (c) sellingof non-agriculturalgoods, other non-agriculturalactivities, (e) servicesand (0 nked non-agricultural activities.

1. Thesefindings seem to be quite closeto AIWs official datafor the District of Baling Accordingto AWs BranchManager, agricultural activities financed by Ikhtiar loans accountedfor around65 to 70 percentof the total activities.On the other hand the non-agriculturally-related activities accounted for around30 to 35 percentof the total activities.The BranchManager further addedthat the non-agriculturalactivities are slowlygaining in popularityand are likely to be prominentin the nearfuture.

Animalhusbandry (16.9 percentof all loans),rubber cultivation (18.9 percentof all loans)and other crop cultivation (14.6 percentof all loans) were the three most popularagricultural activities. Among the non-agriculturalactivities, the (19.7 three most popular activities were selling of non-agriculturalgoods percentof all loans),selling/distribution of food (7.1 percentof all loans) and sellingof agriculturalgoods (5.5 percentof all loans). iv. Looking at the type of activitiesby the cycleof loans(as shownin Table 38) we can seea similarpattern where animalhusbandry, rubber cultivation and other crops were the most dominantin the agriculturalsectors. SirTfilarly the three most dominantnon-agricultural activities were the selling of non-agricultural goods, sellingof agriculturalgoods and selling/distributionof food. Ilowcvcr, sellingof non-agriculturalgoods alone accounted for more than half of the non. agricultural activities where the figures stood at 52 percent for first-time borrowersand 60 percentfor second-timeborrowers.

V. Loans taken from the Ikhtiar Programmewere utilized as mentionedearlier in various activities. In general, loans were utilized by membersthemselves, utiked together (i.e. involving both husbandsand wives or other family members)or taken on behalf of the husband181. In general,the utilizAtion of 236

is loansfor variousincome-generating activities is basicallya family affair and a complexphenomenon [9].

8.3.2 OWN CAPITAL AND UTILIZATION OF SKILLS IN THE IKHTIAR-FINANCED PROJECT ACTIVITIES

8.3.2.1 SUPPLEMENTARY CAPITAL

injected "Amountof capital"here is takento meana persodsown capitalwhich canbe into the incomegenerating activities financedby Ikhtiar loans or by the Ikhtiar membersthemselves to supplementthe capital provided by the Ikhtiar Programme. Table39 providesthe above-relatedinformation.

Table 39: Own Capital Injected into Ikhtiar Activities as Supplementary Capital by Ikhtiar Members

N Percent

1. Members who did not inject the capital. 219 86.2

2. Member3 who had injected the 35 13.8 capital (a to f)

Amount

a. 50.00 and below 21 8.3 b. 51.00 100.00 8 3.1 C. 101.00 150.00 2 0.6 d. 151.00 200.00 2 0.8 e. 201.00 250.00 2 0.8 f. 251.00 and above 0 0

Sub-Total (N) 35 13.8

Overall Total (N) 254 100

Source : Field Data

It will be notedfrom Table 39 that only 35 memberhouseholds (or 13.8 percentof the total members)had injectedpersonal capital into their Iklitiar project activities. From these35 Ikhtiar members,8.2 percenthad injectedpersonal capital amountingto no more than M$50.00. Meanwhile3.1 percent of the membershad injected between M$51-00 to M$100.00. The remaining2.4 percent of the membershad injected a 237

supplementarycapital of between M$101.00 to M$250.00 into the Ikhtiar-financed project activities.

As indicatedfrom Table 39, the majority of the Ikhtiar members(86.2 percent or 219 cases)did not inject any supplementarycapital into their Ikhtiar-financed project activities.This is understandableas most of the Ikhtiar membersdid not have enough savingsto set asidefor the project. Had their position been otherwise, they would not havejoined the programmein the first instance. The findings show that most of the memberswho had managedto inject their own capital into an activity were mostly those on the secondloan. This was due to the fact that the second-time borrowers having generally have the advantage of setting aside some savings by virtue of completedthe first loan cycle.

