Travel safely...

Already, it is quite difficult for me, an Indian, to travel the globe. Even the odd occasion when I want to and can also actually afford it, VISA comes in the way. Lengthy procedures, unreasonable documentation requirements - its already quite a pain.

Now, I hear the Indian government wants to review visa policy for international tourists visiting India - "after the tourist visits India and leaves the country, there has to be a break of 60 days before he/she can apply for another tourist visa". The next day, there was a revision to the proposed revision. All very confusing. That should do us in completely (the only hope I have is that the visa-scene is pretty bad, as it is now)

Siddharth Varadarajan in his column questions the logic behind these proposed visa rules.. Its pretty much the same question that Shashi Tharoor raised on Twitter which prompted sharp reactions from all quarters.

Varadarajan further asks

How many foreign visitors planning a combined trip to India and Nepal or India, Sri Lanka and Maldives would want to risk being denied re-entry? And since it is the responsibility of the airline to fly out passengers denied entry, one can imagine the confusion and uncertainty that will prevail at foreign airport counters when a tourist who has been to India within the previous 60 days arrives to check in with his “supporting documentation.” As for those on business visas, many of whom make dozens of trips into and out of India annually, the two-month rule would prove disastrous were it ever to be made applicable to them. And if the rule is not going to be applied to business visas, how would it help in a repeat of the Headley case considering that the U.S.-based alleged LeT operative had a long-term business visa?

Hmm. Good question. Will somebody answer? SV, though, might have got it wrong at one little place. Because he seems to put his trust in modern systems/technology

...the key to spotting and tracking potential terrorists lies in properly training our immigration officers, providing them with networked, state-of-the-art computers and generally improving the system of data storage and retrieval. Today, most immigration counters in India are staffed by policemen whose unfamiliarity with modern technology is apparent from the way they gingerly handle a mouse and keyboard.

 Oh oh! Think no further than Umar Farouk Abdulmutallab

A Tale of Two Tweets...

It is appropriate - 2009 was the year when the world Tweet-ed away to glory. The number-of-twitter-followers rank list became more important than the Forbes billionaires list.

Shashi Tharoor - India's self-made political celebrity (unlike the other undeserving inheritors) - tweeted about every minute of his itinerary. Earlier in 2009, he was elected to the Parliament and appointed Minister of State for External Affairs. Tharoor knew he had some real work to do. And unlike a celebrity son, he probably does not have the leverage or the budget to roam the countryside and dine in the modest homes of awe-struck 'poor' hosts. If Tharoor had a 30-hour day, we knew all about it, if he had an interesting meeting, we knew it. We also knew what he liked/disliked about cricket and bollywood. Every now and then, there would be a tweet that testified his Keralite roots. Last September, the prodigal politic, tweeted in resignation "cattle class out of solidarity with all our holy cows" after he was censured publicly for flying business class and enjoying the luxury of five-star hotels.

In 2006, Tharoor was on the verge of becoming the Secretary General of the UN. So he surely is a diplomat of indisputable caliber and charm. But Holy Cow! We all know who those cows are. Tharoor survived the ensuing row. I am actually incredibly impressed he survived it in a political party which doesn't hesitate in prostrating in front of the holy cows and collectively, think nothing of sacrificing dissidents regularly at their holy altar. I had thought the axe was about to come down on him, after indignant outbursts by party loyalists.

No harm done...Tharoor kept tweeting (I sent him a tweet to commiserate his plight and to congratulate him for maintaining the humour - praise the Twitter-Lord!). Meanwhile, the incident provided for some hearty laughs

Last week, Tharoor did it again - just when Indian authorities were red-faced in trying to explain how David Headley roamed the country with a tourist visa wantonly plotting terror strikes, and our policymakers responded by calling for tighter visa issuance procedures. Tharoor tweeted "Is all that worth it just in the hope of making it difficult for a future Headley to recce? R we going 2allow terrorists 2make us less welcoming?" and that "the 26/11 terrorists “had no visas” to enter India". Ouch! That must have hurt. All hell broke loose. His senior minister censured him and earlier today, asserted his authority. The opposition jumped at their chance. Meanwhile, his 550,000 tweety followers stand firm in their support for their hero.

