VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations

, Volume 20, Issue 1, pp 50–70

New NGO–Elite Relations in Business Development for the Poor in Rural Bangladesh

Authors

    • Integrated Research System for Sustainability ScienceUniversity of Tokyo
Original Paper

DOI: 10.1007/s11266-008-9077-5

Cite this article as:
Makita, R. Voluntas (2009) 20: 50. doi:10.1007/s11266-008-9077-5

Abstract

Through observation of two programs in broiler rearing and silk production implemented by a Bangladesh nongovernmental organization (NGO), this article explores what role an NGO can play as an intermediary in business development for the poor with focus on the relations between the NGO and local elites. In theory, as market demand for a product or service increases, the business attracts more interest from local elites, to whom all the benefits tend to go in the end. However, the two cases suggest feasible ways for the poor with intermediary to open up a business opportunity in the elite-controlled rural economy: market differentiation and the use of a stagnant industry. As a result, new NGO–elite relations emerge. Considering the limited life of such relations, efforts should be concentrated on enabling the poor to make the most of the business opportunity in the short term under the new NGO–elite relations.

Keywords

BangladeshBroiler rearingSilk productionBusiness developmentLocal elitesNongovernmental organizationsPoverty reduction

Résumé

En observant deux programmes, la production d’élevages de poulets et la confection de soie, implémentés par une organisation non gouvernementale (ONG) du Bangladesh, cet article explore quel rôle peut jouer une ONG en tant qu’intermédiaire dans le développement d’une entreprise destinée aux pauvres, en mettant l’accent sur les relations entre l’ONG et les élites locales. En théorie, lorsqu’il y a une augmentation de la demande pour un produit ou un service, l’entreprise attire davantage l’intérêt des élites locales qui finissent par s’accaparer de tous les bénéfices. Cependant, ces deux cas suggèrent la faisabilité pour les démunis avec l’aide d’un intermédiaire dans le but de générer une activité économique dans le cadre d’une économie rurale contrôlée par l’élite : la différenciation du marché et l’utilisation d’une industrie stagnante. Il en résulte que de nouvelles relations entre l’ONG et l’élite s’établissent. En considérant la durée de vie limitée de telles relations, des efforts devraient être faits pour permettre aux plus démunis d’obtenir le plus de leur activité économique dans le court terme sous l’égide des relations entre l’ONG et les élites locales.

Zusammenfassung

Durch Beobachtung von zwei Programmen in Hähnchenaufzucht und Seidenproduktion, die von einer Nichtregierungsorganisation (NRO) in Bangladesch implementiert wurden, erforscht dieser Artikel die mögliche Rolle einer NRO als Mittelsmann in der Entwicklung von Geschäften für Arme, mit Fokus auf die Beziehungen zwischen NRO und lokaler Elite. Theoretisch gesehen, wenn die Marktnachfrage nach einem Produkt oder Service steigt, findet ein Geschäft mehr Beachtung durch die lokale Elite, zu der im Endeffekt häufig aller Nutzen geht. Die beiden Beispiele zeigen mögliche Wege für die Armen, durch einen Mittelsmann eine Geschäftsmöglichkeit in einer von der Elite kontrollierten ländlichen Ökonomie zu erschließen: durch Marktabgrenzung und Nutzung einer stagnierenden Industrie. Als Ergebnis entwickeln sich neue Beziehungen zwischen NRO und Elite. In Anbetracht der begrenzten Lebensdauer solcher Beziehungen sollten sich Bemühungen darauf konzentrieren, die Armen zu befähigen, mittels der neuen NRO-Elite-Beziehungen kurzfristig das meiste aus der Geschäftsmöglichkeit zu machen.

Resumen

Mediante la observación de dos programas de cría de pollos y producción de seda llevados a cabo por una organización no gubernamental (ONG) de Bangladesh, este artículo analiza el papel que pueden desempeñar las ONG como intermediarias en el desarrollo de los negocios de los pobres, centrándose especialmente en las relaciones entre las ONG y las elites locales. En teoría, a medida que aumenta la demanda del mercado por un producto, el negocio atrae un mayor interés de las elites locales, que en última instancia suelen acaparar todos los beneficios. Sin embargo, dos casos sugieren que hay formas viables de lograr que los pobres con intermediarios consigan oportunidades de negocios en la economía rural controlada por las elites: la diferenciación del mercado y el uso de una industria paralizada. El resultado de ello sería la aparición de nuevas relaciones entre las ONG y las elites. Habida cuenta de la duración limitada de estas relaciones, los esfuerzos deberían concentrarse en permitir a los pobres aprovechar al máximo las oportunidades de negocios a corto plazo que proporcionarían las nuevas relaciones entre las ONG y las elites.

摘要

本文通过对孟加拉国非政府组织(NGO)实施的肉鸡饲养和丝绸生产两大计划进行观察分析,探讨了非政府组织(NGO)作为中介机构在促进贫困地区经济发展过程中所发挥的作用,同时重点阐述了非政府组织(NGO)和当地人才之间关系。从理论而言,随着市场对于产品或服务需求的不断增加,企业得以吸引越来越多的当地人才,最终促使所有利益相关方的参与。而这两个实例也进一步揭示了贫困地区借助中介机构打开商机以推广人才型农村经济的可行办法:注重市场差异性与对滞后产业的利用。非政府组织(NGO)与人才之间的新型关系也因此应运而生。考虑到这类关系的生命周期相对较短,故而应重点促使贫困地区在非政府组织(NGO)与人才之间的这种新型关系下,最大限度地在短期内拓展更多的商业机会。

要約

本論文では、バングラデシュ非営利団体(NGO)が実施した蚕座と絹の生産における2つのプログラムを通して、NGOとローカルエリートの関係に焦点を当てつつ貧困者の事業発展においてNGOがどのような仲介者の役割を果たしているかを追及する。理論的には、製品もしくはサービスの増加の需要を求められる市場は最終的に利益を得るローカルエリートにとって魅力的である。しかしながら、市場の分化と停滞産業の利用という2つのケースにおいては、貧困者はエリートによって制御された農村経済におけるビジネスチャンスを仲介者とともに実現できるといえる。その結果として新しいNGOとエリートの関係は出現する。そのような関係における限定的な生活を考慮すると、貧困者は新しいNGOとエリートとの関係を短期間で構築し、ビジネスチャンスを実現する努力が必要である。

