BEYOND IDEOLOGIES: CREATING WEALTH FOR THE POOR

Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper BEYOND IDEOLOGIES: CREATING WEALTH FOR THE POOR Deepa Narayan and Soumya Kapoor, World Bank ([email protected]) Abstract: Poor people work hard and are the most motivated to move out of poverty. Yet pervasive inequality in opportunity, agency, organization and human development prevents them from getting fair returns and keeps them trapped in poverty. The demise of the Washington Consensus has created a need for new consensus that supports poor people's direct participation in economic growth on fairer terms. This paper proposes creating wealth from below as a new strategy to support market based approaches that are value based and build on poor people's strengths. It requires breaking through the ideological mindsets of state vs. civil society vs. private sector. This paper uses the framework of opportunity structure and agency as the two building blocks to understand the obstacles to economic empowerment in an unequal world. Opportunity structure consists of the institutional climate and the deeper political and social structures that govern the interaction between poor people and other actors. The concept of collective agency is viewed as particularly important. It consists of collective organization, voice, representation and identity which interact with poor people's individual assets and capabilities. The framework also points to possible policy intervention points. The paper then analyses and draws lessons from four large scale programs, AMUL, SEWA, e-choupals and women's self help groups from Andhra Pradesh in India implemented by civil society, private sector and the state that have raised poor people's incomes to varying degrees. Keywords: Collective agency; economic opportunity; collective action; poverty; inequality; inclusion; participation; accountability; information; economic growth; economic empowerment. DISCLAIMER: This is a draft working paper produced for the World Bank conference, ‘New Frontiers of Social Policy: Development in a Globalizing World’. The findings, interpretations, and conclusions herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction/The World Bank Group and its affiliated organizations, or its Executive Directors, or the governments they represent. If you wish to cite from this document please request the latest version from the author(s) or from [email protected]. 1 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Poor people live in an unequal world in which the wealth from economic growth is unequally shared. Proportionate gain is of little help to the bottom poor. Inequality in power, opportunity, agency, organization, and human development perpetuates unequal incomes or widens income disparities even with economic growth. Poor women and men must participate in much larger numbers and on fairer terms to make shared growth a reality. The disillusionment with the Washington Consensus and renewed public support in reducing poverty provides a unique opportunity to develop economic and social policies that support poor people’s participation in markets on their own terms. This paper suggests one approach. It first discusses reasons for the collective failure so far in transforming poor people into market agents on their own behalf. Based on analysis of world wide experiences it then presents a conceptual framework, applies the framework to four large scale programs in India that have improved incomes of poor people, and finally draws policy lessons to support market liberalization from below1 that values poor people as producers, consumers, suppliers and citizens. Ideology Traps In a world divided ideologically over globalization, its benefits and discontents, the ideological divide itself has prevented institutional innovations and policy sets that are informed by the micro realities of poor people’s lives as workers and microentrepreneurs. Mutual mistrust and suspicion among civil society, the state and markets is rife. This prevents mutual learning that is needed to improve the lives of millions of poor women, men, youth and children. Most national governments put their trust in the public machinery to do what is right and moral focusing more on redistributive justice than on policies to create wealth for the poor. Civil society organizations on the other hand, deeply mistrust both the state and markets. They see themselves as having superior moral authority in fighting for the rights of the poor. Private sector investors provide the engine for growth, but their search for profits can create jobless growth and leave behind millions trapped in poverty in rural and urban areas. Another ideological trap is reflected in the differing mindsets and language across disciplines. Thus economic growth is considered to be the purview of economic policy, while social policy focuses on livelihoods of the poor. 2 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper The moral values of civil society; the efficiency, organization and outreach of the private sector; and the financing and facilitative policies of the state all are needed for innovation that empowers millions of poor people to take action to engage with markets, society and polity on their own terms. Conceptual Framework The conceptual framework for economic empowerment of poor people rests on two basic propositions2. The first is that poor people themselves are active agents, the most important resource and the most motivated to move out of poverty. The challenge is how to tap into this energy, motivation and talent (Narayan et al. 2000; Narayan et al. 2002; and World Development Report 2000/2001). The second is that unequal power relations and the underlying social and political processes are beyond the control of individuals even though the processes have a major impact on the interactions of individuals with markets, the state and civil society. The framework uses the concepts of agency, opportunity structure and their interactions to explain empowerment of poor people. There are four building blocks as shown in Figure 1 below: • • Institutional climate • Poor people’s individual assets and capabilities • Social and political structures Poor people’s collective assets and capabilities 3 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Figure 1 Overview of the Conceptual Framework Opportunity Structure • • • • Agency of the Poor INSTITUTIONAL CLIMATE Information Inclusion and participation Accountability Local organizational capacity • • • • • Material Human Social Political Psychological • • • • Voice Organization Representation Identity INDIVIDUAL Norms, Values, Behavior • • • SOCIAL AND POLITICAL STRUCTURES Rights, Rules and Resources Openness Competition Conflict • • • • • • COLLECTIVE DEVELOPMENT OUTCOMES Improved incomes, assets for the poor Improved governance, peace, and access to justice Functioning and more inclusive basic services More equitable access to markets and business services Strengthened civil society Strengthened poor people’s organizations 4 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper The first two building blocks constitute the opportunity structure that poor people face, while the second two make up the capacity of poor people to exercise agency. The opportunity structure of a society is defined by the broad institutional, social and political context of formal and informal rules within which actors pursue their interests. Agency is defined by the capacity of actors to take purposeful action, a function of both individual and collective assets and capabilities.3 Poor People’s Agency Poor women and men have limited ability to act to further their own interests. This “inequality of agency” plays a central role in perpetuating inequality and poverty (Rao and Walton 2004). Embedded in a culture of inequality, poor people therefore need a broader range of assets and capabilities if they are to influence, negotiate, control and hold accountable actors that influence their well-being. For those most marginalized, their collective agency in organization, representation, voice and identity is critical in overcoming social discrimination that leads to economic, social and political exclusion and inequality. Without this collective capacity to negotiate, control and bargain, individual assets and capabilities remain unused or underused. The importance of collective agency for economic empowerment among those socially excluded, has been largely overlooked. Assets include material, human, social and political assets that enable people to withstand shocks and expand their horizon of choices. Capabilities on the other hand, are inherent in people and enable them to use their assets in different ways to increase their well-being. However, the fact that two people with similar assets and capabilities exhibit different propensities to act on their own behalf implies that psychological dimensions of individual agency are also important. Self-confidence and a sense of self-efficacy are important precursors to action (Bandura 1998). The process of taking action and experiencing success further reinforces these feelings, creating virtuous cycles of reflection and action. Finally, capacity to aspire is crucial to different and better futures (Appadurai 2004). Generating this capacity to envision a different future therefore becomes an important part of policy interventions and solidarity movements. 