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Tuesday, June 25, 2013

The journey from Uphaar to Uttrakhand..What Next? Many more disasters waiting to happen


As we witness the horror in Uttrakhand we all will like to understand what we learnt from this great tragedy or whether at all we have learnt anything from it? A week after the tragedy exactly how many people died in the catastrophe is still a puzzle; from a figure of 882 to 10000 anything is possible. Isn’t it’s a farce or probably it’s more than that. How many people went into the state of Uttrakhand ,how many were out there in the holy city of Kedarnath , how many more have been perished and forgotten forever in the nearby areas where silt thick by several meters have taken everything inside it and no one ever will come to know what happened in those remote areas. Yes it’s sad but true that in 21st century our govt’s don’t have any such databases or mechanism to keep that information.

But now the question which comes before us is whether this could have been averted or whether it could have been dealt in a better manner, the answer to both these questions is a big YES and it has been discussed in detail in various blogs and news across the country as how Uttrakhand govt. kept all rules aside to pursue a path of ecological disaster.  From small disasters of local nature like we saw in Uphaar fire accident or many similar accidents where no preparations were there to prevent a fire accident to what we saw in Uttrakhand we seems to be ruled by governments which seems to be working hard not to learn from mistakes.

TIRUPATI

Coming down to my own state of AP to the temple town of Tirupati the scenario is not much different. What happened in Kedarnath may happen in our own holy town of Tirupati. The disaster here may not be so much as from rains but what if a major fire breaks in the temple town. How well prepared is the town for such an eventuality? A peep into the audit report (CAG Report AP year ended March 2012) for the temple down preparedness on the fire safety leaves you down with horror.

 “The temple town of Tirupati (a pilgrim center) has a population of 6 lakh and a floating population of about one lakh per day. Heavy congestion in public places like bus terminals and railway stations, etc. and the increasing number of multistoried hotels pose the risk of fire accidents. However, there was only one fire station at Tirupati covering urban, rural and four surrounding mandals, as against the requirement of 12 fire stations as per SFAC norms. Government replied (November 2012) that the Tirumala Tirupati Devasthanam (TTD) was requested (September 2012) for funding the establishment of five new fire stations at Tirupati and Tirumala.”

 Yes you read it right “ONE” fire station at Tirupati.I am sure the situation of other temple towns in the country will not be very different.

Major Metros in India – Hyderabad

What about the situation of major cities in the country? Again the picture is grim, in words of the audit report (CAG Report AP year ended March 2012). “For effective functioning of the Department, it is imperative to have a comprehensive database containing the details relating to area-wise distribution of population, service area villages and houses with category of premises (like hazardous/non-hazardous), fire stations and their location, geographical mapping of distances between places, short/traffic free routes, etc. within the jurisdiction of a fire station along with the water sources in the vicinity. Audit scrutiny revealed that such a database was not maintained by the DFOs in any of the sampled districts. Further, the Department had not developed any Standard Operating Procedures for combating fire in high rise buildings, earthquakes and other natural disasters.”

 
How on earth will they manage a disaster if it happens if they do not have these details? And till now we are just discussing fire and rains. It sends chill down my spine when I think about a major catastrophe like a nuclear or a biological disaster and how will we deal with it if we can’t even do a proper firefighting.

Situation across State - AP

By now you must have accepted the fate; the situation is as grim across state. As per CAG report SFAC (Standing Fire Advisory Council) recommended a scale of one fire station for 10 sq km radius for towns and one for 50 sq km radius in rural/open areas. As per this norm, the requirement of fire stations in Andhra Pradesh would work out to 5,502.

 However the audit(CAG Report AP year ended March 2012) reveals the following

There were only 253 fire stations (shortfall: 95 per cent) in the State to cover an area of 2.75 lakh sq km10. While the Government issued administrative sanction for six new fire stations (including one in AP Legislative Assembly) in May 2011, as of November 2012, these have not been set up due to non-provision of funds non-allotment of land.

·         Not a single fire station was set up during the period 2007-12.

·         Each fire station covers 16 to 144 sq km in urban areas against the norm of 10 sq km, and 144 to 1,480 sq km in rural areas against the norm of 50 sq km.

·         One fire station covers 3 lakh population on an average as against 50,000 population as per the SFAC norms.

·         875 Mandals (out of 1,12811) and 89 (out of 294) Assembly constituencies did not have a fire station as of November 2012.
 
