A_well-Being Model to Small Scale Micro Enterprise Development

8/6/2019 A_well-Being Model to Small Scale Micro Enterprise Development

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Small-scamicroenterpris

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International Journal of Socio

and Social Po

Vol. 28 No. 11/12, 2

pp. 485

# Emerald Group Publishing Lim

0144-3

DOI 10.1108/01443330810915

Received 9 November 20Revised 22 January 20

Accepted 22 January 20

A well-being model of small-scalemicroenterprise development to

alleviate povertyA case study of Bangladesh village

Masudul Alam ChoudhurySultan Qaboos University, Muscat, Oman

Mohammad Shahadat HossainChittagong University, Chittagong, Bangladesh, and

Mohammad SolaimanUniversity of Information Technology and Sciences,

Chittagong, BangladeshAbstract

Purpose – The paper’s purpose is to present and empirically validate a learning model of participatory grassroots development among the poor and needy in Bangladesh.Design/methodology/approach – The approach used is conceptual modeling and its empiricalvalidation for a case study of poor women’s sewing project in an interior village of Chittagong,Bangladesh.Findings – A perpetual charity-fund with endogenous values and productive transformation of theneedy at the grassroots can prove to be an effective approach to socioeconomic development.Research limitations/implications – The empirical validation can be enhanced with more databeing generated with experience in the women’s sewing project in the near future.Practical implications – This is a policy-oriented paper with practical ways and means-test forimplementation in development planning.

Originality/value – A formal modeling of grassroots development premised on human resourcedevelopment and perpetual charity-fund for financing and their empirical validation is presented.Such an approach is not presently found in the hierarchical models of development planning. Itshould be included for making development meaningful as the grassroots. Particular reference ismade here to Bangladesh development planning.

Keywords Economic development, Modelling, Bangladesh, Communities, Poverty

Paper type Case study

1. Background and objective1.1 Background Microenterprises have a special role to play in alleviating poverty, creating

empowerment and establishing entitlement at the grassroots level of socioeconomicdevelopment. They require easily accessible, low cost, amenable funds and technologythat can be sustained in the long-term rather than be some quick-fix solution. The endpoint of the microenterprise is a participatory socioeconomic transformation in whichnot only the non-competing poor and needy cooperate with each other, but alsomeaningful relations are created between the resourceful and the needy to enhancecommunity well-being. Furthermore, such participatory linkages are expandedvertically by the growth of resources, and laterally by progressively interlinking a widerange of productive activities and projects arising from the synergy of small-scalemicroenterprises in a village development setting (Choudhury, 1998, 2002).

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We argue in this paper that perpetual flow of financial resources is needed for thesustenance of small-scale microenterprises to attain their development goals. We haveexemplified the availability of such resources by what is known as perpetual charity,Zakat and Sadaqah, the Islamic mandatory take from the well-to-do for the needy, and

hence, for the sustenance of village-based small microenterprises for poverty alleviation.Furthermore, in view of its important synergetic features, the expanding

entrepreneurial dynamics are universalized when the microenterprise as a grassrootsorganization can be contained within the national development plan. The features thatparticularly favor microenterprises in socioeconomic development are their low costoperations; the capacity to create productiveness among the poor and needy whoparticipate in the microenterprises, and low cost, stable, easily accessible technologiesthat enhance human know-how. The socially productive know-how is generated by anatural process of learning-by-doing within the enterprise and across village linkages.These factors underlie a participatory microentrepreneurial economy and establish anextensive nexus of village-based complementarities. This is the essence of sustainableparticipatory development.

1.2 ObjectiveOur focus in this paper is on rural microenterprise as a powerful grassrootsentrepreneurial approach for socioeconomic development. Our objective is to outline ageneral system and process-oriented ethico-economic model of development usingsmall-scale sustainable microenterprises in a rural setting. With this model we willrecommend a participatory approach to grassroots socioeconomic development (Ekins,1992; Goodman, 2003). The dynamics of such a model are explained by its embeddedlearning relations between critical variables representing specific activities in thewider village setting. We will study these catalytic rural relations by means of a socialwell-being function.

The social well-being function as the objective criterion of participatory grassrootsdevelopment will be simulated in reference to causal relations between critical variables.The kind of economic indicators in the function, which are related to the social ones andin the system of causal relations by which the well-being function is simulated, will bepoverty alleviation, income generation and a development financing index. Theseindicators together will represent the productive gains in the microenterprise. Among thesocial indicators, which are taken together with the economic ones, are the number of members of a Women’s Sewing Project (WSP) who got married during the process orimmediately following WSP-training, and the activities that generate complementaryvillage linkages. Marriage is considered a prestige indicator in every community, andparticularly in Muslim communities, which form the overwhelming majority of theBangladesh nation. Our real example thus is the Women’s Sewing Project in the village

of Ghariberjhil in the sub-district (Uppazilla) of Satkania in Chittagong. A general-system model of simulation of social well-being now becomes the ideal one to apply forgrassroots development. In recent times such a participatory and complementary natureof grassroots development has been recommended as the socialization goal of humandevelopment (World Bank, 2000; UNDP, 1997, 1998, 1999, 2000).

