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A well-being model of small-scale microenterprise development to alleviate poverty

A case study of Bangladesh village
Masudul Alam Choudhury
Sultan Qaboos University, Muscat, Oman

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Received 9 November 2007 Revised 22 January 2008 Accepted 22 January 2008

Mohammad Shahadat Hossain

Chittagong University, Chittagong, Bangladesh, and

Mohammad Solaiman
University of Information Technology and Sciences, Chittagong, Bangladesh
Abstract
Purpose The papers 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 empirical validation for a case study of poor womens sewing project in an interior village of Chittagong, Bangladesh. Findings A perpetual charity-fund with endogenous values and productive transformation of the needy at the grassroots can prove to be an effective approach to socioeconomic development. Research limitations/implications The empirical validation can be enhanced with more data being generated with experience in the womens sewing project in the near future. Practical implications This is a policy-oriented paper with practical ways and means-test for implementation in development planning. Originality/value A formal modeling of grassroots development premised on human resource development 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. It should be included for making development meaningful as the grassroots. Particular reference is made here to Bangladesh development planning. Keywords Economic development, Modelling, Bangladesh, Communities, Poverty Paper type Case study

1. Background and objective 1.1 Background Microenterprises have a special role to play in alleviating poverty, creating empowerment and establishing entitlement at the grassroots level of socioeconomic development. They require easily accessible, low cost, amenable funds and technology that can be sustained in the long-term rather than be some quick-fix solution. The end point of the microenterprise is a participatory socioeconomic transformation in which not only the non-competing poor and needy cooperate with each other, but also meaningful relations are created between the resourceful and the needy to enhance community well-being. Furthermore, such participatory linkages are expanded vertically by the growth of resources, and laterally by progressively interlinking a wide range of productive activities and projects arising from the synergy of small-scale microenterprises in a village development setting (Choudhury, 1998, 2002).

International Journal of Sociology and Social Policy Vol. 28 No. 11/12, 2008 pp. 485-501 # Emerald Group Publishing Limited 0144-333X DOI 10.1108/01443330810915206

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We argue in this paper that perpetual flow of financial resources is needed for the sustenance of small-scale microenterprises to attain their development goals. We have exemplified 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 grassroots organization can be contained within the national development plan. The features that particularly favor microenterprises in socioeconomic development are their low cost operations; the capacity to create productiveness among the poor and needy who participate in the microenterprises, and low cost, stable, easily accessible technologies that enhance human know-how. The socially productive know-how is generated by a natural process of learning-by-doing within the enterprise and across village linkages. These factors underlie a participatory microentrepreneurial economy and establish an extensive nexus of village-based complementarities. This is the essence of sustainable participatory development. 1.2 Objective Our focus in this paper is on rural microenterprise as a powerful grassroots entrepreneurial approach for socioeconomic development. Our objective is to outline a general system and process-oriented ethico-economic model of development using small-scale sustainable microenterprises in a rural setting. With this model we will recommend a participatory approach to grassroots socioeconomic development (Ekins, 1992; Goodman, 2003). The dynamics of such a model are explained by its embedded learning relations between critical variables representing specific activities in the wider village setting. We will study these catalytic rural relations by means of a social well-being function. The social well-being function as the objective criterion of participatory grassroots development 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 and in the system of causal relations by which the well-being function is simulated, will be poverty alleviation, income generation and a development financing index. These indicators together will represent the productive gains in the microenterprise. Among the social indicators, which are taken together with the economic ones, are the number of members of a Womens Sewing Project (WSP) who got married during the process or immediately following WSP-training, and the activities that generate complementary village linkages. Marriage is considered a prestige indicator in every community, and particularly in Muslim communities, which form the overwhelming majority of the Bangladesh nation. Our real example thus is the Womens Sewing Project in the village of Ghariberjhil in the sub-district (Uppazilla) of Satkania in Chittagong. A generalsystem model of simulation of social well-being now becomes the ideal one to apply for grassroots development. In recent times such a participatory and complementary nature of grassroots development has been recommended as the socialization goal of human development (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 goods mainly for domestic consumption. The capital/employment ratio ought to be low while

