EMPLOYMENT GENERATION, POVERTY ALLEVIATION AND GROWTH
IN PAKISTAN’S RURAL SECTOR:
POLICIES FOR INSTITUTIONAL CHANGE
By
Akmal Hussain
Report prepared for the International Labour Organization,
Country Employment Policy Review (CEPR): Pakistan
March 1999
TABLE OF CONTENTS Acknowledgements 1
Introduction 2
CHAPTER I
GROWTH, EMPLOYMENT AND POLICY
CONSTRUCTS FOR OVERCOMING INSTITUTIONAL
CONSTRAINTS IN THE CROP SECTOR 4
Section 1 Agriculture Growth: Past Pattern and Present
Potential
Section 2 A Policy Perspective on Institutional Constraints
to Growth of Agriculture Output and Employment
2.1 Canal Irrigation
2.2 Seeds, Agriculture Research and Diffusion
2.3 Soils and Agricultural Practices
Tables
CHAPTER II
EMPLOYMENT GENERATION AND POVERTY
ALLEVIATION IN THE OFF-FARM RURAL SECTOR 19
Section 1 Livestock Development, Poverty Alleviation
and Employment Generation: A Policy Construct
Section 2 A policy Framework for Accelerating Growth of
Small Scale Enterprises
2.1 Small Scale Enterprises in the Context of
Macroeconomic Issues
2.2 Strategic Objectives of the Growth of SSEs
2.3 Constraints to the Rapid Growth of SSEs
2.4 Proposed Institutional Structure for Overcoming
the Constraints: Industrial Support Centres (ISCs)
at the Local Level, and Enabling Institutions
at the National/Provincial Level
CHAPTER III RECENT GOVERNMENT INITIATIVES FOR
EMPLOYMENT GENERATION AND POVERTY ALLEVIATION 30
Section 1 Small and Medium Enterprise Development
Authority (SMEDA): An Assessment
Section 2 Self Employment Scheme
Section 3 Punjab Rural Support Programme (PRSP)
Section 4 Pakistan Poverty Alleviation Fund (PPAF)
Section 5 Zakat and Bait-ul-Maal: Is it an Effective
Safety Net for the Indigent
CHAPTER IV
EMPLOYMENT GENERATION AND POVERTY
ALLEVIATION THROUGH NGOs 55
Section 1 Types of Development NGOs and their
Advantages Compared to Government
Section 2 Strategic Issues in taking
Development NGOs to Scale
Section 3 Participatory Development through
Rural Support Programmes: Are they Feasible?
Section 4 Taking Small NGOs to Scale:
Some Necessary Conditions for Success
Section 5 Key Institutions in the Enabling Environment
for taking Participatory Development to Scale
CHAPTER V
POLICY RECOMMENDATIONS 74
Section 1 Crop Sector
Section 2 Non-crop Sector in Agriculture: Milk Production
Section 3 Small Scale Enterprises in the Rural Areas
Section 4 Taking Participatory Development NGOs to Scale
Section 5 Walking on Two Legs: Restructuring GDP Growth
for Enhanced Employment Generation and Poverty
Alleviation
REFERENCES
APPENDICES1
ACKNOWLEDGMENTS
Thanks are due to Dr. Muqtada and Dr. Mahmud of the ILO for stimulating
discussions at the outset, which were most helpful in giving focus and direction to the
Study. Thanks are also due to Mr. Agha Imran Hamid for providing written notes
which were extremely helpful in writing up Section 1 of Chapter IV. Unfortunately,
due to a sudden stomach ailment he could not continue what would have been a rich
intellectual interaction. This may have impoverished the Study. Thanks are also due
to Mr. Umar Zafar, Deputy Chief Manager Marketing at Sayyed Engineers (Private)
Limited for his help in computer processing some of the data, and to Dr. Noor
Muhammad Larik, Director General, Federal Bureau of Statistics, for providing data
on agriculture output and for giving so generously of his time in discussing the pitfalls
of using labour force surveys. Special thanks are due to Mr. Ayub Qutub who gave
unstintingly of his time and patience in answering questions as well as providing
internal PIEDAR documents which together proved invaluable in preparing the
PIEDAR case study. Thanks are due to Dr. Ehsan and the Staff of SMEDA for
providing access to their work in progress, to Mr. M. J. Khan of SBFC for providing
data on the self-employment scheme, to Mr. Maqbool Hussain Toor for his excellent
secretarial support, and to the staff of Sayyed Engineers (Private) Limited, for
cheerfully tolerating my absence for over six weeks. Finally, a debt of gratitude is
owed to my three sons, Abbas, Jalal and Savail, for establishing hitherto unimaginable
discipline in eating, dressing and doing their homework entirely on their own during
the course of this study. Apart from insistently inquiring when the Study would end,
there were no acts of rebellion. Without their love, patience and understanding this
Study could not have been completed.
Akmal Hussain 2
Introduction
The decade of the 1990s signifies a watershed in Pakistan’s economic history. As
overall GDP growth has slowed down, and unemployment and poverty increased, the
underlying factors rooted in the institutional structure of Pakistan’s economy, have
become manifest. Nowhere is this more evident than in the rural sector. Here a slow
down in output growth of the major crops has been associated with declining factor
productivity and increased instability of output growth. The moment of decline in
growth of yields per acre of major crops gives cause for concern. It has come at a
time when the extensive margin in the crop sector has been reached, and further
growth will have to depend on increasing the efficiency of input use.
Due to their weaker resource position, small farmers are likely to suffer greater
adverse impact of declining factor productivity and output instability compared to
large farmers. Yet, our estimates suggest that it is precisely in the small farm sector
that there is a relatively greater potential for employment generation. Consequently,
slower and more unstable growth may be accompanied by a tendency for increasing
inequality in income distribution together with growing poverty and unemployment.
It may be time, therefore, to address the structural weaknesses of institutions in the
rural sector that underlie these trends.
The decay in institutions of government that have sought to ‘deliver’ development to
the people within the top-down paradigm, has been accompanied by the emergence of
development NGOs which attempt to overcome poverty through the alternative
paradigm of Participatory Development.
In this Report an attempt will be made to examine first the pattern of agriculture
growth, and identify the major institutional constraints to its sustainability. A set of
policy initiatives would then be proposed with a view to achieving a higher and
sustainable growth in the rural sector on the one hand, and enhancing employment
generation for poverty alleviation on the other.
In Chapter I, the pattern of agriculture growth will be discussed, the institutional
constraints identified, and the nature and magnitude of employment potential
indicated. Policy constructs for overcoming the institutional constraints to higher 3
growth and increased employment generation, will be specified. In Chapter II,
Institutional initiatives will be proposed for actualizing the considerable output and
employment potential of the non-crop sector in agriculture and the small scale
enterprise sector in rural areas. In Chapter III, some of the major recent government
initiatives for employment generation and poverty alleviation will be examined, their
weaknesses indicated and policies proposed for making them efficacious. In Chapter
IV, for the first time, the strategic question of how development NGOs can be taken
to scale is posed, with a view to enabling them to play a major role in employment
generation and poverty alleviation. In Chapter V, the main policy proposals are
presented in terms of their micro level logic and the macroeconomic perspective
within which that logic is constituted. 4
CHAPTER I
GROWTH, EMPLOYMENT AND POLICY CONSTRUCTS FOR
OVERCOMING INSTITUTIONAL CONSTRAINTS IN THE CROP SECTOR
In this Chapter the pattern of output growth and employment in the crop sector will be
briefly examined to indicate the need to focus policy on the institutional constraints to
actualizing the yield potential. Such a policy acquires an urgency in view of evidence
that the extensive margin has been reached. Future growth would have to rely on
increasing the efficiency of input use where institutional support plays a greater role
than in increasing irrigated-cropped acreage, which fueled agriculture growth in the
past.
Section 1
Agriculture Growth: Past Pattern and Present Potential
The level and pattern of output growth in the crop sector during the 1990’s when
viewed in a longer-term perspective suggest the emergence of institutional constraints
to sustainability. The average annual growth rate of major crops declined from 3.34
percent during the 1980s to 2.38 percent during the 1990s (see table 1). At the same
time, the frequency of negative growth in some of the major crops during the last 17
years has been significantly higher than in the preceding two decades. If we consider
wheat, which is by far the largest of the major crops (over 30 percent value added in
major crops), we find that average annual growth rates have been steadily declining
since the onset of the “Green Revolution”: From the high point of 7.42 percent in the
1960’s to 2.33 percent in the 1990’s (see table 2). Underlying the decline in the
growth of wheat output is a steady decline in the growth of wheat yield per hectare:
From 4.38 percent in the decade of 1960’s to 1.81 percent in the 1990’s (see table 2).
The frequency of years in which an absolute decline in wheat yield per hectare was 7
in the period 1980 to 1997, compared to 5 in the preceding two decades.
Under conditions of declining input productivity, when higher input use/acre is
required to maintain yields, small farmers with fewer resources are likely to suffer a
greater than average decline in yields, compared to large farmers. At the same time,
due to lack of savings to fall back on, they are relatively more vulnerable to bad
harvests under conditions of unstable growth. Consequently, slower and more
unstable growth may be accompanied by a tendency for growing inequality in rural 5
income distribution, poverty and unemployment. This is why it is important to initiate
policies (discussed in this Report) to counteract these tendencies in both the farm and
off-farm sectors of agriculture.
Underlying the phenomenon of a gradual deceleration of growth and increased
frequency of negative growth years1
may be the emergence of a number of
institutional constraints, the major ones being (i) reduced water availability due to
deterioration in the canal irrigation system, (ii) poor quality of seeds, inadequate and
poorly targeted agriculture research and extension services, (iii) degradation of soils
___________________________
1. It has been argued that the increased instability of output in the 1980’s in contrast to
relative output stability in the preceding decade of the 1970’s is due to the fact that:
(a) The timeliness of input application required in the HYV technology package has
introduced an external uncertainty factor (together with weather conditions).
(b) The timeliness constraint manifested itself in increased instability of agricultural
production in the 1980s, in contrast to the 1970’s, due to the presumed “widespread
use”, of the HYV technology in the 1980’s.
Two considerations are relevant here:
(i) The greater instability of agricultural output in the 1980’s compared to the preceding
decade cannot be attributed to “widespread use” of the HYV technology in the 1980’s
(and by implication its presumed relatively restricted use in the 1970’s). This is
because the HYV technology was already in widespread use in the 1970’s. For
example, by 1974/75 HYV adoption had occurred in 64 percent of the cropped
acreage under wheat, in Pakistan as a whole. In the Punjab and Sind where a greater
prevalence of irrigation made these two provinces more amenable to HYV adoption,
the figures for the year 1974/75, are 65 percent and 82 percent respectively. Thus, if
“widespread use” of HYV technology is to be regarded as a causal factor in output
instability then such instability should have occurred in the 1970’s as well, which of
course the output data shows, was not the case.
(ii) The question that now arises is, why did the timeliness constraint of the HYV
technology manifest itself in the 1980’s and not in the 1970’s? The answer could
perhaps be sought in unpacking the notion of the “timeliness” constraint. It
essentially means that the HYV seeds require certain dosages of fertilizer and water
at specific moments in the production cycle. This makes a seasonally flexible supply
of water necessary for optimum yields of HYV seeds.
It could be hypothesized that the timeliness constraint began to bite in the 1980’s and
not in the 1970’s, because during the 1970’s adequate supplies of irrigation water
were available to farmers. During the 1980’s, however, the irrigation canals and
water courses, due to institutional neglect, suffered deterioration, resulting in the
reduced availability of irrigation water at the farm gate. (Although tubewell
irrigation had increased by 6 percent per annum, it is now well established, that much
of the water lost due to seepage from canal irrigation could not be reused by
tubewells due to its passage into saline areas). Consequently, an increasing
percentage of the water requirement at the farm level had to rely on rain water.
Given the timeliness imperative of HYV technology, during the 1980’s and 1990’s,
there was not only an increasing dependence on rain water, but more important, an
increasing dependence on rains falling at the required time even in the irrigated
regions. It is this factor, the partial shifting of the timely water supply requirement to
the vagaries of rain water, that perhaps made the timeliness constraint of HYV
technology bite in the 1980’s and 1990’s, but not in the 1970’s. 6
due to depleting soil nutrients and soil erosion associated with improper agricultural
practices. (Each of these constraints will be discussed in Section 2).
We have estimated that currently in the major crops together with fodder and pulses a
total of 1361 million person days of employment annually exists (see table 3). (This
figure is quite close to the employment demand projection of 1312 million person
days for the year 2000, that we made in 1989, based on 1972 data, for the
ILO/ARTEP).2
Given crop production cycles (where farmers are employed 200 days
of the year), the annual employment demand for 5.4 million persons per year
currently exists in the crop sector.
Table 3 shows the person days of employment required in selected crops at current
levels of cropped acreage in the irrigated and unirrigated areas respectively by size
class of farm. The figures suggest that farms below 25 acres in size are generating
more than twice as much employment than large size farms in the case of wheat,
basmati, cotton and fodder. The employment differential between small and large
farms is even higher in the case of HYV rice (three times higher) and maize (5 times
higher). The employment differential in the case of pulses, however, is lower (1.5
times). These estimates suggest that if the yield and output potential of the small farm
sector could be actualized, a relatively larger increase in employment creation would
occur than in the case of large farms.
Table 4 shows by way of illustration the increased employment demand that can be
generated if the current yield potential of two major crops (wheat and HYV rice),
could be realized through improved agricultural practices, vigorous seeds at current
levels of technology and increased water availability through higher delivery
efficiency of irrigation. The estimates indicate that an employment potential of only
about 16 million person days annually (about 80,600 persons employed for the whole
agricultural year) exists in the crop sector for wheat and HYV rice. However, for
farms below 25 acres substantially more employment could be generated through the
___________________________
2
Akmal Hussain: Labour Absorption in Pakistan’s Agriculture, An Interim Report,
paper submitted to ILO/ARTEP, March 1989. The Labour Demand projections upto
the year 2000 were published in Akmal Hussain: Poverty Alleviation in Pakistan,
(Annexure II, Page 128), Vanguard Books, 1994. Also published in Akmal Hussain:
Strategic Issues in Pakistan’s Economic Policy, Progressive Publishers, Lahore, 1988. 7
realization of the yield potential of these crops compared to large farms. These
figures suggest that if policies for increasing the yield per acre of major crops were to
focus on the small farm sector, a faster and more equitable growth with higher
employment generation could be achieved in the crop sector.
The figures in table 3 and 4 indicate that both the level of employment demand as
well as the potential for increasing it through the crop sector, are quite limited
compared to the size of the rural labour force.3
The brunt of the burden of increasing
rural employment generation would therefore have to be borne by the non-crop sector.
This would include livestock development especially milk production, food
processing, off-farm micro enterprises and industrial clusters in rural areas consisting
of small scale units in the fields of light engineering, automotive, electrical and
construction. This issue is discussed in Chapter II of the Report.
If a village level institutional support mechanism could be established to enable small
farmers to achieve increased water application in the root zone of the crops,
application of composite fertilizers in congruence with field specific soil nutrient
requirements and better quality seeds, a yield increase of 30 percent in wheat and 50
percent in HYV rice could be achieved within a relatively short period. This implies
an additional annual employment potential of about 16 million person days in wheat
and rice alone. Substantially higher increases in output and employment could be
achieved with improved agricultural practices, replenishment of humus in topsoil,
breeding and diffusion of more vigorous seed varieties, and a rehabilitation of the
canal irrigation system. The nature of these institutional constraints and possible
ways of overcoming them are discussed in the next Section 2.
___________________________
3
That the possibility of labour absorption in the crop sector would be severely
restricted by the year 2000, had been predicted in our paper, Akmal Hussain: Rural
Industrialization, Economic Logic and Institutional Requirements. Policy Paper
submitted to the Prime Minister 1989, later presented at International Conference on
Agricultural Strategies for the 1990s, Pakistan Association of Agricultural Scientists,
Islamabad, 7-9 May 1991, published in Akmal Hussain: A Strategy of Poverty
Alleviation in Pakistan, op. cit. 8
Section 2
A Policy Perspective on Institutional Constraints to Growth of Agriculture
Output and Employment
2.1. Canal Irrigation
Poor maintenance has resulted in the gradual deterioration in the canal irrigation
system whose carrying capacity of water has been reduced due to lack of adequate desilting
and crumbling of canal banks. Delivery efficiency (from the canal head to the
root zone of crops) is now as low as 35 to 40 percent.4
The annual diversion of water
from the rivers into the surface irrigation system is about 93 million-acre feet out of
which only about 37 million-acre feet actually reaches the root zone of crops. The
remaining 56 million-acre feet is lost to canal seepage, spillage, breaches and
watercourse losses.
The improvement of irrigation efficiencies has become a major policy imperative in
view of the fact that the extensive margin on irrigated acreage has been reached and
future agricultural growth will have to rely on improving the efficiency of water use
and other inputs. For example, during the period 1967-68 to 1991-92 irrigated area in
Pakistan increased from 12.5 million hectares to 17 million hectares without any
significant increase in total cultivated area during the period. This indicates that most
of the increase in irrigated area involved conversion of rain-fed cultivated area to
irrigated area. Cultivated area has remained virtually constant since the 1960’s, while
irrigated area has remained virtually constant since the 1980’s, indicating that the
limits of both cultivable area and irrigated area may have been reached. Opportunities
of expanding use of ground water are also limited. Therefore, overcoming the crisis
of irrigation efficiency has become a crucial policy challenge for sustainable
agricultural growth and employment in the 21st Century.
The poor maintenance and operation of the canal irrigation system is associated with
not only a decline in the efficiency of the irrigation department but also a serious
shortage of budgetary funds. For example, in the early 1990’s the shortfall between
___________________________
4
Pakistan: A strategy for Sustainable Agricultural Growth, World Bank Report No.
13092 Pak, November 1994. 9
required and actual operations and maintenance expenditure has averaged 25 percent5
.
Given the lack of motivation, management capability, and adequate funding, a
restructuring of the role, functioning and organization of the irrigation department
may be necessary. It may be time now to develop a more cost effective and
decentralized institutional structure involving local communities in the operation and
maintenance of canals and watercourses. A development NGO called PIEDAR which
has been working in the Khanewal District of Southern Punjab has demonstrated the
efficacy and cost effectiveness of improving the operation and maintenance of water
courses through the formation of village level community organizations initially and
then apex organizations of VOs which has set the stage for irrigation management of a
whole distributory. (See Box).6
___________________________
5
Rashid Faruqee: Structural and Policy Reforms for Agriculture Growth, the case of
Pakistan, Agriculture and Natural Resource Division, South Asia Department 1, The
World Bank, October 2, 1995, p. 31.
6
I am grateful to Mr. Ayub Qutub, President of PIEDAR, for providing the
information which enabled the writing of the PIEDAR case study. 10
Improved irrigation efficiency through community management:
The PIEDAR experience
The Pakistan Institute for Environment, Development Action Research (PIEDAR) is
an independent NGO registered under the Societies Act, which began a pioneering
support program in the Khanewal district of Southern Punjab in 1992. Using the
Participatory Development Methodology, it catalyzed the formation of village
organizations of poor peasants and initiated a process for enabling the village
communities to build hygienic drinking water facilities, a wide range of micro
enterprise projects, (operated in many cases by women) for income generation,
increased savings, development of home school for women, and finally lining of water
courses for increased irrigation efficiency.
The PIEDAR approach was different from the approach of the government’s
department of on-farm water management in terms of three features: (a) PIEDAR
established multi-purpose VOs instead of single purpose water users associations
across a number of villages. (b) Between 30 to 33 percent of the investment cost of
the water course lining was financed from the collective savings of the VOs. (c)
Instead of the brick lining technique of the government department, PIEDAR used
pre-cast concrete segments, manufactured in a local factory. With brick lining, due to
non-congruence of the parabolic curve of the water channel and the curvature of the
brick lining, cracks emerge after a year, resulting in large water leakage through the
spaces between the bricks. By contrast, the pre-cast concrete segments whose
internal curvature coincides with that of the water course are not only much more
efficient insulators but also have a much longer life (50 years) compared to brick
lining.
PIEDAR has been engaged in fostering community based water course management
since 1995 and has now achieved coverage of 30 villages and six water courses. The
COs have provided 25 percent of the cash cost of the investment from their collective
savings and have also contributed the cement and labour themselves. (The total
contribution of the poor peasants to the lining of water courses has been estimated at
30 to 33 percent in addition to the labour involved in maintenance. Such a
contribution by the villagers and their interest in maintenance is unprecedented in
any on-farm water management project under government auspices.
2.2 Seeds, Agriculture Research and Diffusion
It is well known that high yielding varieties of seed introduced at a point in time,
gradually lose their potency through reuse, changing micro structure of soils, and
changing ecology of micro organisms in the top soil. Therefore, breeding of more
vigorous seed varieties adapted to local environmental conditions and their diffusion
amongst farmers is required through an effective research and extension program. 11
At the moment, there is no organized seed industry in Pakistan to meet the needs of
farmers for the supply of vigorous varieties of seeds for even the major crops. The
existing institutional framework for agriculture research suffers from a proliferation of
research institutes, which are inadequately funded, often lack professional expertise,
proper equipment and the research environment necessary to produce significant
results. Finally, there is considerable overlapping of research responsibilities across
institutes. Consequently, research has by and large failed to produce operationally
usable results much less increase input efficiency. Seed varieties research where it
has produced new seeds has involved a large time lag in getting research to the
farmers. In wheat, for example, the average age of seed varieties is 11 years
compared to 7 years for all developing countries. It has been shown that there was a
sharp decline in growth of total factor productivity in Pakistan after 1975. Pakistan's
lower factor productivity growth compared to India can be attributed to the poorer
level of research and extension in Pakistan compared to India.7
A new dimension to the imperative of improving research capability in the crop sector
is indicated by the possibility of declining yield per acre related with global warming.
Given the sensitivity of wheat seed to temperature increase, even a 2-degree
centigrade increase in average summer temperature could mean an absolute yield
decline of between 10 to 16 percent during the 21st century.8
With a 2.8 percent
population growth even a decline of 5 percent in yield per acre associated with global
warming, could mean serious food deficits for Pakistan. It is, therefore, necessary to
develop heat resistant varieties of food grains.
The current ineffectiveness of agricultural research and poor diffusion amongst
farmers is a cause for concern. This is particularly so in a situation where future
agricultural growth and labour absorption will have to depend more on input
___________________________
7
Mark W. Rosegrant and Robert Evenson: "Agricultural Productivity Growth in
Pakistan and India: A comparative Analysis", presented at Pakistan Institute of
Development Economists Ninth Annual General Meeting, Islamabad, 1993.
8
If atmospheric carbon is doubled the average summer temperatures in Pakistan are
expected to increase from 1.5 C to 4.5 C (base average of 2.5 C), over the next 70
years. This could lead to a decline in wheat yields from 10 percent to 60 percent,
depending on the type of wheat seed, planting time, related atmospheric/weather
conditions. See: Qureshi, Ata and Iglesias: Implications of Global Climate Change
for Pakistan Agriculture: Impacts on Simulated Wheat Production, Climate Institute,
Washington, D. C. USA, 1992. 12
efficiency than on enlargement of irrigated acreage and input intensification which
were the major sources of agriculture growth in the past.
The following issues may be identified for research and subsequent diffusion:
i) Development of (a) new heat resistant varieties of wheat, (b) short duration
and late sowing varieties of wheat to enable multiple cropping, (c) heat
resistant, pest resistant, short duration and high yielding varieties of cotton, (d)
development of short duration and high yielding varieties of pulses and
oilseeds to fit into cropping pattern of late Rabi/late Kharif crops.
ii) Rehabilitation of agriculture in saline and water logged soils.
iii) Improvement of barani agriculture by research into designs of low-cost
rainwater reservoirs and chalk dams for water-run off, for irrigation and soil
conservation.
iv) Efficient harvest and post harvest handling technology for different crops.
v) Development of hybrid seeds of Maize, Sorghum, Sunflower and other crops.
On the basis of wide ranging consultations with farmers in the Punjab and Frontier
provinces as well as officials concerned with agriculture research during the last two
years, it can be proposed that for more effective research and its diffusion amongst
farmers it may be necessary to take the following initiatives:
i) Restructure the existing institutional framework for seed development in
particular and agriculture research in general to (a) bring greater
professionalism, (b) improve monitoring and evaluation of research work.
ii) Focus research on improving input productivity at the region specific level. In
this context the outcomes of controlled experiments at research institutes need
to be tailored to the specific needs and conditions of farms in the region.
iii) Maintain regular interaction between research workers and farmers in the field
by establishing an institutional linkage between research and village level
institutions for diffusion of such research. Village level community
organizations of farmers for participatory development have demonstrated the
ability for a fruitful dialogue with research and extension institutions in the
government and non-governmental sector. 13
Such interactions amongst farmers and agricultural researchers could redirect
research to the specific needs and conditions of farmers and also enable a
more rapid adoption of improved seeds and agricultural practices. Support
organizations such as the PRSP in the Punjab (during August to October
1998), and AKRSP in the northern areas (during the early 1990s) have
demonstrated an ability for facilitating the adoption of new knowledge and
agricultural practices, particularly in cases where such adoption requires
training and credit to farmers at the village level.
2.3. Soils and Agricultural Practices
One of the most important constraints to sustainable growth and employment in the
crop sector is the degradation of soils, resulting from improper agricultural practices
such as: (i) lack of crop rotation and the resultant loss of humus in the top soil, (ii)
stripping of top soil and resultant loss of fertility associated with over-grazing, (iii)
water erosion along hillsides and river banks due to cutting down of trees and
depletion of natural vegetation which constitutes a water absorber and hence
protection against erosion. According to one estimate,9
over 11 million hectares have
been affected by water erosion and 5 million hectares by wind erosion.
___________________________
9
Alim Mian and Yasin Mirza: Pakistan Soil Resources, National Conservation
Strategy, Sector Paper IV, Environment and Urban Affairs Division, with IUCN,
1993. 14
Degradation of soils may be an important factor in low and declining growth in yields
per acre in Pakistan’s crop sector. For example, average annual increase in yield per
acre of wheat during 1990’s in Pakistan has been 1.8 percent compared to 2.9 percent
in the Indian Punjab, and 2.7 percent for all developing countries. A recent study
suggests that the observed declining yield response to input use in Pakistan’s
agriculture is indicative of increasing soil degradation.10 It is clear that in order to
create a sustainable basis for accelerating agricultural growth and employment in the
future it would be necessary to induce agricultural practices through which the
organic material in the top soil can be replenished and maintained. The existing
extension services do not have the outreach, motivation and the management
capability to achieve the adoption of sustainable agricultural practices at the farm
level. What is required is to build village level organizations of farmers, backed by
sensitive support institutions which can demonstrate the efficacy of such agricultural
practices to their members, together with training and accessing of technical support
from government line departments, donor agencies, private sector firms and
specialized NGOs. A wide variety of such sensitive support institutions (although
with a relatively restricted geographic coverage) have emerged in recent years in the
form of development NGOs and rural support programs. In many cases they have
produced impressive results in improving agricultural practices and productivity, and
accessing technical support and training from diverse sources for farmers at the
village level: For example, SUNGI in the NWFP, PIEDAR in Southern Punjab, KIDP
in Swat, AKRSP in the Northern Areas and more recently PRSP in the Punjab. The
question is how to provide the institutional and policy framework for enabling such
support institutions to achieve adequate geographic coverage. (This issue will be
dealt with in Chapter IV of the Report).
___________________________
10 Derek Byerlee : Agricultural Productivity in Pakistan, Problems and Potential, World
Bank Agriculture Sector Review, cited in World Bank Report No. 13092 – PAK, op.