2. A brief review of the role of microenterprises in Bangladesh 2.1 Microenterprise and grassroots development Microenterprises run on simple technology and small investment to produce goodsmainly for domestic consumption. The capital/employment ratio ought to be low while




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the higher output/input ratio should be high. In this respect, the Government of Bangladesh reports (2003) that the small-scale and medium-size enterprises (MSMEs)contributed Tk.741 billion, equivalent of 20-25 per cent to the Gross Domestic Product(GDP). Thirty-one million people or 40 per cent of the population aged 15 years and

older are employed in MSMEs in both the urban and rural areas, while over three-quarters of MSMEs are located in rural areas. A private sector survey of enterprises inBangladesh mentioned that there are approximately 6 million MSMEs, which includeenterprises with up to 100 workers. In addition, the survey shows that in rural areas 9million people (13 per cent of adult population) are already engaged in small-scalemicroenterprises.

Although the Bangladesh Development Plan aims at encouraging microenterprises,facts show that in practice development polices are not conducive to them. Forinstance, Bangladesh Government’s mitigation of import duty on machinery remainstoo low for less-developed areas as compared to less developing ones. At present,customs duties in Bangladesh stand at 10 per cent on imported machineries fordeveloped areas and 5 per cent for less developed areas, where the microenterprises are

located. But, that 5 per cent on top of the purchase and delivery costs of importedmachinery can prove onerous for rural microenterprises, where the debt/equity ratio ishigh, around 80 per cent. Moreover, this ratio in itself adversely affectsmicroenterprises by keeping them away from joint ventures and low-interest financingas an alternative to the high cost of loans in Bangladesh. Interest rate stands at 10 percent on fixed capital and 14 per cent on working capital. Besides, the unemploymentproblem is worsening everywhere. As capital increasingly replaces labor in production,large-scale businesses once the symbol of economic growth, are not in a position tosolve the unemployment problem. To move the economy into productive labor-usingtechnology the strategy must now be vested on microenterprises.

2.2 Grameen BankA micro-credit bank in Bangladesh that has now grown into a large enterprise for thepoor is the Grameen Bank. This particular success story brought Dr MohammadYunus and the Grameen Bank the Nobel Prize for Peace in 2006. The basic Grameenidea is that the economic uplift of the rural poor can be achieved by lending seedmoney to women without financial collateral, thereby raising self-reliance andencouraging them to play a key role in their own destiny.

Despite its resounding success worldwide, the Grameen vision, which culminatedinto the Grameen Bank of today, is based on interest-bearing loans. In order to mitigatethe negative effects of interest, GB has installed easy repayment schedules for theborrower. Another key factor behind the almost 97 per cent repayment of loans is theclustering of women borrowers into groups of five, whereby a failure to repay by one

becomes a failure to repay by all. Failure to pay would otherwise worsen the positiveattitude that women have in their obligation to repay. Repaid loans are recycled intofurther loans and other development activities.

Besides the interest income on the loans, Grameen is fortunate to obtain substantialfinancial benefits from international financial organizations. Thereby, the overall costof Grameen’s borrowing remains relatively low. So, even though GB administrativeexpenses are very high, it has been possible for it to build up a substantial financialreserve (Hassan and Renteria-Guerrero, 1997).

The Grameen claim on no-collateral from needy borrowers is questionable becauseGB undoubtedly has high interest-charges and strict conditions to ensure recovery of



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loans if default is to be avoided. In effect, high interest charges and strict loan recoveryconditions amount to financial and contractual collaterals. A comparison of the relativecosts of such collaterals is not available, because no charity-based alternative financingscheme and program for alleviating economic hardship of the very poor has been

formally established in Bangladesh. Contrarily, if such an alternative had existed as apool of exigency fund for the poor and needy, we could compare the social alternativeto interest-based loan operations by the interest-free, charity-driven microenterprisefinancing.

However, the fact of the matter is that charity projects enjoy low cost andsustainable ways of generating seed money for social and economic uplift of the verypoor. The sustained flow of charity-funds depends deeply on the moral responsibilityand national fiscal policy framework aiming at poverty eradication and generatingempowerment and entitlement of the very poor and destitute. Sen (1986) has arguedincisively that the great Bengal famine was caused not by inadequacy of food supply,but by entitlement failure among the village dwellers to procure such food supply.Consequently, charity-funds secured by mandatory processes of giving and ethicalconvictions in the community can establish the sustainable financial seed money forsmall-scale microenterprises. These would not have any transaction costs or interestcharges on them. This spirit of giving reflects ethical consciousness contrary to self-interest. Goulet (1997, p. 1167) characterized the difference between self-interest andethical values in socioeconomic development in his words, ‘ plus avoir (to have more)and plus etre (to be more)’.

