Graft graft go away…

Corruption in the country is as common as anything one could imagine. But there is a ray of light. The civil society is on an effective march against the menace

Amitabh Shukla / New Delhi

Anna Hazare and his movement against corruption has caught the imagination of the nation. Never before had the civil society forced the government to act so decisively against graft and in favour of a Jan Lokpal Bill which threatens to eat into the vitals of corruption and make the country rid of the menace once and for all.

Not surprisingly, after Anna launched the movement from Jantar Mantar in New Delhi, the government was in a “moral pressure” and forced to act decisively against top corporate honchos, involved in the 2G scam, Suresh Kalmadi, who is seen by many as the man responsible for the loot of public exchequer in the run-up to the Commonwealth Games and even the prominent functionaries of the UPA allies like the DMK by getting its members charge sheeted.

Many see the swift action as a direct fallout of Anna’s movement and the zero tolerance which the people have now developed towards corruption – a cancer which has thwarted the development of the country for decades.

The anti-corruption movement has been criticized, even lampooned and trivialized by the vested interests. We feel that some of the personalities associated with the movement against corruption could have indulged in some aberrations and should not be spared if found guilty of any wrong doing. However, we should never lose sight of the bigger picture – the drafting of the Jan Lok Pal Bill. Personalities are not important the issues are and corruption is definitely such an issue.

Attempts have been made to derail the bill by the political class and a section of the media by following a policy of selective amnesia. We clearly believe that this is a diversionary tactics to deflect from the issue of corruption. The critics of Anna and those against the Bill can make their “learned assessments” after the draft Bill comes in the public domain, discussed in Parliament and then passed. We do not believe in anarchist theories which do not give solutions but merely pose questions, one after the other. Let the doubting Thomases eat a humble pie on this question.

The attempts to discredited and underestimate the genuine anger of growing sections of the public against widespread corruption at various levels of the political leadership and bureaucracy is a knee jerk reaction to the popularity of Anna, a Gandhian of immense stature. The mud-slinging went to comic extent to sow the seeds of confusion amongst the people. But ultimately, the political leadership of the country saw the futility of bringing in CDs, land deals, character assassination, funding of NGOs into the larger picture of the fight against corruption.

Soon after starting, the movement threatened to spread far and wide across the country and attracted the support of growing sections of the youth, which had till now shown little interest in the campaign against corruption. The participation of the youth, though not comparable to the JP movement of the 70s, forced the government to accede to the demands of framing a Jan Lokpal Bill.

The demand for the creation of a position like the Jan Lokpal has been there since 1969 and ironically, none of the governments in power since then took it seriously, including the Janata Party government in 1977 and the Janata Dal government in 1989, both of which made corruption a national issue, mobilized the youth of the country and won elections on this count.

In the last two years, people of the country have seen what shape and form corruption has taken place - a monster out to gobble everything in sight. A series of scandals relating to the loot of public funds, or the twisting of rules to benefit high and mighty, broke in the country late last year. These included the Commonwealth Games, 2G spectrum allocation, Adarsh society scam in Mumbai, a series of corruption cases against ministers in Karnataka etc. These are mere indicator and the tip of iceberg of how widespread corrupt practices are, in the states and at the Centre.

This is the reason why people are now asking questions relating to discretionary powers enjoyed by ministers and senior officials, and the creation of a Lokpal, or ombudsman, at the Centre. When there is no hope for the citizens, Anna emerges as the beacon at this point of time, catching the imagination and the thought process of the country.

Some want the Prime Minister kept out of the purview of the Lokpal. But the question which we ask is whether this is acceptable in a democratic system? Why does the office of the PM needs to be shielded from vexatious and motivated quarters? Similarly when there have been insinuations against the judges of the High Court and the Supreme Court, wouldn’t it be prudent to bring them too under the Lok Pal. After all how many judges of the country have been impeached since Independence for their acts of commission and omission? None. Is there anyone in the country who can stand up and say with confidence that all the Judges are honest to the hilt? If not, then bring them also under the purview of the Bill.

Even though the main target of attack on corruption and the Lokpal Bill has been the ruling UPA, all political parties are aware that they are under attack as very few have shown the will to fight against the menace in the states where they are in power or at the Centre when they were in office at some point of time. Anna’s movement has clearly shown that they can no longer afford to ignore the mood of the nation. If they do so, it will only be at the cost of their own political fortunes.

Along with the Lokpal Bill, more measures are needed to weed out corruption and usher in development. If money, which goes into the pockets of politicians, bureaucrats, corporate houses etc due to corruption and then finds its way in the Swiss banks, benami deals, hawala trade and is routed back to the country through questionable means is stopped, a lot of money would remain available to remove curses like poverty, illiteracy, hunger, malnutrition and other maladies which affect our society.