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 threequarters of MSMEs are located in rural areas. A private sector survey of enterprises in Bangladesh mentioned that there are approximately 6 million MSMEs, which include enterprises with up to 100 workers. In addition, the survey shows that in rural areas 9 million people (13 per cent of adult population) are already engaged in small-scale microenterprises. Although the Bangladesh Development Plan aims at encouraging microenterprises, facts show that in practice development polices are not conducive to them. For instance, Bangladesh Governments mitigation of import duty on machinery remains too 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 for developed 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 imported machinery can prove onerous for rural microenterprises, where the debt/equity ratio is high, around 80 per cent. Moreover, this ratio in itself adversely affects microenterprises by keeping them away from joint ventures and low-interest financing as an alternative to the high cost of loans in Bangladesh. Interest rate stands at 10 per cent on fixed capital and 14 per cent on working capital. Besides, the unemployment problem is worsening everywhere. As capital increasingly replaces labor in production, large-scale businesses once the symbol of economic growth, are not in a position to solve the unemployment problem. To move the economy into productive labor-using technology the strategy must now be vested on microenterprises. 2.2 Grameen Bank A micro-credit bank in Bangladesh that has now grown into a large enterprise for the poor is the Grameen Bank. This particular success story brought Dr Mohammad Yunus and the Grameen Bank the Nobel Prize for Peace in 2006. The basic Grameen idea is that the economic uplift of the rural poor can be achieved by lending seed money to women without financial collateral, thereby raising self-reliance and encouraging them to play a key role in their own destiny. Despite its resounding success worldwide, the Grameen vision, which culminated into the Grameen Bank of today, is based on interest-bearing loans. In order to mitigate the negative effects of interest, GB has installed easy repayment schedules for the borrower. Another key factor behind the almost 97 per cent repayment of loans is the clustering 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 positive attitude that women have in their obligation to repay. Repaid loans are recycled into further loans and other development activities. Besides the interest income on the loans, Grameen is fortunate to obtain substantial financial benefits from international financial organizations. Thereby, the overall cost of Grameens borrowing remains relatively low. So, even though GB administrative expenses are very high, it has been possible for it to build up a substantial financial reserve (Hassan and Renteria-Guerrero, 1997). The Grameen claim on no-collateral from needy borrowers is questionable because GB 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 recovery conditions amount to financial and contractual collaterals. A comparison of the relative costs of such collaterals is not available, because no charity-based alternative financing scheme and program for alleviating economic hardship of the very poor has been formally established in Bangladesh. Contrarily, if such an alternative had existed as a pool of exigency fund for the poor and needy, we could compare the social alternative to interest-based loan operations by the interest-free, charity-driven microenterprise financing. However, the fact of the matter is that charity projects enjoy low cost and sustainable ways of generating seed money for social and economic uplift of the very poor. The sustained flow of charity-funds depends deeply on the moral responsibility and national fiscal policy framework aiming at poverty eradication and generating empowerment and entitlement of the very poor and destitute. Sen (1986) has argued incisively 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 ethical convictions in the community can establish the sustainable financial seed money for small-scale microenterprises. These would not have any transaction costs or interest charges on them. This spirit of giving reflects ethical consciousness contrary to selfinterest. Goulet (1997, p. 1167) characterized the difference between self-interest and ethical 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 to raise the well-being of the poor and needy members and generate sustainable means of livelihood for them would not depend on financial reserves. Accumulated retained earnings from previous productive operations could still be maintained, but only as exigency funds rather than essential investment funds (Choudhury and Hassan, 2001). Instead, with charity-funds the fullest possible project-wise expenditure is allocated annually for attaining the well-being goals and sustainability of the project. The value of the small-scale microenterprise thereby equals its sustainable charity fund plus the value 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 (ASHA HOPE). The project called ASHA (or HOPE) is an international grassroots development project centered on human resource development of the poor and needy in India. In many respects ASHA is similar to the WSP project highlighted in 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 human nature is molded, and thereby, an endogenous development transformation is injected into the grassroots. On the side of core values ASHA stands for non-political secular outlook. 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 their existing paid occupations elsewhere. Cooperation is manifest in collective discourse transcending individual attention in decision-making. ASHA is non-hierarchical among its workers and in project decision-making. Collective decision-making is carried out by decentralized accountability in each ASHA chapter with mutual respect