But overall, it was interesting to see that there was lesser heat generated this time - after all, this time, Tharoor had merely commented on a vital security issue, and not about a 'holy cow'. Did someone say 2009 was the year of Twitter? Wonder what 2010 will bring?


About me - After months of unsuccessful attempts at trying to fit into the Twitter world, I finally deleted my account last night :(

Encouraging rural innovations

LiveMint ran this piece today - this will hopefully give a boost to the painstaking work by Dr. Gupta and his team over the last two decades. Bollywood can help make anything popular! The following post may sound like an advertisement - it is one and deserves all the appreciation possible. And, help with spreading the word.

The network of the National Innovation Foundation, Sristi, Honey Bee Network and GIAN have been engaged in unearthing innovations from remote parts of the country and link these innovators with companies/organisations willing to commercialise their technologies. The range of innovations featured in these websites are a testimony to the wealth of talent rural India possesses.

The group is obviously clear that rural innovations cannot be unearthed by merely organising an online contest, a university-level competition and the like. So every year, they set off to a different part of the country, spending a week on foot - on a journey called Shodh Yatra. This year's walk is currently underway in Assam, in the north-eastern part of India. I really want to make it to the next one.

Gender equality: Is travel time a good proxy?

"Bored yet? You may be, but don’t blame the data: the finding that men and women travel virtually the same amount is dramatic, cast-iron proof that we have reached a golden age of complete gender equality in America"

is the conclusion of this piece from the Freakonomics blog. I read the findings with interest - the parts about age being a significant determinant of travel time made good sense too. But I am not sure travel time is the ultimate indicator of gender equality - of course, I am not a expert on the subject. Is Eric Morris suggesting that in an unequal society, men would travel more than women? Or is it the other way? This piece doesn't quite clarify.


In a poor country like India for instance, women may spend more time travelling simply because they do not have the same access to money/vehicles as the men.


On the other hand - what about making comparisons based on mapping trails of men and women travelling? This is something we already do en-masse in PRAs in villages as an indicator of social mobility. For urban societies too, distance travelled may be a useful indicator.

Dirty? So what

Dirt might be making a comeback

An interesting piece from the Economist (via Ritwik) that might be asking you not to wash your dirty linen is public...wear it instead! Ah, its great to be finally proved right! Congratulations Denizens!!

Web 2.0 causing productivity losses?

I had come across this news a few days back - happened to read the full press release today. A little excerpt:

"Almost each day, an average corporate employee spends an hour, gluing to various social networking sites such as Orkut, Facebook, Myspace, Linkdein etc. for romancing or otherwise drive some satisfaction out of it. With this average corporate employee’s each day working is reduced by an hour from 8 hour to 7 hour, further reveal the ASDF survey. The above findings are arrived at a random survey, carried out by the ASSOCHAM Social Development Foundation (ASDF) in which nearly 4000 corporate employees were interviewed between age group ranging from 21-30, 31-45 and 46 -60 years in metros..."

For a moment, ignore the typos which suggest that these results were thrown up by some random survey. To most of us, there is nothing even a little bit surprising about the fact that employees are 'romancing' or deriving some 'other satisfaction' (!!) from the internet. The survey draws attention to the wastage that corporates employing net-addicted youth are footing the bill for.

A couple of reasons why no one is likely to make a big deal of this -
In India even today, most people can only access the internet at their workplaces. Even if they do, the connection in their offices is likely to be the best. So its not surprising that "77% of workers who have Orkut account use it during work hours" and "83% see nothing wrong in surfing at work during the office hours".

