Archive for the ‘Essays’ Category

Microfinance sector is a sub-stream of Finance sector. It focuses on the financial services to the poor sector of the population. It is not just a money lending service to the poor people. It covers a lot of services such as short-term and long-term money deposits, insurance policies, emergency loans, short-term and long-term loans, pension plans, cheques and fund transfers for the poor people. The main objective of microfinance is to provide financial services to the poor, who were traditionally not provided access to these services.

Though the microfinance industry was present in India from the early 1970s, it came into prominence very recently. The cumulative annual growth rate of the sector for the last 5 years is 93%. Along with this rapid growth, comes the problems such as the famer suicides in AndhraPradesh. With the problems, there also comes an opportunity to learn and restructure the system to be fail-proof.

How did microfinance emerge in India? Microfinance was present in India for a very long time in informal formats such informal money lending, chit-funds or rotating savings, etc. But in the early 1970s, microfinance institutions started appearing in India. Most of the institutions acquired Non-Banking Financial Company (NBFC) status from the Reserve Bank of India (RBI), the central bank of India. From the beginning of 21st century, it came into prominence and its growth has accelerated in a very rapid rate.

How does microfinance function? Microfinance in India is functioning based on several models:

  1. Self Help Group Model (SHG)
  2. Joint Liability Group Model (JLG)
  3. Individual Lending Model (IL)

Self Help Groups are autonomous social bodies comprising of 10 to 20 members. SHG generates a fund through its members or from a bank, and provides loans to its members or others during needs based on the collective opinion of the group. The collateral here is the borrower’s societal status rather than physical property. Repayment of the loans is ensured by the pressure exerted by the members of the group. SHG has a definite organizational structure with the office bearers elected by the group members. Apart from the financial issues, the social issues are also dealt by the group collectively.

Joint Liability Group is a model of combined responsiblity. Members are formed into groups, and the groups into a centre. Most favoured grouping is five members per group and 8 groups per centre. It concentrates only on the financial matters and doesn’t get involved in the social issues. When a person in the group has defaulted in repaying the loan, the group should pay if it has funds. Else, the centre has to pay from its funds. Frequent group meetings are held to avoid the credit risks.

Individual lending is lending the money to individual persons from the MicroFinance Institutions (MFIs). In this scenario, the person’s ability to repay the loan is also verified. Collateral or surety is also required for higher amounts of loans.

In the rapid growth of microfinance in India, what are the problems associated with it? First and foremost issue is the lack of a regulatory framework. For a sector which shows tremendous growth, a framework is required to regulate the policies. Lack of such regulatory body might even lead to disaster like the subprime crisis. Currently National Bank for Agriculture and Rural Development (NABARD) is preparing a regulation for MFIs. But the process is so slow and takes years to get implemented. Such processes should be sped up.

The situation of Indian economy and society needs SHG to be the model of the MFIs, as SHG is a much better model for a country like India where there are more people below poverty line. But, in India JLG is the most prevalent model. This also isolates the social issues from the financial issues. But in India, they mostly are similar issues occurring together. Integrating social values and financing, as in SHG, helps a lot to Indian society. NABARD’s SHG-Bank linkage programme and RBI’s advice to the banks to lend more to the SHG are some of the initiatives directed towards this step.

Microfinance covers a lot of areas, whereas the MFIs are mostly concentrated on the microcredit alone. Other areas such as savings, health care, insurance, etc, have to be given importance for the sector to develop healthily. Even in the microcredit side, loans are given for a interest rate of a minimum of 20% per annum to even 10% per month. The high interest rates eventually makes it difficult for the poor people to repay. Thus certain MFIs suck money out of the poor instead of supporting them with reasonable interest rates. The farmer suicides in AndhraPradesh is a testimony to that.

Another major issue is the way in which this sector grows. People who doesn’t have any purpose or need are also funded. The more this happens the more the objective gets diluted. And the borrowers are not made to be aware of the interest rates and other processes before lending money. There has to be an increased awareness about microfinance among people.

The increased unrecoverable loans can even cause a crisis to the Indian Financial sector and thereby to Indian Economy as a whole. So, restructuring microfinance in India with regulation and embedding microfinance with the social welfare are required. By those actions, the sector can transform into a robust system. Such a system could reduce the economic disparities of India by capitalizing on the poor economy effectively. That will deliver a healthy inclusive growth deviating from the saying “Rich get richer, Poor get poorer”.

In memory of my loving father.


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2010 in review

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

Healthy blog!

The Blog-Health-o-Meter™ reads Fresher than ever.

Crunchy numbers

Featured image

A helper monkey made this abstract painting, inspired by your stats.

The Leaning Tower of Pisa has 296 steps to reach the top. This blog was viewed about 1,000 times in 2010. If those were steps, it would have climbed the Leaning Tower of Pisa 3 times

In 2010, there were 14 new posts, growing the total archive of this blog to 19 posts. There were 7 pictures uploaded, taking up a total of 1mb.

The busiest day of the year was January 10th with 57 views. The most popular post that day was Education in Australia – A Risky Venture!!!.

