Monday, November 27, 2017

Reflection document on Social Entrepreneurship Saturday

Social Entrepreneurship movement is considered as next big thing and start ups of the development sector. The time needed to solve the social issues is vast, but thanks to the social enterprise movement, these issues are finally being fixed using sustainable business models and market forces. One of the most important tasks for the entrepreneur is to gain clarity about customers’ needs and willingness to pay. This helps in establishing a sustainable business model and create social impact alongside profits for external shareholders. That makes the social entrepreneur different from persons involved with Charity, For Profit Business and Government.

I will quote these three articles as a source of my brief understanding:
I attended a lecture on Mr S K Shelgikar on 25th November 2017. Mr S K Shelgikar, Advisor for Yunus Social Business Fund was the speaker for the talk at Transforming India Initiative - ALC that was revolving around the concepts of Social Entrepreneurship. The target audience were TII Fellows and internal team of consultant at ALC India.


Social enterprise as per me is applying a market-driven approach to addressing social issues and creating positive community change. The fundamentals of social enterprise became more clear today. The best part of the class was three principle on which social enterprise is based : Not for profit maximization, Serving the unserved and Done by personal choice while enjoying the invested time.

Mr. Shelgikar gave a lot of emphasis on mental experiments. They are the good intellectual exercises that drives people towards setting up the goal. I was intrigued on hearing about : Harm Principle, Theory of Regulation and Lexical ordering of virtues. There was so much quoted from Bhagvad Gita, Adam Smith, John Stuart Mill, and Immanuel Kant. This was heavy philosophical stuff that has bounced above the intellectual capacity. He also defined two uncharacteristic traits of Social entrepreneur: Fully convinced in disconnect between inputs and outputs & Empathy for others.

I personally assume the challenge remains in making social entrepreneurship rewarding. Perspectives from employee is different from the perspective of the social entrepreneur. Still, there is good amount of information that has to be reflected and may help me grow as Intrapreneur.

Sunday, October 15, 2017

Business Model Canvas

New sources of funding, new actors and new technologies are quickly changing the landscape of the sector. Currently, not for profit sector is transitioning their operating and/or business models. For transitions to happen successfully, they must look at the historic perspective of why their enterprise is developed in the way that it did and at the same time look at the anticipated future trends. To go through the evolutionary change, there is need of a design thinking for analysis. Business Model Canvas is the ultimate framework for this purpose.

Business Model Canvas represents a business model or business case with nine simple building blocks, including customer segments, channels, and relationships; value proposition, key activities, resources and partners; cost structure and revenue streams. The canvas therefore combines the financial viability of a solution with its usability and feasibility. This tool helps the manager to focus on what’s driving the business and value deliverance.

Professor D V Ramana will explain the whole concept in a simple video under seven minutes for the readers.


It is developed for analyzing and developing models in the for-profit sector. Judith Sanderse did analyze the potential usage of the Business Canvas for the case of NGOs in an academic paper. We can view the changes made in the tool for non profit sector.

To sum it up, the Business Model Canvas can be utilized in various ways during the Design Thinking modes. This tool can be used from Grassroots interventionists to portfolio managers of impact investment funds on focusing on the business management, development strategies and local economy analysis. Readers may read more on the topic through the book called Business Model Generation written by from Alex Osterwalder.

Tuesday, July 4, 2017

Fellowship or MBA in Development Sector

Today, development sector has emerged out as an unconventional yet full fledged career option amongst the youth worldwide. People seeking career in Development Sector face a dilemma on the choice between MBA in Rural/Health/Forest management and fellowship opportunities pan India. There are pros and cons in each choices:

1. Academia: Most candidates become largely irrelevant in running social enterprises by putting effort to keep themselves either too much academic or searching for degree from premier colleges. B School always provide broad base knowledge base than that is gathered in classroom training of Fellowship.

2. Seeking Experience - The grassroots experience is must before jumping into solving an issue as one has to acknowledge the gap between ideology and lived experience. Fellowship experience will be much diverse and fruitful than 2 years in MBA school.

