The project “Provision of Financial Services to Weavers of Marghzar Valley” is an onset of partnership between Asasah and Intercooperation (IC) Pakistan. Both agreed to provide financial services to the weavers and women producers of the Marghzar Valley (Union Council Islampur) in Swat district. Purpose of this intervention is to strengthen livelihoods of weavers’ households by developing their livelihood activity with their own capital assets.

Geographic/Economic: Islampur – a small village in Marghuzar valley, is situated at a distance of 220 km from Mingora central town of Swat District in north-west of Pakistan. Boasting a population of about 16000 individuals, Islampur and its people have been renowned since ages for their skills in weaving woollen shawls and other fabrics. “Early in the morning if one stands anywhere on the cusp of the valley, one can hear the clicking sound of the valley’s handlooms at work”, reminisces Arjumand Nizami, Country Director Intercooperation. The weavers are mostly working as family enterprises. During the 1990s, the sector is said to have been at its peak with around 90% of the population associated with it one way or the other. Interestingly the wool used for the purpose is neither from the local ruminants nor are the threads made in the region (mostly bought from the more upper regions of Kalam and Osho) yet the Islampur handlooms work diligently from September to March every year, churning out the much desired and dearly sought shawls. Islampur displays immense skill yet vicious poverty is apparent. Businesses are stationary with weak market linkages, caught in a trap of weaving to sell (mostly on credit) to the Naeks (the middle men) and then again borrow for buying thread and even grocery.

Socio-Political-Religious: During 2007, militants of the Tehreek-e-Taliban Pakistan (TTP) organization, led by the radical cleric Maulana Fazlullah, rebelled against the Pakistani government in Swat. Hardliner Taliban set up a "parallel government" with Islamic courts, imposing their version of the Shariah law. The Pakistan Army rolled into the region in 2009 and cleared the land of militants. The area is still considered sensitive and the Army maintains a visible presence to this day. The population of Islampur is mostly from two tribes: the considerably well off ‘Mian gaans’ and the workers/artisans ‘Jolah gaans’. The Mian gaans are considered to be a higher social caste who do not interact much with the Jolah gaans or artisans, the lower caste.

“I come from a Mian gaan (socially a higher caste) family. My husband is nearly 20 years my senior, a trend we Swatis still follow – marrying off our extremely young girls to much older men. My husband keeps ill health so does not work on a regular basis. Occasionally he drives for a rent-a-car service. On hearing about a newly established office for women weavers, I sought my father-in-law’s permission to work. I myself am a skilled seamstress especially with embroidery and other handicrafts so technically I felt at home. Our first assignment was to interview and collect data from women weavers –mostly jolah gaans (a lower caste) which involved going into their homes! I was shattered. My father-in-law was also very angry when he heard this and he ordered me to quit work saying Mian gaans are not to engage with the Jolah gaans. But if LPH and now Asasah staff were keen on working with them then how come I threw it all away? I saw sense and had to argue my way back to the office. Even my saying this was an unheard-of thing”.  Neelam Khan, Livelihoods Development Officer, Asasah

Majority of the population is rural. Despite scores of God-given resources, around 50 % of Swat’s population is living below the poverty line with the income index at 0.162 and an HDI of 0.442. The literacy rate lies at 28.7 % (mainly due to education in urban Swat). Engaging women in developmental initiatives is rather challenging, especially in remote valleys where social services are almost not existent. Religious hardliners and power structures often dominate common people's thinking regarding development. Nearest source of finance is Mingora, where several banks exist. The banks mostly give an off-season loan, which does not help in business expansion. Other development players include MRDP, Rural Water Supply and Sanitation (RWSS) Project, NCHD and Literacy for All (LFA).