In any case, corporate employees, especially the social networking kind, rarely only work the stipulated eight hours. We are all so familiar with people who spend 12 or more hours at their workplace, sometimes because they have lots of work to do, but mostly because they spent a good part of their day being unproductive, or they stay in late to avoid the traffic or to just enjoy the AC/internet/snack bar/gym/(sometimes, even access to a computer)

So increased internet usage for leisure at the workplace is happening in an environment where corporates compete to substitute homes for young professionals. And a lot of us have been living out of our offices, using our homes just as a sleeping pad. The survey probably did not ask respondents whether they visit news websites (and quite possibly, have nearly put the newspaper boy out of business); read film reviews to make their plans for the weekend; blog (oh my god! - blogging might die if internet usage at the workplace is restricted) etc etc

I am curious - are there studies linking internet usage by employees with the company's growth/profits? And employee morale? Querying whether these employees spend less time hanging out with friends in the real world (offline) are probably passe...

Seeking some answers, yet again...

Aamir Khan continues to dazzle - as a school teacher in Taare Zameen Par and now as a techie in 3 Idiots. The actor, who debuted over two decades ago singing at his graduation party and repeated the act in 2001, takes another step backwards and in 2010, walks on to the screens as a nerdy fresher.

Anyways - this is not a review. That is best left to Raja Sen, the much-loved movie critic at Rediff. I will just dwell a little on one of the main points the movie was trying to make: on pressure - and highlighting heroes who challenge the norm.

'3 Idiots' transported me back to campus life. Six memorable years - 3 in Delhi; 2 in Anand and 1 in Brighton. The first three were not meant to be pressure-some (barring the three weeks of exams and the CAT(ty) season); the next two were meant to be just that ("this is a college, not a pressure cooker" - haha! you wish, my friend) and I have always spoken/written about how the pressure brought out the best and the worst in people around me. For many of us, batchmates/colleagues were primarily competitors. Stuff that movies like this one are based on. The last year in Brighton was indecisive - it screwed some and spared some...

Personally, I enjoyed the pressure and don't remember an instance when the heat got to me. Of course ragging is a different matter - most of us cried our guts out, but then, also found great friends from amongst our tormentors. Beyond that, insofaras academic/career pressures were concerned, it was mostly smooth sailing. There was always romance in the air :)

But I also wonder - should I take pride in my ability to adapt and ignore my inability to challenge the norms? Surely, it wasn't good enough just to have done well and sailed through. Did I think about 'change'? Sure - a couple of instances stand out. I have consistently had an uncomfortable relationship with the top management of institutions I studied in - primarily because I did not conform and bothered to ask the 'wrong' questions. But did I do enough? I was not alone, there were many others like me - did we do enough? I do not have a good answer to this. It is important for me, though, that I some day, have an adequate explanation. This question actually links up with everything that I have been part of in the past and anything I might do in future. Will there ever be a defining moment that reveals a goal my heart and soul will passionately pursue? From what I currently know of myself, that goal cannot be something that could belong to me - it is more likely to be something to which I might one day belong.

PS - after this post, happened to watch Rocket Singh over the weekend - completely delightful, yet another one about a character that decides not to give in. Great acting, Inspiring, slightly slow/dull in parts - but every bit a gem that I love Bollywood for.

Responsible 'giving'

Saundra, writing the blog Good Intentions are not Enough has been tireless in challenging conventional notions of charitable giving.

I absolutely love the title of the blog. Also the fact that the author argues for more responsible 'giving' - at both the individual and institutional levels. The blog highlights the importance of a well-thought out act, especially relevant since we dont always think much when giving, and are happy to not be called upon to engage and follow-up.

Consider the usual circumstances under which we 'give':

1. 'Giving' to get rid of someone: it could be the beggar on the street/traffic signal; the flood victim at our door-step with (a highly suspicious) certificate; local youth/sports/religious club/trust who will not take 'no' for an answer.
Chances that we care about what happened to/with either our contribution and/or the beneficiary - minimal

2. 'Giving' to get rid of something that we don't really need or something insignificant in value: one of Saundra's principal targets - read her blog for ammo on this one - this one, usually involves petty cash, old clothes/furniture/books and is given away to the household help/local charity...
Chances that we care about what happened to/with either our contribution and/or the beneficiary - zero

3. 'Giving' out of compulsion: In my first job, I along with all my colleagues made a mandatory 2% contribution from our salaries to the residential school run by the NGO. No one complained and I am sure most people didn't oppose the idea
Chances that we care about what happened to/with either our contribution and/or the beneficiary - better than 1 and 2 - if only to ever have a reason to demand that the deductions stop.

