Tribute to Dr Akhter Hameed Khan

Nasim Yousaf

Micro credit 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 micro credit methodology, banks served only the privileged and, as a result, perpetuated the gap between the rich and the poor. However, in the 1950s and 1960s, Dr Akhter Hameed Khan, a world-renowned social scientist from Pakistan, initiated the Comilla Cooperative Programme and proved to the world that it was indeed possible to provide credit to the poor.

In order to gain greater understanding of why Dr Khan’s cooperative scheme was so successful, one needs to travel back to the 1950s. Since its founding in 1947, the country had been plagued by a number of problems, primarily related to administration and infrastructure, lack of industrialisation, poor communication, a large population, unemployment, and poverty. Problems in the agriculture sector were particularly severe. They included disorganised farming, poor yield, crop damages from floods and pests, lack of application of modern techniques, and improper marketing. Small farmers’ landholdings in the villages (in East Pakistan) ranged from one to five acres and they were in a miserable condition.

According to Dr Khan, “90 percent of them owned less than five acres.” 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. The poor farmers in Pakistan had no creditworthy history or collateral that would be acceptable to the banks and other financial institutions. This meant that the 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 poor. According to Dr Khan, “They (farmers) were short of capital and in their distress borrowed from exorbitant moneylenders and sold to oppressive traders. Small scale agriculture, starved of the 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 organisation. The Academy began functioning in May 1959. Dr Khan travelled 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 recognised that ensuring collaboration between the farmers would be the key to relieving many of their ailments. He came to the conclusion that a cooperative system would be the best means to enable this collaboration. Such a system would allow the farmers to share information, make joint production decisions, and leverage their collective resources to establish a basis for credit-worthiness. Dr Khan emphasised the broad principles of “savings, educational meetings, joint planning and action”.

As a result of Dr Khan’s efforts, the villagers began to organise and the cooperative experiment at Comilla went underway. By May 1960, ten local cooperatives had been organised. According to author Arthur F. Raper in his book, Rural Development in Action: The Comprehensive Experiment at Comilla, East Pakistan, these ten cooperatives comprised “seven village-based agricultural societies, a vegetable growers’ society, a women’s cooperative, and a weavers’ cooperative.” Raper further states that by 1961, “Seventeen village societies had…secured 25 loans totalling 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 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 centralised supporting association at the thana level emerged.

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 programme, they had to meet certain requirements. 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 which, 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.

Indeed, the Comilla Cooperative started by Dr Khan was no less than a revolution. Perhaps Dr Khan himself best summarised the reasons behind the success of the Comilla programme, “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.”

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. Non-agricultural societies modelled 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, etc. By the middle of 1968, there were 261 agricultural societies and 78 societies in the SCSF.

Meanwhile, in Bangladesh, Professor Muhammad Yunus was closely observing the success of micro credit at the Comilla cooperatives, and in 1983 started the Grameen Bank. He won the 2006 Nobel Peace Prize for his application of micro credit there. In 1989, the Orangi Pilot Project-Orangi Charitable Trust (OPP-OCT) was established in Karachi by Dr Khan as an independent institution to provide micro credit in the urban and the rural areas. In August 2000, Khushali Bank was formed in Pakistan to provide micro credit. Today, the concept of micro credit is being applied in many countries around the world, thanks in large part to Dr Khan’s efforts at Comilla.

Dr Khan 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 micro credit scheme will surely live on forever. 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) wrote, “He (Dr Khan) 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.” Dr Ishrat Hussain (while he was at the World Bank) said, “…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 Akhter Hameed Khan’s eighth death anniversary was celebrated yesterday, October 9, 2007

She can do beyond acting!

Moscow: Nicole Vaidisova returns to Yaroslava Shvedova during their Kremlin Cup Tennis Tournament match. – Afp Photo