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Scaling up, Networking and Replication (Cont.)

International Replication of Grameen Banking: What Can the Poultry Network Learn from It?

David S. Gibbons

Managing Director
CASHPOR Technical services
Malaysia
E-mail: gibbons@pc.jaring.my and CASHPOR@yahoo.com

Summary

International replication and adaptation of Grameen Banking has been a process of identifying, through analysis and practice, the ‘essential grameen’, that is, the interrelated set of activities and procedures that are necessary for its successful implementation in any context. At the most general level, these have been found to be three: 1) cost-effective identification of the poor, exclusive focus on them and priority for the poorest women; 2) delivery of financial services to them by trained field staff in such a way as to facilitate their successful participation and timely repayment of their loans; and 3) quickest possible attainment of institutional efficiency and financial self-sufficiency, that is consistent with the overriding goal of povertyreduction. The art of replication has been discovery of functional equivalents for implementing the ‘essential grameen’ in different cultural, economic and political contexts. Examples are given from CASHPOR's new replication and adaptation in Mirzapur District, Uttar Pradesh, India. Essential conditions for successful replication have been minimal: a density of poverty that allows for the formation of 30-member, village-based centers, and freedom for poor women to engage in and create self-employment. Applying this experience to the Poultry Network suggests that the ‘essential grameen’ and the conditions for its success are relevant. Further work needs to be done to identify the ‘essential Poultry Production and Health Program (PPHP)’, and the conditions necessary for its success. Then the Poultry Network would be able to proceed with the art of replication, finding where necessary functional equivalents for implementing the ‘essential PPHP’.

Key words: replication, essential Grameen, poultry, production, health, poor women.

International replication of the Grameen Bank

Lessons of experience for other development programs for poor women

Is there a general theory and practice of international replication of successful poverty-reduction programs? Almost certainly not, as there appears to be as much art in the process as there is science. Nevertheless, some guidelines can be drawn from the international replication of the Grameen Bank (GB) methodology for povertyreduction and the empowerment of poor women in Asia, that should be of value in the process of replicating other development programs for poor women in the same region, like the multi-institutional Poultry Production and Health Program (PPHP) located at the Danish Royal Veterinary and Agricultural University. To discover these, we need to take a close look at the process of replication of the Grameen Bank.

International replication of the Grameen Bank

Replications and adaptations of the Grameen Bank methodology have sprung-up, like mushrooms, all over the world. Such is the power of the example set by the Grameen Bank and of young people everywhere who want to believe that a world without absolute poverty is possible and who are willing to work for it. Many of these efforts are successful on a small scale, in that poor women are using the financial services offered to create self-employment that increases household income and reduces their poverty. At the same time they are repaying their small loans faithfully and building-up their tiny savings. Such is the power of the desire of poor women everywhere for a better life for their children. In total, however, the number of poor households in the world being reached (by all types of microfinance for the poor) remains relatively small, certainly less than ten million, especially in relation to the more than two hundred million households still living in absolute poverty today. Most of the households being reached are in Bangladesh. CASHPOR Inc., the network of GB replications and adaptations in Asia, has been promoting the international replication of GB in the Asian region outside of Bangladesh.

CASHPOR Inc.

From six programs in four countries reaching together about 20,000 poor households, when the network was formed in September 1991, it has grown to 22 programs in 8 countries together reaching more than 250,000 poor women and their households. Details can be seen in the CASHPOR Member Up-date that appears in every issue of Credit for the Poor, the quarterly newsletter of CASHPOR Inc.1

1 The Up-date shows only sixteen members. Six more were invited to join the network at the CASHPOR Board meeting in January 1999.

Almost 35 million US dollars is outstanding in the hands of more than 200,000 poor women, and together the 250,000 served have saved nearly 5 million US dollars. Repayment rates in most programs are near perfect, with only just over 1% of the total loans outstanding at risk.2

CASHPOR promotes the international replication and adaptation of GB in two main ways: 1) by providing training and technical services to increase the institutional capacity of its member institutions, all of whom are hands-on replicators and adopters (GBRs); and 2) by establishing new replications and adaptations where there are large numbers of poor households not yet served by a GBR. An example of the latter is our current experimental replication and adaptation, CASKPOR Financial and Technical Services Pvt.Ltd. (CFTS), in Mirzapur District, eastern Uttar Pradesh, India.

