Pink Cards, White cards and the BLACK CATS

Some policy measures by the Governments seem to have very quick impacts. Atleast the bad ones seem to have.

The Andhra Pradesh Group of Ministers (GoM) constituted for the purpose of suggesting measures to revamp the public distribution system (PDS) submitted their recommendations to the Government on May 15, 2005. The eligibility criteria for white cards under below poverty line (BPL) population was redefined. Also, eligibility criteria was redefined for pink ration cards.In the urban areas, families with annual income below Rs 24,000 would meet eligibility criteria for BPL cards. In the case of rural areas, the criteria would be annual income below Rs 20,000 or land holding not exceeding 2.5 acres wet or five acres dry. The Government actually went for income level of Rs.60,000 for BPL.

This was done at a time where there were schemes launched especially for BPL population and the Government relaxed the BPL eligibility criteria so that more people could get eligible for the schemes. One of the schemes was the State-wide Health Insurance scheme which then covered more than 60% of the state's population as against the 10% that it should have been because of the redefinition of eligibility. This basically meant extra premiums going into insurers' pockets. Whether the benefits reach the clients is still to be seen.

Now, look at the impact that has been created by this recommendation.

On June 29, 2008, The number of people covered in ration cards issued in Andhra Pradesh far exceeds the actual number of people in the State.

The Bureau of Economics and Statistics puts the population of the State at 8,41,07,104, whereas the number of people covered in all the ration cards issued by the Civil Supplies Departments stands at 8,43,75,650. This means that the cards cover 2.68 lakh more people, indicating that there are bogus cards.

The way our Governments learn:

The Government now has planned to increase the income limit for BPL to Rs 75,000 from Rs 60,000.

About 25 lakh families that held ‘pink cards’, would be made eligible for white cards – enabling them to get rice at Rs 2 in the public distribution system.

This would require the officials to stock 4.8 lakh tonnes of rice every year, incurring an expenditure of Rs 332 crore.

Hmmm....

IceCream, Dosa, Fried Rice, Pizza, Pasta, Tandoori, Tortilla and 7 more....

Just assume a place where you get all these eatables at one place? I know I will be happy to enter such a place but when it comes to Chinese, I would go to Mainland China Hotel. But it may not be the same with others.

So, why am I asking this query in India development blog? There seems to be an excitement among micro-finance institutions in providing various financial services. They are really excited to provide not just loans, but savings, mutual funds, insurance, remittances, pension, et,al.,

Is it something to be excited about really? We can find some answers from the mainstream financial institutions. Let's take the case of insurance. The results are mixed. Bancassurance forms only 15% of the total sales in India, but around 85% in Japan. But, do we consider the banks as serious providers of insurance? Are they our first choice to go for while inquiring about insurance? Is there more mis-selling of insurance by banks? I am not sure of these things.

So, does it mean that banks should do only savings and lending. Not sure. Coming back to the topic on MFIs, it is a good thing that MFIs have started to look beyond provide just credit. But, answers to whether it is a healthy trend or whether they will do a good job of it is something that will have to wait much longer and MFIs could get excited about these a bit later.

What about Savings?

As Minakshi pointed out in her blog entry yesterday, low-income communities often use credit as a substitute for other products, such as savings or insurance, to smooth consumption (e.g., weddings, health shocks).  As microfinance continues to grow in India, I believe this problem will become more acute.

Four weeks ago, I came to India to join CMF and learn more about microfinance.  Microfinance, and particularly microfinance in India, is a new topic for me.  And as I learn, one questions keeps popping up in my mind: What about savings?

Microfinance's aim is to increase financial access to low-income households in a manner that will help increase incomes and improve livelihoods, but currently Indian MF institutions typically provide only one side of the fundamental finance equation.  Indian MF institutions readily provide loans, but savings options are scarce.  Innovation is occurring within the industry (e.g., housing loans, insurance products), but activity in the savings space is relatively stagnant.

Granted, many SHGs in India practice group savings, but these savings cannot be used for two key problems low-income households face: day-to-day consumption smoothing and support after economic shocks (e.g., health problems).  Individual savings could help with both the aforementioned challenges, but individual savings products in Indian microfinance seem to be the exception, rather than the rule.

