Rev. David Ogbonna is enabling the rural poor to save, develop sound new investments, and obtain adequate and reasonably priced credit.
The New Idea
David's imperturbable search for ways to practically help the poor first led him to recognize what doesn't work: most banks, cooperatives, and government programs. He worked in or with them all, one after the other, but ultimately he found that neither their loans nor their other intended benefits were likely to reach the poor. Inefficiency, complexity, delay, high costs, incomprehension of and little communication with the poor, and greater priority for political and/or personal profit objectives all got in the way.
He therefore set out to help the poor mobilize their own savings and closely linked self-help and self-financed development initiatives. To do so, over the last decade he has repeatedly adapted traditional institutions, invented new patterns, and then experimented with and refined these ingredients into a new grassroots savings, lending, and development system that serves the poor efficiently and on a large scale.
David's first step is to encourage and help existing grassroots associations of all sorts to save systematically no matter how limited their resources. This opens the way to financial empowerment for women, small farmers, crafts people, youth groups, petty traders, and especially traditional savings clubs.
At the same time he's helping these groups learn both the basic concepts of lending (e.g., the role of interest) and how to develop sound, highly profitable possible uses for investment funds once they are available. Thinking through improved farming or production techniques, the necessary marketing components, etc. requires time, specialized resources, and group application and discipline.
As both savings and the ability to use savings grow, the group eventually takes its first loan. The learning process engagement redoubles.
As the primary associations' own money is involved, mutual accountability provides the means of assuring repayment of both group and individual loans. The example of achievement and increased prosperity of participating associations and villages draws the attention of other groups which also want to benefit. The impact of David's program thus continues to expand beyond the original local government areas and state where he began.
David's approach accomplishes many of the same things as Bangladesh's Grameen Bank. However, he had developed the approach's basic design well before word of Grameen's success reached Nigeria. Some of the insights, e.g., reliance on group responsibility and self-interest rather than physical security, are the same, but much is different. David's approach grows organically out of Nigeria's markedly different culture and institutional patterns. It focuses more on both savings and preparing for investing. It also draws in and builds much more on a broad array of existing community institutions, traditional clubs of friends that come together monthly to create a money pool that goes on a rotating basis each month to one member–thereby giving the members periodic capacity to make a major investment.
Poverty, and its accompanying poor health, illiteracy, and lack of information about the means of self-betterment, traps rural people in endlessly exhausting work without gain or hope of improvement. Only migration to the crowded cities seems to offer an alternative or chance for an improved life. Yet, as unskilled men pour into already overburdened urban centers, the economic situation of the nation as a whole deteriorates. Nigeria could, but does not, produce food in abundance.
The lack of facilities for food processing and storage in rural areas causes farmers to sell seasonally in a glut market, only to find themselves short of food in fallow periods. Because traditional savings schemes are short-term and do not involve banks, people are unable to build capital as a means to better their situation through expanded and more varied cultivation or investment in machines for more efficient farming, food processing, and storage.
A maze of registration fees, bureaucratic procedures, and political objectives also discourages or prevents access to funds from conventional loan schemes. Even when rural development loans are accessible, they are often given inequitably or are tied to political connections and tend not to be repaid. Other reasons for low repayment rates are unprofitable investments and general ignorance of the processes of savings and credit. Official loan schemes have had little success in involving and bettering the situations of the poorest rural people.
David's strategy is twofold: mobilization of rural dwellers' own assets, financial and social, through existing associations; and education through field workers who provide information, expertise, and equipment otherwise not available.
Field workers trained in agriculture are sent into villages to meet with groups of farmers, women, traders, craftspeople, and religious societies. These associations are encouraged to discuss their needs and possible beneficial projects, and to determine the amount of money they can put aside for savings on a weekly or monthly basis. Those associations lacking formal structure are guided to choose officers and adopt a minimal set of by-laws to facilitate organized savings and decision-making.
Over a period of two years, the groups pay in money which is meticulously recorded in individual passbooks, while field workers teach them about savings, interest and credit, as well as better techniques for cultivation, marketing, and health. Some groups need training more than loans. Group leaders are linked up with peers in neighboring villages who already are benefiting from the savings and loans scheme, and mutually supportive cooperation is thus facilitated.
Once the agreed-upon savings have been made, each association is eligible for its first loan, having been trained to use credit most advantageously. As soon as the loan is repaid, the group may take a larger loan. When the group has established its good credit, individual members also may apply for small loans, their officers signing for them and the group assuming responsibility for repayment.
Growth of the savings mobilization scheme is both organic and planned. Associations attracted by their neighbors' successes join in, while seminars attract the attention of groups in other states, two of which are already replicating the program. In response to invitations from northern, predominantly Muslim states, David is studying the traditional beliefs and existing modes of savings and associations there to determine how the original scheme should be adapted to suit the northern environment.
The son of farmers and a lifelong resident of the eastern rural area where he began the self-help project, David describes himself as a full-time development worker who can best serve God by making rural peoples' lives more abundant.
His strategies and the services he offers have developed in response to problems and needs he encountered in his early years. The frustrating experience of attempting to register a cooperative which he formed led him to study cooperatives and credit. Later, as a field organizer for the National Association of Co-operative Credit Unions, further frustrations led him to study traditional savings associations and then to organize them and constitute his own de facto bank. Seeing that the people did not understand and even feared credit as a trap, he embarked on the educational facet of his work, which is constantly expanding to respond to peoples' needs.