Saturday, 18 August, 2007

Many Lives, No Masters

Sorry people, those very few who had been reading this blog of mine. I know I am late. Two months is a long time in blogosphere.

Well, what do you expect? The last two months have been hectic, to say the least. I switched jobs in June, and since then, have found no time, but then, gained valuable experience.

I have spent time in Assam in a remote place where there are about 13 extremist groups, and while I was there, 14 people got killed in violence. Then there were floods. One of the reports says about 29 people died from that. No electricity for long stretches of time, high humidity, lots of mosquitoes and bugs, no internet access, very weak or at many times no phone network coverage at all, very small and dingy and ill maintained hotel rooms.

And then I looked around myself, the beautiful landscapes, extremely warm people, great food………life never fails to surprise you with its diversity, all in one place. I sometimes feel so privileged at working in the development sector, for I get to see life from up close. Life, which takes me to luxurious hotels, cocktail parties, meeting with high flying people……..and then, just like its another life, to paddy fields where I get knee deep into mud, meet struggling farmers barely managing two square meals a day, walk through dingy urban slums, eat at some roadside stall sweating in the heat and driving away flies……it really seems that I am leading two lives.

So, forgive me if I do not write often. Writing a blog takes a third life, and right now its difficult managing the first two. Wish there were wizards to manage your lives, just like you have them in blogs to design the templates. Without them, life is meandering. I certainly am not the master of my life, and I wonder if there is any master to to the multiple lives I lead.

Tuesday, 12 June, 2007

Banks in Microfinance: Do They Have Any Strategy?

Microfinance in India has been a big thing for the past decade. In fact, for sometime it was felt that it was a solution for poverty in India before everyone realized that the expectations from it were over hyped. However, with so many players joining the bandwagon, banks have also joined in the fray, sometimes as an ally of MFIs and sometimes as competitors, and mostly as agencies fuelling the intense competition between agencies.

Although almost every bank has entered microfinance, from nationalized banks to private banks to foreign banks, there does not seem to be any focused strategy for the same. Apart from ICICI bank which is very aggressive in the field, all others have a policy of wait and watch, and have been very conservative. While a lot of the banks are there in this sector to fulfill their target of priority sector lending, a few banks believe in the bottom of the pyramid theory, and feel that this sector can actually be a rewarding source of revenue. Yet, no one seems to have a strategy in place, and currently each bank is doing a lot of trials and errors to find out what can be the best strategy, while in the process leaving the MFIs to make hay.

There are three ways that banks reach out to the Microfinance clients. One is by direct lending to such clients, which is usually and mostly through government schemes that come out from time to time. Also, they reach out to people individually. This is not much popular among the bankers as this method has seen large defaults and NPAs for banks. The second method is the SHG Bank Linkage model, where the groups formed by either the bank or some other NGO is given loans by the bank. Most nationalized banks, through NABARD have been following this method, but again, the results are not very positive. The third and the most popular way is to not give loans to the ultimate clients directly, but to lend to an intermediary, the MFI, which in turn onlends to clients. The MFI pays the money back to the bank. Again here there are different methods in which this is done. Term Loans, Cash Credit Loans or Agency model, where the MFI works as an agent of the bank and charges a commission for its services, while the loan portfolio and the clients belong to the bank.

As discussed earlier, the first two ways have not been very successful. The third is the most popular way but there are many problems with that too. One of the major problems there is that an intermediary in between increases the final cost of borrowing to the client by a huge margin. Another problem is that there are very few strong and well established MFIs which can be given loans to, and identifying and separating potential and good MFIs from the poor ones is really difficult, and certainly not an area which the banks are very capable at. Of course there are compatibility issues and the Partnership Model of the ICICI has gone through rough weather recently due to its over aggressive nature and RBIs guidelines. But all this has happened mostly because there has not been a very well thought out strategy on the part of the banks based on their own strengths and weaknesses and available resources. Even if there has been one, it has not been very well thought out or either has been too aggressive or too conservative.

Yes, there is a huge market for Microfinance out there, and yes there is fortune at the bottom of the pyramid, and banks, if they operate properly, can be the most efficient players in the sector, giving the poor clients very good deal on financial services, as banks can provide a full range of financial services at very reasonable rates. But for this to happen, they first need to have a concentrated, focused and well targeted strategy.

Should Social Networking Sites Like Orkut be Banned?

The recent happenings in Mumbai have once again raised questions over the existence of social networking sites like While the Shiv Sainiks have made violent protests against the use of these sites because of some derogatory remark against its party supremo and against Shivaji, the Mumbai Police also seems to have been keen on getting the site banned.