Savings products would meet a demand that already exists, as Stuart Rutherford articulately explains here (Rutherford on the Poor's Savings Needs).  Rutherford provides data and analysis to support his argument that poor people already save, but given the lack of formal options, the amount of savings is below optimal, and most saving that is done is unprotected and informal (e.g., putting underneath one's bed).

Moreover, there are savings models out there worth reviewing, and possibly leveraging.  Rutherford helped start SafeSave, an MFI operating in Bangladesh that has extremely flexible savings products.  SafeSave reps go door-to-door in slums or villages, and clients can put any amount of money into their savings accounts at anytime.  After six months, and meeting a minimum deposit of about US $15, clients receive 6% interest on their savings.  To learn more about SafeSave's savings products, check out page 5 of the case study here.  

I understand that in the early 1990's RBI banned MFIs from offering savings. At the time, the decision made sense; several MFIs would set-up shop, take in deposits, and then close down and run away with the money.  However, the microfinance industry has matured immensely in the past 15 years, and now serves nearly 40 million households.  We should help these microfinance recipients mature along with the industry by providing the with a key economic empowerment tool; easy-to-use individual savings products.

Sub-Prime Crisis and Lessons for Microfinance

As an addendum to Dan’s eminently readable post on the sub-prime crisis and its lessons on Indian microfinance, also on the consequences of the sub-prime crisis, here’s Kate McKee of CGAP. For the microfinance world, this sub-prime crisis brings into relief a lot of issues that microfinance practitioners and policymakers have been debating for a while:

• How much do clients really understand about their loans?
• Are clients ready for more complex instruments?
• When does lending become predatory or reckless?
• What kind of consumer protection do we need in the microfinance sector?

I guess we don’t really have the complete answers to these questions. But one thing which is becoming increasingly clear to me is that credit can sometimes be a substitute for other financial products which are not available in the market, at least for the low-income community. Survey after survey has shown that people borrow for health emergencies, wedding expenses etc, which are much better financed through savings or insurance. Until we figure out how to offer these products to low-income communities, I doubt that the problems above of reckless lending and financial literacy will be solved.

Here’s another article on the sub-prime fiasco and the financial fall-out for microfinance … Morgan Stanley, the subject of the article, was at the forefront of facilitating capital for MFIs by being one of the arrangers of the Blue Orchard Loans for Development last year. Recent sub-prime woes probably means that we shouldn’t expect any complex financial innovations for microfinance any time soon. To quote the article “Wall Street firms are digging out from the mess they made after financing home loans for America's poorest, so it's not surprising that they are now more reluctant to securitize loans for the world's poorest.”

What do micro finance clients and loan sharks have in common?

Tyler Cowen suggests that micro finance clients may play the role of "thugs" within their groups to assure repayment - micro finance's very own collaterisation.

I've heard many shocking stories about client behaviour and methods of repayment, but never this. Does anyone in the field have evidence to corroborate Professor Cowen's hypothesis?

