A comparative case study on outreach and impact of the Ikhtiar loan scheme and the development programme for the hard-core poor in Seberang Perai, Penang
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Date
2006
Authors
Mahmud, Salma
Journal Title
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Abstract
The Development Programme for the Hard-core Poor (PPRT) and the Ikhtiar
Loan Scheme (ILS) of the Amanah Ikhtiar Malaysia (AIM) are programmes designed to
reduce hard-core poverty in rural Malaysia in their respective ways and through their
own mechanism. PPRT, on the one hand, is an effort of the federal government in
tackling hard-core poverty through a package of services to hasten the process of
increasing the household income (HHY) of their participating poor. AIM’s microfinance
programme, on the other, is an effort of a non-government organisation in
complementing national poverty reduction goal.
This study is designed to evaluate the strategy and methodology of PPRT and
AIM programmes in reaching out to their hard-core poor and benefiting them to come
out of poverty. Secondly, it is an attempt to determine the impact of the two
programmes in the generation of household income, savings, accumulation of
productive assets and the creation of self-employment opportunities among their
household members while comparing it to those hard-core poor households untouched
by both programmes i.e. the non-participating poor (NPP).
This thesis attempts to make a modest contribution to the intellectual and
academic tradition in determining the quality of outreach and increasing effectiveness
in the microfinance industry since both programmes incurred expensive public
expenditures with both programmes being implemented nationwide.
The socio-economic information and relevant data for the study were collected
from a random sample of the PPRT, AIM and the NPP households from villages in the
programme area. The information on PPRT and AIM programmes were derived from
official reports, published materials and personal discussions.
Being a federal government initiative, PPRT utilised the official, political and
administrative structure and mechanism at the district and village level to reach out to
their hard-core poor, with the task of registering the participants entrusted to the Village
Development and Security Committee (VDSC). AIM, being a non-government initiative
committed to maximising outreach, developed a 4-stage methodology and
implemented them systematically, village after village until all the villages within their
branch area are covered. The use of mukim-based poverty estimates followed by
‘ikhtiar house indexing’, means-testing and finally re-interview were steps taken in
determining the coverage effectively and extensively. The use of a more thorough
eligibility form (M3) that incorporated information from all sources of income,
remittances from other household members and cross-checking against the total value
of household and productive assets facilitated the acknowledgement of AIM’s
methodology as being transparent and professionally implemented. The use of both
measures by AIM i.e. the household income and the per capita poverty line income
have made their methodology more creditable than PPRT in reaching out to the hardcore
poor.
Despite using a different cut-off point in determining their ‘hard-core’ poverty
category, i.e. 2/3 of the per capita poverty-line measure, AIM had proven to reach out
to more very poor households while their programme suffered less leakage to the nonpoor.
PPRT, due to the use of the official political and administrative machinery and
relying only on the household poverty line income, had deprived a considerable
percentage of the eligible households i.e. the very poor from benefiting from the
programme while facilitating a considerably higher leakage to the non-poor
households.
As for the impact of the programme on the hard-core poor, even though AIM
had proven to be more effective than PPRT, the study noted that reliance on the
economic growth of the state with the trickling down effect as exemplified by the NPP,
have proven to be less effective in generating increase in household income.
With access to vital financial support especially through subsequent loans, AIM
participants managed to capitalise on and scale-up their income generating survival
skills to record substantial increase in household income, savings, accumulation of
productive assets while facilitating self-employment opportunities for the unemployed
and under-employed human resource, abundant among the members of the hard-core
poor households. Being a loan scheme with an administrative fee attached to each
loan, AIM participants displayed self-reliance characteristics that facilitated their
transformation out of hard-core poverty.
More than 4/5 of AIM participants have crossed the poverty-line income
compared to only less than 1/3 among PPRT. It is worthy to note that none of the NPP
hard-core poor households were capable of getting out of poverty via the trickling-down
model. None of the AIM participants remained in the ‘very poor’ and ‘moderately poor’
category while 96% of their ‘formerly very poor’ households have graduated into the
‘poor’ category within the last 5 years.
A much slower transformation was found among PPRT participants with 1/5
(20%) entrenched in ‘very poor’ category, 15% moved into ‘moderately poor’ level and
almost 1/3 (32%) reaching the ‘poor’ category. The NPP, by relying on meagre
resources at their disposal was the least effective strategy in the transformation of the
poor households with more than ¼ (28%) entrenched in ‘very poor’, 25% under
‘moderately poor’ and 45% crossing into the ‘poor’ category, none crossing the povertyline
income.
With substantial increase in household income, it was not surprising to note that
AIM participants were able to have more savings and generate more productive assets
in comparison to the PPRT and NPP households.
Valuable findings have been noted and major lessons can be learned from
them. With such comparative advantage being displayed by AIM, a major policy review
is necessary towards increasing outreach and maximising impact in line with the
national goal of zero hard-core poor by the end of the 9th Malaysia Plan (2006-2010).
Description
Master
Keywords
Social science , Ikhtiar loan scheme , Hard-core poor