How many of the budding Pakistani economists have the confidence
not to take a job at as prestigious an international institution as the World
Bank? Well, Akmal Hussain did precisely that after getting his first degree in
economics from the University of Cambridge. Instead, he preferred joining a local
educational institution to satisfy his desire to do some thing for his country.
Imparting economics ideas to the young bright students of the University of the
Punjab in 1970s was a satisfying experience, recalls Dr. Hussain, but completing
a Ph.D. was even more so to quench his thirst for knowledge.
acquired the degree of Doctor of Philosophy in Economics, from Sussex he started
teaching at the University of California in the early 1980s, but was once again
overtaken by his attachment to his roots. Family business was not of primary importance
to him, his love for the people was.
Call him an idealist,
if you will, who worked with an NGO at the grass roots level in the mid 80s, and
in village Inayatabad near Muzaffarbad, helped the people establish health facilities
for themselves. In the late 1990s he helped establish the Punjab Rural Support
Programme as its first CEO on a voluntary basis. Still, he could never stop writing
and conducting action research to unfold the mysteries of rising poverty.
prolific contributer to academic journals and newspapers, and author/co-author
of eight books, Dr. Hussain has worked in several government committees and has
undertaken research for important international organizations. When he coauthored
the book Participatory Development: Learning from South Asia, it was very well
received in the academic circles of this region.
early 1990s, he gave the concept of Pakistan Poverty Alleviation Fund in book:
The Strategy of Poverty Alleviation that attracted the attention of the World
Bank and the government, which constituted an institution by that name and where
Dr. Hussain was a founding member of the Board of Directors.
is a firm believer in participatory development and wants to see the Punjab Rural
Support Programme, another of his cherished dreams, to achieve cost effectiveness
and rapid coverage.
Talking to Nazir Mahmood of NGORC,
Dr. Akmal Hussain shares his notions on poverty alleviation and the role of microfinance
in this process.
Q.1. What is poverty?
is usually conceived of in terms of the number of people who were unable to afford
a certain minimum number of calories. In addition to hunger and economic deprivation,
poverty is associated with a sense of being isolated and being unable to undertake
action to improve one's condition. For those in government and civil society who
want to engage in action to help overcome poverty it is important to understand
not just the number of people living below the poverty line but the mechanisms
of reproduction of poverty through which the people are kept fragmented, powerless
and deprived of their potential to improve their material conditions. When we
investigate the poverty phenomenon in this framework we discover that poverty
is a result of a certain structure of markets, local elite groups, governance
and even some civil society institutions which lock the poor into a nexus of power.
This nexus of power deprives the poor of their potential income and perpetuates
their dependence. For example when a poor peasant buys inputs he gets them at
a higher price and lower quality than the big landlord. His output on the other
hand fetches a relatively lower price. Similarly the poor who are without political
influence have to pay a higher cost in terms of bribe and frequency of visits
each time they want to access a public service. Therefore poverty can be understood
not simply in terms of numbers of people but processes that generate poverty.
2. If poverty is a process how can we alleviate it?
is a whole new generation of committed individuals in civil society working towards
poverty alleviation at the national as well as local level. They are helping to
organize the poor at the local level, access training to increase their productivity,
provide credit and more equitable access over markets and institutions in state
and civil society. The challenge is to unleash the creative potential of the poor
so that they can control the decisions that affect their lives. The challenge
is to overcome the sense of isolation by integrating with the community by organizing,
by identifying and implementing projects through which their incomes, savings
and investment can increase. The challenge is to build consciousness as well as
institutions through which the poor can take better control over the decisions
that affect their lives and improve their access over markets and public service
Poverty alleviation therefore is
not just about giving credit, it is about empowering the poor so that they can
actualize their human potential.
Q. 3. What strategy
do you suggest for alleviating poverty?
In my opinion
a two pronged attack on poverty is required. First, the process of GDP growth
has to be accelerated as well as re structured, so as to enhance the capacity
of the economy to alleviate poverty. This means increasing not only the over all
investment rate but much greater emphasis on small scale industries and infrastructure
projects in both the rural and the urban areas for increasing employment and output
in the economy. As the share of small enterprises in GDP increases, Pakistan will
have both higher and more equitable GDP growth. The second prong is a direct attack
on poverty. Here genuinely autonomous village and mohallah level institutions
could be created by which the poor can achieve organisation, skill training, increased
productivity, incomes, savings and investment. Thus the localized process of economic
growth could be initiated by the poor in which the surplus of the poor can be
kept in the hands of the poor rather than being extracted out. Thus the process
of participatory development at the village and mohallah level would enable the
poor to become part of the solution rather than being part of the problem.
