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Posted February 1998

Participatory institutional development

by Stephan Baas
Rural Poverty Alleviation Officer
Rural Institutions and Participation Service (SDAR) FAO Rural Development Division
From a paper presented at the International Academic Exchange Conference on Sustainable Agriculture and Sand Control in Gansu Desert Area, China, 3-8 November 1997

1. The underlying idea of "social capital"

Much emphasis has been paid in development literature to the importance of capital: natural, man-made, and human capital. Yet but until recently, little attention has been given to its 4th dimension: social capital [1]. Social capital refers to the social cohesion, common identification with the forms of governance, cultural expression and social behaviour that makes society be more cohesive and more than a sum of individuals - in short, to the social order that promotes a conducive environment for development and solidarity. Social capital theory aims at developing propositions about the conditions under which governments and communities can co-operate to achieve common ends. It states that horizontal institutional arrangements have a positive impact on the generation of networks of trust, good governance and social equity.

Social capital plays an important role in encouraging solidarity in overcoming market failures through collective action and common pooling of resources. It is therefore seen as a sine qua non for promoting community participation and self-reliant development. Social capital manifests itself in a location-specific set of institutions and organisations [2], with both horizontal as well vertical mechanisms of interaction, collaboration and networking. Institutions are conceived as the rules and patterns of behaviour that shape social interaction; organisations are defined as groups of individuals bound by a common goal and conceived in this context as the players in the field.

Institutions and organisations may represent both an obstacle to and an opportunity for productive and equitable development. In their positive sense both institutions and organisations can facilitate collective action and enable individuals to transcend the limitations of acting in isolation. They can, however, be conservative as well. Historical inertia and active persuasion often ensure that rules and enforcement procedures reflect the preferences of "political entrepreneurs" within society. Perceived this way institutions may support maintenance and reproduce the status quo, often to the detriment of the politically and/or economically disadvantage.

An in-depth understanding of the endowment, functioning and interaction of institutional and organisational mechanisms of rural society is therefore of paramount importance for rural development and poverty alleviation efforts. An institutional approach to rural development and poverty alleviation outlines ways and means on how to improve given institutional constellations - to identify the rules and patterns of behaviour and collaboration which reconcile and/or optimise rationality on the part of individuals with rationality on the part of society. Social capital formation then can be promoted and/or built up by the way of a participatory institutional development approach at local level.

2. Framework for implementation

Participatory institutional development, in its broadest sense is a process which mobilises locally co-ordinated collaborative action of small groups of rural (poor) populations and establishes collaborative linkages between these groups and other local and higher level institutions. Since the poor generally lack economic and physical capital, focusing on strengthening their social capital makes sense as it is a pre-requisite for achieving sustainable collective action and useful in acquiring all other forms of capital. This focus implies the strengthening local populations to better plan, manage and monitor their access to assets.

As a basic principle participatory institutional development is demand driven since the rural people themselves, with appropriate organisational and technical assistance, are the best source for information necessary to identify their problems an the solutions that will suit them and belong to them.

Participatory institutional development strengthens localised social capital accumulation processes by mobilising self-help capacities, progressive skills development, and local resource mobilisation (savings, indigenous knowledge) in order to improve ultimately the group member's human, natural, and economic resource base and their political power. The approach reduces costs at both ends: the service delivery costs of governments, NGOs and the private sector, and the access costs of the poor in obtaining these services.

Yet since local level self-help initiatives often require support from higher decision making levels, the establishment of a two-way system of communication connecting the bottom to top and the top to bottom is essential.

At this level of generalisation participatory institutional development is made of four interrelated corner stones:

  1. Process: It is a development process whose moving forces are the growth of consciousness, group identity and solidarity via economic collaboration and mutual social support.

  2. Empowerment: The process of constructing group identity, improving economies-of-scale, strengthening collective bargaining power, acquiring new skills and upgrading the knowledge basis progressively builds economic and social power. It is through this felt empowerment that the poor become more active in initiating interventions that help them overcome poverty.

  3. Participation in decision-making: The term "Participation" is used to describe direct involvement in decision-making. It means the actual involvement of each member of a group/organization in the identification formulation and implementation of group activities [3]. In participatory decision-making decisions are collectively taken through open meetings of members and working responsibilities are assigned on issues such as savings mobilisation, micro scale income generating projects, conservation practices, infrastructural development and asset creation.

