Organization Profile - Source for Change

Source for Change is an all women BPO in Bagar, Rajasthan that provides services like data-entry and digitization services for its clients that include schools, hospitals, libraries and NGOs. Their recent achievement includes a successful implementation of a 19,200 form data-entry project with a turnaround time of 21 days for Pratham Rajasthan. Subsequently, Source for Change, has been nominated as the preferred provider of data-entry services for Pratham.

Services offered by Source for Change

Some of the services offered are school form processing, mortgage/insurance/ bank application processing (can be used by MFIs if they have centralized data entry), conversion of data from PDF to excel, e-books data entry & hospital registry and archival record processing.

Rationale behind an all woman BPO

Hiring women for the BPO makes both social and business sense. From the social point of view hiring women helps to increase women empowerment and providing rural women with a greater sense of self-worth since they generate income for their families. Mothers are also more likely to pass on their English speaking skills and knowledge to the children of the family ensuring a wider impact of the skills they acquire on the job.

Women have fewer options to leave their village for work in rural India since they are obliged to live with their extended families. Thus, from a business standpoint, by hiring local women from the village, zero attrition is almost guaranteed.

Employee Profile

The organization has hired 20 women, aged 18-35, with atleast a 10th grade education and are first time paid employees.

Initial Challenges

Source for Change initially faced the social barrier of hiring women for technology jobs. The organization was able to overcome this by building a strong foundation of trust with the community. The BPO also works around the schedule of their employees and offers 4- hour shifts during the day. The 4-hour shift system goes a long way in controlling attrition as it provides the women sufficient time to complete their household duties.

Sustainability of the Initiative

The organization has documented the training curriculum and mapped processes for starting a rural BPO. This documentation will act as a blueprint for entrepreneurs to start off BPOs in rural areas.

Combating climate change not an either/or option

I just read a commentary published in the May 31st edition of CSE's publication Down to Earth criticizing the Sierra Club's involvement in India.

The author, Nidhi Jamwal, makes a bizarre logical leap that the Sierra Club's creation of a "Green Livelihoods Award" is further evidence that the developed world is projecting India as a "villain of climate change." I am sure the author recognizes the severity of the challenge humanity faces from climate change. The fact is, mitigating climate change is not an either/or option. ALL countries must commit to aggressively fighting climate change, and exploring EVERY possible channel for reducing emissions. Bravo to the Sierra Club for its willingness to share its organizational capacity, contacts and more than 100 of experience in environmental activism with India.

It is incredibly myopic to think that India need do nothing to fight climate change because the responsibility lies with developed countries. Recent research from the Center for Global Development shows that even without the historical emissions from developed countries, the global South is on a dangerous and unsustainable emissions path that would lead to a dangerous temperature rise if unchecked. This "business as usual" attitude is even more myopic when one considers that India is projected to suffer some of the most severe impacts of climate change, including coastal inundation, glacial melting, crop failure and desertification. Who will help India then?

On another note, the author says, "By the same logic, California should be leading in the switch to green technology as it has plenty of both sun and the sea." California IS leading the switch to green technology through massive investment by Silicon Valley VCs in cleantech in the US and abroad, as well as the most aggressive clean energy policies in the US.

Finally, the author concludes that, "Since the US was the largest polluter, with the highest per capita carbon emission, it would make more sense to focus on Washington rather than on New Delhi or Beijing, I would have thought." I am sure the author recognizes that if CSE were only to focus on lobbying New Delhi, we would get nowhere. Why should the Sierra Club behave any differently than CSE would?

Sustainability Lists

Peter T Knight recently published an article on America's love of lists. His focus was on the "Sustainability Lists" that seem to be proliferating. The article is very tongue in cheek and a pretty good read (The article is from Ethical Corporation and requires a subscription). I posted his conclusions below.

"There is something essentially dishonest about methodologies that attempt to be objective about measuring the subjective. Sustainability lists are lists of opinion, heavily skewed by biases that range from ideology to the need to make a buck. That many of the emerging sustainability lists are pupating from those who purport to be gatekeepers of business ethics is just one of those wonderful ironies of business life.

Let us keep things in perspective. Here is a short list of List Truisms:

· Lists are great fun.
· It’s always good to be included in a list of the best.
· It rarely means very much.
· But the chief executive will always hold you responsible if you’re excluded.
· Unless it’s a list of the worst.
· Then you will get a bonus for keeping your boss out of the limelight.
· Especially if you’re stressed about your chief executive’s expected chastising email because you failed to make the latest sustainability list."

Now many of you are probably asking your self how this relates to Indian Development, and there is probably nothing relevant without making a huge stretch of logic, so I won't attempt to do it. If anyone wants a full copy of the article let me know and I'll send you a pdf version.

Smartcards in Healthcare

With the objective of improving health care access in remote villages, the Directorate of Public Health plans to issue smart cards to every woman who registers herself in the Primary Health Care (PHC) center.

“Sometimes, when we ask the people of a particular village to come to a PHC, it may be inconvenient for them. Though their village falls within the functioning area of the PHC, it might be far from their homes,” Director of Public Health P. Padmanabhan said. “With a smart card, they need not let distance come in the way of accessing health care. Take the card to any health centre close by and be treated or get a vaccine,” he told The Hindu.

As Doug points out in his earlier post, smart cards, despite having tremendous potential in the delivery of government services, has huge costs attached to it. The costs will only justify the benefits if a common smartcard platform is used to deliver multiple services. In this case, the use of smartcard will be more efficient if it is used to deliver all government programs in the geography rather than only focusing in healthcare.

