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A Report of Feasibility Study on Institutional Development in

Micro-Entrepreneur Development Program (MEDEP)

Based on the field study of Dadeldhura and Baitadi district

(24th January to 6th February 2003)

Submitted By

Jhalendra Bhattarai Prithvinagar, Jhapa

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CONTENTS 1. INTRODUCTION 1

1.1 Focus of the study 1

1.2 Theoretical Aspect 2

1.3 Problems on the Study 4

1.4 Objectives of the Study 4

1.5 Assumptions of the study 5

1.6 Limitation of the Study 6

2. ANLYSIS OF THE PRESENT SITUATION 7

2.1 Institutional exercise 7

2.2 Strengths 8

2.3 Problems on institutional Development 9

3 ALTERNATES OF INSTITUTIONAL DEVELOPMENT 12

3.1 In the Form of Social Organization 12

3.2 In the Form of Cottage and Small Industry 12

3.3 In the Form of Co-operative Society 13

4 SELLECTION OF THE CO-OPERATIVE MODEL 14

4.1 Traditional Model 14

4.2 Group Models 15

4.3 Mixed Models 17

5 SELLECTION OF APPROPRIATE CO-OPERATIVE STRUCTURE 19

5.1 Subjective co-operative 19

5.2 Multipurpose Micro-enterprise Co-operative 20

6 PHASES OF INSTITUTIONAL DEVELOPMENT 23

6.1 Elementary Phase 23

6.2 Phase of Institutional Development 25

6.3 Phase of Co-operative Maturity 29

6.4 Periodic Support 29

7 SUMMARY 31

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Chapter 1 INTRODUCTION

1.1 Focus of the Study

The general focus of this study is ‘Processes and prospects of institutional

development of the micro-entrepreneurs’. On the technical assistance of UNDP,

Micro-entrepreneur Development Program (MEDEP), under the Ministry of Industry,

Commerce and Supply, HMGN, has been developing the traditional entrepreneurship

and feasible businesses of the micro-entrepreneurs in various districts of the country

since 1997 AD. This program has uplifted the living standard of the micro-

entrepreneurs by increasing their income generation. The data shows there is a

significant achievement in the region, where the program has implemented. During

the study period, it is observed that because of the skill and capital, the micro-

entrepreneurs (both male and female), has professionally got success. It is known

that any targeted program cannot get the support forever from a supporting agency.

If such support is made forever, the dependency behaviour of the target group will be

increased, which in turn evolves no confidentiality to own skill. That’s why it is most

necessary that the micro-entrepreneurs’ groups should be diverted towards a stable

institutional development.

This study is for the micro-entrepreneurs of the Baitadi and Dadeldhura districts of

Far-western Development Region under the MEDEP. It seeks for the solution of how

to bring the micro-entrepreneurs in the track of stable institutional development. In

this process, the study has tried to organise the identified micro-entrepreneurs,

organizations, skill, and capital.

The philosophy of group dynamism was implemented in Nepal at the first time in

2032 B.S. by the Agricultural Development Bank of Nepal (ADBN) through its well

known Small Farmers Development Program (SFDP), which so far has crossed

different phases and has arrived to the point of formation of Small Farmers Co-

operative Limited (SFCL). This is of course can be considered as a successful

feature of it. Professor Yunus’s model of rural banking in Bangladesh had helped for

the economic development by providing capital to the rural poor by organising them

in a group. Some similar programs for the development of the target group based on

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group philosophy in Nepal are: Women’s Development Program, Production Credit

for the Rural Women, South Asia Poverty Alleviation Program, Rural Energy

Development Program, Participatory District Development Program, IFSP/GTZ/WFP,

and B.P. with the Poor to mention only a few. These programs, directly and/or

indirectly, have accepted in its basic form such activities as: organisation of the target

group, their skill development, and internal capital (in the form of savings). Now a

days it is widely accepted that the organisation, human skill, and savings are the

most effective tools in the reduction of poverty. In this context, this study also accepts

the organisation, human skill, and savings for the institutional development of the

micro-entrepreneurs as the focus point.