4. 'Giving' in to peer pressure: "Everyone else is giving Rs. 100. I must too, otherwise..."; when your children are out with their collection boxes for the drought/flood/earthquake victims; when your office/club organises a fund-raiser etc
Chances that we care about what happened to/with either our contribution and/or the beneficiary - Still not too bright, I am afraid...

5. 'Giving' because we believe; we care and have attempted at least an optimal level of research: Some of us do a lot of this already - in helping educate someone we know, a loan for family emergencies for someone who needs help (and we care about). It is here that more of us need to show up. For it is here that we are likely to care, to demand results (at least honest effort) and we learn over time. Individual donors could have a steep learning curve if they invested more in their early 'giving' decisions. For tips on the subject, don't forget to visit this blog.

Democracy and Heads of State

So this one is about the two largest democracies in the world - India and the US, and a sketchy view of their heads of state. If we tried comparing, its hard to say who is doing better - honestly. A year back, it never seemed like that would be in question.

India follows the Westminster model of parliamentary democracy, with the Prime Minister being the head of the state. That means in practice, the PM would be a person who enjoys popular support demonstrated by electoral success, be leader of the largest political party in a multi-party system and is the face of the central government. Instead, in India today, we all know who pulls the strings and the extent to which we have all taken for granted the sight of our PM deferring to the revered Family - a compromise which we understand represents the political compulsions of today. Not that coalition politics and the proliferation of regional parties have made it any easier to govern in the first place. But has the demystification of the PM's office hurt governance in India? I am not sure it has (at least not until there is a credible opposition). We gave him a second chance, with a pretty decisive majority, that too. But the present ruling formation has surely changed the way we perceive the head of our state.

Now look at the US - a country that follows a Presidential system - the POTUS is elected directly by the people and usually has either rock-star charisma or strong ideological appeal. And yet, we are all too familiar with Obama's domestic political battles. The opposition of course has been relentless in their vitriolic opposition, not just to Obama's policies, but to the man himself. In the absence of multiple parties, members of his own party take turns amending, stalling or out-rightly opposing one policy proposal after the other. No, I dont think that is necessarily a bad thing - every democracy needs checks and balances on the prominent seats of power. However, it is a little tragic to see the very agenda which brought the man to power, riding on a wave of mass hysteria, being systematically eroded/defeated by domestic politics. After all this, will he get a second chance? He might. But will there be a repeat of the global euphoria? If there is even a semi-sane opposition, it may be a tough call!

Bravura on wheels

In the last three days, I have spent nearly 12 hours in public transport - and they have been among the smoothest rides ever. Compare that with the 9-hour journey from Berhampur to Bhawanipatna/Bolangir. There was no way for me to survive those stretches without popping an avomine and dozing off (after haggling until I was guaranteed a seat not beyond the first two rows).

And scarred and emboldened by those experiences, I prided myself on surviving tough all-nighters on a bus without a push-back seat and cramped leg space. But hey - Ghana is actually spoiling me. Bus rides are not an act of bravery anymore - the kind where I secretly congratulated myself every time I completed one successfully back in India.

Simple fact - Roads in Ghana are awesome - Indian roads are hardly even comparable! I cannot prove this with pictures. But this, my friends, is the truth.

Jharkhand, take a bow...

Yesterday at Sunyani (regional capital for Brong Ahafo), the Director of the district public health team couldnt stop gushing about the wonderful hospitality he had experienced last year when on a WHO-sponsored visit to Jharkhand in India. He was so impressed by the warm, helpful and welcoming Indians that he has resolved to do whatever he can for any Indian he ever meets in future!

I was not sure how to respond to the gushing admiration. I didnt know if I should have felt proud about our wonderful hospitality, or relief that the gentleman did not have to encounter anything particularly unpleasant. But then again, he surely must have. But he chose to remember just the best parts...and that should be a lesson for all of us globe-trotters.

PS - Sure, I was there for some information without official authorisation and he went out of his way to help me out with it.