Besides, grant of genuine autonomy to the CBI and the CVC would be a move in right direction along with the creation of a similar and effective institution at the state level. Both these institutions have been suffering at the hands of whoever is in power. Genuine autonomy would shield these institutions and help in the fight against under the table deals.

There could also be a case of state funding for elections to root out the malady. A separate debate should begin on state funding, holding elections only once in five years and removing the aberrations which have crept in the electoral system over the years. The resent Assembly election in some of the states indicated how ill-gotten money is used indiscriminately to influence the voters.

But above all, there has to be an institutional mechanism in the country to fight graft. A national consensus has to be built around such a mechanism and we are sure when the Parliament takes up the Jan Lokpal Bill for discussion and passing and the draft Bill comes in the public domain, such a consensus would emerge. (March 30, 2011)

ashukla.mail@gmail.com

NGOs : Crisis of credibility

CAPART has not funded new projects for NGOs for over a year now. It will not do so till new norms for the voluntary sector are finalised

Amitabh Shukla / New Delhi

February 1, 2011

The institutions of democracy are facing a serious crisis of credibility and confidence. 2G scam, disruption of an entire session of Parliament, role of media in lobbying, insinuation against judges, appointment of the Chief Vigilance Commissioner and the Radia tapes dominated the headlines in the recent weeks leaving none of the pillars of democracy sacrosanct.

Is the voluntary sector far off from the crisis? Isn’t the sector too facing serious crisis of credibility and challenge? Have the NGOs come out clean in the entire episode.

This does not seem to be so. A Chennai based NGO had to face the ignominy of CBI raids as its name cropped up in the 2G scam and was said to be the beneficiary of funds from the state government and lobbied for interest groups. The NGO is not alone. The nodal agency of the government, responsible for giving grants to the NGOs, CAPART blacklists hundreds of NGOs every year for fund embezzlement and irregularities.

The acts of transgression of the Chennai based NGO is quite common and is replicated elsewhere in the country as the malaise has been found to be deep and widespread. With a whopping 3.3 million registered NGOs, India's nonprofit sector raises up to $16 billion in funding every year. Foreign funding to Indian NGOs has only increased over the years. According to the figures of the Home Ministry, in 2008, the total official foreign aid to India was $2.15 billion.

It is actually the fight for these funds. Whoever presents a better picture, does a good social marketing and brings a sob value to their projects, gets a lion’s share, particularly from the international donors. Those for transparency say that a large amount of that money is misused, mostly to support high administrative costs of running organizations rather than on actual projects which are intended for the target beneficiaries. Transparency is an exception rather than a norm in a large number of NGOs and very few submit themselves for account audits and come clean on where and how the funds they receive as donations are spent.

While groups like Credibility Alliance, are working toward increasing NGO accountability through accreditation, field visit to scrutinize the records and membership, they have been able to rope in only a handful of NGOs so far. In the year 2009-10, 147 VOs applied for accreditation with Credibility Alliance. Out of these, 23 VOs were accredited under desirable norms and 10 were accredited under minimum norms. The total number of VOs accredited till October 2010 was a mere 115, suggesting that a large number of organisations do not want any scrutiny and would prefer to operate in an opaque, arbitrary manner as per the whims and fancy of the person who founded it and got it registered.

Not surprising as many as 833 NGOs were blacklisted by CAPART at the end of 2009 after they were found indulging in misappropriation of funds. Andhra Pradesh had the highest number of such blacklisted organisations followed by Bihar and Tamil Nadu. Of the 833 NGOs and voluntary organisations which were blacklisted, 192 were from Andhra Pradesh, 125 from Bihar, 83 from Tamil Nadu, 75 from Karnataka, 72 from Uttar Pradesh, 42 from Rajasthan and 35 from Kerala. In 2008, out of the 34,803 registered associations, only 18,796 filed their reports.

The malaise has reached such proportions that for many NGOs symbolize a ‘dirty word’ which is best avoided. They are seen as a tool of laundering money, embezzling donations and presenting a lofty-ideal picture to the outside world. No wonder the private trusts, corporate foundations, corporate social responsibility projects etc prefer to have their own set-up, own staff, their own model of projects, development and disburse funds through them rather than through the NGOs. For instance the Azim Premji Foundation, which got a whooping over Rs 8000 crore from its founder, has its own organization to conceive and execute the educational programmes.

“We are facing a severe crisis. Some NGOs have brought in a bad name for the voluntary sector. The image of those doing genuinely good work is also tarnished in the process,” said Abhay Pandey who runs Nav Srijan Sansthan in Bihar’s West Champaran district, a project to teach 20 children every year which he is doing in his individual capacity with the help of some well-wishers.

Wasn’t it time that all VOs and NGOs, which are registered under the Societies Registration Act undergo mandatory scrutiny of funds and subject themselves to something like the Right to Information. Making transparency mandatory is the need of the hour rather than hiding behind a cloud of secrecy.