5 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper The Opportunity Structure Investment in poor peoples’ individual and collective assets and capabilities will not bring about change unless there is change in the opportunity structure within which poor people can pursue their interests. This involves changes in the institutional climate, removal of formal and informal institutional barriers that prevent the poor from taking effective action – individually or collectively – to improve their lives. It also implies the need for changes in the social and political structures that perpetuate unequal power relations. The institutional climate creates incentives for action or inaction. Key formal institutions include the laws, rules, regulations and implementation processes upheld by states, markets, civil society, and international agencies. Informal institutions include norms of social solidarity, superiority, social exclusion, helplessness, and corruption that can subvert formal rules. Because the rules, regulations and actions of the state are so important in affecting the conditions in which poor people and other actors make decisions, empowerment efforts often focus on changing the unequal power relationship between the state and poor people. The same analysis can be applied to the relationship between poor people and private businesses or civil society organizations. In reality, the impetus for reforms in state regulations often emerges because of on-the-ground experiences of civil society or the private sector. Although there is no single model for bringing about such reforms, experience shows that four key elements are almost always present when such efforts are successful. These are: access to information, inclusion/participation, accountability, and the enabling environment for local organizational capacity. Opportunities for the poor depend also on the nature of social and political structures – the extent to which they are open or closed, inclusive or exclusionary, cooperative or conflictual. When social divisions are deep and systemic, opportunities and access to services are determined less by individual characteristics than by a culture of inequality that discriminates against and excludes entire social groups. The political and social structures are generally more difficult to change than the institutional climate. Two aspects of this conceptual framework are worth highlighting. First, economic empowerment is a relational concept, it emerges out of the relationship between poor people and the state, the private sector and the civil society. Second, the appropriate intervention point varies and changes over time depending on the nature of the barriers, on what is feasible, and the 6 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper development outcomes desired. Discussions and the lessons from the four programs that follow illustrate many of these points. Four Large Scale Programs Reaching the poorest of the poor in India is a challenge. When discrimination and the expectation that a life of poverty is just and this social norm is deeply embedded in social and economic institutions, change is extremely difficult. Changing the lives of dalit women who are considered untouchable, who live on the fringes of society, who are illiterate, who eke out a living on seasonal wage labor, who are beaten by their husbands, and whose children often end up as bonded labor is an extreme challenge. Seeing them as entrepreneurs, and as potential business partners is fantasy. This section focuses on four large scale programs in India, each with a different starting point, which demonstrate the business potential of poor men and women. The programs show that unlocking poor people’s potential reduces poverty, enables poor women and men to contribute directly to achieving shared economic growth and is profitable for businesses. The four programs are the government managed women’s self-help groups (SHG) in the state of Andhra Pradesh; SEWA, a union of poor women workers in the informal economy; AMUL, the cooperative dairy development program; and e-choupals, computers placed in villages to facilitate agribusiness managed by a private company, ITC. In Andhra Pradesh, from small beginnings in 1996, when poor illiterate women were organized into groups of 10-15, to start their own savings and then link to banks, the self-help groups (SHG) have spread throughout the state transforming women’s lives. The SHG model addresses women’s multitude social and economic problems and links women to existing government programs. A village may have as many as 50 groups networked into a village organization which is networked upwards into the sub-district or mandal level and higher into the district level. Originally called Velugu (meaning light) and recently renamed Indira Kranti Patham, the government program has organized 6.2 million poor women into 512,000 self-help groups – almost half the self-help groups in the country. These have federated into 27,350 village organizations, which in turn have federated into 864 representative organizations at the subdistrict level achieving collective agency through organizational strength, without losing the 7 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper advantages of small size. The groups already mobilize $250 million in savings every year, receiving $ 400 million from banks (CESS 2005). Labor unions in India do not benefit 93 per cent of the total workforce including agricultural workers in the informal economy (Unni 2002). After a protracted struggle with government regulations, Ela Bhatt, a lawyer in the state of Gujarat, established the first trade union for women workers in the informal economy in 1972. Members included poor women who were street vendors, daily wage laborers, head loaders, home workers including those doing embroidery, tailoring or raising vegetables in backyards, salt workers, gum collectors and those involved in many other trades. Today, SEWA is the largest trade union in the world of poor women in the informal economy. It has over 700,000 members working in over 70 trades in seven states across India. As a union it fights for its members seeking fairer wages and benefits and upgrading their skills. Its cooperatives include banks, as well as collectives that support women’s agricultural and handicraft products. SEWA Bank, provides an integrated set of services to its 257,000 women account holders who deposited $14.4 million in the year 2003. In addition, SEWA operates health care centers, child care crèches, and insurance programs for its members (SEWA Annual Report 2003). India is also home to one of the most successful cooperatives in the world which has transformed the country from a net importer to an exporter of milk. From small beginnings in the AMUL cooperative in Anand, Gujarat, which was created to bypass exploitative middlemen, Operation Flood, a nation wide dairy development program implemented by the National Dairy Development Board over three decades, has transformed the dairy industry in the country. In 2003-04, the dairy cooperative movement involved nearly 12 million farmers, supplying on an average 15 million litres of milk per day with an annual value of $20 billion to over 750 towns and cities (NDDB 2005). In less than five years, the fourth program called e-choupal, has connected over 3 million farmers in India to markets, increasing their profits through village based internet kiosks. The program was initiated in 2000 by an Indian private for profit company, ITC, which has annual revenues of $2.95 billion (ITC 2005; Deveshwar 2005). The innovation came about when the agribusiness division of ITC had become unprofitable due to opening up of the Indian economy. E-choupals provide farmers with free information about prices of agricultural commodities 8 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper without obliging them to sell to the information provider, ITC. After checking prices, the farmers can choose to buy or sell through ITC or go to the local markets (called mandis) instead. Computers are placed in the home of a middle class farmer whose commission depends on the number of transactions he successfully completes with local farmers buying or selling products through the e-choupal. Efficiency improvements in buying and