NGO "ANOTHER WAY" (STICHTING BAKENS VERZET), NETHERLANDS, SUSTAINABLE INTEGRATED SELF-FINANCING DEVELOPMENT PROJECTS AND ADVANCED DEVELOPMENT TECHNOLOGIES

The financial structures already described in this Section 3: The financial structures of Block 4 the structures to be created cover the creation of a local money system for the transfer of goods and services in each individual project area, and the creation of an interest-free micro-credit system for productive investments.

Many other services of interest to the populations can also be set up. In the next section 8. In depth analysis of cooperative purchasing systems some of the additional possibilities offered by structures set up under integrated development projects are considered.

In this section, an analysis is made of the concept of cooperative purchasing groups.

Read ‘Freehold property for mechanics’: a brief insight into Starr-Bowkett Societies, Maxine Darnell, Australian Society for the Study of Labour History, Sydney, 2005.

In his article, Darnell cites T.E. Bowkett’s book., The bane and the antidote : or bad and good associations, W. Strange, London, 1850.

Darnell cites page 301 of Bowkett’s book, listing the basic principles of the so-called «Poplar Freehold Provident Societies »

1^st   Obtain the advantages of associations.
2^nd Offer interest-free credits.
3^rd   No penalties, no confiscations.
4^th   No benefits (salaries) to those in charge.
5^th   The poorest receive the biggest advantages.
6^th   Reimbursement to each member of payments made in the event of termination of participation.

1. Research.

On one page, explain the underlying reasons for each of Bowkett’s six principles..

Darnell continues :

« The distinctive features of Bowkett’s scheme, which had their first manifestation as ‘Poplar Freehold Provident Societies’, was the very small level of subscriptions required of share holders and the lack of interest charged or earned which allowed the benefits of building societies to be extended to the lower paid members of society. In his scheme the society would comprise 100 members, each of whom would subscribe 9½d per week, or £2 1s 2d a year, providing the society with £205 16s 8d at the end of the first year. Once expenses were paid this made £200 available for the first purchase of freehold land with which monies the society could purchase land and organise the building of a house or purchase a completed house. All subscribers would then go into a ballot to determine the subscriber who would gain the first loan. The successful subscriber, once he had taken his loan would then begin paying £20 rent per year for ten years, as well as continuing to pay their 9½d per week subscription (although Bowkett did state that a mortgage to the society may be preferable to a lease).(work already cited :page 4) The next ‘drawing of lots’ would then occur earlier than 12 months later as the continued payment of subscriptions plus the £20 per annum repayments from the first loan increased the amount available to the society for lending. By the fifth year, two loans each year were able to be balloted for; three per year after 11 years of operation; and four per year after 15 years. At the end of the society, each subscriber would possess ‘freehold property which cost £200, and receive back his £62 in money’. (work already cited :page 4). Bowkett argued that he had chosen 9½d per week as it was an amount that could be afforded by the greatest number of working people and that an amount twice (1s 7d per week) or three times (3s 2d a week) although allowing the society to end in half or two-thirds of the time, was at £8 or £4 per annum ‘too much for a working man to have to pay for many years, in addition to maintaining a family and paying rent’(work already cited :page 35). The amount of £200 for a freehold property was based by Bowkett on the sum required to purchase a ‘house in the neighbourhood of London, of such a kind as working men in general would desire to possess’. (work already cited :page 44). »

Darnell continues :

« As was the case with building societies at the time, Bowkett societies were terminating, with the society ceasing to exist once all subscribers had obtained a house and repayments were completed, which Bowkett estimated initially would be at the end of 31 years, and the subscriptions paid (£62 by each subscriber) were returned to the subscribers. One area of controversy that Bowkett societies had difficulty in avoiding was the manner in which loans were allocated. The drawing of lots, or the balloting for loans amongst subscribers, was decried by many as constituting a lottery. This criticism was to necessitate a change in the wording of the rules from ‘drawing lots’ to ‘making an appropriation’.³³ Bowkett was quite clear in distancing societies developed along his principles from building societies and other societies using the drawing of lots to determine the order in which loans were distributed: »

Darnell reaches the following conclusion :

« A major advantage of Bowkett societies, an advantage that holds today, is that due to the relatively small size and localised nature of each society, repayments are able to be, and are, adjusted to account for changes in a member’s financial situation. . (citation above :page 57). »

Bowkett’s cooperative systems subsequently underwent operational changes which opened them to exploitation by speculators. The Cooperatives became permanent. More recently their activities were transformed so that they became traditional banks.

Integrated development projects return to Bowkett’s original concepts, except that instead of concentrating on homes, attention is given to the purchase of certain types of consumer items such as solar home systems. The monthly contributions made by participants and the value of items to be bought are such that participants can all benefit from the system within a few years, avoiding the long delays typical of Bowkett’s cooperatives. Once the members have all received their structures, the Cooperative in question winds itself up. Should the same group of people wish to buy more structures, they set up a new cooperative. Project structures enable them to do this under the local money system set up, free of formal money costs.