Smartcards as a delivery tool, is a great example of technology put into use for development. However, it will be a shame if use of smartcards is discontinued simply because we have not been able to use it efficiently.

TamilNadu Economy - A critical review

I had attended a speech by Mr.Venkatesh Athreya, a prominent economist on July 14th 2006. The speech dealt with state of Tamil Nadu economy then. I feel that the speech is still relevant today and this is a platform for discussing it. Not that I advocate to all the views, but some do make sense.

The summary of the speech (in a transcript format) is as follows:
I will start my speech with some statictics related to Tamil Nadu. As you know states in India are larger than many countries in the world. Tamil Nadu, with its population of around 6.5 Crores (England's Population) and an area of 1,30,000 sq.km is larger than many developed European countries. It is three times the size of France. Also, the hill,sea, birds, animals and a pretty literate population forms potential productive resources for the state. Despite all this, poverty does persist in our state. We are not here to find answers to this but just to know the reality through a scientific perspective. The questions that will be arised need to be discussed in further debates.

In the last 10 years, accepting a standardised measure for economic status of a country has come under lot of discussion. But, GDP has been accepted by most of the economists as that measure. The GDP of a country is defined as the market value of all final goods and services produced within a country in a given period of time. This does have some pitfalls. For example, Leisure, non-market production, etc., do not come under GDP calculation. Also, some negative(debatable) things do come under calculation of GDP like say higher production of cars in a country would mean higher GDP, but negativities caused due to smoke emission from all the cars is not deducted from GDP.Also, for a state we have accepted SDP as an indicator for health of a state's economy.

The state's SDP figures and breakup can be obtained by visiting the site tn.gov.in. From the SDP of TN over the past 10 years, I have made some observations:
1. In the last 10 years, SDP has increased at a rate of 4%. Is 4% a good enough rate? When we observe other states like Kerala,WB,etc., this is a lower growth rate. The Indian economy as a whole has grown by 6% over the past 10 years. So this growth rate is not excellent, to say the least.
2. But, this 4% is higher than the SDP growth rate of 3% in the 10 years preceding to that. What all have been the components of the growth rate? In the 80's, agriculture contributed to the SDP more while we see a constant decline in contribution of agriculture and industries to the SDP in the past 10 years. The growth has come through Services sector.Agriculture has stagnated in the 90's. When we see the land for production of food grains over 5 year periods, inthe period between 1976-80 it was 45.65 lakhs hectares which decreased to 25.65 hectares in the period spanning 2001-05. This shows a decline of 20 lakh hectares or 50 lakh acres decrease in land used for food grain cultivation. But Production hasn't decreased in the same proportion due to higher productivity. From 64 lakh tonnes in the 1976-80 period, it has reduced to 60 lakh tonnes in 2001-05. But Population has been increasing and a decline in production of food grains is not helping them. Productivity levels have also decreased from 2.3 lakh tonnes/hectare in 1995-00 to 2.2 in 2001-05. So area,production and productivity are all looking downwards.If you see the share of Agriculture,Industry and Services in SDP, it was 26%, 34% and 40% in 1980-81. In 2004-05, it is 12%, 30% and 58% respectively. Any developed country would have had similar increase in services sector share.

So, What is the problem here? The problem is 55% of the workforce in our state is still involved agriculture.In a country like US, 2% of workforce involved in agriculture is producing 10% of GDP. So, without increasing agriculture productivity, you can't start looking beyond agriculture. Alternatives to agriculture also seem to be less(For example, Fishery is also stagnant).The share of industry has also reduced in the last 25 years. Industry involves Manufacturing, Power, Gas , Construction among others. Manufacturing output has also reduced very badly. Also, if you see into manufacturing, the unorganised sector has grown and the decline has been from organised sector. So, sectors that do not have any protection for labor are growing. You might say I see Hyundai and Honda factories around chennai, Cotton business seems to be shining and all. But, if you keenly observe these industries are doing well in very few cities like Chennai,Thitupur,etc., In Trichy, there are no industries except BHEL(Bharath Heavy Electricals Limited) today. There are not many industries in Madurai and thirunelveli. All this investment in the industries is also catering to elite demand(like cars,silk sarees,etc.,)

Now, lets look at increase in share of services bit more critically. Everything that does not fit into agriculture and industries have been put into services. So Shoe polish and selling flowers on the roads is also a service. There seems to be a large increase in low productivity jobs. Also, a large increase in speculative sectors like real estate. Only a small elite of high productivity segments like IT and Biotech are growing and their share is not too high.My Final take on Tamilnadu economy. With 55% labor force in agriculure, without increasing the productivity there, we can't move forward.

The economic reasons for this pathetic state of agriculture in the state is:
1. Governments static Budget deficit as reason and decreasing subsidies.
2.Uncontrolled Import leading to decline in prices at which farmer's output is being bought.
3.No loans from Banks/High interest rates on loans.
4.Decrease in allocating money for Rural development (IRDB almost closed).
5.PDS also almost closed.

Equitas Microfinance for Another Round of Funding

Equitas, an urban microfinance institution, based in Chennai, is attempting to raise Rs.50 crores through private equity. The microfinance institution has adapted banking best practices by creating systems and procedures that enable it to reach high degrees of transparency and efficiency. The organization has reduced transaction costs by the use of centralized data-entry operations and has a fully integrated ERP system in place.