Such charity-based small-scale microenterprises, whose principal objective is toraise the well-being of the poor and needy members and generate sustainable means of livelihood for them would not depend on financial reserves. Accumulated retainedearnings from previous productive operations could still be maintained, but only asexigency funds rather than essential investment funds (Choudhury and Hassan, 2001).

Instead, with charity-funds the fullest possible project-wise expenditure is allocatedannually for attaining the well-being goals and sustainability of the project. The valueof the small-scale microenterprise thereby equals its sustainable charity fund plus thevalue of its fixed assets that it builds up in human resource training.

2.3 Similarities and differences between some grassroots charity projects 2.3.1 (ASHA¼ HOPE). The project called ASHA (or HOPE) is an internationalgrassroots development project centered on human resource development of the poorand needy in India. In many respects ASHA is similar to the WSP project highlightedin this paper. But there are also differences between the two.

Both of these projects center on education and training for productive gains and

sustainability at the grassroots. They both emphasize core values upon which humannature is molded, and thereby, an endogenous development transformation is injectedinto the grassroots. On the side of core values ASHA stands for non-political secularoutlook. ASHA promotes cooperation by networking with jointly sponsored projects,as opposed to competition between its various chapters across India. Members of ASHA are not paid; they volunteer their services by way of motivation and out of theirexisting paid occupations elsewhere. Cooperation is manifest in collective discoursetranscending individual attention in decision-making. ASHA is non-hierarchicalamong its workers and in project decision-making. Collective decision-making iscarried out by decentralized accountability in each ASHA chapter with mutual respect




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in decision-making. On the financial side, ASHA depends on donations fromindividuals, governments, international organizations and the private sector. It alsoraises funds by internal activities, such as sale of merchandise, fund-raising dinnersand Indian concerts. ASHA organizes occasional invited talk and study group

seminars.Values of ASHA on the side of human resource development, sustainable financing,

empowered participatory decision-making, ethical values and proper organization andmotivation at the grassroots are shared by WSP project in its sustainable perpetualcharity-fund idea not risking productive transformation among the poor and needytrainees. Though unlike ASHA, which devotes to basic education for poor Indianchildren, WSP is devoted to poor village women as the target group. Also, financingbeing done by mandatory Islamic fund called Zakat, WSP targets the training needs of poor Muslim village women. But there have been instances of non-Muslim poor womenreceiving the benefits of the WSP charity fund. These were managed from voluntarycontributions outside the Zakat fund.

2.3.2 Amanah Ikhtiar Malaysia. In Malaysia, the Grameen idea has been replicated

by a Government Charity Fund called Amanah Ikhtiar Malaysia (Kasim, 1999;Gibbons and Kasim, 1990). This project has enjoyed all the features of Grameen interms of its low level loans to the needy and poor in small-scale village projects.Amanah Ikhtiar Malaysia (AIM) receives its annual funding from the MalaysianGovernment on an interest-free basis. It is a micro-credit organization, not amicroenterprise, and is based on a free and sustained flow of interest-free charity fund.AIM focuses on the funding of poor and needy clients, but not on training and income-generating goals per se. Consequently, in recent times, AIM despite showing all theorganizational characteristics of Grameen Bank and its loan recovery success, failed toalleviate poverty significantly among the recipients, although the Ikhtiar TrustMalaysia of the Government of Malaysia maintained AIM as a financial and politicalchannel of interest-free funding for small-scale microenterprises (Ismail, 2001).

2.3.3 Small-scale microenterprise versus micro-credit. In general therefore, a small-scale microenterprise based on a continuous annual flow of charity-funds need notgraduate into a micro-credit bank. A micro-credit bank charges high interest rates,exercises strict loan recovery procedures, and depends on large-scale external fundingto build up financial reserves. The interest rates on such external flow of funds andgrants are highly concessionary to the bank. A micro-credit bank earns good profitsfrom the high differential interest rates it charges on its borrowers. The accumulatedreserves plus interest incomes are used to undertake extraordinary operations of amicro-credit bank. Thus there is a hidden cost of financial dependence in a micro-creditscheme that makes its operation unsustainable in case the reserves decline andexternal funds cease to flow.

The collateral charged by the micro-credit banking project is the opportunity costequal to interest charges and loan recovery strictures on the borrowers. Contrarily, anycharity-based resource stands free of opportunity cost. As well, the benefit/cost ratiofor a micro-credit bank operation is calculated by the amount of micro-credits offeredper unit of financial reserves held. In the case of charity-fund, benefits are freelydetermined by the level of income generated, and thus by productivity per unit of thecharity fund gained in the small-scale microenterprise.

