Dr. Akhter
Hameed Khan - The Pioneer of Microcredit
By Nasim Yousaf
New York, US
It’s
hard to believe that microcredit - which has exploded
into the world of finance in recent years - was
considered an unfeasible concept at one time. Microcredit
provides very small loans to those who have no verifiable
credit history or collateral that would be acceptable
to a financial institution. Prior to the microcredit
methodology, banks served only the privileged and,
as a result, perpetuated the gap between the poor
and the rich. However, in the 1950s and ‘60s,
Dr. Akhter Hameed Khan, a world-renowned social
scientist from Pakistan, initiated the Comilla cooperative
program, and proved to the world that it was indeed
possible to provide credit to the poor – with
great success.
In order to gain a greater understanding of why
Dr. Khan’s cooperative scheme was so successful,
one needs to travel back to the 1950s - the early
years of the Pakistani nation. Since its founding
in 1947, the country as a whole had been plagued
by a number of problems, primarily related to administration
and infrastructure, lack of industrialization, poor
communication, a large population, unemployment,
and poverty. The challenges at the national level
also translated into individual components of the
economy. Problems in the agriculture sector were
particularly severe — they included disorganized
farming, poor yield (despite favorable conditions),
crop damages from floods and pests, lack of application
of modern techniques, no guidance or training, and
improper marketing. Furthermore, small farmers’
land holdings in the villages (in East Pakistan)
ranged from one to five acres and they were in a
miserable condition. According to Dr. Khan, “Ninety
percent of them owned less than five acres.”
Needless to say, the prevailing environment made
it very difficult for those who relied on agriculture
for their livelihood. But how had these conditions
come about? Therein lies perhaps the greatest challenge
of all faced by the small farmers: lack of access
to a credit facility.
Poor farmers in Pakistan had no creditworthy history
or collateral that would be acceptable to banks
and other financial institutions. Thus, the financial
institutions were unwilling to risk their money
by granting loans to the poor farmers. This meant
that farmers were at the mercy of private lenders,
traders, etc. The lenders leveraged their advantageous
position to charge high interest rates and earn
profits at the expense of the working poor. According
to Dr. Khan, “They [farmers] were short of
capital, and in their distress, borrowed from exorbitant
money lenders, and sold to oppressive traders. Small
scale agriculture, starved of capital, and skill,
damaged by risks, and squeezed by high interest
rates and low prices for their output, was in fact
going bankrupt.” Under such conditions, the
impoverished were left with no incentive to learn
and adopt modern techniques or increase their per
acre agricultural yield.
In an attempt to address these problems, the Government
of Pakistan established the Pakistan Academy of
Rural Development (PARD). In 1958, Dr. Khan was
appointed as Director of the newly formed organization,
and the Academy began functioning in May of 1959.
Upon taking the helm, Dr. Khan was confronted with
the serious problems facing the agriculture sector.
He traveled from village to village to conduct research,
gain a more intimate knowledge of the farmers’
troubles, and discuss their issues; his focus was
on listening, rather than dictating.
Speaking with the villagers, Dr. Khan quickly recognized
that ensuring collaboration between the farmers
would be key to relieving many of their ailments;
he determined that a cooperative system would be
the best means to enable this collaboration. Such
a system would allow farmers to share information,
make joint production decisions, and leverage their
collective resources to establish a basis for credit-worthiness,
thereby reaping mutual benefits. In designing the
system, Dr. Khan emphasized the broad principles
of “savings, educational meetings, joint planning
and action.”
But Dr. Khan knew that no cooperation would be possible
without the backing of the villagers. Thus, efforts
were undertaken to travel to the different villages
to espouse the benefits of the system and gain support
from the villagers. As a result of Dr. Khan’s
efforts, the villagers began to organize and the
cooperative experiment at Comilla was underway.
By May of 1960, ten local cooperatives had been
organized. According to author Arthur F. Raper in
his book Rural Development in Action: The Comprehensive
Experiment at Comilla, East Pakistan, these
ten cooperatives were comprised of “seven
village-based agricultural societies, a vegetable
growers’ society, a women’s cooperative,
and a weavers’ cooperative.” Raper further
states that by 1961 “17 village societies
had…secured 25 loans totaling Rs. 108,000.
The largest amount borrowed by any village society
[cooperative] was Rs. 15,000 and the smallest Rs.
2,500. These loans were arranged through either
the Comilla Cooperative Bank or the Agricultural
Bank at Comilla.”
As the Comilla experiment matured, there was recognition
that a central association was needed to support
the local cooperatives (also known as primary cooperatives).
So, in January of 1962, the Kotwali Thana Central
Cooperative Association (KTCCA) was registered,
with Dr. Khan as Chairman of its managing committee.
Thus, a two-tier system - comprised of the cooperatives
of small farmers at the local village level and
a centralized supporting association at the thana
level – emerged.
Here it is important to explain the respective roles
of the primary cooperative and the central association
in the two-tier system. The primary cooperative
consisted of a group of farmers from a given village
(or sometimes multiple villages). In order to participate
in the Academy’s cooperative program, they
had to meet certain requirements, including:
• Holding regular meetings with mandatory
attendance by all member villagers.