3. Network Effect - The number of students enrolling and attending the MBA is much more than fellowship program. There is an inherent advantage due to networking in the majority. Majority and minority are about positions in career ladder, not numbers alone. Yet old institutions have good alumni networks required to establish oneself in employment markets.

4. Future Study Abroad: A full time MBA program gives base through academic rigor. MBA school in development sector refine skills by having options like IRP/Mini Thesis on chosen topics. This forms a launch pad for students looking for opportunity to study abroad in courses like Public Policy and Public Administration.

5. Peer Quality - Applicants for both go through assessment like Reasoning, Aptitude Tests, Group Discussions or presentations about a subject related to the development sector and a face-to-face interview. The focus is more on the quantity rather than fit in MBA. Hence, a much dedicated and like minded peers will be more likely to be found in fellowship program.

6. Content of the Program - The content of both are nearly same with different weightages to the mix of NGO Visits, Classroom Experience, Village Studies, & Leadership Activities. The exposure to different ideas is much limited in fellowship but the depth of the program helps those people who had already made choices for the career goal.

7. Social Entrepreneurship - SE is a combination of both thorough knowledge and action driven attitude. The fellowship is much preferred way to effectively diagnose risk aptitude and aspirations. Fellowship gives lot of independent thinking and support entrepreneurship in through business skills training, etc.

8. Leadership Development - The leader-centric functioning of non profit has always doomed the development sector but this is less talked phenomenon in the classrooms. But even various theory of Leadership (Analyst, Architect, & Strategist) doesn't come much good in the real life. Fellowship provides direct opportunity to interact with Non Profit leaders who are taking tactical and strategic decisions in handling the resources.

Prestigious Fellowship in India

1. Transforming India Initiative
2. Teach for India Fellowship
3. Legislative Assistants to Members of Parliament (LAMP) Fellowship
4. William J Clinton Fellowship
5. Gandhi Fellowship
6. Azim Premji Foundation Fellowship Program
7. Ashoka Fellowship
8. India Fellow Social Leadership Program
9. Indian School of Development Management (ISDM)
10. Deshpande Fellowship Program
11. Pradan

MBA Option: Private MBA-School has pure market orientation since with higher infrastructure and faculty cost can't be covered with lower admission fees and lower batch sizes of students. Subsidized education at public institutions like IIFM and IRMA gives much better option to start fresh and new as development professional. Let us cross examine the private & public institution in rural management.

Rural Management of Xavier University Bhubaneswar will cost around INR 15 Lakh (Program fee - INR 11 Lakhs, Development Fund: INR 1 Lakhs, Boarding and Lodging Expenses: INR 1.76 Lakhs, Course Material, IT, Alumni & Placement Expenses: INR 1.4 Lakhs). The highest domestic salary stood at INR 11.00 Lakhs per annum. The average annual compensation stood at INR 7.32 Lakhs per annum. The Median annual compensation stood at INR 7.00 Lakhs per annum. The high end jobs belongs to Banking and Rural Marketing sector. So even with 20% of the savings from average income, it will take almost 10 years to repay the loan here. This high fees has been dissuading young students studying in the private institution to make a career in development sector. Even public institution like IRMA will cost around INR 12 Lakh (Program fee - INR 9.5 Lakhs, Activity Charge- 0.6 Lakhs, Boarding and Lodging Expenses: INR 1.5 Lakhs). The average annual compensation stood at INR 10.22 Lakhs per annum. So, with the same logic it will take minimum 5-6 years to repay the education loan.

I assume that appropriate candidates for fellowships are fresher with 1-2 years experience and mid-career professionals who have a commitment to public service, leadership traits and the potential for professional advancement. The unexperienced students must prefer public institutions like XISS, TISS or IIFM otherwise choose fellowship over private MBA institutions. The burden of loan restricts a professional in long term decision making and financial freedom. Mostly, aspirants engaged in the job or college hadn't enough time to think without peer pressure, analyze down the career and work out what is vital to get the best out of oneself. But, in the end one has think deep, discover options and take bold yet pragmatic decision before making a career in development sector.

