We talk constantly of poverty in India as if it is our real problem. But I don’t think it is. It is a consequence of deeper underlying issues.
Global inequity among human beings has been framed and constructed in the context of money — the want of money and, therefore, the ability to acquire. The focus on poverty as the problem forces us to formulate solutions that involve redistribution of money, to give people the ability to acquire. But what were the original drivers of progress and wealth creation?
The potential of money comes from the interaction with the mind. Wealth is created from human ingenuity. Consider that we are a country where only approximately 10 per cent participate in the formal economy, and only approximately 4 per cent of our citizens meet the Rs 1.6 lakh income criteria to pay taxes. … Read More »
Take a risk. Use your imagination. Transform your world.
Try to say this in any Indian language. I challenge you. You will fall short. Short on comparable, easily accessible vocabulary, short on that easy feel of flow and short on memories of when you last heard something like it said. English is the language of progress and possibility. English is the language of technology. English is the language of change.
To be progressive, therefore, one of the most powerful things we can do in this country is make English mandatory curriculum in every school, and then in the next generation just switch to English as the sole medium of instruction. One world. One language.
OK, I hear the critics. Some of our languages are so beautiful. So much of our culture will be lost. Then quick, start translating. English is one of the … Read More »
In my last post, I mused about who actually knows what something is worth? Beyond survival, ‘value’ is simply collective perception, a construct of our collective mind. So what do we mean when we talk of ‘value’? What is our mind ‘valuing’ and for what purpose? For an entrepreneur this is a fundamentally important question. On a very simple level you could claim to be creating value so long as someone sees it as valuable enough to pay money for it. However, there are people willing to pay money for all sorts of destructive things like drugs and cigarettes and exorbitant amounts of money for completely worthless things like crystal swans. Of course that is my value judgement I’m imposing on it. I have friends that would argue me down that the drugs help their creative process and the cigarette … Read More »
What is poverty? Having less money, living on less than Rs.90 a day or not being able to afford basic human needs?. Look at it this way and money is the problem. Solution: financial inclusion, microfinance, guaranteed employment schemes. But is it? Really?
In India, distribution of income differs from the popular imagery of a pyramid. With only 4% citizens paying taxes and only 10% employed by the formal economy, the prospects of solving this problem through simple redistribution schemes are abysmal. But perhaps it is not about money at all!
The more I encounter poverty, the more I realize that it is actually about the lack of power to change one’s circumstance. If tomorrow I lose all material wealth, no one will call me poor because I am empowered to do something about it.
Generally, you draw your power from the knowledge … Read More »
In 1989 as a 17 year old college student I had a childish view of what it took to get by in the world. Foolishly, I thought that $150 (7,500 Rs.) was sufficient to spend a month in Greece (it was my own hard earned money and seemed a lot to me at the time). $150, I found out, is not a lot of money. It worked out to about $5 a day. In purchasing power parity terms it was somewhere below $2 a day in an India. What followed was hardly a sightseeing tour but an exercise in subsistence living. For $1 there were hostels that would let you roll out your sleeping bag on their roof. If it rained they would accommodate you in the corridors by the bathrooms. In Athens I could not afford the entrance fee … Read More »
MFIs can operate as subsidiaries of banks, using a bank’s access to low-cost funds to lend cheap to the poor.
In 1995, Bank of Madura had 95 rural branches that were generally unprofitable. Deposits in these branches were too low and defaults on loans too high to justify the cost of servicing these communities. Besides, the bank’s staff disliked rural postings and it was difficult to attract talent into these areas.
The then Chairman & CEO, Dr K. M. Thiagarajan, in his bid to develop a profitable model of rural lending, pioneered the model of Self Help Group (SHG) lending, that was a hybrid between the Grameen Joint Liability model and mainstream banking.
Lending was done to a group of 15-20 women, who were co-guarantors for one another. They would meet locally to pool their dues once a month, and two of the … Read More »
Some weeks ago I received a rather acerbic email from a reader lambasting me for my relentless focus on productivity. Life is not just about productivity, he said. It is about relationships. Have I thought about this? Maybe people don’t want to be working day in and day out in factories or offices. People derive happiness from relationships not money and being poor doesn’t mean being unhappy. Our country will suffer because of people like me who come with western ideas to spoil the fabric of our society. And as I have come to realize, this particular reader’s opinion is a fairly common one.
Last week I was going through the Kerala backwaters in a small boat with my kids and I almost could see his point. Life expectancy in Kerala is 78 compared to the 55-65 range in the rest … Read More »
A couple weeks ago my newly married maid came asking me for a loan to pay the rental deposit on her flat. I knew she had saved up much more than the amount she needed so I asked her what she had done with the money. She told me she had bought gold jewellery with it.
