Mumbai and Delhi = last in environmental rankings

From FT.com about report put out by Mastercard.

Looks at air quality and water in all Asia Pacific cities.

Update on Goa SEZ rejection

People living around the Verna Industrial Area say: “We are not averse to industry. But we have experienced haphazard industrialisation at the cost of our local ecology and culture. Jobs have gone to migrants who have strained the local resources,” says Orwell D’Silva, a tribal rights activist.

A great article in InfoChange detailing how exactly Goa rejected its SEZ. Not surprisingly, it started as a grassroots movement. Some great observations on how industry really disrupted local people's lives - causing power outages, destroying the local environment.

“Reading the SEZ Act, we realised that SEZs are fully autonomous foreign territories, like a state within the state, and the government and local bodies have no control over them. The concept itself shocked us. We, the original inhabitants of the village, would suddenly become foreigners on our own land! And those exemptions, breaks and special concessions… it was just unacceptable!” fumes Monteiro.

Moreover, the documents revealed startling legal violations and irregularities within the SEZ projects. For instance, the Raheja SEZ documents showed that the company had not even bothered to submit a detailed project plan; the project application was incomplete and mandatory formalities like the inward slip and company seal were absent.

The play by play account of the article is really fascinating. The dedication of the local community to organize and file through tedious legal documents really paid off.

"With microfinance there are no losers," observes Owen, "everybody wins."

Quoted here . I am just curious to know if there are degrees of winning (somebody winning by higher margin somebody winning by lower)? If yes, the one who wins by lower margin is certainly a looser because others are winning by higher margins. Obvioulsy a clear understading of margins is required.

As of now I am looking at profits earned by MFIs vis a vis benefits earned by poor! Is this comparable, Who is winning? The question is important, since people are looking at easy money from microfinance. Now this reading makes more sense to me.

Randomistas Score Again

According to David Leonhardt of the New York Times, us randomistas are heads and tails above the competition in the popularity contest for coolest new idea. From the article:

...recently set out to conduct my second annual survey of economists... This year, ... I ... asked which economists were managing to do influential work on the crucial questions facing modern society.

Who, in other words, was using economics to make the world a better place?

I received dozens of diverse responses, but there was still a runaway winner. The small group of economists who work at the Jameel Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else.

The Future of Randomized Evaluations

Chris Blattman, a CGD researcher who maintains a great blog on general development-related stuff, has a couple of recent posts (here and here) in which he argues for a change in the way randomized evaluations (REs) for development programs are conducted. Blattman “worr[ies] that (as currently conceived) randomized evaluations are of limited practical use to the practitioners and decision-makers who actually do development” and recommends that researchers work harder to make sure that REs serve not just to determine whether programs work or don’t work but also as “performance management tools” for NGOs and other program implementers. Basically, Blattman wants randomized evaluations to be used more to tell practitioners how to implement programs rather than just which programs to implement. He calls this proposed shift in evaluation strategy “evaluation 2.0”.

My first reaction to these posts was “oh no, this is exactly how REs should not be used.” REs are immensely useful tools because they allow researchers to definitely say whether or not a specific program, in a specific context, has been effective. REs allow us to cut through all the BS and unequivocally say “this program worked” or “this program did not work.” Conducting an RE is not an easy process though. They are costly, time consuming, and often involve a substantial amount of work for the implementing organization. Which is precisely why REs are, and should continue to be, used for answering the big, basic questions in development – which programs actually work – rather than for generating micro-level recommendations on how to implement specific programs. Trying to use REs as a performance management tool is like trying to build a model airplane with a sledgehammer. The complexity of a RE increases linearly with the number of treatment groups it contains so designing an RE to test multiple program implementation strategies would, in most cases, be enormously complex. Second of all, the process of surveying, data entry, and quantitative analysis which typically accompanies an RE can take a year or more -- an eternity for a typical NGO and far too long for REs to be considered as a viable feedback mechanism.

For the most part, the organisations that we work with to conduct REs recognize that the majority of the benefit of the study will be external to their organization. They agree to perform the RE in spite of this because they understand that these potential benefits to the world at large are indeed huge. Rather than ratcheting up the complexity of REs in an attempt to make the results more useful to the implementing organizations themselves (which they themselves have shown little interest in) we should do more to recognize the contribution these organizations make to the field of development by participating in the RE. Ironically, if researchers take Blattman’s advice to “get closer to practitioners” and try to tailor REs to suit practitioners’ needs they will most likely only end up driving these very practitioners away.