Friday, June 9, 2017

First Time Manager

As a fresher, I always thought experience is just a word, but now I certainly believe in it. I have understood the ebbs and flows of the profession better.  What really do organizations want out of the professional? The simple answer is “get the job done”. Generally speaking, all managers are charged with three responsibilities: making money for the firm while saving time and reducing expenses. In below lines, find few tips for the first-time managers:

Skill development It is always expected to have basic skills to conduct meetings, reviews, analysis, and communication skill. There must be always focused on developing self-capacity to increase productivity. This includes a small task of planning for day work in hours to being updated with the latest know-how in the field. Work on your written and verbal communication skills to become more appreciative and acknowledging of your coworkers.

Ask for Trouble- Effort is important but where to put effort distinguishes achievers from hard workers. It is important to get your hands dirty by taking over troubled account or project. The problem can be varying from small communication gaps to a series of missteps. Learn about the root cause of the original problem. Why previous attempts to turn things around were unsuccessful?The solution approach helps in understanding the nature of business development and service quality of the organization.

Understand Business- It is always beneficial to spend some time with senior management. The process to design strategy, decision making and contribution are widely learned in this process only. Consumer behavior, public policy, and external environment are constantly changing and managers ability to anticipate and respond to these changes is vital to the top leadership.

Networking - The meaningful connections with teammates, clients, and supervisors is relationship building in the simple and effective form. It is always better to have network spread across age, sex, ranks, department, and alumni network. This involves regularly answer to emails and returning phone calls, engaging with employees in the hall and break room. Be Assertive, Admit when wrong and Make promises what you can keep.

Managing Team - Make sure that same rule is applied for everyone. If a manager seems to be close friends with just one or a few members of a team — to the exclusion of others — this could be a case of playing favorites that could easily escalate. Any manager that checks in with individuals on time utilization far more than necessary is likely a micro-manager.

Decision Making - It is always better to be consistent and a bit of flexible on decisions, responding emails, approach towards a problem, in monitoring team progress. The reputation of the person flip-flopping under pressure decays rapidly. Never fall into a meeting trap, in which meetings are routinely and unnecessarily convened, because constantly meetings for “input” or to consult about an issue could signal a problem with indecision.

It is important to never lose sight of the basics. Sportsmen are the best to emulate on the competition and positive attitude. Regardless of their ranking, they train regularly to strengthen and refine their basic techniques. It is important to understand what really matters to someone, whether an entry-level team member straight out of school or a veteran employee. A manager must seek to understand what each people in the network really care about. This may sound obvious, but in the midst of pressure for deliverables, it’s often forgotten.

The working culture, beliefs, and attitudes prevailing in the organization dilute individual beliefs in most of the cases. There will be a lot of unknowns when one is naive and young: Do I belong here? Am I good enough? There's a lot of proving to do along the way, to yourself and to those around you. Sometimes you need a bit of success to just say: I actually belong here!

Please read 10 Challenges That Every First-Time Manager Will Face by Jacob Shria for more such gyaan.

Sunday, April 16, 2017

Visit to Mulkanoor

I had a chance to spend time in Mulkanoor for professional exposure visit recently. Why? Mulkanoor is guiding light of India's cooperative movement. I was able to visit Mulkanoor Women's Cooperative Dairy (MWDC) and Cooperative Development Federation (CDF) promoted Thrift Cooperatives but unable to go at Mulkanoor Cooperative Rural Bank and Marketing Society. The purpose of the visit was to gain an insight into Community Micro Finance & Livelihood intervention work and gradual evolution of the cooperative model formed by the local women. I tried to learn from personal experiences as well as technical formalities by interacting with staff, members, & board directors of the cooperatives. My visit began with a morning ride from Hyderabad and it was about a four-hour drive. Mulkanoor falls in Bheemdevarapalli mandal of Karimnagar district.


Mulkanoor is a hub of agriculture related activities. This area is known for paddy, maize and cotton cultivation. In addition to it, Mulkanoor is famous for its milk production too. Mulukanoor Women’s Cooperative Dairy (MWCD), a model enterprise was established in 2002, the dairy today is an enterprise powered by 22,000 women producers. Currently, the dairy has 138 societies also known as women dairy co-operatives (WDC) having members from the bottom of the pyramid (BoP) spread-out in Karimnagar and Warangal districts. MWCD’s brand Swakrushi stands for quality for its consumers.