ملخص

من خلال مراقبة إثنين من البرامج في تربية و إنتاج الحرير التي تنفذها المنظمات غير حكومية (NGO) في بنجلاديش، يستكشف هذا البحث الدور الذي يمكن أن تلعبه المنظمات غير الحكومية (NGO) بوصفها وسيطاً في تنمية الأعمال التجارية للفقراء مع التركيز على العلاقات بين المنظمات غير الحكومية(NGO) والصفوة المحلية. من الناحية النظرية ، كلما زاد طلب السوق للمنتج أو للخدمة، الأعمال التجارية تجتذب المزيد من الاهتمام من الصفوة المحلية ، الذين تميل كل الفوائد إلى الذهاب إليهم في نهاية المطاف. ومع ذلك ، فإن اثنين من الحالات تشير إلى طرق يمكن تنفيذهما للفقراء مع وسيط لفتح فرصة تجارية في الإقتصاد الريفي الني تسيطر عليه الصفوة: تباين السوق و الركود الصناعي. نتيجة لذلك، علاقات جديدة تنشأ بين المنظمات الغير حكومية(NGO) والصفوة. إذا أخذنا بعين الإعتبار العمر المحدود لهذه العلاقات، ينبغي أن تتركز الجهود على تمكين الفقراء من الاستفادة القصوى من الفرص التجارية في الأجل القصير في إطار جديد للعلاقات الجديدة بين المنظمات الغير حكومية(NGO) والصفوة.

Introduction

Small and micro enterprises have been recognized as an effective instrument for the dual goals of economic growth and poverty reduction in many developing countries (Mead and Liedholm 1998; Jeppesen 2005; Agbeibor 2006; Caniels et al. 2006). The dual goals mean that both poor and non-poor people participate in the local economy through enterprises. Although a clear borderline cannot be drawn between, enterprises for growth and those for poverty reduction form different domains. Enterprise development programs for the poor are synonymous with income generation programs aiming to provide beneficiaries with a supplementary source of income; and interventions for the non-poor seek to increase the accumulating capacity of their enterprises (Sahley 1995, pp. 26–27). Duality, composed of the traditional sector as the majority and the modern sector as a small segment, has continued to exist (e.g., Ghose 1990; Toufique 2001).

Nongovernmental organizations (NGOs) have supported both types of enterprises as agencies (e.g., Havers 1991). In an NGO-proliferating country such as Bangladesh, some NGOs themselves have become quasi-commercial enterprises which do not necessarily create employment for the poor (Zohir 2004, p. 4112). While there are programs which support a specific category of poor people in their business development, markets are open to all, both rich and poor, in a real economy. Duality in the enterprise sector suggests that poor people’s enterprises have failed or never tried to compete with wealthy people’s enterprises in the same market. To avoid competition with wealthier people’s enterprises, some NGOs artificially created demand for their poor beneficiaries. However, supplier-oriented products lacked sufficient demand for them (Ledgerwood 1999, pp. 64–66; Caniels et al. 2006) and such demand, if any, did not last long (Riddell and Robinson 1992). Poor people’s enterprises tended to provide low-quality products and services, which were tailored to the needs of only relatively low-income urban and rural households (Harper 1984; OECD 1993). Poor people’s enterprises had no choice but to remain in their own domain separate from the domain of economic growth.

If NGOs want to help poor producers or service providers to get out of poverty, they need to make the poor shift from the domain of poverty reduction to that of economic growth. In the era of globalization, businesses have been more and more required to respond to market needs. As Caniels et al. (2006, p. 430) argue, a vital requirement for market-driven business development is the establishment of lasting provider–buyer relations based on trust and loyalty—something obviously beyond the capacity of poor entrepreneurs. NGOs are, therefore, expected to play the role of intermediary between poor entrepreneurs and markets. For instance, Kindness and Gordon (2001, p. 17) described such a role as the development of linkages to traders and other stakeholders in the marketing chain.

The objective of this article is to explore how an NGO as intermediary can open up a business opportunity for poor producers and link them with competitive markets. In exploring this inquiry, I focus on relations between an NGO who work for the poor and local elites who may operate enterprises in the domain of economic growth. The next section explains a conventional theory of the NGO–elite relations drawn from a literature review. By comparing with this theory, I analyze real NGO–elite relations which emerged through an NGO’s implementation of two income-generating programs in rural Bangladesh. The two cases show how differently local elites reacted to different types of economic activities, how the NGO played the role of intermediary, and what relations emerged as a result. Furthermore, discussion is extended to the opportunities and limitations of the newly emerging NGO–elite relations for poverty reduction.

NGO–Elite Relations: A Conventional Theory

Local elites in agrarian societies are “the people who make or shape the main political and economic decisions” (Hossain and Moore 2002, p. 18). Sanyal (1991, p. 1378) asserted: “How income was to be generated, by which types of activities, and in which niches of the market were strongly influenced by the economic interests of the local elite, who also controlled the local government.” They “tend consistently to be the least sympathetic to the poor… and the most virulent opponents of political and social movements that promote the interest of poor people” (Hossain and Moore 2002, p. 18). Local elites play the role of patrons as long as poor clients are powerless under the existing balance of power. However, they change into opponents when their economic interests and political authority could be challenged by successful development (Gillespie et al. 1996). In community-driven development programs open to all, local elites are likely to capture benefits (Havers 1991, p. 17; Platteau and Gaspart 2003; Platteau 2004; Dasgupta and Beard 2007).

Relations between development NGOs and local elites have been depicted as a kind of antagonism from two aspects. First, as mentioned above, local elites may oppose an NGO if the organization collapses the existing balance of power by supporting elites’ clients (Gillespie et al. 1996). Second, the private sector, which traditionally has been controlled by local elites in rural areas, sees in NGOs a market rival (Stiles 2002, p. 840). In Bangladesh, many NGOs have moved into commercial activities to be financially self-reliant (Zohir 2004, p. 4112). Such NGOs are, by themselves, business entrepreneurs. NGOs are thus criticized: “[They] have an unfair advantage in business by virtue of a whole panoply of formal and informal subsidies and protection” (Stiles 2002, p. 841). Even if an NGO wants to keep good relationships with local elites, local elites are likely to regard the NGO as their antagonist as long as the NGO is involved in business development. When an NGO attempts to open up an economic opportunity for the poor, the most plausible outcome inferable from the existing literature is local elites’ direct or indirect obstruction of the NGO’s activities.