Where did they come from?

The top referring sites in 2010 were orkut.co.in, orkut.com, facebook.com, alphainventions.com, and mail.google.com.

Some visitors came searching, mostly for arunsankar wordpress, arunsankar, arunsankar.wordpress, when u want to be alone in life, and www,arunsankar.com.

Attractions in 2010

These are the posts and pages that got the most views in 2010.


Education in Australia – A Risky Venture!!! January 2010


I Me Myself August 2008


I want to be alone! April 2010


The Giving Pledge December 2010


disturbed!!! August 2010
2 comments and 1 Like on WordPress.com,

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The lecture on “The real significance of scams” by Mr.Arun Shourie, an Indian Journalist, Author and Politician, and Mr.N.Vittal, the former Central Vigilance Commissioner was hosted by Nani Palkhivala Arbitration Centre on December 18th 11:00 AM at Chinmaya Heritage Centre in Chennai. The lecture began with the introduction of the speakers by Mr.Arvind Datar, a prominent senior advocate in the Madras High Court. Then Mr.N.Vittal was asked to deliver his speech.

Mr.N.Vittal began on a sad note describing the current Indian situation as an “era of scams”. He also quoted it as an “era of transparency”, where almost everyday some scam is exposed. He was more interested to elicit ways out of this era rather than analyse the existing practices of corruption. He quoted an example on the enormous impact of ICAC(Independent Commission Against Corruption) on corruption in Hongkong since 1974 to give hope to the let-down Indians. Then, he started analysing the reasons of corruption and the ways to contain them.

  1. First and the foremost reason is that all the government institutions lack accountability. Article 311 of the Indian Constitution is one of the primary reasons. It also leads to dilution of responsibilities of the public servants.
  2. Second, the labour laws are not rigid, resulting in highly secured jobs. So people started bribing to any extent to get these highly coveted jobs. Labour laws have to be made rigid to turn this situation around.
  3. Third reason is the difficulty in proving corruption. The Loop holes in our laws make it easy for the Corrupted hand to escape punishment often easily. Punishments have to be inflicted based on Preponderance of probability rather than “beyond-reasonable-doubt” criteria.
  4. Fourth reason is that our basic law making system is flawed. Sadly, the law breakers are our law makers. Law breakers shouldn’t be allowed to compete in elections to prevent this.
  5. Fifth reason is that only the person accepting bribe is punished. This has to be modified to punish the person who gives bribe as well as in Prevention of dowry act. Further, the punishments should also include confiscation of property.

Further, faith on Judiciary must prevail among people and the people should drive the Judiciary. People must do sting operations in exposing corrupt officials. Transparency has to be enhanced through Technological advances. Another most important thing, is to create the “TINA”(There Is No Alternative) factor, by forming an institution merging CVC, CAG, Judiciary and Electorate, that keeps a check on corruption. After discussing the “anatomy” of corruption, he concluded with a positive note. He said that we are still not in an irrecoverable state. We, still can control corruption. Let us have hope that this “era of scams” ends sooner and forever.

Then Mr.Arun Shourie was asked to deliver his speech. He began with an analogy “Corruption is cancer”. If we don’t keep a check on it, it will spread and destruct the entire society. There might be a political breakdown as well, but every breakdown leads to a breakthrough. He illustrated several reasons of corruption and ways to combat them.

  1. Every profession is concerned about itself. If a scam doesn’t affect a particular profession, people involved in it are not worried. People should have collective responsibility. It is ultimately our tax money that is being played with.
  2. Institutions to combat an issue, becomes an issue in due course. There is no proper check on these institutions. Government appoints weak and flexible persons in these institutions to bend the righteousness of the institution.
  3. Beneficiaries of the scams are in power. They just point hands on others for an even worse scam. They should be barred from public life for life.
  4. The polity confuses the public. It tries to dilute the issue by diverting the attention to some trivial issues. The nexus between polity and media intensifies this. Media should report facts and not statements.
  5. In the media, Current issues are always given importance. Once an issue gets older, no media follows up resulting in the dilution of the issue among the public. Media and People should combine and pressure the government to make sure that no crook escapes punishment.
  6. People also believe whatever is said in the Media. They need to look into the facts themselves, as the facts are available very easily thanks to the emerging technologies. Also, people need to read the news with scepticism. People shouldn’t be confused by the Media or the Polity. They must remain focused and vigilant on these issues.
  7. No adjournments should be there for the cases related to corruption. Adjournments dilutes the case with the time, that they need another trigger to raise voices from all quarters.
  8. Punishments should never be fine in these cases as the convicted will be happy to lose a small part of the loot. Physical incarceration and restriction from the public life should be imposed on the convicts.

The prevailing situation might result in excessive cynicism among the people of India, which is hazardous. But people have to understand that not everyone is a crook and support the honest persons in Governance. He finally gave hope to all the honest people of India that that is not the time to be let down, but an opportunity to learn and contribute more in future to avoid such a worst situation.

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I misunderstood Women’s  Reservation Bill as a real motive in empowering Women. But after I read the amendment, I believe it will not.