Cooperative Development Foundation, popularly known as Sahavikasa, was formed in 1975 when a group of Individuals came together and started working for the development of cooperatives. The CDF has provided technical assistance to the cooperatives with the strategy revolving on the social construction of an economic institution. The following working paper throws light on CDF and Women’s Thrift Cooperatives in Mulkanoor.

I am sharing few peculiar observations about Mulkanoor here -

1. Access to credit is the primary reason to join thrift cooperatives. Financial inclusion is always an enabler of other development objectives and not as a standalone goal. The financial inclusion goal has been achieved in Mulknaoor but the action to ensure social justice or affirmative action in political space have been shunned. The premise of cooperative movement is the result of the struggle against traditionally dominant business class. They have chosen a strategy to fight on the single front rather than spreading limited resources for democratizing the social, political, and economic life.

2. Many women believe that financial products and services are too complicated for them to understand, and this perception serves as a barrier for adoption of these products and services. It’s unfair to expect women members to be expert investors in various available financial services. But thrift cooperative has done ample of capacity building and localization of the financial services. This is inspiring to see how real banking services is supposed to work for real people leading real lives. Thrift cooperative has ensured service accessible to all and not turning into a complex maze only a few can navigate.

3. Most cooperatives fail in running enterprises due to being insulated from the discipline of the market especially in consumer-facing enterprises. MWCD has again proved that AMUL Model can be replicated and adopted anywhere in India. Also, Thrift cooperatives at Mulkanoor have not been caught the in the trap of imposition of across-the-board waivers in the interest rates and loans repayment. Good governance can be attributed to the Andhra Pradesh Mutually Aided Cooperative Societies Act specially. This helps management in not allowing outside interference of the government as they want to maintain the integrity of this cooperative. The institution has developed because they were not politicalized and kept away from concessions and subsidies of the government.

4. Democracy in the cooperative did not just mean that one has the right to vote, adding that it is necessary that the democratic ethos spread in the community. CDF has served the community with the commitment to deregulation and entrepreneurship. It's difficult in a practical sense because a cooperative can't be run like business corporations. Internal issues have to be resolved in a sensitive and tactical way as the community has to live with those whose status quo are affected by the cooperative. Such deregulation and upholding of power by community representative have helped cooperatives in avoiding governance crisis and not transforming into an ineffective parastatal institution.

5. CDF and community leaders have dared to challenge conventional wisdom and social assumptions. Community leaders at Mulaknoor have brought next generation with skills into decision-making positions. That has built a cadre of professional and leaders at the community level. The chance to get skills and to practice and learn leadership has expanded the leadership base and increased the age of the institution.

Mulkanoor cooperative is an exception rather than a rule in Indian cooperative ecosystem. Cooperative Movement has been burdened with a variety of problems, mainly from the outdated cooperative law and practice, conflicting with the basic tenets of cooperation and sound business principles. The cooperatives who are most successful work in an enterprise way without being at odds with transparency as well as accountability. Trust and perception matter more than financial benefits in the cooperative movement. Roots must go deeper in the creation of the power to the people, which is opposed to the coercive power of the state and differs from the traditional business.

Thursday, April 6, 2017

Street Entrepreneurs - 2

The informal economy in India is run by entrepreneurs providing products and services to the customers. These low-skilled occupations require low financial investments and thus have a relatively low threshold for entering. The street vendors have created a carefully constructed beehive of economic activity in the public space. They have created a functional system for themselves without waiting for government to provide them the legal permission, space and subsidy. In the series of street entrepreneurs (first part), I am presenting here a blog post by Anishok Mishra from the 2016-18 batch of XIMB:

The Cost behind the Taste - The Chaiwalas of Bhubaneswar.

Tea, or as we fondly call it "Chai" is one of India's most preferred hot beverages. Almost every person in our country has had a sip of this drink once in their lifetimes. Some prefer it black, some with milk, some with a splash of lemon and those looking to get healthier by drinking it prefer it "Green". No matter the variety or the recipe used to brew, this drink has only grown from generation to generation.