1.2 Theoretical Aspect

This study report is prepared mainly on the basis of following principles.

a) From the title ‘Development of the Poor in the form of Institution’ by Chandra

Kanta Adhikari, a person who experimented in Nepal the concept of

institutional development, the tools of reducing poverty are: (i) Service on the

spot. (ii) Availability of capital. (iii) Identification, utilisation, and the knowledge

and skill of the local resources. (iv) Local leadership development. (v) Own

organisation.

b) Summary of the Professor Yunus’s model- (i) Each individual possesses a

particular possibility. (ii) Social responsibility is the main law. (iii) Appropriate

and simple environment is required to evolve individual’s possibilities. (iv)

Each individual is apt to believe and trust.

c) Summary of the social mobilisation model- SAPAP at Syngja district

developed by Dr. Jayasingh Shah (i) Whole society should be involved for its

complete development. For this local level organisation is the most effective.

(ii) Human skill creates the opportunities. (iii) The saving capacity of the poor

is determined by their hobbies. Saving encourages investment and increases

income.

d) The principle of MEDEP is ‘Micro-entrepreneur expands on the inter-co-

ordination of feasible resources, product-market and capital’.

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e) The seven principles of co-operative proposed in 1995 by the International

Co-operative Organisation as: (i) Volunteer and open membership. (ii)

Democratic control by the members. (iii) Financial involvement of the

members. (iv) Autonomy and freedom. (v) Education, training and

information. (vi) Inter-Co-operative relations. (vii) Interest towards community.

f) Co-operative Act. 2048 and co-operative rules 2049.

1.3 Problems of the Study

This study is intended to provide the answers of the following questions regarding the

feasibility of institutional development of micro-entrepreneurs under MEDEP.

a) Is it necessary for the micro-entrepreneurs to have their own organisation?

b) What are the legal alternatives for the formulation of such organisations?

c) Why ‘Co-operatives’ is considered as the best alternatives?

d) What type of model is appropriate during the formulation of co-operative

organisation?

e) How can the maturity of the groups be measured?

f) How can the dominance of capital and human skill in the organisation be

established?

g) What can be the phases of institutional development?

h) What type of periodic assistance is required to the co-operatives?

1.4 Objectives of the Study

The main objective of this study remains at searching the appropriate technology for

a stable institutional development at local level based on the needs and experience

of the facilitator and micro-entrepreneurs under MEDEP. Moreover, this study aims to

clarify only the previous directions without any disturbance of the existing

construction and system. The completed works are found to be as under.

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a) Mass orientation.

b) PRA

c) Households survey

d) Identification of the needs

e) Group formation

f) Training for entrepreneurship development

g) Running the enterprise and reaching to the capital

h) Monitoring and evaluation

1.5 Assumptions of the Study

This study is based on the following assumptions.

a) The micro-entrepreneurs of Baitaidi and Dadeldhura districts can represent all

the micro-entrepreneurs of the nation under hilly districts.

b) Because of the inaccessible geographic construction, it is too hard to meet

and discuss the micro-entrepreneurs of more than one VDC in the Hills. In

this way it is almost impossible to form an organisation by the involvement of

larger number of VDCs in the Hills.

c) The accessibility of the micro-entrepreneurs relating to the local organisation

should be simple and cheap.

d) The local organisation should be most helpful on supplying the basic and

common needs of the micro-entrepreneurs.

e) The local organisation should be free from the complex legal controls.

f) Just increasing the quantity of local organisations does not increase the

support to the local micro-entrepreneurs. So even a single organisation could

be a helpful one if the quality of its services is good.

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g) The local organisations should be as per the enterprises of the members and

it should be self-dependent.

1.6 Limitation of the Study

a) The post-graduation condition of the micro-entrepreneurs is not made the

target of this study.

b) It was necessary to reach each and every micro-entrepreneur in that the

study should be more logical. However, because of the unsecured condition

of the country, the study is limited to the group leaders and facilitators only.

c) This study does not depict the mature condition of each VDC and the number

of groups therein. For the complete presentation it takes long time. The

facilitators and the groups can do themselves on the direction established.

d) This only an initial study. The program can take new direction on the basis of

it.

e) The changing legal aspects of Nepal directly influence the recommendations

of this study.

f) To complete this study in an effective way no experiments and results are

found so far in Nepal. That is why observation studies, different experiments,

study report; experiences and tertiary sources are used in this regard.

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Chapter 2 ANALYSIS OF PRESENT SITUATION

2.1 Institutional Exercise

During the study visit although some minor differences are found in the Baitadi and

Dadeldhura districts at its micro-level, they are identical at its basic need level.

