What people think of Microfinance?

Microfinance is financial services for poor and low-income communities, people who have been excluded from the mainstream financial system. Yet, there are the diverse opinions people have about Microfinance. I have encountered few in last 5-6 years and presenting them in summary format.

1. The MBA: "Truly amazing business model & poverty reduction tool."

2. The arrogant: “Unsustainable and too risky! Does it actually work?”

3. The over-informed: “Yes, I know about it, you give money to poor. Social enterprise!”

4. The ill-informed: “Thugs lending money to poor at high interest rates and brutal recovery techniques.”

5. The devout fan: "This is the future, only we need investment and scaling and may be P2P."

Microfinance is not panacea from all troubles, this also means that not any poor person can obtain the loan. I can vouch with my experience that only micro loans can't solve poverty. There is enough evidence to support my claim : Microloans Don’t Solve Poverty But research might reveal what will. I always go for the advice of Wayne Dyre before deciding for myself:"The highest form of ignorance is when you reject something you don't know anything about."

Distinct Honour to Chaitanya

Governor CH Vidyasagar Rao has appointed social researcher Dr Sudha Kothari and Founder of Dalit Chamber of Commerce and Industry (DICCI) Milind Kamble as expert members on the Rest of Maharashtra Development Board on 6th June 2016. Sudha Kothari serves as the Managing Trustee of Chaitanya, a developmental organization established by her in 1993. Chaitanya is one of the pioneers of community based microfinance institutions in Maharashtra state and promotes 42 SHG federation with an outreach of 1 Lakh women members across 18 districts of Maharashtra. Dr. Kothari also serves as a Member of Board of Trustees at FWWB India.

One of the great delights of my job is the daily encounter with Dr. Kothari. She is a great mentor and her whole life mirrors commitment to poor women. It’s an honor to work with people whose contributions make us proud and inspiring. 

Good Governance & Public Policy

What is Public Policy ? Public policy focuses on the processes by which various types of policies and regulations that affect members of the public are created and enforced. Public Policy deals with public goods delivery – political economy, taxation, law and order, good social and physical infrastructure, including better education and health facilities – and facilitate provision of private goods (cheaper power, flexible labour laws and other subsidies). The guiding principles for better public policy include building people’s ownership and participation in the governance and decisions affecting their lives. Regulation, Redistribution and Equity came to the forefront of policymaking.

Resources be it human, natural or financial are limited in a country and a government must utilize them in the most productive manner can achieve the best possible growth. That is the essence of good governance. The first and foremost requirement of good governance is broadly distributed political rights among citizens and the government accountability and and transparency in public administration. An ideal public service institutions will be decentralized, professional and autonomous management structures.

The theoretical framework however doesn't work smoothly in the real world. Governments in many developing & underdeveloped countries are corrupt and never work in favor of the people. They work for the interests of specific groups. It would be naive to think that governments work for the public all the time. Economics works alongside and interacts with social and political forces framing the policy. Politically motivated decisions, the undisclosed profiteering, the conflicts of interest, the vested interests, & the bad experiments with good intentions can lead to the flawed policy making process. So how the end objective is achieved ?

Policy makers must be open-minded and open-armed to combat such conflicting interests arising due to potentially corrupt motivation. They must have sound knowledge of the local context of a community – its history, politics, social structure, and culture, along with its economics. More the diverse the stakeholders in policy making, the probe in the issue will examine ground realities, re-validate assumptions on which our policies rest, and evaluating  new initiatives. The real impact of policy decisions are measured by three factors:

* Number of beneficiaries covered under the policy
* Number of beneficiaries who experience a positive change with the implementation
* Participation of the people and innovation springing from the outcomes.

Public opinion is varied and contested space, continually shaped and reshaped over time. Popular opinion in India generally overlook corrupt vested interests or don't want to go for long term reform. Hence, Indian state has always insulated public policy from open debate. The bureaucracy in India has never let the control of policy shifts to an autonomous institutions and public has suffered the ill results of lack of knowledge among civil servants. Bureaucracy seldom promotes creativity and, under the cover of neutrality, preserves the advantages of the powerful by dominating the weak. In the government systems, professionals are always crowded out by the imprisoning logic of bureaucracy. As described aptly by Prof Ajay Shah: In the West, leaders choose the direction of public policy. Government is like a car, which goes where the leader directs. But in India, the car is broken, and just turning the steering wheel is ineffective. To do public policy in India, the skill required is that of an engineer and not the driver. It is about opening the hood, understanding what is wrong with the institution, and fixing it.

