India 2011, more of the same...

Originally India 2010, from a cartoon in The Hindu -

Prospects for 2010 2011:

India Shining - √

Indian bid for Security Council seat - √

INC in power - √

NREGA - √

More Indian $ billionaires - √

Food Inflation - √

Farmer suicides - √

Maoist insurgency - √

and of course,

Cynical bloggers - √

Protecting microfinance from the government...and from MFIs

MicroSave's recent focus note (HT: David Roodman) carries policy recommendations for MFIs on saving the beleaguered microfinance industry. The message for MFIs is clear - "denial is no longer an option" and that if the industry doesn't take action now, it will either crumble either under the weight of mounting losses or crippling government regulations (more likely, both). These recommendations for MFIs are notable only because they are in no way new ideas, and merely illustrate how unresponsive the sector has been - see the following points from the focus note -  

• Transparent interest rates - for research on how microfinance clients understand their loans and interest rates, see here and here, pg 25-26; announcements 
• Transparent operations and governance - a recent article by Prof MS Sriram, a S&P report and my comments from a previous blog post.
• Improve analysis and dissemination of social performance - why the reluctance??!!
• Establish a credit bureau - would be nice, if they really took off.
• Diversify product offerings (financial and complementary non-financial) - BASIX has been trying this for years now; see an interview with Malcolm Harper here   

MicroSave also has policy recommendations for the government. This mostly contains advice for the government to be prudent. A brief discussion on some of the key recommendations follow -  

• The note encourages the government to 'recognise and build' on MFI's successes. I wonder, why doesn't the government embrace the success? There are several reasons why the government can legitimately take credit - 1. The government is the default regulator and has allowed MFIs to grow and spread for all these years; 2. Public institutions (RBI, SIDBI, PSU banks) have played a significant role in infusing funds and resources; 3. MFIs in many parts of the country built on the government-led SHG programme. Whether SHGs are a success or not is a different matter, but one cannot deny the role of SHGs in creating/increasing awareness about financial inclusion
• The note also makes the case for public banks being more vigilant in monitoring operations of MFIs by using an area approach to lending. I am not sure how this will work in practice. Why should MFIs be subject to varying policies of banks. It should have access to funding from a wide range of sources, including private banks - the lenders should have to compete (responsibly) as well. And if there are multiple lenders, who will take responsibility to monitor MFI portfolios in those areas? 
• Recognising the limitations of the SHG model is something that is easier said than done, especially when it comes to politicians. Public institutions are more likely to admit to the shortcomings of SHGs. SHGs in India are a bit like cooperatives in India - they are failing, but they must succeed. But will populist politicians take a pragmatic view of this? I am not hopeful...

Read the rest of the recommendations here. In sum, the need of the hour is stricter enforcement of fair regulation. Easier said than done, I know...

Trends via Google Ngram

Rights/Duties: We have been talking more about 'rights' and 'less' about duties? But then, is the 'rights' talk now beginning to dip a little bit?

Try these at the Google Ngram website


He/his/she/her: The gap seems to be closing, at least on paper...

Why give more aid to India?

In a WSJ blog, Rupa Dehejia wonders if India should receive any aid from the World Bank, especially given the emerging/emergent/emerged superpower rhetoric that surrounds the country; its extravagant spending on events such as the Commonwealth Games; and the massive scams that have been recently doing the media rounds. All valid points, I think. The project in question is an IDA soft-loan to the national roads project, PMGSY. The World Bank has supported the PMGSY since its inception. The author also goes on to ask -  

The flip side is to ask why is the World Bank still engaged in India? Surely, its precious dollars are much more badly needed in the poorest and most backward of its member states, mostly in Latin America and sub-Saharan Africa. After all, when doling out from a fixed pot, aid spending is a zero-sum game: an extra dollar given to India is a dollar not given to a needier recipient

This is a trickier question. Aid spending may be a zero-sum game, but the returns therefrom are definitely not. In this case, there is nothing particularly remarkable about the project - its the usual infrastructure multilateral concessional loans often fund, expecting economic and social dividends from greater road connectivity. At $1.5 bn out of an estimated expenditure of $33 bn, the IDA loan is not even a significant proportion of the total resources required for the project. Why then is the bank interested in funding this Indian programme? And does it make sense?