A change in the institutional structure is taking place in the country, particularly in the developmental field where the move is to decentralize down to the lowest levels of panchayat. The panchayats at the village level are gradually becoming more important in all decision and policy making and development at the grassroots. They are deciding the developmental agenda and governments at the Centre and the states are also giving them control over financial resources to meet the objectives.

It is here that the NGOs have the big task of facilitation and also build capacities. The involvement of VOs in implementing development programs in partnership with the government has become key to this agenda. The involvement of local community, local activists, those who are well entrenched in the society is a must for any positive outcome. If funds for these grassroots organisations, those who understand the nerves of the local community dry up, hundreds of thousands of people living below poverty line will lose all hope.

Undoubtedly, there are hundreds of VOs, NGOs and individuals who have and continue to contribute effectively in the development process. They work with commitment, transparency, vision and a set goal. Why should they suffer from the deeds of the black sheep who are mushrooming all over. Wasn’t it time to separate the rice from the husk. Wasn’t it time to get our act together and bring in a system wherein regulation and control is transparent and effective.

The country may not need 3.3 million registered organisations. Even a few thousand would do. They needed to be weeded out on the basis of parameters set up in consultation with the voluntary sector itself, policy makers and government agencies. The stench has to be removed to make VOs and NGOs more vibrant and effective and restore the confidence of the common people and the donor agencies in them. (February 2011)

Premji shows the way, will others follow?

Philanthropy by captains of industry is picking up but a lot remains to be done for the downtrodden

Amitabh Shukla / New Delhi

January 2, 2011

Corporate philanthropy in India has taken a giant leap with the decision of Wipro chief Azim Premji to donate a whopping Rs 8,846 crore for charity. Never before in the country has any industrial house or an industrialist shown such a gesture of profound magnitude for the have nots of the society.

What makes Premji's gesture all the more important is that the donation has been made from personal wealth and not as part of the much-hyped corporate social responsibility (CSR) of the industrial houses. He could have used the money to buy a cricket team or a private jet but he did not. Moreover, there is a clear vision and direction on what is to be done with the funds to the tune of Rs 8846 crore unlike many examples in which the industrialists merely donate for a specific work like calamity relief, get a photo shoot done for publicity and then forget their responsibility towards the more unfortunate brethren of their country.

Even though India has a tradition of charity - all religions preach this, big time corporate charity is picking up only now. For most personal aggrandizement, stashing money in foreign banks, living a luxurious lifestyle, building a magnificent house, acquiring jets, yachts and limited edition automobiles is the order of the day. Though wealthy people in the past - the Sheths, some industrialists – had been contributing to religious institutions, very few had a vision of what needs to be done with the funds beyond the short term and how to create a lasting impact on society.

If a hungry person is given fish to eat, it will solve a temporary problem of hunger. But if you teach him how to fish, it will be a permanent solution to the woes, goes the saying. Teach him and empower him. This is what Premji has done. Premji in his statement said, "We believe that good education is crucial to building a just, equitable, humane and sustainable society. We want to contribute significantly towards improvement of education in India, and through that towards building a better society." The philanthropist said, "All our efforts, including the University that we are setting up, are focused on the underprivileged and disadvantaged sections of our society. Our experience of the past 10 years has motivated us to significantly scale up our initiatives, across multiple relevant dimensions."

The IT czar said that the Foundation's significant increase in scale and its clear focus on social purposes will require a substantial long term financial commitment, which is the purpose this endowment will serve."

Premji's initiative was followed by Ajay Piramal's Piramal Healthcare which announced spending of up to Rs 200 crore in charity, primarily on healthcare and education. The money will be given to different organisations in phases to optimize the benefits. The company also clarified that such contributions will not directly relate to the business of the company or the welfare of its employees and forms a part of its CSR.

Interestingly, it is the Indian IT industry, their founders, leaders, IT entrepreneurs and spouses, most of whom who have made their fortunes themselves instead of inheriting it, who are spearheading corporate philanthropy in India in true sense of the term. The traditional captains of industry still lag behind in the initiative. Not surprising, IT majors Infosys, MindTree, TCS and HCL have been launching and supporting ventures that create social equity, better lives for the have nots and creation of opportunities for the downtrodden for whom there is nothing to look forward to except government support and to God. The top professionals and entrepreneurs in the IT sector have already set aside chunks of their wealth for charity, most of which are already functioning and changing lives at the grassroots.

While Infosys cofounder Naryana Murthy's family recently gave $5.2 million to Harvard University and its press for a series on Indian literary heritage, Tata Group also gave $50 million to Harvard Business School. Murthy and his wife Sudha Murthy are also understood to have set up a venture capital fund to give credit to the poor. Sudha also leads the Infosys Foundation that works in villages in education, healthcare and other projects. Coming back to Infosys, CEO and President Kris Gopalakrishnan donates around Rs 4 crore a year. Infosys co-founder Nandan Nilekani, now with the government on the National Identification Number project and wife Rohini have gifted $5 million for the Yale India Initiative. Shiv Nadar, the founder of HCL, too has not lagged behind and pledged a tenth of his $4 billion wealth for charity.Sunil Mittal, the telecom czar, is not behind as Bharti Foundation primarily runs on his donations and is doing an excellent work in education in several parts of the country and bridging the gap between government effort and the needs of the community.

The Tatas and the Birlas, the traditional industrialists, are in philanthropy in a big way, often without any publicity, doing it silently and effectively. The Tata Sons, holding company of the group, uses the money earned on charity. Likewise, the Birlas run hundreds of institutions catering to education, medical help, grants to religious institutions amongst others. The Godrej family too has contributed in its own way from the beginning and so have the Sarabhais from Ahmedabad. But is it enough? Indian billionaires can do much more for charity than they are doing. Thousands of cooperatives, NGOs at the grassroots and institutions doing brilliant work are perpetually starved for funds. Their impact could have multiplied many fold had they got the funds which they deserved due to the sheer volume of work they undertake. The outreach and impact of these organisations would only grow and create the desired social impact at the grassroots if they get more funds.

Reports had it that by western standards Indian charity amounts to peanuts and a lot needs to be done by industrialists here. A recent report suggested that in India individual and corporate donations make up only a tenth of charitable giving. While 65 per cent comes from the government through various schemes to the NGOs, the remaining comes from abroad. Clearly, government, both at the centre and the states, remains one of the biggest donors to the projects in the voluntary sector. It has perhaps realized that the NGOs, cooperatives, civil groups and communities have played a major role in rural development, through catalysing people's initiatives for change, as well as through direct implementation of interventions around specific issues and therefore addressing the needs accordingly.

Formal recognition of the role ofvoluntary organizations came in the Seventh Plan document. This led to the formation of the Council for Advancement of People's Action and Rural Technology (CAPART) in 1986, as a nodal agency for catalysing and coordinating the emerging partnership between voluntary organizations and the Government for sustainable development of rural areas. An autonomous body registered under the Societies Registration Act 1860, CAPART is functioning under the aegis of the Ministry of Rural Development, Government of India. Even though there have been charges of irregularities and corruption, today, this agency is a major promoter of development activities in India with focus on grass-root. It assists over 12,000 voluntary organizations across the country in implementing a wide range of development initiatives.

The country is presently going through a change in its institutional structure in the developmental field where the move is to decentralize down to the lowest levels of panchayat. The panchayats at the village level are gradually becoming more important in all decision making and development at the grassroots. They are deciding the developmental agenda and governments at the Centre and the states are also giving them control over financial resources to meet the objectives. It is here that the NGOs have the big task of facilitation and also build capacities within the panchayat institutions to enable them to discharge their responsibilities in a better and inclusive manner.

The involvement of voluntary organisations in implementing development programs in partnership with the government has become key to this agenda. Such a role for the panchayats in the government scheme of things of decentralization will only likely to increase in the future due to its sheer impact. But government contribution is not enough and the corporate houses need to chip in a big way to have a social transformation by involvement of the panchayats and the voluntary organisations working at the lowest pyramid of society.

There is still an amount of indifference to this crucial issue as several e-mails sent by Sopan-Step to some prominent industrial houses on their social contribution and endowment for charity evoked little response. Most of them remained unanswered. Not surprising that fund-raisers for social causes continue to complain about their problems and how the industrialists and the industrial houses keep rejecting their proposal on one pretext or the other. These fund raisers say that a lot of effort and paper work is required here in the country even to raise a small fund for social causes. Moreover, the corporate funding agencies look for short term deliverables which cannot be the exact measurement of the success of a scheme run by an NGO or a cooperative. The huge middle class too is largely tight-fisted despite the prosperity brought by economic boom and is hardly known to contribute towards any non-religious charity. The bar has to be raised.

However, after the global efforts of Warren Buffet and Bill Gates, urging the captains of industry to donate at least half their wealth to charity (see box) and the largest endowment in Indian history made by Azim Premji, the debate has been stirred in a way which had never been done in the past. The arrow has hit the target- the Bull’s eye. It has raised the consciousness on the issue and underlined the point that industrialists do have a role on solving the ills plaguing the society, the same society from where they have made their fortunes. They are gradually realizing the importance of leaving a lasting contribution and a legacy to the society. But, the Corporate Social Responsibility of the organizations has to be seen with a pinch of a salt.