in decision-making. On the financial side, ASHA depends on donations from individuals, governments, international organizations and the private sector. It also raises funds by internal activities, such as sale of merchandise, fund-raising dinners and 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 and motivation at the grassroots are shared by WSP project in its sustainable perpetual charity-fund idea not risking productive transformation among the poor and needy trainees. Though unlike ASHA, which devotes to basic education for poor Indian children, WSP is devoted to poor village women as the target group. Also, financing being 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 women receiving the benefits of the WSP charity fund. These were managed from voluntary contributions 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 in terms 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 Malaysian Government on an interest-free basis. It is a micro-credit organization, not a microenterprise, 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 incomegenerating goals per se. Consequently, in recent times, AIM despite showing all the organizational characteristics of Grameen Bank and its loan recovery success, failed to alleviate poverty significantly among the recipients, although the Ikhtiar Trust Malaysia of the Government of Malaysia maintained AIM as a financial and political channel of interest-free funding for small-scale microenterprises (Ismail, 2001). 2.3.3 Small-scale microenterprise versus micro-credit. In general therefore, a smallscale microenterprise based on a continuous annual flow of charity-funds need not graduate into a micro-credit bank. A micro-credit bank charges high interest rates, exercises strict loan recovery procedures, and depends on large-scale external funding to build up financial reserves. The interest rates on such external flow of funds and grants are highly concessionary to the bank. A micro-credit bank earns good profits from the high differential interest rates it charges on its borrowers. The accumulated reserves plus interest incomes are used to undertake extraordinary operations of a micro-credit bank. Thus there is a hidden cost of financial dependence in a micro-credit scheme that makes its operation unsustainable in case the reserves decline and external funds cease to flow. The collateral charged by the micro-credit banking project is the opportunity cost equal to interest charges and loan recovery strictures on the borrowers. Contrarily, any charity-based resource stands free of opportunity cost. As well, the benefit/cost ratio for a micro-credit bank operation is calculated by the amount of micro-credits offered per unit of financial reserves held. In the case of charity-fund, benefits are freely determined by the level of income generated, and thus by productivity per unit of the charity fund gained in the small-scale microenterprise. As has been pointed out by many (Tennyson ed., 1999), microenterprise and microcredit are not the same concepts in grassroots development. While micro-credit focuses on 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, Grameen Bank as a micro-credit bank never really graduated into a truly microenterprise institution before it turned into a bank for the poor. Unlike a micro-credit bank, a microenterprise does not have the goal of building up reserves for financing grassroots projects. All financial assistance must come from socially mandated donations, and there must be a basis for this to continue in perpetuity. With the almost zero opportunity cost status of the charity-based small-scale microenterprise operations, sustainability of grassroots projects would be established if the annual flow of charity-funds is seen as a binding social obligation raising community consciousness. Such social consciousness requires the will, motivation and education 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 the charity-funds. An example is the British case of Charity Jobs (Charity Jobs, n.d.). Invoking such ethical values is quite possible in Bangladesh. A considerable amount of charitable funds can be collected annually in perpetuity and organized through community initiatives with the help of community workers, non-governmental organizations, practitioners and academicians. Such groups would provide organizational and financing means to establish on-going charity-funds that flow in perpetuity. 3. Womens sewing project in Satkania, Chittagong, Bangladesh as an example of a small-scale rural microenterprise for grassroots development 3.1 The WSP model The alternative model for organizing and financing self-sustaining small-scale microenterprises is exemplified by the case of Satkania Ghariberjihl (WSP) in Chittagong, Bangladesh and its replications and by growing village-based linkages generated. Like the Grameen idea, WSP grassroots development model is replicated at extended village levels, keeping in view that the goal of such operations is simply to improve, not to maximize the social well-being function by participatory grassroots processes of development. The spirit to improve reflects learning behavior, whereas maximization of output reflects competition for scarce resources. WSP was established by a concerned group of academics and practitioners in Chittagong with meager international financial contribution. WSP brings about for its members both social and economic gains in a complementary way. It has generated earning capability for itself and its members. The members are poor and destitute women coming from the local village community. They receive free training and gain both 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 WSPs entrepreneurial activities. Trainees become trainers as they graduate in their training and supervisory skills. The broader socializing dynamics of WSP are brought out by the linkages it develops with other village activities. Examples of such causally linked activities are the village marketing venue, the village school and replication of similar microenterprises in nearby villages. Financial sustainability of WSP is established by the collateral-free availability of charity-funds that come from international sources and some community donors on an annual basis. Such charity-funds are mandatory according to the Islamic law for grassroots uplift. Hence they form a perpetual moral duty on the donor for obligatory assistance of needy recipients.

3.2 Development indicators of WSP Table I gives the performance indicators of WSP, which has been in existence since 2004. During this time, WSPs popularity and self-reliant development of its members on 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 Sadaqah ZS) amounting to a mere Taka 30,000 in 2004. The ZS-flow of funds has

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Year

2004

2005

2006 9,090 3,330 45 40,500 30

Total by year 2006 9,090 3,330 102 82,800 77

Woman population in the village 8,690 8,825 Poor women in the village 3,335 3,315 Enrolment in the sewing project 10 47 Stipend distributed to trainees (at 900Taka/trainee) 42,300 Graduation 47 Number of trainers, supervisors and sub-trainees from trainees in good graduation ranks 1 11 12 Marriages of members 1 3 Income earned and shared by members (Taka) Zakat fund resource (Taka) 30,000 105,000 Assets (machine project house) 3 3 Planned expansion for 2007: embroidery, printing (batik-butik). 2008 expansion: CADCAM sewing, computer installation in village school Incentive Indicator (income stipend)/Zakat (%) 0 40.29 Productivity Indicator of WSP Income/Zakat 0 0

(from trainees) 6 3 7 16,000 16,000 100000 235,000 5 5

56.50 0.16

42.04 0.16

Notes: Total for all nearby villages together being served by the womens sewing project (WSP). Villages: Ghariberjhil, Goazerpara, Chotodemsha, Hosennagar, Korainagar and Chibban. Village Linkage Indicator: village market penetration of diverse products, e.g. bulk production of belts and bags for pilgrims to Makkah; 2 volunteers have started to promote WSP sales in urban markets of Chittagong (Reazuddin Bazar). All in all market penetration and thereby prospect for income generation 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 its members while continuing on the WSP replication in other villages. N.B.: Enrolment in WSP comprises 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. The data for 2007 are not complete. But early information shows a sustained fund of 100,000 USD for the year; and a fresh total enrolment of 40 young women, making the total cumulative enrolment in WSP since 2004 to be 146. A further interesting fact is that to date 7 young women students were married, given the WSP-credential of gained vocational training that assists young women in marriage 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 the existing stock of capital assets of WSP. All WSP assets belong to on-going WSP members and not to anyone else. This characteristic of the assets for the WSP-charitable project adds to its spiritual capital. That is because the perpetual charity of Zakat is forever relinquished to the ownership of the needy target groups for their social and economic uplift. These early information for the year 2007 indicate that sustainability of the WSP-project has been proven and its widening benefits to the extended village locations is expanding along with the acceptance of the project as part of the participatory socioeconomic development model in the culture of Bangladesh village setting