As has been pointed out by many (Tennyson ed., 1999), microenterprise and micro-credit are not the same concepts in grassroots development. While micro-credit focuseson the financing side of lending and on accumulating reserves to make such lending



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possible, a microenterprise focuses on the development side. In this sense, GrameenBank as a micro-credit bank never really graduated into a truly microenterpriseinstitution before it turned into a bank for the poor. Unlike a micro-credit bank, amicroenterprise does not have the goal of building up reserves for financing grassroots

projects. All financial assistance must come from socially mandated donations, andthere must be a basis for this to continue in perpetuity.

With the almost zero opportunity cost status of the charity-based small-scalemicroenterprise operations, sustainability of grassroots projects would be establishedif the annual flow of charity-funds is seen as a binding social obligation raisingcommunity consciousness. Such social consciousness requires the will, motivation andeducation of the community to inculcate a deep sense of social responsibility (Goulet,1999). Policy measures ought to be put in place to motivate, realize and distribute thecharity-funds. An example is the British case of Charity Jobs (Charity Jobs, n.d.).

Invoking such ethical values is quite possible in Bangladesh. A considerableamount of charitable funds can be collected annually in perpetuity and organizedthrough community initiatives with the help of community workers, non-governmental

organizations, practitioners and academicians. Such groups would provideorganizational and financing means to establish on-going charity-funds that flow inperpetuity.

3. Women’s sewing project in Satkania, Chittagong, Bangladesh as anexample of a small-scale rural microenterprise for grassroots development3.1 The WSP model The alternative model for organizing and financing self-sustaining small-scalemicroenterprises is exemplified by the case of Satkania Ghariberjihl (WSP) inChittagong, Bangladesh and its replications and by growing village-based linkagesgenerated. Like the Grameen idea, WSP grassroots development model is replicated atextended village levels, keeping in view that the goal of such operations is simply toimprove, not to maximize the social well-being function by participatory grassrootsprocesses of development. The spirit to improve reflects learning behavior, whereasmaximization of output reflects competition for scarce resources.

WSP was established by a concerned group of academics and practitioners inChittagong with meager international financial contribution. WSP brings about for itsmembers both social and economic gains in a complementary way. It has generatedearning capability for itself and its members. The members are poor and destitutewomen coming from the local village community. They receive free training and gainboth human resource development and a stipend during the period of training.Stipends are derived from the charity-fund.

Management skills gained from training are reinforced by an increasing

diversification of WSP’s entrepreneurial activities. Trainees become trainers as theygraduate in their training and supervisory skills. The broader socializing dynamics of WSP are brought out by the linkages it develops with other village activities. Examplesof such causally linked activities are the village marketing venue, the village schooland replication of similar microenterprises in nearby villages. Financial sustainabilityof WSP is established by the collateral-free availability of charity-funds that comefrom international sources and some community donors on an annual basis. Suchcharity-funds are mandatory according to the Islamic law for grassroots uplift. Hencethey form a perpetual moral duty on the donor for obligatory assistance of needyrecipients.




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3.2 Development indicators of WSP Table I gives the performance indicators of WSP, which has been in existence since2004. During this time, WSP’s popularity and self-reliant development of its memberson social and economic fronts have proven to be impressive. The small-scale project

has been replicated in the near-by village of Patya.WSP was started by private donations of Islamic charity (called Zakat and

Sadaqah¼ZS) amounting to a mere Taka 30,000 in 2004. The ZS-flow of funds has

TableEarly indicators for twomen’s sewing proje

in the village setti

Year 2004 2005 2006Total by

year 2006

Woman population in the village 8,690 8,825 9,090 9,090Poor women in the village 3,335 3,315 3,330 3,330Enrolment in the sewing project 10 47 45 102Stipend distributed to trainees (at 900Taka/trainee) – 42,300 40,500 82,800

Graduation – 47 30 77Number of trainers, supervisors and sub-traineesfrom trainees in good graduation ranks 1 1þ 1 1þ 2 (from trainees) 6Marriages of members 1 3 3 7Income earned and shared by members (Taka) – – 16,000 16,000Zakat fund resource (Taka) 30,000 105,000 100000 235,000Assets (machineþ project house) 3 3 5 5Planned expansion for 2007: embroidery, printing(batik-butik). 2008 expansion: CADCAM sewing,computer installation in village schoolIncentive Indicator¼ (incomeþ stipend)/Zakat (%) 0 40.29 56.50 42.04Productivity Indicator of WSP¼ Income/Zakat 0 0 0.16 0.16

Notes: Total for all nearby villages together being served by the women’s sewing project (WSP).

