The Real Value of Development Work in India and what Transformative Movements across the World can learn from it

This essay is about my journey between east and west, and how I have been changed during this journey. It is about how I got to a new understanding of development and what transformative social movements can learn from it.

(For Part Two please visit think2share.de)

The beginning of my journey

I am a consultant in development cooperation, for 5 years now. I have been working mostly in India, in rural finance. I am concerned with Microfinance, with finance of small amounts for low income or poor people, people who are not seen by banks as viable business partners. Microfinance is seen in development circles as an important tool to alleviate poverty in developing countries. It is of course also a dependency creating mechanism.

From 2009 to 2012 I worked for an association of Microfinance institutions (MFIs) in New Delhi. Here I was concerned with lobby work and research, all amidst a massive crisis of over-indebtedness of poor households. As many debt crises this Microfinance crisis was a result of predatory practices of lenders, the parallels to the global financial disaster were becoming very obvious to me.

I travelled a lot through India, to meet members of the association, to collect data, to participate in stakeholder workshops. I was narrating and listening to the mantra that Microfinance is best done by commercial, investor-financed agencies and how these lenders need to be highly profitable to give valuable financial services to the poor. The reality around me defied that logic, so did common sense. Financial services first of all had to be beneficial for people who use them. It is only when people, the borrowers, gain from the investments they make with the loans that they will benefit. However, if a large part of their net earnings is skimmed off as profits by the MFIs, then they need more and higher loans, off which again the cream goes to the MFIs. The cycle of indebtedness is thus established: the borrower gains, but what I saw again and again was that the lender gains much more. Even as I witnessed the enormous expansion of the commercial microfinance model, I began to question its presumed beneficial impact on the borrowers.

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A village in Uttar Pradesh[/caption]

A glimpse of an alternative appeared when I came to know about the work of a non-government organization (NGO) or civil society organization (CSO) in Karnataka, a south Indian state. I read a book where researchers from the NGO, Sampark, had conducted a long term study with marginalized women in Koppal district of Karnataka and explored the meanings which money and financial services had for them. The first time, for me, someone had asked relevant questions in terms of Microfinance. Fascinated I read the book, appreciated the study methodology and the practical approach. The book describes how women organized themselves in self-help groups (SHGs), started managing their own money and took life in their own hands. I was fascinated by the way the pains and pleasures of this work were described. I was overwhelmed by the living contexts of these people and the way they handled them. Not only were the group members women, traditionally marginalized in Indian society, also some of them were devadasis, women who were devoted to the local temple by their own parents for cultural and economic reasons, who were then sexually exploited by men, usually from the dominating castes. These devadasis led a life of extreme exploitation, both social and economic.

Over a period of 20 years, Sampark had worked with low income women, now numbering 13,000 and including over 600 devadasis, through SHGs. Sampark has formed cooperatives, the women are in charge of the cooperatives; they are in the driving seat. They manage their own savings and loans and also manage loans from banks and other financial services organization. The financial profits are kept by the women. This was “empowering finance”. I was impressed by how empowering finance can be, when the people have control of the organizations and the decision making.

I would go and meet these women.

Causes of poverty

Meanwhile, in my association the focus on defending the reputation of Microfinance as a poverty alleviation tool had started to become grotesque. I left the organization and was fortunate at this time, to be offered the opportunity to participate in a research project in rural finance in India. The project was concerned with understanding how low income rural households perceive beneficial use of money, in other words what financial capability means to them. The study was supposed to be the base for the design of development activities which enable effective financial inclusion by improving use of money of households. This could include provision of financial services but also highlighted many other factors which do play a role in money management, such as coherence within the family or the ability to plan for the future.

I was getting closer to how I like to work: conducting group discussions, looking for meaning as perceived by households themselves, using sensitive analysis methods like grounded theory. The scope of possible partners to improve financial capability addressed many issues I felt important when dealing with vulnerable households.

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Farmers in Rajasthan during a group discussion[/caption]

Yet, in my eyes, what we were trying to do when working with households and improving their financial capability was bending them into a financial system which is not designed to be of benefit for them. The key question that had to be asked was: Can people really benefit from a financial system over whose design and functioning they have no control and influence? I was deeply skeptical.