Each policy must face several test: Are the policies realistic? How will they be implemented? What results will they produce in the long run? Were there more reasonable, less risky, cost effective, user friendly, & more inclusive policy measures that would have yielded as much benefit as the rolled out one ? There is no ultimate policy measure but always a solutions-oriented approach means more innovative outreach and trade-offs in a wiser way. I will be putting more on the non academic and self learned diagnosis of public policy in coming days. Watch this space and hear buzz words like committees, accountability, check and balances, transparency. Have I lost you yet? I will.

Agricultural Commodities - Pulses

Market at the micro-level has to serve three main stakeholders with different expectations. Farmers wants good price and constant demand, distributor wants fat margin and consumer wants low prices and quality product. In the market scenario at macro-level production of the pulses, demand-supply conditions within India, volatility in global commodity prices, variation in exchange rate, policy of the government, and a surge in import can lead to determination of final price of the any commodity. 

This article series aims to provide an introductory overview on the agricultural commodities in India. The first article of this series will carry the discussion by offering an analysis of the pulses in India. India is the world’s largest pulse producing, consuming and importing country. Bengal Gram (Desi Chick Pea / Desi Chana), Pigeon Peas (Arhar / Toor / Red Gram), Green Beans (Moong Beans), Chick Peas (Kabuli Chana), Black Matpe (Urad / Mah / Black Gram), Red Kidney Beans (Rajma), Black Eyed Peas (Lobiya), Lentils (Masoor), White Peas (Matar) are major pulses grown and consumed in India. During 1950-51 to 2013-14, area under pulses increased by 31% from 19.09 million hectares [mha] to 25.23 [mha] and productivity per hectare increased by 46% from 441 kg to 764 kg with significantly disappointing 0.64% CAGR of productivity. Even the area under cultivation for pulses has seen marginal increment, there is shift in the quality of land used for pulses production.

Green revolution has pushed pulses cultivation in tough terrains resulting in declining productivity. As pointed out by Santa Kumar Committee Report: "GoI needs to revisit its MSP policy. Currently, MSPs are announced for 23 commodities, but effectively price support operates primarily in wheat and rice and that too in selected states. This creates highly skewed incentive structures in favour of wheat and rice. While country is short of pulses and oilseeds (edible oils), their prices often go below MSP without any effective price support. Further, trade policy works independently of MSP policy, and many a times, imports of pulses come at prices much below their MSP. This hampers diversification." Hence, the government needs to create a crop-neutral incentive structure for farmers, which is at present skewed in favour of rice, wheat and sugarcane.

Pulses have low carbon emission and water needs which make them ideally suited in India’s farming system. Rainfall in India is highly unreliable both in time and geography, leading to fluctuation in the production. The major driver of food inflation was the hike in prices of pulses, which was caused by the crop loss due to untimely rains. India’s pulses production fell from 19.25 million tonnes in 2013-14 to 17.3 million tonnes in 2014-15, while imports rose from 3.18 million tonnes in 2013-14 to 4.58 million tonnes in 2014-15. With the sky rocketing prices of the pulses, the government has taken haste decision to import 7,000 tonnes of Tur (5,000 tonnes earlier, and 2,000 tonnes now) to tame prices. In a country where the consumption of tur daal hovers between 3.3 to four million tonnes, aiming to control rising prices by importing 7,000 tonnes tur shows both the policy failure in pulse price management and strong cartel of importers artificially jacking up the prices. Ineffective policy measures appear to be knee-jerk reactions more than calibrated responses of policymakers.

No pulses are currently traded in future in international markets and only Chana is traded in future in domestic markets. The Securities and Exchange Board of India (SEBI), which also regulates the commodities futures market, may consider banning forward trading in chana (gram) as part of the government’s measures to bring down prices of pulses. By suspending futures and forwards markets, the government can simply shot the messenger. This is only evidence of a rather sloppy conceptual framework of policymakers. Merely scapegoating traders as  “hoarders” and “speculators” is not going to be effective in today’s times. Also, traders hold the strings to the political purse, and a crackdown against hoarding would be damaging for ruling political party. Forwards and futures markets are supposed to give signals for effective price discovery and efficient price risk management. It is therefore necessary to develop suitable futures contracts for major pulse varieties separately, as also for all pulses together in the form of index futures.