·         The situation of hospitals , malls and other places of public gathering have the same kind of scary figures

Whom to blame

The govt has to be blamed for obvious reasons, from poor urban/rural planning to lack of funds, lack of will power, lack of coordination to insensitive and indifferent attitude of the government is clearly visible in all the facts laid before. But the blame does not end with the government we as general public also has little respect and understanding for a culture of disaster planning. From my own experience of working in a Hi-Tech industry some of the big names in the industry hardly have any kind of firefighting or disaster management plan. The place for the admin in these companies is filled with mediocre talent, people who have little understanding or appreciation for such a preparedness. Fire drills are conducted to fulfill legal obligations instead of actually preparing people for such a disaster, people walking of the normal routes instead of talking the emergency route are just some of the example of how seriously drills are taken. Most high rise building will have vehicles parked around the premises of building which will obstruct any kind of fire tender machine to work effectively in case of a fire event.

 
In a country where we jump lanes and drive in the opposite direction in a one way road I wonder what exactly we try to save, few ml of petrol or couple of minutes and at what cost? But here also can’t the govt do anything, when it can spend millions of tax payer amount to publish advertisements on their party leaders’ birth, death and congratulation messages, the govt could definitely spend some amount on creating awareness among the people. Countries in different part of the world have shown that people can be educated to understand the benefit of such programs. Hope creating awareness on the value of life isn’t that difficult if the government has the right intentions. Hope the govt start to learn something from this tragedy and comes out of its slumber.
 
 
By: Saurabh Sinha
Twitter: @saurabhsinha10
Email Id : saurabhsinha10@gmail.com
Mobile: 91-8008299172

Friday, June 21, 2013

Andhra Pradesh Microfinance Crisis And Its Aftermath


The microfinance industry served millions of poor in rural areas providing them small loans to earn their livelihood, but AP govt brought an ordinance in 2010 and it brought the industry to its knees. Its impact not only killed the industry in Andhra Pradesh but also had its impact felt across the MFI in India. As per a report by “M-CRIL Microfinance Review 2012: MFIs in a Regulated Environment” M-CRIL comes up with the financial and social analysis of this whole issue.

As people stopped making payments whole Microfinance industry came to a standing halt, the sentiment that people had was that the govt will not allow the industry to work anymore therefore no need to make payments, this problem was also abetted by political parties who asked people not to make payments anymore to MFI’s anymore.

From 62% per annum growth in terms of numbers of unique clients and 88% per annum in terms of portfolio over the five years 2005‐2010 – and around 32 million borrower accounts around October 2010, India was the largest MFI sector in the world. This number reduced and the number of effective clients served reduced by 35% by the end of year 2011 to 21 million account.

 As people stopped making payments on the one side on the other side Commercial institutions who were more than willing to provide finance to the MF industry pulled back their hands. During 2011‐12, the private sector banks were in full flight from the microfinance sector, dismayed at the prospect of huge losses on the AP portfolio. By end‐March 2012, institutional lending to MFIs had declined to Rs 15,136 crores ($2.97 billion), down by over 20% from the estimated peak of around Rs  18,000 crores in October 2010.

 
From a PAR of 0.67 in 2010 the PAR has increased to 29.5 % in the state of Andhra Pradesh, this makes it extremely risky portfolio which will act as a deterrent to any institutional lending to the sector. Operating efficiency has been adversely affected as portfolio management issues and client protection compliance expenses have increased OER. Cost per borrower has risen sharply as MFIs first pursued growth at all costs and now have to put considerable effort into client protection measures and follow up of repayments

 
As industry comes to a halt the ones who are most severely affected are the women in rural AP. The relation between women and MFI can be understood from the fact that the overwhelming majority (98%) of Grameen Bank in Bangladesh borrowers are women and similar is the case in India

 
By November 2012, one medium‐sized MFI that worked exclusively in the state has effectively been taken over by its lenders through the conversion of a significant part of their debt into equity and some of the larger MFIs have negotiated a six‐year restructuring of their debt with their major lenders. Elsewhere, the shrinking portfolios some MFIs (in the absence of bank funding) have caused operational problems and led to the take‐over of at least three MFI managements by investors. More acquisitions of this type are likely to occur in the near future.

