Our own Tahrir Squares

The turmoil in Egypt is a lesson for dictatorships and autocracies in the Arab world, their moments of glory are coming to an end. We should wish the citizens of Egypt good luck in their quest for establishing a democratic polity and a free society.

Is there a lesson for established and vibrant democracies like India whose people are free but their aspirations are yet to be realized. Aspirations which are basic and fundamental to be called a civilized and mature democracy.

The Indian is frustrated with the type of democracy we have created. Frustrated that the powers that be are subverting the democratic institutions for personal gains. All the three branches of governance are compromised with serious issues relating to their integrity. The private enterprise is not to be left out of the equation their role in the current crisis is unmistakable.

There is a former Supreme Court chief justice being accused of
inaction and nepotism. A cabinet minister has made an ass of the entire system selling precious spectrum at whatever price he decided. Another minister and his cohorts ran a national sports body like their personal fiefdom and milked money. There are many bureaucrats being caught with crores of rupees during raids conducted by the CBI. All of us are aware of these instances and I am sure there are hundreds more unearthed cases across the country.

Whilst corruption has been around since long the scale and blatancy of it is worrying. Scam after scam is having a demoralizing effect on the citizens; there is a loss of trust on all three branches of governance. The question is will we ever become a “developed country” with the type of system we have created.

Mechanisms to punish the erring politician, bureaucrat exist but the credibility of the institutions that are required to do that is questionable. How many of us believe that the CBI is truly independent?

It is not easy to change the system but we need to do it, the way we handle the Spectrum, CWG and other high profile corruption cases will determine our intent towards establishing a system that is feared by folks who want to subvert it.

I think India is a cross roads and the government should be seize this opportunity to correct the deviant system, else all of us need to walk to our own “tahrir squares” in our cities, towns and villages to force the issue.

Micro Finance - New begining needed

The story of MFIs in India is turning out be case of killing the goose that laid the golden egg. Some of the founders of these MFIs have become heroes for their fight to bring in inclusive growth etc. They have been lauded in international media and honored. Their stated objective was to make these organizations community owned. Alas they are turning out be greedy business men in sheep’s clothing. The unraveling of the industry due to farmer’s suicide in Andhra Pradesh seems to spell trouble for at least some of them.

A host of governance related issues are coming out of the cupboards of these organizations. Some of them have used complex structures to rob the poor women shareholders of their wealth. Some of them like SKS started with noble intentions but once the industry picked momentum set aside the beneficiaries’ interests for commercial gains. Overall a weak regulatory regime helped these MFIs to subvert the system. They milked 26% and above interest rates from the poor.

Look at this, the Promoter of Share Micro fin has taken home 7.4 Cr as compensation for Fy10. This is much larger than the compensation of CEO of any commercial bank. This money if from the poor, is it morally right?

There is enough analysis on the failings of the MFIs, having said that it is true that these organizations have reached out to the poor and needy in the hinterlands of the country and provided loans. They filled in the gap that could not be bridged by the public and private sector banks. These organizations were not keen to serve this segment of the population due to the inherent risks of operations. For that they deserve to be acknowledged.

The Malegam committee has come out with some recommendations there is an ongoing debate on the recommendations, one should expect positive outcomes from the debate.

Despite the shortcomings I believe that MFIs under a strict regulatory regime and who operate with the basic intent of community ownership are needed and government should help stabilize the industry.

There is also a need for the MFIs to reinvent themselves and venture out into areas like insurance, loans for health care, crop loans etc. There is enough scope for MFIs to partner with rural India.

I was in my village this week and met a poor lady who came over to my house with a bunch of medical reports, an MRI with medical analysis stating that her boy had seizures and needs to be under medical care for the next 2 years, expense Rs 2500/month. She told me that she has borrowed money for the initial treatment and diagnosis at 40% interest rates from local lenders. This story can be found in many places across the country. Where do these families go for treatment, govt health services are erratic and unreliable. There is an opportunity for MFIs here, they can finance health care, only if they completely understand the needs and abilities of the clientele they are serving. Swanky offices and IPOs mean MFIs in India have lost their way.