Monday, November 12, 2012

The great Malayali paradox
A people who are both slaves and revolutionaries
In Benyamin's best-selling Malayalam novel Aadujeevitham, recently translated into English and published by Penguin as Goat Days, the protagonist is a poor young aspiring Malayali from Malabar who goes to the Gulf and is forced to live as a slave looking after goats in the desert. It is a depressing true-to-life narrative in first person.
Apart from its other qualities, the book is a dream-killer and reflects the sad truth. Once they get on a plane to the Gulf, the huge majority of Malayalis has to get set for a life of near-slavery with neither job security nor the riches that they are looking for. But they prefer that to joblessness in Kerala.
Mind you, the entire army of struggling Malayalis sends back remittances which form more than 22% of Kerala's GDP. Without those slaving in the Gulf desert, Kerala's many revolutions cannot be fought, nor can bandhs be enforced, nor factories shut down. That is the Kerala paradox.
For the average Malayali who grew up shouting slogans on the street, the life of abject slavery or remorseless, unregulated factory shifts that most of them lead in the Gulf countries is an unreal phase he has to go through. He knows while slaving in the desert or working as a mason building the Burj Khalifa, that he is a slave only momentarily. Permanence is the revolution he can create back home. In heart and soul he is the revolutionary, whether he is from Malabar or south Kerala.
So the average Malayali immigrant comes back home frequently on Air India Express, dons the revolutionary's garb for a while, joins the CPM or Muslim League rally, flexes his muscles, buys some gold for his long-forsaken wife. That is the revolutionary's vacation.
These are the spontaneous revolutionaries who held the Air India Express to ransom on October 19 at the Thiruvananthapuram airport. The plane had been diverted to Trivandrum due to bad weather, and the pilot could not take the diverted flight back to Kochi since her flying hours were over. But try telling that to the revolutionary Mallu, just taking his break from a life of slavery and hard life in the desert.
The Mallu revolutionary, however, has his funda straight. He wouldn't try this trick if an Emirates flight from Kochi to Dubai was diverted to Abu Dhabi. He knows the rules there. Nor would he have tried this bit of slogan shouting if the diverted Air India Express flight had landed in Sharjah.
Trivandrum, of course, is a different battlefield. Here is the centre of all revolutions - the Marxists' revolution, the daily dharnas, the picketing of the state secretariat by government workers, the street bullying of the Marxist goondas, the very theatre of the dictatorship of the proletariat. What better place to try a mock hijack than at Trivandrum airport? Here, the slaves make the rules.
The Gulf returnee had to flex his muscles after many months of living a miserable life as driver, mason, or waiter in a roadside eatery, all in desert regions where no labour rules apply. There, he is well-behaved; not a slogan uttered nor demands raised. But once he boards the highly subsidised Air India Express to go back home, that changes.
During his holiday, the Gulf-returned bully also tries other things. Two weeks ago, one of them walked into a newly opened KFC joint in Trivandrum, bought a chicken, then shouted that there was a live worm inside his fried chicken. He called the TV people, had his highly dubious claim aired on TV and had the KFC shut down, all in the course of one hour. In a Dubai KFC, he may have paid for a replacement.
So shutting down enterprises in Kerala is a full-time hobby. In that holy venture, all Mallus are united. After that shutting down, they go back to their Goat Days.

BY .....................Binoo K John Oct 22, 2012, TOI
I found this interesting, and hits the bulls-eye ! 
The mallu mindscape is no doubt  paradoxical   

Friday, October 26, 2012

Financial literacy or just basic numeracy ? - first things first

So much talk of financial literacy for the poor and all that lecture bajji about computing the financial capability index and stuff like that – all sounded so western to me. The poor in the hinterlands, is drenched in traditional insights which the suave literate is hardly aware of . They take so much from the traditional knowledge systems and in turn confuse them with their overflowing words of literacy ; let alone the financial jargons -literacy ....a la microfinance institution. Often the poor and illiterate do succumb to phoney things in finance, it is still possible to confuse why addition and multiplication has the same result viz; 2 + 2 is 4 and 2 * 2 is also 4. See the enclosed ppt to see how the local moneylender confuses the poor – i made the ppt at a financial literacy seminar and believe me – “everyone hated it “ what is he saying” we say good things about ourselves in seminar ..... While the first job for me in a poor focused financial programme is to get them hold the pencil and write their name.... this is the lesson for an SHG to address !