Cit. 15
TABLE 1
AVERAGE ANNUAL GROWTH RATES OF MAJOR CROPS*: 1980-97
Period 1980-81 to 1989-90 1990-91 to 1996-97
Average Annual Growth 3.34% 2.38%
Note: * At constant 1980-81 factor cost
Source: Federal Bureau of Statistics, Government of Pakistan. 16
TABLE 2
WHEAT
AVERAGE ANNUAL GROWTH RATE OF OUTPUT AND YIELD/ACRE AND THE
FREQUENCY OF NEGATIVE YIELD INCREASE, 1960 TO 1996
PERIOD AVERAGE ANNUAL
GROWTH RATE OF
OUTPUT
(PERCENT)
AVERAGE
ANNUAL
GROWTH RATE
OF YIELD/ACRE
(PERCENT)
FREQUENCY OF
NEGATIVE YIELD
INCREASE
(COMPARED TO
PREVIOUS YEAR)
1960-61 TO 1969-70 7.42 4.38 3
1970-71 TO 1979-80 4.43 3.18 2
1980-81 TO 1989-90 3.30 2.06 4
1990-91 TO 1996-97 2.33 1.81 3
Source: Pakistan Economic Survey 1997-98, Government of Pakistan, Finance
Division, Economic Advisor's Wing, Islamabad. 17
TABLE 3
ANNUAL PERSON DAYS OF EMPLOYMENT BY CROP, BY SIZE CLASS OF FARM, 1990
Crops Size of Farm (Acres) Irrigated Unirrigated All
Cropped Acreage Person Days of
Employment
Cropped
Acreage
Person Days of
Employment
Total Person Days
Employment
Wheat Under 7.5 4,575,546 102,309,209 1,342,547 17,278,580 119,587,788
7.5 to under 25 7,129,095 159,406,564 1,320,371 16,993,175 176,399,739
25 and above 4,942,941 110,524,161 864,296 11,123,490 121,647,650
Basmati Under 7.5 775,961 21,393,245 21,393,245
7.5 to under 25 1,131,580 31,197,661 31,197,661
25 and above 738,379 20,357,109 20,357,109
HYV Rice Under 7.5 1,025,728 36,587,718 36,587,718
7.5 to under 25 1,524,100 54,364,647 54,364,647
25 and above 782,708 27,919,194 27,919,194
Cotton Under 7.5 1,565,646 56,018,814 56,018,814
7.5 to under 25 2,778,527 99,415,696 99,415,696
25 and above 2,275,585 81,420,431 81,420,431
Fodder (Rabbi and
Kharif)
Under 7.5 1,912,598 101,580,973 101,580,973
7.5 to under 25 3,130,554 153,401,131 153,401,131
25 and above 1,748,339 77,876,811 77,876,811
Sugar Cane Under 7.5 433,670 26,618,665 26,618,665
7.5 to under 25 812,894 49,895,434 49,895,434
25 and above 514,833 31,600,450 31,600,450
Pulses Under 7.5 124,564 1,276,781 158,772 1,389,255 2,666,036
7.5 to under 25 355,874 3,647,709 648,962 5,678,418 9,326,126
25 and above 303,651 3,112,423 1,007,494 8,815,573 11,927,995
Maize Under 7.5 512,778 16,537,091 655,644 10,490,304 27,027,395
7.5 to under 25 334,681 10,793,462 283,655 4,538,480 15,331,942
25 and above 182,264 5,878,014 65,773 1,052,368 6,930,382
Total Person Days of Employment 1,360,493,030
Source: I) 1990 Census of Agriculture, Government of Pakistan, Economic Affairs and Statistics Division, Agricultural Census organization.
ii) Employment Coefficients based on WAPDA XAES and Dilawar Ali Khan, PERI, 1980.
Note: Calculations Mine 18
TABLE 4
EMPLOYMENT POTENTIAL IN THE CROP SECTOR, BY SIZE
CLASS OF FARM
Crop Size of Farm
(Acres)
Annual Person
Days of
Employment
Potential for Additional
Person Days of
Employment Associated
with Yield Increase
Wheat Under 7.5 102,309,209 4,296,987
7.5 to under 25 159,406,564 4,463,384
25 and above 110,524,161 1,547,338
HYV Rice Under 7.5 36,587,718 2,195,263
7.5 to under 25 54,364,647 2,609,503
25 and above 27,919,194 1,005,091
Total 16,117,566
Sources: i) Pakistan Economic Survey 1997-98, Government of Pakistan, Finance
Division, Economic Advisor's Wing, Islamabad.
ii) WAPDA XAES, (Unpublished data)
iii) Shamim A. Namdar: Employment Implications of Agricultural Growth
Occasional Study, Punjab Economic Research Institute, Lahore, March
1980.
iv) World Bank Report No. 13092 - Pak, November 1994.
Note: Calculations Mine. 19
CHAPTER II
EMPLOYMENT GENERATION AND POVERTY ALLEVIATION
IN THE OFF-FARM RURAL SECTOR
In this Chapter we will examine the possible role of the off-farm sector in achieving
some of the macroeconomic objectives such as accelerating GDP growth,
employment, poverty alleviation and relieving pressures on the balance of payments.
The two main off-farm sectors in rural areas, i.e., livestock development with
reference to milk production and small manufacturing enterprises, will be analyzed in
terms of their major features to show how (if their potential is actualized) they can
help to not only accelerate GDP growth, but to restructure it so as to enhance its
capacity to increase employment, alleviate poverty and reduce the balance of
payments deficit. In this context, new policy initiatives will be proposed and the
institutional framework for actualizing the potential of both milk production and small
manufacturing enterprises will be specified.
Section 1
Livestock Development, Poverty Alleviation and Employment Generation: A
Policy Construct
Pakistan’s largest farm product is milk, with an annual output of 11.069 billion litres
valued at Rs. 177 billion. The value is even higher than wheat, the largest of the
major crops, with an output of 18.6. million tonnes, (1997/98), valued at Rs. 111.6
billion, (wheat constitutes 30.78 percent of total value added of major crops). What is
even more significant is that the potential for increasing output in the next five years
is far greater in the case of milk, than in the crop sector. Average yields of milch
animals in Pakistan are one-fifth the European average. Discussions with farmers
and the staff of Nestle Milkpak which has a large network of milk purchasing centres
at the village level suggest that milk output can be doubled with improved breeding,
feeding, preventive health and marketing.
Equally important is the fact that the incomes of poor peasant households can be
substantially increased through the acquisition of additional milch animals and
increased milk yield per animal. At current levels of milk output of a moderately
productive buffalo a poor peasant can earn a net income of about 2500 per month per 20
milch animal. There is considerable potential for increasing household employment
and income if a participatory support system at the village and tehsil levels could be
established for the provision of credit, training in breeding, veterinary medicine and
access over marketing services to poor peasants. If such an institutional framework is
linked up with private sector milk purchasing centres in village clusters, then a rapid
growth of milk output in Pakistan could be achieved together with increased income
and employment of poor peasant households.
Given the huge potential export market for milk in Central Asia and the Middle East,
a doubling of milk output in Pakistan with adequate refrigerated transport (both road
and air) and milk packaging services, could potentially increase Pakistan’s export
earnings by over 4 billion US dollars annually. This would solve Pakistan’s balance
of payments problem (the balance of trade deficit in 1997-98 was US$ 3.15 billion),
while at the same time alleviating rural poverty, increasing employment and
improving rural income distribution.
A Dairy Development Organization (DDO), registered under the Companies Act as a
non-profit company, needs to be established in each province as an apex organization
that can coordinate the provision of animal husbandry facilities, training in breeding,
feeding and disease control together with credit and marketing facilities to peasant
households through village/tehsil level participatory support institutions. The DDO
should have an independent Board of Directors, consisting of individuals of
commitment and integrity and with a variety of backgrounds covering experience in
private sector firms working in agriculture related fields, NGOs involved in rural
poverty alleviation, village level CBOs, and international experts in dairy
development.
The DDO could have the following functions: (i) Bring to bear available research and
international as well as local expertise in support of a major program for increasing
the number and productivity of milch animals of poor peasant households. (ii) provide
a forum for various village level community based organizations (CBOs), district
level NGOs and other rural support organizations to share their experiences, improve
their effectiveness in facilitating increased milk production and sale, of poor peasant
households. (iii) Coordinate with the provincial governments to provide refrigerated
road transport facilities and refrigerated storage facilities at airports, (iv) coordinate 21
with private sector firms for packaging and international air cargo facilities for
exports. The export of milk, apart from existing private sector milk packaging firms,
could also be undertaken by apex organizations of village level CBOs.
The work of the DDO, that is directly related with poverty alleviation, could be
funded by income from an endowment fund that could be created by grants from: (i)
The recently established Pakistan Poverty Alleviation Fund (PPAF), (ii) multilateral
development agencies such as the ILO, CIDA, UNDP and the World Bank, (iii) the
Annual Development Programs of the provincial governments, (iv) private sector
firms such as Nestle Milkpak Limited (Milk Pak), Chaudhry Industries Limited
(Haleeb milk), Prime Service Group (Prime Fresh Milk), United Dairy Farms
(Pakpure milk).
Section 2
A Policy Framework for Accelerating Growth of Small Scale Enterprises
2.1 Small Scale Enterprises in the Context of Macroeconomic Issues
Inspite of a high trend rate of growth of GDP (6 percent annual growth rate during
1960 to 1990), its impact on poverty and unemployment is relatively modest.11 It has
been argued that the capacity of GDP growth in Pakistan to reduce poverty and
generate employment is constrained by the structure of the economy.12 While GDP
growth has neither generated adequate employment nor overcome poverty in the real
economy, it has involved such a sharp increase in loan dependence, that debt
___________________________
11 For example, Indonesia with a growth rate close to Pakistan's, in just one decade
(1972-84), was able to reduce its population below the poverty line from 58 percent
in 1972 to only 17 percent in 1984. By contrast, Pakistan in three decades (1962-92)
could reduce its poverty figure to a much lesser extent from 40 percent in 1962 to 22
percent in 1992. See Report of the Task Force on Poverty Eradication, op. cit. 12 For a discussion on how the structure of Pakistan’s economic growth process
constrains its capacity to alleviate poverty, see: Overcoming Poverty, Report of the
Task Force on Poverty Eradication, May 1997.
For a discussion on the low employment elasticity in the manufacturing sector, and
the fact that it originates in the structural features of this sector, see: Pakistan: An
Employment Strategy, ILO/SAAT, December 1997. 22
servicing has become a critical problem in the financial sphere.13 At the same time,
there is concern that rural-urban migration into large urban centres has reached a
magnitude that is far greater than the existing financial and administrative capability
of government to provide for with even a minimum level of basic services.
When the major features of Small Scale Enterprises (SSEs) in Pakistan are examined
in the context of macroeconomic pressures, the prospect emerges of relieving these
pressures to some extent through inducing an accelerated growth of SSEs.
Let us consider SSEs with respect to their capabilities for efficiency of capital use,
employment generation, poverty alleviation, and import dependence.
There is evidence to suggest that in the case of Pakistan, small-scale industry
generates both more employment per unit of investment as well as more value added
per unit of capital compared to the large scale manufacturing sector. A comparison of
Capital/Labour, Value Added/Capital and employment cost ratios for large and small
scale industries suggest that the number of jobs generated in small scale industry per
unit of capital is 5 times more than in large scale manufacturing. Similarly, when we
compare the efficiency of capital use in the two sectors, i.e., value added per unit of
capital (VA/K), we discover that VA/K is almost twice as much in small scale
industry compared to large scale industry.14 More recent evidence suggests that over
80 percent of employment in the manufacturing sector as a whole can be attributed to
SSEs even in 1990-91.15 This percentage does not appear to have changed much
since 1977-78. However, the percentage share of SSEs in the value added in
manufacturing as a whole is only about 30 percent,16 and their share in total
manufactured exports is 27 percent.17
___________________________
13 Pakistan’s debt servicing burden as a percentage of federal government revenues had
reached 61.5 percent by the year 1997-98. See: State Bank of Pakistan, Annual
Report, 1997-98. 14 ILO/ARTEP: Employment and Structural Change, Issues for the Eighties, Report for
the Planning Commission, (Mimeo), 1983.
15 M. Mahmood, cited in: ILO/SAAT, 1997 (Mimeo).
16 Ibid.
17 See Report of the Sub-Committee on Cottage Industries, Punjab, 1999. 23
It appears that the secondary multiplier effects of investment in small-scale
enterprises on output and employment are also relatively greater. For example, the
available evidence shows that small-scale enterprises use locally manufactured
machinery and equipment to a much greater extent than LSM enterprises.
Moreover, a significant proportion of SSEs are export oriented in the fields of apparel,
leather products, surgical instruments, sports goods, carpets and wood working. Thus,
small-scale industry, in a number of sectors, is both export-oriented and/or import
substituting (where vending enterprises in the small-scale sector enable deletion
programs in the large scale manufacturing sector).
2.2 Strategic Objectives of the Growth of SSEs
The growth of SSEs needs to be not only accelerated substantially but also induced
towards a geographic disposition that results in the emergence of SSE based growth
nodes in the small rural towns of Pakistan. Such a process would enable a
geographically diversified growth that is relatively cheap in terms of infrastructural
investment and also oriented towards employment generation. These growth nodes of
SSEs in small towns should be linked with the agriculture sector (producing farm
implements and food processing) on the one hand, and with the Large Scale
Manufacturing Sector (through sub-contracting of components manufacture) on the
other. Such forward and backward linkages would enable both an increase in
agricultural productivity and also a reduction in the import costs of the large scalemanufacturing
sector. The objectives of rapid growth of SSEs would be four fold, (i)
to help accelerate employment generation in the off-farm sector in rural areas, (ii) to
enable a regionally balanced industrial growth with relatively low infrastructural
investment, (iii) SSEs in small rural towns would help slow down migration into large
urban centres. Such enterprises require a relatively low infrastructure input and can
provide skilled employment to the rural workforce close to their homes. (iv) To
reduce the foreign exchange costs of large-scale industry through subcontracting
components manufacture with domestic SSEs. At the same time given the relatively
greater export orientation of SSEs with appropriate institutional support they can help
alleviate balance of payments problems, (v) to increase value added and productivity
of labour in the rural sector, and thereby improve the overall distribution of income. 24
2.3 Constraints to the Rapid Growth of SSEs
Field visits to a large number of SSE units in the Punjab and NWFP during the last
five years, have revealed that while their technical potential in many cases is high, the
units are actually producing low value added items like steel shutters or car exhaust
pipes, instead of components for LSM, or high quality farm implements. This results
in low profitability, low savings and slow growth. The major constraints to
accelerating growth of SSI's in small towns, may be identified as follows:
i) Inability of small units to get orders for components manufacture from LSM
and farm implements from agriculture.
ii) Inability to achieve quality control and to meet tight delivery schedules.
iii) Lack of specific skills like advanced millwork, metal fabrication, precision
welding, all of which are needed for producing quality products with low
tolerances and precise dimensional control. In other cases accounting and
management skills may be inadequate.
iv) Difficulty faced by small units in getting good quality raw materials, which
often can only be ordered in bulk (for which the small entrepreneurs do not
have the working capital).
v) Absence of fabrication facilities such as forging, heat treatment and surface
treatment, which are required to achieve dimensional precision for
manufacture of high value added products, but are too expensive for any one
small unit to set up.
vi) Lack of credit facilities.
2.4 Proposed Institutional Structure for Overcoming the Constraints: Industrial
Support Centres (ISCs) at the Local Level, and Enabling Institutions at the
National/Provincial Level
The Concept
The concept of the Industrial support Centres is based on the fact that small-scale
industrialists in Pakistan have already demonstrated a high degree of
entrepreneurship, flexibility, innovation and ability to work hard. The ISC would
provide an opportunity for rapid growth to SSEs through a demand driven and
decentralized support system, which ensures continuous easy access to a
comprehensive package of support services such as credit, skill training, marketing,
managerial advice and technical assistance. The ISC would also be linked up with the 25
recently formed SMEDA, VTIs, national research centres, and donor agencies for
drawing upon technical expertise, training and financial resources of these agencies in
the service of SSEs.
Both the Punjab Small Industries Corporation (PSIC) and Sarhad Small Industries
Corporation have a number of “Common Facilities Centres (CFCs) located near
regional specific clusters of small scale enterprises. For example, PSIC has 13 CFCs
in fields such as wood products, metal, leather and ceramics goods. However, these
CFCs suffer from four problems which constrain their ability to perform an effective
role in catalyzing SSEs: (a) their focus is almost entirely on providing specialized
fabrication facilities, prototype development, and to a lesser extent, credit. They are
not designed to provide marketing link-up with LSM for subcontracting jobs, or
organizing unit clusters for diffusion and adoption of prototypes.18 (ii) Even their
specialized fabrication facilities (which is their main focus) are in many cases
obsolete and have failed to keep pace with changing market conditions and production
techniques. This lack of technological dynamism and responsiveness to market
conditions is due to the rigid structure within which government sponsored
corporations’ function.19 (iii) They are suffering from lack of systematic and
continuous contact with clusters of SSE units near the CFCs, thereby constraining
their ability to provide effective support. (iv) When faced with financial problems,
they tend to start producing “prototypes” on a commercial scale, thereby becoming
competitors of SSE cluster units rather than acting as support institutions.
Institutional Structure of ISCs
The ISC’s should be located in specified growth nodes where a potential exists for
major rural industrialization activities. (Proposed growth nodes for each of the
provinces of Pakistan are given in Appendix 2). It would be necessary to ensure that
they are market driven, efficient and independent of patronage based pressures from
bureaucrats and politicians. In the pursuit of this objective, it may be advisable to
institute the ISCs as private limited companies with independent boards of directors.
___________________________
18 See Case Study on the CFC in Mian Channu, Punjab, Appendix 4. Also see Akmal
Hussain and Omer Asghar Khan: PHMP Project Proposal for Phase II, SIDB, NWFP
and D.G for International Cooperation, Netherlands.
19 Report of the Sub-Committee on Cottage and Small Scale Industry in Punjab, 1999,
Page 42. 26
This initiative can be taken by the newly established Small and Medium Enterprise
Development Authority (SMEDA) in collaboration with provincial governments,
multilateral agencies and industry specific associations. SMEDA has included
amongst its objectives the provision of catalytic institutional support in the light
engineering sector of SMEs. However, it has yet to prepare a policy program for
intervention in this sector. Since SMEDA is reporting directly to the Prime Minister
and also has a competent set of professionals it has both the political and professional
capability to undertake the initiative proposed in this section. (A profile of SMEDA
is discussed in the following Section III of this Report).
Functions
The Industrial Support Centres would have the following functions:
(i) Catalyzing the process of organizing industry specific organizations of SSEs
in nearby clusters, and providing a support institution for marketing, quality
control, technical facilities, prototype development and credit. The ISC would
maintain continuous contact with members of associations to facilitate
diffusion of ideas and prototypes as they are developed.
(ii) Marketing: Provision of orders from the large scale-manufacturing sector for
components, and from farmers for farm implements. These orders would then
be sub-contracted to the cluster of SSE units that the ISC is supposed to serve.
The individual order would be sub-contracted to the SSI on the basis of the
skills and potential strengths of the unit concerned.
(iii) Monitoring and Quality Control: Having given the sub-contract, the ISC
would then monitor the units closely and help pinpoint and overcome unit
specific bottlenecks to the timely delivery and quality control of the
manufactured products. These bottlenecks may be specialized skills,
equipment, good quality raw material or credit.
(iv) Skill Training and Product Development: The ISC would provide specialized
supplementary skill training on its premises or in one of the new Vocational
Training Institutes (VTIs) that are now emerging, to workers in the SSE units
when required. At the same time, it would provide advice on jigs, fixtures,
special tools and product development where required.
(v) Forging and Heat Treatment Facilities: The ISC's would establish at their
premises plants for forging, heat treatment and surface treatment. The SSI
units could come to the ISC to get such fabrication done on the products they 27
are manufacturing on sub-contract, and pay a mutually agreed price for this
job to the ISC.
(vi) Credit: The ISC would provide credit to the SSEs for purchase of new
equipment and raw materials. This credit could be accessed from the recently
formed SMEDA, Small Business Finance Corporation, and nationalized
commercial banks who are currently developing special windows for credit to
small and micro enterprises. In cases where raw materials are available in
bulk supply, the ISC could buy it from the source, stock it on its premises and
sell at a reasonable price to units as and when they need the raw materials.
Alternatively, it could access raw materials as required from local branches of
the proposed Raw Material Bank (see next sub-section).
The specific technical facilities required by ISCs in the metal based and light
engineering industries by way of illustration are indicated in appendix 1,
together with product groups.
Enabling Institutions at the National/Provincial Level
To initiate and sustain interventions for accelerating the growth of SMEs an enabling
set of institutions at the national level would be necessary. The following three
institutions can be candidates for such a role:
(i) Small and Medium Enterprise Development Authority (SMEDA). This
institution is already in place and has just begun work. The two key
objectives of SMEDA are to: (a) represent the interests of SMEs in the process
of national policy formulation at the highest level to create an enabling policy
environment for the growth of SMEs, and (b) to formulate a comprehensive
package of institutional changes and support services in nine selected
industries in the SMEs sector and coordinate from various sources the
provision of such support services in the fields of technology up-gradation,
credit, marketing, and management expertise.
(ii) Demand driven industry specific Vocational Training Institutes (VTIs)
initiated by a Vocational Training Council (VTC) at the provincial level. (See
Chapter III, Section 5 for a more detailed discussion on the VTIs project). 28
An important element in enabling the growth of SMEs would be the provision
of industry specific skills at a level of competence required by the SMEs. As
the other institutional constraints to SMEs growth, are overcome, the
availability of technicians would facilitate not only a higher growth of SMEs,
but also a higher growth of productivity and overall improvement in the
distribution of income.
The government of Punjab has recently undertaken a major initiative in this
regard by setting up a Vocational Training Council (VTC) which has brought
together expertise from the private sector, government and donors in devising
a program for the establishment of 50 VTIs in different districts of the Punjab.
Each of the VTIs would have an independent Board of Directors and
professional management drawn from the relevant industries. The courses for
each VTI have been designed by the best practice private sector industries and
some of these industries have guaranteed employment to the graduates of such
VTIs. The VTIs are initially funded by Rs. 3.4 billion from Zakat fund and
will train young men and women from poor families who would otherwise be
eligible for Zakat donations. Three of the VTIs have already been established
and started functioning. If this undertaking proves to be a success, it could
become a model for other provinces in the country, for employment generation
and poverty alleviation on a sustainable basis through Zakat Funds. SMEDA
is already closely coordinating with the VTC and its associated VTIs.
iii) Establishment of Raw Material Banks for SMEs
The provision of quality raw materials to SMEs is essential if they are to
achieve quality control of finished goods and conform to the quality control
norms of ISO-9000 and ISO-14000. Currently, there is a severe problem of
acquiring quality raw materials for SMEs, particularly, in the light engineering
sector. This is partly due to the fact that the minimum sale lot is higher than
the requirements of any one SME. On the basis of hearings that we conducted
with different groups of SME owners in different districts of the Punjab the
following problems facing SMEs in acquiring raw materials were identified:20
___________________________
20 Report of the Sub-Committee (of which the author was a member), on Cottage and
Small Scale Industry, op. cit., Pages 31-34. 29
- Because of the high minimum sale lot of metal-based raw materials,
SMEs have to depend on commercial importers thus incurring a
higher cost.
- Commercial importers in an attempt to maximize profits often pick up
stock lots of materials which are sub-standard, thereby, adversely
affecting the quality of finished goods.
- Traders do not give sales tax invoices to the buyers of small quantities
of raw materials, and thus, SMEs cannot claim reimbursement of sales
tax that is built into the price of inputs. This means a loss of 8 to 10
percent on sale revenues compared to the larger manufacturers.
A new policy initiative through which the problems associated with raw
materials for SMEs can be resolved, is to set up Raw Material Banks near
clusters of SMEs, managed by Industrial Support Centres (proposed above), in
collaboration with the respective associations of industries. Information
regarding sources of raw materials, prices and quality specifications,
management expertise for running the banks and credit could be coordinated
by SMEDA. 30
CHAPTER III
RECENT GOVERNMENT INITIATIVES FOR EMPLOYMENT
GENERATION AND POVERTY ALLEVIATION
In this Chapter, five government initiatives for employment generation and/or poverty
alleviation are examined, some of their structural weaknesses identified, and policies
proposed for overcoming them in those cases where the schemes are potentially
viable: (i) SMEDA, (ii) Self-employment Scheme, (iii) PRSP, (iv) PPAF, (v) Zakat
as a safety net for the indigent, and (vi) VTIs.
Section 1
Small and Medium Enterprise Development Authority (SMEDA): An
Assessment
1.1 Origins
SMEDA represents a major government initiative at the federal level to establish an
apex institution for coordinating support to SMEs in order to rapidly accelerate their
growth. In this Sub-section the goal, objectives and modus operandi of SMEDA will
be examined. Since it was established only a few months ago and it has yet to
produce results on the ground it is too early to make an evaluation of its performance.
However, an assessment will be made of the prospects of its success in the context of
the pitfalls it faces in the foreseeable future and some of the necessary conditions
required to avoid them.
The origins of the establishment of SMEDA lay in the recognition that the provincial
level small industries corporations (there is one in each province), are bureaucratized
and starved of resources to a point that they are incapable of playing a lead role in the
transformation of the SMEs sector. It was successfully argued at the highest level in
the government that an apex body was required which had the professionalism and
energy necessary to induce a quantum jump in the performance of SMEs to achieve a
significant impact on employment, GDP growth and exports.
1.2 Goal
SMEDA is expected to produce a corpus of detailed support policies and act as a
lobby group for SMEs in the highest policy making echelons of the government on 31
the one hand, and provide an apex support system to coordinate the provision of a
range of services for strategic sectors of small scale industry, on the other.
1.3 Objectives
SMEDA hopes to achieve the following objectives:
i) To provide a range of services “directly” to SMEs such as technical, financial,
managerial and marketing services.
ii) To strengthen, network and coordinate existing support institutions to “assist”
SMEDA in the provision of the above mentioned services to SMEs.
iii) To develop a firm level data base on the problems faced by SMEs and to
provide information on technologies, financial intermediaries, marketing
sources and management systems.
iv) To provide key institutions and stakeholders in the government, a policy
perspective on SMEs, in order to create an enabling policy environment for
SMEs. In this regard, heads of key policy making institutions in the
government would be periodically briefed on the work of SMEDA and the
role of SMEs. The purpose is to sensitize various government institutions to
the role and problems of SMEs in order to get the support of such institutions.
1.4 Mode of Functioning
For purposes of SMEDA’s work, SMEs are defined as all businesses in the
manufacturing and service sectors with an investment in productive assets (exclusive
of land and building) of upto Rs. 40 million. (This figure would be periodically
revised to take account of changing economic conditions).
SMEDA will select strategic sectors which have the potential for high value added
production to make a significant contribution to accelerating GDP, exports and
employment generation. The sectors that SMEDA has selected to start with are:
Light engineering, fisheries, livestock development for both milk and meat
production, fruits and vegetables, sports goods, surgical instruments, apparel, gems
and jewelry, transport, and information technology. 32
For each of the selected sectors, a strategic plan would be developed with the
participation of relevant SMEs and their representative organizations, on the basis of:
(i) the size of the international market for its products, (ii) potential comparative
advantage based on the strengths and weaknesses of existing SMEs in the sector, (iii)
a detailed assessment of the technological, institutional, managerial and financial
constraints to increasing efficiency, quality and output at each stage of the production
process, (iv) the analysis of (i) to (iii) would be used to develop firm and industry
level operational programs to achieve the objectives of the strategic plan.
After completion of the sector specific strategic plan it will be submitted to the Prime
Minister for approval. SMEDA then hopes to bring to bear the support of government,
provincial level government support institutions for SMEs, parastatal institutions,
banks, DFIs, trade and industry associations and the private sector in the fulfillment of
the strategic plan.
SMEDA plans to establish 10 sector teams. Each sector team consists of a Sector
Head who is a senior management expert with 5 to 6 years experience, two Sector
Specialists with masters degrees in business and engineering with three to four years
experience, and two Sector Councilors. The Sector teams are backed by a support
staff consisting of specialists in the following fields: Marketing, Management Support
Services, Technical Support Services and Financial Support Services.
1.5 Current Work
SMEDA has currently established two sector teams. One team will work on
livestock, fruits and vegetables and the other on light engineering. Apart from these
two fully established teams, SMEDA staff is also working on the fisheries sector
under the direct leadership of the Chief Executive Officer.
1.6 Work in Process: An Illustrative Example
At the moment, SMEDA is in the process of developing a strategic plan for marine
fisheries, to increase exports from US$170 million last year to US$500 million in the
foreseeable future. (The current annual global demand has been estimated at US$ 52
billion). In this regard, through consultation with a wide range of stakeholders,
SMEDA has developed plans to overcome the technological, managerial, financial 33
and institutional constraints at each stage of the value chain from the catching of fish,
transportation, storage, domestic and foreign sale, to the infrastructure and
governance of the Karachi fish harbour. For example, to increase the fish catch per
launch for each outward trip, the existing out-dated communication system is hoped
to be replaced with a GPS system with a two-way radio facility. (This will involve
getting permission from the Pakistan Navy to use a two-way radio within Pakistan
territorial waters by fishermen); the large volume of fish wastage, and deterioration of
quality is to some extent due to the fact that layers of fish are alternated with layers of
hard, sharp edged ice. During transportation on the sea, the sharp edged ice cuts into
the fish causing the resultant blood to percolate down to the lower layers of the fish
resulting in putrefaction. At the same time, the fish in the lower layers are crushed by
the weight of fish in the upper layers. This is another factor in bacterial growth in the
lower layers. (By EU quality standards much of the fish sold in the Karachi harbour
is unfit even for animal consumption).
SMEDA has planned to help develop a factory for flake ice which is much softer and
to use sliding steel trays for each layer of fish in order to substantially reduce losses
and quality deterioration. (The production of steel trays can be contracted to local
SMEs in the light engineering sector). Similarly, the auctioning procedure is hoped to
be made more transparent and improved storage facilities for fish established at the
Karachi harbour to meet with ISO-9000 standards for exports. A major change in the
governance of the Karachi fish harbour will be required. Due to the danger of coming
into clash with the Karachi fish mafia, it is envisaged that a Rear Admiral of the
Pakistan Navy would be appointed to restructure the governance of the Karachi fish
harbour. A consortium of banks is hoped to be created to finance the up-gradation of
the physical infrastructure of the fish harbour, and provide credit to associations of
fishermen to upgrade their communication technology. A total of 6 billion rupees is
estimated to be required for turning around the fisheries sector at the Karachi harbour.
