Posted February 1998
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 , 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.
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:
Principal elements and phases in a small group formation approach at grass root levelPhase 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:
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).
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:
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.
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.
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.
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.