Villages: Ghariberjhil, Goazerpara, Chotodemsha, Hosennagar, Korainagar and Chibban. VillageLinkage Indicator: village market penetration of diverse products, e.g. bulk production of belts andbags for pilgrims to Makkah; 2 volunteers have started to promote WSP sales in urban marketsof Chittagong (Reazuddin Bazar). All in all market penetration and thereby prospect for incomegeneration both for members and WSP has enhanced with good prospects in the near future.Projected goal is to turn WSP into a mini-garment microenterprise during 2008 run by itsmembers while continuing on the WSP replication in other villages. N.B.: Enrolment in WSPcomprises poor women from five villages in the vicinity of the centered. Village of GhariberJill,where WSP is located. See Figure A2 for potential village sectoral linkages and replication. Thedata for 2007 are not complete. But early information shows a sustained fund of 100,000 USD forthe year; and a fresh total enrolment of 40 young women, making the total cumulative enrolmentin WSP since 2004 to be 146. A further interesting fact is that to date 7 young women studentswere married, given the WSP-credential of gained vocational training that assists young women inmarriage as social indicator. Besides, the young women students are now coming from nearby

villages away from the generic WSP village of Gariberjihl, thus breaking the cultural cliche of home seclusion in village setting. Two extra sewing machines were purchased to add to theexisting stock of capital assets of WSP. All WSP assets belong to on-going WSP members andnot to anyone else. This characteristic of the assets for the WSP-charitable project adds to itsspiritual capital. That is because the perpetual charity of Zakat is forever relinquished to theownership of the needy target groups for their social and economic uplift. These early informationfor the year 2007 indicate that sustainability of the WSP-project has been proven and its wideningbenefits to the extended village locations is expanding along with the acceptance of the project aspart of the participatory socioeconomic development model in the culture of Bangladesh villagesetting



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sustained itself ever since on an annual basis. Zakat is a mandatory Islamic charity forthe poor and needy. Thereby, some of the private sector charity-funds so collectedannually are bound to flow into the small-scale project.

The enrolment size as a performance indicator shows phenomenal increase since

2004. WSP expanded from a mere batch of 10 women with three sewing machines andTaka 30,000 invested in fixed capital and sewing training for the poor and needy. TheWSP-training premise was provided by a villager who converted his disused outerpremise ( Daori ) into a sewing center. It now houses the sewing machines and schoolingfurniture, a very humble beginning.

Table I points out that the demand for training increased phenomenally from a mereone batch of ten students in 2004 to 47 students in three batches in 2005. By 2006, atotal of 102 female students have received training with a sustained flow of ZS-charityfund equivalent to a total of Taka 235,000 between 2004 and 2006. Of the total numberenrolled over the last two years 77 students have graduated with sewing skillsproducing marketable items.

Trainees learn diligently and train their pupils as well. This learning cooperation

yields two positive results. On the economic side by the year 2006, diverse sewingproducts though of simple types and designs, have been marketed, bringing Taka16,000 to the trainees during the first half of 2006. Recently, WSP has received an orderfor sewed bags for the out-going pilgrims to Makkah in December 2006. Islamicfestival times are particularly busy for WSP.

The social return of WSP proved to be strong. In total, seven women trainees gotmarried upon completion or during training between the years 2004 and 2006. InMuslim community marriage is considered a prestige for the couple and their parents.WSP earned the women this prestige as a social indicator on the basis of their skillsgained. Graduating students receive certificates of skill in sewing.

What we note from the three-year statistics in Table I is that even with a limitedthough sustained financial resource from ZS-funds annually, and given the stock of itsfixed assets at five machines including the donated housing premise for the project, theper capita allocation of the financial resource for an increasing enrolment size has resultedin income-generating capability for trainees. In other words, a fixed trend in capital inputratio with increasing number of trainees indicates rising productivity per trainee.

Increased revenue per capita for the trainees is reflected in the project’s incomegenerating capability. The project members are now aiming at centralizing the incomegenerating capability for the project. This would be accomplished by WSP’s initiativeto invite bulk orders from the village while freeing members to do their own marketingas well. Sales revenues from the WSP sponsored initiative are distributed among allthose members who are involved in production and marketing. As trainees graduateand gain trainer-skill, a continuous gradation of training program is maintained. In

this way, both self-reliance and equitable distribution of incomes by participation aremaintained as training skills progress.Management in WSP is vested with the women members. They have freedom for

cooperative decision-making and team work. Together, such gains reinforce theeconomic and social productivities of WSP members. It generates a heightened sense of empowerment in members.

3.3 Development synergy engendered by WSP A critical indicator for evaluating the development potential of the small-scalemicroenterprise is the degree to which it can generate extended linkages with other




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participatory socioeconomic activities in various sectors of the local villagecommunity. The immediate village-based linkages that WSP has established include aplanned training extension by CADCAM computer-assisted project development forthe embroidery and printing of Batik-Butik products. ZS-funds for such WSP

operations are collected locally, nationally and internationally. In addition, theprojected income generated by WSP adds to its financial soundness. Productivity andincome-generating capability are enhanced by training, skill and marketing access.

In this way, an important socioeconomic extension is created in the human resourcedevelopment sector of the local village economy. Such a human resource developmentprogram that moves progressively into higher stages, such as computerization of sewing activities, embroidering and printing, carries with it bright prospects foropening up marketing potential and self-reliant development along with securedentitlement and empowerment for the poor and needy women members.