Table I.
Early indicators for the womens sewing project in the village setting

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sustained itself ever since on an annual basis. Zakat is a mandatory Islamic charity for the poor and needy. Thereby, some of the private sector charity-funds so collected annually 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 and Taka 30,000 invested in fixed capital and sewing training for the poor and needy. The WSP-training premise was provided by a villager who converted his disused outer premise (Daori) into a sewing center. It now houses the sewing machines and schooling furniture, a very humble beginning. Table I points out that the demand for training increased phenomenally from a mere one batch of ten students in 2004 to 47 students in three batches in 2005. By 2006, a total of 102 female students have received training with a sustained flow of ZS-charity fund equivalent to a total of Taka 235,000 between 2004 and 2006. Of the total number enrolled over the last two years 77 students have graduated with sewing skills producing 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 sewing products though of simple types and designs, have been marketed, bringing Taka 16,000 to the trainees during the first half of 2006. Recently, WSP has received an order for sewed bags for the out-going pilgrims to Makkah in December 2006. Islamic festival times are particularly busy for WSP. The social return of WSP proved to be strong. In total, seven women trainees got married upon completion or during training between the years 2004 and 2006. In Muslim 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 skills gained. Graduating students receive certificates of skill in sewing. What we note from the three-year statistics in Table I is that even with a limited though sustained financial resource from ZS-funds annually, and given the stock of its fixed assets at five machines including the donated housing premise for the project, the per capita allocation of the financial resource for an increasing enrolment size has resulted in income-generating capability for trainees. In other words, a fixed trend in capital input ratio with increasing number of trainees indicates rising productivity per trainee. Increased revenue per capita for the trainees is reflected in the projects income generating capability. The project members are now aiming at centralizing the income generating capability for the project. This would be accomplished by WSPs initiative to invite bulk orders from the village while freeing members to do their own marketing as well. Sales revenues from the WSP sponsored initiative are distributed among all those members who are involved in production and marketing. As trainees graduate and gain trainer-skill, a continuous gradation of training program is maintained. In this way, both self-reliance and equitable distribution of incomes by participation are maintained 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 the economic 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-scale microenterprise is the degree to which it can generate extended linkages with other