I compare this conventional theory on NGO–elite relations with real settings in which a Bangladesh NGO implemented two income-generating programs for the poor. Bangladesh has “one of the largest and most sophisticated NGO sectors in the developing world” (Gauri and Galef 2005, p. 2046). Bangladesh is also known for field-level bureaucrats and political leaders who tend to disturb the activities of NGOs in favor of the poor (Ahmad 2002, pp. 101–102; Ulvila and Hossain 2002). From the perspectives of both local elites and the NGO, analysis focuses on how the realities were different from the above-mentioned theory and what caused such differences.

A Case Study Approach

The Study NGO

The Bangladesh NGO, the Institute of Integrated Rural Development (IIRD), has since 1987 been working in rural Bangladesh with the long-term objective of establishing a local model of poverty eradication through integrated rural development. They began their activities at Dhunot Thana, Bogra District, and gradually extended activities to six thanas in four districts.1 I chose this NGO for two reasons. First, the IIRD actually worked for the poorest while some NGOs preferred less poor people. The mid-term evaluation report submitted to IIRD’s largest donor, the European Commission, judged that IIRD was “reaching the bottom segment of the population” (Ahmad and Khanum 2002, p. 34). For instance, participants in IIRD’s poultry program had, on average, only 6.2 decimals of homestead land per household.2 This size of land ownership was small compared with other NGOs’ members.3 The majority of the beneficiaries could write only their own names or were completely illiterate. Second, the IIRD not only provided their poor beneficiaries with credit—a prevailing form of assistance from NGOs in Bangladesh (e.g., Gauri and Galef 2005)—but also assisted them in their income-generating activities from a number of directions. This integrated approach to income generation can reveal relationships between the NGO and other stakeholders surrounding the NGO’s programs, more saliently than the simple provision of credit.

This article focuses on two of the income-generating programs the IIRD implemented in Dhunot Thana: broiler rearing and silk production. In both programs, a female member from each beneficiary family became the main actor to complement main income the family’s male breadwinner earned, but most participant families regarded broiler rearing or silk production as a family business. While both economic activities were characterized by a sufficient and increasing domestic demand for the final products, broiler rearing was a comparatively new business IIRD introduced in the locality and silk production was a traditional industry of the Bengal region. These programs were used not to evaluate the effectiveness of the programs but to observe the relationships between the IIRD and non-beneficiary wealthier people, including local elites, as a repercussion of the programs. The different natures of the two economic activities were expected to bring about different repercussion effects.

Two Cases: Broiler Rearing and Silk Production

Broiler Rearing

Poultry rearing is an integral part of rural life and agribusiness. Approximately 90% of rural households raise poultry in Bangladesh (Alauddin and Hossain 2001). While most birds are kept in scavenging systems and are fed on household waste and crop residues, a recent change in Bangladesh’s poultry sub-sector is the emergence of private entrepreneurs who are setting up small-scale, semi-industrial farms and are producing day-old-chicks. A majority of poultry rearers are now shifting to the purchase of their layer and broiler chicks from these semi-industrial farms (Huque et al. 1999; Swan 1999). In Dhunot Thana, however, there were few such modern poultry rearers; most people believed that broiler rearing was introduced by IIRD’s poultry program.

Since its start in April 2001, the broiler rearing program of IIRD has so far involved a total of 280 households in 25 villages (as of April 2004). A female member of each beneficiary household receives initial basic training in broiler rearing from IIRD. IIRD provides each rearer with 10,000 Taka (Tk.) as a loan for the initial investment.4 For quality control, IIRD chooses and distributes the basic equipment and key variable inputs (day-old chicks and feed) in kind. In this poultry program, each rearer is involved in a contractual relationship with IIRD. After purchasing them from a private hatchery, IIRD distributes 100–200 chicks to each rearer in each rearing cycle. For about 35 days, she rears chicks into grown broilers in her poultry hut. During the rearing period, IIRD gives her technical support, including vaccinations. When the broilers are judged sufficiently marketable, IIRD collects them from the respective rearers and ships all the broilers to the capital city, Dhaka. IIRD then calculates production costs, and distributes the profit to each rearer less a deduction for the loan repayment (with 5% annual interest). Seven or eight rearing cycles occur per year.

Silk Production

For many centuries, silk production was the dominant agri-industry in several regions of Bengal. After independence in 1971, the Bangladesh Sericulture Board (BSB), a semi-statutory body established in a traditional silk area, was expected to be responsible for all-round development of the silk sector. Contrary to expectations, however, silk production in Bangladesh did not expand due to BSB’s monopoly in silkmoth egg supply and inefficient management common to all state-owned enterprises. Domestic surplus demand for raw silk was mainly supplemented by imports of Chinese silk (Bakht et al. 1988; van Schendel 1995; Halder 1999).

In 1998, the government, with assistance from the World Bank, put into action the Silk Development Project to revive the silk sector into a promising industry. Within the project, an autonomous, nonprofit company, Bangladesh Silk Foundation (BSF) was newly established to implement the project. BSF does not support producers directly, but works through NGOs with established internal silk production programs. Since the mid-1980s, several NGOs had introduced sericulture as an income-generating activity for rural women in non-traditional silk areas. Eight organizations, including IIRD, have received support as BSF’s partner-NGOs (BSF 2003).

Before the start of the World Bank-supported project, IIRD introduced silk production to Dhunot Thana in 1993. The program consists of five components: (a) mulberry tree caring; (b) silkworm rearing; (c) home spinning; (d) employment in IIRD’s reeling center; and, (e) employment in their weaving centers. Silkworm rearing is central to the program; in 2003, some 133 out of 416 program participants were silkworm rearers in Dhunot Thana. The silkworm rearers purchase eggs exclusively from IIRD and sell their cocoons exclusively to IIRD. IIRD provides the silkworm rearers with mulberry leaves free of charge. IIRD also provides a sericulture loan of up to Tk. 6,000 per rearer for the initial investment, and the rearers are required to repay the loan in 2 years. One rearing period takes 25–30 days and is repeated four times a year. During each rearing period, IIRD monitors the rearers’ activities every day.

