Kuldip Maity

There is no free lunch in this world. Even in charities there are costs. And then we all know that we tend not to appreciate a freebie as much as we would have had we been made to bear the cost.

Traditionally we are not used to thinking that social welfare may not be in conflict with a profit seeking operation. And someone believing that to a point of obsession may not be entirely faulted either. The instances of society feeling challenged by the operations of a specific company’s operations are far too many to be just wished off. But the guilt of a few cannot be held as evidence of crime against all corporates. Unfortunately, however, logic and evidence notwithstanding, the inclination to think to the contrary is far too strong in the minds of the people for the logic to win.

In the case of operations focused on finance the feeling is even more entrenched – specially in the cases of the companies operating in the rural areas. In this specific instance, public perception has been colored by the operations of unscrupulous money-lenders who have traditionally and for ages held the hapless poor in their ruthless clutches.

And this perception has indeed not been a particularly easy thing to contend with for microfinance operations. Microfinance was introduced and specific rules framed for their operations for the purpose of rural development with a focus on alleviation of poverty. The goal here is to create enterprise capacity at the grassroots levels at a sustainable level so that through creation of direct and indirect employment, the country gets to address the plague of poverty without direct intervention from the government agencies.

The premise on the basis of which the whole concept took off was the belief that the poor are the greatest entrepreneurs. It’s argued that the way the poor fight to survive every day of their life needs a great degree of innovativeness. Without the innovativeness the uncertainty of procuring the necessities of life on a daily basis cannot be met. A business operation is also about meeting challenges to survive, sustain and grow.

The premise that flowed from it was that circumstances make the poor to face challenges innovatively on a daily basis. Given the fact that they are used to the basis requirement of entrepreneurship, the remaining components for turning them into business persons are access to finance and training them into putting the funds accessed into productive use. They may require to be provided with literacy specific to their needs.

The trick was to innovate a structure that would be a one-stop shop for a) easy access to finance, b) monitoring the use of funds lent out, c) facilitating expansion of knowledge capacity at the grassroots, d) empowerment in its broadest sense of the term.

Experiments with delivering on these requirements through a multitude of agencies – regional rural banks, rural banks, cooperative banks, literacy missions, except for the last, all operating on cost plus basis – having failed to deliver the desired results, the microfinance model was pushed. The equation was simple. A cost plus model of delivery will not strain the government coffer and as a consequence the taxpayers’ purse and it will be a win win situation. The model that has evolved makes it, from the pure business point of view, a compulsion for the microfinance units to ensure that their customers productively use the borrowed funds. If they don’t they won’t be able to pay back and microfinance units would run up NPAs. So the system itself has built-in efficiency driver and deliverables need to be ensured to avoid closure.

“There is no free lunch” model therefore is not only win win, it’s also a sustainable model to create a solution to fight the curse of poverty. It’s here therefore like any many other properly crafted business policy environment profitability and social welfare shake hands.

There is a need and there is a compulsion. When it comes to the rural economy the compulsion is to survive and when it comes to the need, the rural economy needs access to fund. If we look at the report of the KPMG (January, 2018) the riddle stares at our face so starkly that the situation goes beyond dire.

The fact that even an astute student of finance tends to ignore is the extreme disparity between the access to finance of the urban and rural economies. Weighted against the contribution to GDP the rural economy has a disproportionately low access to lendable funds compared to the urban economy.

According to a KPMG report (January, 2018) rural India contributes 47 per cent to the GDP, while has a 10 per cent loan outstanding against Urban India’s figures of 53 per cent and 90 per cent respectively.

The paragraph above clearly brings to the fore the contradiction between the need and the access deficit to funds. One may wonder as to the feasibility of the statement that microfinance being the backbone of rural economy.

Though it’s true that the rural economy has a severe access deficit to organized sector fund, the segment wise distribution of fund supply clearly tilts the balance in favor of microfinance being the major source.

A study in the same survey mentioned at the beginning of this blog about the sources and their weightage in terms of North Eastern India’s self help groups’ sourcing of funds clearly points to the dependence of them on the microfinance industry. As a source of fund to them the microfinance industry accounts for an overwhelming 71 per cent, followed by regional rural banks at 13 per cent, commercial banks at 11 per cent and cooperative banks at a measly five per cent.

This clearly points to the fact that even within the gamut of availability it’s the microfinance that holds the sway. And there is a reason for that. If we seek the reason why the microfinance holds such an overwhelming weight as a source of fund for the self help groups the answer will be simple if we look at the way the industry operates.

Unlike the banks or similar institutions, the microfinance industry is an interventionist source of fund. If we look at the way the microfinance industry functions we will find them holding the hands of their customers, teaching them best use of funds as investments, structuring the business – in short, an active driver of financial literacy. In fact, the performance of a microfinance company is not measured just by their financials but also by their success in helping their clients in graduating into better economic station in life.