8.3.2.2 UTlIL17ATTON OF SKILLS BY IKHTIAR MEMBER HOUSEHOLDS IN THE IKHTIAR, FINANCED PROJECT AC71VITY

96 percentof the samplehouseholds reported that they had utilized their available skills in the ikhtiar-financedproject activities.In general,the skills they posseswere mainlyrelated to farming,animal husbandry, small business (such as petty trading or sellingof agriculturaland non-agriculturalgoods) and alsovarious other skills suchas tailoringand repairing of domesticelectrical appliances [101. It was found that about4 percentof the Ikhtiar membersdid not utilize their availableskill in the variousIkhtiar incomeas they hadventured into a "new" areawith no previousskills. For instancea memberhad starteda smallbusiness (selling of non-agriculturalgoods ) but had no skill in suchactivity. Ms previousskill was in farming.Similarly, there were few cases of memberswho hadtaken up animalhusbandry, but not havingskills in sucharea. On the whole, the majority of the memberhouseholds had utilized their availableskills in the Ikhtiar activities.

It hasbeen noted that many of the rural poor have survival knowledgeand practical skills which are acquiredby their daily searchfor income (Banking With the Poor, 1992)and gathered over the years(Jazairy et al, 1992).These skills and knowledge,if capitalizedcan create self-employmentand also result in an increasein household income(Kasiniý 1992). Chamber (1983) also noted that the rural poor in developing countriesare knowledgeableand skillful in farming. As such they can use the skills they alreadyhave. Hossain (1988) observedthat in Bangladesh,the very poor rural households use their skills to organizenon-farm enterprises in "partnership*with the rich whoseonly involvementin the activity is contributionof capital.Tlius the Income 238

in obtainedby the poor in suchactivity may not be high. Similarly, as the case of Malaysia,Md Nor (1992) noted that rural people in the traditional villages of JENGKAin the Stateof Pahanghad certain types of skills, suchas tailoring, carpentry andhandicrafts. These had been exploited as a sourceof additionalincome for them.

householdshave The abovefindings seem to suggestthat most of the respondents' someform of skill. With the availabilityof capital,they are capableof applyingtheir existingskill to thebest possible use. As observedby Getubigand others (1991: 20):

"The poor have tremendousinnate capacity to help themselvesand are able to demonstratethis time and again, given the opportunity to do so. To tap their existingskills and productivecapacity, they needcredit for productive assets to complement their labour resources".

8.4 SUMMARY

The informationpresented in this chapterindicates that the majo6ty of the Ikhtiar membersand control group female members(future or potential membersof the Ikhtiar Programme)were in the activeage groups and most of themwere between30 heads to 45 years.This was the pattern observedfor both groups. Similarly the of in households(i. e. husbandsof both the Ikhtiar and control groups) were also the activeage groups as most of themwere between 30 to 49 years.

In termsof education,the IkhtiarProgramme has managed to attracthouseholds with had someformal education. Findings shows that 71.6percent of the 1khtiarmembers, attendedschool. On the otherhand, 56.3 percent of its counterpart,the controlgroup femalemembers had attendedschool. The educationalbackground for the headsof householdsof bothgroups (i. e. husbands),show that 79.6percent of the Ikhtiar heads of householdshad attended school, while the figure for the controlgroup stood at 69.8 percent.In termsof householdsize there was no majordiffierence between the two groups,as the Ikhtiar households! average size was 6.3 personsand that of the control group was 6.1 persons.

It is interestingto notethat it is only with the emergenceof the Ikhtiar Programmethat the femalemembers of the very poor rural householdshave been "transformcd"from 239

unpaiddomestic workers to certainself-employed activities that generateincome. The findings show that the number of Ikhtiar memberswho were unemployed has been reducedfrom 59.5 percentto 35.4 percentbefore and after joining the programme. Thus,the Ikhtiar Programmehas made a positive contribution in tackling the problem of unemployment.

In termsof activitycarried out by the Ikhtiar members,agriculturally- related activities are more popularthan the non-agriculturalactivities. Among the popular activities were animalhusbandry, rubber cultivation, other crop cultivation and the selling of agriculturaland non-agricultural goods.

