r RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN PENINSULAR MALAYSIA - 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 rural poverty 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 Kedah.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 Penang),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 Baling District. 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 PENINSULAR MALAYSIA : 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