• Electing a representative/manager. Each
representative manager was required to connect with
the central association weekly, not only to obtain
training but to deliver any messages back and forth.
The manager communicated on all issues, including
credit. His responsibilities also included holding
training classes in his respective village and disseminating
knowledge which was imparted to him by the central
association.
• Collecting regular savings deposits from
its members. The manager of the primary cooperative
then deposited the savings with the central association.
It is important to note that these deposits were
a key tenet of the cooperative system, as they would
help to build savings in the local communities,
and also provide capital for subsequent loans.
As aforementioned, the central association provided
support to the primary cooperatives. In the case
of the KTCCA, its services included:
• Training and education
• A Service Center to procure, rent and repair
farming machinery
• Banking (capital accumulation, credit, commercial
marketing)
• Teaching scientific methods
The KTCCA derived its funds from private as well
as public sources, including the Government, the
Ford Foundation, and the primary cooperatives. Using
these funds, it was able to offer loans to the primary
cooperatives, who in turn provided credit to their
members. In essence, the Comilla Cooperative had
established its own banking system, which, for the
first time, allowed small farmers to obtain loans
at low interest rates. Furthermore, it enabled farmers
to learn and adopt modern techniques. As a result,
both the individual household and the country benefited.
Indeed, the Comilla Cooperative had proven to be
a tremendous success; the movement started by Dr.
Khan was no less than a revolution! The system worked
because (according to A. Aziz Khan in Comilla
Co-operative Pilot Project [1961-1965]) “on
the one hand, they [village societies] have the
strength of proximity, homogeneity, mutuality of
knowledge and vigilance among their members and
on the other they have the necessary support from
the Central Association.” Perhaps Dr. Khan
himself best summarized the reasons behind the success
of the Comilla program:
“The Comilla project proposed a way out of
the dilemma of the small village cooperative being
economically weak, and the multi-village cooperative
lacking in social and psychological cohesion, by
establishing a large number of primary groups based
on single villages, and federating them into a powerful
central association. Each strengthens and sustains
the other. Each performs well-defined task and function.
In combination, the primary village groups and their
federation, form the nucleus of a new economic order
for rural areas.”
In the years subsequent to the founding of the Comilla
Cooperative, a number of other initiatives were
launched to replicate the success seen at Comilla.
Nonagricultural societies – modeled after
the Comilla Cooperatives - were formed in East Pakistan
(now Bangladesh) and operated under the Special
Cooperative Societies Federation (SCSF). These societies
represented such diverse occupations as rickshaw
pullers, merchants, butchers, weavers, village doctors,
blacksmiths, factory workers, motor drivers, etc.
By the middle of 1968, there were 261 agricultural
societies and 78 societies in the Special Cooperative
Societies Federation. Meanwhile, in Bangladesh,
Professor Muhammad Yunus was closely observing the
success of micro-credit at the Comilla cooperatives,
and in 1983 started Grameen Bank; he won the 2006
Nobel Peace Prize for his application of microcredit
there. In 1989, the Orangi Pilot Project - Orangi
Charitable Trust (OPP– OCT) was established
in Karachi, Pakistan by Dr. Khan as an independent
institution to provide microcredit in urban and
rural areas. In yet another example, in August of
2000, Khushali Bank was formed in Pakistan to provide
microcredit. Today, the concept of microcredit is
being applied in many countries around the world,
thanks in large part to Dr. Khan’s efforts
at Comilla.
Thus, through his pioneering work at the Comilla
Cooperative, Dr. Akhter Hameed Khan brought the
idea of microcredit to the world stage. Dr. Khan’s
work has opened doors for the impoverished, while
simultaneously erasing misconceptions and stereotypes.
He has proven to the world that the poor can be
effective participants in the economy if given the
opportunity. Dr. Khan’s contributions to rural
development, poverty alleviation, and the microcredit
scheme will surely live on forever.
Many experts and learned men, including the President
and Prime Minister of Pakistan, have acknowledged
Dr. Khan’s incredible accomplishments. Below
are a few excerpts:
General Pervez Musharraf, President of Pakistan
(during an interview):
“…he [Dr. Khan] introduced health,
poverty alleviation, education projects which were
so welcomed, and he did it by being with the people,
living with them. I think he was one of the great
figures of the region of South Asia…He was
a man for the people, and we need such personalities
as Akhter Hameed Khan…”
Shaukat Aziz, Prime Minister of Pakistan (then Federal
Minister for Finance, Pakistan, speaking at an Agha
Khan Rural Support Program [AKRSP] conference):
“Ladies and Gentlemen! We are proud that
the AKRSP model is totally 'home-grown'. It is an
iteration of the ideas and experiments of the great
visionary and teacher, Dr. Akhtar Hameed Khan.”