The linkage between the village school and WSP generates circular feedbackrelations between these operations. While the growing potential of WSP causesextension of the village school activity, so also the school by so gaining launches its

bulk needs for students’ uniform with WSP. Thereby, a bulk supply route ispermanently established. Evolutionary learning by village linkages is established.Inter-flow of resources between these activities reinforces the productive sustainabilityof both. The extension of such circular causation across many village-based linkagesgenerates a participatory development process at the grassroots. Such a feedbackprocess of circular causation forms a critical groundwork for participatorydevelopment and overall sustainability of village-based small microenterprises.

The supply and demand routes between the local fabric market and WSP havegenerated income for the members. Increasing income potential, in turn, is well-knownto enhance productive potential, market access and market expansion in the localvillage economy.

Local rural poverty is cut down by the deepening of human resource developmentand marketable skills in WSP trainees. The fact of the matter is that trainees not onlyincrease their skills by training but also receive a stipend to obtain such training. Thestipend money is taken from the ZS-charity fund annually. The uninterrupted flow of ZS-charity fund as seed money compounds with the inner productive capacity of thesmall-scale microenterprise. The two together catalyze an expanding system of circular causation interrelating village-based activities.

Decision-making, organization and planning in such small-scale microenterprisesare fully decentralized and are vested with the women members, between trainers asmanagers and trainees as other members. Cooperative decisions are made by discourseand participation among the members. Cumbersome processes are avoided.Sustainability of resource and training is guaranteed.

The extension and sustainability of village linkages are directly related to thedegree of comprehensive human resource development that women receive andconvert into production. Here the idea of human resource development emanating fromWSP and expanding into intra- and inter-village linkages with diverse activities takesup a comprehensive meaning. That is, the model of participation and cooperation,linkages and learning between activities play their central roles in defining the broaderdomain of HRD in WSP.

Sustainability of resource flow by channeling mandatory charity-funds is possiblein the background of development ethics of, and for non-competing groups (Goulet,1997). The same ethical consciousness is extended across diverse activities with which



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WSP links up by circular causation networking. Without this synergetic element, theinner growth and productivity could not be attained. In order to inspire these valuesand motivation in the women members and others in the community, monthly schoolseminars are organized. Respectable citizens from all walks of life are invited to

motivate the village folks, students and members of WSP.

3.4 Financial resource sustainability for WSP The principal sustainable financial source for WSP as an example of a broader class of small-scale microenterprises is the mandatory Zakat Fund including auxiliary charity(S); thus denoted by ZS. This source of financing intensifies with the rise of moralconsciousness. With the use of the guaranteed ZS-funds it has been possible for WSPto impart training to both Muslim and non-Muslim needy village women. Women withbetter economic status can be admitted with nominal fees. They do not enjoy thestipend benefits of ZS. Necessary screening is maintained to determine the needs andeconomic conditions of students.

As a mandatory take from wealth (liquid assets) plus savings plus income of theZakat payer net of permissible annual exemption (Nisab), Zakat assumes its fiscalstatus in the Islamic community. Thus the ZS-fund is organized away from being merevoluntary charity and expenditure in non-developmental directions, such as handoutsto the poor and needy, the sick and debtor. Instead, the ZS-fund is organized as a socialsecurity fund for ameliorating needy individuals and households according to a socialdevelopment planning framework. ZS forms a social fund of and by the Islamiccommunity. It acts as spiritual financial capital for development purposes. Hence itforms the corner stone of fiscal expenditure and receipts for the community.

4. Compounding charity fund (ZS) with development financing indexThe argument of this paper is that for attaining a heightened level of impact on poverty

alleviation, human resource development and income generation, and thereby, self-reliant empowerment for target groups, sustainability of the ZS-fund, all must becombined annually with other productive financial instruments. A compounddevelopment financing instrument is thus constructed.

We therefore recommend that ZS ought to be linked with its complementaryfinancing instruments, namely, Spending in the good and productive things of life,Trade and the replacement of interest charges by Participatory financing instruments.Examples of the latter kind of financial instruments are profit-sharing, equityparticipation, joint ventures and co-financing. We have now four developmentfinancing instruments, (Z¼Zakat, S¼ Spending in the good things of life, T¼Trade,P¼ replacement of interest by participatory financing instruments). These

instruments replace the interest-based modes of financing and collaterals. Thecooperative financing instruments can be compounded to form a comprehensivedevelopment financing indicator in attaining community social well-being.

5. Compounding development financing index with social well-being5.1 Development financing index as a measure of social well-being The social well-being criterion for socioeconomic development is expressed as acompound function of variables like poverty alleviation, productivity (incomegeneration), village-based linkages and the social indicators of enrolment ratio andmarriages among women trainees as a prestige variable gained from training.




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Impression on marriages among trainees in WSP as prestige social indicator is derivedfrom opinion surveys on the relationship between training and marriage prospects.