Setting the Stage:

Intercooperation’s aim and the LPH’s goal and purpose have all been well-directed towards Marghuzar Valley, where the Livelihood Programme Hindukush entered in 2009 to carry out not a simple assessment, but an innovatively detailed Livelihood Framework Analysis (LFA). It was a strong determination geared towards helping the locals of a small village called Islampur and with this aim it set about to find the gaps in the locals’ lives: the gap between poverty and happiness. Although the weaving industry of Swat is renowned all over Pakistan yet the hardships the locals endure to keep the hand looms spinning is the voice that had never left the valley.

Deciphering Islampur and its Economics: The LFA brought many aspects of Islampur to light including that of its main cottage industry.

It was found that the main actors of hand loom industry of Islampur can be divided into the following categories;

  • Naek – owner of a shop or a number of hand looms with bounded labourers working for him
  • Bounded labour – those who work on the hand looms of their Naek
  • Owner yet bounded weaver – those who own a loom yet work for a Naek
  • Owner weaver – those who own a loom and work on their own
Intercooperation has been providing development opportunities to thousands in Pakistan over the last 26 years with the Swiss Agency for Development and Cooperation (SDC) being its major donor. Under its umbrella, projects and programmes have been carried out for the sustainable utilization of natural resources with the aim to empower poor households, increase their income and improve their livelihoods. One of IC’s major programmes is the ‘Livelihood Programme Hindukush LPH’ (2008 - ongoing). Its overall goal is "Quality of life improved and vulnerabilities reduced, of marginalized communities in rain fed areas of North West Pakistan" and a purpose of "Marginalized men and women enabled to better respond to opportunities and risks through enhancing income and assets base". The Sustainable Livelihood Approach (SLA) and Human Right Based Approach (HRBA) form the basis of the Programme, supporting people to improve their livelihood strategies based on their potentials. It emphasizes on the rights of marginalised women and men (rights holders) and obligations of state institutions (duty bearers). The Programme strategically builds local capacities and service delivery systems around specific resources/products/value chains, aiming at empowering communities to deal independently with various service providers. Partnerships developed with public and private sector institutions/organisations are based on community needs for the implementation of LPH interventions.
Now the first category is of the Naek (Business owner) who owns a number of shops and hand looms and has hired weavers to work for him. The weavers (working for him) are from the second category or the skilled ones. The third category includes skilled weavers who own a loom but are lacking financial resources to work on their own. They are forced to work for the Naek who pays them for every shawl they weave. The last category is that of an owner/weaver who owns a loom, can afford to purchase the raw material and makes shawls for selling on his own. The weavers in the last category also end up selling their products cheaply to the Naek due to lack of marketing skills. Some relevant observations are as follows: The Islampur weaving industry involves a huge yet unique credit system. The Naek in most cases owns a grocery shop as well as looms from where he lends different daily use products on credit (to the weavers). This ultimately allows him to pay his labour less in cash and more in kind (barter system). The Naek in a way controls the cash flow of his workers and their businesses allowing him to take control and exploit the situation in his own favour.
  1. The non-availability of micro financial players in the whole system was a major drawback. A few banks (but all situated in Mingora main city) do offer some micro-credit schemes but the lowest possible loan is far beyond the affordability of the very poor. The schemes have a certain interest involved as well.
  2. Micro financing was a possibility but keeping in mind the region being Swat, the loans needed to be either interest-free or based on Islamic principles. This was decided because LPH (and IC through its 26 years of focus on KPK) thoroughly understands the region’s culture and religious values and seconds it by conducting LFAs.

    3.   It was observed that financing according to business cash flow will ultimately be the success of the financial service provider. This was deducted after realizing that in Swat region many previous organizations (before phasing out) had come forward to provide any assets as required by individuals without searching for sustainable utilisation. Such initiatives had mostly never seen the light of day and simply faded out. 
“The experiences of LPH with the market system development approach in different economic subsectors, has shown that important changes at a systems level could be triggered by large scale impact, and learning & adaptability”. Muhammad Anwar Bhatti, Value Chain Advisor, Intercooperation