An equity investor investing in microfinance institutions evaluates the institution based on parameters such as top management, outreach, technology, financials, products offered, interest rates charged and future projections. Equitas scores high on all these parameters and it is likely to figure in the top five list of equity investors investing in microfinance India.

Read more

Are we approaching provision of energy in the wrong way?

I came across an article by Kamal Kapadia recently on providing energy services to rural communities and the base of the pyramid (Productive Uses of Renewable Energy: A review of four Bank-GEF projects, 2004). The article essentially states that there is a mis-guided belief that access to energy improves lives. Kapadia believes what we fail to realize is that it isn’t access to energy alone that improves lives, but rather access combined with the promotion of productive energy use that improves quality of life. The article was published in 2004 by the World Bank; four years later we continue to engage in one-off interventions.

My own work involves figuring out how to apply carbon finance to provide incentives and funding for appropriate clean energy alternatives among underserved communities. I’ve come to the same conclusion as Kapadia, but admittedly less eloquently. My conclusion is that what is lacking in the provision of energy services to the BOP is integrated development.

The way we have approached human development and poverty alleviation is still based on the belief that if we throw enough money at a problem we will be able to solve it. What I am calling an “If you build it, they will come” mentality. The problem is that this has been the standard answer for the last 30+ years. As I witness every day, poverty still exists—indeed, very much so.

I will concede that there have been isolated successes and expert studies written on this same subject, but these successes and studies only hold value if they are adapted to real world situations and replicated. Development organizations continue to work in isolation, each with a core mission or purpose. When are we going to realize that this model is flawed? That what is needed is an integrated approach to development.

Integrated development allows a series of complementary interventions to be designed at the onset of each project, each building on the one before. The model allows development to become a process and completely adaptable to geographic and cultural situations, in a sense the process becomes a collective consciousness, the whole being greater than the sum of its parts. The end outcome is that development becomes dynamic as opposed to static.

An example of a dynamic rural renewable energy program would be to create a synergy between energy provision, vocational training and micro-lending. Done in isolation each of these interventions are limited, but these interventions can expand considerably if they are done together. The first step is the provision of energy access. The next step is to create new demand and increase the potential of the individuals to pay for the service. The final step is to provide the individuals with the financial capital to productively use the energy for income generation.

The most logical approach to realize this is to link renewable energy entrepreneurs, vocational training programs and micro-finance. We need to form a virtuous circle including energy access, skills to generate alternative forms of income, and capital to put those skills into practice. The integration of the three interventions increases the sustainability of the parts, leading to the realization of the end goal, which is to improve lives.

For more information on integrated development see “Productive Uses of Renewable Energy: A Review of Four Bank-GEF Projects” by Kamal Kapadia, “Mating: A Novel” by Norman Rush and The Millennium Village Project promoted by Jeffrey D. Sachs.

IFC and Standard Chartered Partner to Boost Microfinance

The International Finance Corp, the World Bank's private-sector lender, will partner with Standard Chartered to invest $45 million in credit-linked notes issued by Microfinance Institutional Loans. Standard Chartered is already dabbling in microfinance, but the new initiative with the Washington-based World Bank will enable it to boost its existing programs in sub-Saharan Africa and South Asia.

A credit-linked note is structured as a security with an embedded credit default swap allowing the issuer to transfer a specific credit risk to credit investors.

For example, a bank lends money to a microfinance institution XYZ, and at the time of loan issues credit-linked notes bought by investors. The interest rate on the notes is determined by the credit risk of the microfinance institution XYZ. The funds the bank raises by issuing notes to investors are invested in bonds with low probability of default. At maturity, the investors receive par unless the referenced credit defaults or declares bankruptcy, in which case they receive an amount equal to the recovery rate.The bank in turn gets compensated by the returns on less-risky bond investments funded by issuing credit linked notes.

Read more: http://afp.google.com/article/ALeqM5hJNi2rmM0LKe_ZjsbfSGlUIOAGng

English news channels - Where is it going?

English news channels are a new phenomenon in india over the last few years. News every half hour with reports from all over the country. Polls conducted every hour on what the viewers think on particular issues. Debates using "experts" on different issues everyday. After getting back from work in the evening, one just needs to see these news channels for an hour to get updated on whats going on in their country. The idea is just right. What more can I ask for? As a seasoned viewer of these news channels, I admire at them though not for the right reasons.

A 14 year old girl was killed in noida. These news channels rush to cover the news. Debates
on who could be the killer. The suspicion of police falls on a male servant maid of the house who was missing. Next day he was also found dead. After a few days, police arrest the girl's father.
The media gives a coverage of 10 to 15 minutes on the news every half hour for three days. Debates during peak time on why would a father kill his own child. Questions if this is turning out to be a characteristic of new urban india's problems. Next day, the same channels finds a lot of loopholes in the case and again debates if the father is the real killer. The rest of the news coverage is given to the bollywoodised IPL. A sports analysis on whether the cool headed dhoni will take chennai super kings to semifinal and more importantly if the dresses of cheerleaders are vulgar or not and so on...

In the same week thousands of miles away, a district called cuddalore in tamilnadu sees two murders by a stranger using an iron rod. Few more people have been injured by him and also reports of rape. People in cuddalore district are living in fear. By all counts, this atleast requires equal coverage as the above if not more in these english news channels. Why have they totally failed in covering it? Yesterday, there was a significant increase in farm waiver supposed to benefit the dryland farmers of vidarbha which sees one suicide every 8 hours. Relief to many more farmers but not as important as the other ones for these channels.

