Director,
T.E.(Terry)
Manning,
Schoener 50,
1771 ED Wieringerwerf,
The Netherlands.
Tel:
0031-227-604128
Homepage:
http://www.flowman.nl
E-mail: (nameatendofline)@xs4all.nl : bakensverzet
Incorporating
innovative social, financial, economic, local administrative and productive
structures, numerous renewable energy applications, with an important role for
women in poverty alleviation in rural and poor urban environments.
"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
Edition 11: 15
August 2006
Edition 01: 20 November 2000
An innovative Model Integrated Self-financing Development
Project covering a complete package of basic services for sustainable
development in poor rural and urban areas has been developed. It includes
hygiene education, the provision of drinking water and sanitation services, PV
lighting for study, PV lighting and refrigeration in clinics, waste removal,
high-efficiency stoves and bio-mass to fuel them. It provides a strong thrust
for on-going local development, productivity, and employment. It contains many
decentralised solar energy applications.
The Model has
been placed in the public domain.
The Model is
strongly demand response oriented. Project applications are worked out together
with the users who execute, run, maintain, own and pay for the project
structures. The Model provides practical working solutions for sustainable
integrated development and covers all major development priorities. It
constitutes a practical way of applying modern development concepts such as
those outlined in the DFID "Guidance manual on water supply and sanitations
programmes" (WEDC for DFID, 1998). It integrates in a practical and
feasible manner policy, finance, technology and human capacity building to
offer sustainable solutions to development.
Project
applications are self-financing, subject to an interest-free seed loan
repayable in 10 years. The Model is structured for communities of 10000
households (50000 users) but can be adapted to smaller and larger project areas
as required. The minimum amount of the interest-free seed loans is US$
3.000.000 or US$ 60 per user, which covers the entire basic package of
structures and services, and calls for a monthly payment of US$3 per family of
5 into a Cooperative Development Fund. The Model is structured so that some, if
not all, of these monthly payments can be recovered by savings on the current
expenditure of the families for the (inadequate) structures and services
available to them.
Project
applications require 75% financing in the form of a 10 year interest-free loan
by an External Support Agency. Regional or state authorities in the beneficiary
countries are expected to supply the remaining 25%.
Project
applications are self-financing because they allow the recipient communities to
fully exploit a network of sustainable development activities using:
(i) The interest-free
loan itself
(ii) Local Exchange Trading Systems (LETS)
(iii) Multiple re-cycled interest-free micro-credits to be administered by a
local micro-credit institution. They are generated by recycling seed loan
repayments and project reserves during the loan term, and by recycling
repayments of the micro-credit loans themselves.
One of the most important causes of poverty is
on-going financial leakage from poor rural and urban areas and nations to
richer national and international havens and nations. If poverty alleviation
projects are to succeed, financial leakage from individual project areas has to
be reduced and preferably stopped altogether. This does not imply closure of
project areas to the outside world. It implies that the balance expressed in
formal currency of transactions for goods and services imported into and
exported from individual project areas must tend to zero.
Some important
factors causing financial leakage are energy imports, import of industrial
goods and services, and interest. The cumulative interest content of a typical
western industrial product is thought to be anything up to 40% of the cost to
the end user. This interest normally exits from project areas never to return.
Technologies
using local energy such as human energy, local biomass, PV and wind energy, and
locally recycled wastes together with appropriate financial instruments help
create and encourage open competition and free enterprise within the framework
of a cooperative and non profit-making global financial structure. As the Model
shows, self-financing integrated development is then able to flourish.
Multiple re-cycled interest-free micro-credits
provide formal money needed to develop local production capacity. The rest of
the development under project applications is carried out under local exchange
trading (LETS) systems set up in each project area.
The formal
currency capital available for recycling in the form of micro-credits is made
up of :
a)Part of the
initial seed loan money until it is needed for the project application
b)Seed loan repayments
c)Micro-credit repayments
d)The long term maintenance fund
e)System capital replacement fund which will be built up after the ten years'
seed loan has been fully repaid
For instance,
a woman may need a sewing machine to be able to make clothes. She will need
"formal" currency to buy the sewing machine (and perhaps some cloth),
which is presumably not made in the project area itself. That money will be
made available to her in the form of an interest-free micro credit. She will
sell outside the local LETS system some of the clothes she makes to earn the
"formal" money she needs to repay her loan. The rest of the clothes
can be sold within the local currency LETS system. As she repays her loan, the
repaid capital can be promptly recycled for another interest free micro-credit
project, so the available seed money repeatedly re-circulates within the local
economy.
(Fig 1)
Micro-credit systems within the framework of project
applications under the Model will be set up by local micro-credit institutions.
