Micro Financing of NGOs and Government: Collaborative Impact on Poverty Eradication

Poverty reduction has been declared as the most important millennium development goal not only by the world level organizations and institutions, but also by the government of Pakistan. Micro-credit is considered as a prime tool to fight back poverty. After the success of Grameen Bank of Bangladesh multiple other banks and micro finance institutions (MFI’s) like Banko Soladerio of Latin America, Indonesia’s BRI-UD, BAAC in Thailand, BRAC in Bangladesh and VBSP in Vietnam have been working on almost the similar pattern. In Pakistan different NGOs like AKRSP, Orangi pilot project, Kashf foundation and others have started working for the past few years basically to eradicate poverty and for women empowerment. The government institutions are also seriously making an effort to eradicate poverty through micro financing schemes. Government of Pakistan has selected the RSP (rural support program) model for micro-financing. The success of both government institutions and NGOs is not very outstanding to meet the basic objective of poverty eradication. The aim of this paper is to see the possibility of collaboration between the NGOs and the government to achieve the desired common goal. It is hypothesized that if government and NGOs work together and collaborate each other, the effectiveness of micro financing schemes could be strengthened.


Introduction
Poverty reduction has been declared as the most important millennium development goal not only by the world level organizations and institutions, but also by the government of Pakistan. Poverty as per international definitions is either defined as number of people living under one dollar per day or people who can only take less than 2550 calories per day (adult) (Alam, 2005, Ziauddin, 1999, Gohar, 2000& ADBP, 2005. Not only poverty reduction has been targeted rather after the success of Grameen Bank model, microcredit has been given the prime importance as a tool to fight back poverty. Micro-credit is defined as the short term, small scale loans to the poor and needy to establish small enterprises to grow out of poverty (Chatterjee, 2001, Nanavaty, 2000, & Leon 1998. The idea of using micro-credit as a tool to eradicate poverty has received different reactions from researchers. Some are very much in favor of it (Leon, 1998, Amin, Becker and Bayes, 1998, Chatterjee, 2001, UN report, 1997, Cheston and Kuhn, 2000, Sharma and Zeller, 2000, Media cell PPAF, Kuramanalivia & Montgomary and Weiss, 2003 and many more. There are others who believe that micro-credit schemes whether government organized or NGO based are not fully successful due to certain shortcomings in the system and have suggested many ways to improve like, women participation should increase (Lapenu, 2000), effective screening and semi-joint ventures should be used (Diange, 2000), different models of reassessment should be used depending upon the country and region (Mohiuddin, 1993). Some researchers however, are totally against using micro-finance as a tool of poverty reduction due to not-very-successful results of the existing NGO's and other MFI's (Halme and Mosley, 1996, Waheed, 2002, Jayawardena, 2001, & Coleman 2001. Two main reasons for this poor performance of MFI's are given. First it is either the lack of depth of these schemes in which core poor are left out due to corruption, lack of awareness or planning (Zeller and Sharma, 1998, Kuramanalieva, Montgomery and Weiss, 2003, Bajwa, 2002, Goheer, Montgomery and Weiss, 2005, & Ibrahim and Nayab, 1994. The second is the belief that there is always a decrease in social programs like spending on primary health, education and food due to diversion of funds towards micro-finance (Halme andMosley, 1996 &Jayawardana, 2001). Solution to both these problems have been given by some is the flexibility of product designs and time of micro-finance (Burorjee, Deshpande and Weidmann, 2002& Mumtaz, 2000 while others have suggested some different strategies to make micro-finance effective like, minimalist credit for self employment should be changed to financial and technical assistance for employment generation, poor to be used to help themselves by just providing people organizations and legislation ease, micro-finance first be of "protectional" type for core poor and then "promotional" (Fawzi, 1999), research should be done further (Montgomery and Weiss, 2005), public work, social programs Zakat and Ushr should be used along with micro-finance (Saeed, 2004) and so on. Even such valuable researches and suggestions have done little to improve the performance of MFI's beyond a certain limit. Now the question arises, what can be done to improve the functioning of micro-credit schemes? It is hypothesized in this paper that there is a need for collaboration between government, who is the sole body with complete knowledge about the country as well as priority regions and NGO's in the operation of micro credit financing. No effort has yet been done in Pakistan to study the possibility of collaborative efforts of NGOs and Government in micro-financing particularly of women. This paper consists of three basic sections. Section 2 covers the demographic picture of women, Section 3 overviews the existing exercises of NGO and government in the area of micro-credit to alleviate poverty. A model of collaboration between the government and NGO's is also suggestion in this section. Finally Section 4 highlights the drawbacks of the present system and suggests some measures to remove them.