Progress through CDM

In many of the present CDM projects, we see that community development is just a mere made up fraction as compared to actual development taking place in the field. Taking a break from all this, the Bagepalli CDM biogas project has been a refreshing example. The project has actually benefited 5500 poor households in the Kolar district of Karnataka. The key to the success of this project has been the active involvement of local communities.
The Clean Development Mechanism or CDM is a provision under the Kyoto Protocol which allows industrialized countries (known as Annex 1 countries) with greenhouse gas reduction targets to invest in projects that reduce emissions in developing countries. The basic purpose of the CDM as defined under Article 12 of the Kyoto Protocol, apart from helping Annex 1 countries with meeting their emission reduction commitments, is to assist developing countries in achieving sustainable development.
The mechanism of carbon trading has been equated to the proverbial golden egg laying goose by many. It is so because carbon trading has ensured that the traditional principles and policies for a healthier environment in which the governments across the globe earlier used to yield a stick take a backseat and it has attached a price and an incentive to go green. There was a huge rush to have a share of this new profit making industry as many CDM consultancies offering services right since drafting project proposal and development to the selling of the final CERs cropped up. This was good for expansion of the sector but however in a mad scramble to earn money, profit making took precedence to the sustainable development theme underlying the Kyoto protocol.
Bagepalli is a small panchayat town in the Kolar district of Karnataka state. It is situated close to the city of Bangalore on the Bangalore-Hyderabad National Highway. The town is semi-arid in nature and prone to droughts which have led to the underlying poverty in the region. It has an average literacy rate of 63% which is higher than the national average. Based on the literacy rate figure only, it is easy to assume that Bagepalli would be one of the better towns in the Indian context. However the ground reality is very different. Bagepalli borders the Rayalseema desert belt in Andhra Pradesh which is one of the drought prone poverty pockets in India. This drought also has its bearings in Bagepalli, which have made sustainable development a challenging task in the area.
The Bagepalli Biogas CDM project is one which is adhering to the basic principles of the Kyoto. The project started way back in 2005. The origin and development of the project idea came from many sources, but however Anandi Sharan from the Women for Sustainable Development, an NGO working from Bangalore is amongst the first ones who took up the initiative of developing this biogas project, helping out 5500 families across many villages in the Kolar district of Karnataka. Alongwith the Nepal biogas CDM program, Bagepalli is amongst the rare few successful grassroots level CDM programs. The most interesting feature of this project has been the knowledge dissemination to the local communities. The people are not only aware about the benefits of the biogas digesters installed in their homes, but they are also very much aware of the benefits that they can reap by the CERs being generated through the project.
Ram Esteves from the Agricultural Development and Training Society (ADATS), an NGO based in Bagepalli along with Anandi Sharan visualized the development of the area through pioneering a biogas plant model involving the local communities. Their vision lay in their approach of having a bottom up approach, as the local households were the primary stakeholders, thus all major decisions came from the ground level. The project was pre-funded by including the revenues to be generated by selling the CERs. ADATS played a major role through building village level organizations known as the Coolie Sangha. These Coolie Sangha Units later played a major role in motivating the people across the villages to take up this project.
In case of the Bagepalli CDM project, the monitoring of the biogas units is done on a real time basis and specific people were made accountable for the proper functioning of these units which led to the proper functioning of these units. This was also one of the keys for the success of this project.
The project is not a perfect example but however it is one of the better examples of a CDM project which is benefiting the local community and actually aiding the whole concept of clean development mechanism. The local communities are now undertaking a 18000 household strong CDM project now as a continuation to the first project. The best part of the project has been the transition in the mindset of the village folks. Initially wary of installing gas units in their houses due to the fear of blowing up their houses to talking about revenues generated through CERs, they have come a long way.

BPL Cards as Collateral

As many of you know, most of CMF's work is survey-driven. At a recent Research Associate confab, several CMF RA's mentioned how difficult it was to design a questionnaire that was able to appropriately capture all the elements of informal loans. Moneylender loans often involve no rate of interest, just an amount of interest, no set repayment schedule, no set collateral, sometimes may involve sharing of profits from the enterprise for which the loan was taken etc.

Wanted to highlight yet another unfortunate example of how innovative moneylender loans can be. This article reports that in Orissa, tribals use their Below Poverty Line cards as collateral for moneylender loans.

The problem of misclassification of BPL households is acute in India with 18% of the cards going to the wealthiest 20% of the rural population. But episodes like this, where accurately targeted households forgo their welfare benefits, makes the situation all the more serious. In effect, what it means is that none of the benefits of the various schemes that target BPL households accrue to the intended beneficiary.

India's economy "condemned to reform"?

CRISIL's chief economist Subir Gokarn strikes a note of concern in his Business Standard article, "End of the India story?" about the underlying vulnerabilities in the Indian economy that are being exposed by the current economic turbulence. "The essential point," he says, "is that many of the symptoms of the current economic condition ["surging inflation, unprecedented oil prices, the fiscal situation threatening to slip out of control, foreign investment flows reversing and inducing the rupee to depreciate"] do appear to have a long-term dimension [the shortage of skilled labor, inadequate physical infrastructure, out of control oil and fertilizer subsidies and lack of investment in rural development] which poses risks for sustainable rapid growth. The common feature of these is that they are the consequence of government actions: either the failure to take appropriate ones or the enthusiasm to take inappropriate ones."