Anyways, that's your truly's opinion. Would love to hear feedback on this for other CMFers, either on the blog or via email, as this is obviously an important topic for us. Also, do check out Blattman’s excellent blog if you get a chance.

Google.org and Omidyar Create SME Investment Fund

From Livemint:

New York: Google.org, the philanthropic arm of Google Inc., has teamed up with the Soros Economic Development Fund and Omidyar Network to fund a $17 million company that will invest in small- and medium-size business in India.

The Small to Medium Enterprise Investment Co. would fill the gap between loans offered by microfinance institutions and those of large commercial banks and private equity funds.

I've never really understood development practitioners' obsession with small businesses. Small businesses have woeful loan repayment rates (see the graph below from the Mckinsey Institute report Accelerating India's Growth through Financial System Reform), contribute well more than their fair share of pollution, and, in my personal opinion, tend to be far more discriminatory in their hiring practices than larger companies. Sure, they employ more people, on a per rupee profit basis, than larger companies, but my guess is that that is just due to the fact that their small size allows them to fly under the radar of bureaucrats charged with enforcing labour laws.

You say developed, I say developing - lets call the whole thing off

I recall some years ago Bill Clinton talking about bringing microfinance to the US. Well, he doesnt have to think about it anymore. (commence segway, and - drum roll please)... announcing Grameen in the United States!! They just made their first loan. Never thinking small, Grameen plans on getting to $176 in loans in five years.

The article is pretty short. However I have a personal comment here. The article states that the first loan was made to immigrant women in the Jackson Heights area of Queens, New York. I myself come from that area, and know from firsthand experience that the area was (and now to a lesser extent) heavily South Asian. I would like to know, just out of curiosity, if the first loan was made to Bangladeshi or Indian women. Anyone know if this is true?

It would make sense for Grameen to leverage its name recognition in the South Asian community for its entry point. However to get to their desired goals in five years, they will obviously need to branch out. Itll be interesting what immigrant groups they attract, and how it catches on. Ill definitely keep tabs on this. Stay tuned, more to follow, same internet time, same internet channel.

More about the Srijan Microfinance Business Plan Competition

Targeted to Indian microfinance start ups as well as established institutions willing to scale up, Srijan is calling for Microfinance Business Plan Executive Summaries to be submitted by March 15th.

The competition is organized by Intellecap and Aavishkaar Goodwell, in partnership with The Financial Express. It aims at showcasing dynamic and innovative ideas, and to offer a valuable networking avenue for professionals interested in entering the sector. It will also be an occasion for corporates with a microfinance mandate to create a viable pipeline with their envisaged investment plans.

Loose Nukes and Tongues

The Bulletin Online has a very entertaining article on a recent press conference by Pakistani Brigadier General Atta M Iqhman and Colonel Zhalot in which they express their concern over the safety of America's nuclear arsenal. Coming from leaders of the same military which has helped some of the world's sketchiest nations gain access to nuclear technology, the comments seem a tad bit...er, hypocritical at times. Nevertheless, they do have a point when they say...

"Their leaders lecture us on the sanctity of life, and their president believes that every embryo is sacred, but they are the only country to have used these terrible weapons--not just once, but twice. Paul Tibbets, the pilot of the plane that bombed Hiroshima, said he never lost a night's sleep over killing 100,000 people, many of them women and children. That's scarcely human."

While Iqhman glared reproachfully at Zhalot for this rhetorical outburst, Zhalot continued: "We also worry that the U.S. commander-in-chief has confessed to having been an alcoholic. Here in Pakistan, alcohol is 'haram,' so this isn't a problem for us. Studies have also found that one-fifth of U.S. military personnel are heavy drinkers. How many of those have responsibility for nuclear weapons?"

After reading, I was reminded of this shocking revelation made by The Onion nearly five years ago.

I wanna be like Mike... Green Mike that is.....

Green Air Jordan's? (WSJ, no subscription required).