Should we stop aiding small farmers?

In a recent piece by Ranil Dissanayake in Aid Thoughts he makes the point that "aid prevents economic transformation by artificially supporting weak pre-capitalist forms of organisation" especially with reference to subsistence farming systems in poor countries. While I agree with a lot of the other points made in the post (and with a lot of Ranil's previous entries, which I have been reading with a lot of interest), I couldn't quite take this without debating the particular point I highlight.

The same peasant farmer is today being backstopped not only by subsidised farm inputs and minimum support prices, but also by free education for his children, free vaccines, an employment guarantee, subsidised food grains etc. Suggesting this be taken off even as rich western farmers are fattened on government subsidies seems problematic to me. And that Ranil's views seemed to suggest a process of natural selection leading to survival of the fittest. So I said, this is a recipie for massive distress, followed by death.

Ranil rebuts by emphasising that importance of dismantling unsustainable subsistence agriculture. He also claims that while there may be some distress and trauma when self-employed workers become wage labour, deaths may not necessarily happen.

To continue the discussion - Distress, followed by death - not an imaginary scenario. It has been playing out in India over the last decade. Spiralling cotton and other subsidies in the US - through capitalist empires like Cargill and Monsanto - have driven farmers in India and West Africa to suicide.

My point is - One, the arguments for non-subsistence aid and other forms of aid cannot be viewed in isolation from each other. If diminishing support for farming increases distress, it obviously will call for more investment in life-support systems in consumption, health, education etc.

Second, when it comes to fixing structural issues in development, we need strong advocates for changes in untenable practices at both ends of the spectrum - the rich governments and their economies on one hand and in the farming systems of the poorest on the other.

See this and this that lays out the impact of continuing farm subsidies in developed countries. The figures are appalling. If 70% of subsidies in the US go to 10% of the farmers, what is more painful - dismantling those subsidies, or taking millions of poor farmers off life-support systems? The politics of it is unlikely to allow this to happen though.

I worry that I read an inherent assumption in Ranil's arguments that in the fragmented farms of the poor peasant in developing countries, capitalist systems should be left on their own to evolve. But recent experiences around the developing world with contract farming by corporates (multinationals as well as domestic companies) are still being watched - with fears that unroganised vulnerable farming systems might be unable to withstand the relentless corporate onslaught. P Sainath has written volumes on this and much more - blaming much of the spiraling farm suicides on the juggernaut of commercialisation of farming systems in India.

And sure, thousands were left starving in Britain even as ships sailed off with corn exports in the 19th century. Painful history. And look at where they are today. But just for argument, if we had not evolved from our 18-19th century ways, we would not condemn genocides in another country, rights violations or censorship would not be news and humanitarian foreign aid can just be dismantled right away. But thats not how we chose to grow, right?

Ranil responds

Credit bureaus for microfinance

This is great news

MFIs in India have come together and decided to share client information and taken steps towards developing a code of conduct. Vijay Mahajan - one of the senior captains of the Indian microfinance industry explains.

MFIs (especially Non-banking finance corporations - NBFCs) are the shining stars of the microfinance sector in India. Credited with the grand success of making finance available for the poor, buoyed by stellar repayment rates and rapidly expanding client-base, MFIs and their apex associations are quite often taken by the government as the voice of their clients.

In theory, for commercial large-scale MFIs, implementing a credit bureau can bring two main benefits - one, MFIs can bring flexibility into their product offerings by varying loan sizes and interest rates based on credit history of clients, thus reducing defaults; and two, reduced costs of the pre-selection phase can help large MFIs retain better clients and expand faster and attract more investments. Also, international experience suggests that credit bureaus facilitate the growth of the industry and overall lending in the economy. Countries like Nicaragua, Peru, Guatemala, Bolivia etc are prominent examples.

However, some research work I had undertaken in India in 2007-08 (in Karnataka and West Bengal) made it quite clear that MFIs were not quite united on this issue. Specifically, some MFIs were concerned that large MFIs have built a large client base over a decade of hard work, creating a market for microfinance in the country. If client information is consolidated and made available to all subscribers, new MFIs could easily reach out to the same set of clients, nullifying the time advantage that the first mover has. Also, MFIs are also wary of commercial banks who will now have an easy access to ‘safe’ clients. Since banks can offer finance at much lower rates than MFIs, the threat of losing clients is a real one.