selling have led to increased revenues both to the farmer and to ITC. Today, e-choupals generate more than $100 million in business for ITC, sourcing agricommodities through 5,200 kiosks across 31,000 villages in India – with plans to cover 100,000 villages or one-sixth of rural India in the next five years. By 2010, it aims to achieve revenues worth $2.5 billion in e-choupal transactions (ITC 2005; Deveshwar 2005). Key Lessons This section highlights six lessons about scaling up poor people’s participation in markets on fairer terms. The conceptual framework on empowerment is used to frame these lessons. The six lessons are: • • Build on innovations from civil society, government or the private sector • Link changes in economic opportunity structure to poor people’s livelihoods • Leverage collective agency into economic power through business orientation • Invest in collective agency for socially marginalized groups • Aggregate demand and manage demand responsiveness Translate agency and organization into political clout 1. Build on innovations from civil society, government or the private sector There has been much polarized debate on the merits of the state, civil society and the private sector as key actors in poverty reduction. These cases demonstrate that innovation and thoughtful action on a large scale can emerge from any sector. However, scaling up these efforts requires large scale financing from government or other agencies without interference in policy details and management of programs. The development of dairies in India based on the AMUL cooperative model emerged from civil society, but government and donor financing supported its growth, through the 9 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper creation of new government approved autonomous institutions. The movement was led by Verghese Kurien for almost half a century. The origins of SEWA are in civil society. It was created in the tradition of labor unions and cooperatives, and led by Ela Bhatt, its founder, for over 30 years. The SHG movement in Andhra Pradesh was led by two government bureaucrats, one of whom has been associated with the program since its beginnings over a decade ago. The scaling up of the program was implemented through an independent government created society called the Society for Elimination of Rural Poverty (SERP) which functioned much like an NGO in its orientation and commitment to poor and disenfranchised groups, while retaining the connections and power of government offices throughout the state. The e-choupal network was the brainchild of the head of the agribusiness arm of a large private company, ITC in response to a crisis when the company’s agribusiness was in danger of being shut down. The head of the business, a graduate of the Institute of Rural Management, developed a pilot, using information technology to better serve farmers of soy beans, while making profits for the company. 2. Invest in collective agency for socially marginalized groups The assumption that individuals can move out of poverty through their own individual efforts, by overcoming exogenous constraints, does not take into account social and cultural norms and constraints that are imposed by the more powerful social groups and internalized by a discriminated group. Entire social categories of poor people have limited social or economic mobility because of institutionalized inequality. Historically, the caste system in India has been held in place because the hierarchy is practiced and internalized not just by the higher castes but also by the lower castes. Thus life chances are overwhelmingly affected by social categories that individuals are born into rather than only individual effort (Tilly 1999; Loury 2002; Narayan et al. 2000; Narayan et al. 2002; Rao and Walton, 2004; World Development Report 2006). Investment in the collective agency and organizations of marginalized social groups is characterized by market, state and civil society failure. Yet without organization that is representative and accountable, and that aggregates the power of thousands and indeed millions, the economic and societal interests of marginalized groups will not be met. Building poor people’s organizations that are self-sustaining in the long run requires time, money, sensitive facilitation and a strategy to achieve financial viability. 10 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Three of the four programs discussed in this paper invest heavily in collective agency, by first building a new sense of identity that focuses on dignity, self-respect, equity, and justice, and a sense of solidarity through group formation. Two programs, SHGs in Andhra Pradesh and SEWA, focus specifically on marginalized women, use rituals, songs, and prayers to help women break through old self- imposed and other imposed barriers to recognizing their own worth and their own sense of self. In Andhra Pradesh, the program focuses on dalits, the untouchables. Women’s first request for collective action is to break taboos of untouchability, by actions such as collectively drawing water from a public well that had been monopolized by higher castes; or walking collectively on a road through a high caste village with their shoes on and heads held high, thus symbolically claiming equal status with the higher caste on whom they are often dependent for their livelihoods. At the community level, none of the programs adopt a confrontational approach, rather the focus is on changing self through collective strength and letting social change happen over time. Interestingly, both in SEWA and in the SHG movement, when women are asked about the most important difference in their lives, they mention loss of fear, self confidence, speaking in public and holding their heads high, often before describing the economic changes in their lives. The AMUL milk cooperative builds collective agency through a three tier federation. It focuses only on those who own cattle, primarily marginal and small farmers, but does not exclude the better off. At the village level, dairy cooperative societies are formed in which decisions are made on the basis of one member one vote. There are over 110,000 village dairy cooperatives owned by 12 million farmers. Membership is open to all and even the smallest quantity of milk can be sold to the cooperative by any member. 70 per cent of the members are small and marginal farmers (Kurien in Narayan et al., forthcoming). The only program that makes no investment in collective agency of the poor is the echoupal program that instead uses the computer to aggregate demand. It does not focus exclusively on the poor. So far 70 per cent of the farmers who use e-choupals are middle income while typically10 per cent are poor4. Social categories of the poor mask many differences including gender differences. India is a strongly patriarchal society. Women from the lowest social strata, who are poor, illiterate and without assets, are bypassed by most programs because they are the most powerless and hence invisible to outsiders. It is to overcome such deep culturally imposed constraints that SEWA and 11 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper the SHGs focus only on women. AMUL had to institute special programs to support women’s leadership since tending milch cattle is women’s work. It later created women’s dairy cooperatives to reach women. While this has made some difference, by 2002, women’s membership rose to 2.47 million of 12 million farmers, still only 20 per cent. ITC also does not reach women and has recently initiated a partnership with SEWA’s members to procure and market agricultural produce such as organic sesame seeds. 