A big contribution in the same can be attributed to the numerous vendors who are situated on the streets in shops and "thelas", sporting aluminium kettles and gas stoves, serving tea to all who pass by their shops in glasses, earthen "matkas" or sometimes in plastic cups too. They all have their ways of working and their ways to making ends meet. This article attempts to take a closer look into the lives of these "Chaiwalas" and attempts to analyse how they recreate the same taste every day and the rewards they earn for their efforts.

At the outset, during the course of our short study we observed the following average trend in the expenses that surround a tea vendor:

Monthly sales (Rs) 24600
Montly Cost (RS.) 15193
number of cups per month 4920
Quantity of tea sold (liters) 388
quantity of Tea used (as input IN KG) 12
Cost of Tea Purchased per month 2898
Milk used (litres) 318
Cost of milk 9432
Electricity /Gas 587
Other Expenses 2276
Profit per month 9407

Let above figures not lead you astray. The same are simply an average of the shops that were surveyed at random and follow no patterns as such. Not every tea vendor makes more than Rs. 9000 as profit in a month. Besides this does not consider the expenses such as the cost of his equipment (Stove/Fridge/Utensils etc.) or the support staff. This means that the profit gets trimmed down even further and comes within a range of 4 to 7 thousand a month. This figure gives an insight into the hard lives that these vendors have to endure.

During our survey we approached each of these vendors with a set of questions. Although our intent was strictly academic at the start of the project, we could not help but indulge ourselves into the brimming cups of tea as they shared the information with us in a forthright manner. Be it their sales or their expenses, the "Chaiwalas"seemed as relaxed sharing this information as Toyota inviting people to study its Just In Time systems. Though the comparison may seem far fetched, the same is precisely what transpired.

During the time spent at the stalls asking for information, we observed the plethora of customers that these stalls catered to. Ranging from students who were headed back from tuition to tired office staff blowing off steam after a hard days work; or even the rickshaw drivers when they take a break. Somehow, these "Chaiwalas" have established their presence in all our lives as focal points where people meet and socialize irrespective of their occupation or status. The experience reinforces the importance of these vendors in the social landscape in maintaining a delicate balance between the lives of individuals.

Selling averagely 5000 cups a month and making only a rupee of profit per cup is a grim situation for any business. But the "Chaiwalas" have endured for the better part of a century and continue to do so serving us with a smile across their faces and the amazing fragrance of brimming tea filling our nostrils.

Monday, March 20, 2017

Job Search in Rural Management Domain

Rural management gives career option in both for profit as well as non for profit sectors. A rural management professional can very well be part of the mainstream down the line even though starting career from a rural base. While seeking for job, professionals apply for anything and everything in response to the posted vacancies in the job portals. Consequently, the chances of resume being ignored becomes high. To avoid the rejection, it is suggested to have a customized resume and job applications by including the keywords used in the job description that fits with your skills and experience. An updated Linked-In profile and healthy networking helps in a great way.

I have faced difficulties as a job seeker looking for the right job and even knowing name of various companies/ organization of the rural management domain. It is best to choose a target employers where one would like to work, and focus your efforts on those jobs and employers. I have compiled list of organizations apt for a rural management professional that will assist one in reaching the right and targeted organizations easily.

This database will come in handy to the development professional, current students and alumni of XIMB, XISS, EDI, XIDAS, IRMA, VAMNICOM, Amity University, TISS, KSRM, IRM, IIFM, IIHMR, NIAM, GBPSSI, BIMT, NIMT, IISWBM, NIRDPR & TERI University.

Please provide feedback for any company and organizations not mentioned here.

Learning of the Day: It is important to negotiate on the salary and consider this as a marathon, not a sprint. Prof. Deepak Malhotra offers 15 pieces of negotiation advice in an informal session for students at the Harvard Business School.

Saturday, March 11, 2017

The Future of Self-Help Groups

SHG Bank Linkage Model pioneered by NABARD served dual purpose of financial inclusion  as well as social empowerment for rural poor women from excluded communities. SHG program had shown to be successful in connecting both unserved as well as under-served customers with financial services.