1. This program is found to focus at enterprises development of the target group

by developing their entrepreneurship. On individual basis, micro-

entrepreneurs have developed their skill and established as model

entrepreneurs. To prove this we can take the chairman of Navajyoti bee-

keeping group- Mohan Dev Bhatta 27, and Geeta Thaguna 17, from

DasharathaChandra Nagarpalika-9 and 1 respectively of Baitadi; Ganesh

Sanki 25, Pokhara and Jeetraj Awasthi 18, Asigram-9 of Dadeldhura district.

Moreover, 658 micro-entrepreneurs (285 male + 373 female) of Baitadi and

662 micro-entrepreneurs (463 male + 199 female) of Dadeldhura districts are

benefiting from the program.

2. Naturally the markets for micro-entrepreneurs are at local level. The demand

for market at local level remained merely at bee-keeping and metal works. So

the other micro-entrepreneurs have to divert away and away to search the

market. This has created hard the co-ordination between the micro-

entrepreneurs. The pilot survey suggests if co-ordination is made between the

groups and an organisation is formed then the formation of such

organisations will be formed as per the following.

Districts Purpose Feasible Area Possible Members

1. Bee-keeping Dasharatha Chandra NP 12,13, Kedar VDC

51 30

2. Bee-keeping Kot VDC Nwali VDC

15 15

3. Bee-keeping DasharathaChandra NP (Titra) 29

Baitadi

4. Ginger farming Basulinga area 90 1. Metal works Amargadhi NP 7 60 2. Retail shop Amargadhi NP 2,3,4,5 29* Dadeldhura 3. Bee-keeping Asigram VDC 45

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*Females only

3. Preparation for Institutional Development: In Titra, Baitadi district, it is

observed that 29 female groups are prepared on the formation of bee-keeping

cooperatives. In their own effort they have managed the land for the

preparation of building and the work is going faster. Similarly, in Dadeldhura

district the micro-entrepreneurs of bamboo and little-bamboo are on the

process of registration of their co-operatives, and female retail shopkeepers

have started gathering people for the formation of co-operatives. Again in

Baitadi the enthusiastic beekeeper of Asigram and the micro-entrepreneurs of

Navadurga have formed the main committee at the VDC level.

4. Density of Program: Some of the micro-entrepreneurs are not involved in

the MEDEP. But they are involved in the groups formed by any other

organisation. And they have been saving under those groups. Some groups

are involved under PDDP or CEAPRED. A single person is found to involve in

more than one group.

5. In some areas, it is found that the co-operatives are already formed. In

Bhatkanda, Dadeldhura, 21 youths have formed ‘Bhumiraj Private Youth

Trust’, hence saved an amount of Rs, 125,000 and this amount is mobilised

by themselves.

2.2 Strengths

Despite the difficulties aroused in the institutional development of the target group,

following merits are realised.

1. The micro-entrepreneurs of the project have realised the necessity of

institutional form directly or indirectly. They have started discussing the gain

and needs from it.

2. In some places, the exercise for institutional development is done on their

own.

3. Peoples are feeling necessity of organisation and capital for the betterment of

their enterprises.

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4. Mostly the micro-entrepreneurs are involved in the group. They are exercising

on group responsibility, guarantee for each other, group savings, formation of

group project, and sharing of ideas to mention only a few.

5. As the entrepreneurs are organised under MEDEP, they feel that they have

inter-relation between them. They feel it is their single family.

6. Micro-entrepreneurs have accepted MEDEP as their guardian. They also

have understood that this program will not remain forever. One day the

program will be terminated, by then we will have our own organisation.

7. Employees involved in the program are found committed to support for the

institutional development.

2.3 Problems on Institutional Development

Although lots of possibilities are formed for the institutional development, few burning

problems as listed below are found.

1. Overlapping of the Program: Different organisations have set their

programs to the same target group, which has increased the quantity of the

organisations and hence the program is not become stable.

2. Problems to Integrate the Programs: The members of the groups are

involved in different programs by the different organisations formed to meet

different objectives. The same individual is found to support different

assumptions in the different groups. Had the members involved in different

programs through the same group, they could be participated in the formation

of collective targets. However, the character and role of the same person is

found to vary in each participatory area. Similarly, during the dialogues with

the organisations and main committees formed informally, faced the following

problems.

a. Multiplicity of objectives.

b. Disparity on savings and economic activities.

c. Problems on the nature of the works.