  4. Networking: This refers to the building-up of collaborative action among locally formed groups and their interaction with formally existing public institutions at the local (horizontal) and higher (vertical) institutional levels.
Participatory institutional development goes beyond beneficiary participation at grass root level as it has been practised in so many recent externally funded project approaches. It enters simultaneously at different institutional levels. It aims at:

(a) Strengthening the social capital of the poor via small group formation at the grass root level

The core element of any participatory institutional development approach is the launching or strengthening of small local self- help groups organised around income-generating activities and locally available skills. The promotion of group self-help structures is an important tool of empowerment and increased participation of the poor in decision making and access to assets and services. The process of participatory institutional development at grass root level proceeds through a dynamic interaction between the achievement of specific objectives for improving the resource position of the local community and the strengthening of a sense of community identity. Collective actions towards common objectives such as the initiating of small irrigation projects, production activities like fruit processing, or clean drinking water provision can all be entry points for a local capital accumulation process leading to group savings schemes, reinvestment and asset creation. The ultimate aim is self-reliance.

Principal elements and phases in a small group formation approach at grass root level

Phase 1: Participatory Community Problem Census: This exercise with target communities leads to the identification of the specific problems and needs of a particular community, or to parts of that community. It is usually the first step talen in planning and a group formation process with the objective to tackle community and sub-community problems. The community will decide which kind of activities should be taken and in which order of preference.

Phase 2: Group formation: Group approaches at grass root level are particularly useful in serving the interests of the rural poor. These group formation/strengthening processes ideally follow the following principles:

  • Groups are voluntary and self governing. Participants decide who joins the group, who leads the group and what rules the group should follow.
  • Small and homogeneous groups: A key element is the formation of small self-help groups. Conflicts are reduced when members live under similar socio-economic conditions .
  • Income generation & savings mobilisation are the starting points for group formation. Income earning strategies may be chosen on a flexible basis reacting to raising opportunities.
  • Building on existing capacities: Ideally groups are build on already existing collaborative links between group members.

Phase 3: Group strengthening. Organisational and production skills are improved through demand-driven training, conducted by specially trained group promotors (see below), through workshops requested by groups themselves and provided ideally by local NGOs or support organisations. Once groups have a certain level of group maturity in terms of managerial skills, group cohesion, and the proven ability to manage group money successfully, access to external credit/funding mechanisms is encouraged to further enlarge group investment capital stock and improve economies of scale. Access to external money and repayment conditions are best organised on a group responsibility basis (example: Grameen Bank, PPP Zambia).

(b) Strengthening horizontal organisational and institutional linkages

The small group approach, however, should be seen as only one element, though perhaps the basic "building block" in a broader social capital strengthening process. Other broader and deeper forms of social capital with wider horizontal and deeper vertical ties, also need to be established/ strengthened.

Group networking : Once groups are stable and operational they are encouraged to link together in inter-group associations. These secondary level organisations help small groups obtain larger economies-of-scale, tackle bigger community problems, strengthen negotiation power of the poor, and in more efficiently building inter-group solidarity and developing links between the "bottom" and the "top". These associations also often help defend member groups against the excessives of local elites misusing their economic and political power in groups to neutralise governance reform and emerging locally growing power structures. Unfortunately, while the importance of these informal linkage organisations has long been recognised by scholars (e.g. Putnam: 1993), there has been little progress made in developing practical tools for promoting or strengthening these types of networks.

Support organisations: Independent support organisations at the district level can promote such networks of village associations by (i) training the cadres of social organisers/supporters such as GPs and NGOs, and (ii) administrating at the beginning of the group formation process seed money, and/or financial topping-ups to self-mobilised savings, and/or loans earmarked to help launching/continuing income generation/infrastructural micro scale projects identified and implemented by the local groups. Once local level groups/inter-group associations are mature enough to management their own micro-funds the responsibility for them will be handed over to the local groups, (iii) lobbying for local level institutions.

The necessary conditions for initiating and sustaining the participatory institutional development process at grass root level are:

(c) Strengthening vertical organisational and institutional linkages for poverty alleviation

Linkage with higher level organisations: Disadvantaged rural populations don't just lack horizontal co-operation linkages. They also lack institutions and organisations which help them link up and interact with decision making at higher levels. It is therefore essential to develop networks, partnerships and alliances between grass root organisations and other civil society organisations, NGOs and key decision makers in government line agencies and/or the private sector. There are actually a wide range of rural institutions and civil society organisations who can facilitate these linkages; for example, peasant associations, cultural associations, trade unions, producer co-operatives, women's associations, environmental NGOs etc. An efficient diverse set of civil society and grass root organisations is essential in ensuring fair play, accountable public structures, institutional change and sustainable development. It is crucial, however, to understand which institution/organization does what best, and at which level to alleviate poverty.

