Microfinance is an interesting concept. You lend small risk-bearing money to those at the bottom of the pyramid, less privileged, for whom commercial banks are a no-no; you charge them at varying interest rates (ranging from 150% higher than the prime lending rate all the way to almost 50% lower); and then you wait - wait in the anticipation that these less privileged people will generate a higher income by which they can repay their EMIs. And this works. And it’s been working for centuries (the concept of “sahukars” or village money lenders is not a new one).
2006 Nobel Peace Prize winner, Mohammad Yunus in one of his speeches said that he targeted those people who were rejected by other banks, and decided to make them Grameen’s customers. If you had no assets, no guaranteer, no or very little income, only then would you qualify as a potential customer. An amazing concept, built on the premise of trust. And that’s the thing about microfinance. “Trust” is a highly valued asset in itself. An asset, which doesn’t depreciate, but only appreciates with time.
But there are a few loopholes in this space. I’ve found that a majority of the loan applications we have received so far is for working capital or short term. Someone’s sister is getting married, or someone needs an eye operation, or someone needs to pay daily bills - so he or she takes a small loan. The dire need for money is a frustrating one, and the pressure to repay no matter what the interest - or else be ostracized from the community - is highly strong. When the time comes to shed those monthly EMIs, panic strikes and the next best solution is refinancing. So by the second or third month, we have already woven ourselves into a cobweb of high interest debt and getting out is a struggle.
Untying from this requires a stronger force. Promoting income-generation could be one of them, but this too is contentious. For those in the BOP segment looking to start a new business, a self-help group, or co-operative, microfinancing provides access to money, but to channel this money in a productive manner ie to run a successful profit-making business requires much more. It requires business acumen, venture support, access to training, access to markets. Only 2 out of every 100 new business ideas are successful, and this statistic shines even more brightly in the rural space.
I think the future of microfinance does not lie solely in credit, but instead in a more holistic approach. MFIs need to look beyond and start giving incubation, training and network support. What we need are rural business consultancies, rural financial advisors. Why cant we have a McKinsey, Harvard, or Facebook but for the rural villager? This is not impossible. Granted, it requires a deeper understanding of rural dynamics between the social and political forces existing in the area. And granted, there are practical teething problems. But in order to raise income-levels and make individuals self-dependent, a lot more is needed than access to money. Besides, how will we know unless we try?
Monday, November 10, 2008
ON HAPPINESS
A few thoughts have occupied my mind lately, thoughts which have offered a contrarion logic, thoughts about happiness and its relationship with progress.
The very foundations of human life, such as birth and death, are based on simple principles. We are born from the start of a single breath, and we die from the mere stopping of it. As simple as that. Similarly, I believe that Happiness, is most often found in simple things - in the innocent smile of an infant child, the fresh aroma of home cooked food, the sound of gentle ripples in a pond. Hence we, humans, are essentially simple creatures already provided with the basic foundational tools to find happiness.
Based on this logic, one would think that the quest for happiness is an easy one - a journey, which should only involve understanding and “appreciating” the simple structure on which our existence resides. But if the existence of our life is based on such simple notions, and if happiness can be obtained from simplicity, then shouldn’t we all be bustling with joy? And if in fact we can claim that the simplicity of life has caused us to be happy, and hence the entire world is bursting with happiness, then why do we still have brothers killing brothers, or marriages falling apart, or countries invading other countries - all causes or effects of an unhappy world?
You might be wondering where I’m going with this. And what this has to do with rural development. Here’s a story. I was in Cuddalore recently, visiting an orphanage for tsunami victims. When I went back the next day, I decided to go back with some chocolates and candy for all the children. The kids were thrilled and by the time I went through Round 2, they were completely ecstatic. However, one young girl sat by herself, clutching on to her chocolate. When I came around and offered her another piece, she looked up, smiled and politely refused – she said one for her was enough. What came next left me completely stumped. She said she didn’t want more because she was worried that if she kept enjoying the chocolate today, then what would happen tomorrow when I would leave and there would be no more of it? In the superficiality of it all, this little girl had figured it out! She knew that her happiness lay in enjoying what she had, and her wanting more would only take that away from her.
The problem is that while our existence is a simpe being, our culture, our history, and our thoughts are not. They are in fact the complete opposite – complex, multi-layered institutions. Unfortunately, we are conditioned to shoulder these complexities, and as a result we corrode the simple establishment on which our happiness lies. One of these complexities is also the constant need for more. Economic progress is great for a country. But as our country progresses, and its benefits trickle down to villages and small towns, people’s wants and needs will also keep rising, The simple foundation on which we were born and will die will only get burdened with more.
So I wonder, then, how happy we will our future actually be? Will we break away from the complex traps of life and discover a simpler truth? Or will we build an even more complex cobweb of thoughts and needs? Will we be able to carry the weight of our unforeseen unhappiness, or will we be like the young girl, who basks in the glory of her simple, yet happy, untainted existence?
The very foundations of human life, such as birth and death, are based on simple principles. We are born from the start of a single breath, and we die from the mere stopping of it. As simple as that. Similarly, I believe that Happiness, is most often found in simple things - in the innocent smile of an infant child, the fresh aroma of home cooked food, the sound of gentle ripples in a pond. Hence we, humans, are essentially simple creatures already provided with the basic foundational tools to find happiness.
Based on this logic, one would think that the quest for happiness is an easy one - a journey, which should only involve understanding and “appreciating” the simple structure on which our existence resides. But if the existence of our life is based on such simple notions, and if happiness can be obtained from simplicity, then shouldn’t we all be bustling with joy? And if in fact we can claim that the simplicity of life has caused us to be happy, and hence the entire world is bursting with happiness, then why do we still have brothers killing brothers, or marriages falling apart, or countries invading other countries - all causes or effects of an unhappy world?
You might be wondering where I’m going with this. And what this has to do with rural development. Here’s a story. I was in Cuddalore recently, visiting an orphanage for tsunami victims. When I went back the next day, I decided to go back with some chocolates and candy for all the children. The kids were thrilled and by the time I went through Round 2, they were completely ecstatic. However, one young girl sat by herself, clutching on to her chocolate. When I came around and offered her another piece, she looked up, smiled and politely refused – she said one for her was enough. What came next left me completely stumped. She said she didn’t want more because she was worried that if she kept enjoying the chocolate today, then what would happen tomorrow when I would leave and there would be no more of it? In the superficiality of it all, this little girl had figured it out! She knew that her happiness lay in enjoying what she had, and her wanting more would only take that away from her.
The problem is that while our existence is a simpe being, our culture, our history, and our thoughts are not. They are in fact the complete opposite – complex, multi-layered institutions. Unfortunately, we are conditioned to shoulder these complexities, and as a result we corrode the simple establishment on which our happiness lies. One of these complexities is also the constant need for more. Economic progress is great for a country. But as our country progresses, and its benefits trickle down to villages and small towns, people’s wants and needs will also keep rising, The simple foundation on which we were born and will die will only get burdened with more.
So I wonder, then, how happy we will our future actually be? Will we break away from the complex traps of life and discover a simpler truth? Or will we build an even more complex cobweb of thoughts and needs? Will we be able to carry the weight of our unforeseen unhappiness, or will we be like the young girl, who basks in the glory of her simple, yet happy, untainted existence?
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