The proposed
micro-credit systems will be different from most of those formed up till now.
Formal currency loan capital repayments and longer term reserves within the
projects themselves will be used to finance the micro-credit systems. These
funds are already available for multiple re-cycling, interest-free. When, at
the close of the ten years' seed loan repayment period, the original project
capital is repaid, the users will continue to pay their monthly contributions
into the Cooperative Development Funds to build up capital for system
extensions and/or to replace system hardware after 20-30 years. These fresh
Cooperative Development Funds will become quite large. They in turn become
available for interest-free micro-credits within the project area until they
are needed, so that permanent on-going sustainable development in ten-yearly
cycles is ensured .
Final
repayments of blocks of micro-credits will be co-ordinated so that money for
long term capital investment purposes (system replacement and extensions) will
be available when it is needed. An example of this is shown in columns 37, 38,
39 and 40 of the chart in fig 2, where the higher columns indicate shorter
payback times for the last lots of micro-loans so that the entire interest-free
seed loan capital of Euro 3.000.000 is available for payment in the 41st
quarter.
Money for the
interest-free formal currency micro-credits granted is therefore generated by
the users themselves within the framework of the project applications. The
money and the micro-credits belong to the users. They are interest-free and
continue to re-circulate within the local economy. Based very conservatively on
an average payback time of two years, the theoretical average interest-free
micro-credit finance made available during the first ten years to every family
of five persons in a given project area is US$ 1500. If the average payback
time were to be shorter, the interest-free funds available would be greater
still.
The following
chart (which has been drafted in Euros) shows a typical build-up of micro-loan
investment over the first period of ten years of a project application. It
shows the amount of new micro-loans actually (re)invested each quarter during
the first period of ten years. The amounts are net of current outgo for project
administration and maintenance of structures, which have already been deducted.
In the chart,
the original interest-free seed loan is paid back in the 41st quarter. The
capital available for micro-loans temporarily falls back to the amount actually
being paid into the Cooperative Development Fund each month by the users. It
will then gradually build up again over the next period of ten years, so that a
further amount of at least US$ 1500 can be made available (on an average) to
each family in the form of interest-free micro-loans. This time the funds
accumulated belong to the users themselves, and are available for renewal
and/or extension of project structures when needed.
(Fig. 2)
CHART SHOWING THE DEVELOPMENT OF MICRO-LOANS
The local micro-credit institution will charge a fee
for each transaction to cover its costs and make a socially acceptable profit.
The local bank's fee will be set before each project application becomes
operative. However, the fee will be expressed in the local LETS currencies to
stop financial leakage from the local economy. The bank will have special
permission to accumulate LETS credits for this purpose. The bank may then use
its LETS credits to purchase local goods and/or services available within the
project area and sell them outside the project area for formal currency.
Associated
activities such as collection of payments and distribution of information will
all be paid for in the local LETS currencies.
Local
micro-credit institutions are, therefore, regular members of the local LETS
systems.
The purpose of the planned Micro-Credit systems is
to ensure that individuals or co-operatives without access to formal currency
can get interest-free micro-credit loans for capital investment for production
purposes to boost the local economy. The interest-free Micro-credit loans are
therefore applied mainly to buy items necessary for production purposes which
are made outside the local currency trading (LETS) systems.
The pay-back
time for the interest free loans will vary from case to case. Some micro-credit
investments will generate more goods and services that can be sold outside the
local LETS currency area than others. Some users will therefore be able to earn
formal currency to repay their micro-loans more quickly than others. The users
themselves will decide from case to case during their monthly meetings on what
is acceptable to them.
The
possibility of sale of some of the production to consumers from outside a
project area for formal currency will usually be a condition precedent for the
granting of a micro-credit loan. This condition of partial "export"
sale lapses as soon as the micro-loans have been repaid. In project
applications where an export-import cooperative has been set up, the
cooperative may often be able to help the beneficiary of a micro-loan export
part of his or her production in exchange for formal currency.
The rate at
which micro-loans in formal currency can reasonably be recovered will determine
the payback period, which could therefore be anything between a few months and
a few years. The rate of the loan repayments must be realistically possible for
the borrowers. The system is co-operative and interest free and designed to
enhance the general welfare within the beneficiary communities. As with the
Grameen bank systems, any person or co-operative group wanting a Micro-Loan
will be expected to produce four friends who agree to be jointly and severally
liable for the periodic loan repayments, and to make sure they are made on
time.