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d. Disparity on the maturity of the groups and members.

3. Nature of the Enterprises: For the formulation of organisation at the local

level, it is more effective if the members involved in the enterprises are of

common nature. However, it is not so easy to develop the enterprises of

similar nature under similar geographical situations. Though the peoples are

involved in the micro-enterprises, their line of work is different. That’s why the

prior survey has showed that the institutions can be organised in very limited

places (4 in Baitadi and 3 in Dadeldhura) if they are build with common

objects.

4. Deficiency of Number: In order for the institutional development with

common target, it is observed in the most places that there will be scarcity of

members. For the viability of the institution organised in the form of business

co-operative, there should be at least 50 members. As far as possible, if an

organisation can be formed by the involvement of members of the same VDC,

it would be more effective for accessibility, administrative division, and

business development. From this study, the possibility is very rare for the

fulfilment of entrepreneurs from the same region for the organisation of

institution of common interest.

5. Capital and Credit: MEDEP not only encouraged entrepreneurs involved in

traditional enterprises by providing skill towards business, rather it has co-

ordinated with Agricultural Development Bank of Nepal and managed for the

business loans. After giving autonomy to the groups in the form of institution,

it is hard for the continuity of the system.

The demand for capital increases with the development of the enterprises. If it

is dependent on internal capital formation, there will be no equality between

the style- and the amount of saving among the groups. The number of

member is crucial for the supply of capital from the internal savings.

6. Group Amalgamation: Groups have no prior knowledge of integration. It is

very hard to prepare them mentally for their group amalgamation and the

formulation of well accepted conditions. The probable problems are as under.

a. Uncertain result for group amalgamation.

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b. Variation of number among the group.

c. Maturity of the groups.

d. Group savings and its law.

e. Variation in level and position of the members.

f. Variation in enterprises and objectives.

g. Diversified geography.

h. Building up of common objectives.

7. Periodic Protection: Institutional development is not an overnight process. It

takes time. For this, continuous support is necessary. A continuous support,

advice, and protection of line agency are required before the formation of the

institution and after the formation for self-reliant. So this is a new exercise in

the existing structure of the MEDEP.

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Chapter 3 ALTERNATES OF INSTITUTIONAL DEVELOPMENT

3.1 In the Form of Social Organisation

Since micro-entrepreneurs are the target group of this program, institutional

development is also required to affiliate with promotion and development of

enterprise. Since there is no legal prospect to register business organisation into

profit motive social organisation, they cannot be developed in the form of NGO, CBO

or club.

However, involving entrepreneurs, organisations can be formed for positive business,

training, and promotion. Such organisation can be established in the form of micro-

entrepreneur organisation. But these organisations cannot conduct such micro-

finance services as business activities, savings and credit program nor do they

conduct common business. When business institutions become able, they

themselves organise such institutions. So it is not required to build such institution by

MEDEP at the moment.

3.2 In the Form of Cottage and Small Industry

There is a provision to register the business firm as private or partnership. The firm

can be a most necessary business organisation. They are able to do all sorts of

commercial activities such as profit, business, product processing, etc. Viewing the

features of current micro-entrepreneurs, it can also be suggested to register them in

the form of cottage industry.

But institutionalising such private and partnership business firms, only capable

entrepreneurs become success. The weak and deprived group cannot escape from

the registration to annual renewal fee, tax on profit. So it is not suit for them. Because

of perfect competition among individual entrepreneurs, collective interaction is not

possible. But they become rivals of each other. Some such enterprises are there

which has no meaning to register in the form of cottage industry. Even if they are

registered as cottage industry, some approach remains incomplete for skill

development, fund management, and business promotion. That’s why this alternative

is also not so suitable. It is only hurry.

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3.3 In the Form of Co-operative Organization

Micro-entrepreneurs can be organized by means of co-operatives, which is

mentioned in the proposal of the Co-operative Act. 2048. Co-operative is a notion of

common business of the deprived groups. This is a business organization, which

helps collectively to each other. Although it is a business organization, it acts as

social organization among the members.

Given the condition, co-operative can conduct saving and credit activities. It can play

a role of financial intermediary by taking wholesale loan from the banks. Information

to the member, communication and education (training and skill development) are its

theoretical compulsion. The maximum limit for its members is open albeit the Act has

decided the minimum number at 25. There is possibility to establish such co-

operatives that is as per the subject matter of the micro-entrepreneurs. That's why

co-operative is the best alternative for institutional development of the micro-

entrepreneurs trained by the MEDEP.