The reason is that the objective of these news channels seems to be news selling rather than news reporting. And what sells more easily to their viewers who in majority are english speaking urban population? What catches their attention more? These english channels have cracked it. This is what gets them advertisements and what we call as 'commercialization' has crept
deep into them. So does it mean the the urban english class not appreciate the news reporting of
rural india? I think it is more of a vicious circle. Unless you cover the real issues of rural and urban poor more and more, it would be impossible for you to catch the attention of your viewers on such issues. No doubt that these channels are getting more and more closer to the news channels of USA in quality which has made their citizens believe that the world has a total of 50 states.

However, the english print media on the other side looks more qualitative. Having grown up reading 'The Hindu', print media has been a more reliable source of news for me. Though there are gaps in reporting and have been increasingly commercialized, atleast some of them have maintained the balance between adverstisements and reporting issues of the indian poor. The news channels definitely needs to learn some lessons from the print media if they want to represent the mass rather than a class in the coming years.

Death to the Washington Consensus??

While the benefits of economic growth are well known, the policies which cause growth are often upto debate. The Washington Consensus, a list of policies which were intended as prescription for growth to developing countries, were often summarized as 'stabilize, liberalize and privitize'. These prescriptions have shown to be ineffective, and the country narratives of India and China (not to mention the East Asian growth Miracle) have highlighted that countries have had successful growth records without following the Washington Consensus. (for an excellent criticism of WC, i suggest Moses Naim's seminal article "Washington Consensus... or Confusion" , its an article years back in Foriegn Affairs).

In this setting, the World Bank asked Micheal Spence to head the "Commission on Growth and Development". Over two years its compiled evidence from an impressive list of academics and policymakers from developing nations. Including in its message is that there is no single recipe, that governments have a wide variety of options to choose from, with an emphasis on active and pragmatic governments. The chapters contain not only country case studies, but also more theoretical discussions on development.

For the main report of the commission, see here

Here are various workshops, which each have links to the presented papers.

Im sure these topics will be widely discussed amongst the development policy community. I intend on making this my weekend reading!!

Farmer and Climate Change

The New Age from Australia published this article recently on the perceived link between rural residents, climate change and agriculture. The findings are fairly disturbing, especially in light of the fact that Australia recently ratified the Kyoto Protocol.

The article states that up to 40% of the people surveyed didn't believe that the current 12 year drought had any relationship to changes in the climate, essentially choosing to believe that this was just a natural cycle which would eventually run its course. This belief is in someways dangerous, whether you accept that climate change is caused by human activity or not. But maybe they are right maybe this is a natural cycle that will run its course. But the belief is still dangerous. Because the climate is changing.

One thing that can be certain is that to survive change we have to adapt. Our current efforts at mitigation have thus far proved to be inadequate. So maybe its time to place as much emphasis on adaption as we have been on mitigation. One thing about humans is that they have shown over the years that they are nothing if not adaptable.

Wipro wants a piece of the renewables pie

The Mint reports today that Wipro plans to get into the renewable energy business. This is a promising signal and suggests that industrial giants are finally waking up to the reality of $100+/barrel oil and see profits from renewables. It's also a good sign for consumers of renewable energy devices (like solar water heaters and solar home systems). The entry of big players into the market should create competitive price pressure.

Today's Mint also has a nice feature on "Bangalore's Green Warriors."

Dr Binayak Sen

Dr Binayak sen is a renowned social health worker and human rights activist. On May 14th, 2007 Dr. Sen was arrested in Raipur under the repressive Chhattisgarh special Public Security Act, 2005 and the Unlawful Activities (Prevention) Act 2004 on charges of sedition, conspiracy to wage war against the state and conspiracy to commit other offences. His work needs no introduction. Having spent the last 17 years for providing health care to the poorest in chattisgarh, the state has awarded him saying that he is waging a war against the state! The Hindu carried two good articles on his work and the nature of evidence against him
http://www.hindu.com/2008/05/13/stories/2008051353850900.htm & http://www.hindu.com/2008/05/15/stories/2008051554731000.htm
Last month, the Global Health Council announced Dr Binayak sen as the winner of the 2008 Jonathan Mann Award for Global Health and Human Rights. Marking his one year in jail, there has been a lot of international appeal and actions taking place around the world for his release. We can do our bit by signing a free fax to the chief minister of chattisgarh and the PM appealing for his release.
http://petitions.aidindia.org/binayaksen/

FT Sustainable Banking Awards

In parnterships with the IFC, FT announced its shortlist for the Sustainable Banking Awards

Some interesting nominations on the announced shortlist. No detail for any of them though.

From India -
ICICI is nominated for its BOP work.
BlueOrchard is up for Sustainable Deal of the Year.
ABN Ambro and YES Bank for Bank of the Year

.... and a bank in Iceland for geothermal power generation!!

Taking Politics to the Kitchens of India

The Shiv Sena is now all set to glorify the humble vada pao, a favourite snack of Mumbaikars. Calling it the patent of the party, Sena chief Bal Thackeray said in an editorial in Saamna on Monday that the snack would be renamed “Shiv vada pao”...Sanjay Gurav, president of the newly formed Maharashtra Vada Pao Vikreta Sena, told The Hindu that for the past four months it had been working on organising the existing and potential vendors. “Vada pao is the patent of the Shiv Sena. Mr. Thackeray had called on people to set up vada pao stalls way back in the 1970s. No one else can take it away from us,” Mr. Gurav said.