3. Link changes in economic opportunity structure to poor people’s livelihoods Participation of poor people in markets on a large scale requires changes in economic opportunity structures linked to their livelihoods; otherwise economic growth fueled by jobs for those with higher technical education will not touch the lives of millions of poor people. Instead it will become ‘jobless growth’. Modifying the opportunity structure involves changes in the institutional climate of the state, private sector or civil society organizations that impact poor people’s economic activities. Poor people can access markets on fairer terms if interventions truly level the playing field, so that self-inclusion is possible through individual action. Access to information; transparency; breaking monopolistic power held by traders, buyers or officials, thus increasing choice; accountability; and keeping transaction costs low are important in enabling poor people to take advantage of opportunities. Otherwise pervasive power inequality chokes opportunity for the poor and those without social connections, political clout and assets. When economic initiatives are not targeted to the poor, the involvement of the middle class creates support and rapid expansion. However, to reach marginalized social groups requires both special design features and possibly investment in their organizations and collective agency. SEWA focuses directly on improving the livelihood security of poor women. SEWA’s earliest members were poor women street vendors in Ahmedabad, Gujarat, who were constantly harassed by the police for bribes in their efforts to find a place to vend. SEWA fought many legal battles to assure that vendors were not removed from their traditional vending places and that their right to vend was recognized. It was after almost 20 years in 1989 that a Supreme Court of India judgment recognized the ‘right to trade’ for vendors. In 1992 a high court judgment protected the right of women to vend in five market places in Ahmedabad and the court dismissed 140,000 pending cases filed against vendors in the traffic court. In 1999, SEWA 12 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper founded a National Alliance of Street Vendors with over 500 member organizations in 22 states across India, and became a founding member of StreetNet, an international alliance (Chen et al. 2003). SEWA also works with poor salt workers. The salt industry in Gujarat employs over 70,000 people and produces approximately 67 percent of India’s total salt production (Crowell 2003). Salt production is a regulated industry in India. However, if producers maintain farms that are smaller than 10 acres, they do not need to obtain a license; nearly three-quarters of Gujarat’s salt producers’ work on informal farms. Constraints include hazards such as working in harsh physical and weather conditions, lack of off-season work opportunities, and high transportation costs. One long-standing government regulation stipulates that salt farmers need to own a minimum of 90 acres of land to be eligible to book a train wagon. The small informal salt producers were hence unable to use the cheaper rail service to transport their salt. Since 1989, SEWA lobbied the government to develop a program that would provide a range of services to salt producers working in informal unregistered salt farms. These services include the inputs necessary for salt production as well as housing, education, healthcare, and childcare services. In addition to the financial services provided through the SEWA Bank, the SEWA Rural Union worked to channel financial resources to salt workers through the national Development of Women and Children in Rural Areas (DWCRA) program. To facilitate their participation in this program, SEWA organized the women into producer groups who were given revolving funds for working capital such as tool and equipment. However, it took nearly 10 years for SEWA to convince the government to change its regulations on the railway wagon quota. It was only in 1998, after SEWA arranged for a large group of salt producers to meet the Chief Minister of Gujarat to voice their demands, that the local Association of Salt Farmers was allotted a quota, based on the volume of salt production by its members. AMUL has been more successful than e-choupals in reaching the poor, primarily because more poor people are involved in rearing cattle than in farming soy beans, direct outreach to small farmers and organizing them into cooperatives. Nearly 70 million households in India own a total of 90 million cows and buffaloes. In rural areas, where there are few employment opportunities, dairying becomes an attractive option. Low capital intensity, a short operating cycle and steady returns make dairying a preferred activity among small and marginal farmers and even among the landless that depend on common grazing and forest lands for fodder. A 13 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper majority of milk producers have 1-2 cows and account for 70 per cent of India’s milk production (Kurien 2005). On average, 22.5 per cent of the income of rural households is contributed by milk (Tikku 2002). The AMUL cooperative later known as the Anand pattern cooperative from Gujarat has over three decades become the largest food company in India. In 2003 it ranked first in milk powder and milk related products, beating other well known multinational companies (NDDB 2005). The e-choupal initiative first focused on soy beans targeting the median farmer and effectively changed the institutional climate governing interactions between millions of such farmers and traders. The computers placed in middle class farmers’ homes are accessible to all, free of cost, irrespective of caste or wealth, and have broken the monopoly of information on market prices. In effect, the e-choupal becomes an alternative to the traditional mandis in which farmers are required to sell through middlemen despite the fact that the entire process is stacked against them to serve the interests of the buyers. In the mandis, the farmers discover the prices only at auction time, and hence there is no separation of price information from the decision to sell. In addition, the farmers bear the costs of transportation and bagging of grain and watch helplessly as their grain is weighed manually by scales that are tipped in favor of the buyer. By contrast, in the e-choupal system, if the farmer decides to sell to ITC that day or another day, he is given a written quote of the price which he takes with his produce to the local procurement hub, where he is also treated with respect. His produce is weighed using electronic scales, and lab tests are used to determine the oil content based on which he may get bonus points to be used later to buy inputs. Transport costs are borne by ITC. The response of farmers to the alternative market and market access has spurred a phenomenal expansion of the e-choupal system. Farmers often prefer selling through ITC even when their prices are lower than at the mandi, because they get immediate payment, and they know that they will not be cheated; additionally they save on transport costs. The e-choupal has become the demand and supply aggregator for farmers and ITC in the rural areas, thus achieving scale within three years using the existing policy and regulatory framework including paying the mandi tax. Thus, e-choupals have been very successful in reaching their main client, the middle income farmer, who comprise 70 per cent of those who use the e-choupal, 20 per cent are rich while only 10 per cent of the users are poor. 14 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper When economic initiatives are not specifically targeted to the poor, as in the e-choupals, the involvement of the middle class creates support and rapid expansion. Poor people, still benefit even when they don’t sell to e-choupals, because to stay competitive, the prices that other traders have to pay to procure agri-commodities in the area go up. In some of the soy-growing areas where e-choupals are active, the percent of farmers planting soy has increased from 50 per cent to 90 per cent5. Also, when such programs fine tune their approaches, previously excluded groups also benefit. ITC is currently piloting different approaches to reach women and poorer farmers6. The recent success of the SHG women as procurement agents of agricultural commodities that link back to their livelihoods is discussed in section 5 in detail. Their achievements almost rival those of e-choupals in terms of scale achieved over a short period of time. However, unlike e-choupals, the lead time before poor women could engage in these procurement and marketing activities was long, as the federated networks of SHGs had to be created from scratch. 