1.7 Some Pitfalls: Can they be avoided?
From the perspective of achieving its objectives, SMEDA faces a number of pitfalls
that are inherent in its design:
i) While SMEDA has or can develop capabilities for devising strategic plans for
each of the selected sectors, the ability to implement them is severely 34
constrained by: (a) lack of its institutional outreach to the large number of
SME clusters which are geographically widely dispersed across the country.
(SMEDA’s claim that it can provide support services to SMEs “directly” is not
realistic in view of the appropriately small number of its personnel and lack of
a direct outreach capability to the SME clusters across the country. See
Appendix 2, for a list of SME cluster locations), (b) lack of a formal structured
relationship even with regional support institutions such as small industries
corporations at the provincial level (for light engineering), livestock
development boards, or community based support organizations in the rural
sector (for SMEDA’s forthcoming sectoral strategic plan for livestock), and
the Karachi fish harbour authorities (for SMEDA’s marine fisheries
development plan). The stated objective of coordinating existing support
institutions to “assist” SMEDA in the provision of services to SMEs is also
unrealistic in view of the fact that these institutions are not designed to provide
the fast track high quality services envisaged by SMEDA, and would in any
case resist SMEDA’s attempt to establish control over autonomous provincial
level institutions.
ii) Yet the cooperation of such institutions and their willing integration into
SMEDA’s plan implementation process would be necessary if the wide range
of services envisaged under the plans are to reach SME units on the ground.
Their support may also be needed to build the unit specific data base which is
included in SMEDA’s objectives in order to develop support policies for
SMEs. What makes an effective relationship between SMEDA and these
regional and location specific support institutions particularly complex, is that
they are at the moment rigid, bureaucratic structures, characterized in most
cases by low competence level of personnel, absence of performance based
evaluation and lack of motivation. A major restructuring of provincial Small
Industries Corporations is necessary, not only to increase their effectiveness
with respect to SMEs, but also to link up effectively with SMEDA’s planning
and implementation process. Some of them are already perceiving SMEDA,
either as a source of getting a share of federal government resources, or as a
threat to their turf. That is why, quite understandably the first battle that
SMEDA is fighting, is to win the support of as many influential members of
the government as possible to acquire the necessary leverage with regard to 35
provincial and local institutions. (Hence the current intense public relations
effort of “getting the major actors on board”).
One of the ways in which SMEDA can develop an outreach mechanism is to
foster the establishment of ISCs (proposed in Section II.2.4) and coordinating
their work through ISC monitoring cells especially set up as autonomous units
located at provincial Small Industries Corporations. These ISCs would be
providing a range of services to SME clusters within their geographic range.
Included amongst SMEs receiving support from ISCs would be some that had
earlier been established under the auspices of provincial Small Industries
Corporations. Thus SMEDA, by fostering the establishment of ISCs, would
give a sense of participation to provincial Small Industries Corporations and,
at the same time, through its monitoring cells located at their premises,
SMEDA could lay the basis of ultimately helping to professionalize and
restructure these provincial support institutions.
iii) SMEDA represents a high profile initiative by the Prime Minister, and is
directly dependent on him for approval of strategic plans and fast track
implementation. Therein lies both its current strength and its possible
weakness with a possible change of the regime in the future. Precisely
because SMEDA is seen to have been established by the incumbent Prime
Minister, the wide range of government and parastatal support institutions
upon which SMEDA will depend for its outreach may cease to cooperate with
SMEDA once a change of regime takes place. Equally unfortunate is the
possibility that the new regime may try to consciously undo the autonomy and
professionalism that SMEDA currently enjoys. This has been the sad
tradition in Pakistan since late 1977 when each new regime tries to target with
its own political appointments those institutions which are seen to be the
creation of the earlier regime. In order to prevent such an eventuality or to
reduce its probability, it is necessary for SMEDA to resist government
sponsored appointments within its organization and at the same time to
systematically build working links with a wide range of non-governmental and
parastatal institutions to show in practice that its nature and working is derived
entirely from its public service objectives. At the same time, SMEDA needs
to demonstrate the nature of its work, its efficacy and its broad based linkages
with institutions in government, parastatal, non-governmental organizations, 36
private sector and civil society through an effective communication system.
Ultimately, the source of SMEDA’s strength and sustainability will lie in its
impact on the growth of SMEs, and its integrity, professionalism and
commitment, as perceived by the SMEs themselves.
Section 2
Self Employment Scheme
The Self Employment Scheme launched six months ago stipulates the provision of
loans to the unemployed and those with existing micro-enterprise units seeking
business expansion. This scheme is an enlarged and more lenient version of the
small business scheme launched under the auspices of the Small Business Finance
Corporation (SBFC) in 1992. The collateral requirements of the new SES scheme are
even more lenient than in the earlier scheme. During the period 1992-1996 when the
earlier version of the scheme was in operation SBFC suffered a 50 percent default rate
on its disbursed loans.
The Self Employment Scheme has a planned disbursement target of Rs. 7 billion
initially, which could go up to Rs. 250 billion subsequently. The range of individual
loans varies from Rs. 50,000 to Rs. 500,000, at an interest rate of 15 percent which is
about 5 percent lower than the current bank interest rate on loans to commercial
borrowers outside the scheme. The applicants under the SES are required to show
that they are at or above a minimum age of 18 years (no upper limit). However, there
is no requirement either of literacy, any prior experience in the business he/she seeks
to undertake or even a rigorous project feasibility. The SES scheme does not include
any arrangements for provision of training to borrowers in the business they wish to
undertake for the first time, nor of technical support, marketing or even unit specific
monitoring. SMEDA has recently been given the responsibility of monitoring the
banks which are disbursing the loans.
The SBFC and five nationalized banks are required to aggregatively reach the target
disbursement figure of Rs. 7 billion. So far, six months after launching the SES Rs. 5
billion have been sanctioned by various banks and just over Rs. 3 billion actually
disbursed to about 7,000 borrowers, in the first five months. The borrowers are
concentrated in the Punjab province, especially in Lahore and Rawalpindi. The 37
nationalized commercial banks having acquiesced to the request during a high level
meeting to allocate part of their credit for this scheme have subsequently shown, quite
understandably, a certain hesitation in actually disbursing the loans. In response to
the initial slow pace of disbursement (relative to the targets) the Prime Minister
began listening to complaints of applicants once a week and then issuing necessary
instructions to the relevant banks. Since then the pace of disbursement has
accelerated to reach almost Rs. 5 billion in the first six months.
It has been well-established in Pakistan and other South Asian countries over the last
two decades, that micro enterprise loans result in increased incomes of the poor and
have a low default rate, only when these loans are accompanied by a package of
services to the borrowers. These include careful evaluation of micro enterprise
project proposals, social mobilization or group formation, technical training, technical
support and marketing facilities at the community level, as part of a process of
Participatory Development.21 Where these conditions have been met, (e.g., AKRSP,
SUNGI, PIEDAR, PRSP and OPP), the default rate has been less than five percent,
and the loans have had a substantial impact on the incomes of the borrowers. The
most important reason why the small business finance scheme had such a high default
rate (50 percent) during the period 1992-96 (even though the loans were primarily
disbursed to existing small businesses) was that the institutionalized provision of
support services at the local level, so vital for the success of micro finance was not
included in the design of the scheme.
In designing the new Self Employment Scheme, even the lessons from the failure of
the earlier scheme were not learnt, let alone, the well-documented positive
experiences of a wide range of NGO initiatives in micro finance in Pakistan.
Consequently, the new scheme cannot be expected either to have a positive impact on
the poor in terms of creating a sustainable basis for income generation and
___________________________
21 See: Akmal Hussain:
- Poverty Alleviation in Pakistan, Vanguard Books, Lahore 1994.
- Punjab Rural Support Programme: The First Four Months, Report of the
Honorary Chief Executive Officer, November 1998.
Ponna Wignaraja, et. al:
- Participatory Development, Learning from South Asia, United Nations
University Press, Tokyo and Oxford University Press, Karachi, 1991.
- Report of the Independent South Asian Commission on Poverty, 1994. 38
employment or to have a lower default rate than the earlier SBFC operated scheme.
At best, it is primarily a one-time handout to the poor. In actual fact the scheme may
not achieve even this purpose since the mechanism of disbursement is such that it
cannot ensure that the loans actually reach the poor and are not misappropriated by
the relatively affluent. Even in cases where the loans reach the poor, the absence of
support services and high default rates means that the poor in so far as they may
invest their own savings alongwith the loans into unsuccessful projects, may actually
lose their savings and become worse off than they were before borrowing the loan.
Section 3
Punjab Rural Support Programme (PRSP)22
The Punjab Rural Support Programme represents not only the largest provincial level
poverty alleviation programme, but also achieved results on the ground faster than
any other poverty alleviation initiative in the country. For example, in its first six
months of operation the PRSP established 1100 community organizations of the rural
poor, compared to NRSP, which managed to form 787 in its first four years of work.
PRSP could also be distinguished from other large scale support organizations in
terms of its management approach and the role of synergy and consciousness in
changing the material conditions of the poor as measured through verifiable
indicators. PRSP perhaps also represents significant lessons on how the politics of
power and intrigue within a decaying elite begins to intervene, when the potential of
the poor is unleashed. In this section we will briefly indicate the objectives of the
PRSP, the specific management principles and mode of its functioning and the
verifiable indicators of performance at the end of the first four months of its work.
3.1 Origin
Subsequent to the adoption by the Federal Government of the main proposals
contained in the Report of the Task Force on Poverty Eradication23, the Chief Minister
Punjab decided to take a major initiative to finance the setting up of the PRSP through
___________________________
22 This sub-section is based on the Report of the Honorary Chief Executive Officer of
PRSP to the Board of Directors, November 1998. The full text of the CEO’s Report
is given as Appendix 4.
23 Report of the Task Force on Poverty Eradication, May 1998. 39
a Rs. 500 million grant. The PRSP was established as a non-profit private limited
company registered under the Companies Act. The grant from the Punjab
Government was placed into an endowment fund and it was decided to finance the
operations of the Company through interest income from the endowment fund and onlend
to the poor through a credit line initially from the NRSP and then from a
commercial bank. An Honorary Chief Executive Officer was appointed and work
began in May 1998 for hiring and training the staff of PRSP and at the same time
developing a five year plan of work. By June 1998, eight regional teams had been
developed and deployed in eight divisions of the Punjab, coordinated and supported
by a Camp Head Office in Lahore. Each team consisted of a Regional General
Manager, three to four social mobilizers, and a credit control officer, trained in
operating computerized accounts.
3.2 Goal
The goal of the PRSP is to overcome poverty in rural Punjab within a decade by
actualizing the potential of the poor through a regional support system. The system is
designed to enable organization of poor village communities, through rediscovery of
community consciousness, and provide access to skill training, credit and technical
support. The purpose of such a support system is to initiate and sustain a process of
diversified growth of income and the human, natural and economic resources of the
poor.
3.3 Objectives of the Programme:
i) Organize approximately 1.63 million households, into approximately 29,681
community organizations with approximately half of them female COs, in
13,629 villages, to achieve 100 percent coverage of the poor population in the
target regions.
ii) On the basis of a series of dialogues with COs, identify a portfolio of
diversified income generation projects in agriculture, livestock, micro
enterprises and small-scale infrastructure. Through implementation of these
projects, achieve a 50 percent increase in income levels of the poor population
in the target region in five years, on a sustainable basis.
iii) Enable the provision of training to 107,372, men and women amongst the poor
population in the target districts over a five year period, in the following 40
fields: Community Management, Livestock, Agriculture and Forestry, Poultry,
Technical/Industrial Training, and Micro-enterprise development.
iv) On the basis of social mobilization, skill training and provision of technical
support, provide credit of Rs. 6.66 billion to Rs. 486,240 beneficiaries over a
five-year period, and achieve 95 percent pay back.
v) Achieve a savings fund of COs of approximately Rs. 428.51million in the
target regions.
3.4 Consciousness, Management Culture and Work Procedures:
The defining feature of the Programme which perhaps distinguished it from the other
rural support programmes in the country was the participatory approach to
management within the PRSP team. The challenge was to create a work environment
in which each individual could become a centre of independent thought and action
and yet create a synergy through which collective reflection could catalyze thought
and coordinate action for social change. Given the magnitude of the task before
PRSP and the pace and energy required, such a management culture was essential to a
new passion: A passion which impelled those who worked in the PRSP team, and
those for whom it worked. It comes from transcending the ego and relating with the
community through love. Thus, passionate consciousness is both a cohering force of
the community and also the synergy through which the PRSP team engages in a
process of action and reflection. This principal is the basis of the work culture and the
methodology of action of PRSP. It was illustrated by the dialogues that occurred
between PRSP personnel and rural communities, on the one hand and between the
members of PRSP team on the other. The dialogues were designed to identify and
actualize the creative potential of individuals.
3.5 Verifiable Indicators
In a program whose defining feature was to enable the formation of community
organizations and the development of community consciousness, the most important
verifiable indicator was the number of community organizations formed. A CO was
deemed to have been formed only when it had acquired the ability to hold regular
meetings (at least three) with proper documentation of the meetings and to have
opened a savings account with contributions from each of its members. 41
The number of CO meetings held (with over sixty percent attendance) became the
second indicator and the amount of CO savings was the third indicator of program
performance.
Household level portfolios of investment were developed by the regional teams
through detailed dialogues with communities. These portfolios of investment
indicated the income generating activity that households wished to undertake. The
obstacles to undertaking such projects and successfully completing them were
identified. The number of portfolios of investment completed, thus became the
fourth indicator of program performance.
The basis of the credit appraisal of the portfolios of investment was the assessment of
their viability first by the CO and then by program staff members. Credit
disbursements therefore represented collective evaluation of individual projects and
became the fifth indicator of program performance.
Training needs in the context of both household level projects and collective projects
were identified as an essential element in the process of localized capital
accumulation. Training needs were identified on the basis of dialogues between
program personnel and COs. The number of persons trained in various fields thus
became the sixth indicator of program performance.
Finally, credit payback performance indicated not only the success of income
generation projects but also the capacity of the CO to bring to bear its collective
identity in ensuring timely payback of borrowed money by the individual households.
In the long run the ability of COs to design and implement collective projects and to
resolve social conflicts at the CO level would became an important indicator of
program performance.
3.6 Programme Progress July to October 1998
In the period July to October 1998 the PRSP had, by the Grace of God, not only
established eight regional teams in the target divisions but had formed 764 community
organizations with a collective savings fund of Rs. 2.758 million. (By December
1998, six months after start up, PRSP had formed 1100 community organizations).
The PRSP had disbursed Rs. 22.41 million of credit to 1403 beneficiaries in a wide 42
range of fields including agriculture, livestock and micro-enterprises. The recovery
rate of credit was 100 percent. Training had been imparted to 782 village activists in
community management skills, agriculture and livestock.
Underlying the quantitative achievement, in terms of verifiable indicators, was the
fact that a change had begun to take place in the quality of life of the rural poor in the
areas of operation. Across the eight regions, it was apparent, that the organization of
poor village communities and the initiation of income generation projects had not
only given a new confidence and collective purpose, but had also significantly
increased their individual incomes. For example, small household durri producers in
one region were locked into an exploitative relationship of dependence on arhtis. The
durri manufacturers were provided with raw materials at higher than market prices by
the arhtis, while durris were acquired by the arhtis at less than market prices. After
the PRSP intervention, these durri manufacturers started buying raw materials and
sold durris independently, which led to an increase in their incomes typically from
about Rs. 2,500/- per month previously to about Rs. 4,500/- per month. Similarly, in
other regions, poor households had set up small village retail shops, acquired
buffaloes, small goats, set up bicycle repair shops and Chikkh producing units. A
total of 1403 households had benefited from such interventions. Beyond the income
dimension a change in social consciousness was noticeable: For example, in Multan a
village community reported that they were beginning to settle their disputes within the
CO and had even resolved amicably the disputes, which they had earlier registered at
the local police station. A women’s CO in the same area had set up a girls school,
indicated the beginning of collective action for the collective benefit of the
community.
The PRSP had also succeeded, by the grace of God, in establishing linkages with
government line departments and the private sector to bring their expertise to bear for
poverty alleviation at the village level. For example, the Department of Livestock
and Dairy Development had been mobilized to provide training to village activists in
improved livestock management, the Department of Agriculture had been mobilized
to give advice on pesticide use and the Department of Health had been mobilized to
provide their expertise at a community managed health camp for 650 members of 43
various COs. In the private sector arrangements had been made with AEFFCO24
leading to the holding of workshops in all regional offices to inform CO members
about the importance of soil testing and how a composite fertilizer that was congruent
with the nutrient requirements of each farm could increase yield per acre by 15 to 50
percent. AEFFCO offered to do soil testing in the target areas and provide custommade
composite fertilizer to farmers on demand. Similarly, Nestle Milkpak had been
persuaded to offer their services to show to poor farmers how a scientific mix of cattle
feed could both reduce the costs of feed and double milk yields of buffaloes and cows.
They had also offered to pick up milk from villages on a pilot basis initially at
Sahiwal.
In short, across the eight regions of the Punjab, the seed had been planted of
community organization, improvement in incomes, skills, systematic provision of
technical support at the village level, and a change in social consciousness.
3.7 Lessons Learnt, and Implications for ‘Scaling up’
The experience of the PRSP in its first six months (July to December 1998) has
demonstrated the potential of the Punjab peasantry to pursue liberation from the bonds
of economic dependency through creative action. Equally manifest was the relentless
pursuit of power, patronage and political control by the ruling elite. The discourse of
love and the perception that a sense of community consciousness could become the
basis of changing their material conditions, elicited an enthusiastic response from the
poor peasantry. Underlying their operative psyche deployed for functioning in an
atmosphere of deceit, dependency and desperation, there is a deeply rooted
consciousness of love, integrity and creative action. This can be seen in the living
folk tradition of the Punjab peasantry. It lies just below the surface of language use,
in their silences as much as the cadences of their speech.25 Once this counterconsciousness
of relatedness, integrity and creative action is brought to the surface, a
new recognition comes into play. The challenge in the dialogues undertaken by PRSP
was to bring about this gestalt switch in consciousness, through word, gesture and
work procedures. The awakening of this consciousness and the promise it held of an
___________________________
24 AEFFCO is a private sector firm specializing in soil testing and production of composite
fertilizers.
25 For a more detailed discussion of this issue see: Appendix 4. 44
alternative way of being for the poor, was a major factor in the unprecedented pace of
PRSP’s achievements in terms of verifiable indicators. (Number of COs formed,
level of collective savings, loan recovery rates and number of income generation
projects undertaken).
The progressive development of a sense of community consciousness, improved
skills, increased productivity, incomes and savings, enable the poor to become active
subjects in a process of overcoming their economic deprivation and social bonds of
dependency. This perhaps constitutes ‘empowerment’ of the poor. By contrast, the
power of the ruling elite is constituted by fragmenting and isolating those they
‘govern’, and locking them into a relationship of dependence, in which each handout
of resources to the poor reinforces their dependency and reproduces their poverty.
The enterprise of poverty alleviation, therefore, brings into focus two counter-posed
conceptions of power. The issue of taking ‘poverty alleviation’ to scale, raises the
question of how a different space is to be created, in which the process of reproducing
the power of the ruling elite is replaced by a process of ‘empowerment’ of the poor.
The very concept of ‘empowerment’ of the poor, is problematic in a form of
governance in which political support is to some extent acquired and maintained
through patron-client relations between the ‘governors’ and the ‘governed’. In this
context, disbursement of the state’s financial resources and provision of employment
opportunities are used as a means of enlarging patronage and power. Even some of
those who are heading large government initiated, but autonomous poverty
programmes, tend to operate them as fiefdoms and form alliances with politicians and
the bureaucracy by granting them unwarranted access over resources and employment
decisions within their ‘demesnes’. Consequently, resources (whether granted by
donors or government) apparently provided to create a space of empowerment for the
poor, tend to get re-appropriated by the ruling elite. The space of empowerment for
the poor tends to get restructured into a more complex space which appears to be
empowering the poor while actually reinforcing their dependency through patronclient
relations. PRSP has begun to be subjected to this dialectic. From its very
inception the bureaucracy and politicians made demands to appoint their favoured
clients to different positions within the PRSP team. When these demands were
resisted, and PRSP achieved results beyond their expectations, actions were initiated 45
in December 1998 to undermine the autonomy of the PRSP and subtly integrate it into
the bureaucracy and its domain of power.
The question that arises is how scaling up of support organizations for Participatory
Development is to be achieved without bureaucratizing the support organizations and
the space ‘allocated’ for the empowerment of the poor, prevented from being used for
the exercise of patron-client relations. This possibility occurs whenever governments
create large support organizations which while being formally autonomous are
actually subordinate to the ruling elite and its mechanisms of reproducing
dependency.
Section 4
Pakistan Poverty Alleviation Fund (PPAF)
4.1 Origin
The Pakistan Poverty Alleviation Fund is in the process of being established as an
autonomous institution with a Rs. 500 million (US$ 8 million) grant committed by the
Federal Government and US$ 97 million expected from the World Bank. The PPAF
has a Governing Council already in place which has elected a Board of Directors.
Included in the Board are two nominees of the Federal Government in their ex-officio
positions.
4.2. Goal
The project goal is to alleviate poverty and empower the poor at the all Pakistan level,
by providing them with access to resources and services, using NGOs as partner
organizations (or intermediaries) for the provision of micro credit, community
infrastructure and ‘capacity building’. The project is not designed to directly engage
in social mobilization and village level institution building of the poor. Therefore, its
goal of ‘capacity building’ of the poor will presumably be achieved through selected
NGOs who would act as partner organizations for the PPAF.
4.3. Objectives
The project has three inter-related objectives: 46
(i) Provide micro credit to the poor through NGOs which have a track record of
micro credit of at least two years. It is presumed that the loans would be
accompanied by technical support in order to enable households to translate
such loans into increased incomes. However, it is not yet clear how such
technical support would be provided.
(ii) Support small scale community infrastructure schemes at the local level on the
basis of organizing communities who would identify, prepare, implement and
manage the schemes. The PPAF would provide funds as grants to partner
organizations for financing such community infrastructure projects. However,
the communities would be responsible for recovering operations and
maintenance costs of these schemes. The average size of these schemes is
expected to be about Rs. 500,000. In view of the fact that community
organizations need to have reached a certain level of maturity and
management capability for collective projects, the infrastructure schemes are
to be delayed for at least one year.
(iii) PPAF would provide grants to partner organizations and communities in order
to strengthen their institutional capacity to engage in social mobilization, and
implement and manage development projects at the local level. The PPAF
has not yet developed a management system for selection and need assessment
of NGO candidates applying for such grants.
4.5. PPAF: Pitfalls and Possibilities in the Future
Pakistan today may be at a conjunctural moment in its endeavour of overcoming
poverty: Over the last decade the concept of Participatory Development26 and the
associated need for building independent and innovative support organizations has
become a part of main stream development thinking in government, civil society and
several multilateral development agencies. At the same, a large number of NGOs,
using a variety of innovative approaches to Participatory Development have
demonstrated significant results on the ground, although on a relatively small scale.
A number of rural support programmes have also been established by the government.
These RSPs while formally adopting the Participatory Development methodology
___________________________
26 The methodological and operation foundations of this concept were propounded in: Ponna
Wignaraja, Akmal Hussain, Harsh Sethi and Ganeshan Wignaraja: Participatory
Development, Lessons from South Asia, United Nations University Press Tokyo and Oxford
University Press, Karachi, 1991. 47
have in practice exhibited the tendency to get bureaucratized and reintegrated into the
patron-client structures of power. The former (Participatory Development NGOs) for
a variety of reasons are constrained either from reaching scale, or being replicated
rapidly, or both.
PPAF has the potential to become a major apex support organization for catalyzing
the development and replication of NGOs, to take the enterprise of overcoming
poverty in Pakistan through Participatory Development to a national scale. It can also
act as a forum for careful evaluation of existing Rural Support Programmes (RSPs):
Through cross-fertilizing dialogues with the NGO sector PPAF can help RSPs
restructure themselves wherever possible and sustain their creative growth as
genuinely Participatory Development organizations.
If PPAF is to perform this role, the following conditions may be necessary:
(i) The single most important factor would be to achieve a genuine autonomy
from the structures of governmental power. It must emerge not merely as an
organization for disbursing credit and grants to micro finance institutions, but
as an independent centre for catalyzing and coordinating innovative poverty
alleviation initiatives on a national scale. This will involve (in addition to
providing credits and grants to partner organizations), building the capacity
for: (a) coordinating training of both village level specialists as well as social
mobilizers and middle level management professionals for development
NGOs, and (b) providing a forum for development NGOs to engage in
collective reflection and research.
(ii) PPAF will need to develop a minimum in-house capacity to rigorously
evaluate its partner organizations and access technical resources from other
institutions to monitor the performance of partner organizations and to provide
them with management support and training on demand.
(iii) An independent apex training institution at the national level may be required
for training a variety of village level specialists in fields such as community
management, animal husbandry, sustainable agricultural practices, and offfarm
micro enterprises. As existing NGOs replicate rapidly and/or reach
scale, a large number of such village level specialists will be required for
which an apex training institution may be necessary. 48
(iv) An independent monitoring and evaluation institution for NGOs/RSPs
engaged in Participatory Development, would be helpful in providing PPAF
with systematically collected information on the performance of existing and
potential partner organizations, as well as give an impact assessment of the
poverty alleviation effort. Such an evaluation and monitoring institution can
be a lean outfit, accessing the skills of research and data collection institutions
such as the Federal Bureau of Statistics, PIDE, SDPI, SPDC, and engaging
active NGOs in participatory evaluation exercises. A corpus of data and
research could be developed on the basis of: (a) Household level patterns of
expenditure, consumption, economic activity, access over basic services,
rights of women and security, (b) identifying the mechanism through which
people shift out of poverty (this is already being done in a pilot project called
Pakistan Poverty Assessment (PPA), (c) Developing a poverty map showing
the specific tehsil level and thana level location of the poor population, its
social composition, forms of activity and nature of dependency relations
through which their poverty is being reproduced, (d) a record of the discourse
of the poor indicating how the poor themselves articulate their changing
human condition.
(v) Provide a national forum for policy dialogues on poverty. This forum would
periodically bring together key policy makers, donor agencies, NGOs, RSPs,
community based organizations (CBOs), and development professionals and
researchers both from Pakistan and abroad. The purpose of the dialogues
would be to engage in collective reflection on the lessons learnt from
experience, help sensitize and coordinate poverty alleviation policies of both
government and donor agencies and to identify new policy issues at both the
national and local levels.
Section 5
Zakat and Ushr System and the New VTIs
The Zakat and Ushr System is supposed to be a safety net for the poor and indigent
designed ostensibly with reference to the Shariah. Recently, the Punjab government
has launched a major Rs. 3.4 billion program for vocational training in a variety of
industrial skills for the poor on the basis of financing from Zakat Funds. In this
Section we will briefly discuss both these programs. 49
5.1 Zakat and Ushr System
The Zakat and Ushr System in Pakistan while laying down a rigorous procedure for
disbursement of funds through the government’s administrative system, neither
involves systematic participation of local communities in the identification of
beneficiaries, nor does it have sufficient financial scale and geographic coverage to
constitute an adequate safety net for the poor and indigent.
5.1.1 Administrative Framework and criteria for disbursement
Zakat funds are collected (as a tax at source) and disbursed under the Zakat and Usher
Ordinance 1980. The purpose of the Zakat and Bait-ul-Maal is ‘to assist the needy, the
indigent and the poor’. There are four types of Zakat funds: (a) Central Zakat Fund,
(b) Provincial Zakat Fund (c) District Zakat Fund (d) Local Zakat Fund.
The Central Zakat Fund which collects the funds at source may transfer funds to the
Provincial Zakat Fund (which in turn can transfer funds to district and local funds),
and at the same time, directly disburse grants to eligible individuals. The
disbursement is made by Zakat Councils at the Central and Provincial levels and by
Committees at the District and Local levels. The disbursement mechanism is
essentially a top-down one with the Central Zakat Council preparing its annual budget
for the utilization of funds and then the various disbursement councils and
committees, preparing lists of individuals whom they think are eligible. The Zakat
budget allocates funds in the following five categories: (a) Assistance to the needy,
the indigent and the poor, particularly orphans and widows, the handicapped and
disabled, (b) assistance to those affected or rendered homeless due to natural
calamities, (c) to finance expenditure incurred in connection with collections,
disbursement and administration of the Fund, (d) investment in any non-interest
bearing financial instruments, (e) any other purpose permitted by Shariah.