Q. 4. In this two-pronged strategy
where does microfinance come in?
can just be one of the elements in the poverty alleviation process. If we adopt
micro finance merely as a policy fashion or a gimmick we will fail miserably.
It is not a contraption where you insert micro finance at one end and get income
generation for the poor from the other. Mere microfinance in isolation could do
more harm than good and intensify poverty rather than reducing it. If you just
introduce micro finance to the people and leave it at that, their projects might
collapse and they will lose even their own savings. Microfinance has to be an
integral part of a process by which the people get organized, acquire skills,
select feasible projects and increase their income on a sustainable basis.
Q. 5. What, in your opinion, are the usual causes of
default in microfinance schemes?
without the organisation of the community, will have a high default rate. Microfinance
in isolation without skill development and training in marketing and management
is likely to fail or develop severe problems. Microfinance should not be seen
as a panacea for poverty.
Q. 6. Can both the government
and the Civil Society Organisations come together to launch an effective microfinance
Certainly. The government and the NGOs
can collaborate with each other in poverty alleviation programmes including microfinance
projects. Civil Society Institutions can help with advocacy and identifying of
projects to be initiated. They can also act as watchdogs and do monitoring and
evaluation of various microfinance projects launched by the government.
Under the new local government structure the CSOs and NGOs should develop linkages
and interact with the new functionaries at the local level. On the other hand,
the government should also encourage such involvement.
How can the corporate sector be involved in promoting microfinance schemes?
There is a growing number of entrepreneurs already
active in philanthropic ventures. They are involved with building charitable hospitals,
giving donations to the poor, and financing various social welfare projects. One
can see a strong sense of social responsibility that is surfacing within this
fraternity, although I don't think there are many microfinance schemes being financed
by the corporate sector. Perhaps the Civil Society Institutions can explore this
possibility by contacting the Chambers of Commerce and Industry.
8. What is amiss in the current microfinance, and why they are not making a significant
Providing credit to the people may
be necessary but it is not sufficient for poverty alleviation, as we have just
defined it. It is important that micro finance institutions be integrated with
institutions for providing training and technical support to autonomous organizations
of the poor. Apart from having these multi dimension micro finance institutions
there is also the issue of the scale of poverty to be overcome. To-day over 50
million people live below the poverty line. In such a situation small micro finance
institutions with limited coverage and capital can hardly make a significant impact.
Some NGOs are attempting to reach national scale in terms of the number of districts
in which they are active. Yet even in their case the percentage of Pakistan's
poor population that they have brought within community organisations even after
a decade is less than 5% and at an unsustainable financial cost. Clearly therefore
there are two inter related challenges. The first is to develop cost effective
support institutions that can achieve large scale in a short period of time cost
effectively. The second is to simultaneously initiate a macro economic process
at the national level through which millions of new employment opportunities can
Q. 9. Despite numerous attempts to
reduce poverty why it is then on a rampant rise?
problem is with the coverage of the institutions engaged in poverty alleviation
on the one hand and the rapidly increasing number of the poor due to continuing
economic recession on the other. The government has formed two institutions in
recent years the Khushali Bank and the Pakistan Poverty Alleviation Fund (PPAF).
In terms of their coverage and capital resources even these two institutions are
relatively small compared to the magnitude of the poor population to be covered.
Yet pumping more capital into these national micro finance institutions will not
be enough. In order that they should lend effectively, autonomous organisations
of the poor at the community level would have to be facilitated and replicated
rapidly. It is such genuinely autonomous community based organisations of the
poor that can efficiently receive and utilize micro finance for poverty alleviation.
At the same time the national economy must be revived to generate employment and
incomes for the approximately 50 million people who are currently poor.
Another reason why poverty has increased since the 1990s
is that our overall GDP growth rate has declined sharply.
by successive governments to control the budget deficit by reducing development
expenditure and by increasing indirect taxation has also contributed to increased
poverty. For example the Annual Development Programme which has historically played
a significant role by providing employment and infrastructure projects, has declined
from 6.9% of the GDP in 1970s to 2.9% of the GDP to-day. To make matters worse
the development projects that were being selected for financing were inefficiently
In the case of indirect taxation (as opposed to direct taxation),
the effect on the poor is adverse and the effect on the rich is positive. Therefore
the use of indirect taxation by successive governments as the main device for
increasing government's revenue has further contributed to increasing poverty
and income inequality in Pakistan. The inflow of remittances from the Middle East
has declined substantially compared to the decades of the 70s and 80s. These remittances
which were mostly coming into low income families with their decline may have
played a significant role in increasing poverty.