In the changing financial landscapes, it's merely a question of time before JLG movement overshadows SHG movement. The data on regulated microfinance institutions (MFIs) that submitted their numbers to the Microfinance Institutions Network indicates that over the past year, loan portfolios grew by 84 percent and loan disbursements grew 45 percent (Source). SHGs financed by the bank despite of government schemes like NRLM became stagnant with the growth of MFI sector. The data set (Source) shows decline in SHG financed by banks post 2013 while JLG movement is seeing tremendous growth.


JLG model has led to the establishment of a large microcredit sector in India post 2010. While SHG promoted by NGOs and government agencies are either small in numbers or with high default rates. The reason behind can be explained through: last mile outreach, continuity in service, strategic approach of the movement and market led changes in the society.

Both SHGs and JLGs have distinct credit delivery model. The members are expected to visit the bank and make repayments on their own in SHG model even when a visit to the bank branch leads to travel expenses and loss in daily wages for the client. SHGs have to manage the entire repayment collection process, and maintaining records. This process is reversed in JLG model practiced by MFIs with door-to-door delivery solution of cash disbursement and repayment with proper records.

SHPIs (mostly NGOs) promote SHGs for deepening the impact of their programmes and consolidating their own social agenda. Promoting agencies are solely depend on the funding agencies and aid under any government schemes for cost of formation. SHPIs typically have mandate for capacity building through trainings, credit linkage of the SHGs to banks and their monitoring role vis-a-vis the group discipline that is limited for project duration. Hence, SHPIs were able to sustain the regular and quality customer service to the women members during project period only. Public sector and rural banks have been lending to SHGs only due to government-imposed, priority-sector lending quotas. Once the support from promoter agency ends, the bankers are bit reluctant to provide financial support to SHGs due to fear of default. SHGs are also implementing vehicle for various welfare schemes in rural areas and get funds for it. But most SHGs are running on paper only. The validation and grading exercise to know health of SHGs are avoided by both government machinery and NGOs as this can expose fraud at the ground level. This also led to decay in the quality and credibility of SHGs.

MFIs diversified the geography to cover for political risk post Andhra crisis. Consolidation phase was achieved in the MFI market as crisis has swept away small players and make investors cautious. But the value of acquiring customers went up due to introduction of credit bureaus. The strategy adopted by MFI for acquiring new clients was based on low risk and high pace growth. They concentrated on the regions where the SHG programme was implemented on a large scale with successful result. The new borrowers came by restructuring of already existing JLG and SHG members. The incentives of a loan officer in MFI is based on loan disbursements and recoveries. As a result,they could form JLGs and disburse bigger ticket size loan if they include SHG members with inculcated good credit history in the JLG formation. Also, women prefered JLG model due to availability of credit in increasing amounts without any mandatory savings.

SHGs are gradually becoming the aggregate of individual actions, and rarely works as collective action. The members of SHGs are more inclined towards starting an individual based activity rather than collective based activities. This behavior shows either SHG members have not much awareness about the benefits of coming together or don't have the cohesion among them. A major role behind the screen was played by external market led economy having dynamic individualism and consumerism as its underlying themes. There is tremendous heterogeneity even among the poor SHG members based on parameters of aspirations and entrepreneurism. The break with tradition and affirmative action of state meant the break with established identity-giving authority. The new individuals, freed from the traditional collective, have started to reorient themselves in a new manner. In the booming economy, there are chances of class mobility for entrepreneurial households through remittances and migration. The lines of class division are crossed now more frequently,  the collective identities based on class or caste association are loosening up and leading to ineffective collective action. Hence, theories of collective action are not working as effective now in the rural ecosystem,

This concludes the brief summary of the emerging debate. The popularity of the JLG has eclipsed SHG but its current clients will be shifting to Small Finance Banks to avail savings, credit and other full range of financial services. The affluent clients will drift towards JLG while SHG movement will continue to reach out to vulnerable and marginalized people who own little or no land, are predominantly illiterate, and lack access to formal sources of financing.

Monday, February 13, 2017

Life in ALC India

I have joined at ALC India Limited today. I have moved into consultancy act from programme implementation role. I hope my work will take me places and the initial exposure that was localized in the nature and context will be broadened. Tangible gains go hand in hand with the intangible ones in career of every employee. There will be business relation to establish, field tours to get insight, policy level to conduct and markers to lay for the future. Hoping this life will not be fully devoted to the job and conforming to its mindless dictates.