Why target women?
Like all under developed countries the situation of women health, nutrition, education etc is not very bright. What to talk of these necessities when they don't have any life security. There are three grave yards with 300, 150 and 40 graves of 'Kari' (females killed in pretext of character failure) in Ghotki area of Sindh, Pakistan. Many of these graves are mass graves, with all three grave yards present within five kilometers of each other. (The Dawn 8 th Aug, 2005) .This bleak picture is of a back ward area of and under developed country but if you look at the statistics of one of the most developed county like US you will be surprised to know that in United States, every 15 seconds, a women is beaten, and four battered women die each day (WHO, 1992). This is not the only area where statistics support very strongly to think and invent ways to help women out of their plight.

Poverty
95% of the world's population is women and children. Most of them are living in Asian and African regions; Pakistan being one of the countries of the poor regions of the world is carrying the burden of 43.9 million poop people (Alam, 2005).Considering the position of females 72.1% extremely poor females are from agricultural class and 27.9% are from non-agricultural sector (NHDR/PIDE Survey 2001).

Income participation
Women are the major participants of income generation no matter which region, area, profession and income they belong to. In developing countries as South Korea, 75% of the labor force in export trade zones is 16-22 years old girls. As is often noted, women produce 40-80% of the world's food, but own less than 3% of the land (see WHO, 1992). According to the Labor Force Survey of Pakistan (2003-4), 63% of female labor force is working in informal sector which leads to no proper income and no sense of earning pride. This is something where micro-credit helps poor women to earn both their income as well as their pride.

Health care-system
Three out of eight Millennium Development Goals are directly related to health sector (Pakistan Economic Survey, 2004-05) showing the need of low level of development of health sector. Females are the worst targets of this poor health system. In Pakistan out of total population of 152.53 million almost 50% are females for whom there are only 8000 lady health workers. Population per doctor is 1,359; population per nurse is 3,175 (Pakistan Economic Survey, 2004-05).

Nutrition level
Like the health sector females are in plight in all developing countries, Pakistan being not much better. Where females are supposed to eat after their males even in many educated households. Programs like 'Nutrition in Primary Health Care (PHC)' and 'Tawana Pakistan Project (school nutrition project for girls)' have also not been able to help a lot. However, after the active participation of NGO's and the government in social development programs through micro-credit an improvement has been seen.

Education
Education in developing countries is considered a luxury for boys and sheer wastage of time for girls. Pakistan is also facing the same dilemma. Present condition of education level is clearly visible by the following data.

Authority and autonomy
There are no fixed parameters to measure and judge the level of autonomy and authority of females in any society in depth. However, its very clear fact that economic independence is the main factor to give freedom of decision making in every respect to all humans whether males or females. Thus, micro-credit is a good means to provide the said to female population of the world as well as Pakistan.

NGOs in Pakistan
Non-government organizations have existed in Pakistan since Independence in 1947. NGOs generally have worked for rehabilitation and social welfare and to serve the poor and marginalized. The number of NGOs had remained static for some 30 years, but has mushroomed in the 1980's and 1990's (ADB report on NGOs in Pakistan, 2003). Different categories of NGOs are involved in different types of services, like some are working for gender development, some for human rights and some for micro credit etc. The prime objective of all of NGOs is the betterment of Pakistani women.

Lending methodologies of different NGOs
Different NGOs have adopted different lending methods for their micro-credit schemes. However, generally two main groups of NGOs can be seen depending upon their lending methodologies.

Technical and legal help from PPAF
The The RSPs were originally seen as a group of Government assisted NGOs with a mandate to promote rural development. But they no longer see themselves as NGOs but as something intermediate between a government body and an NGO (Source Pakistan National Human Development Report, 2003& Bajwa, 2002.

Impact and performance of MFIs
Just after the crack down of NGOs, a survey of the Punjab University published in newspapers entailed that 80% of NGOs of Pakistan get million of dollars without doing any welfare work. Their only aim is plundering money. Only 20% NGOs are relatively functional. In Punjab 4000, Sindh 3301, NWFP 309, Balochistan 286, and Azad Kashmir 92 NGOs were reported not working according to their constitutions and promises (Saeed, 1999). A few well-established NGOs in Pakistan work in such sectors as women development, policy debate, research, and publications, but their impact and outreach is rather limited, either because they lack resources or because their target group is narrow (ADB report on NGOs in Pakistan 2003). However, performance of some NGOs working specifically in the area of Micro-credit has been evaluated by UNDP regarding some social development indicators like health, nutrition and household income, etc.     Some highlighted features from above data are: 1. NRSP a government controlled micro-credit scheme is more successful in all social indicators checked here. 2. In all the selected schemes people benefited most are of high income groups, killing all the benefit of poverty eradication and development. 3. Betterment in nutrition and health is obvious in all NGOs. 4. Indicators selected are very basic and few. 5. There was no effective change in sustainable income after loans in a very high percentage of people.