From The Hindu. And I thought "freedom fries" were silly.

One Lakh Car, the sequel

Nissan, Renault, and Bajaj in the Joint Venture to compete with Tata in the 'one lakh' automobile market.

(From the Hindu Business Line)

PPP and the Size of India

There was news some time ago about downward revisions on the size of the economies of India and China. Thanks to Alan Heston (of Heston and Summers Index fame), we can better understand this debate firsthand. He has written about this in EPW and a few other places, but on his personal webpage you can find the background paper.

The 2005 round of the World Bank's International Comparison Programme seems to have had more intellectual and data resources then ever before.

In short, there are five factors which are provided in explanation for the revision.

1 - The prior view of the PPP global economy, the WDI and PWT.

2 - The treatment of government administrative services and other perceptions of non-priced output.

3 - The linking of regional comparisons into the world economy.

4 - Treatment of the net foreign balance.

5 - Nature of urban price collection in China.

Is Corruption Ever Acceptable as a Second Best Solution?

Every once in while, as happened to me just the other day, I get caught by the police while driving my motorcycle without a helmet. This has happened to me about four or five times during my stay in India and the process usually goes something like this: after asking for my documents (license, insurance, registration), the cop points out the blatantly obvious fact that I have broken several laws. (In my defense, complying completely with the driving laws of India is no easy task. I have gone through the pain-staking process of acquiring an Indian driving license -- four trips to the RTO and about 8 hours of waiting -- but there is no way that I am going to even attempt the gargantuan process of switching the registration of my motorcycle from Mumbai to Chennai.) The cop then tells me above-the-table fine for committing these crimes, which is typically some ridiculous number like 2000 rs. After a bit of haggling I am let off the hook for a small fraction of this number.

Perhaps I am being overly accommodating, but I never get upset when this happens. In fact, this process of extorting helmet-less drivers actually seems to me a quite reasonable way of supplementing what are probably very low wages on the part of the cops. Drivers can easily avoid getting pulled over by simply wearing a helmet, so in a sense, it is merely a tax on the lazy and reckless.

Of course, in an ideal world, the cops would be paid a reasonable salary and Indian drivers wouldn’t stand for this, or any, type of corruption. Given the current situation, extorting money from the helmet-less seems like the best alternative.

Why Isn't Mumbai More Dangerous?

At a superficial level, the city seems to have all the ingredients of a massive crime problem: a large, downtrodden immigrant population with limited job opportunities, skyrocketing inequality, and regulatory policies (such as rent control) which strongly favour native residents. These same ingredients have caused the crime rate many other developing country megapolises (e.g. -- Nairobi, which was a very safe city only thirty years ago) to go through the roof. Yet Mumbai remains, by all accounts, a very safe city? What's the secret?

The only hypothesis I can come up with is that the police are so incredibly brutal that no one dares commit a crime. The picture authors such as Suketu Mehta and Vikram Chandra paint of the Mumbai police force is indeed truly terrifying, but this hardly seems plausible though. Strong law enforcement has done little to stop un-organized crime in many other cities.

China vs. India Smackdown

Given my experience living in both China and India, friends and colleagues frequently ask me to weigh in on the “China vs. India” battle that is constantly being touted in the press. (Well, not really, but that’s what I imagine friends and colleagues are thinking.) I haven’t done this yet because I wanted to spend some time thinking about this and go a bit deeper than the superficial comparison you hear repeated ad nauseum in the press. Here it is. Enjoy.

Similarities:

• China and India are both really, really big.
• (Any others I am missing?)

Differences:

• Chinese people eat with chopsticks while Indians typically eat with their hands
• The McDonalds in India serves McVeggies. The McDonalds in China are decorated with large cutouts of auspicious characters.
• Several others

Gandhi Supports Improving MIS

"People never cared to have receipts for the amounts they paid, but we always insisted on the receipts being given. Every pie was thus clearly accounted for, and I dare say the account books for the year 1894 can be found intact even today in the records of Natal Indian Congress. Carefully kept accounts are sine qua non for any organization. Without them it falls into disrepute. Without properly kept accounts it is impossible to maintain truth in its pristine purity.

M. K. Gandhi from "An Autobiography: The Story of My Experiments With Truth,"

Impressive

Brazil gets upgraded to investment grade credit (from FT.com)

The country has flirted and become engaged with disaster in the past decade. Pretty amazing that they have achieved investment grade status so quickly.

Though I wouldn't expect anyone to have any strong confidence in the credit rating agencies these days, in my opinion, the upgrade does seem to represent an achievement.

Can Competition Save the Planet?

The reality of our world is that we have become dependent on energy sources which are not sustainable and contribute to the degradation of the environment. Industrialized countries have built their economies on inexpensive fossil fuel energy and as such face a long and complicated process of changing the way energy is produced and consumed. So they have done what they always do—placed the onus of burden on the rapidly growing economies of India, China and Brazil.

And maybe they have a point this time—developing economies may be our best hope to lower the amount of greenhouse gases which enter the atmosphere in the short-term. But the solution is not short-term. This is a long-term problem and the long-term solution is not going to be solved by end-of-the-pipe technologies. It is going to take unpopular decisions and strong leadership, things which so far have been in short supply.

So we have a choice, do we leave the solution to policy-makers and western industrialists? Or do we take control and make the choice to act in a way that limits our individual impact? For me this is where things get difficult. I read articles on the melting polar ice caps, gaps in global food security, higher global temperatures, catastrophic events...it seems all the problems of the world are the result of Global Warming. What can any one person do?