Nike, who has been under alot of criticism for its labor practices in the developing world, seems to be making an interesting shift. The headline sneaker, Nike Air Jordan's (though I still need to get my hands on a pair of the re-issued Air Max 95's), is going green.

The WSJ article describes how not only the sneaker is made up of recycled material and water based glues under an internal scheme to reduce greenhouse gasses and emissions, but the factory set-up is more friendlier to workers. Workers wont inhale toxic fumes from glues and the actual work flow is now centered along small teams. No mention of if changes are in effect across the entire company. At the end the article, a nice point on how the switching costs do not always result in net savings.

About this article. One, if this starts a trend - what are the effects on labor practices in developing countries? It seems from the articles, factory workers will operate in better working environments. Can the greener design of textiles and consumer products result in pro-labor policies? This seems like a nice 'sweet spot' to me. I would like to think that so-called green companies might have better labor practices, but I wont say Im fully convinced. Im more then happy to read any literature people may send my way.

Air Jordan's are clearly a luxury good. Even when I was in grade school they were priced upwards of $100. How realistic is it for Nike to adopt similar sneaker construction practices for its smaller-margin sneakers?

Im very intrigued with the feasibility of such practices. I see alot of hype, but I also see alot of substantive change. Im just trying to decipher it all.

Why are Business Plan Competitions Getting so Popular?

A simple search on the net yields to almost 60 000 pages for the keywords "social entrepreneurship" and "business plan competition". At the international level, the University of Washington promotes the concept through the Global Social Entrepreneurship Competition, to encourage sustainable business ideas in the fields of healthcare, education, social services and so on.

In India, we know two competitions are simultaneously running: the Genesis Social Entrepreneurship Competition organized by the IIT Madras, and the Srijan Microfinance Business Plan Competition, targeting start ups as well as established microfinance institutions willing to scale up, and offering extensive mentoring to the top ten winners.

So why are Business Plan Competitions important to the social entrepreneurship sector?

At the sector level, business plan competitions allow the emergence of innovations and the promotion of the underlying concepts that they convey, such as sustainable development in the case of social entrepreneurship, and financial inclusion in the case of microfinance. The most obvious reason to participate is that most competitions offer cash prizes as well as mentoring and business plan development support to the winning propositions.
Having access to mentoring is of utmost importance for young entrepreneurs. It allows them to build on former experiences and learn from the mistakes and good moves of those that went through the hassles of building a business before them.

Besides, competitions final events are always great occasions for start up entrepreneurs to network and meet strong figures in their fields, and potential investors that could fuel their initiatives. However, it remains in the entrepreneurs' hands to make the most out of these occasions, as besides a well designed business plan, interpersonal skills and the ability to make the most out of each encounter are the keys to make it from the entrepreneurial idea to the real business.

Update on Microfinance Regulation

As those interested in the sector already know, the Microfinance Bill has been in the offing for a while now. In March 2008, the Finance Minister tabled the bill in the Lok Sabha, which was then referred to the Lok Sabha Standing Committee on Finance. There were many objections to this bill, even within the government, with the Ministry of Women and Child Development and also the Ministry of Rural Development and as such, in December, the bill was further referred to Group of Ministers headed by Sharad Pawar, Minister for Agriculture. It looks eminently likely that this Bill will be introduced in the Lok Sabha in the Budget Session which will begin in the 3rd week of February.

You can see the bill, along with clause by clause comments here, in its entirety here.

One of the primary criticisms of the bill has been that it excludes Non Banking Finance Companies (NBFCs) from its purview. Microfinance is provided through two channels in this country: through SHG-Bank Linkage and directly through MFIs. Of the MFI channel, NBFCs account for about 70% of total loans distributed and for 70% of total MFI membership (M-CRIL, 2007). Thus, excluding NBFCs is pretty much like excluding most people who are using microfinance in this country.

In related news, the Committee for Financial Inclusion, headed by Mr. Rangarajan, Chairman of the Economic Advisory Board, recommended just yesterday that a special category called NBFC MFIs must be created so that these companies can be appropriately regulated. There are a few other important recommendations pertaining to MFIs like reducing the foreign equity requirement to $1lakh from $5Lakh, move regulation of NBFC MFIs over to NABARD and also to give them tax concessions of 40% of their profits if they work in excluded districts as identified by NABARD.