For many it is simply propaganda and public relations exercise with a watchful eye on the stock market. If these industrial houses are seen to be doing something for the society through CSR, they believe that it would increase the acceptability of their products. Many simply consider it as an excellent brand promotion and marketing strategy thinking that such acts would also raise the value of their stocks. Corporate houses and the captains of industry have to see development from the prism of creating empowerment, long term capacity building, and creating awareness in the larger community - all of which take time, effort and gradual realization.

The short term mechanism of calamity relief - flagging trucks carrying relief material, though necessary, is not the solution to the larger issues plaguing the society. The involvement of local community, local activists, those who are well entrenched in the society is a must for any positive outcome. The flow of CSR funds has to be through these organisations and cooperatives at the grassroots and individuals to have any meaningful and lasting impact and not necessarily through the corporate foundations which by and large function for short term results rather than the long but fruitful and lasting long term route.

In March, 2010, the Indian dollar billionaires numbered 69, compared to 52 last year, second only to USA, which has 403. The recent economic fortunes of India have brought untold wealth to some individuals. According to Forbes, the combined net worth of India’s 100 richest people rose to $300 billion this year from $276 billion last year, driven by the country’s booming economy and a rally in the stock market. The Indian economy is galloping towards the double digit figures of economic growth. Rate of growth at 8 to 9 per cent has become the order of the day in the country in the era of booming economy and rising stock prices. While several business leaders are gradually waking up to the importance of philanthropy, time has come to build a greater momentum in order to make terms like hunger, illiteracy, malnutrition, ignorance redundant words in this century. (January 2011)

Government proposes corporate houses’ dispose

SOCIAL RESPONSIBILITY

Will CSR go for a toss as the government dithers on making it mandatory for the industrial houses to set aside 2 per cent of earnings for social causes

Amitabh Shukla / New Delhi

The proposal of the government to corporate houses that they earmark at least two per cent of their earnings for Corporate Social Responsibility (CSR) has few takers amongst the captains of industry in the country.

Wipro Chairman Azim Premji, who has himself earmarked a substantial chunk of his personal wealth for charity, has come out strongly against the idea of formulating laws on mandatory spending by industry on CSR.

“I don't think you generate CSR by putting statutory requirements. I think there is enough social consciousness among the larger companies to drive it on the basis of what they consider their responsibility,” he said at a joint press conference in the Capital with philanthropists Bill Gates, Melinda Gates and Warren Buffett.

Premji was responding to a question on the government’s plan to make it mandatory for corporates to spend 2% of their average income of three years as part of the proposed Companies Bill. “My concern is that you get legislation...and a lot of abuse takes place from that legislation in terms of what you define as CSR and what you define as branding. I would be against it,” he added. The IT Czar, however, said that the government is welcome to issue such a proposal “as a guideline rather than as a mandate or rather than as legislation”.

Corporate houses have been opposing the proposed move to fix a threshold for CSR spending in the form of a mandatory legislation. Minister for Corporate Affairs Murli Deora had earlier said the government is willing to have a discussion on the matter with industry triggering comments by the industrial houses and prominent industrialists.

However, Buffett, who also addressed the press conference refused to comment on the issue. “I know nothing about this tax matter,” said Buffett, the multi-billionaire American philanthropist who is in the country to mobilize opinion and impress upon the industrialists to donate their earnings for charity.

Sources indicated that the government is unlikely to make it mandatory for the companies to spend on CSR. The new Companies Bill, which is on the Board for a while, is likely to make a mention asking companies to spend upto 2% of their net profits on CSR but may not make it legally binding. Interestingly, the Parliamentary Standing Committee, headed by former Finance Minister Yashwant Sinha, with which the Bill has been lying, wants CSR spending and philanthropic activity to be legally binding. The committee argued that companies which have a net worth of Rs 500 crore or more, or turnover of Rs 1,000 crore should set aside 2% of their average net profits for the last three financial years for CSR.

Several rounds of discussions have already been held with the corporate houses, industry associations and industrialists to find a way out. Industry bodies had earlier said that spending on CSR is critical but making it mandatory for firms may not result in best practices. They point out that several companies are already doing it and there was no need to bring in legislation for this purpose. Those against the legislation insist that making it a law would be tantamount to a new control and going back to the licence raj.

Ironically, the stand of the industrial houses comes at a time when the civil society groups have found that a large number of corporate houses do not spend anything on society from which they earn their mega millions. While some large houses indeed spend more than 2 percent on CSR, there are others who consider this spending an exercise in futility and want social entrepreneurship to create lasting wealth instead of earmarking an amount for specific work.

Even as the debate on CSR spending raged on American Warren Buffet who is traveling the world over to promote a culture of giving, arrived in India and asked the industrialists to come forward for charity.

The Berkshire Hathaway chairman and Microsoft’s Bill Gates, the two who who have routinely topped global rich lists for years, have been making efforts to encourage other billionaires to give to social causes.