Under category (e) above, a Food Stamp Scheme was recently initiated under the
auspices of the Punjab government on an experimental basis. It was designed and
implemented by Professor Sajjad Haider, who was a retired professor of Economics,
at Government College Lahore, and a man of great integrity and single minded
devotion. He was able to mobilize Assistant Commissioners, Deputy Commissioners,
members of Local Bodies, the members of the Provincial Assembly and reputable
persons from civil society at the local level, to prepare lists of indigent people who by 50
all accounts were deserving of Zakat funds. Food Stamps were issued to such
persons who could use the Food Stamps to buy a fixed quantity of Atta (flour) on a
monthly basis at subsidized rates. The Scheme was tried in three districts and after
evaluation of its great success, it was extended to nine districts of the Punjab.
Professor Sajjad Haider died in a helicopter crash in December 1998 while returning
from a field trip in Bahawalpur, undertaken in connection with the implementation of
the extended scheme. This experiment showed that Food Stamp schemes, if they are
operated on the basis of integrity, dedication, broad based consultations with
stakeholders especially poor communities, then it can contribute to provide cheaper
food to the indigent. It could perhaps be strengthened if it is combined with a scheme
for encouraging the savings of the recipients, training wherever possible and credit for
micro enterprises in the homes of the indigent.
5.1.2 Limitations of Existing Scheme and Policy Constructs for Greater
Effectiveness
The scale of Zakat funds available and the present administrative mechanism of
disbursement, are such that the Zakat and Bait-ul-Maal institutions, cannot be
expected to alleviate the condition of the indigent and handicapped, in a significant
and sustainable way:
First, there is the problem of inadequate coverage. The disbursement of Zakat funds
annually is about Rs. 2.5 billion in a situation where approximately 28 million people
are living below the poverty line (defined in terms of a minimum calorific norm).
Consequently, Zakat funds, even as a top-down cash handout of Rs. 300 per month
per person, would cover only 2.5 percent of the poor population on an annual basis.
To provide even the minimum food requirements to the poor population through a
cash handout would require an annual Zakat disbursement of Rs. 14 billion (not
including the administrative costs) annually. Even if Zakat funds were available on
such a scale, given the present centralized mechanism of disbursement it is highly
unlikely that the money would actually reach the mustahqeen (the eligible persons) in
all cases.
Second, the top-down disbursement procedure in which the Central Zakat Council
transfers the funds to Provincial Zakat Fund and thence to District and Local Zakat
Funds suffers from the problem of accurate identification of the beneficiaries. The 51
lists of beneficiaries prepared by the Central and Provincial Zakat Councils do not
even include the participation of the lower Zakat bodies, let alone the poor.
Therefore, the lists of beneficiaries far from being based on any consultation with
poor communities, actually suffer from a certain arbitrariness and inadequate
assessment of the actual needs of the poor. Moreover, since the Central Zakat
Council strives to achieve uniform distribution of funds throughout its jurisdiction, the
question of assessing the relative needs of the poor, does not arise.
Third, the disbursement procedure which is at best a cash handout to a small fraction
of the poor population, does not take into account the possibility, that the funds could
be used for enabling the poor to achieve a sustainable increase in their incomes.
Fourth, at the moment the administration of Zakat and Usher seems to be split
between the conservative elements at the Central Zakat Council level who are trying
to safeguard the system with tight checks and balances to ensure complete control
over the distribution of funds and the more ‘progressive’ elements at the provincial
level who want the system to be less rigid and be more responsive to the needs of the
poor. The latter contend that while tight checks and balances are necessary to
prevent misuse of funds, they have not contributed enough to the main cause which is
to alleviate poverty. Recently, a committee has been formed, headed by a Justice of
the Lahore High Court to address some of these issues.
5.2 Vocation Training Institutes (VTIs)
5.2.1 Objective and Scale
The Vocational Training Institutes Program aims to establish 50 VTIs in the Punjab at
an estimated capital cost of Rs. 3.4 billion financed from Zakat Funds. Its objective is
to provide industry specific technical training to matriculates primarily from poor
families. It is estimated that 20,000 skilled persons will graduate from these
institutes in two shifts, annually. The location of the institutes will be mainly in the
rural areas, with 32 out of the 50 planned institutes located in tehsil headquarters in
various districts of the Punjab. 52
5.2.2 Implementation Mechanism
The program has been designed and is being implemented by the Vocational Training
Council (VTC), an autonomous body consisting of individuals from the private sector
industry, and professionals from various disciplines and also secretaries from the
following provincial government departments: Zakat and Ushr, Local Government
and Rural Development and Finance. The implementation process consists of the
VTC facilitating the establishment of an independent Board of Directors for each
VTI, its principal and faculty and helping to design courses that correspond to the
needs of respective industries.
5.2.3 Distinguishing Features
The concept of the VTI’s project is distinct from the earlier vocational training centres
in the sense that they are supposed to be demand driven and operationally integrated
with the needs of industry. Specifically, the VTI’s project has the following
distinguishing characteristics: (i) Execution of the project is being done mainly by
corporate managers and proprietors from reputed private sector companies, (ii) the
Board of Directors of each VTI is expected to be exclusively drawn from reputed
industrial concerns, (iii) the trainees are required to spend one-third of their training
period on internship in various private sector units in the industry concerned, (iv) each
member of the teaching staff of each VTI is expected to be attached to individual
industrial units for a specific period each year in addition to attending regular teaching
staff development programs for updating their knowledge on the state of the art in
each industry, (v) the students would also be provided with entrepreneurial/small unit
management training to enable self-employment after graduation if the student
chooses to set up his/her own enterprise after graduation. There are plans to link up
with the banking sector and SMEDA, to access loans for those graduates of VTIs who
wish to become small scale entrepreneurs, (vi) there will be a vocational counselling
and placement cell in each VTI which will be in continuous liaison with private sector
industry to ensure that all those who graduate from the VTIs get jobs in the relevant
industry. For example, as soon as the first VTI, (for computer software training and
hardware maintenance) was established, private sector industry offered to employ all
the graduates as soon as they completed their course. 53
5.2.4 Prospects and Hazards
Pakistan’s manufacturing sector, apart from other factors, is constrained by a shortage
of industry specific technicians at the shop floor level. The applicants, in most
cases, have general skills, either picked up on the job elsewhere, or are graduates from
vocational training centres which in most cases impart general and often outdated
industrial skills. Consequently, industrial units are obliged to provide on job training
often in an unstructured fashion and suffer significant losses in machine breakdown
and loss of productivity. At the same time, due to the poorly trained shop floor
personnel, industries in Pakistan, in most cases, find it difficult to introduce shop floor
adaptations and innovations, and also to achieve and maintain high quality standards
necessary for competitive exports. In this sense, the VTIs as they are presently
conceived can play a significant role for private sector industry to help improve
productivity, provide a basis for technical change and introduction of improved
quality control systems. At the same time, the VTIs will contribute to shifting the
labour force from low skill, low value added sectors to high skill, high value added
sectors, thereby, improving average incomes of workers.
The catch however, is that the effectiveness of VTIs critically depends upon: (i) the
appointment on the basis of merit alone of high quality professional management and
training staff, with the relevant industry experience and training skills, to achieve a
qualitative improvement in the professional standards of shop floor technicians, (ii) a
training the trainers program through which a pool of high quality trainers with the
latest skills in each industry can be created. There are plans at the moment of getting
training staff from Germany to develop an initial pool of trainers. Whether or not this
plan comes to successful fruition may have a significant bearing on the overall
success of the VTI’s program, (iii) successful integration of industry specific VTIs
with best practice industrial units which can help in designing courses, provide
independent evaluation of training standards, provide internship facilities to VTIs
students and finally provide job opportunities to VTIs graduates. Successful
integration of VTIs with industry, will depend not only on having a dynamic
counselling and placement cell in each VTI, but also on the professional quality and
reputation of VTIs staff and their individual links with industries, (iv) the
independence, professional standing and commitment of members of the Board of
Directors and senior management of each VTI, (v) adequate financing on a
sustainable basis of the recurring costs of each VTI, as well as the timely replacement 54
of machines and equipment used for training, to ensure that it meets with the latest
industrial standards and is in good working order. Obsolete and poorly maintained
machines at VTIs will not only induce a deterioration in the quality and relevance of
the training but also the morale of the training staff and reputation of the VTIs
amongst the relevant industries. If these imperatives are met, they will considerably
raise the training cost per student and the overheads of the VTIs. To be able to meet
the recurring costs an adequate framework for financing them through contributions
from private sector industry, government and donors will have to be made. The
implication for the implementation of the VTIs program is that instead of emphasizing
the establishment of a large number of VTIs quickly, greater attention needs to be
paid to the financial sustainability and professional excellence of those VTIs which do
get established. 55
CHAPTER IV
EMPLOYMENT GENERATION AND POVERTY ALLEVIATION
THROUGH NGOs
Over the last two decades the tightening financial constraints on the government27 and
growing awareness of the limitations of top-down development programmes to
alleviate poverty,28 have created the space for non-governmental organizations and an
alternative approach to development action, called Participatory Development.29
During this period a variety of NGOs have established support programmes aimed at
developing community organizations at the village level, institution building,
providing training and accessing credit and technical support.
The question that arises at this juncture is whether these alternative institutional forms
can achieve sufficient coverage of the poor population, and cost effectiveness, to
become a credible framework for achieving a significant impact on the overall
employment and poverty problem in the country. In addressing this question it may
be useful to examine broadly the different types of Participatory Development NGOs
and their antecedents and to then identify the conditions under which NGOs can be
(a) effective, (b) reach scale both in terms of population and geographic area covered,
and (c) achieve and maintain cost effectiveness. An examination of these issues
would provide the basis for proposing national level apex organizations and a broad
policy environment within which the replication and up-scaling of NGOs can be
facilitated.
Section 1
Types of Development NGOs and their Advantages Compared to Government
Compared with the other South Asian countries the development NGO sector in
Pakistan has been slow to mature. Until well into the 1980s the bulk of NGOs in
Pakistan were small charitable or social welfare oriented bodies. Of these, a distinct
segment were rural cooperatives, registered under the Cooperative Act. These would
___________________________
27 The government’s annual development programme as a percentage of GDP has
declined from seven percent in the 1970s to 2.5 percent this year.
28 For a discussion on the limitations of top-down development programmes see: Akmal
Hussain, Poverty Alleviation in Pakistan, op. cit., pages 23 –26.
29 Ibid., pages 27-28, for a discussion on the theory of Participatory Development. 56
have merited attention inasmuch as the Cooperatives Act is one of the possible,
indeed one of the logical means of constitution of a non-profit NGO. There are
historical reasons however, why cooperatives in the form in which they have existed
in Pakistan with Government support, are distrusted by the bulk of the rural
population. Apart from the tendency of rural cooperatives to be dominated by rural
elites which manipulated their policies and monopolized their resources and benefits,
there has been generalized outright fraud in the cooperative sector.30 This has led
development professionals to explore other possible means of NGO formation, such
as a charitable trust (the form chosen by NGOs such as Orangi Pilot Project) 31 and
non-profit private limited companies (which is the form chosen by RSPs) or a society
under the Societies Act, (the form chosen by PIEDAR).32
___________________________
30 The Cooperatives scandal in Pakistan, which wiped out the savings of tens of
thousands of small investors, came to a head in 1993. There were two main types of
scams: Financing cooperatives that swindled small private investors through
"pyramid" schemes that collapsed or by outright theft, and agricultural societies that
have embezzled public money, provided through laxly administered loans at heavily
subsidized rates using grossly overvalued assets as collateral. In general the majority
of both types of offenders have escaped legal sanction.
31 The Orangi Charitable Trust (OCT) which is the micro-credit agency for the Orangi
Pilot Project (OPP) group has found the Trust format particularly useful because
"OCT could take greater risks and bear losses of defaults and bad debts because it
was neither the custodian of depositors (it did not accept any deposits), nor profit
maker for shareholders (it had no shareholders and gave no dividends)." (from Micro
Enterprise Credit, Dr. A.H. Khan, OCT, Karachi 1996).
32 There are five ways in which a development NGO can register itself as a legal entity:
i) a voluntary social welfare agency under the Voluntary Social Welfare
Agencies Registration and Control Ordinance;
ii) a society under the Societies Registration Act, 1860; this is the route taken by
most of the NGOs since the provisions of the Act provide legal cover without
the more stringent requirements of the Companies Ordinance;
iii) a co-operative society under the Co-operative Societies Act, 1925;
iv) a public and charitable trust; while restrictive for multi-sectoral development
NGOs, this suits certain specialised organisations such as the Aga Khan
Foundation, the Orangi Charitable Trust and the Trust for Voluntary
Organisations;32
v) a non-profit company, as provided for by Section 42 of the Companies
Ordinance of 1984; this allows flexibility of operation, but imposes strict
legal requirements that mandate financial and managerial discipline including
regular reporting requirements. This is the route chosen by the RSPs. 57
Development NGOs exist in a variety of sizes and forms, from large centralized
bodies spanning a number of districts and even provinces, such as the Rural Support
Programs (RSPs) to smaller organizations supporting a relatively small number of
Community Based Organizations (CBOs) in two or three regions within the same
province (such as SUNGI) or in more than one province (such as PIEDAR). They
range from multi-function NGOs that support a wide range of activities in fields such
as income generation, natural resource management and the social sector, (e.g.
PIEDAR, SUNGI and RSPs) to a particular limited set of operations such as
KASHEFF (which is essentially a micro-credit support NGO), or which target a
particular disadvantaged group such as women (e.g. Shirkatgah).
Development NGOs operating in rural areas may be classified into three broad groups
by scale of operation:
i) The RSPs, instituted by government which are multi-functional and also have
a wide area of operation at a national level (NRSP), or a provincial level
(SRSC and PRSP). The RSPs start functioning on a large scale and in a wide
geographic area by simultaneously establishing regional offices in a number of
districts.
ii) Smaller NGOs such as SUNGI and PIEDAR which are independently created
and multi-functional33 start operating on a small scale, and in a single location.
They gradually increase their scale of operations in terms of both population
covered and geographic area. Nevertheless, they remain much smaller than
RSPs.
iii) CBOs which operate on a very local scale either at the village level or a cluster
village level, and which are supported not by NGOs of types (i) and (ii) above,
but directly by donors such as the Aga Khan Foundation (as distinct from the
Aga Khan Rural Support Programme).
___________________________
33 Certain NGOs such as SUNGI combined their development work with active
advocacy on issues of both public and local interest. Other NGOs such as PIEDAR
engage in policy dialogue at the national and also South Asian level. While these
dimensions may be important in the overall development context, they are beyond the
scope of this study. 58
Development NGOs using the Participatory method have four main advantages over
government in fostering rural development through the participation of village
communities: (i) Penetration, (ii) targeting, (iii) cost-sharing and sustainability of
development initiatives, (iv) human resource development, consciousness and
empowerment. Let us briefly consider each of these features:
i) Penetration: Despite the supposed universal availability of services provided
by government, its actual coverage of the population is generally very low. In
fact, the RSPs were set up on the premise, (accepted by government), that the
federal and provincial governments do not have the organizational reach to
bring a range of development activities to the majority of the nation’s rural
population and that even if it were possible, the recurring budget for the
development activities would be beyond the financial capacity of the
government. There is also a tendency on the part of government to make
intended beneficiaries come to a service provider often over a considerable
distance, rather than bring the service to the community. This attitude
emanates from a concept of power endemic to governance in Pakistan,
whereby service provision is regarded as a means of perpetuating dependency
relations. Thus the provision of services through government functionaries
becomes an instrument of bringing those dependent on such services into their
domain of power. NGOs by contrast are able to penetrate to the level of
village, hamlet or community. This is integral to their approach (counterposed
to that of government), which is to enable the poor to empower
themselves and become both subjects and the object of development effort.
ii) Targeting: Most government programmes work on a scale and through an
administrative approach that encourages provision of resources and services to
be misdirected beyond the target group, reach high levels of leakage and
sometimes get misappropriated by government functionaries and local power
brokers such as landlords, influential traders and politicians. For example,
according to the field visit report of the Swiss Development Corporation, “at
most five to fifteen percent of the target group of small farmers benefit
directly from research, extension, credit and seed supply service in
Pakistan”.34 NGOs by contrast are able to target disadvantaged regions,
___________________________
34 Government of N.W.F.P. and Swiss Development Corporation: Report of the Project
Preparation Mission, January 1990. 59
communities, groups and even individuals more precisely. This arises, out of
their institutional orientation, greater understanding of the complexity of the
social and economic process within which they are intervening, and finally,
their operating methodology. The latter, in some cases, includes compiling
and updating community data bases such as village profiles, which include
both physical and social geography, community histories, land ownership and
irrigation patterns, crop, livestock, village trade and production, and basic
consumption and income data.
iii) Cost-sharing and sustainability of development initiatives: Rural development
NGOs seek to organize communities into basic participatory organizations
variously called village organizations, self-help organizations, community
organizations and community based organizations. These village level
organizations which are based on decision making by the general body of their
membership rather than by the elected office bearers, identify projects and
activities that are of priority to the villagers and which they are willing to help
sustain from their own resources. Such projects, whether income generating or
social sector are prioritized and selected through an intensive, interactive
process involving the whole membership of a community organization. Since
members have agreed to contribute labour materials or money to their building
and upkeep, they reflect the community’s greatest needs. The community will
therefore continue the maintenance and upkeep of the project even if the NGO
no longer operates there. This is in sharp contrast to government aided projects
that are ‘orphaned’ at birth because government itself seldom has funds for
operation and maintenance (O&M), and villagers who were not consulted
during project selection, siting, technology choice and construction, will not
assume responsibility for O&M.
iv) Human resource development, consciousness and empowerment: The NGO
development intervention does not merely aim to provide service delivery or
other tangible benefits at a point in time as the government does. It is a process
of empowerment: By raising consciousness, acquiring new skills, increasing
productivity, incomes, savings and investment, the poor community acquires a
new power over the economic and social forces that fashion their daily lives.
Thus the tangible benefits acquired by the community are part of a process in
which the community begins to take initiatives for its own material welfare,
and develops its human, natural and economic resource base to sustain it. 60
Section 2
Strategic Issues in taking Development NGOs to Scale
The question of how NGOs are to achieve scale in both their demographic and
geographic coverage, focuses attention on six inter-related issues: (i) The only large
NGOs which start by operating in a number of different districts and provinces
simultaneously, are RSPs which have been established by the government. The issue
here is whether these RSPs can remain participatory development organizations
autonomous of government, and whether they can achieve adequate coverage of the
poor population in Pakistan, cost effectively and within a credible time frame.
(ii)How can a small NGO which has achieved success in Participatory Development
in a few villages, upscale its coverage without losing the key features which defined
its character and determined its earlier success? These are, institutional autonomy,
participatory decision making both within the NGO as well as in its relations with
village communities, innovativeness, and cost effectiveness. (iii) How can small but
successful NGOs be multiplied quickly in a large number of different locations to
achieve a much larger coverage, and yet maintain cost effectiveness? (iv) What are
the conditions under which NGOs, as they enlarge geographic coverage, divest
themselves of village level community organizations which have achieved maturity
and which can develop their own organization clusters and support systems? (v) What
are the strategic macro level constraints in terms of training of personnel, financial
resources and geographically diversified monitoring and impact assessment
capabilities? (vi) an enabling policy environment at the national level.
The ensuing discussion examines these issues in the context of key features of the
RSPs, (which are designed as large scale organizations) and successful small NGOs,
respectively.
Section 3
Participatory Development through Rural Support Programmes: Are they
Feasible?
3.1 The Nature of RSPs and their Approach
The Rural Support Programmes in Pakistan consist of the National Rural Support
Programme (NRSP), Baluchistan Rural Support Programme (BRSP), Sarhad Rural 61
Support Corporation (SRSC), and Aga Khan Rural Support Programme (AKRSP).35
More recently the Punjab Rural Support Programme (PRSP) had been established
with a different management approach and much lower overheads compared to other
RSPs. However, since December 1998, PRSP too has been taken over by the RSP
system (for details of PRSP’s distinct management approach and budget evaluation,
see Appendix 4). The RSP system which except for BRSP shares a common
leadership at Board level, has also begun setting up RSPs at the district level in
response to regional interests of the government and availability of new donors with
district specific interests.
The RSPs having been set up with government help, were occasionally described by
observers as ‘GONGOs’ for government organized NGOs, as much to outline their
ambiguous status vis a vis government, as descriptive of their origins. Lately,
however, at least NRSP has characterized itself as being not an NGO but as falling
somewhere in between NGOs and Government.
The RSPs are based on the principle of social mobilization which was first used in its
rudimentary form in Comilla (Bangladesh) during the 1960s and later developed in
the Saemul Dong Movement (South Korea) and the Bhoomi Sena Movement in
Maharashtara (India), and the Aga Khan Rural Support Programme (Pakistan) during
the mid-1980s.36 The approach of social mobilization was formulated into a rigorous
methodology called Participatory Development,37 under the auspices of the United
Nations University South Asian Perspective Project during the 1980s. RSPs today
using the Participatory Development methodology have approached the poverty issue
from the vantage point of scale seeing themselves as an alternative framework
(couterposed to the government’s top-down approach) for overcoming poverty at the
___________________________
35 BRSP, SRSC, AKRSP and PRSP have mandate to work in Baluchistan, NWFP, the
Northern Areas and Chitral, and Punjab respectively. NRSP’s activities, however,
span all four provinces and Azad Kashmir, but not the Northern Areas.
36 For a discussion on the genesis of the approach, see: Ponna Wignaraja: Genesis of the
Intellectual Quest: An Overview, in: Participatory Development, Learning from
South Asia, op. cit. Chapter 1.
37 See: - Akmal Hussain: Poverty Alleviation in Pakistan, op. cit. Chapter III.2.
- Wignaraja et.al. Participatory Development, Learning from South Asia, op.
cit. 62
national level. They focus on the process of social organizations at the village level,
development of group identity, capacity building for managing COs, human resource
development at the village level, capital formation and credit discipline. The
operational linchpin of this approach is the formation of community organizations
(COs) at the village level, in which all decision making is the responsibility of the
general body of members.38 The process of helping to form and strengthening the
capacity of the CO is a responsibility of the RSP. One of the key roles of RSPs is to
facilitate linkages between its village organizations and government line departments
and occasionally with the private sector. Operationally, RSPs perform these functions
by establishing regional programme offices (at the district level) and then field unit
offices at the village cluster level. These district level offices are controlled and
administered by a large Head Office staff which apart from general management
executives includes a central human resource development team, a monitoring
assessment and planning team and finance and accounts staff.
The three RSPs (NRSP, BRSP, SRSC) are incorporated under the Companies Act and
include both serving and retired government officers on their Boards, in their personal
and ex-officio capacity. This was originally done to neutralize opposition from the
bureaucracy, which might otherwise resent the NGO as an intrusion on their ‘turf’,
and a duplication of their activities entailing a loss of power and responsibility.39
3.2 RSPs as a Framework for Poverty Alleviation at the National Level: The
Question of Time and Money
Rural Support Programmes distinguish themselves from NGOs and place themselves
into a separate category defined by the scale of the coverage they propose to achieve.
The raison d’etre of the NRSP, for example, is the claim that they can achieve a
hundred percent coverage of the poor population in the foreseeable future. Therefore,
___________________________
38 There can be no delegation of this responsibility to office-bearers of the CO. That
would be called the “representative” approach, a wider example of which would be
decision making by legislators/elected representatives on behalf of the electorate, or
to outside agencies whether Government or NGO – which would be characterized as
the “top-down” approach.
39 The PRSP had a different composition of Board membership to start with, compared
to other RSPs, with a relatively greater weight assigned to the private sector
members. However, once the PRSP had achieved success on the ground, the
bureaucracy re-asserted itself and took over effective control. This change was 63
it may be useful to examine the credibility of their claim in the light of their
organizational cost per beneficiary and the pace at which they have increased
coverage so far. According to their own figures, NRSP, during the six year period
from their inception in 1992 to the end of 1997 formed 4510 community
organizations (COs) consisting of 107,869 members, with 58 percent of the COs
being formed in the last year (1997). Even if we assume that one-third of the
members within COs have shifted out of poverty permanently (this is a generous
assumption since most of the COs are only one year old), NRSP can at best claim to
have overcome poverty for only 1.3 percent of the poor population of Pakistan so far.
At this pace it will take NRSP just over 462 years to cover the current poor population
of Pakistan.
Let us now consider the expenditure aspect of the RSP’s claim that through their
framework poverty can be overcome for the entire poor population of Pakistan. The
expenditure incurred by NRSP in 1997 alone was Rs. 318 million. Assuming that in
earlier years the expenditure was close to the interest earnings on their endowment
fund (Rs. 90 million per year) and expenditure increased only gradually, even then the
estimated NRSP expenditure per person shifted out of poverty was Rs. 33,777. Let us
make the further optimistic assumption that as coverage increases, average costs
remain constant (they will actually tend to increase given the fact that NRSP
expansion geographically, involves setting up new field units and sharply increasing
overheads). Even then the total cost of covering the current poor population of
Pakistan through NRSP operations comes to Rs. 924 billion, at 1997 prices. (It may
be pertinent to mention that the total development expenditure incurred by the
government in the year 1996-97 was Rs. 85 billion). It appears, therefore, that the
enterprise of overcoming poverty exclusively through the framework of RSPs in
Pakistan is neither feasible in terms of time taken, nor in terms of the resources
required.
3.3 Structural Weaknesses of the RSP Model
i) The administrative structure of the RSPs is designed to provide a permanent
support infrastructure without any provision for encouraging cluster formation
accompanied by a change in both operational and financial policies, resulting in
sharply increased overheads and centralized control. 64
amongst COs let alone devolving organizational responsibilities to such apex
formations at the local level. Instead there is a tendency to set up more and
more offices and a growing cadre of management staff at the central, regional
and field unit levels. Consequently, RSPs are characterized by high and
growing overheads as their operations expand. The financial implications of
this aspect of the RSPs organizational structure have been discussed in earlier
Section 3.2.
(ii) The sustainability of maintaining its management structure becomes
problematic as operations expand in widely dispersed geographic locations.
The heavy reliance on RSPs staff in mobilizing communities and building
community organizations could be both costly and counter-productive in terms
of the objective of empowering village communities. This approach can be
contrasted with relying on a process of identifying, training and supporting
village activists to perform these services for their communities with long term
recurring costs borne by the communities themselves. This internal dynamic
within communities reduces dependence and is more likely to produce a selfsustaining
community organization capable of taking charge of its own
development. At the regional level also, instead of maintaining and
continuously enlarging regional offices it may be more cost-effective to
encourage formation of sub-regional apex organizations of autonomous CO
clusters. These could provide a more decentralized and self-financing support
system at the regional level.
(iii) The linkage of RSPs with provincial governments has produced another set of
problems. There is no clear recognition within government of the independent
role of an RSP. On the contrary, there is a tendency to regard the RSP as a
slightly different version of a government department with much higher
salaries, and which could be used to provide relatively high wage employment
to civil servants, politicians and their clients. At best, RSPs are seen by the
government as vehicles for attracting donor funding and taking on many of the
development responsibilities of government departments while still being
subject to institutionalized control by senior civil servants and politicians.
There is a tendency for RSPs to fall in with government demands, whether in
terms of staff appointments, allocations of funds to particular sub-regions, or
taking on in a top-down fashion, government designed projects in the social
sector such as health and education. This tendency is facilitated by the 65
presence of ex-officio and other serving government officers on the Boards
and management of the RSPs.
(iv) A problem not unique to RSPs but exaggerated by their large scale is the
handling of credit operations. As large multi-sectoral development
organizations they view credit as an integral part of their other interventions
such as social mobilization, training and institutional capacity building of
RSPs themselves. Therefore, RSPs in their accounting systems tend to avoid
separating costs specific to the credit program. This alters the perception of
their credit program at the policy level, by seeking subsidized credit for onlending
at market rates to the poor, as a means for facilitating their overall
multi-sectoral program. At the same time, it becomes difficult for them to
calculate cost recovery and break-even points for the credit operation.
Section 4
Taking Small NGOs to Scale: Some Necessary Conditions for Success
Of the large number of multi-sectoral NGOs with small beginnings, using the
Participatory Development methodology, at least three can be said to have grown to a
significant size and achieved national prominence. These are SUNGI, PIEDAR and
BANH BELI. Three questions arise in the context of their success: (a) What are
the common factors in their success? (b) At this stage of their growth, what are the
constraints they face to further up-scaling and/or rapid replication? (c) What are the
elements of an enabling environment at the national level which could let a “hundred
flowers bloom”, in the sense of nurturing the rapid growth/replication of development
NGOs, enable mutually catalyzing interaction and yet maintain the unique character
of each of them?
4.1 Success Criteria
Apart from the efficacy of the Participatory Development methodology adopted by
the above mentioned NGOs, perhaps the single most important factor in their success
is the quality of leadership. Specifically, it is the ability to relate with humility and
love with the poor. It is to build a team which while being internally coordinated, at
the same time, enables each member to become a centre of thought and action. The
successful NGO leader creates the team synergy to develop innovative responses to
each new problem on the ground. Yet, he/she ensures that each action by the team
contributes to reinforcing the process of the poor taking charge of their own 66
development. The effective leader focuses the team to experience the potential of the
poor and to grasp the specific dynamics of how they can organize, take
responsibilities and initiate change. Thus the challenge for the NGO leadership is to
so relate with the poor and the team, that every act, every word, every moment of
silence, contributes to fertilizing the other, rather than establishing control: Liberating
rather than inducing dependency.