And then I remember four simple words that seem to have been buried among carbon footprints and emissions off-sets—'Think Global, Act Local'. But even then I start an internal debate on what changes I should make. Act Local...what exactly does this entail? What life-style changes do I have to endure? Can I still drive my car to work? Use the AC when the temperature is in the high 30s? Eat meat? Can I still go on that trip to visit my sister in Virginia?

The problem is that there is no simple solution, because just as our economies have become dependent on carbon intensive energy, individuals have become dependent on the infrastructure that developed as a result of inexpensive energy. Food security, dependence on electrical devices, means of transportation and most important how we measure our quality of life are all based on energy intensive activities...so maybe technology, economic mechanisms and policy aren't the proper way to address the climate crisis. Maybe sociology holds the answer.

We have evolved into a world that is based on competition between individuals, nations and sports teams. Competition for status. Competition for material goods. Competition for the sake of competition. In the US this is known as 'keeping up with the Jones'. If a neighbor gets a new car or new flat screen TV, there is a sense that maybe if I don't have that same TV I am falling behind in the game of life... that in some way I am losing status among my peers. The result is the desire to keep pace—to go out and buy a bigger TV, a bigger car and maybe a new sofa to match the new TV. The answer might be as simple as reframing the competition from how much I have to how little I have.

To a certain extent this is happening. There is a certain status attached to 'going green'—purchasing a hybrid car in response to the SUV the neighbor bought or installing solar panels on our 5,000 square foot McMansion. But the action is still in response to someone else's actions and the action in the end a form of consumption. What if we really did start acting locally.

By this I mean within ourselves. What if instead of competing against others we began to challenge ourselves to consume less? Use less electricity? Read a book instead of watching TV or surfing the internet? Walk to the store rather than drive? Maybe a better solution is to empower ourselves to make the difficult choices. Let's give ourselves permission to fall behind. Our children will thank us.

Addendum to Doug's post on "The Mystery of the Missing Outrage"

The fact is that, while reservations - whether in educational institutions or public sector jobs - have become to be known as instruments of "social" justice, the economic logic behind this has been ignored in debates for long.

Leaving aside political issues, there has always been an economic rationale behind reservation. Historically, the people belonging to the lower castes were denied, apart from their social status as fellow human beings, some critical economic rights. They were involved in mundane and routine jobs for which they were paid mostly in kind – they earned only that which they could consume, mostly within the same day. They did not have assets such as land that could go as material capital nor did they have an education or skills which could go as human capital, which they could invest and reap benefits for themselves. Since they consumed their earnings within days, they lacked savings that could purchase them other assets. The idea is to make the households own their economic lives, as that is what they lacked when oppressed.

Hence the concept of reserving a. some jobs, b. some seats in educational institutions, c. some amount of total capital formation in the economy and such other measures that would “set them free” on an economic path of their choice. The fact that these were reserved implies the basic economic truth – there is a limited supply of those that are reserved. This was also the logic behind the suggestion that any reservation must be within a timeframe, as once a household is set free, it is no more oppressed. It may be recalled that the Constitutional Committee, when it formed the reservation policy, it suggested withdrawal of all such policies after 25 years. Thus, the same economic logic that proposes the reservation policy argues for a timeframe or at least a ‘creamy layer’ policy.

When this basic economic logic on both sides of reservation debate - one that puts forth the case for reservation and the one that puts forth the case for ending it is missing, there is no objectivity, and only hate posts.

Coming to the two important questions raised by Doug: First, in China, people in general do not talk against any government policy. On contrast, in India, there are hate posts on almost every issue, on both sides of the argument.

Second, we do miss the outrage over the "abysmal state of education in general" and basic education in particular in the blogosphere, though there have been in the print media to a small extent. The reason being, this would open up the issue of the quality of teachers appointed either through reservations or through the powerful politicians for a gain.

23 years and the struggle is still on!

Shortly after midnight on Dec 3 1984, poisonous gases leaked from Union carbide plant, bhopal leading to thousands of dead bodies on the streets in a few hours. Union carbide's CEO Warren Anderson arrested and let out on bail flew back to US and the Indian government has not been able to extradite him yet. In the last 23 years,
•500,000 people were exposed to deadly gas
•More than 20,000 dead till date and around 50,000 are too sick to work for a living
•Around 150,000 suffering serious long term health effects
•Continued contamination of groundwater and environment not addressed by DOW Chemicals which took over Union Carbide