participatory socioeconomic activities in various sectors of the local village community. The immediate village-based linkages that WSP has established include a planned training extension by CADCAM computer-assisted project development for the embroidery and printing of Batik-Butik products. ZS-funds for such WSP operations are collected locally, nationally and internationally. In addition, the projected income generated by WSP adds to its financial soundness. Productivity and income-generating capability are enhanced by training, skill and marketing access. In this way, an important socioeconomic extension is created in the human resource development sector of the local village economy. Such a human resource development program that moves progressively into higher stages, such as computerization of sewing activities, embroidering and printing, carries with it bright prospects for opening up marketing potential and self-reliant development along with secured entitlement and empowerment for the poor and needy women members. The linkage between the village school and WSP generates circular feedback relations between these operations. While the growing potential of WSP causes extension 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 is permanently established. Evolutionary learning by village linkages is established. Inter-flow of resources between these activities reinforces the productive sustainability of both. The extension of such circular causation across many village-based linkages generates a participatory development process at the grassroots. Such a feedback process of circular causation forms a critical groundwork for participatory development and overall sustainability of village-based small microenterprises. The supply and demand routes between the local fabric market and WSP have generated income for the members. Increasing income potential, in turn, is well-known to enhance productive potential, market access and market expansion in the local village economy. Local rural poverty is cut down by the deepening of human resource development and marketable skills in WSP trainees. The fact of the matter is that trainees not only increase their skills by training but also receive a stipend to obtain such training. The stipend 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 the small-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 microenterprises are fully decentralized and are vested with the women members, between trainers as managers and trainees as other members. Cooperative decisions are made by discourse and 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 the degree of comprehensive human resource development that women receive and convert into production. Here the idea of human resource development emanating from WSP and expanding into intra- and inter-village linkages with diverse activities takes up a comprehensive meaning. That is, the model of participation and cooperation, linkages and learning between activities play their central roles in defining the broader domain of HRD in WSP. Sustainability of resource flow by channeling mandatory charity-funds is possible in 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, the inner growth and productivity could not be attained. In order to inspire these values and motivation in the women members and others in the community, monthly school seminars 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 moral consciousness. With the use of the guaranteed ZS-funds it has been possible for WSP to impart training to both Muslim and non-Muslim needy village women. Women with better economic status can be admitted with nominal fees. They do not enjoy the stipend benefits of ZS. Necessary screening is maintained to determine the needs and economic conditions of students. As a mandatory take from wealth (liquid assets) plus savings plus income of the Zakat payer net of permissible annual exemption (Nisab), Zakat assumes its fiscal status in the Islamic community. Thus the ZS-fund is organized away from being mere voluntary charity and expenditure in non-developmental directions, such as handouts to the poor and needy, the sick and debtor. Instead, the ZS-fund is organized as a social security fund for ameliorating needy individuals and households according to a social development planning framework. ZS forms a social fund of and by the Islamic community. It acts as spiritual financial capital for development purposes. Hence it forms the corner stone of fiscal expenditure and receipts for the community. 4. Compounding charity fund (ZS) with development financing index The argument of this paper is that for attaining a heightened level of impact on poverty alleviation, human resource development and income generation, and thereby, selfreliant empowerment for target groups, sustainability of the ZS-fund, all must be combined annually with other productive financial instruments. A compound development financing instrument is thus constructed. We therefore recommend that ZS ought to be linked with its complementary financing 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, equity participation, joint ventures and co-financing. We have now four development financing instruments, (Z Zakat, S Spending in the good things of life, T Trade, P replacement of interest by participatory financing instruments). These instruments replace the interest-based modes of financing and collaterals. The cooperative financing instruments can be compounded to form a comprehensive development financing indicator in attaining community social well-being. 5. Compounding development financing index with social well-being 5.1 Development financing index as a measure of social well-being The social well-being criterion for socioeconomic development is expressed as a compound function of variables like poverty alleviation, productivity (income generation), village-based linkages and the social indicators of enrolment ratio and marriages 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 derived from opinion surveys on the relationship between training and marriage prospects. The correspondence between the social well-being function and the compound development 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 the no-collateral variable in the above-mentioned linked activities. Such a calculated indexvalue 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 the simulation of social well-being in reference to the feedback between the variables and the index. Socioeconomic development impact ensuing from community-based small-scale microenterprises, as exemplified by WSP, is now understood as a simulated process of systemic learning caused by participation and linkages between the variables representing their underlying community-based socioeconomic activities. This is equivalent 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 recursively affected by the index values and by the variables of the social well-being function. A nexus of circular causation is thus generated between all the variables and the recursively determined simulated values of the financial index. These estimated variables yield simulated values of the social well-being function. The resulting simulation model can be easily computerized and implemented at the village community levels. This can be the Satkania Uppazillah Office by virtue of the easily recordable data arising from small-scale sample, which expand with expanding inter-sectoral learning linkages. On a larger scale, such a model can be computerized at the Bangladesh Islamic Bank. Figure 1 depicts the circular causation between (Z, S, T and P). The system-oriented learning process that conveys the meaning of operational sustainability in social development planning is implied by such circular causation. Village-based linkages signify the extensive complementarities that underlie the concept of operational sustainability in grassroots development. By the method of circular causation every variable in the boxes in Figure 1 is shown to interact, integrate and co-evolve along the development path. In this way, the evolving participatory processes in systemic learning are sustained. Let the recursive learning variable be denoted by -variable. -values are endogenously regenerated in the 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 ethical parameters and their induced consequences are referred to in the literature as spiritual capital (Zohar and Marshall, 2004). -values also indicate a positive transformation of the compound financial index by virtue of its central role in simulating the social well-being function. Hence a -value reflects a positive monotonic value of the index. The simulation exercise implies processes of re-strategizing market values by the learning impact, village linkages, institutional changes and micro-level policies. Each of the variables in the social well-being function is induced by the synergetic consequences of the -variable. That is by the compound index. Thus in the end, the -variable is determined in the entire

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

system of circular causation by recursive feedback between the simulated socioeconomic 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 evolutionary vector be denoted by X comprising the various boxes in Figure 1. X denotes the vector of estimated values of (Z, S, T and P) generated by circular causation between these. The participatory development transformation attained by means of small-scale village microenterprise as evinced by WSP causes integration between the variables measuring performance and well-being through village socioeconomic linkages. The compound financial index of X (Z, S, T, P) plays the critical role in such a transformation. Subsequently, this compound index as a positive monotonic measure of -value endogenizes the social well-being function, causing circular causation to occur between the critical socioeconomic variables. 6. Words of caution on charity-funds for socioeconomic development Though this paper has highlighted on the productive use of charity funds that exist in perpetuity, there are still concerns of dependency syndrome that can arise. Choudhury and Malik (1992) have shown in the case of Malaysia that estimated macroeconomic models in Zakat, and socioeconomic variables do show positive relationships indicated by the estimated coefficients of the log-linear forms. But the sign of the investment variable in relation to Zakah-variable was found to be negative. This is worry to the fact that Zakah and investment may be substituting each other in relation to productive grassroots change. Contrarily, we have argued in this paper for a positive relationship between these variables.