The orkut site has been very popular lately, and has been attracting many users who do social networking, meet and keep in touch with old friends, develop new friendships, discuss issues, voice their opinions on issues they feel about strongly or just have fun. There are communities on orkut ranging from ‘Social Development’, ‘Venture Capitalists’, ‘I love My Dad’, ‘I love Maggi’, ‘I want to kill Himesh Reshammiya’ etc. etc. etc. Here comes the thing of freedom of expression again, and the site promotes that.

Personally, I have found wonderful use of this site. Though I do not participate much in the communities of orkut, I have found many old, long lost friends on orkut, who I had never expected to meet again, and getting back in touch with them has been an absolute pleasure. Again, keeping in touch with your friends and associates or just dropping a short message has never been easier. One never forgets birthdays anymore, as they are listed on orkut. We even had a small reunion of school friends who had lost touch over time but again got back through orkut.

That was the good part. But there is an ugly side to it too. There are many emails floating around, many news articles from time to time, telling us about unpleasant incidents that happened over the sites. A girl and a boy meeting through orkut and setting up a date, where the girl is later found murdered in a hotel room, or about terrorists being active on the sites, harassment, sexual threats, misuse of pictures, intimidation are quite commonplace. Then there are offensive communities. There was a community, ‘I Hate India’, which showed the picture of burning of the Indian flag. Also there are porn communities, communities spreading hatred or violence and all such sorts. Now here it is that how far can such freedom of expression be taken?

Is banning the site a solution to all these problems? To some extent, maybe yes. You cannot, in the name of freedom of expression, allow such things to go on which puts to risk the privacy, safety and lives of people. But then these are things that happen in the society, with or without orkut. Even without orkut, there were still crimes in the society. As in everything else, nothing works more than self censorship. One should choose for oneself whether one wants privacy and be a member of such a site or not, or put one’s picture in the site or not. Also, the discretion to go out with someone that one has met only online is exercised by the person who goes out, and as in all cases, restrain has to be maintained in that, and such cases happen not only when people go out with someone they have met on orkut or elsewhere. Infact, one cannot put the entire blame on orkut for all the mishaps that have happened.

So, what is the solution? I guess banning the site is not the solution. Then even emails and mobile phones and cameras and many many such things will need to be banned because these have also been the medium of many crimes and harassments. The solution is not in banning the site and gagging the freedom of expression, but then for the promoters of the site to come up with as many possible ways that the misuse of the site can be stopped, like preventing the photos to be easily copied from the site, which has been one of the easiest way of harassing and impersonating people.

Monday, 28 May, 2007

If the Government Fails, Blame it on Big Corporate Paychecks

I fail to understand what happens to our brightest of leaders at times. Dr. Manmohan Singh is highly respected as an economist, was the pioneer of liberalization in India and is known to be pro growth and reforms.

Hence the statement he made the other day at CII about ‘rationalizing’ the remuneration of top corporate executives and their lifestyles is very much unlike him. Was it a politically correct statement he was forced to make or a surge of socialistic feelings (which is again so unlike him) is not known, yet in the times we are living right now, the whole idea is flawed.

The first thing is about the market forces. For a corporate to do well, you need the best workforce, especially at the senior level positions who have leadership roles, hence guiding the organization towards better results. Now, the availability of such talented and capable people is low, and the best people always come at a premium. Retaining top executives in a globally competitive work area is highly difficult. Most of the times, the remuneration of these people is performance based, and it is quite justified if they are paid according to their performance.

When the Honorable Prime Minister says that high salaries to these executives fuel the divide between the rich and the poor, and that these people should restrain from spending or showing off their wealth publicly, is it not that somewhere he is accepting the failure on the part of the government to take proper steps to bridge this divide, for it is the government’s job to raise the income and standards of living of the poor through its programs and thus bridging that divide, not by capping the income of others who are doing it absolutely legally and by their capability and hard work. Also, does the government has any business in deciding how someone spends his own money, what lifestyle he chooses to live in or that if he decides to live it up? And is it not hypocrisy to have such a diktat only for these corporate honchos who are making India proud globally and creating a wealth of opportunities and only making the economy grow, thus creating livelihood opportunities for the very same poor people who he thinks will have an objection to someone else earning more. Why is this diktat not also for politicians who also live it up, have grand weddings for their relatives and their own birthday bashes? It is well known to us what the sources of their income is, and no one objects to these people spending crores of public money publicly, each having cases of disproportionate wealth and tax evasion etc.