 
All microfinance stakeholders, whether within or outside Andhra Pradesh now await the passage of
“The Micro Finance Institutions (Development and Regulation) Bill, 2012” tabled in the national Parliament on 29 May 2012. However the bill is stuck in parliament and with the central govt unable to come out of the firefighting mode due to spate of corruption scams by its ministers and therefore has been unable to get this bill passed.  

In the meantime, the Government of Andhra Pradesh continues to challenge the constitutional validity of the bill on the grounds that in the Indian Constitution this despite the same party ruling at both center and the state. And if such a thing does happen it will be the end of road for the MFI in AP and those who will suffer will be millions of poor who will be denied a chance to earn their livelihood by their own efforts.


By: Saurabh Sinha
Twitter: @saurabhsinha10
Email Id : saurabhsinha10@gmail.com
Mobile: 8008299172


Microfinance: How AP govt Killed it .. An Detailed Analysis

What is Microfinance & How it all started?
It all started somewhere in Bangladesh when Muhammad Yunus during visits to the poorest households in the village of Jobra near Chittagong University, discovered that very small loans could make a disproportionate difference to a poor person. Traditional banks did not want to make tiny loans at reasonable interest to the poor due to high risk of default. But Yunus believed that, given the chance, the poor will repay the money and hence microcredit was a viable business models. In 2006 Yunus and Grameen Bank received the Nobel Peace Prize "for their efforts through microcredit to create economic and social development from below. Microfinance was able to do what none of the governments had been able to do that earlier, provide loans to the poorest of poor to earn their livelihood from their own savings and help them come out of the not‐so‐benevolent arms of moneylenders.
 
Microcredit in India and its journey in the state of Andhra Pradesh
What Yunus did in Bangladesh was something we in India also required to do to reach to the millions of people who were financially excluded from the formal financial system. From here microfinance made a beginning in India. In India AP was one of the states which took a lead on this form of finance for the poor and the industry flourished till brakes were put down on it in 2010.In 2010 AP govt brought an ordinance which changed the future of microfinance in India. There were several reasons why the govt brought such an ordinance but the knee jerk reaction to the ongoing crisis resulted in a totally breakdown of microfinance industry in Andhra and up to a certain degree had an impact on microfinance industry across India.
Reasons for the ordinance
  • While the industry flourished in those years it started getting into unfair practices ,excessive lending by MFIs in the state of Andhra Pradesh lead to over‐indebtedness which caused distress to low income microfinance borrowers
  • More than 200 poor, debt-ridden residents of Andhra Pradesh killed themselves in late 2010, according to media reports compiled by the State government
  • Coercive behavior by MFI staff in collecting from these over‐indebted borrowers suffering from the stress of keeping up with their repayment obligations
  • One woman drank pesticide and died a day after an SKS loan agent told her to prostitute her daughters to pay off her debt. She had been given Rs 1.5 lakh in loans but only made Rs 600 a week.
  • Originally developed as a non-profit effort to lift society's most downtrodden, microfinance increasingly became a for-profit enterprise that serves investors as well as the poor. As India's market leader, SKS has pioneered a business model that many others hoped to emulate.
AP Ordinance
As a result of hundreds of deaths the State Government of Andhra Pradesh passed a sweeping Ordinance governing all lending activities in the state by banks as well as non-bank finance with stipulations that no collateral may be taken, repayments must be monthly, nobody must have more than one loan outstanding, all financial services business must be carried out in government offices and the permission of government agencies must be taken before any loans can be taken. This wrote the death knell for Microfinance industry in AP and had its impact in the country.
The Impact of the AP govt Ordinance on Microfinance Industry
In its annual report “M-CRIL Microfinance Review 2012: MFIs in a Regulated Environment” M-CRIL comes up with the financial and social analysis of this whole issue. Following are some of the points being observed.
 
People Stopped making payments for loans
 
The industry plunged into crisis when clients in AP stopped payments .The AP Government’s ordinance on lending by MFIs made it virtually impossible for them to continue their operations in the state.
 
The unspoken message to clients was that MFIs would not be allowed to operate and, therefore, there was no need for them to repay their MFI loans.
 
Given the populist nature of (particularly) local level politics in India, this message became “spoken” when politicians actually went around the state with the message that MFI borrowers no longer had to repay their loans.
 
Discouraging borrowers from repaying their loans is an irresponsible act since it makes clients ineligible from receiving further loans and thereby disrupts their lives and economic activities even as it de-stabilizes the financial market. There can be problems in the functioning of any market; concern about such problems should lead to corrective actions and reforms, not to the destabilization and total shut down of whole segments of economic activity.
 