Generallythis chapterhas given a clearpicture of the socio-economiccharacteristics and backgroundof the Ikhtiar membersand the control group households. Additionally,some general background of the Ikhtiar memberspattern of the activity pursuedand cycles of loans utilized have also been presented.This background informationis relevantfor the analysisin the nexttwo chapters. 240

FOOTNOTES

I be Whetherthese 265 samplehouseholds of the control group in Baling will in Chapter10. joiningthe IkhtiarProgramme in thevery nearfuture arediscussed 64 2. In general,an economicallyactive population is one in the 15 to age group. in 15 to 59 However, in this study the (i) active age group is defined as those the fife age group. This is because,as noted by Ahmad (1983), the expectationof at 69.8 birth in the Malay communityis, on average,66.8 years for males and years between the for females.(ii) The very active age in this study is defined as those that the 15 to 45 years. Recent statistics (Utusan Malaysia, July 1994) suggest expectationof life at birth has increasedfor the Malaysian femalesand males and the figures stood at 69 for malesand 73 for females.

3. In the Malaysiancontext, the educationalsystem is basicallyaimed at achieving It threelevels of educationalattainment, namely primary, secondary and tertiary. takessix yearsto completea primary education,three yearsto completeupper secondaryeducation and three or moreto completetertiary education. borrowing 4. The economicdata about householdincome and background of behaviorfor the Ikhtiar Programmemembers group and the control group are discussedin Chapter9 anddata on the amountof landholdingsof the two groups arediscussed in Chapter10. impact the S. No attempthas beenmade in this study to examinethe detailed of Ikhtiar Programmeon the creation of employment among the members! discuss, householdsdue to time andfinancial constraints. As such,this sectionwill in a very generalway, the occupationalpattern of the members'households. their 6. In general,nearly all the headsof households(and to a certain extent partners, usually their wives) were employed, either in self-employmentor in District working for anotherparty at the time of survey.However, the of is form Baling, self-employmentamong the very poor rural households a major of living livelihood and includesall those peoplewho have to earn their without feature being in regular and salariedjobs and this is the distinguishing of the householdsunder study. In Baling the broad categoriesof the various types of be self-employedand to a certainextent, those who work for anotherparty, can generallydivided into the following groups:

L Ordinary farmers (padi, rubber, vegetablegrowers, tobacco, fruit, livestock rearing andother) earnedcash income from: a) sellingtheir own agricultureproduce for those who owned the land (owner- cultivator)and b) salesof the produce,but minus deductionsfor rent. In the case of sharing system (share-cropper), the income is generally divided between the worker/operatorand the landlordor landowner. 241

H. In non-fann activities, it includes 4 broad categories of self-employed workers: a) small-scalevendors, petty traders, small traders (opening of a small provision or sundry shop) and hawkers (selling goods ranging from non-agricultural to agriculturalgoods such as vegetables,fish, eggs, cooked foods and other staple householdgoods, gannents and similartypes of products; b) home-basedproduce such as processedagricultural produce, collecting and packaging(such as betel-nutand others); c) providers of services,such as repairing of motor-cycles, electrical appliances andtailoring and similar activitiesand d) non-agriculturallabourers (see number zu(b) below).

W. Labourer-There are two types: a) agriculturallabourers are workers involved in agriculturaloccupations and they arePaid wages for the work theydo and b) non-agriculturallabourers (involved in non-agriculturaloccupations) which include constructionworkers in housing and building industries and similar industries,cleaners, cooks and other providers of services. iv. In additionto the above3 main groups, a much larger proportion of the householdsreported having multiple sources of income.This is becausea single memberis often employedin morethan onejob. In generalthe emergenceof the Ikhtiar Programmehas also createdthis pattern,whereby a particularhousehold hasbeen able to createadditional self-employment with the credit for financing incomegenerating activities (See also Footnote9 below).In general,as observed by Remenyi(1991) andJazairy et al (1992), in many developingcountries many rural workers may be engagedin multiple activities,capable of moving by the seasonand also the time of day betweenoccupations. This makesit difficult to classifythem by occupations.Nevertheless, as rightly statedby Remenyi(1991: 13):