I have been arguing for some time with whoever will listen to me about the need to eliminate the subsidies on conventional fuels and electricity to encourage renewable energy and energy efficiency to limit GHG emissions. With the persistence of fuel subsidies, renewable energies cannot compete on a large scale. When we don't pay the true cost of the electricity we consume, there is diminished incentive to conserve .

The British economics firm Lombard Street Research estimated that in 2007 fuel subsidies cost the GoI some $17.5 billion - 2% ofGDP. With the surging oil prices this figure will no doubt rise significantly in 2008. Gokarn argues that spiraling oil and fertilizer subsidies threaten to crowd out public investment in infrastructure and social welfare, potentially creating a vicious cycle. Without adequate investment in education, the skills gap will worsen, constraining long-term growth prospects. The same analysis can be extended to infrastructure and rural development.

I have been approaching many issues lately through the lens of climate change, and Gokarn's analysis raises alarms. With productive investment crowded out by runaway subsidy bills, the engines that could propel us toward low-carbon growth are threatened. We need public investment to fuel R&D into low carbon technologies, and we need entrepreneurs and highly skilled labor to develop and deploy these technologies on a wide scale. We also need the "facilitating environment" Gokarn discusses that favors renewable energy and energy efficiency and provides the right incentives (not necessarily subsidies) to scale up their application.

I am hopeful that the India story has many more chapters yet to be written and that the chapter, "Global leader in the fight against climate change," will be prominent among them.

A Proper Debate

The Brookings Global Economy and Development Conference, which was held in Washington DC at the end of May, is proof that there is now a healthy debate on the proper use of randomized evaluations and the benefits and limitations of this method of research.

I currently help manage a randomized evaluation, and when I tell this to those that inquire, the usual response I receive from those aware of this kind of research is either great excitement or deep skepticism. I believe that for those that lie in one camp or the other, reading several of the articles from this conference might help moderate their position.

I particularly recommend Dana Rodrik's article "The New Development Economics: We Shall Experiment, But How Shall We Learn?" as well as Alaka Holla and Michael Kremer's "Pricing and Access: Lessons from Randomized Evaluation in Health and Education."

Thanks to Doug for making me aware of the conference.

Pay Day Lending and Social Networks

There is a long running joke in my family that I borrow money from my parents like poor tropical countries do/did from the World Bank. The loans are always soft (no interest), and for various reasons repayment is often waived. If I am going through a period of unusually high revenue, I am always quick to repay back, but otherwise, the principal may remain unchanged for months or even years. The analogy ends in that my parents have never forced any Washington Consensus like behavior change as a precondition of my borrowing.

There are three main points I am attempting to get across by giving the reader this tidbit from my personal life: 1) I have kind, perhaps not stern enough parents, 2) I do not take great pride in my financial independence from my parents, 3) Social networks and social capital are what allow people to attain cheap short term loans.

One of the truly disastrous debt cycles Americans often fall into is that of the recurring pay day loan. In an article published by the Fannie Mae Foundation, payday lenders are described as:

“institutions that offer small consumer loans of $100 to $300—routinely charge 15 percent per two-week period. In addition to annualized interest rates of more than 400 percent, such loans encourage households to spend the next paycheck before it arrives, thus encouraging a dangerous cycle that can trap a household in permanent debt.”

There are a few parts of this definition I object to. First, I hate the use of “annualized interest rates of more than 400 percent” as if this were a crime (though, in truth, in Canada it actually is a crime). When an individual takes a short term loan (in this case two weeks) from a profit making institution, the annualized interest will almost always be enormous. The bank has to pay for their transaction fees, so it is necessary for the institution to charge a significantly higher interest rate on a two week loan than the bank would for a one year term loan. Second, the quote from Fannie Mae makes it sound like the institutions who offer these loans are doing so with the intent of encouraging “households to spend the next paycheck before it arrives,” when in fact it is the total opposite, people choose to take on debt because they WANT to spend that money before it arrives. Otherwise why not just wait?

I don't enjoy defending the economically libertarian view of payday lending, but it is rarely helpful to start any discussion of a financial instrument for which there is a clear demand with the belief that the instrument itself is evil.

