Poverty alleviation is a big challenge to our society. Creation and growth of wealth does not guarantee prosperity to poor mass. Rather it gives rise to increasing gap of income between haves and have-nots in the capitalist system of economy. Stark poverty in itself is a big problem, but unprecedented gap between the poorest and the wealthiest has cast a devastating effect on human society in the present age. Pro-capitalist global agencies have their own agenda to deal with this human problem. They insist on unregulated open market which is more conducive to multi-national companies for exploiting the natural resources to amass more and more wealth in their coffer. Ecological imbalances, rising gap of income between poor and rich, over-consumption by a few and under-nourishment of masses, rising social, economic, psychological and political problems and other malaises of neo-capitalist economy are least of their concern.
As per an estimate, the market size of microfinance in India is in the range of 58 to 77 million people. They need small amount of loans for consumption or business. Assuming loan sizes between 2000 and 10,000, the credit demand is around 230 to 733 billion INR. If we assume that the low-income but economically active population including small and marginal farmers, landless agricultural labourers, and micro-entrepreneurs, are also potential microfinance clients, the annual credit demand goes further up to an estimated 245.7 million individuals and USD 51.4 billion (INR 2.1 trillion) in annual on lending requirements.
Is there any alternative model to address the need of large populace? At the conceptual level, Islamic economic system aims at equity and economic justice. But the problem is that people advocating for Islamic economic system have not yet endeavoured to launch any self-sustainable scheme of economic well being of the masses.
As Dr. Nejatullah Siddiqi has rightly pointed out that Islamists have not yet been able to produce an alternative model under the grand Islamic economy against the prevailing capitalist economic system, to which poverty stricken masses can repose their faith.
In the Indian context, we can intervene at popular level through cooperative model which would be free from interest and has potential for resources generation from micro-deposit for credit as well as poverty alleviation of the masses. The basic thrust of the microfinance is to address the economy of the masses with small earning but finding no avenue within their convenient reach for micro deposit, micro credit, micro investment and micro insurance. This is meant for 70% population of poor India.
INTEREST-FREE COOPERATIVE OPTIONS
In India, there are various Cooperative Acts for running cooperative societies without interest with State and Multi-State structures. Following Cooperatives Acts are conducive for launching cooperative societies in different States to attain the goal of Islamic economy to a large extent:
There are 10 States where, under the new Cooperative Act, we can launch interest-free cooperative societies. They are Bihar, Jharkhand, Andhra Pradesh, Karnataka, Orissa, Delhi, Madhya Pradesh, Chhattisgarh, Uttaranchal and Jammu and Kashmir. The relevant acts are Jammu and Kashmir Self Reliant Cooperative Act of 1999, Uttaranchal Self Reliant Act of 2003, Bihar Self Supporting Cooperative Societies Act of 1997, Jharkhand Self Supporting Cooperative Societies Act of 1997, Madhya Pradesh Autonomous Cooperative Act of 1999, Chhattisgarh Autonomous Cooperative Act of 1999, Orissa Self Help Cooperatives Act of 2001, Andhra Pradesh Mutually Aided Cooperative Societies Act of 1995, and Karnataka Fraternal Cooperatives Act of 1997. Delhi state also enacted a liberal act.
In the remaining States we can opt for Central Multi-State Cooperative Act.
LAUNCHING COOPERATIVE SOCIETY
Formation of promoters’ group in different States: At least 10 persons belonging to different families agreeing to form a cooperative society should be identified in different States. At the very initial stage, it should be kept in mind that the membership of the cooperative society shall grow in coming days. It should reflect the real social combination irrespective of caste, creed or religion. Without incorporating larger sections of the society, cooperative aims would not be achieved. No substantial change can be expected in economy at the grassroots level without involving cross section of the poor populace. Integrity of membership demands inclusiveness, mobilisation and continuing education of the people for whom the society is being formed.
Preparation of Bye-laws: As per provisions of respective Cooperative Act, bye-laws shall be prepared for which standard format can also be adopted with necessary changes according to local situation and needs. The bye-laws have to be registered by following due process under provision.
Structure: The cooperative society branch of the State shall have following statutory and non-statutory bodies: Statutory – (i) AGM (annual general meeting) comprising all eligible members, (ii) Board, comprising members elected at the AGM at the frequency fixed in the byelaws with at least seven members or above as fixed in the byelaws under the provision of the Act. Non-Statutory – (i) Executive Committee, which can easily sit every month, and (ii) LAMC, which has to meet once in a week to take decisions for granting loan and appraisal of the membership forms.
Starting the activity: Identify at least one place where cooperative branch has to be started. Office should be established with at least one paid Manager, One Assistant and one peon and a few daily collectors on commission basis who shall collect micro deposits and loan instalments from members. Simultaneously a voluntary group, named, Loan and Admittance of Members Committee (LAMC) should be formed and in later stage formation of LAMC shall be done by election.
Achieving Viability Condition: At the initial stage some financial support would be required for establishment and recurring expenses (including staff salary) for at least one year. The financial support can be obtained from donation by promoters as well as promoting organisation. This financial support may also be treated as loan for pre-operative expense to be recovered from the society at a later stage. However, the Branch should try to expand active membership (i.e. daily depositor and loan seekers) to at least 300 by the end of the year, assuming annual operative expense within Rs.1,50,000 which has to be met from service charge and profit-loss sharing products of loan.
Essential Supervisory Requirement: The activities of the society has to strictly follow the norms and provisions of the Act, i.e. timely submission of various reports, audit, control over deposits by daily collectors, proper accounting process, assessment and timely decision on loan activity, etc. For this purpose, the LAMC has to meet frequently and at least the chairman should spare some time for office on daily basis.