The indian government accepted an out of court settlement with union carbide in 1989 and after years of delay, the survivors got $500 each as compensation couple of years back. The victims weren’t consulted in the settlement discussions and it is not even enough for five years of their medical treatment. The plant has not been cleaned yet and the toxicity has reached the ground water making it unfit for drinking.
None of the plants safety systems were working. Some were switched off to save power and money! AFter 23 years, none of them have been punished. Warren and Union carbide have been issued summons and both did not appear for trial. They were named 'absconders' by bhopal district court in 1992. The new twist came about when Dow took over Union carbide in 2001. Union carbide is now a 100% subsidiary of Dow chemicals however Dow continues to argue that it does not have any liabilities in bhopal. But soon after the acquisition, Dow setaside $2.2 billion for an outstanding claim against Union Carbide to pay off former Union Carbide asbestos workers in Texas.
Bhopalis meanwhile continues to suffer from a range of health problems from contamination of breast milk to stunted growth. Over the last 23 years, they have continued to struggle non violently for their rights. Hundreds of survivors marched from bhopal to delhi to meet the PM in 2006 demanding clean up of site by dow and also ask the government to provide drinking water to them. Afte 6 days of hunger strike, Dr Manmohan singhpromised them with actions to provide clean drinking water, set up a National commission to look into the issue and make dow pay and clean up for the act. Two years later, they have again marched on foot frombhopal to delhi asking the PM to walk his talk. Having marched for around 40 days and sitting on the pavement at jantar mantar bearing 40 degrees for a month now, they are still waiting to meet the PM.There has been serious concernsamong the movement that the government is considering to let Dow off the hook for an investment of $1 billion dollar in the country.
The movement however over the years have managed to create awareness among many Indians andinternational community all over the world. Campuses from IITs in India to Texas A & M are discussing putting off Dow's funding for research and recruitments. Recently IIT Delhi returned Dow's sponsorshipfor an international conference.
Bhopal has been a case of extreme lack of political will on one side and a huge corporate criminal negligence on the other side. Ethics and environment has been increasingly becoming a bad word for a lot of corporates and governments whos only worry has been foreign investments, profit and growth percentage. For many of these voiceless people who have been suffering at the hands of corporate and state oppression, non violent people's movement has been the only ray of hope. 23 years of suffering, 500 miles of walk and 40 degrees of heat - Will the PM hear it??

HDFC Bank's New Initiative in Microfinance

HDFC Bank plans to introduce a mobile-bank-cum- ATM in Coimbatore to benefit its microfinance clients. Through this medium, the bank will offer a suite of banking products such as credit, savings, insurance and remittances. at the customers doorstep. Each mobile bank is expected to cost the Bank Rs.40 lakhs (USD 100,000) and Rs.1 lakh (USD 2,500) monthly.

The bank plans to extend this technology all over the country depending on the success of its pilot in Coimbatore.

Original article can be read here

The Mystery of the Missing Outrage

I've been spending a lot of time in the Indian blogosphere lately and if there's one thing I've learned about Indian bloggers it's that they really, really don't like reservations.

My intention is not to belittle the arguments of those who oppose reservations or to weigh in on the complicated calculus of aggrievement so as to offer an opinion on whether any historically oppressed group really deserves reservations. I just wanted to pose a couple of questions that I find particularly puzzling about this whole debate.

Q1: Why is there so much outrage against reservations in India but almost none in China? In China, even the number of children a family can have is in part determined by a household's group identity yet there is little resentment against this pervasive system of reservations. Is this because in China the government imposed the system of reservations on its own whereas in India the establishment of reservations were, in part, a response to the demands of voters?

Q2: Where is the outrage over the abysmal state of education in general? The entire debate over reservations for university applications for IITs and IIMs seems somewhat academic when the vast majority of Indian lack access to anywhere near the quality of schooling necessary to have a sporting chance on the exams for these institutions.

Does the Indian Microfinance Sector Need a Credit Bureau?

This excellent new study by Rajalaxmi Kamath, Arnab Mukherji and Smita Ramanathan of IIMB offers some strong evidence that the answer is "yes." Over the course of three months, the authors painstakingly recorded each and every cash inflow and outflow for a small sample of households in the Ramanagaram slum of Bangalore. From the report:

One of the strong results that came out from the analysis of the diaries was that our sample had many households borrowing systematically from multiple MFIs and SHGs. In the sample all, except one of the households were indebted to multiple MFIs / SHGs. 19 of these 20 households was indebted to more than 2 MFIs / SHGs and 10 of these were indebted to more than 4 MFIs / SHGs. 14 of these households also had loan repayments to finance companies, chit-funds and money-lenders. At the extreme end, there were two households that were indebted to a total of 7 MFIs / SHGs, apart from taking loans from a private finance company. (emphasis mine)

The authors would be the first to admit that their sample can in no way be construed as representative of all microfinance borrowers or even of microfinance borrowers from Bangalore's slums, but still, these are striking results. How in the world do these women the time to attend all of these meetings is what I want to know?

A common argument against the formation of a credit bureau for the microfinance sector is that loan officers are already which of their clients have loans from other sources. Even if the loan officers to these clients were aware that they borrowed from more than one source, I find it highly unlikely that they are fully aware of the full scale of their borrowing though.

Here Comes the Deluge

With the CAG finding irregularities in implementation of its flagship National Rural Employment Guarantee Scheme (NREGS), the Government has decided to stop direct cash payment to the beneficiaries and open bank accounts to transfer their wages.

From The Financial Express. Contrast this with the now puny seeming call for all banks to open up 250 "no frills" savings accounts for un-banked customers at each branch by the Committee for Financial Inclusion (and repeated by the Committee for Financial Sector Reforms).

In the short term this will certainly put a huge amount of strain on the banking system and create massive delays in for end beneficiaries. On the other hand, over the long run this has the potential to result in more households being financially included and a banking system which is more responsive to the needs of the poor. Professional bias prevents me from evaluating which of these two effects is more important.

On an aside, does anyone have any idea why Singh mentioned only bank accounts and not post office money orders? The AP government is currently distributing NREGA wage payments via post office money orders in some districts.

What can Indian Microfinance Learn from the Subprime Mortgage Crisis?