In the field of of rural finance, for instance, collaboration could be encouraged with regional institutions, following the model of Community Development Funds (IFAD) or Social Action Funds (World Bank). They should bring together representatives from central and local government, NGOs, community based and grass root organisations and local traditional structures of leadership. They are setting broad principles and priorities for the disbursement of funds and invite organised households/groups to submit project proposals for funding on a competitive basis. The regional institutions can again be regrouped in peak organisations allowing efficient dialogue among such organisations, as well as with governments and donors.

Ensuring complementarity with the role of the state and the private sector: Recognising the importance of civil society and grass root organisations, however, does not mean ignoring the role of the state and the private sector. Governments have mandates and capacities to combat poverty and hunger. They set some of the rules of the game by determining legal frameworks, agricultural and macro economic policies, developing infrastructure, funding research and education, and creating the enabling environments for local action. The private sector can act as a crucial contributor to economic growth and innovation. The reform of public institutions is often needed. Such reforms need to go beyond the pure act of decentralising decision making authority. There must also be a greater degree of devolution of development functions to locally representative bodies, elected or traditional. These bodies must be given larger say in planning local development activities, the use of public resources, the delivery of public services and the management of common property resources such as land and water.

Concluding remarks

For successful rural development and poverty alleviation, partnerships and close interaction between Governments, Civil Society, the private sector and the poor themselves are needed. Research, planners, administrators and rural populations are called upon for joint efforts on both national and international arenas.

The framework of participatory institutional development offers a tool for self-help capacity building and improved economies of scale starting from the grass roots. Rural development programmes and efforts on the other hand should complement the institutional bottom-up approach and be decentralised to the highest possible degree towards organised groups at local level. They should be demand driven and participatory to capture local needs, information and resources. They should be flexible and organised as a learning process, ready to re-direct priorities if suggested by regular executed evaluation exercises. In order to achieve rural populations competitiveness within the new economic and institutional framework of liberalisation they should be market-economy oriented.

To fill the gap left by downscaled state services, infrastructural and direct financial assistance should be complemented by the promotion of supportive civil society institutions. Rural development programmes should be separated from welfare provision to minimise false expectations. They should be based on (and at the same time be a vehicle to further increase) collaboration between state and civil society to maximise complementarity between the initiatives of these two sets of institutions.


1. The term "social capital" was coined by J.S. Coleman in his article: "Social capital in the creation of human capital" published in the American Sociology, Vol 94, 1988. Social capital theory states that societies via their own institutions and forms of collaborative action can and do affect the quality of state and non-state interventions. A major objective of social capital theory is to explain the ways in which social actors demand and receive a more equitable share in the common good and to explain the relationship between governments and their clientele.

2. Institutions and organizations are not identical. In institutional literature D. North's clarification is widely used according to which Institutions are the rules of the game of a society, or, more formally, are the humanly devised constraints that structure human interaction. They are composed of formal rules (statute law, common law, regulations), informal constraints (conventions, norms of behaviour and self-imposed modes of conduct), and the enforcement characteristics of both; Organizations are the players: groups of individuals bound by a common purpose to achieve objectives. They include political bodies; economic bodies; social bodies (churches clubs,associations) and educational bodies (North 1995:23). Institutions then are the formal and informal ties that bind collectives. Formal institutions are the explicit rules that govern social behaviour (established in written law, created by conscious, record decision with established precedents (Swift 1994: 154). As such, they have come to depend upon recognition from the modern state. Informal institutions, by contrast, imply the habitual ways, in which a society manages its everyday affairs. Examples here would include customs relating to kinship and marriage and the way these institutions affect access to land and labour in a specific cultural setting (C. Johnson, 1996).

3. In this sense it does - particularly at the local level - not refer to a system of representatives who act on behalf of people.


Coleman, J.S., 1988. 'Social capital in the creation of human capital'; In: "The American Journal of Sociology", Vol 94, 1988.

Johnson, C. 1996, "Institutions, Social Capital and the pursuit of sustainable Livelihoods". Working paper, IDS Sussex.

North, D. 1995, 'The new Institutional Economics and Third World Development'. In: Harris et al. "The new Institutional Economics and Third World Development". London Routledge.

Putnam, R.D. 1993. "Making Democracy Work: Civil Traditions in Modern Italy". Priceton University Press.

Swift, J., 1994. 'Dynamic ecological systems and the administration of pastoral development'. In I. Scoones "Ecological dynamics and grazing resource tenure". Brighton, IDS.

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