Kuldip Maity

Affordable housing loan disbursement may have turned into a contentious issue. On the one hand, there has been the issue of cutting down on source lending to NBFCs empowered to issue housing loans post IL&FS debacle and on the other, the issue of reaching out to the target audience.

As far as the first issue is concerned it must be understood that IL&FS has upped the issue of fund sourcing by all NBFCs irrespective of their engagement areas as well as the non-NBFC MFIs. The parent fund providers like banks and other FIs have chopped down on exposure due to an elevated risk perception and also because RBI has come down heavily on the entire credit market as a deterrent step against recurrence of issue thrown up by IL&FS.

However, as far as the issue of reaching out and creating access to the loan for the target segment is concerned it’s time MFIs were brought into the game. The rationale for allowing the MFIs to enter this segment would be to exploit their reach and network to ensure a greater degree of efficient disbursement to fulfill the underlying goal of the affordable housing loan.

There is a catch though. The ceiling on individual loan ticket applicable to an MFI is less than a lakh of rupees. The affordable housing loan interest subvention limit is capped at Rs 600,000/- per loan and the target beneficiaries are economically weaker section.

For a loan seeker to avail of the benefits, he or she has to first substantiate eligibility. If the claim is found to be true the access will open. The point here is that MFIs are the only channel who are in the know of their customers’ actual position and hence checking the veracity of the claim will not be just on the basis of papers. Disbursement through MFIs therefore will impart a second layer of authenticity to the disbursement and the cause.

The issue, in the next count, spills over into the eligibility of the MFIs themselves. To exploit them as another channel to disburse affordable housing loans will mean easing of disbursement curbs on their individual ticket size. This one actually is the actual point of contention. Due to various reasons RBI sticks to restricting the individual borrower’s loan access to a lakh of rupees from the second cycle.

With such a loan disbursement ceiling on MFIs the question that crops up is simple. The rationale for the creation of MFI channel lies in creating a route for the economically weaker section to come out of the vicious circle of deprivation and rise beyond their station through a process of funding and hand holding.

Now as we all know for most of the members of the target section, their residence is also the nerve center for their economic activities. And if this model must seek completion then all the above threads in the proposition lead to just one conceivable conclusion – the policy begs to be revisited for using MFIs as an effective channel for the affordable housing loan for optimum achievement of benefits for the target section.

One solution perhaps lies in allowing the MFIs to create another vertical for affordable housing loans with the attendant long term repayment cycles as are available in the cases of housing finance companies while retaining the JLG model in their existing business engagements.

This is a question that has been doing the rounds globally. However, in India the seeking of validation to this issue is comparatively of recent origin. We have mentioned in a previous blog that in Africa digital transaction caught on fast not because of an initiative taken by the governments concerned, but because of the local compulsions of citizens.

In Africa there were two issues that kept dogging the corporates and the citizens and also the governments. Given the remoteness and inaccessibility of a vast swath of the territory, corporates and the governments were foxed by the issue of how to pay wages without incurring a huge cost of carrying money in a secured way. For the citizens, the issue was how to protect cash in their hands from the thieves.

To solve this problem M-pesa was launched in Africa that caught on like wild fire for remittance, payment and micro credit. This was the model that later was emulated in India in different flavours to solve the huge dependence on cash for transaction and is being actively pushed for popular acceptance.

Now cash transaction is expensive in the hands of the government and it is accepted. Because it involves cost of paper, ink and printing, protecting the currency from counterfeiting and from fraudulent use, secured bulk transportation and hoarding. There is also the issue of black market. It is generally argued that cash based transactions tend to make illegal transactions easy. With transactions conducted through electronic mode all these costs can be reduced to a bearable level.

However, doing away with cash altogether is not easy. Even in the developed countries where electronic transaction is huge, cash is not entirely done away with. The degree of success of converting an economic transaction into a largely electronic based transaction mode depends directly on the degree of development and education. It’s also contingent on the spread of electronic communication as digital transaction is highly dependent on seamless network availability.

Where transaction volume is low, savings are at the margin and support infrastructure has yet to be accessible universally, converting people to generally accept electronic transaction mode is not only difficult it’s also almost impossible. In the African context adopt-ability was ruled by the lawlessness and need for security. The same is not true here. So conceiving a situation wherein all citizens will adopt electronic transaction is a feasible and necessary scenario but not in the immediate run. However, with the push from the government this will happen in the long run saving crores of rupees in the economy bringing gains to all the stakeholders.

The fact the initiative has started showing results is proven by the steady rise in small ticket transactions through the electronic routes. Debit card transactions are growing at a steady clip of 37.5 per cent according to RBI data in the October quarter in 2018-19. A bulk of which is accounted for by the small ticket transactions. This implies that even the people who were mainly dependent on the cash economy is getting into the target stream which has been the goal of the financial inclusion.

Similar growth is seen on the UPI platform with 482 million transactions clocked in October, 2018 against a measly 0.2 million in November, 2016. As we can see from the movement digital transaction is picking up at a respectable clip.

Though we have some way to go before we can say that digital economy has replaced cash economy, we may not be far off from the goal.

Globally use of digital technology to aid education is now an accepted proposition. With new tools like augmented reality and others the students now have direct access to the reality of their learning. They learn what they can see. However in the context of a developing economy like India the issue is different. Here, in this country, literacy is defined by the percentage of population who can both read and write with understanding of short simple statement on everyday life. Going by this definition the Ministry of Human Resource study tells us that the rate has gone up from 61 per cent in 2001 to 69.3 per cent in 2011. The dropout rate is also on wane.

With the government spend on education hovering around 4 per cent this situation has little scope of changing radically. There is a large-scale agreement that the definition of literacy may not necessarily imply a functional understanding of written document.

There are issues with the quality of teaching at the school level. Teachers handle far too many children together depriving the youngsters of individual attention. Then there is the issue of poverty. Parents prefer kids to stay home and help the parents out. All these things tend to shackle efforts to boost the spread of education. So those who stick it out come out literate with ability to read and write with a questionable functional use which is the direct outcome of the quality of teaching.

It is assumed that with the spread of access to digital technology the cost per use will also come down further and become more affordable. It is also assumed that with intensity of the technology turning more dense, its exploitation as an education tool would also be easier.

The advocates of digital technology deployment in education argue that with this the kids in the remote area will get to experience what they are learning with their own eyes. Continents will no longer just stay on a two dimensional map, life science will not remain on paper, even mathematics will turn meaningful.

The issue about education in India is that students, beyond economic compulsions, do not find what they are taught meaningful as they cannot, even by highly stretched imagination, absorb the application of their learning. For urban kids with multi dimensional exposure this issue is not so overbearing.

The roadblocks however are slightly daunting. Digital educational aid is already a reality in urban English medium school. But in urban schools using local language as medium of instruction, even if their students can afford the technology, it’s not yet a feasible option as there is a huge paucity of relevant content in the local languages. This deficit is really a clincher argument for the ‘nay sayers’. They are saying that it will take decades to develop academic content in the regional languages and by the time it is deployment ready the technology will change so much that it will turn irrelevant.

Net net there is no gain saying that digital technology is a great fillip in the field of education. India stands to gain hugely from its proper utilization as an aid to instruction in class. But we should also remember that critics also have a point and we need to address it before jumping in the bandwagon.