Government Policy towards NGOs
Historically, the government has maintained a supportive policy framework for NGOs and provided them with financial and technical assistance. Government and government-sponsored institutions that provide financial grants to NGOs include the following 1.

Government/NGO Relations
A major barrier to improved government/NGO relations is the reluctance and resistance of middle management in the bureaucracy to learn new concepts, new development paradigms and innovate ways of working. They often view NGOs as nuisances. The fact that government officers responsible for dealing with the NGOs are not trained to work with them adds to the problem. Even if a government officer wants to work with them, rules and regulations do not tell the officer how to do this. There is little time and budget for exposure visits, and frequent transfers are another evil to deal with in this regard. In terms of attitudes of NGOs towards the Government, there are four distinct trends.
1. Many small NGOs are looking for guidance, grants and mentorship.
2. The majority of established NGOs look to the Government as partners and facilitators for joint ventures. 3. A majority of "new-breed" of NGOs are obsessed with proving the inefficiency and corruption of the government. 4. The fourth type of attitude of NGOs is to absorb funds over-night and disappear. Source: ADB Report, 2003

Conceptual Framework for Collaboration
Model moves upward from poverty eradication towards developed economy through collaboration between NGOs and Govt.

Observations
There are basically two different methodologies being followed by all MFIs and banks. They are either doing group based lending, like Grameen bank, in which clients themselves make groups to back each other. These groups are usually from the same area or village. This type of lending has shown largest percentage of success in women. However, there have been some cases in which richer of the group influenced others or where relatives took leverage of their relations. Second type of lending is individual lending which is less favored and less effective for being high risk factor. This type of lending is usually being followed by the Public organizations. Here too this has been observed that it is not the poor class which gets the benefit of the scheme but the better ones and eventually the poor again have to depend upon either their friends and relatives or the informal money lenders charging very high rates of interest. Suggested solution of this problem is to give "protectional" loans to poorest to bring them to poor category and then give them "promotional" loans to increase their income to the level where they can start saving.
Second main observation gathered through these micro-credit institutions is that poor and especially poor women are the best risk factors as the recovery rate of loans from them is 100%. Many factors lead towards this outcome, out of which mentionable is group or peer pressure, social help from these MFI's and especially the future access towards credit. However, due to lack of proper knowledge and access a high percentage of women who have the potential to properly utilize micro-credit actually do not get the loans. It has been observed that those organizations KASHF foundation and AKRSP, NRSP etc and other NGO's instead of Commercial banks and public funds which also give insurance and emergency cover to their clients are much more successful as compared to others. Micro-credit schemes are useful and effective for both gender development as well as poverty reduction in Pakistan. However, both the schemes initiated by NGOs and the government are not effective to their full potential due to lack of cooperation and collaboration. In some areas there is overlapping of both NGO and government schemes while others are waiting for their turn. Haphazard data maintenance and lack of communication on NGO's part and lack of planning in government's part is very obvious in such cases.
These same very reasons and corruption, results in misusage of funds and leakages of grants. People are not targeted properly and there are no systematic ways and means of screening to avoid such cases. There is no depth in many of these schemes. This seriously affects their performance. Mostly poor people who are taking loans use a large percentage of it for consumption purposes and this leads lesser substantial income after loans or no change at least. Other causes of no increase in their substantial income even after taking loans is lack of guidance about what and how to utilize it properly, no technical training, education and lack of proper markets of their products. One positive aspect is that a very high percentage of clients of these schemes are women, thus these schemes are somewhat effective in gender development. However, there still is a lot of room for improvement. And this can only be done by better collaboration between NGOs and the Government.

Conclusions
The facts and figures of micro credit schemes in the country show that different NGOs and the government schemes are working for the common cause of eradicating poverty but without any formal coordination. The uprooting poverty objective may be more successful if government and NGOs collaborate each other in defining the areas to work on.
Government is the main body having all the required data and information plus a list of priorities of social and developmental needs of all the country but generally lacks teamwork, planning, workforce, finances and dedication to do such works. Whereas NGOs are the agencies with Finances but gathering information about the whole country and proper prioritization of the needs of the whole country is impossible for them individually. Government of an underdeveloped country is always short of finances so why to spend in areas where NGOs are already doing the work. All these factors strongly point out the complementary nature of the relationship between Government and NGOs. Thus if a proper working relation is established between NGOs and the Government on micro-credit for women through a proper department and office it can save a lot of trouble and funds. According to ADB report 2003, "the cross-currents of part cooperation, part misunderstanding and part adversity, lead at best to an uneasy relationship between the government and NGOs. At a time of accelerated interaction and partnership between the Government and NGOs, the NGO/GO relationship in Pakistan currently is at low ebb. A fresh perspective is needed in the debate and new mechanisms that match the current priorities in the development work.