When I quit the job with Chaitanya, I almost felt I had unfinished business to do. I felt that my reputation with ADS and in peers had been very good. And then you have to start searching for job after a gap, it is tough. It knocked me out for few interviews. I have seen a lot of ups and down with the career even a pink slip. I have emerged stronger after experiencing harsh realities of the lives early on in his career. When you get on a learning path, it is the best time of your life. Every day means something, every lesson provides the clarity you clamour for. Life is not about doing it alone. It's about learning from those who have already achieved great heights, and adding that history to one's own built-up.

"Life is not easy for any of us, but what of that? We must have perseverance and, above all, confidence in ourselves. We must believe that we are gifted for something, and that this thing, at whatever cost, must be attained" - Marie Curie

Friday, January 6, 2017

Way to Cashlite Economy

Market and State are principal agent of development. The welfare prone Indian state is now promoting the digital financial inclusion and cashlite economy.The demonetization narrative and data has been diverted towards digital and cashlite economy. The state appears to have vision of going cashless, notably like South Korea, Denmark, Sweden, and Norway. The cashless economy is an utopia but cashlite economy will happen till 2050. The digital ecosystem in India is demonstrated in the diagram below (Thanks Microsave) :



The issues in move towards cash-lite economy has been discussed in detail here -:

1. Policy Level: RBI has drafted policies (in its Payment System Draft Vision Document) to accelerate the shift towards electronic transactions. This policy will require an integration with National e Governance and Digital India plan for having a significant outreach and affect. The 'Committee on Digital Payments', headed by Ratan P Watal deployed by Ministry of Finance has already delivered report on digital payments. They have suggested fiscal incentives to promote digital transactions and a separate regulator to deal with issues concerning payment. Payments and Settlement Act, 2007 will need revision under fast changing digital ecosystem. Unified Payment Interface (UPI) acting as gamechanger has enabled all bank account holders to send and receive money from their smartphones without the need to enter bank account information or net banking userid/ password. RuPay has gained more than 1/3rd market share in total cards outstanding and 18% share in terms of volume of debit card transactions. RuPay is pioneering step as it has lower integration fee with banks and reduce the outflow of precious forex. There is need for incentivizing and strategizing the consumers to use digital accounts. Digidhan is an initiative for promotion of digital payments with lucky draws for consumer and business entity. Beneficiary of government user will receive DBT, scholarship, pension, social transfers and price subsidies from the state as well as central government.

2. Internet Connectivity: The first question to be asked by marketers on digital India: Is the quality of Internet connectivity good enough to go for consumption online? Current internet penetration in India is 34.8 % of the total population. (source). Connectivity issues and the power scenario in the country often impact transactions in India. The Cost, Speed and Reach are three major factors influencing spread to tier 2 and 3 cities in India. The introduction of 4G in the Indian markets is expected to be the next game changer but the prices of broadband connections as well as data charges for 3G/4G are quite high. Unless 3G/4G comes at par with 2G rates, one can't expect digital initiatives like these scaling up. Also, the failure of digital transactions is highest with 2G connectivity. With improvements in connectivity and reduction in cost, the market is set to explode with innovation.

3. Role of Banks: 24*7 and 365 days banking will come through the change in financial services in India. Promotion of (e-KYC) information previously captured during enrolment for Aadhaar, and available electronically to banks or enrolling institutions will reduce a lot of paperwork and time for the banks. A waiver on debit card fees having no credit risk must be promoted among customers. Instead of Surcharge fees and Convenience fees, promotional discount and incentive on current account with some interests will promote people to move towards digital footprint. The presence of multiple players and increase in e-commerce volumes has helped rationalize payment gateway charges to 2.5-3.0% that used to hover around 4-7%.  Saral Mukherjee on Livemint has correctly argued : Benchmark for the merchant discount rate (MDR) for debit cards should be the NEFT/RTGS/IMPS fees rather than credit card fees. If the IMPS charge for transferring up to Rs1 lakh is Rs5, why should debit card use cost 1% of transaction value? Card-based transactions also leave an audit trail. Since MDR on debit cards is a cap and not a floor, banks could have proactively reduced MDR to spur adoption.

