Monday Dec 23, 2024
Monday Dec 23, 2024
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Opportunities should be provided to bring the disadvantaged groups to the mainstream of economic life
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Sarvodaya and Isuru Project
It is with great pleasure that I accepted the invitation of Dr. Vinya Ariyaratne whom I always keep in high esteem for his integrity, probity, and civic mindedness to speak on the 68th year anniversary of Sarvodaya Movement. I had another reason to accept this. That is because Sarvodaya, especially its enterprise arm called the Sarvodaya Economic Enterprise Development Society or SEEDS and its training arm, Sarvodaya Management Training Institute or SMTI, were participating community-based organisations in one of the microfinance projects implemented by the Central Bank from 1989 to 1998.
This project, called the Small Farmers and the Landless Credit Project or SFLCP1, dubbed in Sinhala as Isuru Project, was the first ever microfinance poverty alleviation project implemented in Sri Lanka. I was the Project Director from 1990 to 1998. It had been funded by the United Nation’s International Fund for Agricultural Development or IFAD and the Canadian Government’s development arm, Canadian International Development Agency or CIDA together with the supplementary services from the Central Bank of Sri Lanka.
Delivery of microfinance
The project targeted to alleviate poverty among the poorest of the poor in four pilot districts, namely, Puttalam, Kandy, Galle, and Matara, in which the incidence of poverty was the highest by helping the deserving people to develop income generating enterprises through the delivery of microfinance. We had money. But we did not have field level experience or outreach capacity to identify the poor, empower them through a social mobilisation program, help them select income generating activities, deliver credit, supervise the work that they did, recover credit and reflow the same, allow them to graduate to higher levels of credit and finally cross the poverty line. SEEDS was one of our development partners in all the four districts and SMTI was one of the training institutions that helped us to empower the beneficiaries whom we called our development partners. I had an excellent working arrangement with both partners.
SEEDS did a wonderful job by delivering credit to the most deserving and helping them to cross the poverty line within 5-6 years. SMTI did the training and helped us to ensure the sustainability of the project when it was concluded in 1998. All the beneficiaries were organised into development societies at the village level, those development societies were federated into District Societies and the District Societies were amalgamated at the national level. It was SMTI that drafted the relevant constitutions, got them incorporated under the Societies Ordinance, trained the beneficiaries to run their own affairs, equipped them with financial, bookkeeping, and auditing knowledge, and selecting the management teams through democratic elections. That was the track record of both SEEDS and SMTI. Hence, when the invitation came, I was so happy to accept it.
Economic growth: material wellbeing
Development is a multidimensional achievement of a society covering economic, social, cultural, political, and religious activities. Of this, economic development is a subset. It has two dimensions. One is the continuous advancement of material wellbeing which we measure through real economic growth. Last week when the Census Department said that the real economic growth in the third quarter of 2024 was 5.5% compared to the corresponding quarter of the previous year, it talked about the improvement of the material wellbeing of people. For instance, if people had 100 hoppers in the third quarter of 2023, they have now cooked 105 hoppers and another half. If there were 20 people in the country in the third quarter of 2023, each person could eat, in principle, 5 hoppers. Now suppose that the population has increased to 21 in the third quarter of 2024. Now, each person can eat 5 hoppers and a little bit. Therefore, their material wellbeing has been improved by a little bit.
Sustainability on environmental grounds
The other dimension of economic development is the sustainability of this achievement. Sustainability also has two meanings, one relating to the ability of a society to maintain the growth on environmental grounds. This was explained by the UN’s World Commission on Environment and Development, also known as the Brundtland Commission, as a situation in which meeting “the needs of the present without compromising the ability of future generations to meet their own needs”2. What this means is that if economic growth takes place reducing the common resource base it is not a sustainable development.
Sustainability as standing on one’s feet
The other meaning of sustainability is the ability of a system to continue its growth momentum on its own without the support of an outsider. For instance, if a person is helped by somebody to move up to a higher economic status, even after the withdrawal of that support, he must be able to continue to grow. In other words, it talks about a person or a society to stand on its own feet. Sri Lanka came out of an unprecedented economic crisis recently through the support of the international community, especially its neighbour to the North, India. It seems that, as the two leaders of India and Sri Lanka had announced in a joint press statement following the Sri Lankan President’s visit to India, the Indian support is needed continuously meaning that resolution of the crisis is not sustainable3. Sri Lanka cannot stand on its own feet and, therefore, Indian support is needed for it to even keep itself floating.
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CSOs and economic sustainability
The ability of a nation to stand on its own feet, the second definition of sustainability, comes from several other core factors. First, that society should be corruption free since the incidence of corruption eats out its resources. Second, it should observe the rule of law by enforcing law on everyone equally without fear, favour, bias, or prejudice. Third, it helps society to protect the property rights thereby minimising the risk of investing in both human and physical capital. This will ensure continuous economic expansion. Fourth, there should be effective measures to keep poverty levels low. Fifth, income distribution in society should be equitable helping to establish a chaos-free stable society. Sixth, education and training of all members of society should be undertaken to promote inventions, innovations, and entrepreneurship. Seventh, opportunities should be provided to bring the disadvantaged groups to the mainstream of economic life.