Some of the recent development debates have been about where aid must focus in order to make the maximum impact on poverty - should it be where the poor live or on governments that lack resources to help its people, even if their numbers are small - and in this debate, predictably, India has been in the spotlight. 


In my opinion, aid to India makes sense. Not just because the good majority of Indians are poor, but also because of the following, some of which are true today and others, that would be true in future -  

• Aid can help improve local accountability and direct local attention towards domestic inequality. That might mean smaller volumes of aid, but directed strategically. This does not mean supporting only advocacy/activist/policy NGOs, but also supporting innovative and experimental approaches to conventional development challenges. Local citizens' groups, NGOs, politicians and government officials have taken on the obstacles to citizens holding governments to account in India in many different ways. The challenge is to keep these movements active and growing.  
• Being present in India is not just to 'give' to India, but also to 'take' home lessons from her. The Indian (or the Brazilian or Chinese) model of governance and economy has important lessons that could be relevant to other developing countries - at least more relevant than just the historical experiences of the west. 
• In spite of all the poverty and HDI indices, countries like India, China and Brazil are important geo-political players. Their collective power was clearly visible in the recent climate talks and international governments and multilateral NGOs have a clear stake in the progress of such global negotiations. One of the best ways to build ground is to participate in domestic debates and fora - go from being an untrustworthy outsider to being a trusted one, with a possibly divergent, but transparent point of view. 
• Donors in India surely realise that it is not as easy anymore for them to stand aloof from the Indian state and dictate terms. It may largely be tough posturing by the government, but in recent months, some prominent donors have been told off by senior officials/politicians for being harshly critical of public systems and for highlighting incessantly, the country's shortcomings. In response, donors will probably become smarter; and attempt to work closely with local actors in pushing for change from within. 
• Involvement in big-ticket projects (infrastructure) in the form of small inputs (technical support) might be one of the ways for donors to remain relevant in the country. Staying relevant is important not just so we aid professionals have a job or because donors have their own agenda (which they obviously do), but also because the aid industry has something to contribute.

International agencies (whether donors or otherwise) and a strong domestic government is a good recipe for a fruitful partnership. Some day, it will not be about foreign governments and multilateral bodies giving aid to India, but about a mix of government and non-government bodies working together to share knowledge and resources; to continue work on improving systems of global governance; negotiating fiercely to further/guard each other's global political positions; to improve our understanding about development and help action what works; and to help citizens across countries understand each other better.

Rahul baba defines 'aam aadmi'

“The aam aadmi in India is that person who does not have a connection to the system. Whether he is poor or rich, Hindu, Muslim, Sikh or Christian, educated or uneducated, if he is not connected to the system, he is an aam aadmi.”

The examples Mr. Gandhi cited ranged from a tribal boy in Niyamgiri who is thrown off his land without justice, to the young professional in Bangalore who can't get her child into a good school, to the university topper in Shillong who cannot get a job because he doesn't know the right people, to the poor carpenter from Basti living in the slums of Mumbai who did not get an education for lack of opportunity 

See here. There was also a whole lot of fluff about the corrupt 'system' and how it is squeezing the aam aadmi. Our future Prime Minister also had this gem

India will not be a nation until the aam aadmi's “progress is based not on who he knows but on what he knows,”

Really!?!? Only an absolute sense of entitlement and near-complete lack of self-consciousness can come up with lines such as the above. Here is a man who in every way reaffirms the status quo, spouting wisdom about progressive change. If only he would walk the talk...but then, who is keeping track? The non-aam aadmi are beyond caring. The aam aadmi on the other hand, are too busy figuring out how to make their lives work, using both 'what' and 'who' they know

End Corruption NOW!