The correspondence between the social well-being function and the compounddevelopment financing index is this. Equally weighted four variables (Z, S, T and P) are

multiplied to form a compound financial index. Interest-free (P) financing reflects theno-collateral variable in the above-mentioned linked activities. Such a calculated index-value induces all the variables of the social well-being index. That is, the variables of the social well-being function and the index-value interrelate circularly in thesimulation of social well-being in reference to the feedback between the variables andthe index.

Socioeconomic development impact ensuing from community-based small-scalemicroenterprises, as exemplified by WSP, is now understood as a simulated process of systemic learning caused by participation and linkages between the variablesrepresenting their underlying community-based socioeconomic activities. This isequivalent to simulating the social well-being function in reference to the system of circular causation as relations between its variables and the compound financial index

that acts as the primal factor influencing all the other variables.In turn, the evolutionary learning dynamics of the socioeconomic development

processes imply that the index itself will be affected by the simulated variables.Consequently, the evolutionary values of the variables in the index become recursivelyaffected by the index values and by the variables of the social well-being function. Anexus of circular causation is thus generated between all the variables and therecursively determined simulated values of the financial index. These estimatedvariables yield simulated values of the social well-being function.

The resulting simulation model can be easily computerized and implemented at thevillage community levels. This can be the Satkania Uppazillah Office by virtue of theeasily recordable data arising from small-scale sample, which expand with expandinginter-sectoral learning linkages. On a larger scale, such a model can be computerized atthe Bangladesh Islamic Bank. Figure 1 depicts the circular causation between (Z, S, Tand P). The system-oriented learning process that conveys the meaning of operationalsustainability in social development planning is implied by such circular causation.Village-based linkages signify the extensive complementarities that underlie theconcept of operational sustainability in grassroots development.

By the method of circular causation every variable in the boxes in Figure 1 is shownto interact, integrate and co-evolve along the development path. In this way, theevolving participatory processes in systemic learning are sustained. Let the recursivelearning variable be denoted by -variable. -values are endogenously regenerated inthe simulation system in reference to the system of circular causation between the -induced variables. In other words, along with its induced variables convey the path of

socioeconomic change that is driven by moral and ethical consciousness. Such ethicalparameters and their induced consequences are referred to in the literature as spiritualcapital (Zohar and Marshall, 2004).

-values also indicate a positive transformation of the compound financial index byvirtue of its central role in simulating the social well-being function. Hence a -valuereflects a positive monotonic value of the index. The simulation exercise impliesprocesses of re-strategizing market values by the learning impact, village linkages,institutional changes and micro-level policies. Each of the variables in the socialwell-being function is induced by the synergetic consequences of the -variable. That isby the compound index. Thus in the end, the -variable is determined in the entire



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system of circular causation by recursive feedback between the simulatedsocioeconomic variables of the social well-being function.

5.2 Formalizing the WSP development model We formalize our model in the following way: Let the process-based evolutionaryvector be denoted by X comprising the various boxes in Figure 1. X denotes the vectorof estimated values of (Z, S, T and P) generated by circular causation between these.

The participatory development transformation attained by means of small-scalevillage microenterprise as evinced by WSP causes integration between the variablesmeasuring performance and well-being through village socioeconomic linkages. Thecompound financial index of X¼ (Z, S, T, P) plays the critical role in such atransformation. Subsequently, this compound index as a positive monotonic measureof -value endogenizes the social well-being function, causing circular causation tooccur between the critical socioeconomic variables.

6. Words of caution on charity-funds for socioeconomic developmentThough this paper has highlighted on the productive use of charity funds that exist inperpetuity, there are still concerns of dependency syndrome that can arise. Choudhuryand Malik (1992) have shown in the case of Malaysia that estimated macroeconomicmodels in Zakat, and socioeconomic variables do show positive relationships indicatedby the estimated coefficients of the log-linear forms. But the sign of the investmentvariable in relation to Zakah-variable was found to be negative. This is worry to thefact that Zakah and investment may be substituting each other in relation toproductive grassroots change. Contrarily, we have argued in this paper for a positiverelationship between these variables.

Figure 1.Circular causationbetween (Z, S, T and P)




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Thus, good control and supervision are required at the grassroots to monitor the useof perpetual charity-funds into productive investments. As noted in this paper by theexample of WSP and in reference to grassroots charity projects like ASHA,management and values play substantive role in the endogenous transformation of

grassroots into productive change. We thereby emphasize these implements in themidst of good knowledge-induction and institutional guidance so as to make theperpetual charity-fund a socioeconomic development outlet.

7. Conclusion: policy prospect on small-scale microenterprises forvillage-centered development planning in Bangladesh7.1 Highlighting the participatory model of development planning A process-oriented participatory model of development planning has been prescribed forthe grassroots. Such a model fits in well in village-centered development planning inBangladesh. The critical variables of social well-being are identified as human resourcedevelopment, poverty alleviation, and income generation, reflecting productivity,empowerment and entitlements of members of small-scale microenterprises. Also, thereis the social variable such as marriages of members, which is found to convey theprestige effect of training. Then there is the social synergy of village-based linkagescaused by small-scale microenterprises. Circular causation between these variablesreflects the meaning of sustainability gained through such social organisms.