The ethos of microfinance lies in direct intervention at the grassroots for poverty alleviation through creation of easy access to funds to the cohort that cannot provide conventional collateral for obtaining loans from banks or similar institutions. Having provided the fund, the microfinance companies are tasked with ensuring the loan provided is put to profitable use so that the clients can repay the loans from their earning surplus. And then in the subsequent cycles they are solvent enough to expand their earning source from further loans.

Microfinance by creating enterprise capacity thus at the grassroots turns itself as the backbone of the rural economy, or more appropriately the backbone for sustainable development efforts.

Anguthhachaap. This term has over a period of time become synonymous with illiteracy. In the Hindi movies of those eras when nobody could even think that the Bombay filmdom would one day be referred to as Bollywood – an aspirational cloning of Hollywood – it was almost a regulation scene in which a jamindaar or a money lender would be shown forcing a person put his thumb impression on a deed that would someway lead to the slavery of the entire family of the unsuspecting poor illiterate man.

That what was an ink impression has in the digital age turned into an important tool to authenticate a person’s identity beyond reasonable doubt. In those days one needed an expert to match fingerprints and certify the authenticity. In these digital days, it just takes a few seconds to check the same with the person concerned putting his thumbs on a scanner that can be carried in a pocket.

Fitted to a smart phone and connected to a database thumb impression therefore is not just about a tool to allow an illiterate person to authenticate a transaction. It has moved beyond that into a realm that minimizes frauds with the help of biometrically authenticating a person’s identity.

This has had a far-reaching consequence for financial inclusion. For long illiteracy had stood as a roadblock to getting the citizenry bar none into organized financial market. There was also the problem of reaching out into a remote village with a traditional financial institutional branch. To validate every transaction that was done with thumb impression needed a trained personnel which of course was a challenge.

With the evolution of digital technology the whole task of authentication can now be done by anybody. All that it requires is a net connection, a smart phone and a small thumb scanner. All of these can be carried in a pocket. The net would connect the phone to a database storing thumb impressions. All that a financial representative would need to do is to scan a client’s thumb and transmit that to the database concerned through the phone and the job is done. Aadhar is meant to do just that. Help biometrically establish the authenticity of a person’s identity.

The point to note here is that the digital age has brought in a sea change in the facilities available to the financial sector. Specially the micro finance industry that works at the grassroots with customers many of whom may not have conventional documents or facilities to authenticate their identities got spared the pain of leaving perennially outside the boundary of the organized financial market. With biometry they are spared the crisis of identity as it were. Anguthhachaap is no longer synonymous to illiteracy.On the contrary, it stands for empowerment.

When the Gods needed to destroy the Mahishasura, they invoked a female power in the form Devi Durga.

In the entire history of civilization, almost without exception, the mightiest power has always been reposed in a female God. Take the example of Athena, the Greek Goddess. She is the Goddess of wisdom, courage, inspiration, civilization, law and justice, strategic warfare, mathematics, strength, strategy, the arts crafts and skill.

Strangely, if we, for a moment, pause to think about MaaDurga we find the deification of the same traits in the form of herself, her daughters MaaLakhshmi and MaaSaraswati. While she as the mighty warrior kills the invincible to save the world from doom, her children, specially the Goddess of prosperity and the Goddess of knowledge, keeps the world edified and in order through wisdom.

If we start connecting the dots without any bias we would find that all the evolved civilisations reposed their faith in the female power. The modern day science has also traced a reason for it. Studies conducted across various activities have returned results showing women have empirically done better than men in stabilizing a challenging situation or in times of crisis, by individual performance, women have shown to have better abilities coming out as a winner due to their endocrinilogical endowments.

Closer home we have ample examples of women challenging the notion of a mediocre nation. Remember Karman Malleswari who won an Olympic medal in 2000 Sydney Olympics -- a 100 year after Norman Pritchard won two medals in 1900 Paris Olympics. With Mary Kom, Phogot sisters, Hima Das, Deepa Karmakar, Deepika Kumari and others in the sports and in other fields proving every other moment their resilience and superiority.

In the case of development narrative we find the same stories getting repeated. In poverty alleviation therefore it has been a conscious decision to leverage the resilience, grit and enterprise of women in fight against poverty. The understanding here is that women look after the family even in the hardest of the adverse situation and keep it ticking. It takes a great deal of enterprise to survive in the face of great adversaries. If that be so, a little handholding would go a long way in creating a new India. This basic understanding and its implementation through microfinance has started bearing fruits specially given the priority the government has put on creation of women SHGs, and JLGs and also facilitating their funding by creation of the MUDRA.

While sports women like Deepika, Phogot sisters, Hima and Jhulon have shown that they are the flag bearers of the new India, a silent revolution is also happening in the hands of their sisters at the grassroot level. The Durgas of the new India are out there to annihilate the curse of poverty. It’s only a matter of time before the transformation becomes palpable.

On this note let me wish you all with Season’s greetings.