The second factor in the success of small NGOs is the identification, training and
fostering of village level activists who gradually begin to manage existing COs,
thereby, enabling NGO staff to give more time to develop new COs. This process of
devolution of management responsibility from NGO staff to village level activists is a
crucial factor in the enlargement of NGO coverage in a situation where funds are
limited and rapid expansion of staff financially infeasible. The converse of this
dynamic is that if too much money becomes available too early, it undermines
discipline, initiative and energy of the NGO.
The third factor in the success of small NGOs which have reached significant scale is
the development of second level management and the ability of top level leadership to
devolve responsibility, acknowledge their achievements and to learn from them just as
much as it is necessary for the leadership to learn from the poor. An inner
wakefulness that comes from transcending the ego is necessary to be always open to
learning from the poor, and from each member of one’s team. It is this openness to
learning from others that constitutes the basis of the organization’s dynamism, its
innovation and its sense of being a community.
The fourth factor in the success of small NGOs in reaching significant scale is the
development of credible accounting procedures, and a regular monitoring and
evaluation exercise on the basis of which donor funding can be sought when it is
required. In each case the successful NGO, apart from devising efficacious modes of
reflection and action with the village communities, also develops formalized
recording and reporting systems
4.2 Key Features in the Transition from Medium-sized to Large-sized NGOs67
Those NGOs which started small and through certain specific features (discussed
above) have reached a medium-size are now faced with the challenge of up-scaling to
a much larger size. Typically, the successful NGOs started work in one hamlet a
decade ago, are now working in scores of villages and in three or four districts. The
question is what are the key changes within the organization which could enable them
to reach a large size. In this context, seven key changes may be required:
i) The single leader at the top (variously called Chairman, President or Chief
Executive Officer) would need to build a team of at least three or four leaders
who can work independently at the top level. This is necessary in a situation
where programme operations become so geographically diversified that
overall programme management would need to get regionally decentralized,
such that each regional programme would be operating in three or more
districts. At the moment, each of the heads of the three successful NGOs
mentioned above are taking all strategic decisions and many tactical ones and
have a hands on presence in each area of operation. In addition, they are also
devoting part of their time to doing consultancy work or other private business
to supplement their meagre salary from NGO funds. Consequently, the
leadership is so over-stretched, that it is difficult for them to consider making a
quantum leap of up-scaling. Yet, they have acquired the consciousness of
relating with the poor necessary to train and develop a larger top level
leadership.
ii) For a major up-scaling of successful medium-sized NGOs, it would be
necessary to receive grant funding for institutional strengthening and growth.
The Pakistan Poverty Alleviation Fund that has recently been established,
(discussed in Chapter III, Section 4) could provide such funding after careful
evaluation of the concerned NGOs and assessment of their expansion plans.
iii) As the organizational structure of the NGO changes from a centralized to a
geographically decentralized one, the methodology of work would also have
to change to enable introduction of procedures for monitoring and strategic
planning. As full autonomy is granted to regional programme heads, each of
them would be expected to report and evaluate on programme performance
within an agreed format and in consultation with community organizations and
the regional programme team. This evaluation could be done on a monthly
basis and could feed into the process of developing regional programme plans
on a quarterly and annual basis. These regional programme plans prepared 68
initially at regional programme offices, would include issues such as the
number and locations of new COs to be formed and the deepening of existing
COs. In would also include facilitating the preparation of participatory village
development programmes for infrastructure, social sector services, and offfarm
enterprises, as and when such services are identified by COs. The
deepening of existing COs in the regional programme plans would include
devolution of organizational responsibilities to village activists for managing
village level or village cluster level apex organizations of the poor. Such
devolution of responsibility would, on the one hand, enable self-managed
community organizations to develop, and on the other hand, enable the NGO
to keep its overheads low as it enlarges its coverage. The regional planning
exercise could be conducted at the regional office on a quarterly basis.
However, this process could also involve annual plenary planning sessions at
Head Office where village activists, key members of regional teams and Head
Office personnel in planning, monitoring and human resource development,
would interact with each other.
iv) One of the necessary conditions for successful NGOs that up-scaled to
medium-sized level, was the development of a nascent middle level
management in their team, although still tightly supervised by the top
leadership. As such NGOs up-scale to large size and achieve geographic
diversification, such middle level management would have to be brought to
maturity, allowed greater autonomy and considerably increased in number.
Such middle level management would play a key role in coordinating social
mobilization, training of village level activists, and accessing technical support
and credit. The middle management cadre by virtue of its proximity to the
field would also be important in collecting data necessary for monitoring,
evaluation and planning.
v) The challenge to NGO up-scaling is that unlike RSPs, they must keep
overheads costs to a minimum level. In order to achieve this, it is necessary
for the NGO to be able to withdraw from those villages where COs have
achieved adequate maturity and have developed the capacity to form apex
support organizations of their own. The critical factor for enabling NGOs to
devolve organizational responsibilities to apex organizations of COs, is the
development of a cadre of village activists with training in the following
fields: (a) community management skills, (b) ability to interact with donor 69
organizations and government line departments, (c) expertise in a range of
basic skills such as, livestock management, agriculture, soils, irrigation,
natural resource management and micro-enterprise development. Such a cadre
could constitute a core management team in an independent apex support
organization.
vi) As the NGO up-scales to a large size it would generate a variety of training
needs for CO members at the village level, as well as career development and
professional training needs of NGO personnel. Consequently, a human
resource development programme within the NGO may be necessary to
identify the human resource and career development needs specific to the
internal dynamics of the NGO’s work. The human resource development
section within the NGO would need to be a lean unit which should network
with diverse specialized institutions to access the required training services.
vii) As the NGO reaches a large scale, there would be a quantum leap in the range
and complexity of financial flows within the NGO programmes and also
between the NGO and macro level institutions (such as PPAF, commercial
banks, donor agencies and government departments). It would, therefore, be
essential for the NGO to have a high quality professional finance and accounts
division, with the ability to develop and operate MIS, finance, accounting and
statistical software packages. Members of this division, while having the best
available skills as chartered accountants and finance managers would need to
be sensitized to the methodology of Participatory Development and their work
integrated with field operations. It would be necessary to develop accounting
procedures that while meeting the auditing requirements at the most rigorous
level, would also have the innovativeness and flexibility to cater to the unique
nature of development NGOs credit operations.
The following matrix shows the key features of NGOs at each stage of their growth
from small to large size. The features specified at the small size and transitional
stages, actually prevail in successful NGO that have grown to a significant size. The
features in the third stage (large size), however, are indicative in nature, for large
NGOs to be sustainable, cost-effective and genuinely participatory. 70
NGO GROWTH AND CHANGING PROFILE OF KEY FEATURES
Sr.
No.
Key Features Small NGO
(Prevalent Features)
Transition to Upscaling
(Prevalent Features)
Large NGO
(Indicative Features)
1. Leadership Single, dedicated leader usually without formal
management training.
Emergence of one or more field officers
as Regional programme Heads. Hiring
of specialists at senior management
level.
Hiring and training of professional and dedicated
leaders for regional programs. Elevation of talented
middle management field officers to top leadership
positions.
2. Management
Systems
Absence of formalized procedures, multi-function
role of staff members, intense synergy and team
work. An openness to learning from the poor and
from each other.
Institutional regulations and job
specifications emerge; yet, emphasis on
participatory decision making;
collective reflection in regular staff
meetings.
Formalized management systems, functional
division of roles, systematic, periodic collective
reflection to ensure participatory decision making
and planning. Inhouse research capacity and link up
with specialized research institutions.
4. Accounting and
Finance Systems
Rudimentary, operated by non-specialists.
Maximum emphasis on keeping costs at lowest
level.
Hiring of professional accountants
emergence of financial analysis,
computerized accounts and formal
auditing.
Hiring of top level finance manager with
professional finance and accounting team, sensitized
to participatory development approach, development
of customized software for MIS and credit
operations.
5. Devolution of
Responsibility to
Independent Apex
Support
Organizations of
VOs
Social mobilization and support functions
performed only by NGO staff.
Emergence of cadre of village activists,
who share support role; emergence of
independent multifunction support
organizations at village level.
Large experienced cadre of village activists, matured
multifunction VOs; emergence of independent apex
multifunction support organizations at village cluster
or tehsil level. They enable redeployment of NGO
field staff and hence NGO overheads kept low.
6. Relationship with
Funding Agencies
Funding usually from single foreign donor,
covering function specific operational costs hence
occasional donations from friends of leader.
Funding from multiple donor sources
for both operations and institutional
capacity building. Application to PPAF
for institution building grant and credit
line.
Establishment of an endowment fund, project
specific and region specific funding from multiple
donor sources, link up with banks and PPAF for
financing credit operations.
7. Relationship with
Government
Government departments usually hostile, avoiding
pressure from lower echelon government officials a
significant preoccupation.
Nascent links with government line
departments to access technical support
for VOs, good working relationship
with district officials and selected
provincial secretaries. Interference by
vested interests amongst senior
government officials and politicians a
major hazard particularly due to
fragility of NGO at this stage.
Systematic working relationship with government
Line departments at the provincial, district, and
tehsil level. Systematic working relationship with
specialized institutions for technical support and
training in government, autonomous and private
sectors. Unwarranted government interference
through senior officials and politicians could be a
significant hazard. 71
Section 5
Key Institutions in the Enabling Environment for taking Participatory Development
to Scale
The discussion in Chapter IV has shown that two broad institutional forms have been
tried out for Participatory Development: (a) Multifunctional Development NGOs which
were started by private sector individuals, on a small scale, in a single location and which
have over the last decade achieved a significant coverage in terms of number of villages
and geographic areas. Nevertheless, such NGOs can be said to have only up-scaled from
small size to medium size so far. (b) Rural Support Programmes which were initiated by
government and started off on a large scale, initiating work in a number different districts
and provinces.
The strength of (a) above is that it is cost-effective and the overheads remain relatively
low even as the NGO grows from small to medium size. Such NGOs may now be on a
new threshold of achieving large scale coverage. However, to do this, changes in
features of their organizational structure (see matrix on page 68), as well as a large inflow
of grant funds for financial sustainability would be required. In the case of RSPs,
however, the performance of the largest one, NRSP, has shown that given their
centralized management approach, their cost per beneficiary is so large and pace of
coverage so slow, that they do not constitute a feasible framework in their present form
for overcoming poverty in Pakistan. Nevertheless, in the areas where NRSP has worked,
in spite of its high costs and slow pace, a significant change in the lives of CO members
has been brought about. The challenge is to restructure the management approach of
RSPs to make their internal functioning participatory instead of top-down, to induce
greater decentralization, and devolution of operational responsibilities to village
organizations, so that RSPs can become cost-effective and achieve more rapid coverage.
The enterprise of poverty alleviation through Participatory Development in Pakistan in
the future may involve creating a policy framework for the rapid growth of NGOs. Four
key elements of such a policy framework may be identified as follows:
i) Enable the recently established PPAF to engage in capacity building so that it can
fulfill its mandate of becoming an apex organization for fostering the rapid 72
growth of Participatory Development NGOs. This capacity building would
involve the development of five dimensions of its organization: (a) the ability to
coordinate rigorous evaluation and impact assessment of the work of partner
organizations, (b) coordinating large scale training of village activists, social
mobilizers and management professionals for NGOs going to scale, (c)
coordinating management support for NGOs (e.g., MIS, customized software
programs, and management systems), which are in the process of up-scaling, (d)
provide a forum for NGOs to learn from each other’s experience, (e) provide a
forum for policy dialogue between NGOs, governments, donors and the private
sector.
ii) Establish a national facility for training village activists in a variety of skills. It
should be a lean organization with a mandate to network with all NGOs, identify
their training needs and then coordinate with different training sources, develop
courses and ensure that high training standards are established. The sources
would include VTIs, training facilities in provincial government line departments,
(such as Agriculture, Forestry, Livestock and Irrigation departments), autonomous
organizations and the private sector.
iii) Establish a national Monitoring, Evaluation and Participatory Poverty Assessment
Institute (MEPPAI) in the private sector supported by donors and government
which has the professional expertise to undertake rigorous monitoring, evaluation,
and impact assessment exercises for the PPAF and NGOs, on demand. Such an
institute would also network national data collection and research institutions
(such as the Federal Bureau of Statistics, PIDE, LUMS) to bring their expertise
together for particular impact assessment exercises. The Participatory Poverty
Assessment (PPA) currently initiated by DFID could be institutionalized into a
permanent feature within the MEPPAI.
iv) Establish an inter-ministerial working group on employment generation and
poverty alleviation, chaired by the Prime Minister. The purpose of such a group
would be to develop macroeconomic policies to restructure the growth process so
as to increase the capacity of Pakistan’s economic growth for employment
generation and poverty alleviation. Moreover, the group should review existing
macroeconomic policies with a view to: (a) accelerate GDP growth, (b) increase 73
the employment elasticities of output growth in various sectors, (c) induce a shift
of the labour force from low value added to high value added sectors and (d)
improve the skill composition of the labour force in favour of high productivity
skills and those which are in relatively greater demand, as the level and structure
of economic growth changes. 74
CHAPTER V
POLICY RECOMMENDATIONS
Section 1
Crop Sector
1.1 The available data suggests that the output growth rate of major crops has
declined during the 1990s compared to the decade of the 1980s and this decline is
accompanied by increasing output instability from year to year. Under
conditions of declining input productivity when higher input use per acre is
required just to maintain yields, small farmers with fewer resources are likely to
suffer a greater than average decline in yields compared to large farmers. At the
same time, due to lack of savings to fall back on, small farmers are more
vulnerable under conditions of unstable growth. Consequently, slower and more
unstable growth may be accompanied by a tendency for growing inequality in
rural income distribution, poverty and unemployment. That is why, it is
important to initiate policies to counteract the tendency in both the farm and offfarm
sectors in rural Pakistan. (Proposed policies are discussed at the end of each
of Chapters I to IV of this report).
1.2 Our estimates suggest that farms below 25 acres in size are generating more than
twice as much employment than large size farms in the case of wheat, basmati,
cotton and fodder. The employment differential between small and large farms is
even higher in the case of HYV rice (three times higher) and maize (five times
higher). A detailed discussion on this issue and presentation of evidence can be
found in Chapter I, Section 1, together with accompanying tables. These figures
suggest that if policies for increasing the yield per acre of major crops were to
focus on the small farm sector, a faster and more equitable growth with higher
employment generation could be achieved in the crop sector.
1.3 The phenomenon of the deceleration of agriculture growth and its increased
instability, may be due to the emergence of three major institutional constraints,
(i) reduced water availability due to deterioration in the canal irrigation system,
(ii) poor quality of seeds, and inadequate agriculture research and extension
services, (iii) degradation of soils due to depleting soil nutrients and soil erosion 75
associated with improper agricultural practices. Policies for overcoming these
constraints are briefly mentioned in the following sub-sections, (for details see
Chapter I, Section 2).
1.3.1 The improvement of irrigation efficiencies has become a major policy imperative
in view of the fact that the extensive margin on irrigated acreage has been reached
and future growth of output and employment in the crop sector will have to rely
on improving the efficiency of water use and other inputs.
Lower water availability to farmers is to some extent due to the poor maintenance
and operation of the canal irrigation system. It may be advisable to develop a
more cost-effective and decentralized institutional structure involving local
communities in the operation and maintenance of canals and water courses. The
efficacy of this approach has been demonstrated by PIEDAR in the Khanewal
District of Southern Punjab where village organizations were successfully formed
for, apart from other functions, the management of water courses.
1.3.2 Agriculture research has by and large failed to produce operationally usable
results and this fact is considered an important explanatory variable in Pakistan’s
declining factor productivity. Seed varieties research where it has produced new
seeds has involved a large time lag in getting research to the farmers, (in the case
of wheat for example, average age of seed varieties is 11 years compared to 7 for
all developing countries).
It is proposed that for more effective research and its diffusion amongst farmers,
the following initiatives may be necessary:
i) Restructure the existing institutional framework for seed development in
particular and agriculture research in general to (a) bring greater
professionalism, (b) improve monitoring and evaluation of research work.
ii) Focus research on improving input productivity at the region specific
level. In this context the outcomes of controlled experiments at research
institutes need to be tailored to the specific needs and conditions of farms
in the region. 76
iii) Maintain regular interaction between research workers and farmers in the
field by establishing an institutional linkage between research and village
level institutions for diffusion of such research. Village level community
organizations of farmers for participatory development have demonstrated
the ability for a fruitful dialogue with research and extension institutions
in the government and non-governmental sectors. Such interactions
amongst farmers and agricultural researchers could redirect research to the
specific needs and conditions of farmers and also enable a more rapid
adoption of improved seeds and agricultural practices. Support
organizations such as the PRSP in the Punjab (during August to October
1998), and AKRSP in the northern areas (during the early 1990s) have
demonstrated an ability for facilitating the adoption of new knowledge and
agricultural practices, particularly in cases where such adoption requires
training and credit to farmers at the village level.
1.3.3 One of the important factors in the low and declining yields per acre in Pakistan’s
crop sector is the degradation of soils due to depletion of humus. In order to
create a sustainable basis for accelerating agricultural growth and employment in
the future, it would necessary to induce agricultural practices through which
organic material in the top soil can be replenished and maintained. The existing
extension services do not have the outreach, motivation and the management
capability to achieve the adoption of sustainable agricultural practices at the farm
level. Development NGOs in recent years have demonstrated that village level
organizations of farmers backed by sensitive support institutions can play a
powerful role in introducing sustainable agricultural practices to farmers, together
with training and accessing of technical support from a variety of sources in the
government and private sectors.
Section 2
Non-crop Sector in Agriculture: Milk Production
There is considerable potential for increasing export earnings, rural employment and
poverty alleviation through increasing milk production, (e.g. potential increase in milk
export earnings is US$ 4 billion, and each additional milch animal for a poor peasant 77
household can increase income by Rs. 2500 per month). To actualize this potential a
participatory institutional support system at the village and tehsil levels needs to be
established for the provision of credit, training and breeding, veterinary medicine and
access over marketing services to poor peasants. Such an institutional framework can be
linked up with private sector milk purchasing centres in village clusters. This could be
done through existing private sector milk packaging and processing companies, e.g.
Nestle Milkpak Limited, Chaudhry Industries, Prime Service Group.
The body through which such initiatives can be taken is a new Dairy Development
Organization (DDO). Details of the possible structure, functions, and operational
mechanism of the DDO are discussed Chapter II, Section 1.
Section 3
Small Scale Enterprises in the Rural Areas
Given the limited potential of the crop sector for generating employment, accelerating the
growth of small-scale enterprises in the rural areas is essential. Higher SSEs growth
would help in: (a) increasing employment elasticities of output growth in the
manufacturing sector as a whole, (b) accelerating GDP growth through lowering of
ICORs, (c) changing the structure of GDP growth so as to improve income distribution
and the poverty alleviation capacity of growth.
In order to overcome the constraints to the rapid growth of SSEs (discussed in Chapter II,
Section 2.3), it is proposed that Industrial Support Centres (ISCs) be established in
specified growth nodes where SSE clusters exist. The ISCs would constitute a support
system for providing SSEs with: (a) Vending link up with large scale manufacturers, (b)
accessing specific skill training to improve quality of products, (c) good quality raw
materials. This could be done by establishing raw material banks in each SSE cluster,
(d) specialized fabrication facilities, such as forging and heat treatment, (e) credit through
SMEDA. (Details of the organizational structure, functions, possible locations, and inhouse
technical facilities of ISCs and product groups which could be serviced by them
are discussed in Chapter II, Section 2.4). 78
The institutional framework within which the ISCs could be established and sustained is
the newly formed SMEDA.
This organization could network with the newly formed Vocational Training Institutes
(VTIs) and with the proposed raw material banks for SMEs.
Section 4
Taking Participatory Development NGOs to Scale
For a direct attack on the poverty problem it is proposed that Participatory Development
be taken to national scale. This is a process of empowerment of the poor through social
mobilization at the village level, development of group identity, and initiating a localized
capital accumulation process at the village and cluster level. Experience of development
NGOs during the last two decades has shown that this process can be initiated and
sustained by building a network of support institutions at the village and regional levels.
In order to take development NGOs to scale and replicate them rapidly to achieve
national coverage, the following enabling policy framework is proposed:
i) Enable the recently established PPAF to engage in capacity building so that it can
fulfill its mandate of becoming an apex organization for fostering the rapid
growth of Participatory Development NGOs. This capacity building would
involve the development of five dimensions of its organization: (a) the ability to
coordinate rigorous evaluation and impact assessment of the work of partner
organizations, (b) coordinating large scale training of village activists, social
mobilizers and management professionals for NGOs going to scale, (c)
coordinating management support for NGOs (e.g., MIS, customized software
programs, and management systems), which are in the process of up-scaling, (d)
provide a forum for NGOs to learn from each other’s experience, (e) provide a
forum for policy dialogue between NGOs, governments, donors and the private
sector.
ii) Establish a national facility for training village activists in a variety of skills. It
should be a lean organization with a mandate to network with all NGOs, identify
their training needs and then coordinate with different training sources, develop 79
courses and ensure that high training standards are established. The sources
would include VTIs, training facilities in provincial government line departments,
such as Agriculture, Forestry, Livestock and Irrigation departments, and the
private sector, such as SDPI, HDC, LUMS.
iii) Establish a national Monitoring, Evaluation and Participatory Poverty Assessment
Institute (MEPPAI) in the private sector supported by donors and government
which has the professional expertise to undertake rigorous monitoring, evaluation,
and impact assessment exercises for the PPAF and NGOs, on demand. Such an
institute would network national data collection and research institutions (such as
the Federal Bureau of Statistics, PIDE, LUMS) to bring their expertise together
for particular impact assessment exercises. The Participatory Poverty Assessment
(PPA) currently initiated by DFID could be institutionalized into a permanent
feature within the MEPPAI.
Section 5
Walking on Two Legs: Restructuring GDP Growth for Enhanced Employment
Generation and Poverty Alleviation
A strategy for rapid employment generation and poverty alleviation at the national level
needs to function on two legs: (i) the establishment of new institutions which can enable
accelerated growth of output and employment to occur at the micro level through small
scale enterprises in small rural towns, on the one hand, and a village level capital
accumulation process through Participatory Development, on the other, (ii) a
restructuring of the economic growth process through macroeconomic policies.
In order to undertake macroeconomic policies through which the overall employment
generation and poverty alleviation capability can be enhanced, it is proposed that an interministerial
working group on employment generation and poverty alleviation be
established under the chairmanship of the Prime Minister. The purpose of such a group
would be to review existing macroeconomic policies which have an adverse effect on the
poor and/or create distortions leading to capital intensive technology and product choices,
and adverse effects on the poor. At the same time, the group should formulate policies
that can (a) accelerate GDP growth, (b)increase employment elasticities of output growth
in various sectors, (c) induce a shift in the labour force from low value added to high 80
value added sectors and (d) improvement in the skill composition of the labour force in
favour of high productivity skills and those which are in relatively greater demand, as the
level and structure of GDP growth changes. 81
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the Honorary Chief Executive Officer of PRSP to the Board of Directors,
November 1998.
- Overcoming Poverty, Report of the Task Force on Poverty Eradication,
May 1997.
- Development Interventions for Small Manufacturing Enterprises using the
Common Facilities Approach: Case Study of Centre for Agricultural
Machinery Industries (CAMI)/Common Facilities Centre (CFC), Mian
Channu (Southern Punjab), June 10, 1994.
- Poverty Alleviation in Pakistan,Vanguard Books, Lahore, 1994.
- Rural Industrialization, Economic Logic and Institutional Requirements.
Policy Paper submitted to the Prime Minister 1989, later presented at
International Conference on Agricultural Strategies for the 1990s, Pakistan
Association of Agricultural Scientists, Islamabad, 7-9 May 1991.
- Labour Absorption in Pakistan’s Agriculture, An Interim Report, paper
submitted to ILO/ARTEP, March 1989.
- Strategic Issues in Pakistan’s Economic Policy, Progressive Publishers,
Lahore, 1988.
- Study on Industrialization Potential of Selected Backward Districts in
Pakistan. A report submitted to NDFC, Karachi, 1987.
- The End of Teaching, Weekly Viewpoint, Lahore.
Hussain, A. and Khan, O. A. : PHMP Project Proposal for Phase II, SIDB, NWFP and
D.G for International Cooperation, Netherlands. 82
Khan, A.H. : Micro Enterprise Credit, OCT, Karachi 1996.
Mian A. and Mirza, Y.: Pakistan Soil Resources, National Conservation Strategy,
Sector Paper IV, Environment and Urban Affairs Division, with IUCN, 1993.
Mahmood, M. : Cited in: ILO/SAAT, 1997 (Mimeo).
Pakistan Economic Survey 1997-98, Government of Pakistan, Finance Division,
Economic Advisor’s Wing, Islamabad.
Qureshi, A. and Iglesias: Implications of Global Climate Change for Pakistan
Agriculture: Impacts on Simulated Wheat Production, Climate Institute,
Washington, D. C. USA, 1992.
Report of the Sub-Committee on Cottage and Small Scale Industry in Punjab,
Government of the Punjab, 1999.
Report of the Project Preparation Mission, Government of N.W.F.P. and Swiss
Development Corporation, January 1990.
Report titled, Pakistan: A strategy for Sustainable Agricultural Growth, Report No.
13092 Pak, World Bank, November 1994.
Report titled, Pakistan: An Employment Strategy, ILO/SAAT, (Mimeo), December 1997.
Report titled, Employment and Structural Change, Issues for the Eighties, prepared for
the Planning Commission ILO/ARTEP, (Mimeo), 1983.
Report titled: National Human Settlements Policy Study, Pakistan Environmental
Planning & Architectural Consultants Limited (PEPAC), March 1983.
Report of the Project Preparation Mission, Government of N.W.F.P. and Swiss
Development Corporation, January 1990.
Rosegrant, M.W. and Evenson, R. : Agricultural Productivity Growth in Pakistan and
India: A comparative Analysis, presented at Pakistan Institute of Development
Economists Ninth Annual General Meeting, Islamabad, 1993.
State Bank of Pakistan, Annual Report, 1997-98.
Wignaraja, P., Hussain, A., Sethi, H. and Wignaraja, G.: Participatory Development,
Lessons from South Asia, United Nations University Press, Tokyo, and Oxford
University Press, Karachi, 1991. 83
APPENDICES
APPENDIX 1
INDUSTRIAL SUPPORT CENTRES:
TECHNICAL FACILTIES AND PRODUCT GROUPS
APPENDIX 2
PROPOSED GROWTH NODES FOR SMEs AND LOCATION OF INDUSTRIAL
SUPPORT CENTRES
APPENDIX 3
DEVELOPMENT INTERVENTIONS FOR SMALL MANUFACTURING
ENTERPRISES USING THE COMMON FACILITIES APPROACH:
CASE STUDY OF
CENTRE FOR AGRICULTURAL MACHINERY INDUSTRIES
MIAN CHANNU
APPENDIX 4
PRSP
PUNJAB RURAL SUPPORT PROGRAMME
THE FIRST FOUR MONTHS84
APPENDIX 1
INDUSTRIAL SUPPORT CENTRES: TECHNICAL FACILTIES AND
PRODUCT GROUPS
I. Specific Technical Facilities at ISC's
The specific facilities that could be available at ISC's to fulfill their technology
diffusion/fabrication functions in the field of metals, and light engineering industry.
1. Materials testing laboratory
2. Foundry
3. Surface Treatment Plant:
(a) Hot Dip Galvanizing Unit
(b) Paint Spray Installation
4. Welding Workshop
5. Sheet Metal Unit:
(a) This metal sheet and pipe bending unit
(b) Thick metal sheet unit
6. Heat Treatment Unit
7. Tool and Die-making Shop
8. Automotive Workshop/Garage
9. Design and Information Centre
II. Product Groups
The product groups for which above facilities could provide support to SSI's are:
1. Agriculture
The ISC's could provide manufacturing support and marketing for SSI's in the following
products:
a) Tools for manual work such as Hoes, Shovels, and Rakes
b) Animal traction equipment 85
Inspite of rapid tractorization in Pakistan there remains a high demand for ox-drawn
implements. The main technology here is the assembly of section irons and plates.
Forging is essential in this field but there is also need for cast iron. The production of
this equipment may consist of:
- Ploughs: (Forging and structural steel work)
- Rotary-blade harrows (Forging, casting and structural steel work)
- Bearings and other parts for animal drawn carts
2. Power Traction
Popular tractor drawn equipment contains cast as well as forged and machined parts.
Welding is often necessary. Items to be produced may include:
- Spare parts for power cultivators (mainly forging)
- Ground graders (mainly plate assembly)
- Rollers (mainly plate assembly)
- Seeders, harrows and cultivators (Plate stamping, casting and structural
steel work)
- Components for sprayers (aluminum casting)
3. Irrigation
This equipment includes valves and pumps for industrial and household use.