With all of it? I asked her. Why did you do that when you knew full well you had this expense coming up?
I had to she said, without gold they won’t let you get married.
Who is ‘they’? I inquired.
Everyone, she told me. All my relatives in my village
At the time I told her she was foolish. Now I’m not so sure.
Back in the old days money used to be linked to something of physical utility – typically gold. For every note issued, the government … Read More »
A couple weeks ago we surveyed readers like you to see what your perceptions were of rural India with regards to mobility and connectivity. We also wanted to get a sense for how different your own behaviour and access is from the villagers. We asked you to guess different parameters about infrastructure and behaviours in the region of Vadipatti (i.e. Vadipatti Taluk excluding the town) which is in central Tamil Nadu. Whoah! you guys were way off. Most of you guessed that the villagers had less access, mobility and connectivity compared to you but you just didn’t realize HOW MUCH less. Here are the results:
Who answered the surveys
125 people answered this survey online. 75% were from the major Indian cities. Of this half were from Chennai which is the closest major city to Vadipatti Taluk and the rest spread out … Read More »
Over half the world simply subsists – caught in a cycle of supporting ones immediate survival. More than half of India is a subsistence economy. The word subsistence is a derivative of the word ‘exist’ which comes from the Latin word existere meaning ‘to emerge’ or ‘to be’. But what does it really mean to subsist? Typically it is thought of in terms of poverty – some amount of money that people earn – but to me it is not equivalent – I think it is better defined in terms of an energy use cycle.
Here’s what I mean. In rural India, according to the NSSO studies, people use 50% to 70% of their income to buy food which means the majority of expenditure goes towards fueling the survival of the body. Compare this to the United States where it is … Read More »
Cataclysmic events are no strange beast to the banking business. As for microfinance, the sector will survive even as some players drop out.
Sure, I say. I’m taking a contrarian position in the industry and here’s why. Let’s look at why people have loved the microfinance industry, at least in the past.
First, there was enough propaganda that it was alleviating poverty to make you feel good about association. And proponents will still argue that if some of the struggling MFIs are allowed to fail, it will crush the dreams of financial inclusion and, thereby, a chance to ‘better the lot of the poorer sections of society’.
This simply does not hold. Six years into this, it is starkly apparent to me that financial inclusion in the form of high interest loans does not better the lot of anyone very much. There is … Read More »
****This survey is now closed******
We have some interesting results that will be officially announced in a ten days or so and not on the 15th as previously promised.
Think you know what rural India is really like? We are doing a short quiz to understand your perception of rural India and to get some information about your ecosystem that we will use as comparison. The survey will take you about 2 minutes and we will post the results next week along with what the real numbers look like.
Take the quiz!*
Please do take 2 minutes to participate!
*For folks outside of India – ‘Petrol Bunk’ is India speak for ‘Gas Station’.
There is this strange sense of duality that India seems to bring upon you. On one hand there is this feeling of being on the cusp of something extraordinary. The giddy experience of watching something once so far removed from the developed world morph so rapidly and palpably into a modern society. The sense of possibility, the sense that something big is about to happen is now regular dinner party conversation.
The journey of one generation to the next has been so fast that parents often have little context for the lives of their children. Particularly for the lives of the children who have been abroad and returned speaking, dressing and acting differently. This new India is English speaking, moves easily from one city to another, sometimes one country to another. It is hyperconnected and watches all the same TV shows … Read More »
When tackling any sort of problem, it matters immensely how you frame it. The construct and language you use to describe the problem will inevitably direct and guide how you formulate solutions. Let’s take a look at the economic topography of the world – there are places where a great deal of innovative products and services are created that many have access to and other places where much less is created and fewer people have access to the little there is. The medium of exchange for these goods and services being money, the issue of this global inequity among human beings has been constructed in the context of money. It has been framed as an issue of ‘poverty’, the lack of money and therefore the ability to acquire. With this framework lack of money becomes the central issue and we … Read More »
The last decade has seen a sensational rise and fall of microfinance in India. After the crisis in Andhra Pradesh (AP) that claimed debt related suicides on account of exorbitant interest rates and high pressure collection tactics, the Reserve Bank of India (RBI) has finally put in place regulations based on the recommendations of the Malegam committee. With massive defaults to contend with and the new regulation that places caps on the rates and spreads, the industry is struggling to find its feet again. Many of the less efficient players are out of luck and out of business. Others are tightening their belts and getting more efficient in their operations. But, is microfinance 2.0 just about process efficiency? Or can it be something greater?
Where it began
Let’s start with the premise of microfinance and what it started out trying to … Read More »