The questions of the moment for me is: how is this going to be incorporated into the bill, if at all? The committee seems to have made this inclusion easier by recommending that NABARD be the regulator for NBFC MFIs. NABARD is the named regulator in the proposed bill as well.

IF (well I may jumping the gun here a little bit) NBFCs are included in the bill, this may mean that they can collect savings – which would be huge for the Indian microfinance sector. We have already spoken earlier in this blog on the importance of savings as a product. Furthermore as Prabhu Ghate points out, Indian MFIs have one of the highest financial expense ration (cost of funs/total cost of funds). In Bangaladesh , interest rates are lower precisely because almost a third of their funding comes from member savings. Here’s another reason why policymakers should allow MFIs to collect savings: it may lower interest rates that MFIs charge.

first Bush and now Singh...

Using the ultimate cliche I am going to pontificate that the tipping point has finally come...Singh has actually taken a proactive stance towards climate change...

CMF in the News

I work only desks away from a celebrity.

Our very own Minakshi Ramji was quoted on the difficulties in developing microfinance housing products in an Eco Times article on Repco's new microfinance housing loan product.

Hip Bureaucrats

Think most bureaucrats are stuffy and boring? Not forward thinking? They don't think green enough?

Not I, say the White House. A great article in the WSJ on how something simple like not publishing tons of documents can save trees (a short read too). President Bush by not making the usual 3,000 copies of the budget is saving 480 tress and US taxpayers $1 million.

Seems like something simple most governments agencies can start adopting. Many already go through the process of posting documents online. If you will permit me the use of cliche - this is as low hanging as low hanging fruit can get.

Now if only the UN can get those policy documents to under 100 pages......

NREGS – Let it not be like other government programs!!

some news and insights on NREGA from Akhand Tiwari:

The morning news at All India Radio had a plea from Dr Raghuvansh Prasad Yadav, (Read it in hindi here). Dr Yadav is Union Minister of Rural Development, and has asked state’s government co-operation for implementation of NREGA. He also announced to celebrate 2nd February as rojgar diwas (employment day). More about NREGA

Here are few comments on CAG’s report published in EPW’s January 26 issue. It tells how very poor (for whom the program is targeted) have not been reached. There are two reasons for this. First only 3.2% of registered members were provided the minimum days work and second this number is actually the people who demanded work that includes equal number of well-off and poor families. Thus it also opines that registered number of household in no-way reflects the health of program. To quote directly from the article, which was directly taken from CAG’s report “giving the additional charge of PO to BDOs [block development officers], who were responsible for other developmental schemes at the block level, strikes at the root of effective implementation of NREGA”. And this has been the reason for ineffectiveness of many government programs. My experience reflects the same story and it’s not only at the block level its much higher up to the secretary level in states. At lower level while, the reason is un-devotedness towards the success of program and government’s reluctance to use funds in totality (otherwise why there were no recruitments for this purpose specially). At much higher level it is huge bureaucratic lobby, which prevents experts from taking the highest executive positions for such work. They just become masks to be put into committees (often review committees)

This statement from the article tells the rest of the story – “The history of public works in the subcontinent suggests that expecting corruption to disappear overnight is unrealistic.”

Farmer Suicides Show Upward Trend in Major States

On the day after Gandhi’s death anniversary, P. Sainath writes on the front page of the Hindu that farmer suicides show no abatement in almost all states except Karnataka.
There were 17,060 farm suicides in 2006, the latest year for which numbers are available, of which Maharashtra accounts for over a quarter. The SEZ states (as Sainath terms them) Maharashtra, Andhra Pradesh and Madhya Pradesh account for over two-thirds of all suicides in the country and show a sharp upward trend.

In the case of Maharashtra, 2006 was the year which saw the implementation of relief packages worth a total of Rs. 4,825 crores in the Vidarbha region. It is tempting to conclude that these numbers imply the failure of debt relief packages to be effective. However, I would argue that it may be more pertinent to look at 2007 numbers before making any conclusions. Of course, there are other, important critiques to be made of the policy to hand out debt relief on such a large scale.

Most disturbingly, the article ends with this statistic: The number of farmer suicides between 2002 and 2006 would imply that, on average, there has been one farmer’s suicide every half an hour since 2002.