Data Collection

To observe the reaction of local elites to the broiler rearing program, I focused on a village in Dhunot Thana. This village, which I shall call “P” village, had the maximum number of program beneficiaries, 20 households, and private, non-beneficiary poultry enterprises. P village was adjacent to the Thana headquarters, the administrative and commercial center of Dhunot Thana, where poultry-related traders had their businesses. Primary data were collected from October 2003 through April 2004, mainly through semi-structured and open-ended interviews with the IIRD staff, participants in the program, neighboring wealthier farmers, and private poultry enterprises and traders.

In silk production, there existed no private enterprise equivalent to the IIRD program in Dhunot Thana; most private enterprises centered on the traditional silk areas in other districts. Therefore, primary and secondary data were collected from a macroscopic point of view to analyze why silk production did not spread among wealthier farmers in the IIRD program venue. Prior to interviews with the IIRD staff, participants in the program and neighboring wealthier farmers, interviews were also conducted in January 2003 with silk production-related government organizations and private enterprises in a traditional silk area.

Introducing a New Economic Activity: Broiler Rearing

The Local Elite Perspective

In Dhunot Thana, the traditional scavenging system was still the principal form of local poultry rearing. There were only a few proactive wealthy farmers who started modern poultry rearing prior to the IIRD program. One of them, T1 in Table 1, started modern poultry rearing in P village in 1997 and also opened the first specialist poultry shop in the commercial area near the Thana headquarters in 1999, retailing chicks, poultry feed, vaccines, and grown broilers together with rice from his rice mill. However, the poultry business did not extend further. Only after the start of the IIRD poultry program, following T1, did poultry-related traders open their shops, one after another, in the commercial area (Table 1). All these traders admitted that their business had been growing, except for the influence of bird flu.5
Table 1

Poultry-related traders in Dhunot Thana (as of April 2004)

Trader

Content of business

Starting time

Remark

T1

Retail of day-old chicks, poultry feed, vaccines and broilers

1999

 

T2

Wholesale and retail of broilers

Mid-2001

A participant in the IIRD poultry program

T3

Wholesale and retail of poultry feed, medicines and equipment for poultry rearing

Late 2001

 

T4

Wholesale and retail of broilers

October 2002

 

Retail of day-old chicks

March 2003

T5

Wholesale and retail of broilers

Late 2002

 

T6

Wholesale and retail of broilers

June 2003

The exclusive dealer of IIRD

The rapid increase of poultry-related business in the commercial centre of the Thana suggests that there was an increase in the number of private poultry farms in the entire Thana. Four of the six poultry-related traders also operated poultry farms in their residential villages. They originally entered into the trading business to enlarge sales channels for their own poultry farming, as well as to make the procurement of inputs easier. The increase of private poultry farms was also apparent in P village. Following T1’s poultry farm, seven broiler farms and one layer farm opened after the start of the IIRD poultry program in this village. All these private farm managers confessed that their business was directly or indirectly stimulated by the IIRD poultry program. As Table 2 shows, the private poultry farms in P village were larger in scale and better equipped than those of IIRD’s beneficiary-rearers. The owners of the private farms were from wealthier families, including a former Union chairperson who represented the local elites.6 When they were seeking an additional business opportunity, the IIRD poultry program gave them a good idea.
Table 2

Major differences between the IIRD beneficiary-rearers and local poultry farms, P village

 

IIRD beneficiary-rearers

Local private farms

(1) Physical and financial resources

    Initial investment

Tk. 10,000

Tk. 30,000–Tk. 180,000

    Capital

Loan (+grant) from IIRD

Own; institutional loan

    Financial sources

IIRD only

Various

    Production capacity

100–200 chicks

300–1,200 chicks

    Facilities and equipment

Necessary minimum; without electricity

Larger and higher-quality; with electricity

(2) Human resources

    Education

None

Year 7 to Bachelor’s degree

    Training for poultry

From IIRD

From an agricultural college; governmental programs; personal networks

    Other family labor

Available

Not used

    Hired labor

None

Available

(3) Sales

    Sales channel(s)

Fixed

Variable

    Primary market

Dhaka

Local

    Sales price

Fixed

Variable

    Sales lot

The whole

Divided into several lots

(4) Other managerial characteristics

    Managerial form

Sub-contract

Independent

    Positioning in household economy

Sole regular income source

Side business

Note: In this village, 20 households benefited from the IIRD poultry program

In response to economic growth in Bangladesh, diversification out of crop farming was underway, especially among wealthy farmers (Hossain 2004). In Dhunot Thana as well, many farmers always looked for new opportunities to diversify their income sources. Hence, the majority of the poultry farms were operated by the owner-families as their side business. The farm owners had main income source(s) and entered into the poultry business to gain additional income for further accumulation. For instance, “SI” in P village, jointly with his brothers, operated the following businesses:
  • SI, the eldest brother: Broiler rearing (since November 2002) and supervision of all activities.

  • The second brother: Crop farming (about 7 acres), water selling, and power tiller renting.

  • The third and fourth brothers: Operation of a sawmill and a furniture-making workshop near the Thana headquarters.

  • The youngest brother, unmarried: Joint operation of a poultry farm with one of his former classmates (since May 2002).

The cyclical nature of broiler rearing was convenient to wealthier families who entered into broiler rearing as a side business. The private farms in P village tended to suspend the business fairly frequently. One, inclined to job hunt in a Dhaka-based company, could not spare enough time for poultry rearing. Another farm manager became busy in election canvassing. And SI could afford to wait and see the impact of bird flu on the local chicken market by taking a long interval between rearing cycles. Poultry rearing was a convenient income source which was compatible with richer people’s diversified activities.

These local poultry farms were not direct competitors to the IIRD program or the participants. While most final products from the beneficiary-rearers of the IIRD program were purchased at a fixed price and sold to the Dhaka market, the private farms sold their products at variable prices to local wholesalers or retailers in Dhunot Thana or in the nearest city. Demand for broilers, although growing constantly, was still small in the local market. Larger poultry farms rearing more than 500 chicks could not find a local buyer who could accept a whole batch at one time, and instead sold in smaller lots. The production scale of individual local farms, 500–1,000 chicks per cycle, was too small to ship their broilers to the Dhaka market. If several large farms cooperate in sales, they can sometimes sell their products to a larger market. However, there was no formal plan for putting such an idea into practice. They were not interested in conducting strategic marketing for broilers because they did not intend to develop the side business into their main business. Rather, the individual farms struggled to find buyers in a market temporarily shrunk by the fear of bird flu. Arguably, the nature of poultry rearing as one of their many side businesses did not encourage them to compete with the IIRD poultry program in the same market.

The NGO Perspective

Since its beginning, the IIRD poultry program had deliberately avoided competition with private poultry farms in the same locality although there were few private farms at the start of the program. The NGO directly linked the beneficiaries’ production with the large Dhaka market. IIRD divided the beneficiary-producers, located in 25 villages, into 12 groups, and staggered rearing cycles by a week: the first group starts in the first week, the second in the second week, the third in the third week, and so on. In this way, IIRD provided broilers for buyers (broiler wholesalers) in Dhaka constantly throughout a year. Normally, IIRD shipped 4,000–5,000 grown broilers from Dhunot Thana to Dhaka each week, by a chartered truck. Without such marketing efforts by IIRD, it would have been impossible for poor producers themselves to find buyers in a big city like Dhaka and operate such long-distance transport regularly. Although each beneficiary was a small-scale poultry rearer, the entire program formed a large enterprise, with which each of the local poultry enterprises could not compete.

The broiler-rearing program for the poor also brought benefits to non-beneficiaries. The largest benefit to private poultry farms was the direct supply of high-quality inputs to them. As a local agent of the CP group, IIRD gradually increased the sales of Thai-origin chicks and feed—selected for the program—also to private poultry rearers outside the program.7 In 2003, about 13% of the total sales of chicks and 7% of the feed sales were to private rearers. While IIRD sold chicks and feed to their beneficiaries at the fixed prices, they sold to others at variable purchase prices plus a margin. One of the largest customers who purchased 1,000 chicks in each rearing cycle (T6 in Table 1) became a dealer attached to IIRD in June 2003. Since then, IIRD had sold CP chicks and feed to this dealer only, in Dhunot Thana, and the dealer had sold to local poultry rearers at his retail prices. This business of IIRD was generally appreciated by local poultry farms because it enabled them to get higher-quality chicks and feed, as well as to reduce the cost of transporting the inputs: they previously had to spend a half day going to Bogra city to purchase CP chicks.

Not only T6 but also the other poultry-related traders (Table 1) each had a relationship with IIRD. T2, from a poor family, reared 200 chicks per cycle under the IIRD poultry program. He was specially allowed to purchase broilers, 500–600 birds per week, from the IIRD program and sell them in the local market. Although IIRD did not take part in the operation of T2’s shop, IIRD seems to have assessed the local marketability of broilers produced under the program through T2’s trading business. All the other broiler traders, T1, T4 and T5, purchased some of IIRD’s broilers through T2 and valued the quality of IIRD’s broilers. Likewise, both of the two chick traders, T1 and T4, purchased chicks from IIRD through its dealer, T6. While T1 and T4 also dealt with chicks from other hatcheries, they agreed about the higher quality of CP chicks used by the IIRD program. It is not too much to say that the IIRD poultry program formed a new broiler market in Dhunot Thana.

Finally, the IIRD fieldworkers were willing to help non-beneficiaries, including local elites, start and operate their own poultry enterprises. Private farm managers informally received technical advice from IIRD. SI in P village said: “I purchase vaccines from IIRD. I sometimes ask Ronju [poultry fieldworker in charge of P village] to vaccinate my chicks in his free time. [With respect to the bird flu,] following the IIRD poultry program manager’s advice, I want to decide when I should start the next rearing cycle” (February 2004). The broiler-rearing program for the poor stimulated and positively supported the emergence of wealthier farmers’ enterprises.

NGO–Elite Relations Concerning the Program

The NGO–elite relations concerning the IIRD poultry program were clearly different from the conventional theory. During the period of my fieldwork, I heard no rumor about wealthier neighbors’ interference in the IIRD poultry program. Rather, local elites and other farmers seem to have easily embraced the opportunity created for the landless poor. One reason for such an attitude was that private enterprises operated by local elites did not share a common market with the program participants. The two groups channeled their products to different markets: the Dhaka market from the program participants and the local market from other local poultry enterprises. The market differentiation can be maintained, at least, as long as the wealthier farmers situate their poultry business as a side business.

Another reason was that wealthier farmers wanted to learn about this new business opportunity for themselves. A poultry farm operator in P village told me: “The poultry program manager of IIRD is a friend of mine. When I started the poultry business, I received technical guidance and market information from him” (November 2003). IIRD maintained good relationships with the private enterprises by providing them with inputs and technical advice. These benefits were welcomed by wealthier farmers who wanted to diversify their economic activities. The private poultry operators learned not only from the IIRD staff but also from the beneficiary-rearers. I sometimes witnessed some of the private farm managers peeping into the poultry huts of those involved in the IIRD program. SI had never received training in poultry rearing; he learned the necessary procedures from his neighborhood beneficiaries of IIRD. SI’s brother and his friend always monitored both the inputs distributed by IIRD to a neighbor rearer and the efficacy of the inputs, and compared their own productivity with that of their neighbor. Based on such comparative analyses, they decided which inputs to use for their farm. The IIRD poultry program in Dhunot Thana seemed to function as an indirect source of extension service to the richer poultry rearers.

The NGO–elite relations concerning the broiler rearing program may be summarized as cooperation. Local elites or wealthy farmers needed cooperation from the NGO to enter into the new business; the NGO needed a cooperative attitude of local elites toward their beneficiaries’ activities to manage the program smoothly.

Using a Stagnant Industry: Silk Production

The Local Elite Perspective

When I conducted fieldwork in Dhunot Thana, it had already been 10 years since the start of IIRD’s silk production program. During the period, no local farmers attempted to start sericulture (mulberry plantation and cocoon production) by themselves in Dhunot Thana. To them, sericulture was no more than a declining industry.

In 1994, the government recognized that interventionist and protectionist policies had failed to stimulate growth of the silk manufacturing industry and reduced import duties on raw silk from 30% to zero. The imports of raw silk dramatically increased in the latter half of the 1990s. As a result of this trade liberalization policy, while the weaving segment of the silk sector got a boost, rearers and reelers were unable to compete with the better-quality imported yarns favored by the silk weavers using mechanized looms. As a consequence, many of the sericulture farmers engaged converted their mulberry fields to other purposes (BIDS 2003; World Bank 2003).

The objective of the World Bank-financed Silk Development Project was restructuring of the public sector controlled by BSB. The project allowed the private sector and NGOs to take over some of the responsibilities handled by BSB under the newly established BSF and to confine the functions of BSB to research, extension, and training (World Bank 1997; BIDS 2003). Although the total cocoon production of Bangladesh once decreased because of the competition to Bangladeshi yarns from imported yarns, the effect of the project has been a decline in production by BSB-attached rearers and a gradual increase in production by NGO-supported rearers. Reduction in cocoon procurement caused declines in the other stages of silk production in the public sector. The public sector, albeit practicing mainly mechanized reeling even in 1984–1985, produced only 14% of silk yarns in Bangladesh; the majority was produced by the private sector relying on cottage reeling units (Bakht et al. 1988, p. 70). The weaving unit of BSB’s factories merely achieved, on average, 46% of the target production during 1981–1982 to 1991–1992 (Saha 1996, p. 172). The public sector involvement in silk production has been shrinking steadily.

The World Bank Project demonstrated that improved yarns could be produced domestically at prices below those of imported yarns, but the volume of production and the reliability of supply remained uncertain (World Bank 2003, p. 12). Although the import tariff on raw silk again increased gradually, it was not yet high enough to protect domestically produced silk yarns. In 2001–2002, the import tariff rate for both raw silk and silk yarn was 22.5%, which was still low compared with 35% in India (BIDS 2003, p. 62). Weavers in the private sector still preferred to use better-quality imported yarns. While the country produced about 478 metric tons of silk cocoons annually, from which approximately 38 metric tons of raw silk was manufactured, the market demand for raw silk was 300 metric tons (BSF 2003, p. 23).

Local elites in Dhunot Thana well knew that the influx of imported silk yarns had compelled many sericulture farmers in the traditional silk areas to convert their mulberry fields to other crops. They also knew that the silk manufacturing sector (the process after weaving) was constantly growing with the use of imported or smuggled silk yarns. They thought, however, that silk manufacturing which required skilled workers and good access to both inputs and consumers was a business suitable for the capital city, Dhaka, or the traditional silk areas adjacent to the Indian border but unsuitable for a remote area such as Dhunot Thana. Consequently, none of the local elites tried to enter into sericulture and compete with the IIRD program or take away the program benefits from the participants.

The NGO Perspective

The Bangladesh silk sector was undergoing a decline in mulberry cultivation, silkworm rearing, and reeling on one hand, and a growth in weaving and manufacturing of silk products, on the other. Some NGOs, including IIRD, were linking the declining part with the growing part.

IIRD played a significant role in linking the five components of the program. The selection of raw materials such as mulberry leaves and silkworm eggs for silkworm rearing influences both quantity and quality of final products. In terms of quality control, the selection and distribution of silkworm eggs to the silkworm rearers and the classification of cocoons before processing were crucial functions required of IIRD. IIRD provided the beneficiaries with necessary inputs at cost: silkworm eggs to the silkworm rearers and waste cocoons to the home spinners.8 The free provision of mulberry leaves by IIRD was the most important assistance offered to the silkworm rearers. In the traditional silk producing areas, bush and low-cut mulberry plantations were dominant, and silkworm rearing had been conducted by landowning farmers as a side business (Bakht et al. 1988). Silkworm rearing was usually restricted only to those who owned or leased land for mulberry cultivation. In contrast, all IIRD’s plantations were on roadsides, and mulberry leaves were provided for the silkworm rearers free of charge, which enabled landless households to get involved in silkworm rearing. However, there were two major disadvantages to roadside tree plantation: during the dry season, roadside dust made the mulberry leaves unsuitable for silkworm feed; and the leaves were stolen and used as livestock feed (BIDS 2003, p. 7). To cope with these problems, IIRD generated the job of mulberry tree caring.

When NGOs work as the intermediary in business development for the poor, the most difficult challenge is to properly balance the producer (beneficiary)-oriented production and consumer-oriented marketing. To increase the production volume and sales as an enterprise was not the objective of the IIRD program. Before each silkworm rearing period, IIRD decided the quantity of silkworm eggs to be distributed to each rearer in consideration of her capacity and personal circumstances. As a result, both the actual number of silkworm rearers who participated in each rearing cycle and the production by quality category varied respectively from season to season; the quantity of eggs each rearer took charge of also differed from season to season. As things stand, it seems difficult to control cocoon production sensitively in response to market demands.

In reality, it was impossible to operate the weaving centers drawing on the fluctuating cocoon production of the beneficiary-silkworm rearers. IIRD, therefore, purchased imported Chinese silk yarns to provide the beneficiary-employees with employment continuously throughout a year. Chinese yarns occupied 40% of the total yarns used in the two weaving centers of IIRD. In order to keep the quality of final products (silk cloths) competitive in the domestic market, IIRD mixed Chinese silk yarns with those produced by the beneficiaries during the weaving process. They sometimes accepted orders which required the use of 100% Chinese silk yarns.

To make the IIRD program viable, the procurement of raw materials from outside the program was indispensable, not only in the weaving stage but also in all the other production stages. IIRD sometimes purchased mulberry leaves to complement the lack of leaves in the program area, waste cocoons to give more income-generating opportunities to the home spinners, and good cocoons to operate the reeling centre for a longer period.9 Products made by non-beneficiaries in the private sector were also sold in IIRD’s showrooms (in Dhaka and other two cities) to attract more customers. With these marketing efforts and accompanying financial burdens, IIRD managed to link poor producers with competitive markets.