Pulses are now termed as crops for poor, largely cultivated in marginal lands prone to poor irrigation supplies. Low pulse yield in India compared to other counties is attributed to poor spread of improved varieties and technologies, abrupt climatic changes, vulnerability to pests and diseases, and generally declining growth rate of total factor productivity. Lack of effective market news system and existence of different grades and qualities have also contributed to these imperfections in market. Appropriate reporting with quality differences and graded produce could go a long way to reduce the high price differentials, spatial as well as temporal.

Readers can also read a good article in IPGA examining the price issue of pulses. Jokes comparing  butter-chicken  to pulses are already in the market, and the trend doesn't look good for next year. It will be much shame for current government promoting 'Make in India' campaign while importing pulses, oil-seeds etc from foreign nations. India government needs to get the act together if they are truly committed to the food security of our fellow citizens.

Adieu Udaipur !

Today is my last day at Access Development Services (ADS). I started eighteen months ago managing Farmer Producer Companies (FPOs) at South Rajasthan. I am very proud of my team, and I wish them well. They have a lot of challenging work ahead. But for me, it’s time to move on.  I’m not going to sugarcoat the reasons for my exit. This might be my last chance to switch sector since I am not getting any younger. I have taken a role of Operations Manager in Chaitanya at Pune that works in the micro-finance sector. I recognize the task before me is neither small nor easy. Microfinance means different work-style and leadership.

The profile of a candidate in the development sector belongs to someone who easily adapts to new environments, enjoys travel and field work, likes to tinker with things, and prefers independence and improvisation to super specific tasks. Strong people management skills is a bonus learning, and much required. One can't always be the smartest person in the room, but one can always be the most prepared person in the room.

I have learned most about networking, human resource management and leadership abilities in this job. I had mostly taken decision in an inclusive way as a part of management. That had lowered efficiency in some cases but have helped in creating an atmosphere of trust with community and co workers. There will always be few relationship more important than hierarchy in the organization. These relationship can be with the field worker or CEO of the organization. They’re worth investing in and maintaining for a long term.

It is vital for me to know my own strength and weakness. I have progressed but have seriously under-performed in terms of its potential. I had missed few professional goals in the journey. This can be attributed to the lethargy and unguided career management. I have a minor trait as bit of mental frustration pile up gradually under job pressure. By intrinsic nature, I struggle to be realistic about my own ability, and importantly, my limitations.

I live by certain ideologies that help me know when I am doing wrong as a rural manager. I take pride in the work. I do and feel equally responsible for the success and failure of how the country and society function. ‘Development’ and ‘benefit’ are not values-free concepts, but rather have different interpretations of each individual & organization. I believe today in dynamic world that development is both the promise of inclusion and equal opportunity on the one hand, and the rhetoric of competition and relative advancement on the other. 

How a little of the word, I know, even at the age of thirty. I saw the cruel fate of millions of their daily struggle for life and dignity. Through them, I learned a lesson in humility and endurance. I ended up being their students and learnt about farming, relations, migration for work and household issues. The places where one discovers his own hidden individuality are never on the map. They are just out there, may be in a remote village or just in the middle of a cosmopolitan city. Udaipur helped me to refine and redefine my capabilities. Real life scenario is always further off the projections when individuals assess their own career plans, partly because their chances, desire to succeed and hard work create a new future.

I want to bid farewell to my ADS team. There is no way I could have achieved all that I have without their help. I have a sense of achievement and happiness over the span of months. I’m thankful for the opportunity that I had at ADS. I learned more than I thought I would. It was challenging to work for donors such as Rabobank Foundation, Small Farmers' Agriculture-Business Consortium (SFAC), World Vision India & Department of Agriculture, Rajasthan Government. I was lucky to have interaction with livelihood experts like Sankar Datta and Vipin Sharma with various representatives from institutions such as World Bank - India, Fair Trade India, Hivos International, Sir Ratan Tata Trust & Navajbai Ratan Tata Trust (SRTT), IDBI Bank, Ananya Finance, Friends of Women's World Banking (FWWB), CARE Bangladesh, MART & Rajasthan Grameen Aajeevika Vikas Parishad (RGAVP). Here’s to new challenges and new opportunities.  I am still on the way to chase profits with purpose as a rural manager and will quote Gandhi's words while taking decisions on career: "Whatever you do will become insignificant, but it is very important to do it." 

Thought of the Day: