Where Angels Prey

Where Angels Prey is a novel by Ramesh S Arunachalam. Please refer to www.whereangelsprey.com for more information

Wednesday, October 26, 2011

MFI savings mobilisation: Should they get an okay for tapping into public deposits and low-income clients?

Ramesh S Arunachalam

MFIs should not garner deposits from low-income customers. The RBI, which will become the sole Indian microfinance regulator, also feels so—and there are a number of facts that support the apex bank’s view

There is an ongoing debate on whether MFIs (microfinance institutions) in India should be allowed to access savings from low-income people and/or access public deposits. While opinions range from a strong ‘yes’ to an absolute ‘no’, the debate has reached an emotional high with many stakeholders openly arguing for letting MFIs access savings of low-income people. However, a recent article in Mint suggests that (http://www.livemint.com/2011/10/18190834/RBI-against-letting-MFIs-colle.html), the RBI (Reserve Bank of India), which is to become the sole regulator of microfinance in India, has argued against letting MFIs garner savings from low-income people. It was a huge relief to read this, and without any doubt, the RBI is ‘spot on’ when it says that MFIs should not be permitted to access savings of low-income people.


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Monday, October 24, 2011

Has MFIN, one of the self-regulatory bodies in Indian microfinance, been accountable for its actions and statements?

Ramesh S Arunachalam
The MFIN enquiry initiated in February 2011 (on governance & transparency) is still not in the public domain. The MFIN-sponsored NCAER study, that suffers several serious shortcomings, makes one wonder whether MFIN can function as an objective association—without conflicts of interest—and as an effective self-regulatory body for Indian microfinance

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Sunday, October 23, 2011

Bordercrossing Books: “The Journey of Indian Micro-Finance”

October 22, 2011 in Andhra Pradesh Microfinance Crisis, Book Review | Tags: , , , , , |

Book Review by

Ramesh S. Arunachalam, 2011: The Journey of Indian Micro-Finance: Lessons for the Future. Chennai: Aapti Publications.

The microfinance crisis in India which broke out in fall 2010, first imperiling numerous borrowers and then an entire industry, is the most fundamental event in the world of microfinance since the Nobel Peace Prize in 2006. In hindsight, it may even turn out to be the defining moment of microfinance history – never before has the dark side of microfinance, and the vulnerability of the industry, been so brutally exposed to a global audience.

Naturally, these events have attracted a host of opinions and analyses ranging from simply blaming the Andhra government for bringing down a healthy industry, to accusing MFIs of having become worse than loan sharks. And yet, so far, we understand very little of why India’s vast microfinance sector went so far astray. Thankfully, people like Ramesh S. Arunachalam are out to change this.

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Friday, October 21, 2011

Trident Microfin is under a Corporate Debt Restructuring plan: How can Kotak Bank slap a legal notice on the microfinance institution?

Ramesh S Arunachalam
 
According to certain media reports, Kotak Bank has slapped a legal notice on Trident Microfin for a dishonoured cheque. But the microfinance institution is under a CDR plan. This is a peculiar case—and there are a number of legal issues and questions surrounding this move

In the last couple of days, we have had news releases that claimed that “Kotak Bank has slapped a legal notice on Trident” (Kotak Mahindra Bank slaps legal notice on Trident, 19 Oct, 2011, PTI ), which is part of a CDR (Corporate Debt Restructuring) plan. And we have had various stakeholders condemning the action already. Moneylife decided to look into the various (legal issues and questions) surrounding this peculiar happening where a company committed to a corporate debt restructuring (CDR) has been apparently sent a legal notice.


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Wednesday, October 19, 2011

MFIN-NCAER study: Here’s the proof that microfinance agents are thriving in Tamil Nadu

Ramesh S Arunachalam

The MFIN-sponsored NCAER study has acknowledged the role that microfinance agents are playing in places like Hyderabad and Jaipur. Curiously, Chennai does not find a mention in this study. Here’s some concrete evidence to the contrary

Yesterday (18th October), we had written on how microfinance agents have spread their tentacles far and wide across the country, and how they are breeding resentment against MFIs (See:MFIN-NCAER study unearths agents’ role in microfinance, but does not find these middlemen in Chennai). We had also written on how the MFIN-NCAER study acknowledges the presence of these middlemen, but the report has a number of loose ends.

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Tuesday, October 18, 2011

MFIN-NACER study unearths agents’ role in microfinance, but does not find these middlemen in Chennai

Ramesh S Arunachalam

Agents have spread their tentacles far and wide across the country, and they are breeding resentment against MFIs. The MFIN-NACER study acknowledges the presence of these middlemen, but the report has a number of loose ends

As the Ministry of Finance and the RBI (Reserve Bank of India) are trying to solve the Indian microfinance regulatory puzzle, there is further evidence on the use of agents in Indian microfinance. The question to be asked then is whether and how the proposed Microfinance Bill will prevent use of such middlemen in the future.

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Saturday, October 15, 2011

The National Rural Livelihood Mission (NRLM) should take charge of dry-land farming now

Ramesh S Arunachalam

For implementing the inclusive growth agenda, it is crucial to prop up agriculture, the soft underbelly of our economy. Here’s what can be done

Inclusive growth is an area that we have been talking about for a few years now, but integrating agriculture into the Indian economy has been rather difficult for many reasons. Agriculture continues to be the soft underbelly of the Indian economy and unless the millionsi  involved in Indian agriculture are enabled to participate meaningfully in the growth process of the country, inclusive growth will remain an elusive dream in India. Let us make no mistake about that!

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Thursday, October 13, 2011

The RBI and the Ministry of Finance should view the MFIN-sponsored NCAER study on small borrowings with a great deal of caution

Ramesh S Arunachalam

Can a study sponsored by MFIN, the association of for-profit NBFC MFIs and conducted by NCAER to enquire into the operation of MFIN’s own member-NBFC MFIs—on aspects such as multiple lending, over-indebtedness and coercive repayment—address various issues in a fair manner?

Yesterday (12th October), Moneylife had written on how the Union Minister for Rural Development, Jairam Ramesh had said that MFIs (microfinance institutions) are not any sort of panacea and how the findings of a NCAER (National Council for Applied Economic Research) study does not provide a robust defense of MFIs (See: Microfinance institutions not the answer for poverty alleviation, says Jairam Ramesh ).

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Wednesday, October 12, 2011

Microfinance institutions not the answer for poverty alleviation, says Jairam Ramesh

Ramesh S Arunachalam

Union Minister for Rural Development, Jairam Ramesh, released a joint study by NCAER (National Council for Applied Economic Research) and CMCR (Centre for Macro Consumer Research) on ‘Assessing the Effectiveness of Small Borrowing in India’ at New Delhi on 10th October. According to Mr Ramesh, MFIs (microfinance institutions) “are not answers to poverty alleviation and certainly not the panacea they like to see themselves asi

While Moneylife will be doing a detailed critique of the NCAER study (sponsored by the Microfinance Institutions Network, MFINii ), its methodology and findings separately, certain aspects of the study, based on material currently available in the public domain, deserve to highlighted:

First, it is very interesting to note that the minister’s interpretation (of the NCAER study findings) runs counter to the views of Dr Rajesh Shukla (Director of NCAER-CMCR), as expressed in two prelaunch articlesiii . In these articles, Dr Shukla argues, “An alternative source of finance like microfinance has come as a breakthrough… MFIs attempt to alleviate the deplorable situation of the poor and require freedom to operate”iv .

On the contrary, after releasing the report, Mr Ramesh said, “the findings of the study did not provide a robust enough defense of MFIs vis-à-vis the self-help groups (SHGs).” The real comparison of MFIs should be with moneylenders (the informal sector) and not SHGs, he noted. He further added, “There was hype governing some of the MFIs. They set out to claim that they are solving India’s poverty problems. If they were modest in their ambitions, the vehemence with which their critics struck back would have been even much lesser… vehemence of backlash was directly proportional to the exaggerated nature of the claims of many of these institutions.” He made this statement at the release function while referring to the recent fracas in the functioning of MFIs in Andhra Pradesh.v


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Saturday, October 8, 2011

A workable microfinance & financial inclusion policy: How can it be formulated?

Ramesh S Arunachalam

India needs a microfinance policy that is holistic, futuristic and yet practical in terms of satisfying unmet ground-level financial needs of low-income and excluded people. It should be developed through a truly bottom-up and democratic process with widespread stakeholder input and consultations

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Friday, October 7, 2011

Microfinance industry: Where is the self-help group-bank linkage model headed?

Ramesh S Arunachalam

The SHG-bank linkage model is ideal for providing credit at the grass-roots level for weaker sections of society and for poor women. However, a few issues need to be addressed to make the model more comprehensive

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Tuesday, October 4, 2011

Indian microfinance crisis: What can international agencies like CGAP learn from it?

Ramesh S Arunachalam

The Consultative Group to Assist the Poor could not spot the inherent weaknesses in the commercial microfinance model that it was unabashedly promoting. This is a reason for self-introspection by its board, senior management and other stakeholders involved in its governance. CGAP, as an institution, should become more accountable to low-income people, whom it exists to serve in the first place

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Monday, October 3, 2011

Microfinance securitisation: Impact of client-acquisition strategies and other factors

Ramesh S Arunachalam
A number of chinks need to be ironed out during the process of microfinance securitisation. The RBI needs to look into these while finalising its draft guidelines on this subject

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