The ‘Essential Grameen’

Whether we are providing training and technical assistance or establishing a new GBR, we adhere to what is now called the ‘essential grameen’.3 It is the set of interrelated practices that are necessary for a GBR to succeed in reaching and benefiting large numbers of the poor and poorest women and thereby making a significant impact on poverty, no matter what its context. At the most general level there are only three essentials:

  1. Exclusive focus on the poor, with priority for the poorest women;

  2. Provision of financial services (small loans and savings facilities) in a way especially designed to facilitate their successful participation and timely repayment of the loans; and

  3. Quickest possible attainment of institutional financial self-sufficiency that is consistent with the over-riding goal of poverty-reduction

2 Portfolio at risk is the total amount of loans outstanding, with at least one repayment late by more than 90 days, divided by the grand total of loans outstanding.
3 This is my latest formulation of this useful concept. For earlier versions see Sukor & Gibbons, 1991 and Gibbons ed., 1994. The main addition is the section on institutional financial selfsufficiency.

Ad 1. Exclusive focus on the poor and priority for the poorest women

All international replications of GB that I know of, that started working mainly with poor men, like GB itself, have ultimately come to give priority to poor women. Professor Yunus says this happened at GB because poor women proved to be better clients than poor men are, and any financial institution will give priority to its better clients. Poor women proved to invest more of the loans in income-generating activities rather than spending on consumption, they were more faithful at weekly repayment and they tended to spend more of the increased income on poverty-reduction, especially for their children, than did poor men. Not only were they better clients, but also they were better poverty-reducers. So naturally, once the Bank realized this, it gave priority to poor women in the expansion of its outreach to the poor.

But why are poor women better clients and poverty-reducers? Professor Yunus says it is because poverty is a women's issue. They feel poverty more deeply. They know first when there is not enough food; they know when their children have gone hungry, they hear them crying at night from hunger and watch helplessly, as their little bodies become bloated through malnutrition. They know better when their children need medical attention, and know why it cannot be sought. They watch the children of the non-poor putting on their clean, ironed school uniforms and going off to school everyday, while their own children, clad in rags, play in the dirt. They know poverty deeply and intimately, but they feel helpless to do anything about it. Usually they were born poor, and they don't dare dream of any other kind of life for themselves or their children.

Into this tragic but apparently unchangeable situation comes the Grameen Bank offering an opportunity for poor women to do something about their poverty and that of their children. A tiny ray of hope is ignited in their minds. Maybe their life can be better; maybe that of their children can be easier; and maybe they can bring it about themselves without depending on their husbands. So, despite being worried about getting into debt and not being able to repay, they force themselves to borrow …but often only after seeing a poor neighbor succeed at it.

There is of course a flip side to this miracle story. Aminur Rahman (1999) who suggests, from his village-level observations in Bangladesh, that the Grameen Bank prefers women more for strategic reasons in relation to investment and recovery of loans than for the benefit of the women themselves has described it most fully (P.69), because they are more compliant and easier to discipline than the men. Moreover as the honor of their wives (and themselves) is at stake in repayment the husbands also pressure their wives to repay as required. Thus poor women are pressured from both sides, and some describe this as intolerable.

These observations are useful because these things do happen from time to time, in GB and probably most of its replications. Money lending, and fundamentally that is the core of the GB methodology for poverty-reduction, is not a pleasant business. Always some borrowers will “test the limits” and try not to repay. Others will experience disasters, e.g., serious illness of husband, wife or children, death of the cow or buffalo purchased with the loan, flood or drought, etc., that make it impossible for them to repay as scheduled. GBR field staff, being pressed by their management to increase collection and to lower the portfolio at risk, and who may be paid incentives for doing so, may not bother to distinguish willful from unwillful defaulters, and may unfairly pressure the latter to repay. Ambitious branch and area managers may pressure their subordinate staff to maintain unrealistically high repayment rates, so as to maximize their chances for promotion. In every large organization there will be some bullies who will resort even to physical pressure and violence against subordinate staff and clients to get what they want. But well managed GBRs, that encourage upward flow of information, have strong field supervision and effective disciplinary procedures, can keep such excesses to a minimum. For example, the Zonal Manager in Tangail, Bangladesh, where Aminur Rahman did his study, was recalled to Head Office for his excesses in 1995, and ultimately sacked for them. In the long run, however, it is the poor women themselves, who will decide whether it is in their interest to continue in the program or not.

It is essential for a GBR to have a cost-effective method of identifying and motivating poor women in their villages, in order to minimize the leakage to the non-poor, and for there to be adequate quality control over this process.4

Ad 2. Provision of financial services to poor women in a way that facilitates their successful participation and timely repayment of their loans

A number of important policies and practices contribute to this outcome:

a) No collateral nor external guarantors required

It has been a major achievement of Professor Yunus to prove that banking does not have to be based on physical collateral nor external guarantors. GB's policy of not requiring such security for its loans has made it possible for hundreds of thousands of assetless poor women to avail of its financial services.

b) Delivery of the financial services to the villages of poor women

Rural women in Asia are tied to their villages by obligations to children and husbands, as well as, in some places, by culture and for safety. Moreover, poor women don't have the means to leave their villages. So if they are to be able to participate in a microfinance program its business must be carried out in their villages and in a simple way without complicated forms or procedures. Usually this is done through weekly center meetings (see below) attended by a trained field staff of the program, but sometimes they are held every ten days or even bi-monthly. While being an essential element of the GB methodology, this also has major implications for the cost of such programs, as will be seen below.

4 Two methods are available: 1) CASHPOR's Housing Index (Please see our Draft Training Manual on Cost-effective Targeting, 1995, which can be ordered from us by e-mail: CASHPOR@yahoo.com; and 2) Participatory Wealth Ranking (please see the Small Enterprise Development Foundation's Participatory Wealth Ranking: an Operational Manual, version 3.0, which can be ordered from them through: sef@pixie.co.za

c) Formation of solidarity groups by the poor women themselves

This participatory process, which culminates in the federation of such groups into village-based centers of around 30 poor women on average, gives dignity and collective strength to them, as well as the opportunity for leadership training. It also provides valuable information to the GBR on which poor households in the village are credit-worthy, and enables it to impose collective responsibility on its borrowers for repayment.

d) Self-choice of loan activities

The women choose the loan activities themselves, based on their skills and experiences. Their group and center must approve these, which then take collective responsibility for the loan repayment.

e) Small loans mainly for income-generation

The loans are kept small, usually between US$50 and $75 initially, and only increase gradually for subsequent loans, as the ability of the poor to repay increases. The main responsibility for proper loan utilization is placed with the group and center, but field staff of the GBR also carry out thorough loan utilization checks, one week after the funds are disbursed. Loans are disbursed in a staggered manner to group members in order to create credit discipline

f) Financial products designed especially for poor women

The financial products, both loans and savings, must be designed especially for the situation of poor women. Loan products must be adequate for the kinds of incomegenerating activities in which they can engage. Savings products must take into account that deposits will be very small and withdrawals frequent.

g) Frequent repayment

Repayment is frequent, usually weekly but sometimes every 10 days or bi-monthly, over a year - at least for first loans - in order to keep the installments small thereby making it easier for poor women to establish their credit-worthiness.

h) Safety net

A small compulsory saving is deposited into a Group or Center Fund at each center meeting. This Fund is a source of emergency loans for group/center members, with the approval of their peers. It also enables them, over say five years, to build-up savings that can be used to purchase shares in the GBR which can, as has the Grameen Bank, become a community-owned microfinance institution (MFI).

i) Eligibility for subsequent loans dependent upon repayment of the previous loans

Upon completing repayment of a loan, a client becomes eligible for a subsequent one, the maximum amount of which will be determined by her previous repayment record and her loan proposal as approved by group and center. A poor household, not to mention the poorest, cannot come out of poverty with one or two loans. On average it may take five to ten small loans, over as many years, depending on the severity of the poverty in the area. Subsequent (possibly larger) loans, therefore, are vital for poverty-reduction. They are vital also for attainment of institutional financial self-sufficiency by GBRs serving the poorest, as is seen below.

Ad 3. Quickest possible attainment of institutional financial self-sufficiency that is consistent with the overriding goal of poverty-reduction

Reaching and benefiting large numbers of the poor and poorest women in their villages with financial services, even when done efficiently, requires large amounts of funds. For example, the Microcredit Summit target of providing financial services to 100 million of the poorest women is estimated to require about US$21 billion over the next 7 years. The only possible main sources of funds of that magnitude are the saving and commercial financial institutions and markets. In order to be able to access such funds in the large amounts required MFIs (including GBRs) will have to become commercially sound institutions themselves; that is they will have to become profitable business concerns.

It can be argued that this cannot be part of the ‘essential grameen’ because the Grameen Bank itself did not pursue such a strategy. It is in its 16th year as a bank and still it is not financially self-sufficient as an institution. But it is making a significant impact on poverty in Bangladesh by providing financial services to more than 2 million poor women. Strictly speaking this is true. While the Grameen Bank has been run in a business-like way right from its establishment, it does not appear to have charged an appropriate interest rate to clients; that is, one that would cover all of its costs, particularly after they are adjusted for the effects of inflation and subsidies. It is not, therefore, making real profits. Yet that has not prevented it from attracting the large amount of funds (probably around 300 million US dollars) it needed to reach more than two million poor households. So why is it essential for smaller GBRs today to attain institutional financial self-sufficiency quickly, say within four or five years, in order to be able to make a significant impact on poverty in their countries? Mainly because there are now many more of them and the targets and total fund requirements are much greater, but also partly because the world financial conditions have tightened and donors do not appear to be anywhere near as interested in the international replication of the Grameen Bank as they were in its expansion in Bangladesh. From experience over the past eight years in CASHPOR, I can say that fund shortage has been the only insurmountable obstacle to much greater expansion of outreach of our member GBRs.

The following would appear to be essential in this process:5

  1. a three-to-five year business plan toward institutional financial self-sufficiency;

  2. skilled financial, as well as field, managers;

  3. increasing levels of institutional efficiency to emerging industry standards;

  4. interest rates/fees to clients that are appropriate to cover all costs and to attract savings;

  5. “near perfect” repayment,6

  6. a computerized management information system that produces financial statements at international standards;

  7. an effective staff productivity incentive scheme

The ‘essential grameen’ was identified first through analysis of the GB methodology, but it has been refined over the years mainly through trial and error. Something like the same process probably will have to take place with the PPHP.

5 We are not yet in a position to be as certain about these “essentials”, either in terms of content or completeness, as we are about those in the first two categories, because we have not experienced the process of reaching truly large numbers of the poor and poorest through the attainment of institutional financial self-sufficiency. For a full statement of these requirements as we see them now, please see Meehan and Gibbons (1999), “The Summit's Challenge: Working Towards Institutional Financial Self-sufficiency while Maintaining a Commitment to Serving the Poorest Families”, the first draft of a paper prepared for the forthcoming Microcredit Summit Meeting of Councils in June 1999 at Abidjan, Ivory Coast. A copy is obtainable from the Microcredit Summit Secretariat at gailey @microcreditsummit.org. The authors welcome comments.
6 “Near perfect” because humans and organizations are rarely perfect. We consider a repayment rate (cumulative collected divided by cumulative due for the year) of above 95% and a portfolio at risk of lower than 10%, to be “near perfect”.

The art of replication

The art of replication lies in the process of implementing the essentials in a different context. Functional equivalents have to be discovered for essentials that cannot simply be copied, because of cultural, economic or political barriers in the new context. This is the most creative and exciting part of the whole process. It requires deep knowledge of the new context but also a meaningful degree of freedom from the psychological constraints that it imposes. To see this clearly let us look at the replication and adaptation of GB in Mirzapur District, eastern part of the Indian state Uttar Pradesh by CFTS. Because of limitations of space, we consider only differences between CFTS and GB on how the ‘essential grameen’ is implemented, that is the adaptations that CFTS had to make to implement the ‘essential grameen’ in its context.

1. Exclusivity for the poor and priority for the poorest women

Grameen BankCFTS India
Uses agricultural land of less than 0.5 acre, and total value of household assets less than that of one acre of average quality agricultural land in the area, to identify the poor on the ground. Does not distinguish between the very poor and moderately poor in targetingInitially found it impossible to get accurate data on land ownership and operation because of suspicion among the poor. We used CASHPOR's House Index adapted to housing conditions in Mirzapur as a crude measure to identify the potential.

Then as we wanted to distinguish between the very poor and the moderately poor, we added caste which is another easily observable characteristic in rural India, as in most villages housing is segregated by caste.  So the very poor were scheduled caste or tribe households (SC&ST) with house scoring less than two points on our Index. The houses of the moderately poor score 2 or 3 points on our Index and tended to be in the other backward caste (OBC) section of the village.

In this case CASHPOR's House Index score and caste were used as functional equivalents of GB's land and asset criteria for identifying poor women in their villages. Later, when we were more trusted among the poor, we were able to get reasonably accurate information about land owned and operated, work of the husband and wife and possession of large farm animals. With that CFTS was able to sharpen its targeting and to be surer of the distinction between the very poor and the moderately poor.

2. Designing the program to promote successful participation of poor women

Grameen BankCFTS India
Most of the GB's clients do paddy husking with their first loan, especially poorestwomen. The first loan maximum is currently US$ 100 which is more than enough for paddy husking. It is a first loan activity particularly suited for the poorest because they have the skill and there is little risk, as there is an unlimited market.In Mirzapur, there is no equivalent first loan activity to paddy husking. CFTS sets its first loan maximum at about US$ 57; but our clients tell us there is nothing they can do to bring in weekly income with that small amount. They want at least twice the amount to buy a milch buffalo. We are not prepared to risk that amount on unknown clients as we are worried about their repayment ability, particularly of the poorest. So they tend to be under-represented among our clients.

In this case CFTS has not been able to develop a first loan product suitable for the poorest. Hence our keen interest in the PPHP. It looks like an ideal first loan activity for the poorest women, if it can be introduced successfully in Mirzapur District.

Grameen BankCFTS India
GB has basically only one loan product for its first-time borrowers, the General Loan with a term of 52 weeks. In the second loan cycle it offers both General and Seasonal Loans. The latter start out at half the amount of the General Loan, and have a term of 50 weeks.CDTS started with only one loan product, its Initial General Loan (IGL) with a term of 50 weeks. Clients complained that not only was the loan too small but also they had to wait too long. So after discussion with them, we launched two new loan products for the first loan cycle: a savings-based loan which can be taken after six months, as a multiple of average weekly voluntary savings; and a balance based loan for those who did not borrow the full amount of IGL. Both additional loans require perfect repayment for the first six months and both have a term of 50 weeks.

By listening to its borrowers, CFTS was able to develop new loan products that enable its more capable clients to get ahead faster, but do not increase the risk in an unmanageable way, and increase the interest income of the Company.

3. Quickest possible attainment of financial self-sufficiency that is consistent with the overriding objective of poverty-reduction

As is mentioned above, it was not necessary for the Grameen Bank to adopt this strategy for expansion, but it has become necessary for its replications. Adopting it in India has proved to be quite controversial, although not so much among our clients. From the beginning CFTS has presented itself as a financial company with a social concern to reduce poverty in a sustainable manner. In the process we are charging our clients a flat rate of interest of 20% p.a. on their loans. This compares to the 20% p.a. on a declining balance that is charged by the Grameen Bank to its clients. So our effective interest rate of almost 40% p.a. is virtually double theirs.

Our spreadsheet analysis tells us that our current interest rate will enable us to break-even in our fourth year of operation and to cover our accumulated losses prior to break-even by the end of the fifth year. We have been able to attract funding from the Grameen Trust only for the first three years. So clearly we cannot take longer to break-even, which would happen if we lower our interest rate on loans to clients.

Nevertheless our interest rate has raised eyebrows among bankers and bureaucrats in India. They warn that the politicians will criticize us and force us to reduce our interest rate. So far this has not happened, but we are still small and not yet of interest to such people. It is our strategy to have made ourselves indispensable to our clients before the politicians pay much attention to us, and then they will have to accept us. Only time will tell if this was a good strategy.

Can the poorest pay?

This is the critical question of course. If the poorest can pay our required interest rate, and still have surplus income to begin to pull themselves out of poverty, then we have a win-win situation. If not, our strategy for attaining institutional financial self-sufficiency is inconsistent with our overriding general goal of poverty-reduction and our particular interest in making better the life of the poorest.

As we all know, in microfinance loans are small. Even relatively “high” interest rates on them still result in relatively small (in amount payable) instalments, especially if these are paid frequently, say weekly, over a medium length loan term, say one to two years. In India a moderately yielding, say 4kg per day, milch buffalo can be purchased pregnant for around 4000 rupees (about US$100). If a loan of the whole amount is made available for that purpose to a very poor women at 20% interest (flat) for a term of 2 years with 100 equal weekly instalments of principal and interest, each payment would amount to 52.8 rupees as per the following calculation (remembering that the 20% for the second year will be charged only on the outstanding balance at the year's beginning. This is calculated to be 2400, as 32 rupees x 50 instalments = 1600 rupees in principal would have been repaid in year 1. The interest on the balance of 2400 for year 2 will be 480 rupees added to the 800 rupees for year 1, this gives a total interest payable over two years of 1280 rupees and a total amount payable of 5280 rupees divided by 100 weekly instalments this comes to an average of 52.8 per week (just over one US dollar). The 4kg milk could be sold for 12 rupees a kg. This means that the weekly repayment money of 52.8 rupees could be earned in little over one day, leaving the income from the other 5 to 6 days to reduce the poverty of the household. The risk of the buffalo dying can be covered by livestock insurance at a premium of 4 rupees per 100 rupees of the animal's value per year or a total of about 160 rupees, which could be paid easily from the sales of the milk. As the buffalo will produce milk for only about 9 out of 12 months, however, the client would have to save or engage in some other income-generating effort for the remaining three months. To fill the gap clients in India purchase a second buffalo as soon as they can. With two milch buffalo they can have a good steady income throughout the year, with which they can pull themselves and their families right out of poverty within a few years. A good example of this can be seen at the SHARE Branch in Dachepalhi, Gunter District, Andhra Pradesh, where more than half of the loans disbursed over the past 5 years have been for milch buffalo, and many of the original clients are now living in large concrete houses of their own design.

The buffalo example hints at a second important factor that makes it possible for the poor and the poorest to pay appropriate interest rates. The returns to capital in their microenterprises tend to average more than 100%. This was the finding of a recent impact evaluation study of CARD - a Grameen replication in the Philippines - by Mahabub Hossain7 (Hossain and Diaz, 1997). Returns to capital in his random sample of clients averaged 117%. As CARD's effective interest rate on loans to clients is about 39% p.a., this left 78% in the hands of clients to reduce their poverty. It can of course be argued that if CARD's interest rate were significantly lower, its clients could come out of poverty faster. But from where would they get their loans? If CARD does not charge an appropriate interest rate it would become bankrupt and would no longer be able to meet the financial needs of its clients. There is no certainty that another Micro-finance Project (MFIP) would fill the gap. The only alternative for the poor may then be the traditional moneylender. A recent study of the returns to capital in microenterprises in India and Kenya (Harper, 1998), found them to be even higher on average than did Hossain and Diaz at CARD.

The near perfect repayment rates, which are characteristic of MFIPs around the world, are empirical evidence that the poor can pay appropriate interest rates charged by efficient microfinance institutions. Working in an area of India where repayment of IRDP loans is said to have been less than 10%, CFTS has been able to collect 96% of weekly repayments due, since it began operations 18 months ago. There is no significant difference between the repayment rates of the poorest and the moderately poor clients. CARD has maintained near perfect repayment for years, with about half of it clients coming from the poorest category. The sixteen CASHPOR-member MFIPs, who together had US$34 million in loans outstanding to over 200,000 poor and poorest households throughout Asia at the end of 1998, had a combined portfolio at risk of only 1.13%. The millions of weekly payments in full on time, that lie behind that figure are eloquent evidence of the ability of the poor and the poorest to pay appropriate interest rates for their financial services.

So it is clear that the poor and the poorest can pay much higher effective interest rates on loans for income generation than has been thought.

7 Director of the Social Science Division of the International Rice Research Institute (IRRI), the Philippines

Essential conditions

The component activities of the ‘essential grameen’ have been listed above, and we have seen examples of how they are being implemented in Mirzapur District in India. To complete our analysis of the process of successful replication and adaptation, we must now identify any conditions, i.e., contextual factors, essential for its success.

1. Density of poverty

The main costs of providing financial services to the rural poor are the administrative expenses (mainly salaries and allowances of the field staff), of delivering them to the village-based center meetings. These costs will increase if the poor households are geographically scattered, rather than living in villages in large-enough numbers to make possible the formation of a GB-style center, with at least 6 groups (30 poor households). As the costs increase so also must the appropriate interest rate at which the microcredit should be provided, if it is to be a financially sustainable operation. There will be an interest level beyond which the poor women cannot earn a net profit from their micro-enterprises, after paying the principal and interest on their small loans. Once it is neared, they will no longer enter the program. This is a serious restriction, as the poorest households in a country often live in a scattered manner in its resource poor areas, e.g., in the stony mountains in southwest China or the hills and mountains of Nepal. Mention of mountains reminds that the nature of the terrain in which the poor live also is important. Nobody has yet successfully replicated and adapted the GB methodology in such difficult contexts. Fortunately most of the poor in China and Nepal do not live in such areas.

2. Freedom to create self-employment

The GBRs for the most part finance the creation of self-employment by poor women. If they are not permitted, say for cultural or political reasons, to engage in such activities, then this approach to poverty reduction could not succeed. It is hard to imagine a country in which women could be more restricted than in Bangladesh where the GB originated, however, so the cultural prohibitions would have to be very strict indeed to prevent poor women from taking advantage of the opportunities that microfinance offers. Probably this is not a serious barrier to the international replication and adaptation of the GB Model.

Political restrictions on private enterprise were important barriers in some communist countries until recently, but this is no longer the case in those, like China and Viet Nam, where the largest numbers of poor households live. Should there be a return to centrally planned economies that forbid or severely curtail private enterprise in the rural areas, however, this would preclude successful replication and adaptation of the GB Model in such contexts.

Other than the requirements of a geographical density of rural poor households that permits the formation of village-based centers that contain at least 30 households, and the freedom of poor women to engage in and create self-employment, there do not appear to be any other essential conditions for the successful international replication of the GB Model. That is why we find it succeeding in many different national contexts all over the world.

Lessons for the replication of other development programs for poor women

What lessons does our work in replicating the Grameen Bank have for replication of other development programs for poor women, such as the Poultry Production and Health Program? At the most general level, we should analyze the PPHP idea and the experience of implementing it in different national contexts to discover its ‘essentials’ that is, the minimum set of component activities and procedures that is necessary for its success in any context. At the same time, we should be looking for any essential conditions and contextual factors, for its successful implementation.

Such analysis is beyond my expertise. What I can do, however, is to ask if any of the ‘essential grameen’, including the conditions essential for its success, appears to apply to the PPHP? Each of the three general components of the ‘essential grameen’ appears to be relevant to the international replication of PPHP.

1. Exclusive targeting on the poor and priority for poor women?

At first sight this important lesson does not appear so relevant to the replication of PPHP because presumably it requires a minimum density of participants within a given locality in order to be feasible and efficient. If there were not enough poor women, then the non-poor would have to be given a chance. To ensure that the latter did not exclude the poorest women (likely in India because of caste prejudices), however, it would be a good idea to ensure that the poor and poorest women were given the first opportunity. For this they would have to be identified with a cost-effective targeting tool, like the CASHPOR Housing Index or Participatory Wealth Ranking.