A government, despite its resource base and sovereign powers cannot set all these pre-conditions in society. Civil Society Organisations or CSOs can offer its support to make the government action more effective. It is collaboration between the national governments and CSOs to do good for society. To make it work, the national governments should recognise the important role which CSOs play in society and the empowerment of the people will help the governments too to deliver their services more efficiently and more effectively.
CSOs: watchdog and not bloodhound
In this context, CSOs can function as the third eye of a government to keep corruption low, ensure protection of human rights, establish good governance, and make the political system working. This alert system provided by CSOs makes it necessary for them to function as watchdogs and not as bloodhounds. The job of the watchdog is to alert the government whenever there are violations of human rights or instances of corruption. In contrast, a bloodhound will chase after wrongdoers and punish them. That role should be played by the government agencies which are specifically empowered to do so by legislatures.
If CSOs seek to assume this role, it is inevitable that they get the wrath of governments, officials, private parties, and all others who have stakes in such illegal dealings. It is a wrong path for them, and they should avoid getting into it. But for them to play the role of watchdog, society and governments should recognise the important role which they play as supporters of creating a just and fair society.
K-typed growth
Development is meaningless if it does not deliver prosperity to all, known as inclusive development. If the fruits are being apportioned exclusively by a selected group, the widening gap between the rich and the poor leads to social, political, and economic disorder. In Sri Lanka, despite the pro-poor policies adopted by all the post-independence governments, income disparity has been the same, the top 20% apportioning to them about a half of the wealth, the lowest 20% getting about 5%, while the rest is being used by the middle class4. This type of economic development is known as ‘K-typed Growth’ with the rich getting richer and the poorer getting poorer. It leads to a situation in which a significant portion of population remaining in poverty.
Traditional economic theory assumes that poverty can be reduced by having faster economic growth in which the fruits of the growth trickles down to the lower segments of the income earners. This is treating poverty at macro level with a bird’s eye view on the economy from the top. But at micro level, when looked at the people from a worm’s eye, it gives a different picture. The poor are destitute, hopeless, and living in constant fear about the future. The opportunity set available to them is getting shrunk in each passing day. Hence, to get them out of poverty, there should be specifically directed approach like the one used by SFLCP implemented by the Central Bank. This is where CSOs comes into the picture.
Isuru project methodology
Our experience in SFLCP will be useful here. We used CSOs as partner agencies as our extended arm at the worm’s eye level. They were selected on their experience, track record, financial strength, ground level outreach capacity, governance structure, and commitment to offer microfinance services to the target groups. The methodology used was as follows: The selected CSO will approach a village, conducts a socio-economic survey to identify the pockets of the poor, offer them an opportunity to join the project, organise them as self-help groups or SHGs, take them through a social mobilisation program, inculcate savings habits in them, provide technical training, and finally link them to the banker who will extend credit.
The project office coordinated the work, assessed the progress, did troubleshooting, and conducted periodical surveys of the beneficiaries to identify their progress. It was like taking the poor who are destitute and helpless to the intended goal by giving them a helping hand. The system worked well and according to the project completion report prepared by the donors in 1998, 80% of the original beneficiaries had crossed the absolute poverty line.
However, the Central Bank’s Impact Assessment Survey of 2005 by comparing the economic advancement of beneficiaries has put the success figure to 63%5. These are of course micro interventions that will not substitute the growth initiatives implemented by governments at the national level. They are simply complementary and would fill a gap existing between the national initiatives and the ground level dropouts.
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Governance and self-regulation
In conclusion, it should be noted that for CSOs to play an effective role in participating in economic development, there should be a proper internal governance structure within them. This is important since they handle other people’s money, and they are entrusted with that money by beneficiaries or donors or governmental authorities placing trust in them. This trust is inviolable. Authorities have sought to resolve this problem by registering and regulating them through central authorities. However, in my view, as I have argued elsewhere, these organisations should be subject to internal self-regulation first and then subject to external regulations by authorities6. If there are breaches of trust by them, it is also necessary to enforce strict laws under the Penal Code to bring them to book promptly. It will not only establish trust in them but also serve as a lesson for other CSOs which may be planning to misappropriate the moneys placed under their custody by the public or other donors.
Footnotes:
1Details of the SFLCP can be found in CBSL, 2005, Impact Assessment Survey of the Small Farmers and the Landless Credit Project, Colombo.
2World Commission on Environment and Development, 1987. Our Common Future, Oxford University Press, p 8.
3https://www.mea.gov.in/press-releases.htm?dtl/38797
4CBSL, Annual Report for 2022, Vol I, Special Statistical Appendix Table Nos 10 & 13
5Impact Assessment Survey, op.cit, p xv.
6https://www.findevgateway.org/sites/default/files/publications/files/mfg-en-paper-microfinance-policy-and-regulatory-framework-experience-and-perspective-of-south-asian-region-sri-lanka-bangladesh-nepal-and-india-2004.pdf
(The writer, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at [email protected].)
We had money. But we did not have field level experience or outreach capacity to identify the poor, empower them through a social mobilisation program, help them select income generating activities, deliver credit, supervise the work that they did, recover credit and reflow the same, allow them to graduate to higher levels of credit and finally cross the poverty line. SEEDS was one of our development partners in all the four districts and SMTI was one of the training institutions that helped us to empower the beneficiaries whom we called our development partners. I had an excellent working arrangement with both partners