4.  Role of Market: The old existing business models for the merchants must be molded such that digital transaction will reduce their time and cost of conducting business. The move to cashless transaction can originate from the retail consumer but needs to involve wholesalers, distributors and manufacturers in the supply chain. E-commerce firms are doing 70% of business through cash on delivery in India. Cash transaction increases another level of risk to the supply chain in the form of cash handling and higher rates of return of products. There is need to have push for digital payment infrastructure. With easier availability of capital through online lending will be a catalyst for MFIs to digital payments, both as a way to repay the loan, and accept consumer money. The future of rural banking and microfinance is sachet sized cashless transactions! This will reduce costs, minimize ticket sizes and volumes will go up!

5. Last Mile Connectivity:The network of Banking Correspondent agents will be utilized in the cash-lite economy. Agents are working on low profitability due to the low levels of transactions and high operational expenditure. Agent dormancy, or inability to deliver service, has a corrosive effect on trust, which is the bedrock for any system of digital financial services. Any initiative in digital services must pay attention to the business size and frequency that will come through use of micro ATMs, mobile money and mPOS terminals. There is a report by microsave on long road ahead for digital economy for all. The agent must be well prepared to handle behavioural traits like habit of using cash with compelling value proposition, offers and anti-fraud procedures in explaining the digital services to the rural customer.

6. Consumer Protection: More secured online payment systems is the primary concern of the consumer. The failure rates of transfer/payment, grievance settlement, fraud management, integration support and lead time are the evolving areas required for consumer protection in digital economy. Ease of use, honest pricing, individual data protection and cyber security are all required for customized end product and fintech providers will have chance for innovative solution. The financial service providers must be transparent in process of customer recourse, complaint management and dispute resolution.

7. Digital Financial literacy: Digital financial literacy program needs push from government in creating awareness and customer protection. The conception of financial literacy is packed with stereotypes of the poor as ignorant and in need of moral lessons on savings, consumption and credit. The attention must be paid for entertainment and engagement rather than learning module in design of mobile app, advertising and training material. There is need of persona or mascot for digital product that can target the early adopters.

8. Convergence: A digital ecosystem will prosper with the amalgamating schemes and campaigns. According to the EY reportpenetration of POS terminals is only 693 per million of India’s population, compared to similar emerging countries such as Brazil, which has 32,995 terminals per million people and China and Russia, each of which has around 4000 terminals per million people. India’s POS landscape is characterized by a large skew in favor of urban locations-more than 70% of the POS terminals are installed in the top 15 cities contributing to over 75% of the total volumes at POS.There is 12.5% excise duty and 4% special excise duty on swipe machine imported from two manufacturers--Ingenico and Verifone. Manufacturing of Swipe machine must be linked with Make in India campaign. This can be done by promoting India an electronics manufacturing hub. This is what economist Atul Kohli called state-directed development, not simply private sector expansion. There is need for integration with Smart City for piloting schemes such as online payments for home utilities (electricity, water, gas and taxes) and municipal taxes.

9. Role of Development Sector- The development sector is least prepared for the change with digital India. They need to tap into informal sector through pilot scheme and CSR activities. Example, a pilot can be done by altering the flow of wage accounts in the informal sector from cash to digital through community mobilization and focusing on migrant workers. NGO as partner can increase outreach and capacity building of SHGs can be better done through their medium.

According to a 2014 study by Tufts University, The Cost Of Cash In India, cash operations cost the Reserve Bank of India (RBI) and commercial banks about Rs 21,000 crore annually. This shows India as cash intensive, even for a developing country. Internet usage and penetrations, smartphone penetration, e-commerce growth, GST implementation, new banking licenses, tax reforms and the evolving cashless payments landscape will take India towards cash-lite economy. Given the evolutionary stage of the digital market, both old and new business will be bound to make mistakes and business models are likely to evolve. The future lies in identifying business models and incentives for transitioning merchants and consumers to go digital.

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