Called “The Giving Pledge”, more than $125 billion from mostly American billionaires, have been pledged so far. Both Buffet and Gates themselves have pledged most of their own wealth to the Gates foundation. At a press conference later Thursday evening, the Gates and Buffett answered questions about the work of the Bill and Melinda Gates Foundation and their mission to promote giving.

Buffett said he was enthused by the response he received from Indian entrepreneurs. “There was exceptional participation and candour. We certainly experienced great enthusiasm. What form it will take will be seen in days to come,” he added.

Those whom Buffett met in India included top industrialists from groups like the Tatas, Piramals, GMR, Godrej, Britannia Industries, Monnet Ispat and Energy, HSBC, HDFC, Bajaj Auto, Max India, Dabur amongst others. Except the GMR, no group has so far come out openly on pledging their wealth for social causes.

“There was a tremendous give-and-take in the session. It is clear that there is some great thing going on about philanthropy,” Gates said. He spoke of the country's history of philanthropy and its tradition in the country.

Asked whether any of the 70 rich people had pledged their wealth for good reasons, Buffett, said the experience was enthusiastic but a follow-up remained to be seen. “The U.S. receives 2 per cent of its Gross Domestic Product from philanthropy and we hope it would increase in the coming years. India will also see an increase in the number of givers. The people in the room were enthusiastic,” he added.

“We heard many people having made a lot of money in India and willing to give it back to society but were still looking for a way to do so,” Melinda Gates, co-founder of the Foundation said.

Azim Premji, founder of Azim Premji Foundation, said he was completely committed to supporting the larger ambition of catalysing social change to build a better society.

ashukla.mail@gmail.com

(April 2011)

MFIs: Devils or contributors to rural prosperity

Amitabh Shukla / New Delhi

Policy makers are trying to regulate microfinance institutions so that they can become engines of progress

The Microfinance institutions operating in the country have come under an intense scrutiny, something which had not happened ever since they started operating in the country a few years ago, replacing the traditional money lenders in several places.

While a section in the government dubs them as modern money lenders, charging rates of interest unheard of in the banking sector, a section of cooperatives, farmers’ group, NGOs working at the grassroots level seem to indicate that they have brought in money in the rural sector and have helped a large number of self help groups.

Villains contributing to rural distress or institutions which have helped alleviate rural poverty that is the question dominating the policy makers, government, Self-help groups, NGOs and civil society activists now.

The public outcry led to a situation where the Andhra Pradesh government brought out an Ordinance pushing the microfinance institutions in the corner, a situation of extreme distress which they had never experienced in the recent past. Suicides of farmers in parts of Andhra Pradesh, Vidarbha (Maharashtra) were the reasons from the Ordinance along with political populism and pressure generated by the political parties.

A senior government official said that subprime lending or the loans extended to people with poor repaying capacity is one of the primary reasons for the defaults. He said this is followed by coercive methods, often humiliating, which have led to suicides in some cases.

Vijay Mahajan, President of the Microfinance Institutions Network (MFIN), a group comprising all the large companies in the sector, argues that 80 per cent of the microfinance institutions are regulated by the Reserve Bank of India as non-banking financial companies and they have to submit monetary statement to the banking regulator.Mahajan, who is also the Chairman of Basix, counters the allegations leveled against the microfinance institutions but also promises that certain things need to be looked into by the companies and they were already doing that.

He points out that some fly by night operators and those institutions not in the organized sector, have brought in a bad name to micro credit and even the organized players would help the government bring them to book. The top officials of the MFIN have been meeting the government officials to put forward their demands and seek a solution to the crisis in which they find themselves.

Due to the crisis, triggered by the AP Ordinance, the finance ministry plans to introduce a new legislation for the nation’s microfinance industry, Minister of State for Finance Namo Narain Meena said in a written statement to the Rajya Sabha. The new rules brought loan collections in Andhra to a near halt, leading to a plunge in shares of the largest micro-lender.

The Micro Finance (Development & Regulation) Bill, 2010, will be developed in consultation with the central bank, Meena said.

The Reserve Bank of India a few weeks ago appointed a sub- committee led by Y.H. Malegam to study the nation’s microfinance companies and recommend ways to make their interest rates “reasonable,” Meena said. The Malegam committee will submit their report in three months, he said.

At a function in New Delhi, Finance Minister Pranab Mukherjee too made it clear that the idea was not to strangulate the MFIs, but to regulate it so that the interest that they charge is not exorbitant and the method of realisation, under no circumstances is quick.

How these MFIs differ from the concept of Nobel laureate Mohammed Yunus of Bangladesh is that they work for profit unlike the not-for-profit model and work like a normal corporate entity and see giving micro credit as a business. While Yunus’ model is based on a mechanism to lift people out of the poverty cycle, the model of the MFIs is based on profits and they see it more as a business rather than anything else.Sensing that the noose is tightening around them, the prominent microfinance companies have agreed to reduce the interest rate to 24 per cent effective, initially to the borrowers in Andhra Pradesh.