4. Aggregate demand and manage demand responsiveness Poor people actually pay more for just about everything because they buy in small quantities, and they receive less for what they sell because they sell in small quantities-they have little bargaining power. In addition their transaction costs are higher per unit. Organizations of the poor help overcome the disadvantages of being small and powerless by aggregation of numbers. Two ways have emerged for demand aggregation, one through organizations of the poor, and the second through computers providing public access to information at low cost embedded in a carefully tested and designed system that increases value and efficiency in the production, procurement, processing and marketing chain. Aggregating demand. The dairy cooperative movement based on the Anand pattern started with the very clear objective of getting more rupees in the hands of the farmer for every litre of milk sold. It organized farmers in a three tier network, with each tier serving distinct functions so as to return higher value to the farmer. Milk production is decentralized, in the hands of 12 million individual farmers. Procurement of milk is done by the 110,000 village level cooperative societies composed of these individual farmers. The cooperatives federate into 170 district level unions that serve as centralized milk processing centers. These unions combine into 15 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper 22 state level marketing federations, whose primary job is to market the milk and milk products (NDDB 2005). In the SHG movement, the program is clear about its client, the poorest of the poor women from scheduled tribes and castes, but its overall vision in terms of empowerment and improving the wellbeing of poor marginalized women is cast in broad terms. Its strategy consists of social transformation through group formation. Women are organized by community coordinators into groups of 10-15 women. Each group selects two women to form a representative village organization. Women have been organized into 512,000 self-help groups and approximately 27,000 village organizations. These village organizations have been federated into 864 Mahila Mandal Samakhyas (MMSs) at the mandal or subdistrict level. It is important to note that irrespective of the innumerable and diverse activities undertaken at the group or village level, all groups and village organizations are federated upwards into the same Mahila Mandal Samakhya. This aggregation at the mandal level, the power of sheer numbers and the ability to leverage this power, eventually changed the strategy of the program to focus on a more limited number of agricultural commodities with the aim of improving the livelihoods of poor women. Like the self-help women’s movement in Andhra Pradesh, SEWA started with a broad objective of women’s empowerment through self-employment and self-reliance. It first focused on poor urban women and only later extended into rural areas. It invests heavily in organizing women into groups, cooperatives and unions, and has fought and won several legal battles to get the rights of informal workers recognized. SEWA is composed of poor women engaged in more than 70 trades, most of whom have been organized into distinct cooperatives or unions. These include street vendors, vegetable producers, dairy farmers, salt workers, tobacco workers, bidi rollers, gum collectors, nursery growers, embroiderers, and tailors to name a few. The sheer diversity of occupations has meant that even though collectively the numbers reach over 700,000, for each occupation the numbers are much smaller. Based on its experience, SEWA believes that livelihood security is not complete without access to health care, childcare, insurance and housing. SEWA tries to link its members to government provided services where these exist or tries to improve the services. But it often ends up providing the service and hence is directly engaged in domestic water supply management, irrigation, forest management, nursery schools, literacy classes, health campaigns, 16 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper insurance, and loans. This dispersion of numbers limits SEWA’s bargaining power both with the state and within markets. ITC’s e-choupals is the only program that does not invest directly in collective organizations of the poor. Its objective was to develop a more efficient agriprocurement chain for ITC by bypassing the middlemen in the mandis and using information technology to create a more profitable chain for both ITC and for soy bean farmers. The computer serves both as an aggregator of farmers’ demand for markets and an aggregator for supplies needed by farmers. Technically, the system is open to all and operates on the principle of self-inclusion. However, since the operator of the e-choupal (the sanchalak) is a farmer with median income, reports suggest that social barriers still keep many small farmers as well as women away from the e-choupal network (Prahalad, 2005). Managing demand responsiveness. Maintaining demand responsiveness over time is easier when objectives are clear and when the incentives, norms and mores, management structure, and the institutional climate, is aligned with these objectives. When working with poor people, programs face a special challenge of maintaining focus while remaining responsive to demand, as poor men and women face multiple disadvantages which are interlinked. The temptation is to keep adding components to programs that address other problems that poor people face. The dairy cooperative movement has managed to remain a single commodity program. Its demand responsiveness remained fixed for decades on the small dairy livestock owner, how to improve the quality of his product, through livestock related education, veterinary services and how to market it to get the best returns. Daily prices are written on a large blackboard at the village milk collection center for all to see. With single minded focus on the doodhwala (milkman), the movement did adopt technologies such as the electronic fat reader to remove any discretion of the persons involved in setting the price of the milk being bought at the village cooperative; and setting up a dairy portal for members to access other information independent of the cooperative. Other innovations included spot payment if desired or a monthly payment in cash, based on entries in a passbook. However, it did not for example start schools for children. Evaluations however show that in areas where Operation Flood was active the enrollment of girls in schools increased significantly, fueled by additional income controlled by women. Under Operation Flood, it expanded in three phases (Candler 1998). 17 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Unlike AMUL, SHGs started with a wide-ranging set of activities including savings, credit, insurance, getting children into school, water shed management, provision of food from government fixed price shops, forestry, health campaign, community infrastructure development and training for a wide range of livelihood activities. It also includes support to widows, and addressing a range of issues affecting women’s lives from domestic violence, child marriage, prostitution, to freeing bonded children. The program is now shifting its focus to consolidate around improving incomes through secure livelihoods. The organizational work at the community level is supported by community coordinators. Their selection and management is an example of alignment of financial incentives, norms and mores to support responsiveness to the demand of poor women. Community coordinators usually have a graduate degree and live in or near the community. They are put through an extensive interview process and psychometric tests. They are then sent to a village without much guidance and asked to find out about living conditions and get to know the women. At the end of this process, if the poor untouchable women like them and provide a positive assessment of them, they are hired as community workers. The salaries of the workers are channeled through the groups to reinforce this message of accountability to groups who also have the rights to fire the coordinators. The progress of groups is graded and as groups mature they pay the community coordinator through their own resources. Of all four organizations, SEWA is perhaps the most demand responsive to its members involved in varied occupations each with their own set of problems. SEWA believes in addressing all the needs of its members, since these needs are interrelated; but in doing so, its expertise has become diffuse and it has been unable to scale up most of its operations or make them financially independent of government or external funding. ITC’s objective clarity combined with financial benchmarks from the beginning helped steer the program. ITC has managed demand for e-choupals by starting with soy beans in one state and then extending to other agricultural commodities, while changing features to fit different needs. In response to demand by farmers, it also provides quality assured inputs to farmers and is also experimenting with opening super markets (Choupal Sagar) as well as extending credit and insurance. In e-choupals, several design features signal the primacy of the farmer. To close the distance between the e-choupal operator and farmers, the selected sanchalak is someone who 18 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper lives in the community, has median income, who farms and is required to continue farming. The sanchalak is required to provide free information to all and only makes money through commissions ($0.10) on each transaction completed, if a farmer decides to sell to or purchase from ITC. With the operators’ revenue depending on repeat transactions, they have a built in incentive to satisfy the farmers and build trust. This is further reinforced by a public ceremony in which the sanchalak takes an oath to serve all without distinction of caste or creed, in addition to a promise to invest part of his commission back into the community. Trust is further built by requiring that the sanchalak perform quality tests on moisture and foreign matter in the farmer’s presence, and justify any deduction in price to the farmer. 