Friday, August 10, 2012

The grand papa of microFinance - oh la la !

The grand papa of microfinance – ohh la la !

I had an occasion of being a part of the Financial inclusion conclave “ the first mile walk to Financial inclusion” organised by sadhan at New Delhi on 7-8 Aug 2012 at New Delhi . The title was very apt and many speakers including the RBI, Deputy Governor commented on the creativeness of the title . The event however, never showcased much of it; with topic like microfinance regulation and SHG federations etc. the beauty of the meet however, was the large participation of the SHG members, who were panellists; we had an exclusive session with them moderated by a CEO of Development Support Team, Pune. Though many complained about the banks not giving credit, most of the clients spoke about the savings balances they maintain and the other benefits that accrued due to their being a part of SHG.

Well, my purpose of writing this piece is to inform about the great dampener session which was the penultimate one on microfinance regulation with Mythili Bhusurmath in the chair, Umarji, Anuraj jain of DFS and the grand dad of microfinance. While everyone spoke the current bill and the good things it can do; but, the grand dad had only one agenda – “blast the AP govt”. He went off at a tangent not covering the bill but castigating the AP govt , telling everyone that they should be tried in a court. It was a virtual diatribe, stating they should be behind bars etc etc, especially when nobody was there from the AP govt to defend or state their point of view. It was at the end that the Chair asked the grand dad to stick to the topic on microfinance regulation and the present bill; for which the grand dad commented i wanted the word microfinance vandalism to be mentioned in the bill; and it be should a part of the microfinance lingo in the future. For a godfather who was once prudent, creative and propped up by NABARD in late 1980’s and then RBI and Government, now seems to make a joke of himself! I wish i posed these Q’s for him

1.      Did the godfather NOT foresee the risks of business, including the risks from external sources, even when perceives it this away.
2.      Did he believe that all the poor in the country live in AP? Was AP the only state where poverty existed; what prompted them to stay away from states that needed these services?
3.      Was he not aware of the microfinance crowding that was happening in AP? Was he not aware of the perils of overcrowding?
4.      What happened to his due diligence abilities of the business side?
5.      If as an industry, why did not learn from the earlier lessons when the first signs were out in 2006?
6.      Was their Code of conduct drafted for mere printing and lip service during conferences? Why was not it put in place to avoid such mishaps?
7.      If the grand pa thought that other mFIs where responsible (which he keeps repeating) not him and his company, why were they not restrained by the association?
8.      If the case is subjudice; cannot the grandpa wait for the final outcome? RBI had only recently filed its affidavit on jurisdictional issue and that too for NBFC which it regulates?
9.      If the RBI regulation was weak  for NBFC ( grand pa has a NBFC); why did not tell this to RBI ?
10.  What happened to client level trust which his mFI had built, and why did the client ditch him?-  i ask this because i had heard him reply to a Q in previous conference meeting at Gujarat Govt in 2008; where a participant asked about mass default by mFI client in Anand, Gujarat. The grand dad’s reply was “ we built trust with clients and they don’t default en-mass    
11.  The AP Act states not more than 2 loans to a client; if it’s more they reserve it, while mFI target the same segment, overcrowd and there are instances of 5-9 loans to one family – does grandpa’s NBFC do a KYC and realize that the client has already got an outstanding 2-4 loans and his loan is the n th, could he not avoid them ?. Did he purposely plunge his fingers into fire and now blaming the fire for it ?