NGO–Elite Relations Concerning the Program

The conventional theory of the NGO–elite relations did not apply to the case of IIRD silk production program, either. In Dhunot Thana, local elites were simply indifferent to the program. Indifference, which meant no interference in this case, was favorable to the NGO who introduced silk production activities to poor people. What the NGO did for local elites was not to stimulate them to implement the program smoothly. IIRD built very simple reeling and weaving centers to process cocoons from their beneficiary silkworm rearers as well as to employ poor women for the centers. The absence of a specific relationship between the NGO and local elites can be interpreted as a good relationship in this case.

To facilitate the poor to participate in a declining or stagnant industry may be one way of avoiding competition with the rich. A key factor in utilizing a stagnant industry is to link the stagnant industry with a growing market. If IIRD had attempted employment generation for the poor only in the part that was growing (the process after weaving), it would have been impossible for the IIRD program to compete with such large private enterprises in the urban areas, and the local elites would have intervened in the program in various forms. Because sericulture or silkworm rearing was a stagnant industry of no interest to the local elites, it was able to exist as a business opportunity only for the poor. In addition, without the growing domestic market in the downstream (producing final goods), it would have been impossible to create the opportunity in the upstream (producing inputs). It is the existence of both stagnant and growing industries that enabled the NGO to take advantage of the stagnant industry for the livelihoods of the poor.

New NGO–Elite Relations for Poverty Reduction

Direct Benefits from Economic Growth

The different natures of the two income-generating programs drew from local elites different reactions to the programs. Concerning the broiler rearing program, wealthier farmers adjacent to the program participants took a great interest in broiler rearing and tried to learn this new economic activity from the NGO’s program. As a result, a cooperative relationship was established between the wealthy farmers and the NGO. On the other hand, the local elites were not interested in the declining part of silk production and no competitors appeared in the same locality. In other words, there was neither a positive nor negative relationship observed between the local elites and the NGO. These two forms of relations were brought about partly by the efforts the NGO made as an intermediary in business development and partly by external factors such as local elites’ desire for business diversification and a decline in sericulture. The experience of the two programs showed alternatives to the conventional theory that NGOs’ economic activities for the poor are disturbed or exploited by local elites.

These two cases also suggest that the poor can directly benefit from economic growth if such new NGO–elite relations are generated. As economic growth in the 1990s, especially after trade liberalization accompanied increased inequality (World Bank 2002), the majority of the poor have been excluded from economic growth in Bangladesh. Despite this macroscopic trend, there is room for poor people to enjoy the benefits of such economic growth more directly than to wait for trickle-down effects. It was the growing broiler market for urban consumers that enabled the IIRD poultry program to differentiate the market for poor producers from the other for local wealthier enterprises. It was the vigorous business diversification of agrarian elites, in response to economic growth that allowed them, for their own benefits, to admit the poultry program for the poor. Even a declining industry such as sericulture provided the poor with a significant income source, by linking itself with a growing industry under economic growth. If an NGO works as an intermediary for linking poor people with competitive markets, there are possibilities of creating such alternative NGO–elite relations which enable poor people to avail themselves of economic growth.

Limited Life of the New Relations

A necessarily raised question is: How long will the new NGO–elite relations last? The limited life of the new NGO–elite relations can be predicted from both political and economic viewpoints. Given that some NGOs have actually grown into large quasi-commercial enterprises in Bangladesh (Zohir 2004, p. 4112), local elites in Dhunot Thana may begin to consider the intermediary NGO—IIRD—as a large entrepreneur as well as a neo-elite over time. Although the IIRD does not intend to get involved in political activities, a successful continuation of the programs for the poor may change the status of IIRD from a mere intermediary to a new patron for the poor clients. In reality, some development NGOs have exerted influential power to mobilize their beneficiaries for political activities (Devine 2006). When local elites have such a view of IIRD, they will begin to disturb the IIRD programs in accordance with the conventional theory, irrespective of their particular interests in the economic benefits of the programs.

Another viewpoint for predicting the limited life is the nature of local and national economies which may change in the longer term. If IIRD’s broiler rearing program proves to be a viable business with the Dhaka market, local elites or wealthy farmers may change into direct competitors to the IIRD program, for instance, by organizing a cooperative for large-scale shipment to Dhaka. More arguably, sericulture will not continue to be a stagnant industry. It is natural that the Bangladesh government and aid donors attempt to revitalize the upstream market (for cocoons) as long as the downstream market (for silk products) continues to grow. The evaluation team of the World Bank-funded Silk Development Project has already recommended the commercialization of mulberry cultivation and the integration of mulberry cultivation with silkworm rearing (BIDS 2003, pp. 94–95). These recommendations, albeit indispensable for the establishment of the private sericulture sector in Bangladesh, imply that if they are put into practice, the current opportunities for the landless poor will be transferred to landowning farmers. If mulberry becomes a lucrative cash crop, and if the increase of the import tariff rates on silk makes domestic sericulture more competitive, this economic sector will attract interest from local elites. A stagnant industry is, in the end, compelled to choose extinction or reconstruction. When it is reconstructed, there will be no space for poor producers. Only during the transitional period can the stagnant industry be used as an economic opportunity for the poor.

Justification for Intermediary NGOs

On the premise that the new NGO–elite relations favorable to poor people’s income generation does not last permanently, intermediary NGOs should take advantage of the new relations efficiently and persuasively. I propose two justifiable ways of selecting beneficiaries and setting a targeted period of assistance. The first is to support the chronically indebted poor in order to reduce their debt; and the second is to help the moderate poor become self-supporting. While the second way may have a more immediate effect on a reduction in measurable poverty incidence, the first is substantial for the reduction of persistent poverty.

Participation in a business development program brings some net profits to indebted families, whereas general microcredit programs just increase debt. A poultry program beneficiary’s family in P village was chronically indebted. While the family was a member of three microcredit programs, new loans were being used for the repayment of previous loans. The husband of the family, a day laborer, finally talked to me about their financial trouble:

Due to my son’s and my own sickness, my debt has accumulated little by little. I am now in debt of Tk. 1,000 to my neighbors. I also obtained general loans from IIRD and other two NGOs on the pretext of investment in a new small business. But I have actually used the loans for the debt repayment. The income from each cycle of poultry rearing also went to the debt repayment. I have to repay to the three NGOs a total of Tk. 400 every week. Even if I get a wage-labor opportunity every day, this amount will surpass my earnings. (April 2004)

The average wage rate paid to a laborer was Tk. 50 per day in the area. This family is not a special case; many authors point out the increase of cross-financing by gaining multiple memberships from different NGOs and by resorting to wealthier relatives and neighbors as informal moneylenders (Montgomery et al. 1996; Sinha and Matin 1998; Zeller et al. 2000; Chaudhury and Matin 2002; Meyer 2002). For such chronically indebted poor people, it is reasonable that an NGO should work as a marketing intermediary until they get out of debt. Reduction in debt as an outcome of the program may not draw the special attention of local elites because the program does not allow the beneficiaries to increase their visible assets.