Yet payday lending can lead to a wealth diluting cycle. This pernicious cycle that often results from borrowing against your next paycheck goes something like this. The example bel0w assumes that you are poor (400 dollars every two weeks) and living on the margins, check to check:

Weeks 1-2
-You normally spend 400 dollars per week but this week you need 200 Dollars for an unexpected expenditure (perhaps a medical emergency)
-You have 300 Dollars in the bank at the moment after spending 100 dollars from your last check on groceries.
-You decide to borrow against your next paycheck from a payday lender.

-You borrow 400 Dollars that you will pay back when you get your next paycheck (that is ten days from now), and you will have to pay 40 dollars extra in interest
-Now you are able to spend 600 dollars in this two week period

Paycheck Comes
-The paycheck is 400 dollars.
-After giving this paycheck to the payday lender and paying him 40 dollars in interest, you realize that you only have 60 dollars in the bank for the next two weeks.
-The payday lender offers you the same deal of borrowing 400 dollars against your next paycheck for a 40 dollar interest fee. With no better options, you accept this deal and you now have 460 dollars.

Weeks 3-4
-You attempt to budget your self to spend only 150 dollars in these two weeks
-With a family and other needs, it is just too hard, and you find that you only have 80 dollars left at the end of the two week period

Paycheck Comes

-You decide to again take the offer of another loan from the payday lender.

-Despendondent, you realize that you have already given the payday lender 120 dollars for what was originally a 400 dollar loan, and there is no way out of this spiral.

In that most venerable of resources, the Wikipedia entry, it is written, “Critics blame payday lenders for exploiting people's financial hardship for profit. They say lenders target the young and the poor, particularly those near military bases and in low-income communities. They also say that borrowers may not understand that the high interest rates are likely to trap them in a "debt-cycle," where they have to repeatedly renew the loan and pay associated fees every two weeks until they can finally save enough to pay off the principal and get out of debt.”

Payday lenders certainly do benefit from the “financial hardship” of their customers. I also don’t doubt that there are plenty of scurrilous payday lenders out there. But let us remember this is an economic option of last resort. This is a financial instrument used by those who either are unaware, don’t have time or simply cannot access cheaper sources of funds.

Let’s use my life as an example again. 2 months ago I was in India, as I am today, and my father called to tell me that I needed to pay 1,000 dollars in US taxes. For various reasons all having to do with my numerous vices, I did not have enough money at the moment to send my father. He suggested that he would pay the taxes, and I would owe him 1,000 dollars, which I could pay him back for next time I saw him.

Now let’s assume I did not have access to money from my father. I suppose I would have asked one of closest friends, and I think they probably would have ponied up. But if my friends did not agree, I would be in a serious bind because I only had one month to pay and I don’t have great credit. I would probably go to the bank and see whether they had a loan product they might deign to offer me. If the bank did not have a loan product that could quickly be disbursed, I probably would have gone to a payday lender.

As you see, my defense against the payday lender was not primarily formal finance but rather my friends and family. Of course, it does not hurt that my friends and family are from an moderately high economic class, but I don’t think that tells the whole story. A working paper by Orlanda Ruthven, Money Mosaics: Financial Choice & Strategy in a West Delhi Squatter Settlement, essentially argues that that the social relationships you have and cohesion within your social group are just as important as your economic status. Ruthven describes the internal lending within members of the Nath caste, “Among the Naths, credit needs are overwhelmingly fulfilled by intermittent lenders and such private loans on interest – along with bank accounts – are the most widely used financial devices of Naths. Through social leverage and the assurance of a convergent lifestyle (i.e the low chance that a borrower would somehow move on or disappear), lenders are able to maintain rates at unbeatably low rates enjoyed by no-one else in the colony.” Importantly, the Naths are by no means the wealthiest group within the settlement. (just to be absolutely clear, I do not think this working paper proves my argument in any way, and I understand that I do not have strong empirical backing for what I am suggesting).

As this blog has become unusually long, I am going to continue my thoughts on what this all means for high interest short term loans in India and Indian microfinance later this week.

In the meantime, linked here is another worthwhile read on the comparatively high prices the poor in America have to pay for financial and other services from the Brookings Institution.

The wall is falling down, falling down...