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Chapter 4 SELECTION OF THE CO-OPERATIVE MODEL

Even though the Act has not defined a clear definition of co-operative model,

individual membership is necessary. Some of the compulsory conditions of the

principles of co-operative are the democratic control of one person-one vote, fund

management from the surplus profit (saving), transparent accounting system. On the

basis of business and needs of the members, there is a provision to form a sub-

committee in order to offer special facilities to all the members.

For the institutional development of the micro-entrepreneurs as per the fundamental

principles of the Act, MEDEP feels necessary to evaluate following types of co-

operative models.

4.1 Traditional Model

Formation of Board of Directors among the limited members of particular field and

responsibility towards General Assembly is the traditional model. The diagrammatic

presentation of this model is depicted below.

General Assembly

Board of Directors Account Committee

ÄÄÄÄÄÅÅÅÅÄÅÄÅÄÅÅÅÄÅ

ß Members à

In this model, the group structure of entrepreneurs remains recessive. This system

cannot institutionalize the sharing of co-operation nor does it can cover inter-group

saving. That’s why in the context of MEDEP this model is not so appropriate.

4.2 Group Model

Although members can be individual members of co-operatives, they must unite in a

group for the membership. Members are involved in the group and each member

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receives the share-membership of the institution. There are some complexities in this

system but, nonetheless, possibilities are there. For a proportionate representation,

equal development of all the groups, and to keep co-ordination between all the

groups, some obstacles are felt to exist. To get rid of these obstacles different types

of experiments are made, which are discussed below.

1. Double Tier Model: In this model members are involved in different groups. Each

group conducts group-activities. There is no barrier for the groups to perform

particular activities. Each group must follow the common conditions and from

each group there must be a proportionate presentation to the Board of Directors.

The Board of Directors conducts institutional activities that are favourable to all.

The diagrammatic presentation of this model is pictured below.

General Assembly

Board of Directors Account Committee

In this structure if the number of member is high it will be difficult to organize the

Board of Directors. And the size of Board of Directors becomes so large that it

becomes ineffective. This system is accepted well if there are no more than 15

groups in a particular field area. Since equal number of Board of Directors is

selected from the larger and smaller groups, there is no proportionate

representation. Despite this fact, MEDEP feels, it is right to adopt this model in

the hills districts.

2. Three Tier Model: This model is necessary when there is large number of

groups. For the representation of work area in the Board of Directors, it is divided

in an appropriate manner into representative area. Under single representative

area, inter-committee is formed that represents all the groups proportionately.

Board of Directors is formed by an equal representation of all the inter-committee.

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

16

This model is found in Small Farmers Co-operative Limited founded in the effort

of Agricultural Development Bank of Nepal.

In this model, there are always a fixed number of boards of members. There will

be no effect in the number of boards of members as the number of groups and

members go on increasing. This model will be very effective if smaller groups with

limited number are formed. In actual practice, in this model there is an inter-group

in between members and institution, which makes it longer for the decision

process. Also there is dispute on rights. The diagrammatic presentation is shown

below.

General Assembly Board of Directors Account Committee

IG-1 IG-2 IG-3 … IG-8 IG-9

4.3 Mixed Model

In some co-operative organisations some members are involved in the groups and

some as individual. In the mixed model the election procedure is as per the traditional

model.

This type of co-operatives is found to form in two different types of situations. Firstly,

the traditional model with the involvement of weak persons in groups. Secondly, in

the group structure of member involved in group membership is formed for those who

are left.

In the first structure, groups are seen to dominate from the individual members. While

in the second structure, individual members are dominated from the groups.

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

17

General Assembly

Board of Directors Account Committee ÄÅÅÅÄÅÄ

ÄÅÅÅÄÅÅÅÄ

Individual Members

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

ÄÅÅÅÄÅÅÅÄ

Members in group

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Chapter 5 SELECTION OF APPROPRIATE CO-OPERATIVE STRUCTURE

Some models other than dealt in Chapter-4 are observed, but it is unusual to explain

them in the context of present study.

During the selection of co-operative, the organizational structure becomes a vital

reason. Following institutional development is felt necessity for the micro-

entrepreneur of MEDEP.