Growth of the sector has been undermined
While MFI operations continue to be a significant component of the financial system in the country and its contribution to financial inclusion continues to rival, if no longer exceed, that of the rural banking system, the efficacy of that contribution has been undermined by the crisis and its aftermath.

 
 
 
Portfolio of MFI’s based in AP got a huge setback making the industry unattractive and risky.
Analysis of portfolio quality data from M‐CRIL’s sample of 56 MFIs indicates that the MFIs in India as a group have amongst the worst portfolio quality ratios in the world. The sample average of PAR30 at 23.7% is exceeded by the L‐10 group (at 29.5%) – of whom 4 have their main operations in AP. This is in sharp contrast to the reported portfolio quality ratio of 0.67% for end‐March 2010.The figure also shows how the ordinance impacted other MFI across country where political interference resulted in losing confidence in the future of this industry.
Analysis of portfolio quality data from M‐CRIL’s sample of 56 MFIs indicates that the MFIs in India as a group have amongst the worst portfolio quality ratios in the world. The sample average of PAR30 at 23.7% is exceeded by the L‐10 group (at 29.5%) – of whom 4 have their main operations in AP. This is in sharp contrast to the reported portfolio quality ratio of 0.67% for end‐March 2010.The figure also shows how the ordinance impacted other MFI across country where political interference resulted in losing confidence in the future of this industry.
  • From a PAR of 0.67 in 2010 the PAR has increased to 29.5 % in the state of Andhra Pradesh, this makes it extremely risky portfolio which will act as a deterrent to any institutional lending to the sector
  • Operating efficiency has been adversely affected as portfolio management issues and client protection compliance expenses have increased OER
  • Cost per borrower has risen sharply as MFIs first pursued growth at all costs and now have to put considerable effort into client protection measures and follow up of repayments

 
Commercial banks pulled their hands out of MFI’s due to lack of Confidence in the sector

 It is apparent that the heavy handed October 2010 ordinance of the Government of Andhra Pradesh has resulted in a delinquency crisis of huge proportions. All banks and capital market participants have immediately stopped or reduced extending any funding to non-bank finance companies on a nationwide basis 
  • During 2011‐12, the private sector banks were in full flight from the microfinance sector, dismayed at the prospect of huge losses on the AP portfolio.
  • By end‐March 2012, institutional lending to MFIs had declined to Rs 15,136 crores ($2.97 billion), down by over 20% from the estimated peak of around Rs  18,000 crores in October 2010.    

 The resolution of the current crisis now awaits the restoration of confidence of the commercial banks and other investors in the microfinance industry 

Impact on Women
 

The relation between women and MFI can be understood from the fact that the overwhelming majority (98%) of Grameen’s borrowers are women. Women traditionally had less access to financial alternatives of ordinary credit lines and incomes. They were seen to have an inequitable share of power in household decision making. In fact the whole model of Microfinance revolves around women especially in rural areas and killing this source of finance means major unemployment in rural areas and talking away the opportunity from millions of rural women to earn their own livelihood and support the survival of their families.
With around 21 million borrower accounts the size of the microfinance sector more than matches’ significant parts of the Indian financial system in terms of the number of citizens affected a majority of them being women.

Future of MFI’s in Andhra Pradesh
 
A detailed report by “M-CRIL Microfinance Review 2012” shows the deep impact this crisis have taken on AP those MFIs that work extensively in Andhra Pradesh. By, November 2012, one medium‐sized MFI that worked exclusively in the state has effectively been taken over by its lenders through the conversion of a significant part of their debt into equity and some of the larger MFIs have negotiated a six‐year restructuring of their debt with their major lenders. Elsewhere, the shrinking portfolios some MFIs (in the absence of bank funding) have caused operational problems and led to the take‐over of at least three MFI managements by investors. More acquisitions of this type are likely to occur in the near future.
 
Future of Microfinance in India

Debate on the Dependency on commercial institutions

While this is an area of debate whether Indian Microfinance industry should be too dependent on commercial lending by financial institutions or should it follow the Grameen Bank model of Bangladesh. Unlike Indian model the Grameen model uses the deposits from the clients to finance their lending requirements 
 

The 1.5% savings orientation of Indian MFIs is clearly very low by global standards. The L‐10(top 10 MFI’s) – more visible and, therefore, more vulnerable – have a negligible savings ratio, down substantially from the 23.7% of the 2003 M‐CRIL sample. All Asian countries with flourishing microfinance sectors – Bangladesh, Indonesia and Philippines – have deposit ratios that account for substantial proportions of portfolio – see exhibit above. Also, the rural banking system in India undertakes all it’s lending from deposits (portfolio deposit ratios >100%).