This is a story of a wall. This is not a wall that you would see from the moon like The Great Wall of China. Actually, this is about a wall which you would not want to see on the earth. This is the wall in Uthapuram village in Madurai district.

Thanks to the protests by Communist Party of India (Marxist), a section of the wall that segregated Dalits from the rest of the residents at Uthapuram in Madurai district was demolished on May 6.

This 30-metre wall, variously described as ‘caste wall’, ‘wall of bias’, ‘wall of shame’, ‘wall of untouchability’ was raised by Caste Hindus (Pillais and Vellalas) in 1989 following “caste riots” in the village.

The demolition of a portion of this ‘caste wall’ at Uthapuram marks a milestone in the history of the Dalit liberation struggle. But, there are too many invisible walls present in the village. This could be seen from the fact that while the Dalits were delighted that the Government had, at least partly, conceded their demand, the predominant caste-Hindu residents (Pillais) left the village en masse, apparently not able to bear the sight of the demolition even before it started.

Microcredit Inc: Franchising microfinance

(guest post by Intellecash Strategy Team)

Here at India Development Blog we like to highlight people who are doing things differently, particularly in the social entrepreneurship sector.

IntelleCash (www.intellecash.com) is a bright new idea to apply the principles of mainstream business franchising to microfinance in India.

Vineet Rai, the CEO of development consultancy Intellecap, conceived the idea while considering how the microfinance sector could achieve a more rapid outreach of financial services to the poor, and more particularly, how to make use of talented entrepreneurs in doing so.

Business franchising is a set of techniques which have already had a revolutionary impact on the retail and the fast food sectors. IntelleCash is the first to take these ideas and use them for microfinance.

Individual entrepreneurs are given access to a proven business model, and then apply it to their own local area. By building on a template that has already been successful elsewhere, the risk to the entrepreneur is greatly reduced. For clients, quality standards are assured by the use of a familiar brand and a standardized product.

Ankur Singhal, a senior manager at IntelleCash explains: “Right now, the Indian microfinance market is packed with small microfinance institutions (MFIs) who are failing to grow to their full potential due to inexperience and lack of professional management. It is a shame, because the market for financial services amongst the poor is larger than ever”.

IntelleCash gives entrepreneurs a ‘toolbox’ of services to guide them from the drawing-board to the field, including intensive staff training, software, consultancy services and capital structuring guidance.

For the most successful and profitable franchisees, there is also the option of equity finance from IntelleCash’s investment partner, Aavishkaar Goodwell (www.aavishkaargoodwell.com).

So far it seems to be working. The first batch of franchisees are spread across Delhi and Maharashtra, and more are due to launch soon. Mr Singhal comments: “What is really exciting is to see how our services are empowering entrepreneurs to help themselves and reach out to the poor.”

Is it always economics v/s meta-economics?

Let me define economics and meta-economics for this context before I start with any debate. Economics helps us decide based on one crucial judgement - whether an action yields a monetary profit to those who undertake it or not. What, then, is meta-economics? As economics deals with man in environment, we define metaeconomics to be dealing with two aspects - one dealing with man and the other dealing with the environment. In other words, this is economics that derives its aims and objectives from a study of man, and that it must derive at least a large part of its methodology from a study of nature.(E.F. schumacher)

For most of the things, meta-economics has been seen as a kind of hindrance to profit-oriented economics. Mostly we talk about balancing 'growth' with environmental conversation. But, it is not the case always. It is not conflicting in all the cases. I will just give an example of using compost derived urban waste for farming. Here, we agree that compost derived from urban waste is surely more eco-friendly. But we tend to believe that it might be costly for the farmer using such compost and also that it might not be productive enough. Let us look at reality. When compost was used it did give higher productivity. Now let us also look at input costs in both cases.

This is just one example. Here, we see a saving of 10% in total costs and 50% in usage of most other input material and also compliance with meta-economics .I will post other examples as we can move towards looking at meta-economics as a thing that could co-exist with economics

World Environment Day...Tips

Some simple tips from the UN...

June 5 (Reuters) - The United Nations urged the world to kick its addiction to carbon dioxide on World Environment Day on Thursday, and said everyone must take steps to reduce their greenhouse gas emissions to fight climate change.