1. Needs of stable organisation for the micro-entrepreneurs.

2. To manage the fund at local level.

3. To found ‘Apex’ organisation for the micro-entrepreneurs.

4. For equal representation in the organisation.

5. To help for the promotion of the business.

6. To achieve legal authority.

7. To institutional management for the skill development.

8. To reduce unnecessary intermediary.

9. For the benefit of economy scale.

Selection of co-operatives on the basis of above needs nature of the enterprises,

structure of product, market mechanism and types, quantity of members, objectives

of entrepreneurs to mention only a few should be well considered. Selection of co-

operatives made on the consideration of such things needs following types of

evaluation.

5.1 Subjective Co-operative

These types of co-operatives are much specified in objectives. Some of such co-

operatives can be taken as, bee-keeping, ginger farming, dairy farming, metal works

to name but a few. These types of co-operatives have become more effective for

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they have common objectives. This creates an opportunity for the production,

promotion and the market management. This in turn, develops at a faster rate the

business development of the members. The efficiency is also increased because of

the engagement in a single work.

From the study made in Baitadi and Dadeldhura districts following problems are seen

for the formulation of this type of co-operative.

a) Geographic inaccessibility is the first barrier for such co-operatives. Currently,

eight such co-operatives can be formed, viz., bee-keeping 4 (Dadeldhura-3,

Baitadi-1), in Baitadi ginger farming 1, metal works-1, retail shop-1, and

bamboo work-1.

b) A total of 26 co-operatives can be formed in each district if separate co-

operative of the micro-entrepreneurs are formed in each subject. There is no

provision in the Act to federate subjective co-operative organisation by

merging co-operative of different subjects.

c) If subjective co-operative is formed then the micro-entrepreneurs of Allo,

Ketuki, Dalmode, Teeka, Photo studio etc. cannot fulfil the quantity of

member for the formation of co-operatives.

d) If co-operative of a subject is formed by grouping members at the different

parts of the district, then it is clear that work cannot be done on team spirit.

How can active participation of the member be expected while it takes 2-3

days for up and down?

e) If co-operatives of different nature be developed, diversification on working

system will be arising. It becomes also hard to support, advise the donor

agency and for the evaluation and observation.

f) The objectives and needs of different organisation also differ significantly. So

they cannot unite and cannot be effective.

g) Overhead cost increases.

5.2 Multipurpose Micro-enterprise Co-operative

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The subject of enterprise is not so significant for the formation of this type of co-

operative. A single co-operative of each type of micro-entrepreneurs can be formed,

which includes particular geographical regions. The micro-entrepreneur members

can involve as per the subject. A Board of Directors is managed in which there is a

representative of each type of micro-entrepreneurs. Generally one such co-operative

can be formed among a single VDC or particular wards on the municipality. Since co-

operative can be formed in each unit of the district, entrepreneur’s co-operative

federation can be formed. Because of these organisations, it will be easier to

promote market in the district level as well as national level.

If such structure is adopted, the small number of entrepreneurs will also be involved

in the main stream of the institutional development and none will be left. Being same

nature of all the co-operatives there is uniformity in legal process and easy to co-

ordinate with the banks. Development of inter-co-operative relations and exchange of

help will also be simple.

Under MEDEP model, the distribution of works to the EDF will be not only easy but

also guaranteed of job if the community accept the EDFs as co-operative managers.

The community can take advantage of from the trained and experienced manager.

The objective of small member micro-entrepreneurs can go backward. To revive this

weakness, a subjective sub-committee in the organisation can be formed.

Small machinery required for particular micro-enterprise can be run on group basis.

The honey processing plant can be kept in the district on the organisational level.

Medium sized plant can be established in co-operative organisational level.

The diagrammatic presentation is shown below.

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General Assembly Board of

Directors Account

Committee

Subjective Sub-committee

Subjective Sub-

committee

Subjective Sub-

committee

Bee-keepin

g Group

Hosiery Group

Allo Product Group

Bamboo

Group

Metal Works Group

During the formation of such co-operative organisation, the priority order of common

needs of the members should be fixed. They are as follows.

1. Saving and credit

2. Financial intermediary

3. Training and skill development

4. Building of processing plant

5. Market promotion

6. Co-ordination with donor agency

This model, recommended for MEDEP is prepared according to the traditional model

in order to form multipurpose co-operative.