Nitish Kumar's government was recently sworn in for a second time after a resounding victory in Bihar, India. 

On the receipt of an order from a special court, the Bihar government will seize property belonging to officials accused of corruption even before charges are proved. The government then plans to immediately install a school in the seized property

Asked what proof they need to begin proceedings to seize an official’s assets, Mr. Yadav said this: “If you earn 10,000 rupees ($222) and you have a 10-crore (100 million rupees, $2.2 million) property, you must be stealing from somewhere, right?”

If in a court case the official is able to prove the assets aren’t from ill-gotten gains, he’ll get his property back with “5 or 6%” interest, said Mr. Yadav. The aim is both to punish and deter “so that people who are thinking of stealing become frightened.”

From WSJ 

The future of our parliamentary system

Manmohan Singh worries about our parliamentary system 

Asked what the government strategy would be if the Opposition protests spill into the Budget session in February next year, the Prime Minister expressed his apprehension: “I am worried about the future of the parliamentary system…I do hope reason will prevail [and the Opposition will not do that].”

Very statesman like, Mr Prime Minister. But how will you convince us that you are the one to talk about parliamentary ethics when you yourself have decided not to contest an election not once, but twice. Not surprising in the least therefore, to read this - 

He was also asked why he chose to make this visit...when Parliament was in session. His response was that first, “India would not be taken seriously if we fail to keep our commitments” on dates fixed for important bilateral and multilateral meetings, and two, anyway, not much was happening. “What is happening there [in Parliament] anyway?”

Its not your job to fix the logjam. Noted.

Hail the Street-level Bureaucrat

Street-level bureaucracy - one of my favourite agencies ever! During their effort to institute community-level action plans in Hyderabad, Accountability Initiative finds some more (not surprising) evidence.


First, the roadblock...

The Pratham and PAISA teams arrived at the meeting armed with their formats and the government orders. But once the conversation began things started falling apart. The officials, particularly the Head Masters were simply not interested in the proceedings – they had to be there because of the government orders but they really didn’t see the need to engage the parents, most of whom for them were not aware of how to do complex administrative tasks like make plans.

...followed by the diagnosis

The problem however is that the frontline officials remain unconvinced. And this is why we don’t see effective change on the ground. On paper, India looks like the most participatory democracy in the world. Scheme after scheme, government order after order mandate that people –whether through organized community groups or other means – must make plans and audit programs. The reality of course, is completely different. A good administrator will pass a progressive order but she will never spend time motivating her team to implement the order. This is exactly what is happening in Hyderabad. The  collector seems to believe that his problems will be solved if his team implements his orders. But he doesn’t see the need to work with his team convincing them of his mission and carrying them with him. For me the greatest learning from Hyderabad PAISA is that change can only come if the foot soldiers, those on the frontlines are convinced of the  need to for change and motivated to implement it.

China's Confucius Prize

A Chinese award to rival the Nobel 

Named after the famed philosopher, the new prize was created to "interpret the viewpoints of peace of (the) Chinese (people)," the awards committee said in a statement it released to the AP on Tuesday.

...The first honoree is Lien Chan, Taiwan's former vice president and the honorary chairman of its Nationalist Party, for having "built a bridge of peace between the mainland and Taiwan."

I think there should be a healthy debate about alternate conceptions of 'rights'. The Confucius prize could have been an opportunity to further the debate. Check out this paper by Elizabeth Perry where she argues that Chinese have an alternate conception of rights, which need not match Western ideals and that, in turn doesn't make it any less legitimate (excerpts from the abstract) 

In this article, an examination of Chinese conceptions of “rights,” as reflected in the ethical discourses of philosophers, political leaders, and protesters (and as contrasted with American understandings of rights), provides the basis for questioning prevailing assumptions about the fragility of the Chinese political order. For over two millennia, Chinese political thought, policy, and protest have assigned central priority to the attainment of socioeconomic security. As a result, the meaning of “rights” in Chinese political discourse differs significantly from the Anglo-American tradition.