It is the women and girls who will look after the poultry. Working with them will be more direct and it will improve their status. In most south Asian contexts poultry, especially of the scavenging kind, are usually seen to be the possession of the women. It is a fairly liquid form of savings for them. They can sell a hen when they need the cash, without prior permission of the husband. So by working primarily with women, the PPHP would be improving their economic position directly.

But why priority for the poorest women? Because they and their children are the neediest, and PPHP is a program that could make a literally vital difference for them. As mentioned above, outside of Bangladesh, it is difficult to find a suitable first loan activity for the poorest women. PPHP would appear to be just such an activity. It would require only a small investment, it would bring in additional income fairly quickly and regularly and it would entail minimum risk.

2. Design of PPHP to facilitate the successful participation of the poorest women?

There would appear to be several parts of the PPHP for which this lesson is relevant. First, in the training of women. Most obvious are that the costs of the program should be kept within their reach and the training should be carried out in poor villages. There should be no up-front fees which would prevent poor women from entering PPHP; and the training of poor women in PPHP should be carried out in their villages at times when they are relatively free - in months when there is little employment for agricultural laborers, for instance.

Perhaps not so obvious, but very important, is that participation by poor women in the program must be voluntary. They must decide, after being sufficiently informed that it is a good opportunity for them. For this the motivation work and training materials will have to be suitable for illiterate women.

3. Attainment of financial self-sufficiency for PPHP as soon as is consistent with poverty reduction

If it is not designed to cover its operating costs from its operating income as soon as is consistent with the overriding goal of poverty reduction, PPHP will not be around long and will not be scaled-up to reach and benefit truly large numbers of poor women and their households.

Poor women will have to pay appropriate costs for hens, chicks, essential veterinary services and food supplements. The timing and amounts of these payments should be planned carefully to ensure that most poor women would be able to make them.

Also the women will have to be convinced, by training and demonstration, that the payments are essential to their success with the program. Otherwise they won't make them.

Essential conditions

A minimum density of poor households will also be an essential condition for PPHP, as will be freedom of poor women to engage in and create self-employment. In addition, an efficient system for marketing the poultry products must be in place. As there are already markets for eggs and poultry in most rural communities, the main problem may be to prevent over-supply that would drive prices below production costs. Probably it would be best to begin the program in areas, like Uttar Pradesh state in India, that are known to be poultry deficient.

Conclusions

Even this preliminary effort to find lessons in the international replication of the GB, that would be useful in spreading PPHP, has brought to our attention some potentially important matters. Identification of the ‘essential PPHP’, including conditions necessary for its success, is the obvious next step. After that, where necessary, functional equivalents will have to be found for implementing the ‘essential PPHP’ in different contexts.

References

Gibbons, David ed. (1994). The Grameen Reader 2nd edition, Dhaka: Grameen Trust.

Gibbons, David (1995), Cost-effective Targeting: a draft training manual for identifying and motivating poor women, Seremban, Malaysia: CTS Sdn. Bhd.

Harper, Malcolm (1998). Profit for the Poor. London. Intermediate Technology Press.

Hossain, M. and C Diaz (1997). Impact Evaluation of CARD. The paper is available from the Grameen Trust: g-trust@grameen.net

Meehan, J. and D.S. Gibbons (1999). The Summit's Challenge: Attaining Institutional Financial Self-sufficiency while Maintaining our focus on the Poorest, Paper prepared for the Micro Summit's Meeting of Councils in Abidjan, Ivory coast, June 1999, and available from the authors at CASHPOR@YAHOO.COM

Rahman, A. (1999). “Micro-credit Initiatives for Equitable and sustainable Development: Who pays?”, World Development, Vol.27, No. 1: 67–82.

Small Enterprise Foundation (1998). Participatory wealth Ranking: an operational Manual, Version 3.0. Available from sef@pixie.co.za.

Sukor, Kasim and D. Gibbons (1991). Banking on the Rural Poor. Available from Grameen Trust (g_trust@grameen.net)


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