After a round of fascinating one-on-one and group meetings, I had grown to appreciate the challenges in encouraging MFIs - engaged in a scramble for clients and equity - to coordinate among each other. Unfortunately, there was poor precedent in the form of weak efforts at coordination among MFIs over issues such as staffing practices, recovery practices, interest rates etc. So what could make the sector come together? Pressure from regulators? Increasing risks in the microfinance market, a few mini crises? Desire to integrate better with global equity markets? A big crisis - I hoped not!

When the credit crisis happened, microfinance in India, in spite of a 100% exposure to sub-prime clients, escaped largely unhurt. But surely, the warning signs were clear. Incidents like that in Kolar served to emphasise the high risks and potentially inflammatory situation if things went wrong.

Thus, it is great news that 30 MFIs in India have come together to buy a 5% equity in a credit information company. I am sure there has been a gradual move towards this over the last year and more. I am also positive that equity investors and multinational banks expanding into the microfinance industry have contributed to the momentum.

Surely though, the road ahead is not without challenges. For one - an effective credit bureau could result in lenders bypassing poor households, preferring instead to work only with ‘safe’ clients. In a risk-averse market, a credit bureau might leave the poor with no access to finance. But isnt that already happening in some ways? The poorest of the poor have never been a preferred potential microfinance client.
Two - technology and the sharing platform. The UID system is only now starting and there are serious problems with unique IDs for clients.

But if it all goes through and a credit bureau starts operating, it will need to be coordinated/implemented in a very sophisticated manner. Now worries though - it can only get better...

Prices in Ghana

A price list:

1 Ghana cedi (GHC) = INR 33 approx.

Some prices from Accra (these are street prices):

Item	Price in Ghana		Price in India
	In GHC	In INR	in INR
Plate of plain rice, boiled egg, sauce (gravy)	1.00	33.00	10
Rice with chicken, sauce (and other local meals)	2.50	82.50	20-25 (?)
Bread and 2 eggs (fried)	0.70	23.10	12
Boiled egg	0.25	8.25	2.5
Coke etc (300 ml glass bottle)	0.50	16.50	10
Hair cut for men	2.00	66.00	15-20
Public transport in tro-tro (tempo van) (min)	0.15	4.95	2
Public transport in tro-tro (tempo van) (max)	0.50	16.50	10
Petrol (per litre)	1.15	37.95	50+

The price of diesel is about the same in both countries. Petrol is actually cheaper here (another reason for so many cars?)

I am often struck by how much more expensive it is here. Of course food is cheaper if cooked at home, but likely to be by similar proportions in India as well.

Also, Official Minimum wage in Ghana is GHC 2.7 (INR 85)

Any ideas?

Fascinating...

At a petrol pump off the highway from Takoradi to Nkroful, about 300 km from Accra - a 'manual' pump and dispenser. Cannot vouch for the quality of the fuel though. The glass bottles measure a gallon each, I am told. No computerised receipts on this one, hence not advisable if on an official tour.

Full marks for intent

snapped at a sparsely occupied guest house in Nkroful, 63 km from Takoradi

Exercising 'power'

Policeman to me: Indian women are fantastic. But if we look at them, Indian men will beat us up

Me: No no...that is not true

about 15 minutes later

Policeman: I have heard many stories...Indian women are fantastic in bed (obviously, this time, finishing his thoughts)

I stared at him...surprised. But then people here take little time in getting friendly and chatting up like they have known you for years. Btw, did I mention that I was at the police station because of an accident and while this conversation was going on, his colleague was successfully negotiating (arm-twisting) a $70 bribe

Off to the field tomorrow

Finally! Central and western region of Ghana. Which districts exactly? Still a secret. But news that it will be a 5-day trip. Sounds like fun!

Thrown!