5. Leverage collective agency into economic power through business orientation Poor people gain in income when their social organizations are leveraged to access or create new economic opportunities that are linked to their livelihoods. This process of using organizational strength to gain advantage in markets is not automatic for several reasons. First, pervasive inequality keeps poor people’s organizations on the margin. Second, the process of creating large cooperatives, unions or federated organizations of poor people is itself time, skill and finance intensive. Since the returns come many years later, there is collective (state, markets and civil society) failure in investing in the creation of such organizations, nurturing them so they evolve and gain strength over time while eluding capture by the elite from within or outside the groups. Third, many civil society organizations reject or do not have the mindset or experience to create profitable businesses on a large scale. Fourth, the efforts of support agencies who want to be responsive to poor people’s needs become too scattered to effectively gain a large enough market share so as to change their bargaining power with government and markets. Finally, most civil society groups focus too much on supply and not enough on demand, markets and the value chain. There is a striking contrast between the SHG movement and AMUL on one hand and SEWA on the other, in their success in leveraging their social capital into becoming important economic players on behalf of their members. The expansion of self-help groups in Andhra Pradesh is itself quite recent. But it was only when federations of self-help groups started emerging in the third year that the program realized the full potential and power of these federations. The program changed its strategy and 19 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper intervention point because it realized that, while social transformation was important and organization the starting point, this by itself did not change the economic reality of poor women in fundamental ways. Women were still indebted to landlords, traders and money-lenders, and had no bargaining power with any of these groups on whom they were dependent for their livelihoods. It therefore decided to change its focus to improving poor women’s economic power by leveraging the social capital of millions of poor women in a federated network. The new strategy was informed by a detailed livelihood and agricultural commodities survey, advice of business experts and the five-year experience of the CEO of SERP in managing a large tribal agricultural corporation. Reminiscent of AMUL, the strategy focused on understanding the market, the production, procurement and processing value chain linking back to livelihoods of the women. Once again, middlemen were identified as a big part of the problem in the economic struggles of poor women. The program decided that instead of losing profits to middlemen, women’s groups would become procurement agents for 10-15 agricultural commodities. Andhra Pradesh is one of the highest producers of neem or margosa. In one area, women started buying neem fruit from their members as well as other farmers in the village at higher prices than other traders. They captured 60 per cent of the neem market in 2004 (7500 metric tonnes), and will procure 90 per cent of the neem for the state in 20057. Women received training from the largest wholesaler in quality control and the project provided weighing scales and moisture measurement instruments to women’s village organizations. Similarly women’s groups are rapidly becoming the favored procurers of maize in the state, managing new decentralized procurement centers for the government run state marketing federation that procures grains for the Food Corporation of India. SHGs have procured 120,000 metric tonnes of maize worth $14.5 million from 255 village procurement centers with plans to expand to 1,500 procurement centers. As a result of their activities, prices that other maize traders have to pay to all farmers have gone up in these areas, cutting down the shares of the middlemen8. This data understates the full benefits. Earlier, traders often cheated farmers through rigged weighing, by levying excessive deductions for impurities and moisture content, by paying below-market prices, taking advantage of lack of information of the poor, and by deferring payment for delivered produce, obliging farmers to go into debt. Marketing federations now enable producers to recoup all these sums, almost doubling their returns. 20 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Private companies are also beginning to discover the power of poor people’s organizations as production, procurement and distribution chains. Godrej, the largest cattle food company in India, has contracted with SHGs in Andhra Pradesh to grow maize on 7000 acres. It will give technical expertise to the farmers, and buy their produce. ITC is setting up an e-choupal at Nellore in Andhra Pradesh for aquaculture, in collaboration with the village organizations and the Marine Products Export Development Authority. ITC guarantees it will buy the output, but this can also be sold to rival traders. Hindustan Lever, a multinational producer of soaps and household needs, has started training rural women to be door-to-door sales agents. Simultaneously it is working with the government to set up rural computer kiosks to allow the public access information locally and affordably. It aims to have 5,000 kiosks by end of 2005. The refocus on poor people’s assets and livelihoods has also led to redesign of the community infrastructure fund, which was the single largest component of the SHG program. The fund is now being used to enable poor women to buy land to build their asset base and reduce vulnerability. Other new activities to reduce vulnerability include insurance products and rice credit lines9 to prevent people from selling assets to cope with hunger. AMUL in Gujarat, unlike the SHG movement in Andhra Pradesh or SEWA, started with a single focus on one commodity – milk –and right from the beginning their mantra was marketing. Understand the markets, understand the producers’ needs and desires on the other hand, and move up the value chain by capturing production, procurement, processing and markets. AMUL is unique in combining a cooperative with a hard headed, business oriented approach. Decisions are made on how they affect the bottom line and the farmer’s share for every rupee worth of milk produced. While the farmers control the cooperative unions, marketing is in the hand of professionals who have the skills and education needed for a highly competitive local and global marketplace. The professionals chosen can be hired and fired by a farmer controlled board. The managers can recommend closure of a village dairy cooperative society if the costs of collection are not profitable. In addition to milk powder, AMUL produces various milk products, including cheese, yogurt, ice cream, chocolates and other milk based sweets. AMUL branding and advertisement campaigns are iconic and legendary. 21 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper SEWA till recently has been less successful in capturing significant market shares for its members. The top management has deep commitment but not a business background. The sheer range of their economic activities has meant that their efforts are spread thinly. SEWA’s approach to leveraging its collective strength into economic clout differs from SHG and AMUL. It is steeped in the Gandhian principle of self reliance. Additionally, because of its union origins, SEWA’s posture is almost by definition in opposition to employers, the private sector and the government. Its relations with government in particular, have often been of confrontation, legal battles including filing cases in the Supreme Court of India and High Courts and inching forward with great tenacity over decades in forcing government to ‘liberalize from below’ as in the case of gum collectors. Despite the government’s liberalization policies, there continues to be an arcane regulatory regime that restricts economic opportunities for the poor by requiring licenses and setting the qualification bar so high that small and micro producers are excluded. Since forests are nationalized, sales of forest products are controlled by the government through licenses and permits. In Banaskantha district of Gujarat, 90 per cent of the women are involved in gum collection which involves walking several kilometers under desert conditions to thorny gum trees. A system of licenses and permits resulted in women selling to middlemen for