More complex technologies are involved in producing irrigation equipment. Among the
technologies are the casting of non-ferrous metals and production of special cast iron.
Typical products are:
- Components for centrifugal pumps (all ICS workshop technologies are
involved)
- Connections and bends (mainly aluminum technologies)
- Components for hand pumps (casting, machining and welding)
- Components for sprayers (casting and machining)
- Panels for water reservoirs and roof tanks (welding and sheet metal
technologies)
4. Off-Road Transportation
Off-road transportation includes rail transportation. Products are:
- Parts for railway cars and rail transport (forging, castings, and plate) 86
- Bushings and covers (nodular cast iron)
- Traction components (forged or shaped metalwork)
- Brake components (cast iron)
- Hooks, turnbuckles, clamps and other fastenings (mainly forged).
5. Vehicle Components Industry
Vehicle components include spare parts for motorcars, trucks, buses, tractors and
industrial conveying and hoisting equipment. Particular vehicle components subject to
frequent breakdown, such as pulley systems, fans and traction hooks, should be
considered. The following are representative items:
- Brake discs and drums (pig iron)
- Oil-tight covers, oil pumps, pistons (aluminum alloys)
- Fans (aluminum alloy and stamped plate)
- Lights and tool kits (aluminum alloy and stamped plate)
- Trolley roofing (stamped plate and structural steelwork)
- Hubs for tractor and trolley wheels (cast iron)
6. Metalworking
The metalworking industries require metal containers, conveyors, gears, pulleys, electric
motors castings, and supplies for trucks and cars. Typical products are:
- Plate bins (shaped plates)
- Components for rolling conveyors (plate or cast-iron castings)
- Pulleys and gears (iron castings and forging)
- Equipment for ingots moulds (iron castings)
- Blacksmith or smelter equipment (uses all ISC technologies)
- Miscellaneous tools (mostly forged)
7. Food and Related Industry
The food processing industry in Pakistan in the SSE sector is still in its infant stage.
However, the scope for the production of canned fruit, fruit juices and vegetables is quite
favourable. The set-up of such industries requires an approach on a case-to-case basis.
Among the products are:
- Containers for food liquids (normally stainless-steel stamped parts)
- Stainless steel vats, tables, containers for food-processing plants
- Wire products (baskets, shelves, dish drainers)
- Metal hanging panels
- Cookers, water heaters, solar heaters 87
- Components for seed-oil presses
8. Construction
Building yard machines are generally imported in whole or in part from abroad.
Domestic production of simple castings may partly replace imports. The following are
construction products:
- Building yard equipment (mostly forging)
- Scaffolding material (mostly forging)
- Mason tools (mostly forging)
- Components for building yard machines
- Implements for rolling shutters or window screening (shaped plate,
welding)
- Components for door framing and windows (cast or stamped plate)
- Drain covers, grates, road drain wells (cast iron)
- Piping elbows and unions for drains (cast iron)
- Components for valves, gate valves, unions, for portable or street and road
signs, road fencing
- Hinges and locks
9. Household Appliances
Household appliance products for the model workshops are:
- Bath tubs, showers and sanitary equipment (mostly cast iron)
- Taps (non-ferrous casting)
- Miscellaneous household fixtures and equipment (cast iron and aluminum
castings and shaped sheets)
- Brassware for fittings, stop cocks, water taps
10. Power and Telephone Line Fittings
Considering the ambitious plans in Pakistan for the increase in installed power capacity
and electrification of rural areas, items in this category should be subject to market
surveys and, if feasible, then produced. Possible ISC workshop items are:
- Connection, support and mooring clamps for power liens (cast iron and
aluminum castings)
- Accessories for overhead line supports (aluminum castings and forging)
- Cable connection boxes (cast iron and aluminum castings)
- Waterproof feeder boxes (cast iron and aluminum castings) 88
11. Valves for Industrial Use
Valves for industrial use include products that are almost exclusively nodular cast iron.
Components include those of gate valves and fittings for gas and oil pipelines. Also
included are components of small rotary compressors and radical fans, which mostly use
shaped-plate castings. Cast-iron pipes, centrifugally or statically cast, must also be
considered. 89
APPENDIX 2
PROPOSED GROWTH NODES FOR SMEs AND LOCATION OF INDUSTRIAL
SUPPORT CENTRES
PUNJAB
1. Lahore-Chunian Axis.
Centre: Bhai Pheru
2. Lahore:Sheikhupra Axis.
Centre: Sheikhupura
3. Gujranwala-Sialkot Axis.
Centre: Sialkot
4. Rawalpindi-Mianwali Axis.
Centre: Mianwali
5. Bahawalpur-Bahawalnagar Axis.
Centre: Bahawalnagar.
NWFP
1. Haripur-Abbotabad and Haripur-Havelian Axis.
Centre: Haripur
2. Islamabad-Nowshera-Peshawar Axis.
Centre: Peshawar
3. Peshawar-Kohat Axis.
Centre: Kohat
BALUCHISTAN
1. Lesbela-Quetta Axis Axis.
Centre: Lesbela
2. Lesbela-Mekran Axis
Centre: Mekran
SIND
1. Hyderabad-Nawabshah Axis
Centre: Nawabshah
2. Nawabshah-Sanghar Axis
Centre: Sanghar
3. Nawabshah-Larkana Axis
Centre: Larkana
4. Larkana-Sukkur Axis
Centre: Sukkur 90
APPENDIX 3*
DEVELOPMENT INTERVENTIONS FOR SMALL MANUFACTURING
ENTERPRISES USING THE COMMON FACILITIES APPROACH:
CASE STUDY OF
CENTRE FOR AGRICULTURAL MACHINERY INDUSTRIES
MIAN CHANNU
TABLE OF CONTENTS
SECTION I: THE CAMI/CFC PROBLEMATIQUE
SECTION II: ANALYSIS OF THE CAMI/CFC PROJECT DESIGN
II (1) Objectives and Instrumentalities
II (2) The Problem of Imperfect Congruence between Project Objectives and
Project Instrumentalities.
II (3) The Problem of Market Demand and Sustainability
SECTION III: PERFORMANCE OF THE CAMI PROJECT
III (I) Sales Performance
III (2) Prototype Development of Parts/ Products at CAMI
III (3) Extension Services, Training and Credit
III (4) Conclusion
III (5) A Note on Criteria for Performance Evaluation for CFC’s
SECTION IV: THE CFC IN THE CONTEXT OF THE GROWTH NODE CONCEPT
IV (1) The Concept of Growth Nodes
IV (2) Desirable Types of Industries
IV (3) Thresholds
IV (4) The Geographical Dimension
IV (5) The Importance of Project Selection and Location
SECTION V: WHERE SHOULD CAMI GO FROM HERE?
V (1) Diversification of Clientele
V (2) Serial Production of Component Manufacture
V (3) Enlarged Extension / Marketing Capability
V (4) Institutional Change for Greater Management Autonomy and Beneficiary
Participation.
* This case study is based on an earlier field evaluation of the Mian Channu, Common
Facilities Centre, and Survey of SSE units in Mian Channu and Multan, conducted by the
author in 1994. Akmal Hussain: Development Interventions for small manufacturing
Enterprises using the common facilities approach: An Evaluation with Reference to
CAMI/CFC. 91
SECTION I: THE CAMI/CFC PROBLEMATIQUE
In the category of development interventions characterized by CAMI/CFC, the full
fruition of project potential is predicated on the achievement of two objectives:
i) Providing to a large clientele, a wide range of customer specific and specialized
fabrication facilities in sheet metal (cutting and bending), heat treatment and light
engineering (such as manufacture of components).
ii) Achieving improved product quality of farm implements through the development
of prototypes which embody improvements in product design and better
engineering quality of components.
The pre-requisite for achieving both (i) and (ii) above is the generation of client demand
for the CFC’s goods and services. This is determined to a large extent by the
“demonstration effect” and resultant diffusion of information regarding the goods and
services that CAMI/CFC has to offer. Price and quality of course are also important
factors. But if the prices of CFC fabrication services plus transport costs are less than
those prevailing in the closest urban centre (in this case Lahore), where such services are
available, and quality significantly higher, then ceteris paribus the
demonstration/diffusion factor becomes the pre-eminent determinant of demand. Such
diffusion is stimulated though not necessarily determined by extension, training and
credit programs.
The demonstration effect and the diffusion process occur in real time, whose magnitude
depends on: (a) the effectiveness of the extension service effort; (b) the volume and speed
with which the CFC services are supplied in response to demand; and (c) the pace of
adoption of CFC generated technology. During this interregnum between the start of
CFC operations and the emergence of a large scale and geographically widespread
clientele, the CFC would be necessarily both under-utilized and generate a deficit
between sales revenues and operation costs. However, there is a possibility of achieving
a high utilization of productive capacity, and avoiding a financial deficit even during the 92
interregnum, if the following two conditions prevail in the production and management
structures respectively:
(a) A prior balancing of machine stocks to enable serial production of selected
components/products with high demand and substantial profit margins, to be
manufactured with spare productive capacity.
(b) An autonomous management structure capable of quick and flexible responses to
changing demand conditions.
Thus the problem inherent in CFCs, is that there is an inevitable time lag between
installation of machines and the diffusion of demand for its services throughout the
cluster (or network of clusters) of small manufacturing enterprises. If adequate provision
in the project design has not been made for financial sustainability during the
interregnum, (either in the form of a serial production component of the project, or
adequate provision for bridging finance to cater for the expected budget deficit), then the
CFC project is doomed at the very moment of its birth.
In the context of CAMI/CFC problematique a number of questions emerge which may
have a more general relevance for development policy with regard to small
manufacturing enterprises:
1. Does the growth of clusters of SME's have greater efficiency gains for society and
larger secondary multiplier effects, compared to dispersed units?
2. Is the CFC within a framework of partnership between donors (providing the
capital investment) and a parastatal organization (operating the CFC), in fact the
most efficient institutional form of intervention for stimulating cluster growth?
How can beneficiaries banks, and other actors be involved in the development
intervention?
3. What are the criteria for quantifying the external economies of CFCs and
imputing them to the social cost benefit evaluation of the CFC?
These issues will be discussed in the following sections with special reference to CAMI. 93
SECTION II: ANALYSIS OF THE CAMI/CFC PROJECT DESIGN
II(1) Objectives and Instrumentalities
The strategic objective was to accelerate economic growth and increased employment
generation in the Mian Channu/Multan area. This was to be achieved by means of
stimulating the industrialization process in the farm implements and related high
engineering sub-sectors of the area.
The CAMI/CFC was designed to have three functions which would constitute the
instrumentalities for achieving the above objectives:
(a) Manufacture prototypes of farm implements and components with improved
design and engineering quality and then through an extension/credit effort induce
farm implement manufacturers of the area to adopt the upgraded technology
embodied in the CAMI prototypes.
(b) Provide small manufacturing enterprises in the area (which are predominantly
farm implement manufacturing and related light engineering units), with
specialized fabrication facilities which none of the SME's in the area could afford
to establish themselves, and which could be supplied to them at CAMI, for a
price. These common facilities include sheet bending and cutting, heat treatment
and forging.
(c) Provision of extension services, training and credit.
II(2) The Problem of Imperfect Congruence between Project Objectives and
Project Instrumentalities.
Implicit in the project design is the assumption that it would address the strategic
objective of accelerating economic growth in two ways:
(a) Agricultural growth and productivity would be accelerated by helping provide
improved farm implements. 94
(b) Industrial growth would be accelerated by stimulating the growth of small-scale
enterprises in the engineering sub-sector, of two potential growth nodes: Mian
Channu and Multan.
The assumption that technologically improved farm implements would accelerate
agricultural growth and productivity in itself is erroneous. This is because
(a) Improved farm implements are by no means a critical constraint to agricultural
growth. Some of the critical constraints to increased yields and accelerated
agricultural growth are:
i) Inadequate irrigation to the crop zone due to poor delivery and application
efficiencies. (Which are 58 percent and 37 percent respectively in the
Punjab).
ii) Inadequate and improper application of fertilizer. Not only is the quantity
of fertilizer per acre inadequate (for a whole range of institutional reasons)
but also its chemical composition often does not correspond to the nutrient
requirements of the soil.
iii) The damage to topsoil ecology resulting from over-use of pesticides, in
some cases and use of cultural practices which preclude soil replenishment
over time.
iv) Poor cropping patterns and a failure to shift into higher value added crops.
Now the project design while addressing none of the critical constraints to agricultural
growth, relies entirely on the relatively less important constraint, i.e. farm implement
quality. Even this constraint can be effective in accelerating agricultural growth only in
conjunction with improved irrigation, fertilizer and cultural practices which are of course
absent from the project design.
The project objective of stimulating industrial growth in what the project document refers
to as “Mian Channu/Multan area”, is based on the methodology of growth nodes. The
area in question should be properly referred to as Mian Channu and Multan areas. Here
there are actually two nodes, and not one as the project design assumes. The concept
being that by intervening to provide a strategic infrastructure need (in this case prototype 95
development and specialized fabrication facilities), the project would give a critical
impulse to the engineering units concentrated in these areas, and induce a rapid and
diversified industrial growth. The two distinct growth nodes are: The Mian Channu node
stretching north upto Okara and the Multan node stretching south to Bahawalnagar.
An important feature of the growth node methodology is that a linkage needs to be
established between the growth nodes for achieving self-sustained and rapid diffusion of
markets, technologies, and economic growth (see Section 4). The CAMI/CFC project
design by confusing two distinct nodes as one (“The Mian Channu/Multan area”), is
unable to specify actions and institutions required to establish the necessary linkage
between the nodes.
II (3) The Problem of Market Demand and Sustainability
As discussed in Section I, inherent to a CFC designed within a top-down approach is the
phenomenon of a time lag between installation of machines and their full utilization for
catering to a large clientele. There are three necessary conditions for sustainability:
i) A committed bridging finance component to finance the budget deficit during the
time lag.
ii) A production unit component, with equipment, personnel, raw materials stock
requirement and specification of the particular components to be manufactured for
profitable sales during the "time lag" period. This is necessary in order to finance
the deficit on the operating costs of the common facilities, costs of prototype
development and extension training and credit services.
iii) Built into the Project Design should be a large extension service outfit that can
catalyze the diffusion process emanating from prototype development and CFC
operations. It is through the quick dissemination of information, to SME's about
CFC capabilities, specification of the unit specific fabrication requirements, and
the provision of training and credit, that a demand for CAMI/CFC could have
been created quickly. 96
A major flaw in the Project Design of CAMI/CFC is that the first two necessary
conditions are absent while the third (Large Extension Service outfit with wide
geographic coverage) is so weak, as to be incapable of fulfilling project objectives. There
are currently only two extension service officers, and both are based in Mian Channu.
These officers though competent and highly motivated are poorly paid and poorly
equipped. Actually the provision should have been for at least 9 extension officers, 4 to
be based in Mian Channu and 5 in Multan, equipped with transport, communications, and
data generation/analysis facilities.
That the three necessary conditions for sustainability of the project during the “time lag
phase” are not adequately addressed in the CAMI/CFC is not surprising: The Project
Design does not specifically consider the sustainability issue. It only indicates that there
will be certain “recurring costs” which will be borne by the government. There is also a
vague mention that the project should “try” to generate revenues to finance some part of
the recurring costs. There is no attempt at estimating the magnitude of recurring costs on
a yearly basis let alone a formal contractual stipulation that the Punjab government or
PSIC include the recurring costs of CAMI in their budgets, for the years in question.
Similarly, there is no concrete plan in the Project Design on how the revenues are to be
generated, the project mix, the mechanism of demand generation of CFC services, and
prices of products and services of CAMI.
SECTION III: PERFORMANCE OF THE CAMI PROJECT
III (1) Sales Performance
During the period July 1993 to May 1994 CAMI has provided CFC facilities to 79 SME's
in and around Mian Channu, it has completed 276 jobs in both fabrication operations for
clients and manufacture of components, and generated a sales revenue of Rs. 848,847.
(a) An analysis of the geographic composition of this sales revenue shows that 57%
was generated in Mian Channu and 43% in widely dispersed locations ranging
from Bahawalpur, Multan, Lodhran in South Punjab to Gujranwala and
Faisalabad in the North Punjab. (See table 1). However, in keeping with the 97
expected dynamics of growth nodes, a predominant proportion of sales revenues
of CAMI (81%) were concentrated in the Mian Channu and Multan Nodes. Mian
Channu generated more than twice as much revenue (57%), as Multan (24%),
even though the Multan node has a larger number and more diversified small
manufacturing enterprises. The distribution of sales revenue between Mian
Channu and Multan suggests:
i) That there is considerable potential for the growth of CAMI/CFC revenues
as the sales potential of Multan and its environs (Lodhran, Vehari,
Kabirwala, and Khanewal) is yet to be actualized.
ii) There is a need to substantially increase the geographic outreach of CAMI
extension/marketing component, by establishing an extension service
office in Multan and increasing the number of extension officers.
b) The size distribution of sales revenue amongst clients/customers, indicates that
81% of sales revenues came from customers who paid more than Rs. 5000/-, and
only 19% from those paying less than Rs. 5000/- (see table 1)
c) The monthly sales revenues are rising fast. The trend line fitted on the basis of
Ordinary Least Squares (OLSQ) method, shows a sharp upward trend in sales
revenue, with the slope being as high as 12627, when sales revenues are regressed
on time. The T-Test shows that the slope coefficient is significant at the 99%
level. (See table 2).
III (2) Prototype Development of Parts/Products at CAMI
Existing Performance
i) An improved version of the best thresher available in the local market, has been
produced. The specific improvements in the CAMI thresher prototype are as
follows:
(a) An improved version of the thresher cutter blade has been developed: The
blade is made of alloy steel which is heat treated over 40% of its length to
achieve 40 HRC hardness, while 60% is left relatively soft. The logic is
that the hard section at the cutting end, enables more precise cutting, and
the section where the impact of forces occurs, is left soft to give greater
flexibility and resilience. 98
(b) The cutter blade is clamped on to the thresher beam for increased
durability and strength (instead of being welded on, as in the obsolete
version).
(c) Development of an improved thresher pull channel which has reduced
thresher damage during transportation.
ii) A Rotavator bevel gear set has been developed through vendors under CAMI
control. The heat treatment has been performed at the CAMI/CFC facilities. This
is a major contribution to technological improvement in an important and widely
used farm implement. The existing Rotavators produced by SME's use poor
quality, ill fitting and second hand bevel gears cannibalized from old trucks in the
junk market.
iii) A Rotavator side gear has also been developed, which will improve its durability
and reduce maintenance requirements.
iv) An improved Seed Drill which uses an overlapping metal design at corners, with
spot welding, instead of crude welding of straight sheets in the obsolete version.
This improvement has considerably enhanced durability, and seed loss during
operation.
v) High quality hulling knives have been developed which have the potential for
substituting import of this component. These hulling knives are used in oil
expellers for breaking oil seed. Interviews with manufacturers of oil expellers in
Mian Channu and Multan suggest, that CAMI fabricated hulling knives are in
high demand and would substantially improve the quality and reduce production
cost of oil expellers.
Planned further Developments
The development of the following components is in process or is planned in the
immediate future:
- Front blade of Rotavator.
- Side gear of Rotavator.
- Rotavator shaft.
- Rotavator blades and knife 99
- A radically improved version of the Boom Sprayer for tractor driven
spraying of crops. The new design of the boom sprayer being developed
by CAMI is expected to overcome the following weaknesses in the
existing boom sprayers being manufactured by SME's: (a) Improper
nozzle distribution (b) Poor pump quality, (c) Lack of flexibility of
function, (d) Lack of control over pressure and flow.
III(3) Extension Services, Training and Credit
The extension service unit is operating out of Mian Channu, and has only two functional
staff members. The existing staff combining competence with dedication, has played a
key role in both prototype development and in creating a demand for CFC in the Mian
Channu area to identify their special fabrication needs, and pinpointing design problems
in existing farm implements. This has been achieved through extensive discussions, both
individually and in large meetings with staff of SME's.
As a result of the extension service effort, a clientele of 79 entrepreneurs has emerged
resulting in 276 individual jobs for CFC. Apart from this the Extension staff is working
with the following three SME's to enable them to upgrade their production organization,
including building lay-out, storage techniques, technical training and product
development:
1. Jamal Industries. This unit has been helped by CAMI extension staff to develop
an improved potato digger and sugarcane planter.
2. Dogar Industries. This unit is collaborating with CAMI to make further
improvements in their sugar planter.
3. Bhutta Industries. CAMI extension staff has helped prepare a scientific workshop
layout, and designed material storage racks enabling saving of space, and greater
efficiency in production and material handling.
In the field of training, during the period August 1993 to April 1994, seven training
courses have been conducted at CAMI, from which a total of 38 trainees have graduated. 100
The CAMI credit program has only recently come into existence and so far only 4 loans
have been sanctioned (two investment loans and two working capital loans) amounting to
a total of Rs. 700,000. The money however has not yet been disbursed. The CAMI
credit program is conceived as being integrated with the extension service program. The
idea is to provide credit to SME's in agricultural implement and metal sectors, for both
investment and working capital requirements. There is a revolving fund provision of Rs.
5 million in the CCP, with a ceiling of Rs. 200,000 on investment loans, and Rs. 150,000
on working capital loans, with an interest rate of 11% on both.
III (4) Conclusion
The team of personnel who have been running the project after its commissioning about
18 months ago are facing an uphill task as they confront four obstacles, all of which
emanate from project design flaws:
(a) Financial constraints since revenues are not covering operating costs just yet, and
PSIC is pressing (at this awkward stage) for financial self-sufficiency of the
project. (See Section II for an analysis of flaws in Project Design which have
resulted in this problem).
(b) Inadequate staff provision in the project for the extension service unit. Yet, this is
precisely the unit that would be expected to play the leading role in: (i)
Generating demand for CFC services, (ii) Helping to identify new prototype
ideas, (iii) Marketing of components manufactured at CFC, and (iv) Identifying
high demand and high revenue items for serial production which is necessary for
the financial sustainability of CAMI.
(c) A machine stock which while suitable for the common facilities objective, needs
some balancing with additional machines if serial production of components is to
be established. (See Section IV for details).
(d) An institutional framework (A parastatal actually running the project, combined
with donor support) which leaves very little autonomy with on-site management.
The decision making process is both cumbersome and bureaucratic given the
nature of PSIC control from its head office in Lahore. Such an institutional 101
framework is not suited for innovative management, quick decisions in response
to rapidly changing market conditions and risk taking, all of which are essential if
the project is to actualize its considerable potential.
Inspite of the difficulties confronted by project staff, there is an impressive level of
teamwork and motivation in both the management and the workforce, to achieve success.
Both team cohesion and motivation are reinforced by the conviction amongst its members
that the project is already playing a vital role in catalyzing technological improvements,
increased income and growth in SME's in Mian Channu; and that it has considerable
potential for achieving a much larger geographic and demographic coverage, in a short
time span. The pre-conditions for fulfilling this potential are that changes be brought
about in the composition of machine stock, a complementary serial production of selected
components is set-up; an enhanced extension and marketing organization with wider
outreach is established; and greater autonomy and flexibility is achieved in management.
The growth of monthly sales shows a clear upward trend and within 11 months sales
revenue has increased from Rs. 10,000 per month to almost Rs. 180,000 per month. The
monthly expenses both (recurring and contingencies are about Rs. 300,000. The
depreciation on the capital stock is approximately Rs. 200,000. There is already a need to
treble the sales revenue. The potential exists to raise sales revenue by ten times.
III(5) A Note on Criteria for Performance Evaluation for CFC's
A project evaluation calculus based on costs and benefits internal to the CFC is
inappropriate for this kind of enterprise. The justification of setting up the institution is
derived from the fact that a reduction in costs and/or an increase in revenues is made
possible for a matrix of individuals and institutions external to the project itself. Equally
important is the fact that the increase in net incomes of these `external' beneficiaries is the
aggregate result of inter-active stimulation of economic actors, occurring in a cumulative
process over time. Such a process changes both the structure and growth potential of the
regional economy by laying the basis for accelerated technological change, growth in
demand, investment, income and employment. (For details see Section IV). 102
Consequently, CAMI/CFC project evaluation criteria must set out to measure:
a) The impact of the project on the costs, incomes and growth of the SME's initially
in the Mian Channu node and later in the Multan Node.
(b) The extent to which the SME's in the node increase the economic interaction
amongst themselves: Such interaction would be specified in terms of providing
inputs for each other's products, demand and sub-contracting arrangements.
(c) The extent to which the CFC helps the SME's in the node to establish backward
and forward linkages.
A proper calculation of economic benefits of CAMI/CFC would require data on the
impact of CAMI/CFC on net incomes of beneficiaries, and secondary multiplier effects
of forward/backward linkages in the region. In its absence it is only possible to make an
assessment based on the number of units that CAMI/CFC has had any impact on. If
during the first year alone, as discussed in Section III, CAMI has provided common
facilities to 79 entrepreneurs in the Mian Channu node, developed and diffused seven
technologically upgraded components of farm implements, completed 276 fabrication
jobs and given 7 training courses in different trades to 38 persons, then it is by no means
a bad performance. If the geographic outreach and diversification of target enterprises
can be achieved through a strengthened extension service unit, the stimulus to growth and
structural change within the node can be considerably intensified.
Under these circumstances to think of closing down the CAMI/CFC and bringing about
the destruction of capital as a result, on the basis of a narrow and static IRR criteria,
would be indefensible from the standpoint of serious economic analysis.
SECTION IV: THE CFC IN THE CONTEXT OF THE GROWTH NODE
CONCEPT
IV(1) The Concept of Growth Nodes
The location of an industrial project in a backward region often involves large external
diseconomies. Where these relate to such components of the infrastructure as road and 103
rail transport and energy and telecommunications, the government can ameliorate
shortages by providing more of these facilities, although obviously there are major
national savings in providing these for a large number of industrial and other users than
for an individual project. There are other elements of the environment which are more
difficult to create such as a local market for skilled and semi-skilled labour. Finally,
there are backward and forward linkages and industrial services that are essential for
maximum efficiency which can only provided to a given industrial unit by other units and
other industries. It is in the context of all these factors that the concept of growth nodes
has arisen. There are three distant elements in this concept, that of the type of industry
that generates linkages, that of critical thresholds for industries and that of space, or the
geographical dimension.
IV (2) Desirable Types of Industries
As a sort of a seed crystal, Perroux40 has suggested the concept of the “Industrie Matrice”
which denotes an industry that can act as a sort of engine of industrial growth . He posits
such an industry at "the leading edge of technology" but obviously this may be modified
to the circumstances of a particular backward region where a particular industrial unit
while not at the state of the art level of technology in international terms, does represent a
breakthrough for that particular region. Its backward and forward linkages represented
by its own demand and its ability to supply the demands of other units are what make it
an “industrie Matrice”. Watanabe41 extends this concept by his characterization of
industrial growth at a point as “An intense thicket of backward and forward linkages, not
bi-directional but uni-directional”. In other words a group of industries generating a
demand for a wide range of goods and services and also possessing the ability to supply
an ever-growing range of goods and services. As an example of this, an engineering unit,
say a farm implements manufacturer with his needs for a wide range of subcontracting
jobs and his ability to produce in house, a diverse range of components in quantity, is a
___________________________
40 Cited in A. Hussain, et. al. Study on Industrialization Potential of Selected Backward
Districts in Pakistan. A report submitted to NDFC, 1987.
41 Op. cit. 104
better example of “industrie Matrices” than say a cement plant which requires much
fewer subcontracting jobs and is essentially a monoproduct. The interaction of a number
of units of the first type will not only fuel growth between themselves but create (through
rising external economies) a better operating environment for industries of the second
type and so the “Thicket of Linkages” grows.
IV(3) Thresholds
The work of Kozlowsky42 and Hughes shows that both investment and economies of
scale functions in industrial growth are lumpy not smooth functions, i.e., both are given
to sudden rises and not gradual, incremental changes. The establishment of a particular
industrial unit by creating a demand causes the crossing of a threshold for the
establishment of another unit. A similar threshold can be said to exist for an industry (or
industrial sector) as well as a service industry. Likewise, the increase in operating
industrial units creates a pre and post demand for more infrastructure.
IV(4) The Geographical Dimension
In a sense, the theories elaborated thus far do not include a spatial dimension. This is
brought in by the work of Boudeville43 and B.J.L. Berry44 who have shown that Distance
Decay Curves exist for most goods transported from one location to another. This means
that the largest quantum of goods are transported over the shortest distances and there is a
corresponding falling off as distances increase. This is obviously not a simple
relationship since a unit cost of transport must relate to the value added of the good in
question with adjustments for perishable goods but it does hold true with these provisos.
A similar relationship has been posited with regard to information flows where frictional
losses are likely to be higher between larger geographical spaces.
42 Cited in National Human Settlements Policy Study. A report submitted to Pakistan
Environmental Planning & Architectural Consultants Limited (PEPAC) in March 1983.
