Worst over for MFIs?

reported for this story by my colleague atmadip on how the credit taps might be opening up again for the mfis. which is good for them. coz the last few months have seen mfi loan portfolios shrink as bank lending dried up.

At Chennai-headquartered Equitas, the asset base is down from 950 crore to about 660 crore since March this year. Or take Ujjivan Microfinance in the east. Its loan portfolio has fallen from 620 crore to 590 crore during the same period. Satin Microfinance, which lends in the north, has seen its loan book reduce from 230 crore to 195 crore, so far this financial year. “We are seeing that portfolio of most MFIs has shrunk substantially in the last one year,” says Alok Misra, CEO of M-Cril, which rates the portfolios of MFIs.

More on Shashi Rajagopalan

Your question was on how to revive PACs. We have to make them thrift-oriented where every member must save x rupees every month instead of waiting for banks to refinance or for Nabard to step in. That may continue but that cannot be a long-term plan. The long-term plan has to be your own funding. When you have thrift in an organisation, not only do you have a stronger co-op, but wealth retention also takes place at the local level. The profits of that enterprise stay at the local level. Your own savings stay with you. They get invested locally. Plus the profits from the entire enterprise also stay locally — the profits of any third party leave the area.

And the fact that a large number of people have access to credit on a regular basis means there is purchasing power in the hands of a large number of people at the large, contiguous area year after year. You automatically have a large, domestic, service sector emerging which is sustainable because it is not falsely supported from outside. And almost everywhere we see, we see liquor, some entertainment, flour mill, tea shops, workshops, mason, and transport coming in first into the village. And wherever you have good co-ops, sooner or later, you see the housing going up in the area.

And that is a story by itself. It has not been reported anywhere so far. But, my goodness, look what we can do. Instead of going on crying that agriculture cannot support so many people.

I uploaded the complete transcript of my interview with Shashi Rajagopalan, she of the co-operatives fame, to the et website yesterday. Take a look. 

the first six years of nrega: an interview with reetika khera

economist and iit delhi professor reetika khera is out with a new, edited volume on the first six years of nrega. and given that i am interested in figuring the myriad ways in which india — politicians, state governments, the centre, rich and poor farmers, babus, what have you — is responding to nrega, i mailed her a bunch of questions.

for instance, half the country says nrega is responsible for wage inflation. votaries of nrega say it has empowered the poor. and then, you look at the stats and realise that nrega is nowhere near offering the 100 days of work per household that it guarentees. in 2009-10, for instance, it offered about 50 days. how can 50 days of employment in a year foster empowerment, engender wage inflation?

here is what khera had to say:

You say that 53 days of NREGA employment is too little. In a sense, I agree because I suspect that the actual demand is much higher. On the other hand, 53 days of employment – in one’s own village, at the minimum wage – means something for a poor family. In Bihar in 2008, labourers who were getting 10-20 days of NREGA employment told us that it had made a big difference in their lives.  You may wonder how so little can matter so much. That’s because the alternatives for NREGA workers are very unattractive. For instance, migrating to work in brick kilns, or as agricultural labour, often to another state, without proper shelter for your family, captive in the hands of the “thekedar” who takes you there for 2-3 months at a stretch. On the other hand, if 10-20 days of work at Rs 100 per day is available locally, labourers can combine it with work on their own lands or even as poorly paid agricultural labourers locally and stay with their families.

the rest of the interview here. 

fixing india’s agri crisis. option one. turn to conservation agriculture.

after the stories on dryland agriculture and the crisis in indian agricultural soils, there is this…

It’s incontrovertible that Indian agriculture needs an overhaul. Yields are plateauing. Agricultural soils are weakening. Groundwater levels are collapsing. Farmers are leading lives of increasing desperation. The big question is: how do we fix agriculture? Does the answer lie in genetically modified crops? Or, perhaps, in organic farming? More balanced fertilisation? According to I P Abrol, director, Centre for Advancement of Sustainable Agriculture (CASA), and chairman of the Working Group providing inputs to the 12th plan on natural resource management and rainfed farming, the answer lies in conservation agriculture. A new approach towards agriculture where the emphasis is on protecting the farmer’s natural resources – not taking them for granted.

take a look. i am not a convert. conservation agriculture still sounds like the current approach with a bit of mulch thrown in. will have to read up more on this sometime. that apart, in the weeks ahead, this theme — on the different thoughts/ideas on how to revive indian agriculture — needs to be developed further.

India’s soil crisis

In his fields, Badhia Naval Singh , a farmer tilling 8 bighas of land in the Bagli tehsil in Madhya Pradesh, has been seeing something strange for a while now. Earlier, if he pulled out a tuft of grass, he would see earthworms . “Ab woh dikhna bandh ho gaye hain (they don’t show up any longer),” says the 45-year old .

Also, he says, when he ploughed earlier, the soil would break into soft crumbs and fall along the long furrows the plough left behind. Now, the soil is harder and the plough uproots a succession of large clods – dheplas, in local parlance – from the earth. The changing nature of soils – for the worse – is a refrain with farmers in these parts, even across the country.

Ishwar Lal of Pandutaki village nearby does not see as many birds or frogs around his fields as before. Near Bhopal, farmers say traditional vegetable crops do not grow in their fields any longer. Across the country, farmers say yields drop if they don’t add more fertiliser every year. These anecdotes suggest dramatic changes in Indian soils in about 40 years.
these are changes that call rachel carson’s silent spring and the vast dust storms, so well described by donald worster in dust bowl, that swept the US during the depression years to mind. across the country, farmers are categorical that their lands are changing. in this story, i tried to gauge whether these anecdotal reports were valid. based on what field samples collected by the indian research establishment tell us, the farmers are right — nutrient deficiencies are widespread, stocks of organic carbon (humus) are low, resulting in soils’ ability to absorb water falling, erosion rising, and numbers of soil fauna falling.
the print edition had a set of graphs that are integral to this story. am appending a link to the pdf of the story. do take a look at that as well. ETD_2011_7_12_17 india’s soil crisis

on the draft bill that seeks to set microfinance right

With the Finance Ministry completing its draft Microfinance Institutions (Development and Regulation) Bill, another large piece of the puzzle on how to regulate Microfinance Institutions has fallen into place.

It has been a tough puzzle to crack. In the beginning of last year, when complaints about women being pushed into debt traps were gathering pace, the RBI and the FinMin were flummoxed by the diverse array of microfinance providers – NBFC-MFIs, co-operatives, non-profits, trusts – all answering to different regulations. The business itself, built around multiple, small transactions in farflung areas, made it hard to verify claims about collection methods and interest rates.

Today, looking at the draft Bill, it is evident that the FinMin has managed to find a way out of some of these perplexities.

needless to say, the bill is not perfect. but, then again, bills rarely can be in a rambunctious democracy given the need to accommodate diverse viewpoints. further, it has just been opened for comments. so, now to see how it evolves from here on. for now, the main thing is, a regulatory regime for the MFIs is gradually taking shape. the journey so far, here, here and here.