Professor Muhammad Yunus, 2006 Nobel Peace Prize
winner and admirer of Dr. Khan (in his letter sent
on the occasion of a symposium on the Life and Times
of Dr. Khan, held in Islamabad from March 02-05,
2000):
“He [Dr. Khan] was one of the greatest
human beings of the past century. He was so much
ahead of everybody else that he was seen more as
a ‘misfit’ than appreciated for his
greatness. Dr. Khan needs to be rediscovered in
the light of the realities and needs of the emerging
century. We have a lot to discover and a whole lot
to learn from him.”
Shoaib Sultan Khan, Chairman of the National Rural
Support Program (NRSP):
“He was my mentor not only in name but
in reality. Every time I met him, I learnt something
new… He never failed me in showing the light
when I would be desperate and have the feeling of
being caught in a cul de sac or faced with an insurmountable
wall. He would explain every issue - -social, economic,
temporal or metaphysical -- with the ease of a person
having full command on the subject. His explanation
of the religions of the world especially of Islam
used to have a depth and breadth which left even
the most ignorant deeply moved.”
W. Klatt, St. Antony’s College, University
of Oxford (in a book review of Rural Development
in Action: The Comprehensive Experiment in Comilla,
East Pakistan by Arthur F. Raper):
“The man responsible for this [women’s
participation and development] and other changes
in attitude is Akhter Hameed Khan, at one time a
member of the I.C.S., after 1959 the Academy’s
director, and recently appointed Vice-Chairman of
its Board of Directors…He is indeed a remarkable
man without whom the Academy would not be worth
writing about… The experiment’s main
success lies in the village co-operatives, the pubic
works program and the women’s share in changing
life in the villages.”
David E. Bell, Vice President, The Ford Foundation:
“The Comilla story centers in a more important
sense around a man — a remarkable man —
Akhter Hameed Khan...[who] is the prime cause of
its [the Academy’s] success… The choice
[of Dr. Khan] could not have been wiser, for it
was he who brought to the Academy its central concept…”
Harvey M. Choldin, Michigan State University:
“There is no denying that Akhter Hameed
Khan, the first director of the academy, has been
the centrally important figure within the programs
there…He has developed a reputation for concern
for East Pakistani problems over a period of decades,
as a high civil servant working in that area and
as the head of a local college. Within the government,
he has access to high civil servants, some of whom
were colleagues of his in the Indian Civil Service
before independence…His style combines erudition
with humility and simplicity. He works long hours,
with, at times, a great deal of contact with village
people, often through the medium of long walking
tours through the villages.”
Harvey M. Choldin (in another article):
“Many observers consider these projects
[at Comilla] to be among the most successful rural
development efforts in underdeveloped areas. The
projects offer an opportunity for social scientists
to observe and analyze modernization processes…”
Harry W. Blair (in Pacific Affairs journal):
“The Pakistan Academy for Rural Development
at Comilla, East Pakistan, has been widely considered
as an outstanding example of a successful community
development program. Under the leadership of its
director, Akhter Hameed Khan, the Academy has had
an especially impressive record of achievement in
its major activity of establishing cooperative development
projects. Its program revolves primarily around
three spheres of activity: agricultural credit,
the provision of training and supplies, and research.”
Dr. Ishrat Hussain (while he was at the World Bank):
“…Today micro-credit has become
a buzzword in the lexicon of development practitioners
for poverty alleviation throughout the world but
35 years ago this idea was pioneered in Comilla.”
Dr. Norman Uphoff, Cornell University:
“Sadly, such towering figures and lofty
intellects as Akhter Hameed’s are quite uncommon.
Only a few emerge in any generation. His lifetime
spanned an era of incredible change, with remarkable
advances in certain political and economic respects,
and lamentable failings in these same realms.”
Professor Rehman Sobhan, Chairman, Centre for Policy
Dialogue, Dhaka, Bangladesh (as part of a lecture
on “Democratizing Development in South Asia:
Responding to the Challenge of Globalization,”
which he was delivering upon the invitation of the
Akhter Hameed Khan Resource Center in association
with the Rural Support Programmes Network):
“Akhter Hameed Khan was an inspiration
to my generation. I had the privilege of learning
from him when I was a young teacher of economics
at Dhaka University in the early 1960s. His model
of rural development was then making its impact
in Comilla Thana and its headquarters in the Abhoy
Ashram in Comilla had already became a place of
pilgrimage for those at home and from abroad seeking
inspiration for resolving the problems of poverty
in an increasingly unequal society. What lent credibility
to Akhter Hameed Sahib’s endeavors was his
own human personality and willingness to realign
his career choices to conform to his beliefs. The
simplicity of his manner, the austerity of his life
style, the wry, self-deprecating humor with which
he dealt with people of all classes, age groups
and background served as a testament to his commitment
and integrity as a human being… The ultimate
tribute to Akhter Hameed’s contribution to
changing the lives of the less privileged are to
be found in the role models he inspired. In Bangladesh
people such as Mohammed Yunus, founder of Grameen
Bank and our most recent Nobel Laureate, targeted
the landless groups as the principal beneficiary
of collateral free micro-credit.”
Professor Emeritus George H. Axinn, Michigan State
University:
“In my mind and heart, the greatest professional
and human contribution to rural development in the
second half of the 20th Century was made by Akhter
Hameed Khan.”
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