a pittance when the market prices were ten times higher. After a decade long struggle, it was finally in 2000 that SEWA was granted permission to sell in the open market indefinitely. SEWA marketing now sells about 60,000 kg of gum per year at rates varying from 45 cents to $1.20 whereas the government continues to procure at 20 cents/kg (Chen et al. 2003). More recently, like SHGs, SEWA is experimenting with new partnerships with private companies including ITC and Hindustan Lever. Through its Gram Mahila Haat, SEWA has entered into a partnership with ITC to supply 250 tonnes of sesame seeds involving 1,450 of its members. ITC provided training in quality requirements, pesticide restrictions, farming techniques and packaging, resulting in women earning an additional 20 cents/kg on their produce in 2003 over the previous year. Through the creation of an international non-profit company, Grassroots Trading Network (GTN), SEWA has also entered into a partnership with Hindustan Lever to develop a rural distribution network to sell goods door to door; and with Hero Cycles to distribute their bicycles while also setting up service and repair facilities. A Trade Facilitation 22 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Center has also been created to move women’s embroidery and other textile products higher up in the value chain and includes selling through large fashion retail stores. Organizing poor illiterate women who live on the fringes of society is extremely difficult. To organize poor people into social and economic organizations is costly in money and time. The paradox is that while they require external funding, the organization has to keep independent of the control of the financiers and eventually become self-sustaining. This process is helped by two factors. First, social organizations must generate their own income streams. Second, the program must be driven by a vision of achieving financial viability. The AMUL pattern cooperatives received high levels of funding for expansion through Operation Flood from the government and a number of donors including loans from the World Bank and food aid from others. The Anand pattern cooperatives after heavy initial investments and subsidies have been financially independent for close to two decades. The SHG movement has been financed by government agencies, donors and loans from the World Bank. It also received a major boost from the Government of India’s policy in 1998 asking all commercial, rural and cooperative banks to lend to SHGs as a priority sector, without asking for collateral. In one stroke, this meant that a network of 160,000 retail bank outlets within five kilometres were ready to lend to SHGs (Reddy 2005). The SHG program in Andhra Pradesh has developed ratings and benchmarks to rate the maturity of its groups which includes the history of repayment of loans. In response to the recent growth of the sub-district federations (MMS), the program is also beginning to define exit strategies and the minimum income stream needed per year by an MMS for self-reliance. SEWA too has received grant funding from innumerable donors as well as government funding for various schemes but not World Bank loans.10 SEWA has yet to achieve financial independence in most of its other activities. Its most successful financial venture is SEWA Bank. ITC is the only program that has no government subsidies in its development. The idea was financed through internal company resources after it won an internal competition to harness the power of IT to make the agribusiness more profitable. Each e-choupal costs $6000 to set up and an additional $100 every year to maintain. Investment is recovered through saving of 2.5 per cent of total transaction cost for ITC while the farmer saves 2.5 per cent in prices – shares that were earlier taken by middlemen (Prahalad 2005; Annamalai and Rao in Narayan et al., forthcoming). 23 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper 6. Translate agency and organization into political clout Large numbers of poor people organized as economic players that can be mobilized almost instantly draw the attention of politicians and political parties, particularly in democracies. As they become important, such organizations become identifiable “vote banks” whose interests matter, and who are potential ‘swing voters’ (Acemoglu and Robinson, 2005). The milk cooperatives and the self-help groups’ women’s movement, both have apex organizations that are representative of their members. Verghese Kurien used the power of numbers to lobby effectively for government policy change, creation of new autonomous institutions such as the National Dairy Development Board, and large flows of government and external financing from the EU and later loans from the World Bank to ‘prime the pump’. The dairy development movement also represented the first use of food aid from EU to develop the dairy industry and stabilize prices rather than dumping free milk into the market and depressing local prices. Kurien also developed close relationships with India’s successive Prime Ministers all of whom, from Lal Bahadur Shastri to Indira Gandhi and others supported his vision and gave him policy space to drive the dairy development movement. India is now the largest milk producer in the world. Cooperatives that have followed the AMUL pattern, which includes freedom to set prices, are more self-reliant than those in which the government interferes with full farmer control. The SHG movement in Andhra Pradesh has also been supported by successive governments because the power of numbers of organized rural women has not been lost on the politicians. Just before the last election, the Chief Minister sent a signed postcard to every women’s group in the state, putting new burdens on the postmen who had to read out the card to the mostly illiterate women. He still lost the election. The new Chief Minister has continued support, changing only the name of the program. Both the AMUL dairy movement and the SHG have been very successful in walking the fine line between high levels of government support and non-interference in the internal policies, directions and management of the program. Verghese Kurien, who is considered the man with the ‘billion litre idea’, is legendary for his skirmishes with government officials who did not see eye to eye (Kurien 2005). In SHG, the program is managed through an autonomous government created society, SERP, which is run by senior government bureaucrats on deputation. Hence the 24 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper movement is closely aligned with the government, and is able to leverage connections with government including direct access to the Chief Minister while still protecting itself from becoming a honeypot to dispense favors. The current Chief Minister announced a policy to subsidize 3 per cent of interest on loans. The program has managed this policy announcement with finesse - the subsidy is absorbed by the federation at the mandal level while the interest rates paid by individual women remain the same. Dalit women at the village level in Andhra Pradesh have experienced first hand their growing political clout. Women in SHGs accept their new political space with delight and laughter. They are keen not to be aligned with any political party but with improved governance. A leader of one of the self-help groups in a village said, “earlier we could never even see the local MLA (Member of the state Legislative Assembly); now when he sees me, he gets up and comes personally to greet me by name”.11 Women are also standing and winning local gram panchayat (village body) elections through astute strategizing. “Our strategy was to have SHG members stand up from both parties, so no matter which party won, the SHG won! Earlier the candidates were selected and nominated by the higher caste and the wealthy. Now we decide. We wanted to contest for the sarpanch (panchayat president) post. The upper caste wanted a particular person for that post, so they came and negotiated with us and asked us not to contest. We agreed because the person they nominated is the husband of an SHG member. Four SHG members won elections for reserved seats in the village.”12 Even when not standing for local elections, the relationship between the local panchayats and the women is changing. Previously women from SHGs had no information about the funding or the activities of village government. Women now report that the sarpanch in most villages not only attends key meetings of the groups, but also provides women information on new government projects and activities, but still do not divulge information about funds received! Not only MLAs, but also Members of Parliament visit women’s apex organizations and the groups use these visits to flag to them their problems including problems with local-level government