Just under half of personal emissions come from things under individuals' control, the United Nations said.

It recommends the following for anyone keen to shrink their carbon footprint.

* Wake up with a traditional wind-up alarm clock, not an electronic one: save almost 48 grams (g) of carbon dioxide (CO2) each day.

* Brush with a non-electric toothbrush: avoid nearly 48 g of CO2 emissions.

* Replace a 45-minute workout on a treadmill with a jog in a nearby park: save nearly 1 kilogram of carbon.

* Heat bread rolls in a toaster, not an oven, for 15 minutes: save nearly 170 g of CO2.

* Take the train rather than the car to the office: a distance of as little as 8 km (5 miles) can save 1.7 kg of CO2.

* Shut down your computer and flat screen during the lunch break and when you leave work: this cuts CO2 emissions generated by these appliances by one-third.

* Install a water-saving shower head. This will save 10 liters of water per minute and halve CO2 emissions of a three-minute hot shower.

* Switch from regular 60-Watt light bulbs to energy-saving compact fluorescent lamps.

* Dry clothes on a washing line instead of a tumble dryer: knock 2.3 kg of CO2 off your total.

* Pack a light suitcase: world savings of 2 million tonnes of CO2 a year are possible if every airline passenger cuts their baggage to below 20 kg and buys duty free goods on arrival.

Sources: Reuters, United Nations Environment Programme (http://www.rona.unep.org/documents/press_release_world_environment_day_June_2008.pdf) (Writing by Gillian Murdoch, Beijing Editorial Reference Unit; Editing by David Fogarty)

((gill.murdoch.reuters.com@reuters.net; +00 86 10 6627 1032)) Keywords: ENVIRONMENT DAY/EMISSIONS

Financial Sustainable Banking Awards

Bangladesh's ASA, a micro-finance institution, was awarded the "Bottom of the Pyramid" award by The Financial Times and the International Finance Corporation. The Bottom of the Pyramid award recognizes efforts to provide financial services to the 4 billion people living on less than 2 dollars a day.

E+Co, a non-profit investment company that tackles climate change and poverty has been awarded the Sustainable Investor of the Year. E+Co invests in individual energy enterprises and building a portfolio of companies that provide clean energy products and services. The organization aims to provide modern energy services to 10 million people in Asia, Africa and Latin America by the year 2010.

More information about the FT Sustainable Banking Awards, including judging criteria and award categories, can be found at: www.ftconferences.com/sustainablebanking.

Electoral Economics - Cost of Democracy

Democracy comes at a cost. Let us have a look at the cost of the recent Karnataka elections. Officially, under election commission's guidelines, each candidate is allowed an expenditure of Rs.12 lakh for the election campaign. Of the Rs.12 lakh, he has to set aside Rs.4 lakh for the campaign of National- or State- level leaders, leaving him or her with Rs.8 lakh.

How does he use this Rs.8 lakh? With expenditure on each vehicle estimated at Rs.1,200 a day, a three-week use would push the candidate's expenditure on one vehicle alone to about Rs.25,000. Candidates said that they deploy around 20 vehicles, which accounts for Rs.5 lakhs.

Apart from this, he has to distribute money, liquor, pamphlets and other inducements. He also has to employ goons who would battle the hooligans from rival canditates. In all, he uses over 2,000 people, paying between Rs.1,000 and Rs.5,000 for a day of work, for almost 20 days.

So, ultimately a candidate spends on an average Rs.5 to 6 Crore. In quite a few constituencies, most notably the nine seats in the iron-ore rich Bellary district and the 28 seats in Bangalore and in other centres, it is estimated that the candidates spent atleast three times that amount. This would mean an expenditure of more than Rs.4000 crore for the 224 constituencies in the state. Incidentally, the Election commission of India's (ECI) expenditure for conducting elections was put at around Rs.70 crores.

Some cost we pay for democracy !!

Facts from the Frontline June 20, 2008 edition article 'Gaining Currency' by Ravi Sharma

Crime and Punishment

I don't know whether this post of mine exactly fits into this blog. I do allow the moderator to delete this post any time s/he wants to if found irrelevant by people.