(Fig 3)
HOW THE ORIGINAL SEED LOAN MONEY IS USED
Since the Micro-credits are essentially self-financed
by the communities through their Cooperative Development Funds, the funding
priorities must be left to the communities themselves. This is especially so
where potential conflicts of interest arise because there is not enough funding
immediately available to meet all requests for assistance. Meetings to discuss
members' proposals and further developments with on-going projects will become
a feature of the social life of the communities at tank commission level. Since
it is expected that many of the beneficiaries under the scheme will be women
and women's groups, women will need to have full representation during such
meetings. One of the basic goals of the formation of the Community Health Clubs
foreseen in the Model Self-financing Integrated Development Project is to use
the Health Clubs as a launching pad to create women's groups. These groups will
give women the chance to discuss their needs, develop their priorities, and
make submissions during the Micro-Credit meetings. The Health Clubs should also
be able to ensure that women participate en bloc at the Micro-Credit meetings.
Rules for the organisation of the Micro-Credit
meetings will be set up during phase two of the various project applications
with the full participation of the beneficiary communities. These rules must
lay down the general principles behind the systems. These would, for example,
presumably include the following principles:
1) All loans
are to enable the beneficiary to extend his/her LETS and formal currency income
by producing more goods and services
2) The goods
and services must benefit the general interests of the community and encourage
exchanges under the local LETS systems.
3) Some of the
goods and services must be saleable outside the LETS systems to earn formal
currency to repay the micro-loans.
4) The
Micro-Credit loans must promote the rapid circulation of formal money within
the beneficiary communities. For example, using formal currency to build a
clinic or hospital would not qualify for micro-credits because the capital
invested cannot be re-circulated. On the other hand, buying equipment for
testing water quality (foreseen in the Model) would qualify, as the formal
currency cost can be recovered by charging in formal currency for water
analyses conducted for users outside the project area until the micro loan has
been repaid.
5) Special
priority will be given in the first instance to micro-loans to start the
collection and transport of compost, urine, and grey water, and establish the
recycling centres that will collect, store, and export non-organic waste
products from the project area. The formal currency micro-loans will be
recovered by sale of the waste outside the project areas.
The following drawings and graphs form an integral
part of this paper.
SELF-FINANCING INTEGRATED DEVELOPMENT PROJECT
- FULL PROGRAMME
DRAWING OF INSTITUTIONAL STRUCTURES.
CASH FLOW DIAGRAM.
HOW THE ORIGINAL SEED LOAN MONEY IS USED.
GRAPH SHOWING DEVELOPMENT OF MICRO-LOANS .
THE INTEREST-FREE LOAN CYCLE.
TANK COMMISSION - THE BASIC PROJECT STRUCTURE
The Model Self-financing Integrated Development
Project the micro-credit aspects of which have been discussed in this paper has
been placed in the pubic domain and can be freely accessed and downloaded
together with drawings, charts and graphs in colour from the home page of
website : www.flowman.nl
Anhydrite, use of; Banks, role of in development; Gypsum
composites products; Bio-mass, for cooking; Briquettes, bio-mass; Chain
control, integral; CO2 emissions, reduction of; Compost, recycling; Composting
toilets; Cookers, high efficiency; Cooperation, role in development;
Development projects, structures for; Development, sustainable; Drinking water
supply; Economy, developing countries; Economy, development projects; Economy,
foreign aid; Economy, industrial development; Economy, interest-free
development; Economy, Local Exchange Trading (LETS) systems; Economy, nominal
local currencies, development of; Economy, micro credits; Economy,
self-financed development; Economy, taxation and development; Education,
hygiene; Gender, role of women; Gypsum, cheap; Hand pumps; Health Clubs,
development projects; Hygiene, education; Industrial development; integral chain
control; Integrated development projects; Interest, role of; LETS systems;
Loans, interest-free; Local currency systems; Local Exchange Trading (LETS)
systems; Materials, regeneration of; Micro-credit systems; Photovoltaic (PV)
home systems; Photovoltaic (PV) lighting; Photovoltaic (PV) pumps; Photovoltaic
(PV) refrigeration; Poverty alleviation; Pumps, solar; Pumps, hand ; Rainwater,
harvesting; Recycling, compost; Recycling centres; Recycling, waste;
Regeneration of materials; Rural water supply; Sanitation, developing
countries; Sanitation, dry; Self-financing development projects; Solar pumps,
submersible; Stoves, high efficiency; Sustainable development; Tanks, gypsum
composites, local manufacture; Toilet facilities, gypsum composites; Toilets,
dry; Urine disposal; Washing places; Waste collection systems; Water
purification, UV; Water supply projects; Water supply, rural; Water tanks, gypsum
composites, Women, role of in development.
List of articles on subjects related to
the Model.
List of attachments to the Model.