The financial capability research had extremely important insights for me. First, it reminded me of the potential of well managed self-help groups (or cooperatives in general) in terms of empowerment and livelihood options. Second, it helped me focusing on the core in understanding poverty: poor people have no or little access or usage rights for the productive resources they need to generate income. If the people on the lowest rung of the ladder have to attain a measure of equality, then resources must be distributed and shared more equitably. The discourse on microfinance (or finance in general) does not raise these questions. My feeling grew stronger and stronger: that if such issues are left out in development work, then, in the long run, the development activities themselves merely serve the purpose of subjugation of people’s productive energy to the interests of capital. These issues left me thinking and longing to seek lasting and equitable solutions to poverty, in different kind of microfinance, and indeed, in a different development paradigm.

Coming back to Germany

At around this time, I returned back to Germany, and in a different context.

Across the world, in Europe, in Germany, a rising number of people had started discussing alternative ways to the current economic system in the world. I started reading, about the Occupy movement, I also read about and connected with numerous projects which broke free from the market logic or state directives. I learned about the compelling work of Elinor Ostrom and her research on common pool resource management. I read about the commons movement in general, about peer-to-peer economies, about participative economics. I realized that there are various ways of structuring an economy, of sharing, of working cooperatively. I learned about old ways of living together, of collaborative dealing among communities. I learned to see the vicious logic of capitalism in every aspect of life, also inside myself. I met people who already prepared a new society, who lived the other, the different way. I understood that at the core of equitable economic action lies the question as to how the social organization of resources and capital is structured, and that local communities have every right to demand their voice in decisions regarding their water, their land, their money. I saw how corporations and governments collude to control and appropriate these common resources, and how we all watch, not challenging, not calling the bluff. I asked myself: in this process of not challenging, don’t development workers also collude with this appropriation? Do I want to be a part of this exploitation? I wanted time and space to reflect, to find the answers to these questions for myself.

I decided to go back to the root of my doubts and inspiration. Sampark had created something tangible on the ground, with empowered women controlling own and external finances. I decided to go and visit Sampark; in Sanskrit Sampark means contact.

Reclaiming the credit commons – the work of Sampark

I visited Sampark with this intention, to meet my inspiration, meet the people of Sampark, the women of the cooperatives. To spend time with them and possibly give something back to the organization which had influenced me so much; which had triggered so many processes of doubting, learning and resisting. I met Sampark staff involved for years in the work in the villages, staff who had been researching for the book. I met staff of the cooperatives who were self-help group members themselves, for years. I met group members in villages. After 4 days in Karnataka villages and in Bangalore I was able to frame what I had seen. By expressing what the value of their work is for me I opened a new way of looking at my own work.

As I approached the villages where Sampark worked, I had simple questions in my mind: what is it that the people Sampark works with create? How can Sampark’s success be understood?

If development interventions should be concerned with supporting local communities in generating, maintaining and using their local resources, their commons, then the management of these commons in a participative and democratic way would be the key to a successful development intervention. Could it be that Sampark had done just that: built people’s own institutions like credit cooperatives, enabled local communities to manage a crucial resource – credibility and credit- and thereby supported the reclaiming of the credit commons? I was going to examine Sampark’s interventions with a “commons” lens.

In the 20 years of work with the women Sampark has focused on group building processes. One element of these group building processes is the management of the women’s own money – the saving (and lending) not only built an own fund for women it also generated a valuable experience of gaining control over monetary resources and supporting other women with loans from the group fund. Over time, the number of groups increased and so did the own capital.

The groups were formed into clusters of SHGs and into federations of clusters. The federations have their own staff and administration. This cooperative structure acts as a bank for its members by managing savings and giving loans.

The financial cooperatives of Koppal have returned something to the community which was lost- their mutual credibility- their credit commons. People can now decide themselves whom they want to give credit to and under which conditions.

How were the credit commons lost? And to whom?

Rising financialization of most aspects of daily life has made people dependent on money, the Indian Rupee. Everything has a price and must be purchased. At the same time this money, when in shortage, can only be acquired from banks as they are exclusive issuers of credit. As money lenders they decide whether and how to give a loan to a person. Communities became dependent on outsiders who extend credit following business plans designed in far- away places with motivations alien to the local population. They lost their ability to decide how their common credit should be extended in the community, they lost their credit commons.