Thus, good control and supervision are required at the grassroots to monitor the use of perpetual charity-funds into productive investments. As noted in this paper by the example 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 the midst of good knowledge-induction and institutional guidance so as to make the perpetual charity-fund a socioeconomic development outlet. 7. Conclusion: policy prospect on small-scale microenterprises for village-centered development planning in Bangladesh 7.1 Highlighting the participatory model of development planning A process-oriented participatory model of development planning has been prescribed for the grassroots. Such a model fits in well in village-centered development planning in Bangladesh. The critical variables of social well-being are identified as human resource development, poverty alleviation, and income generation, reflecting productivity, empowerment and entitlements of members of small-scale microenterprises. Also, there is the social variable such as marriages of members, which is found to convey the prestige effect of training. Then there is the social synergy of village-based linkages caused by small-scale microenterprises. Circular causation between these variables reflects the meaning of sustainability gained through such social organisms. To date, Bangladesh villages have failed to utilize productively the mandatory and sustainable flow of ZS-funds in small-scale microenterprise development. The experience of WSP model shows that there is a substantial potential for self-reliant development at the grassroots, one that is easily implemented at minimum cost but having good performance measures economically and socially. In the absence of such an innovative way of implementing small-scale microenterprises for self-reliant and empowered development of the poor and needy with sustainable seed money and low cost of operation but yielding socially and economically productive prospects, a great deal of the charitable funds is leaked out of development at the grassroots. Such a lost opportunity ought to be reversed for the well-being of the very poor and needy. 7.2 Policy perspective The appendix gives a computer-generated Spatial Domain representation of villages in the vicinity of WSP. The SDA-generated figures show the distribution of enrolment and poverty by distance of various villages from the Growth Centre (market). Marketing outlets and trading prospects for WSP are to be found in the Growth Centre. The SDA simulations imply that there is positive correlation between training, market proximity and poverty reduction among the target group of women. Such a computerized model can be stored with Uppazillas for continuous monitoring of grassroots development in the context of Bangladesh development planning.
References ASHA (n.d.), available at: www.ashanet.org/index.php?pageabout-asha-corevalues (accessed 14 January 2007) Charity Jobs (n.d.), available at: www.CharityJob.co.uk Choudhury, M.A. (1998), Integrating the grassroots with paradigms of trade and development: the case of Malaysia, in Choudhury, M.A. (Ed.), Studies in Islamic Science and Polity, Macmillan, London, pp. 135-68.