I am a near-complete klutz when it comes to modern banking systems - and I get especially pessimistic when I have to deal with call centres. Somehow, I have managed to avoid it all along, except for ICICI bank and DELL in India and MTN in Accra (who I never get through to)
(About DELL - the 'person-on-the-line' sold me my laptop and then promptly went terminally offline when I had questions about the 'complete cover' I had paid through my nose for)...ah, DELL India is a sore spot, but that's not today's story.

It starts back in September, when I was leaving UK. I had requested admin at IDS to process a couple of outstanding payments to a friend's bank account, since I wouldn't be able to access mine once I left the country. All well, I thought, until two days back, when I realised the payments instead, had gone into my own bank account - a princely sum of GBP 340. Instant panic attack! I didn't even think at first the call centre was an option.

When I got around to calling though, the following miracles happened -
1. I found that call rates from Ghana to the UK are SO cheap - not so to India
2. The UK bank's call centre number connected me to an Indian guy sitting in Bangalore and I discussed the latest at the FORUM mall with him online
3. While all this was going on, the 'person-on-the-line' helped me set up a phone banking account, and immediately thereafter, use it to transfer my money to a bank account of my choice.

Okay...I have heard of 'globalisation'. I have read Thomas Friedman. I know lots more than phone banking gets routed to call centres in bangalore, where there are people younger than me working night shifts answering questions.

But, it did throw me off. Basically, I didn't expect everything to fall in place that easily - so I am impressed. Kudos to THE bank.

The myth of microfinance: who is freaking out?

In recent months, 'the myth of microfinance' has become a catch-phrase. A 2-minute google search throws up at least 9 articles that have the terms 'myth' and 'microfinance' in their title. See here - one, two, three, four, five, six, seven, eight, nine

In fact, it has sparked off a war of words between different camps of experts that work with the microfinance sector. All this, over a Boston Globe article that pokes a hole into the macro-romanticism of microfinance, quoting randomized experiments in India and Philippines. Amidst all this, I suspect all those who are actually in the market of microfinance have continued their busy lives giving out loans, collecting repayments and making their millions. And for that reason alone, I believe microfinance will continue to prosper. After all, what could be more attractive than a development project that created wealth at rates unheard of in the best financial markets and which promises empowerment, particularly that of women? With so much money being lent and repaid, heartwarming pictures of smiling women sitting in small groups, legendary stories of group discipline and peer pressure and the (reported) near-zero default rates (even before the specter of a global financial meltdown was upon us and Mohammad Yunus became the only banker that escaped unscathed), microfinance indeed is the star.

Sure, from the MIT and Yale studies, one could say that microfinance needs to go beyond just credit and include not just other financial services, but also complementary frameworks for developing livelihoods, improving access to essential public services etc - but in the absence of those services, we have microfinance and we can do what is possible to make sure it is well directed and regulated so clients dont get swamped by debt. Luckily, evidence from the studies suggests that clients are holding on just fine, at least for the moment. However, microfinance clients dont seem to have become any more empowered.

In spite of being a late arrival, this is an industry that has easily trumped conventional development sector programmes...mostly on the power of the profits it generates. Interestingly, this is highlighted by Banerjee (one of the lead researchers in the MIT study), in his Hindustan Times column where he points out the futility of expecting microfinance to work miracles and then lamenting its fallibility. I agree.

As long as microfinance continues to be a successful business proposition, I do not foresee its demise. I also do not expect MFIs to scale back on their work even if research proves that microfinance is not a miracle drug; and the development sector gives up its romantic dreams. Microfinance in its infancy was supported by huge volumes of soft money. Now, major players in the microfinance industry do not need any subsidies. They are willing and able to play the game on their own might and in the process, have reached out to millions of clients. In his column, Banerjee also takes us back to the basics - the importance of making financial services available to sections of the economy at rates that would have been unimaginable even a little more than a decade back and unless we have a better idea, we have to make our peace with it.

The problem with many ideas is the unrealistic promises they make. The problem with a lot of propaganda is that the risk of being exposed runs high. If microfinance can steer clear of inspiring romance, just reel in the drums and ensure that the business continues to prosper without hurting its clients, all would be well.