Development has multiple aspects to it and it is very tough to define it in a single sentence. But, according to me and for simplification purpose, development could be seen in one aspect as eradication of economic and social disparity. I am sure none of us in this generation would be here to see achievement of this goal of eradication of disparity. But as people, who strive for it, we should look at various components that define this goal and take them in our essence in our day to day activities. One of the aspects of development defined this way is to look at the treatment of crime by economically and socially deprived.

I am writing this post sitting in a hotel room. Another resident of this hotel had left a purse with Rs.7000 and precious cards in her room yesterday when she was out on official work and the toilet cleaner stole the purse. The Police just found the boy in some place outside, brought him and were slapping him unstoppingly in front of a crowd to find where he had kept the cash.

Most of us were proud of the police for their sharpness. Some were more than happy that there were no more suspicion on them for the theft. Most of them were really happy that the guy was punished for such an offence. I seriously have certain questions. I am putting them to you at the risk of sounding too romantic. If stealing the purse was a crime, leaving the purse so carelessly is also a crime. Why would a crime committed by somebody to whom that money was really valuable be more serious than a crime committed by somebody who earns almost Rs.1 lakh a month? What about losing the purse or thinking to have lost the purse? What if you find such an opportunity?

These questions are in no way a defence to the crime committed by the person. We do keep reading quotes like : 'Society creates crime; criminals do it' and seem to appreciate them when dealing with it theoretically. But, do we understand the essence of it? Was there a need for the criminal to be slapped and hit continously in front of a crowd? Is only death by hanging a harsh enough punishment for a civilized society? Is slapping and hitting the criminal in private parts in public acceptable to a civilized society?

Who will define the rules for dealing with the crime by these economically and socially deprived people - without 'letting them off'? When will we define newer tolerance level? Is it not indicative of the way we look at economically and socially deprived in general?

Would higher tolerance and proper dealing help us look at disparity itself in a different way and as a smaller problem than is perceived today? Would that reduce the crime rates.....

Time for Micro-Technologies

It is an accepted fact today that microfinance has come a long way in the last few years but there still exist a large number of inefficiencies in the system.

As we look at the MF Institutions, there are advanced marketing, finance, human resource and accounting ideas adopted from mainstream businesses by them. But one sphere which they lag from more efficient businesses is the technology platform. As we look at all kinds of Microfinance institutions (small/medium/large), one thing that is apparently visible is the lack or minimal use of technology. Most of them seem to use too much of paper in their operations. A paper-less environment seems an idea too far fetched from reality.

Before we look at developing technologies that will be aid Microfinance operations, we have to go back to basics of economics to find the desired characteristics of the technology that needs to evolve.

As E.F. Schumacher points out in his essay ‘Peace and permeance’ (1973), we need technologies (in any sphere) which are:

• Cheap enough so that they are accessible to virtually every one
• Suitable for small-scale application and
• Compatible with man’s need for creativity

Let us evaluate these points and look at how these needs fit in for the Microfinance and how far we are from building Micro-technologies with these characteristics.

The technology solutions that are developed need to be cheap so that everyone can access it. This is a barrier that seems very tough to break. The solutions that are available now are too costly for any small microfinance institutions to start using them. The problem with a costly technology is also the fact that they are relatively more complex. So even with the organizations using these technologies, there is a very little understanding at all the levels of employees. Only a few who deal with the technology team seem to understand it.

Also, the technologies that are used have to be suitable for small-scale applications. This would help in experimentation which would help in improvements happen to the system at a faster rate.

Both the above characteristics above lead to the most important characteristic that is needed in a micro-technology: Need for the technology to be compatible with man’s need for creativity. A cheaper system which would be suitable for small-scale application would help all the stakeholders in the system understand the technology, experiment with ideas and come up with more creative use. This would help us stop looking at technology as typing '7132' in an application for starting loan opening operation which is an insult to the self-respect and creativity of any individual.

For too long has a privileged few understood the technology that is used for microfinance. Even the other-wise privileged few like CEOs and CFOs of the MFIs have not understood these technologies. It is the duty of the people who understand and are involved in building the current systems to help everyone move towards the agenda mentioned above. These needs are pretty much same for technology in any sphere, but the need is more for the Microfinance at this instant as technology can create a whole new difference in deciding the next phase of this sector.