This separation of executive organs is important. Should there be any problems with the management of any one purchasing group, the problems will have no direct effect on the management of other groups.

Suppose a tank commission were to decide to set up a cooperative for the purchase of solar home systems for all of the homes in the tank commission area. Assume there are 50 families, and that the purchasing price (bulk purchase price, without interest, without formal money administration costs) is € 200. The first thing the cooperative will need to discuss with its members is how much they can contribute each week or month, taking the possibilities of the poorest families into account. With a contribution of € 1 per family per month, the fund would have € 200 to spend every 4 months, or 3 systems per year. This would mean that the last families to receive a solar system would have to wait more than 15 years. As was the case with Bowkett’s cooperatives, this is a period of time that the participants may consider unacceptable.

With a contribution of € 2 per family per month, the Cooperative would have € 200 to spend every 2 months, or 6 systems a year. This would mean that the last families to receive a solar system would not have to wait more than 7.5 years. Participants will probably consider this too long as well.

With a contribution of € 3 per family per month, the Cooperative would have € 200 to spend every 6 weeks, or +/- 9 systems a year. This would mean that the last families to receive a solar system would not have to wait more than 5 years.

When setting the amount of the monthly contributions, the regular payments made by families into the project’s Cooperative Local Development Fund must always be taken into account. These begin with € 0,60 per person per month (or € 3 for a family of 5) and may well be increased over time to € 0,85 per person per month, or € 4,25 per month for a five-member family.

It is a question of making balanced calculations and applying common sense Where, as in the example given above, the initiative is taken by a tank commission in favour of all of the members served by the commission, the interests of the poorest families must be taken into account. Where no agreement can be reached, the richer families are always free to set a voluntary cooperative up at either tank commission, or well commission, or even project level. Where a a group is «compulsory », covering ALL members of a given group, members may accept to pay a differentiated contribution – less for the poor and more for the rich. For «compulsory» groups where just a few families have difficulty making their full payments, an application can eventually be made through the project structures for interest-free micro-credits, or even for a contribution by way of gift. Item 70215 of the budget for the proposed integrated development project «Vivons Makalondi » in Niger, provides a small fund of € 10.000 which could be used for this purpose. The Project might also consider looking for a donor willing to finance part of the costs.

When the cost calculations are made taking the possibilities of all members to pay into account, the direct benefits to members of the initiative in question should also be considered. For example, where a proposal is made for the distribution of wind-up (manually powered) radios is made (in particular where a unit for the assembly is set up in the project area under a micro-credit loan !) families will make big savings on their current outgo for the purchase of batteries. If the poorest families are given priority for the purchase of the wind-up radios, they will automatically have more money (from savings in battery payments) to make higher contributions. In the same way, if a group is set up for the purchase of solar home systems (in particular where a unit is set up in the project area under a micro-credit loan !) families will make large savings in current outgo for candles and oil and batteries for lamps. If the poorest families are given priority they will have more funds available to finance a higher level of contributions.

2. Opinion.

On two pages explain the difference between Bowkett’s purchasing cooperatives and the ones foreseen in integrated development projects. Begin with an introduction to the subject. Then mention the economic aspects in question, such as reimbursement of capital on termination of the Cooperative, the possibility of withdrawal at any moment of capital paid in, the chances of long delays in receiving benefits, and differences in the sizes of the groups. Explain why these are not issues with Cooperative Purchasing groups under the Model. Write your conclusions.

3. Opinion.

The concept of «compensation» from savings arising from the purchase of some goods can contribute to covering purchasing costs over a relatively short period. Describe on one page at least three items for which this concept could be applied in your chosen area, and provide the economic calculations relating to them.

4. Opinion.

The possibility of making the formation of purchasing groups easier by offering priority rights to the poorest families has been raised. The system would promote the creation of more purchasing groups with a shorter duration. Give a one-page analysis of the (eventual) objections the richer families in your project area would have to such schemes.

5. Opinion.

The possibility of making the formation of purchasing groups easier by offering priority rights to the poorest families has been raised. The system would promote the creation of more purchasing groups with a shorter duration. You are a woman and head of one of the poorest families in a planned purchasing group. On one page, explain to the representatives of the richer families of the planned group why giving priority to you and the other poor families is a guarantee of the success of the initiative.

◄ ►

◄ Fourth block : Section 3: Financial structures.

◄ Fourth block : The structures to be created.

◄ Main index for the Diploma in Integrated Development (Dip. Int. Dev.)

◄ List of key words.

◄ List of references.

◄ Course chart.

◄ Technical aspects.

◄ Courses available.

◄ Homepage Bakens Verzet

"Money is not the key that opens the gates of the market but the bolt that bars them."

Gesell, Silvio, The Natural Economic Order, revised English edition, Peter Owen, London 1958, page 228.

“Poverty is created scarcity”

Wahu Kaara, point 8 of the Global Call to Action Against Poverty, 58^th annual NGO Conference, United Nations, New York 7^th September 2005.

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