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Choudhury, M.A. (2002), Microenterprise development using Islamic financing and organizational instruments: modality and practicum, International Journal of Social Economics, Special Issue: Socioeconomics of Charity and Poverty Alleviation, Vol. 29 No. 1/2, pp. 119-34. Choudhury, M.A. and Hassan, M.K. (2001), The role of Zakat in non-wage versus wage-earning labour markets, Review of Islamic Economy, Vol. 10, September. Choudhury, M.A. and Malik, U.A. (1992), Quantitative analysis and policy conclusions, in The Foundations of Islamic Political Economy, Macmillan, London, pp. 284-319. Ekins, P. (1992), A New Global Order, Grassroots Movements for Global Change, Routledge, New York, NY. Gibbons, D. and Kasim, S. (1990), Banking on the Rural Poor, Center for Policy Research, Universiti Sains Malaysia, Penang. Goodman, A. (2003), Now What? Developing Our Future, Peter Lang, New York, NY. Goulet, D. (1997). Development ethics: a new discipline, International Journal of Social Economics, Special issue: socio-economics of community development in global perspectives: part I festschrift in honor of Imam Ghazzali, the great twelfth-century epistemologist, Vol. 24 No. 11, pp. 1160-71. Goulet, D. (1999), Defining wealth, rethinking development, achieving sustainability, Humanomics, Special issue: the role of microenterprise in community economic development: a global perspective, Vol. 15 No. 2/3, pp. 42-59. Government of Bangladesh (GOB) (2003), Population Census 2001 Preliminary Report, Bangladesh Bureau of Statistics. Government of Bangladesh (GOB) (2003), A National Strategy for Economic Growth, Poverty Reduction and Social Development, Ministry of Finance, Dhaka. Government of Bangladesh (GOB) (n.d.), The Fifth Five Year Plan 1997-2002, Planning Commission, Bangladesh. Hassan, M.K. and Renteria-Guerrero, L. (1997), The experience of the Grameen Bank of Bangladesh in community development, International Journal of Social Economics, Special issue: socio-economics of community development in global perspectives, part II: festschrift in honor of Immanuel Kant, the great eighteenth-century epistemologist, Vol. 24 No. 12, pp. 1488-523. Ismail, R. (2001), Economic and social impact of Amanah Ikhtiar Malaysia (AIM) scheme: a case study in Kedah and Terengganu, Humanomics, Special issue: community economic development in global perspectives, Vol. 17 No. 1/2, pp. 141-55. Kasim, S. (1999), Credit for self-employment and micro-enterprise in community economic development, Humanomics, Special issue: the role of micro-enterprise in community economic development: a global perspective, Vol. 15 No. 2/3, pp. 60-98. Sen, A.K. (1986), Exchange entitlement, in Sen, A.K. (Ed.), Poverty and Famines, an Essay on Entitlement and Deprivation, Clarendon Press, Oxford, UK, pp. 167-73. United Nations Development Program (UNDP) (1997), Human Development Report, Oxford University Press, New York, NY. United Nations Development Program (UNDP) (1998), Human Development Report, Oxford University Press, New York, NY. United Nations Development Program (UNDP) (1999), Human Development Report, Oxford University Press, New York, NY. United Nations Development Program (UNDP) (2000), Human Development Report, Oxford University Press, New York, NY.

World Bank (2000), World Development Report 2000-2001, Oxford University Press, New York, NY Zohar, D. and Marshall, I. (2004), Spiritual Capital, Berrett-Koehler Publishers, San Francisco, CA. Appendix. Correlation between enrolment and distance of villages from growth point and between incidence of poverty and growth point

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Figure A1.
SDA generated relationship between enrolment and growth centre

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Figure A2. SDA generated relationship between poverty and growth centre

About the authors Masudul 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 in Sultan Qaboos University, Muscat, Sultanate of Oman. He is also the co-founder and International Chair of the Post-Graduate Program in Islamic Economics and Finance at Trisakti University, Jakarta, Indonesia. He supervises five Doctoral students in this program. He has contributed innumerable scientific articles and books through international scholarly outlets and won major research grants in his research area of focus on different themes. His most recent and significant works in the area of research focus are the five volumes entitled Science and Epistemology in the Quran (5 Volumes, Edwin Mellen, 2006), with individual volume title. Also by the same publisher are Explaining the Quran (2003, Edwin Mellen) and Development Planning in the Sultanate of Oman (with M. Shahadat Hossain) using the method of relational epistemology. The Islamic World-System, a Study in Polity-Market Interaction was published by RoutledgeCurzon (2004). Computing Reality (with Shahadat Hossain) is in press with Aoishima Research 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

Literature) for the last 23 years. HIJSE is a quarterly journal specializing in endogenous ethics in socio-scientific reasoning. The journal is published and distributed by Emerald Publishers in the UK. Masudul Alam Choudhury is the corresponding author and can be contacted at: masudc@qu.edu.om Mohammad Shahadat Hossain is Professor and Chairman in the Department of Computer Science at Chittagong University, Bangladesh. He received his MPhil and PhD degrees in Computation 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 and Ethics. He is continuing his research on computer models of economics, business, engineering and 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 Professor and 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 his post-doctoral research at Rhode Island University, USA in 1997-1998 under Fullbright Fellowship. More than 100 research papers published in refereed journals including Sustainable Development (John Wiley & Sons Ltd.), 10 research projects completed, sponsored and financed by international funding agencies and 15 research works presented at international seminars. He organized 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 natural resources products and consumer goods in Bangladesh. He is the winner of many awards and honors including Fullbright Fellowship, Commonwealth Scholarship, IDB Fellowship, AMDISA Fellowship and DFID award for research, teaching and contribution to the profession.

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