They have also decided to switch to the monthly recovery system from the weekly system which causes tension in the households.The sops offered by the MFIs do not stop here. They have decided to announce a scheme of restructuring loans of their highly indebted borrowers, share the credit history of their borrowers and create a common database and affirmed that they do not and will not use coercive policies.Besides, they have decided to expose the unregistered entities pretending to the MFIs and promised to take strict action against their own errant staff for any violation of the MFIN code of conduct.

The other promises of the MFI’s include setting up of a telephone helpline to record complaints, establish regional Ombudspersons, set up an Eminent Persons Group to probe into the suicide allegations and bring in more transparency in the entire system.Now let us see why the MFIs are needed in a poor rural setting, more so in our country.

It is amply clear now that more than subsidies poor need access to easy credit. We have already seen that absence of formal employment has made most of the rural poor what is called non-bankable. The result is visible.

The moneylenders come in the picture and this cycle forces the poor to borrow from them at exorbitant interest rates as high as 100-200 per cent in some cases. In fact the loan taken by one generation continues to the other due to the high rate of interest.As the MFIs chipped in, the experience of the last over ten years, has shown that providing finance to small entrepreneur and farmers – the poor - is productive. Given loans at market rates, they repay their loans and use the proceeds to increase their income and assets. This is an eye-opener and least surprising since the only realistic alternative for them is to borrow from informal market at an interest much higher than market rates.

There are several success stories around the country how the livelihood of people have changed due to timely and easy credit, how women have become self-sufficient by running cottage industries with the help, how the unemployed turned small-time entrepreneurs and how the rural economies of a particular area has changed for the good.

Community banks, Self-help groups, NGOs and grassroots savings and credit groups around the world have shown that these micro loans can be profitable for borrowers and for the lenders, making microfinance one of the most effective poverty reducing strategies.

Not surprising that nearly half of the MFIs working today have come into existence in the last five years as Sa-Dhan, the Association of Community Development Finance Institutions, has pointed out in its handbook. This reflects the high growth of number of MFIs in recent years.

It also points out that the not-for-profit MFIs still dominate in the sector but the non banking finance companies (NBFCs) are catching up very fast.Lured by the mullah, most of the new entrants in microfinance and the erstwhile not-for-proft MFIs are converting into NBFC and they cover the overwhelming majority of collective outreach and loan portfolios of all MFIs.

Traditionally the southern region was the backbone of the MFIs but Sa-Dhan points out that even as it still retains the leadership in terms of concentration of MFIs, the eastern region has strongly emerged as the next preferred destination while the north-eastern region lags far behind.Before the big advent of MFIs, the Self Help Groups were there besides the moneylenders.

In SHG, credit is linked to savings, there is focus on capacity-building among borrowers and the rate of interest is almost half with option of monthly repayment.

What made matters worse is that in states like Andhra Pradesh, the MFIs chose the easy route of tapping into established SHGs for advancing loans. This was viable in the early stages but, over time, it has led to the problem of multiple lending and excessive debt burdens.Moreover, MFI credit, for the most part, went for consumption – for family weddings, buying consumer goods instead of income generation. What went to agriculture could not be returned back as returns in agriculture are so low that it is inconceivable that it can service interest rates of around 30 per cent that MFIs charge.

In some cases, MFI credit went for commercial agricultural farming and when the crops failed, it led to severe distress in the household, even leading to suicides.Government feels regulation is needed, it is a must. A delicate balancing act needs to be done in this as not to kill the availability of credit and also not to bring in a new set of moneylenders in the guise of MFIs. Weaving microfinance in and around livelihood seems to be the way out.

(December 2010)

Mobilising themselves against a callous administration

Amitabh Shukla

Hindustan Times, March 7, 1997

CHAMIALA (Tehri Garhwal), March 6 (From Amitabh Shukla) The sleepy town of Chamiala in Tehri Garhwal district of Uttar Pradesh and the neighbouring areas have all what a nature lover would ask for. Beautiful mountains, rivers and simple hill folks, who treat all outsiders as guests. However, what the Bhilangana block, the administrative division under which the area falls, lacks is a transparent and accountable administration which can identify itself with the people.

Poverty and lack of employment opportunities has forced majority of the adult males to migrate to the plains, mainly the bigger cities to earn a livelihood. So only women folks are left behind to cope with a callous administration. As a result they are not only fighting against poverty and hardships associated with life in the mountains, but also corruption at the grassroots level under the banner of Chetna Andolan.

The inept administrative authorities have made no attempt over the years to make the people aware about the different programmes meant to alleviate poverty in the rural areas, instead they have colluded with the vested interests to pocket the money meant for the people.