43 Op. cit.
44 Op. cit. 105
The defining characteristics for a growth node are therefore:
i) The aggregation of industries so as to include a number of “industries matrices”.
ii) For this aggregation to create an increasing number of unidirectional linkages.
iii) To allow concentrated and cost effective provision of infrastructure including
R&D specialized fabrication facilities, transport, telecommunications, energy,
labour, finance and information.
iv) For this growth to permit the passing of thresholds necessary for the establishment
of new units and industries.
It only remains to be added that proximity in time is as important as proximity in
geographical space if the node is to be self-reinforcing. As these nodes come up they
then begin to interact with each other in a process of mutual reinforcement and bring
about further growth and development along their axes and at their locations.
IV(5) The Importance of Project Selection and Location
If the criterion of private profitability as embodied for example in the internal rate of
return (IRR) is the determinant in project selection, it is inevitable that project decision
will favour the relatively more developed regions, because it is there that the internal
economies of the project are highest.
If however we disregard the concept of IRR as a criterion in project selection we return to
a situation where the selection of projects is based on one or more factors external to the
economic and financial feasibility of the project. This policy has been a costly failure in
the past. What is required is to create the external economies necessary for positive
returns for industrial projects. This is best done through the creation of growth nodes.
Crucial to this concept is the setting up of groups of industrial projects in close proximity
with a more or less centralized provision of the major infrastructural requirements. This
process will over time increase both the internal and external economies by allowing
each project to reinforce the other and increasing the attractiveness of the area to new
investors as explained above. 106
There are four analytically distinct economies associated with the process of economic
growth in a node:
i) Static external economies which is the ability of projects to meet the demands for
materials for other projects, to utilize their end products or to service them in one
way or another.
ii) Dynamic external economies. This means that each existing project either
decreases the cost or increases the revenue of new projects through the process
outlined above.
iii) Dynamic internal economies of scale. In the first instance a rapid growth rate of
output as would occur when a growth node takes off, would be associated with a
larger proportion of new machines in the total stock of machines. This, in turn,
implies a higher average productivity through a relatively greater utilization of the
newest technologies. This factor is not of crucial importance to the individual
project but extremely important to the overall question of industrial growth.
iv) As these nodes function another factor comes into play which is contained in K. J.
Arrow's concept of "learning by doing", i.e., the improvement of industrial
procedures and the gaining of greater efficiency simply through experience over
time.
It is clear that proximity in space and proximity in time are both crucial to the concept of
growth nodes. A growth node requires a critical concentration of industries and
infrastructure over a relatively short time if the process is to be self-reinforcing.
Paradoxically, these centralized growth nodes require for their successful operation a
degree of decentralization at the very highest level of financial and industrial
administration in the country. The response of different growth factors to individual
problems in a growth node must be quick and precise. This is only possible if a large
degree of financial and other decision making is at a level where attention can be paid to
the individual characteristics of the problems of a particular growth node.
SECTION V: WHERE SHOULD CAMI GO FROM HERE?
If CAMI is to fulfill its development function and at the same time become financially a
‘going concern’ then action needs to be taken within four dimensions: 107
V(1) Diversification of Clientele
Widening the impact of CAMI on small manufacturing enterprises. In this context two
types of diversification of beneficiary impact needs to be considered:
(a) Widening its geographic scope from Mian Channu (as at present) to the tehsils of
Lodhran, Kabirwala, Vehari, Khanewal and city of Multan and its environs.
These are contiguous areas and lying along the road network emanating from
Multan. CAMI activity in these areas would establish a linkage between the Mian
Channu and Multan growth nodes and induce inter-active and accelerated
economic growth, as discussed in Section III and IV above.
(b) Diversification in the types of manufacturers served by CAMI. Currently CAMI
is concentrating both common facilities services as well as component
manufacture for predominantly farm implements manufacturers. The range of
clients served could also cover agro based industry (such as ginning factories) and
light engineering units.
V(2) Serial Production of Component Manufacture
Developing serial production capability in a number of high quality components, which
are used (but not manufactured) by farm implements manufacturers, agro based industrial
units and light engineering units. If CAMI were to develop such a capability, it would (a)
improve the quality and profitability of a wider range of SME's, (b) achieve fuller
utilization of the CFC equipment and (c) CAMI itself would become an internally
profitable institution.
In conjunction with serial production, CAMI needs to establish a stock of raw materials
required by clients for specialized fabrication and components manufacture. Such a raw
material stock could be conveniently established on the basis of an overdraft facility
arranged with a local commercial bank, and the raw material stocks could be
hypothecated to the bank by way of collateral. If such a raw material stock could be 108
established it could considerably enlarge clientele of the CFC, since currently many
potential customers find it inconvenient to buy the raw material themselves from a far off
place and then bring it to CAMI/CFC for fabrication.
Discussions with CAMI staff has yielded a possible list of components that CAMI could
manufacture on a serial basis. The list of components and the additional machinery
required, alongwith estimated prices of machines and sales revenue from component
manufacture is presented in table 3. The table indicates that with an additional fixed
investment of Rs. 12.9 million, annual revenue could increase by Rs. 20.4 million.
V(3) Enlarged Extension/Marketing Capability
The present extension capability is inadequate for achieving wide geographic outreach,
quick diffusion of prototypes, and rapid increase in the clientele served by CFC and
supplied with CAMI products. An increase in extension/marketing staff from existing 2,
to a total of 10 persons is required, with a camp office established in Multan, to enable
more effective outreach in the Multan node. Extension officers should be provided with
vehicles and attractive salaries, in view of the difficult and important job they would be
performing. Given the client specific nature of the fabrication facilities offered by
CAMI/CFC, and the technical nature of components to be produced and sold , the
extension and marketing should be synthesized, and performed by technically trained but
socially sensitive extension service staff.
V(4) Institutional Change for Greater Management Autonomy and Beneficiary
Participation.
As discussed in earlier sections, the current institutional framework does not allow the
necessary autonomy to CAMI management, and flexibility for innovative initiatives.
With PSIC controlling the functioning of CAMI, management procedures tend to be
bureaucratic and the motivation and initiative of management staff is suppressed by a
distant and centralized control. At the same time, the current rigid institutional structure
precludes the possibility of CAMI mutating into more creative organizational forms in 109
which there could be functional participation of a number of different actors related with
CAMI actively: Small manufacturers, farmers, banks, and young trainees.
Perhaps at some point in the future it may be useful to envisage replacing the present
organizational structure with an NGO, registered under the Societies Act, (or even a
private limited company) with the board of governors/directors, including a
representative of PSIC, the Project Director, a representative of the Donors, at least two
representatives of small manufacturing enterprises in the Mian Channu and Multan areas,
one representative of the farmers' association of the area, and one representative of the
banks functioning in the area.
Such an NGO apart from its own board meetings, should hold regular meetings of small
manufacturers, farmers, and engineers/technicians, to discuss issues related with the
functioning of CAMI as a catalyst to industrialization in the area. Apart from this, the
NGO should hold regular seminars to disseminate knowledge on professional issues
related with agriculture engineering, finance and management. The NGO could usefully
link itself with the Lahore University of Management Sciences, which is currently
develop a teaching/training course for the small business sector.
Such an NGO, in order to concentrate on the diffusion of CFC services, training,
diffusion of new prototype ideas, and marketing of components manufactured in house,
could conveniently contract out the task of prototype development to AMRI (in Multan). 110
TABLE 1
COMPARISON AND LOCATION OF SALES REVENUE
JULY 1993 - MAY 1994
Location/Size Total %
Jamal Industries 77,704 9.2%
Ilyas Borthers 155,009 18.3%
Karmanwala Industries 46,963 5.5%
Akhtar Rashid 45,000 5.3%
Total Large Mian Channu 324,676 38%
< 5,000 Rs. Per month 157,368 19%
> 5,000 Rs. Other locations 366,803 43%
Multan 204,921 24.1%
Lodheran 10,432 1.2%
Vehari 5,000 0.6%
Bahawalpur 5,850 0.7%
Gujranwala 5,600 0.7%
Faisalabad 45,000 5.3%
Sahiwal 45,000 5.3%
Chichawatni 45,000 5.3%
Grand Total 848,847 100%
Source: CAMI data, Calculations by P. Buijs 111
TABLE 2
REGRESSION RESULTS OF SALES REVENUE TREND
The regression equation is
MONTHLY SALES = 1964 + 12627 MONTHS
Predicator Coefficient Stdev t-ratio P
Constant 1964 25078 0.08 0.939
MONTHS 12627 3698 3.42 0.008
s = 38780 R-sq = 56.4% R = sq (adj) = 51.6%
Analysis of Variance
SOURCE DF SS MS F P
Regression 1 17,539,280,896
17,539,280,896
11.6 0.008
Error 9 13,534,900,224
1,503,877,760
Total 10 31,074,181,120
Usual Observations
Obs. MONTHS SALES Fit Stdev.fit Residua
l
St. Resid
7 7 12000 90355 12263 -78355 - 2.13 R
R denotes an Obs. with a large st. residual
MONTHS Monthly Sales Revenue
1 8000
2 39000
3 45000
4 52000
5 58000
6 128000
7 12000
8 139000
9 88000
10 10200
11 184000
Source: CAMI data, Calculations by A. Hussain 112
TABLE 3
PROPOSED PRODUCTION PROGRAM (ANNUAL)
ITEM DESCRIPTION QUANTITY RATE AMOUNT ADD.
MACH.
Cultivator shovel 30000 15/- 450,000.00 A
Cultivator tines 5000 80/- 400,000.00
Inter-row cultivator tines 4000 100/- 400,000.00
Seed drill hoppers 300 700/- 210,000.00
Rotavator blades 20000 60/- 1,200,000.00
Rotavator transmission set
(bevel gear, side gear,
shaft)
400 6500/- 2,600,000.00 B + C
Thresher pulls 1400 300/- 420,000.00
Thresher channels 700 500/- 350,000.00
Thresher cutters 52500 11/- 577,500.00
PTO bevel gear set 3000 500/- 1,500,000.00 B + C
Transmission gears
(various)
2000 500/- 1,000,000.00 B
Hulling knives 6000 75/- 450,000.00
Oil expeller extruder worm 1500 250/- 375,000.00 D
Oil expeller discharge 500 80/- 40,000.00 D
Oil expeller plaes 2000 275/- 550,000.00
Service CFC - - 600,000.00 B
Raw material shop sales - - 10,500,000.00 B
Total:- 20,437,500.00
ADDITIONAL MACHINERY REQUIRED ESTIMATED AMOUNT
(Rs.)
A. 3 Nos eccentric press 300,000.00
B. Broaching machine 900,000.00
C. Bevel gear generating machine 5,000,000.00
D. Special Lathe 1,000,000.00
D. Material processing equipment 5,700,000.00
(decoiler, straightening machine,
shearing machine, hacksaw machine,
weighing scale, jib crane, hydraulic
fork lift truck, electric chain hoist, etc
Total:- 12,900,000.00 113
Appendix 4
PRSP
PUNJAB RURAL SUPPORT PROGRAMME
THE FIRST FOUR MONTHS
Report submitted to the
Board of Directors
By
Dr. Akmal Hussain
Honourary Chief Executive Officer
PRSP
December 1998 114
BOARD OF DIRECTORS
Mr. M. Shafi Arshad Mr. Shoaib Sultan Khan (Chairman)
Dr. Rashid Bajwa Mr. Wasif M. Khan
Mr. Aminullah Chaudry Mr. Muhammad Akram Malik
Mr. Tariq Farook Mr. Khalil Mian
Mr. Humayun Farshori Dr. Zafar Iqbal Qureshi
Dr. Akmal Hussain
(Honorary Chief Executive Officer) Mr. Tariq Sultan
Dr. (Begum) Attiya Inayatullah Mr. Asad Ali Shah
Ms. Shazia Khan Mr. Shaukat Tareen 115
OPERATIONS
Region Regional Manager Districts Tehsils/ S. Tehsils Where COs Formed
Lahore Dr. Amjad Saqib Lahore, Okara, Kasur
Lahore
Gujranwala Brig. (Retd.) Riaz Ahmad Riaz Gujranwala, Hafizabad, Shaikhupura
Wazirabad, Gujranwala, Kamoke
Sialkot Mr. Ayub Munir Sialkot, Narowal
Daska
Faisalabad Col. (Retd.) Javed Murtaza Faisalabad, Jhang, Toba Taik Singh
Faisalabad, Jaranwala
Sargodha Mr. Nasir Mahmood Sargodha, Mianwali
Sargodha, Sahiwal
Sahiwal Mr. Basharat Ali Sahiwal, Pak Pattan
Sahiwal
Multan Ms. Humaira Hashmi Multan, Khanewal
Multan
Muzaffargarh Mr. Muhammad Darjaat Muzaffargarh, Laiyya
Muzaffargarh
Head Office (Lahore) Dr. Akmal Hussain Hon. CEO 116
TABLE OF CONTENTS
INTRODUCTION
MANAGEMENT VISION AND METHODOLOGY OF ACTION
I. Language, Literature and Social Change
II. Passion, Paradigm and Praxis
III. The Participatory Development Paradigm
GOALS, OBJECTIVES AND VERIFIABLE INDICATORS
IV. Goal
V. Objectives of the Programme
VI. Verifiable Indicators
FIVE YEAR STRATEGIC PLAN
VII. Strategic Plan
BUDGET 1998-99 AND FINANCIAL IMPACT ASSESSMENT
VIII. The Budget and Financial Analysis
PROGRAMME PERFORMANCE
IX. Programme Performance
X. Summary Review
APPENDICES 117
INTRODUCTION
A programme whose goal is nothing short of overcoming poverty in rural Punjab
within a decade, is historically unprecedented in this Province in both the magnitude
and complexity of effort. It was therefore clear from its inception that the PRSP
would have to bring together a talented team of Managers each of whom could
combine creativity with commitment. The challenge was to create a work culture in
which this creativity and commitment could be sustained through an intensive work
schedule and collective synergy. Since we were facing a unique set of circumstances
in each of the eight regions where we started work, it was necessary to develop a
management system that permitted sufficient space to each member of the team for
independent thought and action, while at the same time, creating an environment for
collective reflection and conceptualization through which we could deepen the quality
of social action. This report attempts to present the principles underlying the
management style and work procedures of PRSP, while also reporting on the strategic
plan we devised through initial field visits, the objectives we specified for the
program and the remarkable results that were achieved in the first four months.
PRSP MANAGEMENT VISION AND METHODOLOGY OF ACTION
You are the woof and you the warp
You are in a every pore
Says Shah Hussain Faqir
Naught am I all is you
-Shah Hussain – 17th, Century
DEPLOYING CONSIOUSNESS FOR SOCIAL CHANGE
Six inter-related elements of the Punjabi Sufi tradition may be relevant to the PRSP
endeavour:
1. The growth of the self involves a transcendence of the ego through a relationship
of love (ISHQ) with the “other”.
2. The practice of ISHQ involves combining passion with rigorous rationality.
3. The true stature of a person therefore is measured not in terms of what he owns,
but what he gives to others. 118
4. By the same token the more developed a person’s consciousness, the more he
locates himself in the collective being of the community.
5. The process of growth of the self therefore is progressive integration with the
community.
6. Dialogue is conceived by the Sufi as a process of mutually fertilizing reflection,
which so enters consciousness, that it becomes the basis for existential choices
and action.
I. LANGUAGE, LITERATURE AND SOCIAL CHANGE
INTRODUCTION
Overcoming poverty in rural Punjab is fundamentally a process of empowering the
poor to actualize their creative potential. Such a profound social change, if it is to be
sustainable, involves tapping into the specific cultural wellsprings of creative
consciousness of the Punjab peasantry.
The peasants of Punjab may be poor, but they are inheritors of a rich cultural and
philosophical tradition, which is reflected in their forms of apprehending social life,
their poetry and folklore. Through their forms of love and social action the Punjab
peasants express their dreams and sorrows, and make their individual and collective
history.
The consciousness of the poor peasantry in rural Punjab has been deeply influenced
by the Punjabi Sufi saints. This can be seen in the folklore and experiential reference
points of contemporary language use in rural Punjab. Six inter-related elements of the
Punjabi Sufi tradition may be relevant to the PRSP endeavour:
The growth of the self involves a transcendence of the ego through a relationship of
love (ISHQ) with the “other”.
The practice of ISHQ involves combining passion with rigorous rationality.
The true stature of a person therefore is measured not in terms of what he owns, but
what he gives to others. 119
By the same token the more developed a person’s consciousness, the more he locates
himself in the collective being of the community
The process of growth of the self therefore is progressive integration with the
community:
Dialogue is conceived by the Sufi as a process of mutually fertilizing reflection,
which so enters consciousness, that it becomes the basis for existential choices and
action.
These elements of the Sufi tradition are deeply rooted in the consciousness of the
Punjabi peasantry. They lie just below the surface of language use in their silences as
much as the cadences of their speech. Najam Hussain Syed, (perhaps the greatest
Punjabi Sufi poet of the 20th century) has referred to this subliminal consciousness of
the peasantry:
Once this counter consciousness of love and relatedness, of integrity and creative
action, is brought to the surface, a new recognition and set of values come into play.
The challenge in the dialogues undertaken by PRSP was to bring about this gestalt
switch in consciousness, through word, gesture and work procedures.
The awakening of this consciousness in however nascent a form, was seen in the work
of PRSP to be a material force for social change. One of the important factors in the
rapid growth and depth of CO formation in the PRSP is that this consciousness was
tapped during the dialogues.
II. PASSION, PARADIGM AND PRAXIS
1. Consciousness, Organizational Structure and Work Procedures
The defining feature of the program is the passion, which impels those who work in it
and those for whom we work. It is not just an emotion but a form of consciousness.
It comes from transcending the ego and relating with the community through love.
Thus, passionate consciousness is both a cohering force of the community and also
the synergy through which the PRSP team engages in a process of action and
reflection. This principal is the basis of the work culture and the methodology of 120
action of PRSP. It is illustrated by the dialogues that occur between PRSP personnel
and rural communities, on the one hand and between the members of PRSP team on
the other. The dialogues are designed to identify and actualize the creative potential
of individuals.
The form of learning and creative growth pursued by PRSP through its dialogues has
been called prophetic as, opposed to messianic.
45 The messianic
leader/teacher/manager is one who claims to embody the truth and if his followers
want to become something they can only be his shadows. By contrast, the prophetic
leader/teacher/manager is one who abnegates his own exceptionality and recognizes
each individual as the unique origin of change. The participants in the dialogues
whether between PRSP and a community or within PRSP itself, are essentially coequals
in a journey of actualizing each other’s creative potential in the context of
social change.
The organizational structure reflecting the messianic approach is hierarchic and
restricts the space for independent thinking. Its work procedures involve issuing
instructions or blindly implementing them. By contrast the organizational structure
associated with the prophetic approach is non-hierarchic, designed to provide space
for thought and action by autonomous individuals in collegial interaction. Its work
procedures instead of being a simple dichotomy between instructions and compliance,
are designed for mutually fertilizing dialogues, action and collective reflection.
2. Alternative Paradigms and the Methodologies of Action
The paradigm of the PRSP is a framework of thought and action, which has been
called Participatory Development.46 This is exactly opposite to the paradigm, which
has been followed by development practitioners in this country during the last 50
years. Since Pakistan’s independence, the idea behind development actions was that
the poor are victims to whom certain goods and services have to be delivered. This is
the “top-down” paradigm. In the past, governments at best tried to develop
administrative mechanisms through which goods and services could be handed out to
___________________________
45 See, David Cooper: The Death of the Family.
Akmal Hussain: The End of Teaching, Weekly Viewpoint, Lahore.
46 Akmal Hussain: Poverty Alleviation in Pakistan, Vanguard Books (Private) Limited,
1994. 121
the poor. It is now widely recognized that such an approach has not worked because
in the process of delivering goods and services, a large part of the resources get lost
enroute, while poverty is reproduced after some time. The problem of the lack of
goods and services for the poor is the result of the fact that they are locked into a
system of dependence at the local and national levels. The dependence of individual
members of poor village communities originates in the fact that they are fragmented
and alone. They have neither the skills nor the resources to increase their
productivity, nor the organizational strength through which to acquire resources from
governments, donors and the market. The Participatory Development paradigm by
contrast aims to enable the poor to organize, acquire new skills, increase productivity,
achieve savings, and develop the ability to access training, technical support and
credit from a variety of institutional sources.
COUNTERPOSED APPROACHES TO LEADERSHIP/ MANAGEMENT/TEACHING
MESSIANIC PROPHETIC
Leader/ manager/ teacher claims to embody the
truth and if his followers want to be something,
they can only be his shadows.
Organizational structure is hierarchic in which
space for thinking is restricted.
Work procedure involve issuing instructions or
unthinking implementation.
Leader/manager/teacher abnegates his own
exceptionally and recognizes each individual as the
unique origin of change.
Organizational structure collegial (non-hierarchic),
designed to provide space, for thought and action by
autonomous individuals.
Work procedures designed for mutually fertilizing
dialogues, action and collective reflection.
III. THE PARTICIPATORY DEVELOPMENT PARADIGM47
1. Elements of the Participatory Development Paradigm
___________________________
47 Akmal Hussain: Poverty Alleviation in Pakistan, Vanguard Books (Private) Limited,
1994. 122
Participatory Development is a process which involves the participation of the poor at
the village level to build their human, natural and economic resource base for
breaking out of the poverty nexus. It is specifically aims at achieving a localized
capital accumulation process based on the progressive development of group identity,
skills development and local resources generation. The essential feature of
Participatory Development is social mobilization or the formation of group identity.
This is done by initiating a series of dialogues with rural communities, which can
result in the formation of community organizations. The beginning of the process is
therefore the emergence of a nascent form of community consciousness. This is then
deepened as the community identifies and implements projects for increasing income,
acquiring new skills and begins to engage in collective savings.
As the sense of group identity is deepened it gives a new self-confidence through
which the community can engage in more ambitious projects involving collective
action and management.
The concept of Participatory Development has three key elements:
(a) Process: It is a process whose moving forces are the growth of consciousness
and group identity, and the realization, in practice, of the creative potential of
the poor.
(b) Empowerment: The process of reconstructing a group identity, of raising
consciousness, of acquiring new skills and of upgrading their knowledge base,
progressively imparts to the poor a new power over the economic and social
forces that fashion their daily lives.
It is through this power that the poor shift out of the perception of being
passive victims of the process that perpetuates their poverty. They become the
active forces in initiating interventions that progressively improve their
economic and social condition, and help overcome poverty.
(c) Participation: The acquisition of the power to break the vicious circle of
poverty is based on participation within an organization, in a series of projects.
This participation is not through ‘representatives’ who act on their behalf but
rather, the actual involvement of each member of the organization in project
identification, formulation, implementation and evaluation. It is in open
meetings of ordinary members at the village/mohalla level organization that
decisions are collectively taken, and work responsibilities assigned on issues 123
such as income generation projects, savings funds, conservation practices in
land use, infrastructure construction and asset creation.
2. The Dynamics of Participatory Development
The process of participatory development proceeds through a dynamic interaction
between the achievement of specific objectives for improving the resource position of
the local community and the inculcation of a sense of community identity. Collective
actions for specific objectives such as a small irrigation project, building a school,
clean drinking water provision, or agricultural production activities can be an entry
point for a localized capital accumulation process. This is associated with group
savings schemes, reinvestment and asset creation. The dynamics of participatory
development are based on the possibility that with the achievement of such specific
objectives for an improved resource position, the community would acquire greater
self-confidence and strengthen its group identity.
3. The Implementation Mechanism
A rural support system that enables:
i) Organizing village communities and rediscovery of community consciousness.
ii) Access over credit.
iii) Access over skill training.
iv) Access over technical support from:
- Government line departments,
- Donors,
- Other NGOs,
- Autonomous bodies
GOALS, OBJECTIVES AND VERIFIABLE INDICATORS
Plant your ideal,
The tree of light
In your inner courtyard,
Be constant in it’s pursuit
Remain with the beloved
Remain with the beloved
-Shah Hussain – 17th, Century 124
IV. GOAL
Overcome poverty in rural Punjab within a decade by actualizing the potential of the
poor through a regional support system. This system shall be designed to enable
organization of poor village communities, through rediscovery of community
consciousness, and provide access to skill training, credit and technical support. The
purpose of such a support system is to initiate and sustain a process of diversified
growth of income and the human, natural and economic resources of the poor.
V. OBJECTIVES OF THE PROGRAM
Organize approximately 1.63 million households, into approximately 29,681
community organizations with approximately half of them female COs, in 13,629
villages, to achieve 100 percent coverage of the poor population in the target regions.
On the basis of a series of dialogues with COs, identify a portfolio of diversified
income generation projects in agriculture, livestock, micro enterprises and small-scale
infrastructure. Through implementation of these projects, achieve a 50 percent
increase in income levels of the poor population in the target region in five years, on a
sustainable basis.
Enable the provision of training to 107,372, men and women amongst the poor
population in the target districts over the five year period, in the following fields:
Community Management, Livestock, Agriculture and Forestry, Poultry,
Technical/Industrial Training, and Micro-enterprise development.
On the basis of social mobilization, skill training and provision of technical support,
provide credit of Rs. 6.66 billion to Rs. 486,240 beneficiaries over a five-year period,
and achieve 95 percent pay back.
Achieve a savings fund of COs of approximately Rs. 428.51million in the target
regions.
VI. VERIFIABLE INDICATORS
In a program whose defining feature is to enable the formation of community
organizations and the development of community consciousness, the most important
verifiable indicator is the number of community organizations formed. A CO is 125
deemed to have been formed only when it has acquired the ability to hold regular
meetings (at least three) with proper documentation of the meetings and to have
opened a savings account with contributions from each of its members.
The number of CO meetings held (with over sixty percent attendance) becomes the
second indicator and the amount of CO savings is the third indicator of program
performance.
Household level, portfolio of investment are developed by the regional teams through
detailed dialogues with communities. These portfolios of investment indicate the
income generating activity that households wish to undertake. The obstacles to
undertaking such projects and successfully completing them are identified. The
number of portfolio of investment completed, thus becomes the fourth indicator of
program performance.
The basis of the credit appraisal of portfolio of investment is the assessment of their
viability first by the CO and then by program staff members. Credit disbursements
therefore represent collective evaluation of individual projects and becomes the fifth
indicator of program performance.
Training needs in the context of both household level projects and collective projects
are identified as an essential element in the process of localized capital accumulation.
Training needs are identified on the basis of dialogues between program personnel
and COs. The number of persons trained in various fields thus becomes the sixth
indicator of program performance.
Finally, credit payback performance indicates not only the success of income
generation projects but also the capacity of the CO to bring to bear its collective
identity in ensuring timely payback of borrowed money by the individual households.
In the long run the ability of COs to design and implement collective projects and to
resolve social conflicts at the CO level would become an important indicator of
program performance. 126
FIVE YEAR STRATEGIC PLAN
What ever colour I weave
I weave deep
-Shah Hussain – 17th, Century
VII. STRATEGIC PLAN*
TABLE SP-1
COMMUNITY ORGANIZATIONS
(ALL REGIONS)
Sr.
No.
Outputs 1st Six Months Year
1
Year
2
Year
3
Year
4
Year
5
Total
I. Community
Organizations
(All Regions)
800 2825 4975 6600 7500 6981 29681
Region 1 100 300 600 900 1000 1200 4100
Region 2 100 400 900 1700 2000 2000 7100
Region 3 100 400 600 700 700 600 3100
Region 4 100 400 700 1000 1500 1500 5200
Region 5 150 625 875 800 800 400 3650
Region 6 100 500 800 800 800 581 3581
Region 7 150 200 500 700 700 700 2950
* The Strategic Plan was made in June 1998 for 7 Regions. The 8th Region (Multan Division)
was established later in August 1998 127
TABLE SP-2
CREDIT
(ALL REGIONS)
II. Outputs Ist Six Months Year 1 Year 2 Year 3 Year 4 Year 5 Total
II. Credit (All Regions)
Amount
Beneficiaries
Rs. 95.525 M
6900
Rs. 345.276 M
25340
Rs. 711.125 M
51950
Rs. 1075.625 M
85450
Rs. 1786.625M
125050
Rs. 2646.025M
191550
Rs. 6,660.20 M
486,240
Region 1
Amount
Beneficiaries
Rs. 5.0 M
500
Rs. 21.0 M
2100
Rs. 60.0 M
6000
Rs. 120.0 M
12000
Rs.150.0 M
15000
Rs. 240.0 M
24000
Region 2
Amount
Beneficiaries
Rs. 6.0 M
400
Rs. 16.5 M
1200
Rs. 45.0 M
2400
Rs. 67.5 M
3600
Rs. 126 M
4800
Rs. 157.0 M
6000
Region 3
Amount
Beneficiaries
Rs. 9.15 M
750
Rs. 24.0 M
2500
Rs. 36.0 M
3750
Rs. 49.0 M
5050
Rs. 67.5 M
6250
Rs. 79.9 M
7450
Region 4
Amount
Beneficiaries
Rs. 18.0 M
1200
Rs. 50.0 M
2500
Rs. 100.0 M
5000
Rs. 200.0 M
10,000
Rs. 400 M
20,000
Rs. 800.0 M
50,000
Region 5
Amount
Beneficiaries
Rs. 24.375 M
1500
Rs. 125.776 M
7740
Rs. 268.125 M
16500
Rs. 298.125 M
24500
Rs. 528.125 M
32500
Rs. 593.125 M
36500
Region 6
Amount
Beneficiaries
Rs. 10.50 M
1050
Rs. 63.0 M
6300
Rs. 147.0 M
14700
Rs. 231.0 M
23100
Rs. 315 M
31500
Rs. 376.0 M
37600
Region 7
Amount
Beneficiaries
Rs. 22.5 M
1500
Rs. 45.0 M
3000
Rs. 55.0 M
3600
Rs. 110.0 M
7200
Rs. 200 M
15000
Rs. 400.0 M
30,000 128
TABLE SP-3
SAVINGS
(ALL REGIONS)
Rupees in Million
Sr.