In India, Reservations implies giving Opportunities. Reservations are not handled properly in India. According to me, Reservations mean reducing standards. For me it looks like, “She will not be able to compete with Men! Give her some reservation!”.

Many politicians say they are trying to bring this bill into force for 14 years. Pity that in these 14 years, these politicians couldn’t empower women even in their parties. We can’t say that it is difficult for Women to come to light in Indian Politics. There were women who did, though many were the daughters/wives of some politician.

This amendment reserves 1/3rd of the seats to women for 3 terms rotating the reserved constituencies. What will happen is known to everyone. Wife/Daughter of a minister or some politician will be sent to New Delhi during that term. In most cases, She may not go to parliament at all. A seat wasted!! Many Constituencies will bear the brunt of this bill. Should this happen?

Women can be empowered in politics only if they were willing to do so. I am not sure whether they are!! But most of the girls/ladies whom I know are uninterested in Politics. Why should we force someone who is not interested in? Their views should also be taken into consideration in all the issues. Yes, we should!! But will giving a seat to a woman is enough? No. Mamta was not allowed to express her views in Parliament when she was elected previously, competing men.

Women will get what they want only when Men start giving them. Indian Male Population should leave their hegemonic attitude towards women first. Reservation for women should be at the party level. Steps must be taken to improve the percentage of women pursuing law education. This is pivotal.

But in India, things mostly go on a top-down approach rather than a bottom-up approach. If this bill is passed in lok sabha as well, we need to follow up on how many wives/daughters of male politicians are getting opportunities to become MPs. I hope to see more active women participation in the future. I hope.

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Mamta Banerjee presented her second Railway budget of the present UPA term.

My view on some details, which I consider vital are:

  1. The ticket charges were not hiked. This is very common in the Railway Budgets now.
  2. Mamta admitted that the rate in which rail roads were laid is very less. India’s first rail was operational on 1851. Since then, till 1950, 53,596 km of rail road had been laid at an annual average of 535km. But after 1950, for nearly 60 years, only 10,419 km were laid, at an annual average of 170km. This fact astounded me. Did Indian railway progressed well under the British Government? Mamta came up with an ambitious target to lay 25,000 km of rail roads in 10 years. This may look unachievable. But if achieved, this will be the success of the people who elected UPA for a second term.
  3. Proposed six fresh water bottling units. These units will offer fresh water at cheaper rate. If implemented, it will benefit common man largely. A good initiative.
  4. Plan to improve many stations was announced, but this improvement should not be a just words. Infrastructure is one area we need to concentrate more to become world-class.
  5. The frequent deaths, thefts and accidents involving Railways were addressed with plans to implement hi-fi technology. Safety of people is also considered. This is a welcome one.
  6. “House for All” scheme to provide housing to all the railway employees within ten years shows Mamta’s concern towards the Railways’ employees without them her words will not materialise.
  7. Hospitals will be set up in a lot of  stations. Mamta cares for the people, the people who voted her to power.
  8. For reducing the carbon foot-print, increasing the usage of CFLs and setting up Rail eco-parks were proposed.
  9. 6 non-stop duronto services to be introduced. This is a boon to many businessmen travelling regularly between two cities.
  10. Concessions to technicians of regional fim industry is proposed. It benefits the film producers, who don’t require this. A useless concession, I must say. 100% concession to cancer patients should be welcomed. This will benefit them largely.

If the terms in this budget are executed properly, then it marks the entry of Indian Railways into a new populist generation. Nevertheless if the terms are just words to please the people, the people who voted Mamta may be wrong.

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Compulsory Voting Bill is passed in the Gujarat Assembly. Kudos to the Gujarat government and its CM Narendra Modi for making it an amendment.

Many Indians used to think  “What is the point in voting? Every politician is corrupt.”, “Hey get a life.. why waste a holiday for voting?”,  “I am not interested in politics.”. But these people blame the government as if they were the ones who elected the representatives. They fail to use their right and then blame the government for corruption, bribe, poor standards across all the public sectors. This has to change. Of course we need to create more awareness, but will that be effective. In the recent elections, certain shops gave offers to people who have cast their vote. It is a shame that some did vote for those offers, and some even boasted of that. It is better to use free goodies in the awareness programs rather than reminding them about their rights.

In recent polls, many constituency registered just 40-50% votes. In this scenario, third parties would have got some 5-10% of the votes. Thus a person who gets 20%(one-fifth of the voters) of votes can now represent his constituency. Pathetic situation, isn’t it?

The most important step in the development of a state, constituency, municipality or panchayat is to select efficient people to represent the people. This can only be achieved by making voting compulsory. Thereby we can make sure that our right is not misused, but exercised properly. One thing that surprised me is that the congress opposes the bill by stating “Voting is a right not a duty”. So if a right is not at all used, why have that right? The Election Commission says this is impractical. Why can’t we implement it if countries like brazil, argentina, singapore, etc have implemented it? Are they saying they are incompetent?

I say this is the right moment in Indian Politics to think about implementing the bill throughout the country. This is a step towards the “best democracy” in the world (“By the people, For the people and to the people”).

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