To date, Bangladesh villages have failed to utilize productively the mandatory andsustainable flow of ZS-funds in small-scale microenterprise development. Theexperience of WSP model shows that there is a substantial potential for self-reliantdevelopment at the grassroots, one that is easily implemented at minimum cost buthaving good performance measures economically and socially. In the absence of suchan innovative way of implementing small-scale microenterprises for self-reliant andempowered development of the poor and needy with sustainable seed money and low

cost of operation but yielding socially and economically productive prospects, a greatdeal of the charitable funds is leaked out of development at the grassroots. Such a lostopportunity ought to be reversed for the well-being of the very poor and needy.

7.2 Policy perspectiveThe appendix gives a computer-generated Spatial Domain representation of villages inthe vicinity of WSP. The SDA-generated figures show the distribution of enrolment andpoverty by distance of various villages from the Growth Centre (market). Marketingoutlets and trading prospects for WSP are to be found in the Growth Centre. The SDAsimulations imply that there is positive correlation between training, market proximityand poverty reduction among the target group of women. Such a computerized modelcan be stored with Uppazillas for continuous monitoring of grassroots development inthe context of Bangladesh development planning.

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Appendix. Correlation between enrolment and distance of villages from growthpoint and between incidence of poverty and growth point

Figure ASDA generatrelationship betwe

enrolment and growcen



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About the authorsMasudul Alam Choudhury retired as Full-Professor of Economics from Cape Breton University,Sydney, Nova Scotia, Canada after 21 years of service. He is now Full-Professor of Economics inSultan Qaboos University, Muscat, Sultanate of Oman. He is also the co-founder andInternational Chair of the Post-Graduate Program in Islamic Economics and Finance at TrisaktiUniversity, Jakarta, Indonesia. He supervises five Doctoral students in this program. He hascontributed innumerable scientific articles and books through international scholarly outlets andwon major research grants in his research area of focus on different themes. His most recent andsignificant works in the area of research focus are the five volumes entitled Science and

Epistemology in the Qur’an (5 Volumes, Edwin Mellen, 2006), with individual volume title. Alsoby the same publisher are Explaining the Qur’an (2003, Edwin Mellen) and Development

Planning in the Sultanate of Oman (with M. Shahadat Hossain) using the method of relationalepistemology. The Islamic World-System, a Study in Polity-Market Interaction was published byRoutledgeCurzon (2004). Computing Reality (with Shahadat Hossain) is in press with AoishimaResearch Institute, Tokyo, 2006. He is the editor of the international refereed journal,

Humanomics, an International Journal of Systems and Ethics (Cat. in Journal of Economic

Figure A2.SDA generatedrelationship betweenpoverty and growthcentre




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Literature ) for the last 23 years. HIJSE is a quarterly journal specializing in endogenous ethics insocio-scientific reasoning. The journal is published and distributed by Emerald Publishers in theUK. Masudul Alam Choudhury is the corresponding author and can be contacted at:[email protected]

Mohammad Shahadat Hossain is Professor and Chairman in the Department of ComputerScience at Chittagong University, Bangladesh. He received his MPhil and PhD degrees inComputation from the University of Manchester Institute of Science and Technology (UMIST),UK in 1999 and 2002, respectively. He is also Visiting Professor of Trisakti University, Jakarta,Indonesia. Hossain was Tyndall Visiting Research Fellow at the University of Manchester, UK.He is a member of the editorial board of Humanomics – International Journal of Systems andEthics. He is continuing his research on computer models of economics, business, engineeringand environment advancing understanding of the evolutionary nature of the field of computational science.

Mohammad Solaiman is a marketing scientist with over 25 years experience of teaching,research and administration to human resources development (HRD). He is presently Professorand Dean of the Business Faculty in University of Science and Technology Chittagong,Bangladesh. He earned his PhD in marketing from the University of Poona, India. He did hispost-doctoral research at Rhode Island University, USA in 1997-1998 under FullbrightFellowship. More than 100 research papers published in refereed journals including SustainableDevelopment (John Wiley & Sons Ltd.), 10 research projects completed, sponsored and financedby international funding agencies and 15 research works presented at international seminars. Heorganized an International Seminar on ‘‘Marketing in New Millennium’’ held in Hotel Agrabad,Chittagong, Bangladesh during September 27-28, 2001. He has an excellent knowledge of theoretical and practical issues related to micro enterprise development, marketing of naturalresources products and consumer goods in Bangladesh. He is the winner of many awards andhonors including Fullbright Fellowship, Commonwealth Scholarship, IDB Fellowship, AMDISAFellowship and DFID award for research, teaching and contribution to the profession.

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A_well-Being Model to Small Scale Micro Enterprise Development

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