No.
Outputs First Six
Months
Year 1 Year 2 Year 3 Year 4 Year 5 Total
III. SAVINGS
(ALL
REGIONS)
3.45 25.14 57.43 88.18 120.1 134.21 428.51
Region 1 0.45 2.70 5.40 8.10 9.00 10.80
Region 2 0.72 5.76 12.96 24.48 28.80 28.80
Region 3 0.90 7.20 10.80 12.60 12.60 10.80
Region 4 0.45 3.60 6.30 9.00 13.50 13.50
Region 5 0.54 3.33 8.73 14.76 20.52 24.84
Region 6 0.16 1.50 7.24 8.74 21.28 27.27
Region 7 0.23 1.05 6.00M 10.50 14.40 18.20
TABLE SP-4
SKILL TRAINING
(ALL REGIONS)
Sr.
No.
Outputs First
Six
Months
Year 1 III. Year 3 Year 4 Year 5 Total
IV. Skill Training (All Regions)
Activist Training
Other Skills
1370
2290
3420
9275
5430
13970
7200
17645
5200
18710
7162
17070
28412
78,900
Region 1
Activist Training
Other Skills
300
300
900
1200
800
2400
2400
3200
300
4000
3600
4800
Region 2
Activist Training
Other Skills
60
50
120
185
180
310
200
525
200
490
200
610
Region 3
Activist Training
Other Skills
60
160
200
640
300
960
400
1120
400
1120
300
960
Region 4
Activist Training
Other Skills
50
150
100
250
100
300
200
600
300
900
300
1000
Region 5
Activist Training
Other Skills
600
1000
1250
3200
1750
4000
1600
4200
1600
4200
800
2100
Region 6
Activist Training
Other Skills
200
430
300
1800
1600
3000
1600
3000
1600
3000
1162
2600
Region 7
Activist Training
Other Skills
100
200
550
2000
700
3000
800
5000
800
5000
800
5000 129
BUDGET 1998 – 1999 AND FINANCIAL IMPACT ASSESSMENT
Everything quantifiable runs out,
And everything anticipated
is yet to come
-HAZRAT ALI (PBUH)
Table B-3
MEASURING EFFICIENCY
RATIO ANALYSIS
RATIO
( I ) Administrative Expenditure
Total Expenditure
4,574,632
45,611,292
= 10.030%
( II ) Administrative Expenditure
Value of Outputs
4,574,632
3,973,315,194 = 0.115%
( III ) All Expenditure
Value of Outputs
45,611,292
3,973,315,194 = 1.148%
( IV ) Administrative Expenditure
Interest Income
4,574,632
6,215,000 = 73.606%
130
VIII. THE BUDGET AND FINANCIAL ANALYSIS
Table B-17
INCOME STATEMENT 1998-99
BUDGETED INCOME Rupees
Surplus before taxation brought from last year 9,995,036
A. INTEREST ON INVESTMENTS 91,620,000
Service Charges on credit (Annex-III) 27,622,080
Total Income 129,237,116
BUDGETED EXPENDITURE
B. EXPENDITURE
B1. Administrative Costs
Rupees
B1.1 Capital Expenditure 2,723,000 0.63%
B1.2 Administration & Office Overheads 1,195,000 0.28%
B1.3 Travel & Vehicle Operation 348,600 0.08%
B1.4 Personnel Costs 2,848,572 0.66%
Total Administrative Cost 7,115,172 1.66%
B2. Programme Costs
B2.1 Credit Disbursements 345,276,000 80.36%
B2.2 Provision for Loan Losses 17,263,800 4.02%
B2.3 Human Resources Development 8,160,000 1.90%
Social Mobilization
B2.4 Capital Expenditure 21,790,000 5.07%
B2.5 Administration & Office Overheads 10,670,400 2.48%
B2.6 Travel & Vehicle Operation 4,528,800 1.05%
B2.7 Personnel Costs 14,882,080 3.46%
Sub-Total of Social Mobilization 51,871,280 12.07%
Total Programme Costs 422,571,080
Total Expenditure Budgeted 429,686,252
Less Credit Disbursements 345,276,000
Total expenses excluding Credit 84,410,252 19.64%
Add Interest on OD 21,407,112 4.98%
G. Total 105,817,364
Income/(Deficit) Before Taxation Carried Forward 95.98% 23,419,752*
• Subject to exemption from Income Tax 131
Table B-2
BUDGET & ACTION
INPUT VS OUTPUT
INPUTS OUTPUTS
Number of Present Discounted Number of Present Discounted Value Interest Total
Poor With Value of Skills Persons of Income Stream Due To Income
New Skills Acquired Organized Social Mobilization
1 Administrative Expenditure
(I) Fixed Overheads
Rent 60,000
Legal Expenses 72,000
Auditors Fee 110,000
Salaries 2,848,432
Depreciation 236,600
- 3,327,032 -
(II) Variable Costs
Telephone 240,000
Utilities 180,000
Stationery 60,000
Books & Periodicals 60,000
Publication Training & research 144,000
Furnishing 35,000
Crockery 10,000
Legal Expenses 88,000
Calculators 16,000
Vehicle Pole & Maintenance 165,000
Contingencies 120,000
Daily Allowance of staff 129,600 1,247,600 4,574,632 -
2 Training Expenditure 8,160,000 6,927 2,224,709,955 2,224,716,882
3 Social Mobilization Expenditure
(I) Fixed 8,722,000
(II) Depreciation 2,795,660
(III) Variable 11,359,000 32,876,660 55,312 1,742,328,000 1,742,383,312
4 Income Generation - 6,215,000 6,215,000
TOTAL 45,611,292 2,224,709,955 1,742,328,000 6,215,000 3,973,315,194 132
PRSP BUDGET ANALYSIS
INVESTMENT AND SOCIAL BENEFITS
¾ With an expenditure of Rs. 8.1 million on training in the first
year, and social benefit of Rs. 2.224 billion can be generated.
¾ With an expenditure of Rs. 32.876 million on social
mobilization, a social benefit of Rs. 1.742 billion can be
generated.
¾ The total social benefits (in terms of discounted present value
of future stream of earnings) from the first year’s total
budgetary expenditure is 8611%. 133
PROGRAMME PERFORMANCE
The mind is not a vessel to
be filled but a fire to be
kindled
-PLUTARCH
THE QUANTITATIVE DIMENSION
In the period July to October 1998 we have, by the Grace of God, not only established
eight regional teams in our target divisions but have formed 764 community
organizations with a collective savings fund of Rs. 2.758 million. We have disbursed
Rs. 22.41 million of credit to 1403 beneficiaries in a wide range of fields including
agriculture, livestock and micro-enterprises. The pay back credit is 100%. We have
trained 782 village level activists in fields such as community management, livestock,
agriculture, poultry, public health and light engineering.
THE QUALITATIVE DIMENSION
A change is beginning to take place in the quality of life of the rural poor in the areas
of our operation. I have had occasion to talk with communities in all the eight regions.
The hope that we have kindled and the love that I have received from them has deeply
moved me. Across the eight regions, the organization of poor village communities and
the start-up of income generation projects have not only given a new confidence and
collective purpose in many cases but has also significantly increased their individual
incomes. Beyond the income dimension I have noticed, for example, in Multan a
village community reported that they are beginning to settle their disputes within the
CO and have even resolved amicably the disputes, which they had earlier registered at
the local police station. A women's CO in the same area have set up a girls school
indicating the beginning of collective action for the collective benefit of the
community.
LINKAGES FOR TECHNICAL SUPPORT
The Department of Livestock and Dairy Development has been mobilized by our,
RGMs to provide training to village activists in improved livestock management, the 134
department of Agriculture has been mobilized to give advice on pesticide use and the
Department of Health has been mobilized to provide their expertise at a community
managed health camp. Private sector firms such as AEFFCO have been linked up with
PRSP, to conduct workshops with COs for training in soil testing and use of
composite fertilizer for the precise nutrient requirements of each field. Similarly,
NESTLE Milkpak has been approached to provide information on increasing yields of
milch animals.
IX PROGRAM PERFORMANCE
Program performance and verifiable Indicators
Table SP-1 shows program progress in terms of verifiable indicators specified in
Section VII. A total of 764 COs were formed during the period July - October 1998,
including 542 male CO’s, 211 female COs, and 11-mixed Cos.
An indication of the management capability and early state of community identity
formation is the fact that collective savings amounting to Rs. 2.578 million were
achieved, including Rs. 2.397 million savings amongst male COs and Rs. 0.18 million
savings amongst female COs. Payback performance on credit so far is 100 percent.
A total of 1,838 CO meetings were held with over 60 percent attendance. Credit
amounting to Rs. 22.141 million was disbursed during the period, including Rs.
20.878 million to male COs and Rs. 1.263 million to female COs.
A total 782 person were trained in a variety of fields such as community management
skill training (CMST), livestock, agriculture, industrial and technical.
II. SOFTWARE DEVELOPMENT FOR PRSP
At PRSP, the importance of using Information Technology in Financial and Credit
Operations was felt at a very early stage. A computer specialist was appointed who
was supported by the Computer Systems Department of Sayyed Engineers (Private) 135
Limited48 on a gratis basis, under the guidance of the Honourary Chief Executive
Officer, to cater to the specific features of PRSP operations: A decentralized
accounting system in which social mobilization, CO formation and a wide range of
individual and collective activities were important elements.
The Financial Accounting System has been installed in all the regional offices. The
development of a Credit Control System has been completed and trial run of this
system is taking place. This system will be installed in the regional offices in the first
week of December. The following is a brief description of these systems.
Financial Accounting System
The Financial Accounting System of PRSP has been installed at all regional offices in
October 98. Financial data is being fed into this system on a daily basis. This system
is running free of errors since we received the computerized monthly Trial Balance
report from all regional offices.
There are three important reports that will be generated from Financial Accounting
System:
- Trial Balance
- Comparison of Budgeted vs. Actual Expenses:
- Month-wise comparison of Actual Expenses
Credit Monitoring and Information System
Credit Control System is a core system for PRSP because it will not only help to
record and maintain data but it will also help in analyzing, the information like
technical appraisal and the sources of income of the borrower. The scope of this
system is very wide since it is linked with Financial Accounting as well as Social
Mobilization.
___________________________
48 The support of Mr. Irfan Saeed & his team of Software Experts at Sayyed Engineers
(Private) Limited for the development of customized software for PRSP is gratefully
acknowledged. 136
A significant advantage of this system is the ease with which loan repayment
schedules can be prepared specifically catering to the gestation period of each project.
Moreover Credit Control Officers will be able to inform and remind Social Organizers
and subsequently Community Organizations about dates of their repayments a week
ahead.
Technically, this system will consist of master databases of borrowers, Community
Organizations where credit has been disbursed and two transaction files to record the
disbursements and recoveries. The system will generate reports to summarize the loan
information by Type of Loan, by Community Organization, by Social Organizer, by
field unit or by regional office. On the other hand, it will take care of the most
complex jobs of Credit Control Officer, like Bank Reconciliation, preparation of
Income Statement and preparation of Loanee Ledger.
The tables in Appendix-2 indicate the Credit Monitoring & Financial Accounts
Monitoring formats derived from the Information Systems Software Development for
PRSP. 137
PROGRAM PROFORMANCE
QUANTITATIVE DETAILS
Table PP-1
AGGREGATE ALL REGIONS JULYTO OCTOBER, 1998
PROGRAM PROGRESS REPORT
PARTICULARS ACTUAL
Programme Introduction 1,305
Number of Male COs formed 542
Number of Female COs formed 211
Number of Mixed COs formed 11
Total 764
Number of COs members (Male) 11,944
Number of COs members (Female) 4,231
Total 16,175
CO's Savings (Male) 2,397,590
CO's Savings (Female) 180,608
Total 2,578,198
Number of CO meetings held 1,936
a) With over 60% attendance 1,806
b) Less than 60%attendance 130
Credit Disbursed to Male Members (Rs.) 20,878,100
Credit Disbursed to Female Members (Rs.) 1,263,000
Total 22,141,100
Credit Payback Performance 100 %
Number of Loanees (Male) 1,340
Number of Loanees (Female) 104
Total 1,444
Average Cash Income of Loanees 3,042
Average Non-Cash Income of Loanees 1,375
Number of Persons Trained in: M ale Female Total
CMST 304 16 320
Live Stock 33 - 33
Agriculture 124 - 124
Poultry - 19 19
Industrial Technical 15 152 167
Public Health - - -
Others 86 33 119
Total 562 220 782 138
COLLECTIVE SAVINGS
MONTHS MALE FEMALE TOTAL
JUL 47,115 47,115
AUG 495,797 23,653 519,450
SEP 685,526 37,206 722,732
OCT 1,169,152 119,749 1,288,901
TOTAL 2,397,590 180,608 2,578,198
NUMBER OF CO FORMATION
MONTHS MALE FEMALE TOTAL
JUL 79 17 96
AUG 109 47 156
SEP 157 50 207
OCT 221 101 322
TOTAL 556 198 764
CREDIT DISBURSEMENT
MONTHS MALE FEMALE TOTAL
JUL 360,000 360,000
AUG 1,956,760 200,000 2,156,760
SEP 4,993,000 260,000 5,253,000
OCT 13,568,340 803,000 14,371,340
TOTAL 20,878,100 1,263,000 22,141,100
NUMBER OF PERSONS TRAINED
MONTHS MALE FEMALE TOTAL
JUL 45 45
AUG 94 40 134
SEP 145 35 180
OCT 328 95 423
TOTAL 612 170 782 139
X. SUMMARY REVIEW
In the period July to October 1998 we have, by the Grace of God, not only established
eight regional teams in our target divisions but have formed 764 community
organizations with a collective savings fund of Rs. 2.758 million. We have disbursed
Rs. 22.41 million of credit to 1403 beneficiaries in a wide range of fields including
agriculture, livestock and micro-enterprises. The recovery rate of credit so far is 100
percent. Training has been imparted to 782 village activists in community
management skills, agriculture and livestock.
Underlying this quantitative achievement in terms of verifiable indicators, is the fact
that a change is beginning to take place in the quality of life of the rural poor in the
areas of our operation. I have had occasion to talk with communities in all the eight
regions. The hope that we have kindled and the love that I have received from them
has deeply moved me. Across the eight regions, the organization of poor village
communities and the start-up of income generation projects have not only given a new
confidence and collective purpose in many cases, but has also significantly increased
their individual incomes. For example, small household durri producers in one
region were locked into an exploitative relationship of dependence on arhtis. The
durri manufacturers were provided with raw materials at higher than the market prices
by the arhtis and durris were acquired by the arhtis while at less than market prices.
After PRSP intervention, these durri manufacturers now buy raw materials and sell
durris independently leading to an increase in their incomes typically from about Rs.
2,500/- per month previously to about Rs. 4,500/- per month now. Similarly, in other
regions, poor households have set up small village retail shops, acquired buffaloes,
small goats, set up bicycle repair shops and Chikkh producing units. A total of 1403
households have benefited from such interventions. Beyond the income dimension I
have noticed, for example, in Multan a village community reported that they are
beginning to settle their disputes within the CO and have even resolved amicably the
disputes, which they had earlier registered at the local police station. A women’s CO
in the same area have set up a girls school, indicating the beginning of collective
action for the collective benefit of the community.
We have also succeeded, by the grace of God, in establishing linkages with
government line departments and the private sector to bring their expertise to bear for 140
poverty alleviation at the village level. For example, the Department of Livestock
and Dairy Development has been mobilized by our RGMs to provide training to
village activists in improved livestock management, the Department of Agriculture
has been mobilized to give advice on pesticide use and the Department of Health has
been mobilized by our RGM in Lahore to provide their expertise at a community
managed health camp for 650 members of various COs. In the private sector
arrangements have been made with AEFFCO leading to the holding of workshops in
our regional offices to inform CO members about the importance of soil testing and
how a composite fertilizer that is congruent with the nutrient requirements of each
farm can increase yield per acre by 15 to 50 percent. AEFFCO has offered to do soil
testing in our target areas and provide custom-made composite fertilizer to farmers on
demand. Similarly, Nestle Milkpak have been persuaded to offer their services to
show to poor farmers how a scientific mix of cattle feed can both reduce the costs of
feed and double milk yields of buffaloes and cows. They have also offered to pick up
milk from villages on a pilot basis initially at Sahiwal.
In short, across the eight regions of the Punjab, the seed has been planted of
community organization, improvement in incomes, skills, systematic provision of
technical support at the village level, and a change in social consciousness. We may
be witnessing the tentative beginning of a silent revolution in the lives of the rural
poor in the Punjab. 141
Appendix I
Table PP-2
Region-wise Cumulative Social Mobilization Report
July to October 1998
Region CO's Formed
Male Female Total
Lahore 83 21 104
Gujranwala 73 15 88
Sialkot 84 23 107
Faisalabad 83 28 111
Sargodha 73 29 102
Sahiwal 61 38 99
Multan 44 38 82
Muzaffar Garh 52 19 71
Total: 553 211 764
Table PP-3
Region-wise Cumulative Credit Disbursement Report
July to October 1998
Region Credit Disbursed Number of Beneficiaries
Male Female Total Male Female Total
Lahore 5,522,000 55,000 5,577,000 250 7 257
Gujranwala 1,380,000 - 1,380,000 53 - 53
Sialkot 5,982,000 650,000 6,632,000 369 43 412
Faisalabad 337,000 - 337,000 15 - 15
Sargodha 1,955,000 - 1,955,000 87 - 87
Sahiwal 2,427,000 419,000 2,846,000 123 30 153
Multan 538,840 25,000 563,840 43 2 45
Muzaffar Garh 2,736,260 114,000 2,850,260 400 22 422
Total: 20,878,100 1,263,000 22,141,100.00 1340 104 1,444
Table PP-4
Region-wise Cumulative Community Savings Report
July to October 1998
Region Community Savings
Male Female Total
Lahore 556,500 43,500 600,000
Gujranwala 160,900 15,260 176,160
Sialkot 510,000 28,000 538,000
Faisalabad 103,774 9,911 113,685
Sargodha 398,791 16,682 415,473
Sahiwal 368,238 36,444 404,682
Multan 46,434 20,140 66,574
Muzaffar Garh 252,953 10,671 263,624
Total: 2,397,590 180,608 2,578,198 142
Table PP-5
Region-wise Cumulative Training Village Activists Report
July to October 1998
Region Activists Trained
Male Female Total
Lahore 39 - 39
Gujranwala 90 35 125
Sialkot 84 6 90
Faisalabad 26 - 26
Sargodha 56 113 169
Sahiwal 30 - 30
Multan 115 19 134
Muzaffar Garh 120 39 159
Total: 562 220 782
Table PP-6
Credit Control Status Report by Region
Upto 31st October 1998
Region Credit
Disbursed
Credit Due Credit
Recovered
Credit
Over Due
Pay Back
Performance
%
Lahore 5,577,000 57,750 60,655 - 105%
Gujranwala 1,380,000 43,035 43,035 - 100%
Sialkot 4,907,000 64,903 64,903 - 100%
Faisalabad 337,000 - - - -
Sahiwal 2,676,000 36,187 48,192 - 133%
Sargodha 1,955,000 26,937 26,937 - 100%
Multan 563,840 3,300 3,302 - 100%
Muzaffargarh 2,850,260 35,729 39,307 - 110%
Total: 20,246,100 267,841 286,331 - *
107%
Note: *
Some repayment dues were paid ahead of time by CO members. 143
Table PP-7
Composition of Credit Report
Regional Office Lahore
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer,
Agro Chemical,
Feed/fodder
Upto 12
Months 50 - 50 1,035,000
Enterprise
Development
Working
Capital
Upto 24
Months 124 5 129 2,772,000 34,781 35,704
Livestock
Development
Fattening/
Breeding Sheep
& Goats,
Fattening of
Calves
Upto 12
Months 75 2 77 1,745,000 22,969 24,951
Milk Animals
(Cows/
Buffaloes)
Pulling/
Cartage
Animals
Upto 30
Months - - - - - -
SIIE Development of
Productive
Infrastructure
Upto 24
Months
Individual
1 - 1 25,000 - -
Upto 60
Months for
CO
- - - - - -
Total: 250 7 257 5,577,000 57,750 60,655 `
Table PP-8
Composition of Credit Report
Regional Office Gujranwala
July to October 1998
Package
Type
Purpose Credit Period Number of Loanees Total Credit
Disbursed
Total
Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro chemical,
Feed/fodder
Upto 12
Months 10 - 10 150,000 - -
Enterprise
Development
Working Capital Upto 24
Months 22 - 22 630,000 27,935 27,935
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months 18 - 18 540,000 15,100 15,100
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months - - - - - -
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
3 - 3 60,000 - -
Upto 60
Months for CO - - - - - -
` 53 - 53 1,380,000 43,035 43,035 144
Table PP-9
Composition of Credit Report
Regional Office Sialkot
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri inputs Seed, Fertilizer,
Agro Chemical,
Feed/fodder
Upto 12
Months 83 6 89 1,307,000 - -
Enterprise Development Working Capital Upto 24
Months 153 5 158 2,545,000 57,209 57,209
Livestock Development Fattening/
Breeding Sheep &
Goats, Fattening of
Calves
Upto 12
Months - - - - - -
Milk Animals
(Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months 41 9 50 885,000 7,694 7,694
SIIE Development of
Productive
Infrastructure
Upto 24
Months
Individual
9 - 9 170,000 - -
Upto 60
Months for
CO
- - - - - -
Total:
286 20 306 4,907,000 64,903 64,903
Appendix I
Table PP-10
Composition of Credit Report
Regional Office Faisalabad
July to October 1998
Package Type Purpose Credit Period Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro
Chemical, Feed/fodder
Upto 12
Months
1 - 1
7,000 - -
Enterprise
Development
Working Capital Upto 24
Months
7 - 7
175,000 - -
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months
7 - 7
155,000
-
-
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months
- - 7
- - -
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
-
- -
-
- -
Upto 60
Months for
CO
- - - - - -
Total: 15 - 15 337,000 - - 145
Table PP-11
Composition of Credit Report
Regional Office Sahiwal
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro
Chemical, Feed/fodder
Upto 12
Months
48 - 48
793,000
- -
Enterprise
Development
Working Capital Upto 24
Months
59 5 64
1,280,000 29,554 40,636
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months
16 25 41
603,000 6,633 7,556
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months
- - - - - -
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
- - - - - -
Upto 60
Months for
CO
- - - - - -
Total:
123 30 153 2,676,000 36,187 48,192
Appendix I
Table PP-12
Composition of Credit Report
Regional Office Sargodha
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro
Chemical, Feed/fodder
Upto 12
Months
9 - 9
125,000 1,385 1,385
Enterprise
Development
Working Capital Upto 24
Months
39 - 39
875,000 18,500 18,500
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months
23 - 23
515,000 - -
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months
14 - 14
380,000 7,052 7,052
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
2 - 2
60,000 - -
Upto 60
Months for
CO
- - -
- - -
Total:
87
-
87 1,955,000 26,937 26,937 146
Table PP-13
Composition of Credit Report
Regional Office Multan
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro
Chemical, Feed/fodder
Upto 12
Months
8 - 8
67,840
- -
Enterprise
Development
Working Capital Upto 24
Months
26 1 27
360,000 3,300 3,302
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months
9 1 10
126,000
- -
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months
- - -
10,000
- -
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
- - - - - -
Upto 60
Months for
CO
- - - - - -
Total:
43 2 45 563,840 3,300 3,302
Appendix I
Table PP-14
Composition of Credit Report
Regional Office Muzaffargarh
July to October 1998
Package Type Purpose Credit
Period
Number of
Loanees
Total Credit
Disbursed
Total Credit
Male Female Total Due Recovered
Agri Inputs Seed, Fertilizer, Agro
Chemical, Feed/Fodder
Upto 12
Months
101 - 101
585,760
- -
Enterprise
Development
Working Capital Upto 24
Months
61 - 61
519,000 35,729 35,729
Livestock
Development
Fattening/
Breeding Sheep & Goats,
Fattening of Calves
Upto 12
Months
238 22 260
1,745,500
-
3,578
Milk Animals (Cows/
Buffaloes) Pulling/
Cartage Animals
Upto 30
Months
- - - - - -
SIIE Development of Productive
Infrastructure
Upto 24
Months
Individual
- - - - - -
Upto 60
Months for
CO
- - - - - -
Total: 400 22 422 2,850,260 35,729 39,307 147
Table B-4
Present Discounted Value of Future Streams
of Earning Resulting from 1 Year's Credit Rs. 6,242
per person for Micro Enterprises
Annual Income (Rs) 9,363
No. of Years 6
Discount Rate 18%
Present Value of Income (Rs) 32,748
Less Interest Payment in First Year (Rs) 1,248
Net Present Value of Income (Rs) 31,500
Table B-5
Present Discounted Value of Future Stream
Of Earnings Due to Skill Acquisition
Annual Income per Person (Rs) 60,000
Number of Years for which Income is Earned 20
Interest Rate 18%
Present Value of Income (Rs) 321,165 148
COLLECTIVE SAVINGS
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
JUL AUG SEP OCT TOTAL
(Amount in Rupees)
MALE
FEMALE
TOTAL
-
200
400
600
800
1,000
JUL AUG SEP OCT TOTAL
(Number of CO's Formed)
MALE
FEMALE
TOTAL
CREDIT DISBURSEMENT
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
JUL AUG SEP OCT TOTAL
(Amount in Rupees)
MALE
FEMALE
TOTAL
NUMBER OF PERSONS TRAINED
-
200
400
600
800
1,000
JUL
AUG
SEP
OCT
TOTAL
MALE
FEMALE
TOTAL
NUMBER OF COs FORMED 149
Formats of Reports of Credit Control System and Financial Accounting
System:
Financial Accounting System
Trial Balance
July – October 1998
Regional Office: Muzaffargarh
A c c o u n t
CODE HEAD DEBIT CREDIT
1120 OFFICE EQUIPMENT 18,300 DB
1122 COMPUTER & PRINTERS 159,000 DB
1124 PHOTOCOPIERS 46,500 DB
1130 FURNITURE & FIXURES 101,832 DB
1140 MOTOR VEHICLES 1,087,069 DB
1144 AIR CONDITIONERS 25,254 DB
2010 PRSP HEAD OFFICE CURRENT ACCOUNT 2,245,855 CR
2480 PREPAID EXPENSES 96,000 DB
2810 BANK OF PUNJAB: OPER. 140,563 DB
2820 HABIB BANK LIMITED –CR POOL 1,000 DB
6000 OPERATING EXPENSES 379,776 DB
7000 PROGRAMME EXPENSES 2,325 DB
8040 SUNDRY EXP. CARRIED FORWARD 188,236 DB
2,245,855 DB 2,245,855 CR
Financial Accounting System
Trial Balance
For the month ending October 1998
Regional Office: Muzaffargarh
A c c o u n t
CODE HEAD DEBIT CREDIT
6010 SALARIES AND BENEFITS 82,537 DB
6020 WAGES 2,500 DB
6050 STAFF TRAVELLING 76,930 DB
6120 POSTAGE AND TELEGRAM 536 DB
6130 TELEPHONE AND FAX 2,182 DB
6140 VEHICLE PETROL, OIL, LUBRICANTS 36,227 DB
6142 VEHICLE REPAIR AND MAINTENANCE 2,292 DB
6145 VEHICLE HIRING 18,350 DB
6150 OFFICE SUPPLIES 13,455 DB
6160 MEETING AND CONFERENCES 134 DB
6170 FREIGHT AND CARRIAGE EXPENSES 738 DB
6184 STAFF GUEST HOUSE EXPENSES 23,350 DB
6200 BUILDING MAINTENANCE 1,401 DB
6210 EQUIPMENT MAINTENANCE 43,953 DB
6230 BOOKS MAPS AND PERIODICALS 1,153 DB
6240 COMPUTER CONSUMABLES 3,373 DB
6300 PRINTING AND STATIONERY 40,233 DB
6320 UTILITY EXPENSES 432 DB
6400 TRAINING EXPENSES 9,640 DB
6410 TRAINER ALLOWANCE 20,000 DB
379,776 DB
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