A clear example of this was evident when women activists approached the block officials with a list of people requesting registration under Employment Assurance Scheme (EAS), they were informed that a list had already been prepared by the block, and a number of works had already been executed. However when those people whose names were there in the official list as beneficiaries were contacted, it was found that they had no knowledge of the scheme. They had received neither any family cards nor any employment under the EAS.

approximately 700 cards were made, but never issued to the people. When the activists repeatedly demanded information on the issue of cards, the block officials finally thrust a sheaf of signed but empty EAS family cards into the hands of the activists.

In Keparse village, officially maximum works have been commissioned. However, inquiries revealed that work was entrusted to contractors and only a handful of people were provided employment, mainly those related to the block pramukh (head). Interestingly, the official records suggest that 40 cards have been issued in the village.

Similarly, in Maikot and Gauna villages, where block of ficials claim that EAS work has taken place, the people who have done the work have repeatedly complained that no payment has been made, though a year has passed since the work was done.

Many other cases of official apathy and corruption have also come into light. The Kothiada canal which is supposed to be 16km-long still has no water though the Government has spent lakhs on it. Abal Singh Bisht, the village head of Maikot says that the agriculturists are suffering as seven gram sabhas were supposed to be irrigated by this canal.

Similarly in Sunar village, a foundation-stone was laid for an ITI long time back, but not a brick has been laid forcing the prospective students to go to far off areas for their studies.

Despite sanctioned plan, no road has been built between Sendur to Patgaon which is a distance of 20 kms. Jasbir Singh. the gram pradhan of Sunar complains that women and other people have to tread long distance in the hills to replenish their stock with essential items.

On the educational front too, the State has hardly shown its visibility. For instance in the Kanya Pathsala of Chamiala there are only seven students, though the number of teachers is seven.

Movement against corruption gaining momentum

Amitabh Shukla
Hindustan Times) March 3, 1997

CHAMIALA (Tehri Garhwal), March 3 (From Amitabh Shukla) A movement at the village and block level against corruption, pilferage of funds and the right to information is slowly picking momentum in the villages in and around Chamiala in Tehri Garhwal district of Uttar Pradesh.

Supported by common villagers, the movement called Chetna Andolan (Awareness movement) demands transparency in fund allocation for the villages under different rural development schemes of the Government.

Brainchild of Mr Trepan Singh Chanhan, a social activist who was earlier associated with the 'Chipko Andolan', led by Mr Sundar Lal Bahuguna and then with other causes related to environment in Tehri district, the genesis of 'Chetna Andolan' dates back to 1995 when the youth gathered to debate and discuss their experience of development.

They started raising questions in their respective Gram Sabhas, demanding full details of development related expenditure mainly in schemes like Jawahar Rozgar Yojna (JRY) and Employment Assurance Scheme (EAS) and consequently found large-scale pilferage of funds.

In his village Kepars, Mr Chauhan led the people in exposing fraud and irregularity in administration of development funds. Similarly in Dhansani village, another youth Mr Jhoom Singh Jhakedi mobilised people and succeeded in forcing the sarpanch of the village to return to the gram sabha embezzled amounts to the tune of Rs two lakh.

The activists mobilised not only women but all sections of the society in Bhilangana block. They also organised a number of khula manch (people's hearings) in which the villagers raised uncomfortable questions demanding transparency and other irregularities.

The khula manch, organised last week, laid emphasis on the need for struggle for information, for the right to know how development is being administered and demanded transparency and accountability in administration. Women from distant villages, some 20 km away from Inter College, Lata village, carrying placards denouncing corruption and demanding transparency, assembled and expressed their views and voiced their demands. The speakers, mainly common villagers repeatedly stressed the need and legitimacy of social adult of development.

Ms Aruna Roy of the National Campaign for People's Right of Information said that the real need today is for accountable administration. "The common people have to know their rights and force the bureaucracy to change its lackadaisical approach and corrupt practices," she said.

Similiarly Mr Sundar Lal Bahuguna, leader of the Chipko Movement who is now leading a campaign against the Tehri dam, supported the demands of the 'Chetna Andolan' and linked it to the rights of those affected by the construction of the Tehri dam. Mr Bahuguna sat throughout the deliberations and also broke his 'maun vrat' (silent fast) to air his views and support the cause of Chena Andolan. Speaking to the newspersons, Mr Chauhan said that the funds which are meant for the people should be used only for them and there should be total transparency and involvement of the people in the disbursement of developmental funds.

He narrated his experience of the struggle against corrupt officials and the harassment, including slapping of false cases against the activists by the officials in collusion with the vested interests. He also spoke about the expansion of the movement to the far-flung villages and the election of 35 gram sabha heads supported by the Chetna Andolan in the Bhilangana block of Tehri Garhwal district.

Interestingly, no bureaucrat or Government official turned up for the 'khula manch' despite repeated pleas and invitation from the activists.