When a business development program targets the moderate poor, the program may be able to send out many graduates in a comparatively short time and complete its mission before the program attracts much attention from local elites. Another poultry program beneficiary in P village became one of a few electricity users in the village within only 3 years of beginning. The use of electricity is a symbol of wealth in rural Bangladesh. The poultry rearer also started to use electricity for her broiler rearing while the other participants continued to use a kerosene lamp for warming chicks. Before that, her eldest son, who had just completed primary education, started to run a small grocery shop in a rented space. The initial investment in this new business came from the poultry income. Four months later, her family assisted him into his own shop. The profit from the son’s shop finally became equal to or slightly larger than the husband’s income as a sawmill worker. The family was investing most of the poultry income in merchandise for the son’s grocery shop. While the husband was employed more regularly than day laborers, the wages he received, Tk. 250 per week, were not markedly different from those that day laborers received. It is apparent that without the wife’s poultry income, they could not start the son’s new business. In other words, through the participation in the poultry program, the number of regular income sources for this family increased from one to three. If the son’s business gets on the right track, even without the poultry income, they will be able to invest in another new business with their own capital or assistance from a microcredit program. This family, albeit remaining in the category of the poor, has already found their way close to the poverty line, above which, over time, they will be able to rise by themselves. In the words of Remenyi (2000, p. 33), the family climbed the “poverty pyramid” from the “laboring poor” to the “entrepreneurial poor.” The moderate poor such as this family also need a marketing intermediary until they become self-supporting.

Conclusion

Through the observation of two programs in broiler rearing and silk production implemented by a Bangladesh NGO, I have explored what role an NGO can play as intermediary in business development for the poor with focus on the relations between the NGO and local elites. In theory, as market demand for a product or service increases, it attracts more interest from local elites or wealthier competitors; all the benefits tend to go to local elites in the end. However, the programs in a real setting did not follow this theory. The broiler rearing program successfully differentiated a market for poor producers from that for wealthier producers. Such market differentiation rested on the nature of wealthier people’s broiler rearing as a side business of theirs as well as direct and indirect benefits they received from the NGO. As a result, a cooperative relationship emerged between the NGO and the local elites. On the other hand, the silk production program avoided competition with the rich by linking a stagnant industry (silkworm rearing) with a growing market (for silk products). If the NGO can keep the local elites indifferent to the stagnant industry, it is still possible to make profits from the industry for some period until it completely disappears or revives for the rich. These two cases suggest feasible ways for the poor, with assistance from an intermediary, to open up a business opportunity in the elite-controlled rural economy.

This case study also predicts the limited life of such newly emerging NGO–elite relations. Local elites may fear the empowerment of the intermediary NGO as a new patron for poor clients. Furthermore, even if a market for the poor is secured away from general competitive markets, the special market will be merged in other markets over time. Therefore, efforts should be concentrated on enabling the poor to make the most of the new NGO–elite relations in the short term. It is particularly reasonable to use a market intermediary in order to help the chronically indebted poor reduce their debt and to help the moderate poor become self-supporting. While economic growth is indispensable for poverty reduction, economic growth is not automatically open to the poor. To enable the poor to take advantage of economic growth is the role of NGOs as intermediaries. Both donors and policymakers have to be prepared to bear higher costs to support such intermediary NGOs who need to provide more personnel, expertise, and commitment than in implementing a conventional microcredit scheme.

Footnotes
1

There are 64 districts in Bangladesh; thana is an administrative unit under district.

 
2

One acre is equal to 100 decimals.

 
3

For instance, according to a survey conducted in a nationwide spread of 120 villages in 1994, the average sizes of cultivable land owned by members of three NGOs—RDRS, BRAC, and ASA—were 47 decimals, 41 decimals, and 50 decimals respectively (Zeller et al. 2001, p. 28).

 
4

This amount was almost equivalent to the annual income of an agricultural laborer and was actually equal to 6.4 months of the participants’ average household income at the start of the poultry program (IIRD 2001). The currency rate for one US dollar was 58.8 Taka in 2003 (Economist Intelligence Unit 2004).

 
5

The outbreaks of bird flu have been reported in several Asian countries since mid-December 2003. Although there were no physical victims of the bird flu in Bangladesh, domestic demand for chicken suddenly decreased due to rumors about the bird flu, which temporarily shrank the chicken market.

 
6

Union is the smallest administrative unit under thana.

 
7

CP (Charoen Pokphand) is one of the largest feed producers in the world. CP has fully integrated agri-industry activities in 12 Asian countries or regions, including Bangladesh (CP Group, no date).

 
8

Cocoons collected from the silkworm rearers were classified by quality into good and waste cocoons. While good cocoons were conveyed to the reeling center and finally processed into silk cloth for garments, waste cocoons were distributed to home spinners and processed into silk cloth for home textiles.

 
9

Waste cocoons were distributed to home spinners at a fixed price. IIRD provided each home spinner with a spinning machine on loan. Raw silk spun by the spinners was processed into silk cloth for home textiles in the weaving factories.

 

Acknowledgements

I am indebted to the Center for Asia Pacific Social Transformation Studies (CAPSTRANS) at the University of Wollongong for a postdoctoral fellowship which enabled me to write this article. I would also like to thank participants in a seminar I held at CAPSTRANS and two anonymous reviewers for helpful comments on earlier drafts. The original fieldwork for this article was financially supported by the Australian National University, for which I am grateful to the staff of ANU. I also appreciate University Press Limited (Dhaka, Bangladesh) for permitting me to use some data from my book titled "Livelihood Diversification and Landlessness in Rural Bangladesh" (2007) for this analysis from a new perspective.

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© International Society for Third-Sector Research and The John's Hopkins University 2009