Is Mr. Prime Minister not able to see that these are the people who create so much wealth, employment and earn so much foreign currency for the country, make the country grow, thus themselves helping the poor. And the most direct thing to this is, the more that these people earn and spend, the more it is that they pay in taxes. Income tax, wealth tax, capital gains tax, sales tax, VAT.....what and what not? So this is the money that the government gets, which it is supposed to spend on welfare and development projects to help the poor, so the more the better. Then why is he so against it?

Actually, our leaders find new ways to shirk responsibility and blame anything and everything for their own failures, however illogical that might be. So, the government, which was not capable to bridge the gap between poor and the rich, not able to spend prudently and plan welfare and development measures properly, now blames the high salaries of these capable, hardworking and intelligent executives for its own failure. If anything, these kinds of moves hamper the progress of the country rather than the so called high remunerations of top corporate executives.

But then, we did not expect this to come from you, Mr. Singh, maybe any other neta saying it we would not have given it too much importance, because we are used to hearing such nonsensical statements from our politicians. But we always thought you were different, atleast in matters of economy. But this I guess, is Indian politics.

Thursday, 24 May, 2007

Forest SEZs, Serious Environmental Zatka

The Union government has recently taken an initiative to create special economic zones (SEZ) by leasing out degraded forest land to industry. While on the face of it, it seems like a great idea, is beneficial to everyone and good for the environment, going deeper into the matter will show us that the move may have serious negative implications and the move may have come more as a response to sustained pressure and lobbying from the paper and pulp industry rather than a genuine concern for the environment or the forest dwelling communities.

Let us first look at the positives that are being touted by the supporters of this policy. It is being said that with industry taking up degraded forests, and with the subsequent investment, India’s forest cover will increase to the ideal level of 33%, the target India has set for itself, in a mere five years. Increased forest cover means reduction in carbon emissions, another environmental benefit. Apart from the environment, it will benefit the forest dwelling communities as well as it will provide employment to those people in the industries that are set up there. The industry will gain from it in the form of increased and assured supply of raw materials, which has always been a concern in the industry. There is huge demand in the market for paper products which is currently met through imports, and with literacy levels going up, the demand is going to rise even further, and this move will help in meeting such demand, at lower prices. So the picture looks rosy and win all for everyone.

First let us look at the environmental factors. When you hand over the forest resource to industry, you are leaving it to be exploited to its hilt for commercial gains and depleting the resource. What is the kind of forest that will grow on these lands once given to industry? Eucalyptus is the major tree that will be grown. It is a proven fact that that the commercial trees like eucalyptus, which are very fast growing, deplete the water table considerably. It also does not allow other species to grow in the same area. The industry will promote mono cropping which in itself entails a lot of risks. Such trees also do not provide ideal habitat to most forms of animals. And the most basic thing that a forest should do, prevent soil erosion, is also not done by these forests. Again, one of the many benefits being claimed by the supporters of this move is that these forests will act as carbon sinks. This is also not true as carbon can be absorbed significantly only by forests having a very thick canopy cover, which is not the case with commercial plantations. Hence, if anything, there is going to be more of an environmental hazard than benefit if forest land is leased to industry.

Coming on to the other factor of this move benefiting the forest dwelling communities, it is not very difficult to see that even these people will be exploited and left stranded. While it is true that some of them will get employment in these industries in the form of tending to the forests and other forestry operations, it is also true that they will lose more than what they will gain. First is the risk of displacement from their traditional and age old abodes. We have seen this happening again and again, and the bloody uprisings in Nandigram in West Bengal are testimony to this. We do not want another one, do we? Again, the industry will be buying off traditional rights of fodder and other forest produce from the people. This will mean loss of the communities’ traditional rights over fodder and other forest produce over which they have been dependent for ages. The industries will be far less tolerant of these people taking away forest produce once they have bought the rights compared to the forest department. True, that the people themselves will sell off these rights, but have we not seen how these rights are acquired, are the people aware and capable of negotiating the right prices with the smart business savvy industrialists, and are they far sighted enough to see what alternative sources they have once they give away their rights to the industry? These are some very pertinent questions that need to be asked of ourselves before any such move.

I fail to understand, yet again, as to why does the government need to give away forest land, even degraded, to the industry to meet its environment targets? Can it not do it by itself? What is our Forest Department doing? Well, I guess like most other government agencies, it is.........forget it........