Along with the development of these co-operative, micro entrepreneurs co-operative

federation is built at district level. Making co-operative, as central organisation there

is possibility to widen the co-operative business. The structure of this is as follows.

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LEVEL

International

Inter National Co-operative Association

National National Co-operative Association

Central Central Co-operative Organisation LTD

District

Micro-Enterprise Co-operative Federation LTD

District Co-operative Federation LTD

Village Micro-Enterprise

Co-operative LTD

Micro-Enterprise

Co-operative LTD

Micro-Enterprise Co-operative LTD

Micro-Enterprise

Co-operative LTD

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Chapter 6 PHASES OF INSTITUTIONAL DEVELOPMENT

Adopting this model, which is recommended for the institutional development,

MEDEP should improve and reform its working system to some extent as mentioned

below.

a) The identified entrepreneurs should be involved in groups with the geographical

location.

b) While extending the program, group formation must be implemented.

c) In the Hills, as far as practicable only one group (at most 30 members) should be

formed in a ward or in a tole.

d) Women’s participation should be increased.

e) An atmosphere of inter-group friendship and co-operation should be maintained

right from the time of group formation.

f) After minimum number is reached, as far as practicable the groups should be

formed subjectively.

6.1 Elementary Phase

On the process of micro-enterprise development, right from the time of base-line

survey to regular evaluation, the continuity should be given as elementary phase.

With connection to the study, the phases may be as listed below.

1. Selection of potential area.

2. Discussion with key person.

3. Mass Orientation.

4. PRA

5. Selection of feasible entrepreneur

6. Household survey of the entrepreneur

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7. Identification of needs.

8. Group formation and saving collection.

9. Creation/development/training of entrepreneurship.

10. Beginning of enterprise.

11. Achievement to capital.

12. Regular monitoring and evaluation.

13. Measurement of group maturity.

For the institutional development, group maturity is a compulsion condition. To

measure the group maturity, rigid support must be fixed. On the basis of maturity

measurement indicator as fixed by SAPAP, MEDEP Dadeldhura found to prepare

group maturity measurement indicator. For the moment, after revising the indicator,

the form can be filled by the groups from their discussion and can be determined

their own maturity. In order to measure the maturity of the groups, following weights

can be attached to the different indicators.

S.N. INDICATORS WEIGHTS (%) 1. Enterprise Development (skill, business, and income) 10.0 2. Group Development (participation, meetings, discussion,

decision, leadership development, group song) 20.0

3. Savings and Credit Activities (savings, loan, transparency, account record)

20.0

4. Internal Resource and Capital Formation 20.0 5. Social and Community Activities 10.0 6. Inter-group Co-ordination and Market 10.0 7. Group Policy Formulation, Adoption and Discipline 10.0 TOTALSè 100.0

The weights can further break into the sub division of the corresponding indicators so

that it becomes easy and simple to measure the maturity. With a simple training the

group itself can measure its maturity with the help of this yardstick.

6.2 Phases of Institutional Development

In this phase, unification of the matured group and formation of co-operatives as per

the needs can be done. About 18 months maturity period, following works should be

carried out.

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1. Measurement and monitoring of maturity. Mainly there may be following

three types of works.

a. Training to LDF (MEDEP Staff) for the measurement of maturity.

b. Exercise to the groups on filling and utilizing of ‘Participatory

Evaluation Sheet’.

c. Evaluation of group.

2. Co-operative Orientation Program. This program is felt necessary to

motivate the members of each group towards the formation of co-operative by

offering them the general knowledge about it. Following levels can be

included in the motivation program.

a. Training and demonstrative orientation on motivation to the LDF and

MEDEP staff.

b. Motivation to fieldwork members.

3. Group Amalgamation. In this phase, group discussion is held for the

formation of co-operatives, group amalgamation, expansion, etc. For this

following works may arise.

a. Discussion on unification at the group level and selection of leader for

the unification.

b. Training to the leader for the group unification and drafting its

conditions on group basis.

c. Decision on agreement of the unification and formation of the co-

operative at the group level.