officials from ministries of health, education, and rural development. SEWA has more moral clout than market or political clout. SEWA is recognized the world over for being the first union of women in the informal economy. It is also respected for its ethical approach. Ela Bhatt and SEWA as an organization have both won innumerable national and international awards. Ela Bhatt served as a member of the National Planning 25 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Commission playing an important role in shifting attitudes and changing policies on informal workers in India. The country’s National Policy on Street Vendors, promulgated in 2004, is due to SEWA’s work. In addition, it has played a central role in initiating and establishing several “global grassroots institutions,” such as Women’s World Banking, HomeNet, StreetNet, and WIEGO (Chen 2005). While SEWA has skillfully managed its relationship with government, remaining independent, while often dependant on government funds, most recently it has run into problems with the Gujarat government. The State Government has blocked an IFAD financed and SEWA implemented project for earthquake rehabilitation and as a consequence SEWA has withdrawn from all government projects in Gujarat (India Today, 2005). Unlike other programs however, SEWA also has an explicit policy against members’ participation in political parties, and prohibits its members from standing for local elections except as independents. At the national level, it takes great pains not to serve on high level committees that are chaired by a leader of a political party, though it continues to have access to the highest government officials and to heads of international organizations. ITC’s e-choupals initially did not involve people’s organizations nor any change in the government regulatory regime. However, its superior responsiveness to farmers who see the echoupal as fair, transparent, reliable and trustworthy, has won them farmers’ support and through their actions ITC has gained political clout. In Madhya Pradesh a 15 day strike orchestrated by the mandi associations that had lost as much as 50 per cent of sales to e-choupals had to be called off when 25,000 farmers took to the streets in the capital city of the state, Bhopal. Madhya Pradesh also amended the Agricultural Produce Marketing Committee Act allowing companies to legally procure directly from farmers without going through the mandi. Several other states are doing the same. Conclusion Poor people do not cause poverty. What poor people want is economic opportunity and a fair chance. When given a fair chance, poor people demonstrate over and over again that indeed there is ‘fortune locked in the bottom of the pyramid’ (Prahalad 2005). They want liberalization from below. Poor people gain economic clout in markets when they achieve scale through aggregation, most commonly through federated organizations or when thousands of individual 26 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper financial transactions are aggregated through computers. Without this aggregation, the bargaining power of poor illiterate women with markets and other providers does not change. This process of aggregation does not happen automatically but can be successfully initiated by civil society, the private sector or the government. The six lessons discussed point to both policy and programmatic actions. First, improve the investment climate to create new economic opportunities linked to poor people’s livelihoods. Poor women and men’s economic activities are primarily in the informal economy which is unprotected by laws, and are constrained by an astonishing number of regulations that constrain their investment, production, processing, procurement, selling and buying choices. The most basic action is to lift these dysfunctional regulations. Poor people also need financial products such as loans, venture capital, and guarantees that are delivered in ways that fit poor people’s needs. This requires detailed knowledge about their economic lives as producers, consumers, suppliers and citizens embedded in particular social and political relationships. Social policy has an important role to play in bringing research based evidence on the value chain in which poor people’s economic activities are embedded to the policy discussions on economic growth, investment climate, trade and poverty reduction both within country and at the global level. Second, improve the domestic investment climate for the private sector. Innovations spread quickly when they benefit the middle class. Poor people can gain from overall improvements in investment climate, particularly from infrastructure and when free information is provided about prices with low transaction costs. This is even more powerful when combined with real choice on when and to whom to sell. Under most circumstances, however, special design features are needed to help poor people overcome a range of social, cultural and economic constraints not faced by the middle class or rich. Both the AMUL and e-choupal experience indicate that the most disenfranchised groups, and poor women, will continue to be marginalized unless program design features are specially designed to overcome their multiple disadvantages. Third, ways must be found to aggregate poor producers’ supply and demand so as to alter their bargaining power in markets and trigger changes in supply responses from the private sector, the state and civil society. Different types of poor people’s organizations can play critical roles. The challenge for poor people’s organizations is to avoid capture by their own or external 27 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper elite and maintaining connections with poorer and newer members as the leaders and older members climb out of poverty and join the middle class. Another approach is to embed information technology in carefully designed outreach programs with computers aggregating the demand of small and microproducers. Fourth, financial subsidies from different sources must be used to build organizations of the poor driven by a vision of generating income streams and achieving financial independence over time. The paradox is that nobody wants to invest in organizations of the poor that are autonomous without getting something in return. Yet these programs prove that poor men and women are canny entrepreneurs even when they are illiterate, and can lift themselves and their families out of poverty within 5-7 years. Finally, given the market failure in investing in poor people and poor women’s organizations, one of the most important and enlightened investments by the private sector as part of its corporate social responsibility can be to finance and support the emergence of strong, autonomous federated networks of poor people who can become able business partners over time. 28 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper References Acemoglu, Daron and James Robinson. Economic Origins of Dictatorship and Democracy. Cambridge: Cambridge University Press, 2005 ACNielsen ORG-Marg. Consultancy on Strengthening of Self Help Groups in Andhra Pradesh: SWOT Analysis of the Groups Surveyed in A. P. Hyderabad, India: ACNielsen ORGMarg, 2000. Aiyar, Swaminathan, K. 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New Delhi: World Bank, 2003 33 Arusha Conference, “New Frontiers of Social Policy” – December 12-15, 2005 D.Narayan et al., conference paper Notes 1 This term was first used several years ago by Ela Bhatt founder of SEWA. For detailed discussion of the framework and its applications see Narayan 2002 (in particular Section 1 and Section 5 containing experiences around the world in 20 practice notes). Also see, Chapter 1, Narayan 2005. 3 See also Petesch et al. 2005 and WDR 2006 for a full discussion. 4 Personal communication, S. Sivakumar, CEO, International Business Division, ITC, November 30, 2005 5 For details, please see http://www.digitaldividend.org/ 6 Personal communication, S. Sivakumar, CEO, International Business Division, ITC, November 30, 2005 7 Field notes from a three day village immersion program, November 2005 in a village in Kurnool district, Andhra Pradesh. 8 Personal Communication, Vijay Kumar, CEP, SERP, November 30, 2005 9 Rice Credit Lines provides SHGs with three alternatives. In the first, SHGs can borrow up to 50 kg of rice, with repayment due in one month. In the second, they can borrow 100 kg repayable in two months. In the third, they can borrow 100 kg repayable in six months or on a schedule linked to local harvests. This helps women cope with temporary distress. 10 In orders of magnitude, the levels of external and government funding are probably lower for SEWA than for AMUL or SHGs. 11 Field notes from a three day village immersion program, November 2005 in a village in Kurnool district, Andhra Pradesh. 12 Ibid 2 34