“Third-Party Originators/Lack of Accountability. Mortgage brokers, who originate the majority of subprime mortgages, have a strong incentive to close as many loans as possible, but very little reason to consider the loans’ future performance. Lenders shield themselves from the full potential cost of foreclosures by selling their loans to investors through the secondary mortgage market. Together, third-party originations and the risk dispersion made possible through the secondary market help distance loan originators from serious adverse consequences of foreclosures.”

This quote comes from a paper published the Center for Responsible Lending on the causes and effects of the subprime mortgage crisis. The quote comes from a list of the causes of the crisis, though I found this argument the most salient.

Although not a perfect parallel, there are definitely similarities between the subprime mortgage market and the microfinance market. Although subprime mortgages now have a negative connotation there are those who still believe that, if targeted correctly, subprime loans give those with lower income and less credit history the opportunity to purchase houses and develop wealth. Former chairman of the United Stated Fed, Alan Greenspan even lauded subprime mortgages as “the democratization of credit.” This all may sound familiar to those who follow the MF industry. Like subprime loans are characterized by higher interest rates than those for higher income families, so the same is usually true in MF. Just as people have believed that loans to the poor in developing countries are risky, so too for the poor in America. So clearly there must be something that the Indian MF industry can learn from this crisis.

There can be no doubt that the financial markets are becoming exponentially more interconnected and complex. Most people, myself included, simply find the futures market difficult enough to understand. Financial constructs like securitization, collaterized debt obligations (CDOs) and mortage backed securities are even more confusing and sophisticated. The basic idea behind all of these instruments is that now banks and investors can purchase the rights to repayment from a loan. Not only that, but people can even bet on the likelihood that these loans are repaid. Referring to this phenomenon in the housing market, The Economist, in its way with words, calls this the “the baroque superstructure of mortgage-backed derivatives.”

For example, lets say that today an MFI makes a loan of 10,000 rupees to an SHG in Chhattisgarh on 20% annual interest that is to paid in one year. The rights to the repayment on that loan can be sold by that MFI to an investment bank for 11,000 rupees (you will notice the MFI has made 1000 rupees and now has almost no risk). The investment bank may want to do this to diversify their holdings or simply to show their customers that they are involved in “socially responsible investing.”

In turn that investment bank may hedge their risk by selling the right to that repayment on the futures market. Meaning the investment bank may guarantee to another fund that they will sell them the rights to the repayment at 11,200 6 months from now. This is a highly simplified version of how these sales truly work, but that is the gist (usually the investment fund will buy the entire portfolio, so 10,000 rupees was just used for ease of understanding).

What I have just set out is essentially what people are referring to when they talk about the secondary and tertiary markets. What this all means is that the organization who distributed the loan and even the first investment bank that bought the rights to the loan, hold a reducing amount of risk, and therefore their incentives to assure repayment and target their loans well have been reduced. One the flipside, there is the positive that this allows banks to hedge their risks and raise capital, which is particularly important for fast growing MFIs. A strong argument has been made for securitizations when conducted responsibly and by well prepared institutions.

Several MFIs have already engaged in the sale of their portfolios, including BRAC and ProCredit Bank Bulgaria. The SHG-bank linkage model in India is also kind of a variation on securitization. In this model, SHGPIs (self help group promoting institutions), set up SHGs, which are linked to large banks who distribute the loan. But the large banks often rely on the staff of the SHGPI to assure the quality of the SHG and sometimes even to collect repayment. In this case, the SHGPI is comparable to the mortgage broker in the subprime market.

Like the phantom organization I used in the example earlier, the worry is that MFIs that have securitized their portfolios and banks, which have leant money through the SHG-bank linkage program no longer have the incentives to ensure quality. The intention is that these financial instruments are designed with these issues in mind, and they are able to mitigate these problems, but in reality, that is not often true, as we have seen from the subprime mortage crisis.

Expansion of MF and an increase in lending to the poor are certainly worthy goals, and the same is true of giving the poor in America the ability to borrow to purchase homes. The lesson to be learned for the Indian MF industry from the subprime mortgage crisis is that it is imperative to focus on keeping incentives aligned as that growth occurs.

For more info on the subprime mortgage crisis and its global ramification see this BBC news article.

New Stern report: Key Elements of a Global Deal on Climate Change

Lord Nicholas Stern released a new report on Wednesday outlining what needs to happen to halve global CO2 emissions by 2050. I haven’t read the full report yet (you can do so here), but here are some of his key proposals for what developing countries should do:

• Developing countries should adopt binding national emission targets by 2020 (possibly earlier for middle income countries), and they should commit to shaping current policies with this target in mind. Actions to be taken now include enhanced energy efficiency policies and reduced deforestation.
• The CDM should move from a project-based to a wholesale mechanism to facilitate massive scaling up. In its current state, the CDM is generating cash flows of only $6 billion/year to developing countries, while financial flows of up to $100 billion/year will be needed to achieve climate stabilization. According to Stern, sector-specific targets and benchmarks will be needed for a wholesale mechanism to work. (CDM experts out there, please do share your thoughts on what a wholesale mechanism would look like).
• To ensure the full participation of developing countries, developed countries and global institutions must demonstrate that low carbon growth is possible; developing countries stand to benefit from large-scale financial flows through CDM; and low carbon technologies will be available and shared.
• Developing countries should aim to achieve “climate resilient development” through adaptation assistance from developed countries.

Stern calls for a global cap-and-trade system to achieve his three “e”s: effectiveness, efficiency and equity. I’d be interested to hear from readers who favor a carbon tax to understand why it's a better option that cap-and-trade.