What Sampark has supported is the nurturing of the credit commons in the communities. By supporting institutions of mutual help- the cooperatives- it enabled the provision of loans based on mutual trust and knowledge of one another’s life situation. In this space credit is extended as per the assessment of the community itself and interest paid on loans stays in the community, either building the share capital of the cooperative or being paid as dividend to its members, i.e. shared profits. The former case enhances the ability of the cooperative to finance more and larger investments the latter directly is income of the members.

This is the value of the work of Sampark – to enable local communities to decide how to use their own resources. These spaces of local decision making and benefit sharing are the credit commons, here local communities decide how resources are being used and what to do with the earnings from this deployment.

Way ahead

This approach is of course not exclusively used by Sampark. A number of NGOs have gone the path of supporting communities in the management of resources which belong to them: natural resources, credit, knowledge. A lot can be learned from linking credit commons to the development of these other resources of the community.

In the credit commons context, the further development of the institutions depends on how they (and the NGO) understand the value of what they have created. It depends on how they ensure participative decision making for the good of the community. A rising international interest of people’s decision making beyond authoritarian states and predatory markets has provided a body of knowledge which helps in identifying the crucial factors in protecting and developing credit commons further.

The insight is relevant for Sampark and for transformative movements across the world. These movements can learn from Sampark as to how the credit commons was built. For example conflict resolution processes during the building of the commons can provide deep insights for those interested in creating their own credit commons. Why do conflicts arise, how are they addressed? Other communities have gone their own ways in reclaiming their credit commons by fully disposing of national currencies and introducing their own medium of exchange and account. Sampark can also learn from them.

If what the women and Sampark have created is a commons- a commonly owned, maintained and used resource- then an adaption of the approach of Elinor Ostrom and her team can be applied. What they have contributed is an institutional analysis and development framework for common pool resources- natural resources like forests and fisheries. Their research has identified indicators which help understand why and when community management of resources is beneficial and sustainable.

Sampark not only works in building financial cooperatives but also in other development areas. Naturally one can ask whether the commons idea can be used in current livelihood interventions and education programs, the aim being to focus attention on supporting communities in building, maintaining and using natural resources and knowledge commonsnecessary for livelihood creation and empowerment. Here the questions would be framed like this: is it possible to base all interventions of Sampark on creation of commons managed by democratic and participative decision making of local communities? Can Sampark become a commons based development organization? Should Sampark become that, is that in line with its mission and vision? What factors need to be looked at when aiming at participative resource based development?

Importantly the existing cooperatives themselves can focus on financing such commons, for example common irrigation systems or water tanks, or common use of land. This highlights the potential of money as a medium for real transformation. Figure 1 shows the relationships between the different aspects of a commons based development perspective.

Ways of sharing capital

These thoughts show one way towards thinking about a real transformation of society. All resources can be imagined as commons with people and institutions nurturing them, benefiting from them, protecting them. These processes are called commoning, social activities which maintain and develop the commons. Whether it is in the development context or in the transformative context the nature of the different commons needs to be understood - credit is something very distinct from knowledge and natural resources. Understanding their different natures and their relationships to each other has far reaching implications for the governance of these commons. What unites them is that they are all resources belonging to local and global communities who care for them.

In finding the conceptualization and practice of creating the commons and reclaiming the commons I feel I have found a good way forward in addressing the questions of increasing inequality. If those who have, continue to extract from those who don’t, as money lenders do from the borrowers, then equity will never be restored. Instead, if we reclaim the credit commons, if we arrive at ways of sharing capital and the profits generated by lending, then we eliminate the artificial separation of the borrower and the lender, and with it, we eliminate the exploitation of the borrower by the lender.

I have found that in my travel from India to Germany, I arrived with a disturbance about the way in which we promote microfinance, with exploitative models. I came in touch with the concept of creating commons. I returned to India, to find the source of “empowering microfinance”, a process of reclaiming the credit commons. The community based organizations and processes are empowering, and can be applied to creating other commons, such as natural resources, knowledge. It has truly been a journey of self discovery, indeed of deep and profound transformation.

Guest post written by Thomas Mehwald

Thomas is a freelancer and researcher based in Berlin. He has been working as consultant in rural finance and research for over five years. Before that he was working in different banks where he got a deep insight of the functioning of the banking system. Current fields of practice are alternative economic models, social learning processes as well as researching and consulting in rural development.