"In many sensesthe poor are the true 'permanentpart- timers' in the workforce of the Third World, choosing this mobile lifestyle in order to minimize risk and maximize capacity to take advantage of changes, possiblyvery suddenchanges in market conditionsand opportunities". 7. (a) As mentionedin Chapter6, therewere 613 member households included in the samplingframe. From this figure,567 were the first-timeborrowers and 46 were the second-timeborrowers. All the46 respondents(second-time borrowers) were includedin the householdsurvey. On the otherhand, 215 sampleswere selected from the first-time borrowers(39 percentof the total first-time borrowers! population).It wasinitially decided to separatethe 567first-time borrowers into 2 groupsbased on the typesof activityfinanced by Ikhtiarloans which consisted of (i) agriculturaland (ii) non-agriculture.From thesetwo categoriesa certain percentageof almostequal proportionswould have been selectedbased on randomsampling. However, during the preliminarypreparation of the household survey,i. e. prior to the actualexecution of the fieldwork or surveyproper, a detailedbreakdown of activitiesfinanced by Ikhtiar loansamongst the 567 first- 242

timeborrowers having completed their first loan was not readily availablefrom IkhtiarProgramme! s files because it wasin the processof updatingand rechecking this information.Thus the selectionof the two groupsbased on activities of an equalpercentage could not be carriedout.

(b) It wasnoted by theBaling Branch Manager that around60 to 70 percentwere engagedin agriculturalactivities, while 30 to 40 percentwere in non-agricultural activities.

(c) As result of this, from the 567 first-time borrowers, population and an observedsample of 215 respondents,based on random sampling,it was found that there were yielded (1) 136 agricultural activities or 63 percent of the total borrowers,and (2) 79 non-agriculturalactivities or 37 percent.

The involvementof family membersin the economicactivities is basicallyin the formof familylabour assisting their parents.Labour is normallyexploited in every aspectof familyeconomic activities such as farming.

9. The generalbroad patternsof income-generatingactivity undertakenby the Ikhtiar memberhouseholds in relationto the availabilityof the Ikhtiar loans are crudelyhighlighted below, based on one of the most popularoccupations among the ruralpoor in Baling,i. e. rubbercultivation: is L Thehead of household's(the malemember) previous and current occupation rubbertapper. With the availabilityof capital,his wife decidedto start up petty trading activities selling vegetablesand other agricultural goods in the local market.The husbandalso providesa helping hand when necessary.They thus helpedeach other out.

fi. The headof household's(male member) and his wife!s, "before"(1989) and "after"(1992) occupations were as rubber tappers. However, there is nowa slight differencesin termsof thewhole operation. Previously the tapping was done on a sharing-basis(share-cropper), where income from rubberwas divided based on 50 to 50 basiswith the landlord.With the Ikhtiar loanthey now rent the landfrom the land-lordand retain all the incomefrom the saleof rubber(This pattern of arrangementin kasing of rubberland is discussedagain in Chapter9). iii. The headof household's(male member) previous and currcnt occupationis rubber tapping. With the availabilityof capital his wife has taken up chicken rearingactivities, with someassistance from the husband(normally in the evening his after morningtapping). Rubber tapping thus still forms the main occupationof the headof household.

iv. In onecase, however, the headof householdhas moved out of rubbertapping. With an Ikhtiar loan the husbandhas switchedtotally to non-farm employment, that is, by openingan eatingstall, with assistancefrom his wife. Thus with the availabilityof capital,the very poor rural householdshave found the Opportunityto createvarious types of working arrangementsin order to generate 243

anincome in a ratherflexible way (suchas tapping in the morningand tendingto livestockrearing in the eveningand many other patterns of arrangements). 10. joining An illustrativeexample is the caseof one particular memberwho, prior to the Ikhtiar Programme,had beeninvolved in the tailoring businesson a part-time basis,operating in her own house.Her old sewing machinehad not been providing good serviceand lack of capital had preventedher from replacing the machine, which could have led to expanding her business through attracting more customers.After joining the Ikhtiar Programme, and with the availability of capital, shebought a new machineand other necessarymaterials such as the cloth andthread required. As a result,her businesshas expanded.