4. Formation of Co-operative. The decision of monthly meeting of each group

and the representative of the board of directors should adopt the process of

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collecting group savings. For the legal registration of the co-operative,

following process should be carried out.

a. Selection of Ad hoc Committee from the assembly of the members.

b. Training to the Ad hoc committee.

c. Drafting the By-rule.

d. Selection of helper (may become a manager).

e. Saving integration.

f. Knowledge of co-operative by-rule, discussion and distribution of

shares.

g. Registration of co-operative.

h. Drafting on the rules of account, finance and administration.

i. Formation of prior general assembly and board of directors.

j. Training to the board of directors, managers, and account committee.

k. Permission from the corresponding agency for the acceptance.

l. Conduction of transaction.

5. Evaluation of the co-operatives. It is mainly three sides for the evaluation of

the organization, which are as follows.

a. From the board of directors or other sub-committee.

b. From the members.

c. From the donor agencies.

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Monitoring and evaluation are the regular process. That’s why solution for its

continuity should be adopted. For the registration of the organization most

necessary and accepted indicators should be fixed. On the basis of simple,

clear and specialized indicators, exercise on the system of participatory

evaluation must be done right from the beginning. For this following works

should be carried out.

a. Development of indicators fixation and monitoring and evaluation.

b. Training of monitoring and evaluation.

c. Impact evaluation.

6. Training on Skill Development. For the management of co-operative,

following types of training other than that related to the micro-entrepreneur

development are necessary.

a. Saving and credit management training.

i. At group level.

ii. At co-operative level.

b. Fund and account management training

i. Account committee and directorate level.

ii. Managerial level.

c. Training on business plan of the co-operative and entrepreneurship

development.

7. Seminar on participatory evaluation. At least once in a year there must be

one-day participatory seminar among the donor agency, local administration,

and social federation/organization.

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8. Affiliation with financial institution (bank). Since there is deficiency of

capital on the demand for it, MEDEP should take necessary action to make a

link between bank and co-operatives. On the other hand, the co-operatives on

their own effort make a close relation with the bank and for this it should be

disciplined to perform the duty.

9. Regularity on savings and meeting.

10. Construction of co-operative’s building.

11. Handover of MEDEP program to the co-operatives.

6.3 Phases of Co-operative Maturity (2 years)

1. Beginning of co-operative marketing by the organization.

2. Success in the formation of co-operative federation at district level.

3. Self-reliant of the organization and the business on profit.

4. Multi-sectored service: inter co-operative co-ordination and support.

5. Establishment of co-operative bank and coordination with such banks.

6. Affiliation with international co-operative market.

Phases are not absolute. The elements such as needs, time, law and order, support,

environment, and competition also show impact on institutional development.

However, on the basis of situation in the preliminary survey, MEDEP is requested to

adopt above phases.

6.4 Periodic Support

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On the way of institutional development of the micro-entrepreneurs, some technical

support agency should continue the support in the involvement of themselves. Some

of its parts are as follows.

a. Works of all the initial phases should go up to 2 years.

b. On the way of institutional development. (Until handover at least 1½

year).

i. Preparation for different types of direction.

ii. Conduction of training.

iii. Management of stationary.

iv. Remuneration to the helper.

v. Establishment of relation with the bank.

vi. Monitoring, evaluation and information service.

vii. Market relation, development and expansion.

c. On the phases of maturity (2 years)

i. Training, monitoring and evaluation.

ii. Stationary and technical support.

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Chapter 7 SUMMARY

MEDEP has become successful right from the implementation level on

reducing poverty by micro-enterprise creation, and development. In order for

the stability of the present encouragement of the micro-entrepreneurs, it is felt

necessary to autonomies their local organization. Such organizations should

be business oriented and legally accepted and they must be registered as

‘micro-enterprise co-operative Ltd.’ under co-operative Act. 2048.

Although a large number of subjective co-operatives like bee-keeping, bamboo-works, metal works and ginger farming are found, their density

are low and hence they may be deprived from the benefit of institutional

development. That’s why it is suggested that co-operative should be formed

on the subject ‘micro-enterprise’. From the different sub-committee

subjective activities can be done effectively.

For the program of rural and deprived groups, the philosophy of group

dynamism can effectively create group responsibility. Hence MEDEP should

also motivate to form co-operatives on group basis.

In the district level, after the formation of micro-enterprise co-operative

organization, there is a possibility of co-operative market development and

expansion thorough above mentioned organizations.

For a successful operation of organization, its base must be strong which is

its member. If the member’s businesses become the co-operative’s business

then the products of Dadeldhura and Baitadi districts can be easily sold at the

well-known Indian market ‘Pithauragarh’ in the boarder area.