But with a hasty announcement and an extremely unsavoury PR job over Liu Xiaobo, China might just have messed up this time and lost an opportunity to engage with the rest of the world in a worthwhile debate


Update on 9/12/10: Oops, what a joke!

Microfinance: cursed in India?

An interesting analogy from Sivakumar - not exactly an insider, but someone who surely knows about people and business as well as anyone with a commercial interest in the development sector.  He gives a set of reasons why microfinance is in trouble in India. Excerpts below; see full version here 

The interest-rate debate, once again 

While the interest rates of MFIs are lower than what a local money lender charges, the fact that the rates hardly came down in so many years of MFI existence implies that the sector hasn't innovated enough.

The difference between credit and finance and financial services 

Along the way, as MFIs proliferated many of them focused on transaction efficiency, and lost sight of these two pillars (business development services and social mobilisation) that defined the original business logic.

Where are the clients who are hurting from this crackdown on MFIs? 

What's even more surprising is the lack of overt support (in this hour of crisis) from the very beneficiaries themselves - the borrowers - even after knowing fully well that the MFIs would close and they may have to resort to higher cost borrowings again. The absence of social capital in the operations of many MFIs (described in 2 above) meant that the borrowers didn't see the long term benefits of continued engagement with those MFIs, instead were happy extracting the short term transactional benefits (escape from repaying their loans). In contrast, when the middlemen struck work at mandis in 2004 to stop ITC eChoupal from making the agri markets transparent, thousands of farmers came on to the streets spontaneously to support eChoupal.

A quick lesson on scaling models 

Any organisation can choose from four scaling models - scaling up, scaling deep, scaling out or scaling through. Up requires standardisation of processes for efficient replication of a demonstrated unit. Prerequisite of deep is a capability to orchestrate an ecosystem to deliver multiple products & services to the same customer group. Out is replication of the same model in a different domain. And, through is a typical franchising approach with the attendant conditions. Some MFIs attempted crossing from one model to the other or even blending different models without building the requisite capabilities, obviously leading to trouble.

The compulsions of market finance 

Large sums of money was pumped in through Private Equity, IPO etc. before the sector geared itself for scaling. These sources of money demanded rapid growth, which in turn meant diluted quality of execution (multiple loans to the same borrower, coercion in recovery etc). 

Do MFIs have trained HR? 

Not enough manpower was trained in conjunction with the growth of the sector, unlike what was done in other manpower intensive large scale businesses, such as Software, Green Revolution and Operation Flood. It is estimated that some 100,000 people are employed in MFIs. Again, whoever succeeded without quality manpower.

In many places, the group leaders (of borrower groups) started their own bridge loan businesses, thus "ever-greening" the loans, making the ground reality opaque to MFI staff.

And finally -  

Many people question the ethics of some MFI promoters for using the growth & profits from the highly leveraged soft loans (originally given for a social cause) for private gain. In businesses at BoP, it is important for the lead players not to lose the strength of morality to be able to push Government towards reform.

Restoring sanity

Microfinance has had it real bad lately. When I first came across news about the Norwegian documentary that apparently exposes Mohd Yunus, it sounded like a terrible misfortune and one that would surely sour the pitch further for microfinance in South Asia. This is why I am relieved to read David Roodman, who in his typically nuanced style, explains -    

What is revealed is that in 1996 the Grameen Bank transfered some $100 million in aid receipts from Norway, Sweden, and other donors to a separate, non-profit entity called Grameen Kalyan—without informing those donors. Grameen Kalyan then lent the money back to the Bank at 2% interest. According to the Bank’s just-released account, this interest supplied a Social Advancement Fund which was to provide services such as scholarships to Grameen members and employees. A Norwegian official first detected the transaction in a footnote of the Bank’s 1996 annual report, which was published in mid-1997. The Norwegian government became alarmed that money it had given to a specific institution for a specific purpose (housing loans) had been transfered to another institution for other purposes without the donor’s knowledge. It also pointed out that this gift to Grameen Kalyan reduced the net worth of the Grameen Bank, thus of its shareholder-members. (A good timeline is here.)