In all his monologue not a word about the client, except stating that “Now the 92 lakh poor families in AP are in debt with money lender at much higher rates” !!  So clients are quoted at their convenience. All request are made for relaxing that, allow this , allow that etc- in short at institution focused and see what they are doing. Well institutions are means to an end and not an end in itself. Institutional survival is not important, which should be determined by markets and its users, it has to be client interest which is paramount.   

Well, the good thing about the earlier part of the conference was it had a lot of SHG members, mFI clients were absent by their presence. Invariably every SHG member, who spoke ( and some did sing)  spoke about savings , but most of the panellists were keen about the credit not adequately following.

After the tirade  by the grandpa - i left the conference in a huch, with a very bad headache...yes literally !    

Now i am inclined to "Stand for something or you'll fall for everything".....

Wednesday, March 14, 2012

The little known effect of Bank Rate change!

On 13 Feb 2012, what did NOT appear to be a tectonic shift in the financial sector was the sudden spurt in bank rates by the Central Bank, perhaps unknown and unheard in the history. The Reserve Bank of India decided to change the Bank Rate, realigning it with the Marginal Standing Facility (MSF) rate. The upward shift of Bank Rate to 9.5 % was gigantic in real terms; as the same was kept unchanged at 6 % since April 2003. Perhaps such colossal leaps are unheard of in the history of the Central Bank and not many questions were asked by the alert media or finance experts. But, RBI just called it a “technical adjustment”, however, no such technical alteration was ever made in the bank’s history even when growth rates plummeted in the past or when inflation consistently touched double digits a few years back.  Perhaps, we are in an era of rates galore by the Central Bank; a base rate which could provoke clients; MSF rate, repo and reverse repo rates which could incite banker interests by spurring or draining liquidity. Then, has the RBI’s bank rates becomes innocuous now? With monetary policy signaling done through modulations in the reverse repo rate and the repo rates, Bank Rate now merely serve as penal rates for shortfalls in meeting reserve requirements for banks, or serve as reference rate for indexation purposes. Then, why this facade of rates including Bank Rate? Well it permits to obfuscate more than it reveals...  

With high bank rates, it could be the less alert Cooperative Banks that could face trouble as these institutions often unknowingly transgress the required reserve requirements, attracting penalties. While most of the other recent policy shifts by the Central Bank has enabled greater comfort for the beleaguered commercial banks, be it relaxation in prudential norms post the sectoral crisis, or the RBI gift by cut in CRR or the revised and magnified version of priority sector which could now include bank's credit to NBFCs or securitized loans as Priority Sector. But, the real bonanza for the Commercial Banks is the hidden one, that’s by defaulting in priority sector and parking it Rural Infrastructure Development Fund (RIDF) with NABARD, which fetches them the bank rate. Well no retailing headaches, no other transaction costs and no risk and an assured payment of a now attractive Bank rate.  
Well, the commercial banks including the foreign banks who are on a level playing field as regards the priority sector targets are concerned seemed to have really saved their skin. But, would the rural sector and development in hinterlands suffer? Would the credit absorption capacities stagnate with no supportive infrastructure being added on, well the obvious answer looks a certain yes !

Since 1995-96, the RIDF investments not only significantly addressed the eroding state in agriculture capital formation in the public sphere, but also brought about a significant change in upgrading the infrastructure in rural areas.  Economists and rural development experts have unequivocally exhorted a direct correlation between the index of infrastructure development and rural development. The RIDF manned by NABARD had made significant strides in fairly building the near absent rural infrastructure, which now serves as the lifeline in the rural hinterlands. While the expert’s assessments have suggested the need for exploring more and sustainable and cost effective resources for this infrastructure building process, the recent Bank rate changes could make it a costlier resource for the state government. In fact such high cost resource could push state governments away from accessing this resource which could deter the efforts at building primary and social infrastructure units in the hinterlands. And in hindsight, one sees that an innocuous rate like the present emasculated Bank Rate could do more harm for the hinterlands rather than help the cause.

Works at NABARD for poor HH / was Research Affiliate at CDS, Tvm / was Visiting Faculty on microFinance for MBA students NMIMS, Mumbai.