Monday, 21 May, 2007

Now, A Quota For Bank Loans

For the last few months, we saw students fight it out against the quota or reservation policy in higher education. It seems the UPA government has done it again. The RBI has now included minority communities in the list of weaker sections for the purpose of priority sector lending by banks. All domestic banks are supposed to lend 10% of their total loans to these weaker sections.

First let us get into what this new regulation would mean. It would be the banks which will decide who the beneficiaries of this scheme would be. This will be done based on the demographics of the state. So, in Punjab, Sikhs may not be eligible for the priority sector loans, while in Jammu and Kashmir, Muslims will not be able to avail such loans. Earlier, the scheduled castes, scheduled tribes, small and marginal farmers, artisans and urban poor too distressed to repay their debt to money-lenders were part of this list.

Now, according to The Times of India, a senior banker has told them that he measure will help banks find better customers as the definition of weaker section has been widened. If we go a little deeper into this statement, we will know where the problem lies. With this new regulation, banks can now easily target the economically well off sections of the minority communities and can still meet their priority sector lending targets. The poor and economically and socially backward people will once again be marginalized as banks will first look at giving out secure loans. It is once again like the quota system in education where the creamy layer will once again take away the benefits of a scheme which is supposedly made for the benefits of the ‘weaker sections’.

Here is what I fail to understand. Why do our governments come out with schemes like these where it can be very easily seen that the benefits will be taken away by the creamy layers of the society, and does not solve the very problem that it has been formed for. Is there a conscious attempt at not trying to solve the problems, complicate issues further and still make people believe that they are doing something? Every party plays the vote bank politics, and we as a nation fall into the trap of this politics again and again, election after election and never learn our lessons. That is the saddest part.

Wednesday, 16 May, 2007

The Development Divide

The recent announcement of the cheapest mobile phone handsets by Reliance set me thinking. This is development. Telecom has been one of the hallmarks of our development. The growth and reach have been so dramatic that today mobile phones have tremendous outreach, to all sections of the society. Be it a business tycoon, a housewife, a school teacher, college going students, a housemaid, rickshaw has made communication within reach to all and sundry. Not to mention the dropping call rates that have made distances shorter.

The same trend can be seen across many sectors. Things once viewed as luxury items are all within the common man’s reach. Be it television sets, refrigerators, computers, branded clothing, air travel (another major revolution) and the like. The sharp reduction in the prices of all these items within a short span of time has brought all these within reach of the common man. Now, my contention here with all this is, who do we consider to be the common man.

While it is true that the prices of the above items have been coming down, at the same time it is also true that inflation rates have been going up drastically, and prices of essential commodities have been going up. Cost of food grains and vegetables have gone up. Real estate prices are at an all time high. Costs of day to day household goods are increasing. Subsidies are coming down. This now means that sustaining the household at the basic level is becoming more expensive. After this basic level of sustenance is achieved, it becomes much easier for the household to then acquire the items that were once supposed to be more prohibitively priced like telephones, televisions, air travel etc. The different trends across these two segments of products point towards a dangerous trend. While it is becoming more and more difficult for the poor to sustain even the basic needs of the household, the standard of living of the lower middle class to the higher classes keep on increasing, and yet we talk about bridging the gap between the haves and the have-nots.

What efforts are we taking to correct the above anomaly? Practically nothing, in fact, in our scramble for development, we are fuelling this divide even more. While it is true that mobile telephony, real estate and aviation are revolutions of our time, and the cost of automobiles, air conditioners internet usage etc. have brought them within reach of a large mass, and that is a healthy trend, it is also true that there is some correlation between the trends of the two segments.

With the retail boom, industrialization, urbanization, the property prices have soared, which has made it difficult for a common man to acquire shelter for himself. Also, with acquisition of more and more land (including agricultural land) for industrialization, the costs of agricultural produce have gone up. Rapid urbanization has led to migration from traditionally agricultural belts. This again leads to rise in prices of agricultural produce. It does not help that with increasing population, the sizes of land holdings are coming down, making agriculture unviable. Government support for SEZs, in agricultural areas, not only leaves the farmers to fend with more problems with livelihoods, it also gives industries more incentives, hence bringing down their prices but leaves lesser land for agriculture and increasing the costs for farm produce. Also, with subsidies coming down in agriculture, there are lesser incentives and increasing costs in agriculture.

While it is true that support to industry is imperative for growth and development, it should not come at the cost of agriculture and the primary sector. We need development, and costs of mobile phones to come down, but the development has to be balanced and not increase the divide between the haves and have-nots. Only if there is a balance can we say that we are truly developing and only that will lead to a healthy society and sustainable development.