 
Policy paralysis at the Center:

 
All microfinance stakeholders, whether within or outside Andhra Pradesh now await the passage of

“The Micro Finance Institutions (Development and Regulation) Bill, 2012” tabled in the national Parliament on 29 May 2012. It is generally thought that the bill has the following positive features

1 It specifies that the central bank, Reserve Bank of India, will be the regulator of MFIs

2 It provides for MFIs regulated by RBI to accept thrift from their borrowers – thus, no public deposits but the provision of a savings service to borrowers

3 It clearly removes microfinance from the ambit of state‐level money lending laws greatly reducing the risk of interference by state governments in the provision of financial services to low income families.

However the bill is stuck in parliament and with the central govt unable to come out of the firefighting mode due to spate of corruption scams by its ministers and therefore has been unable to get this bill passed. Hope the govt comes out of its policy paralysis to pass this bill in coming monsoon session.

In the meantime, the Government of Andhra Pradesh continues to challenge the constitutional validity of the bill on the grounds that in the Indian Constitution this despite the same party ruling at both center and the state. And if such a thing does happen it will be the end of road for the MFI in AP and those who will suffer will be millions of poor who will be denied a chance to earn their livelihood by their own efforts.
 

 
 
By: Saurabh Sinha
Twitter: @saurabhsinha10

 

Monday, June 17, 2013

हो रहा भारत निर्माण

बहुत हुआ भारत निर्माण , कर लो अब थोडा आराम  
मोदी का ना नाम लो , इतना हमपे छोड़ दो |
कितने हैं हमारे दावेदार कैसे समझोगे तुम यार  
उम्र बीती है तुम्हारी देख देख एक ही परिवार  
 
 
नव वर्षों तक ना काम किया , फिर कैसे निर्माण किया ?
निर्लज्ता को छोड़ दो , राज धर्म पे ज़ोर दो  
विस्फोट पे विस्फोट ,घोटाले पे घोटाले ,
नक्सलियों ने ना जाने कितने घर में मातम कर डाले 
पूँजी निकली देश से और दुश्मनों ने हैं डेरे डाले  
 बढती अर्थवयवस्था पे अब लग गए मंदी के ताले  
 
 
दाल में काला या काली दाल 
कौया चले यहाँ हंस की चाल 
जिनने लूटा देश को वही तय करें संसद की चाल ,
गरीब का क्या होगा भला यहाँ पे , सरकार हो रही है मालामाल
मची है होड़ लूटने की और कहतें हैं की हो रहा है भारत निर्माण ॥ 
 
 
आतंकी बने इस  देश में बहस का मुद्दा ,
जनता का कैसे होगा भला ,
खाली राजकोष और खाली तुम्हारा शब्दकोष ,
गुंडे बन गए हैं इस देश के बादशाह 
ना विवेक ना वाणी , अपनी ही सरकार मे किसी ने तुम्हारी ना मानी । 
ना क्रिया ना प्रतिक्रिया , मौन व्रत तुमने लिया 
इतना सब कुछ बीत गया पर मोहन तुम कुछ ना बोले ,
अब भी अपना मुख ना खोले ,
मोहन अब कुछ बोल दो , मौन वर्त को तोड़ दो  
 
शंखनाद अब हो गया है ,जनता सन्देश सुनती है ,
राजशाही अब ख़तम करो ,जनता आदेश सुनाती है  
 
 
वक़्त बदलने वाला है अब चाल बदलने वाली है ,
मेरी मानो मतवालों ये देश बदलने वाला है  
दुर्जन अब ना गर्जायेंगे ,युवायों से घबराएंगे  
सबने हिम्मत कर ली है , हम सबका ये नारा है ,
हर सांस लहू की हर बूँद ने दिया इंक़लाब का नारा है  
 
फिर से खेती लहराएगी , उम्मीदें फिर जग जायेंगी ,
देश की दशा फिर से shinning हो जाएँगी 
थोडा वक़्त अब और है , थोडा सब्र अब और है 
उम्मीदों के भारत में बस अब थोड़ी सी ही देर है