The Bank’s explanations for this strange transaction were and are disturbingly dubious. One rationale was and is that the Bank gave the money away and borrowed it back because it was afraid that otherwise it would burn a hole in the Bank’s pocket. This Bank, entrusted with the serious responsibility of using foreign funds to help the poor, would not entrust itself with the basic function of a bank: holding money safely. Or—more likely—the Bank was and is lying. Another reason given was and is that the deal could reduce Grameen’s tax liability. But according to an Norwegian embassy official, Yunus first emphasized this rationale, then deemphasized it months later. (And the Bank disowned the rationale in a letter to Tom this August.) The dissembling raises suspicions: perhaps the move was nefarious, as sensational headlines have insinuated in the last few days. But lacking evidence to the contrary, I am prepared to believe that the real motive was indeed to set up the social fund, and that the Bank got trapped in rationalizing a contract violation. In the end, the disputants compromised: about half the funds (I think) were moved back, after which the Norwegians judged that their interest in the appropriate use of their money was served. On what basis should we second-guess them?

Qatar's 2022 FIFA WC bid

We’re pioneering technologies that will allow for outdoor, air-conditioned stadiums that will be carbon neutral, benefitting the environment and creating ideal conditions for players and spectators.

After the FIFA World Cup™, these stadiums will be partially deconstructed, allowing us to build 22 new stadiums in the developing world. The technologies we are developing to cool our stadiums will also be made available for use around the world.

Qatar's successful pitch 

Farmer's Day award

GNA reports 

Mr Benjamin Adjetey Adjei, a 60-year-old man, from the Greater Accra was on Friday adjudged the overall best National Farmer for 2010 at this year's National Farmers Day Celebration held at Somanya.

For his prize, he was allocated a three-bedroom house and presented with GHC 5,000, personal accident insurance cover, GH¢ 4000 personal life insurance cover, a trip to the United Kingdom and a decoder and viewing bouquet from DSTV.

The second prize award went to 41-year-old Maxwell Akadem, from Sandema in the Upper East Region and went home with a tractor and hallowing machine with GHC 4,000 personal life insurance cover.

The third prize award went to Mr Eric Nii Doseh, a 47- year- old farmer, from Adaklu village in the Kwahu North District of Eastern Region, who went home with a double cabin pick-up and GHC 4,000 personal life insurance cover.

Politics of computing development indices

Aid Watch picks on the new HDR computation methodology 

The biggest change in method was that the new HDI is a geometric average rather than a normal (additive) average. Geometric average means you multiply the separate indices (each ranging between 0 and 1) for income, life expectancy, and education together and then take the cube root (I know your pulse starts to race here…)

Now, students, please notice the following: if one of these indices is zero, then the new HDI will be zero, regardless of how great the other indices are. The same mostly applies if one of the indices is close to zero. The new HDI has a “you’re only as strong as your weakest link” property, and in practice the weakest link turns out to be very low income (and guess which region has very low income).

So, as Martin noted, the new HDI relative to the old HDI penalizes countries with very low income compared to decent numbers on life expectancy and education. One reason I think this is unintentional is that these are exactly the cases that the HDR used to celebrate! The biggest losers here are Zimbabwe, Liberia, DR Congo, Burundi, Madagascar, Malawi, Niger, and Togo.

In conclusion

...it’s clear that obscure choices of method make a big difference in who you celebrate – and who you make look bad. And way too often, Africa winds up in the latter category.