The microfinance debate: SHG vs JLG

For last few weeks a huge debate has been brewing in the microfinance space. AP government has cracked down upon MFIs and passed an ordinance to stop them from lending to people who are part of SHGs(or self help groups), unless those SHG members obtain a NOC from their SHG.

To the uninitiated, MFI use a model called JLG (joint lending group) and government supports SHG. The basic difference between these two is the fact MFIs lend money from the banks to make loans to poor people of the JLG model. In SHG model, on the other hand, participants are encouraged to open a bank account themselves and put their joint savings into it. When they need money and SHG approves it, they get a loan. They can also get money from bank, where they have a bank account, if they need. However in most cases, such external borrowings are very little as bank doesn't reach out to them. In the end, very little money from outside the economy is pumped into the local economy.

In my opinion, SHG model doesn't work that well when it comes to poverty alleviation. Here's how I'd like to present my point:

Diwali, to many, seem like a waste of time and money. How can such a poor(?) country put up with such spend thrift traditions! In spite of all the arm-chair musings, every time it comes along, people end up spending more money than last year. In the end, it ends up circulating a lot of money from the banks and pockets of the people to the deepest & darkest(TM) corners of our country. People buy clothes, sweets, fireworks, electric lightings, earth lamps, tisi oil, shares (on diwali night) etc. Most of these goods end up pushing money from people who have it to people who need it as these goods come from the toil of the poorest of our brothers. Lets look at these goods in a little detail and look at their value chain.

Buying of clothes -> cloth shop owner -> cloth weavers -> cotton farmers
Buying of sweets -> sweet shop owner -> poor people making these sweets -> sugar seller -> sugar companies -> farmers of sugar cane etc

Had there been no diwali, any other festivals or marriages, we would end up killing our clothing industry, cotton farmers, retail cloth shops and lively hood of other millions.

Currency only makes sense if it can be spent. Similarly SHGs are not doing any good by persuading people to put most of their money in the bank. As more and more people do it, the local economy suffers from lack of liquidity.

JLG model on the other hand *pumps* money in the local economy, which spurs *real* growth. People buy more, work more to earn more and this increased economic activity in turn empowers a lot many other people in the local economy to contribute effectively and feed their families. At the end of the day when these people have enough money they will turn to banks to save it. Pressurizing them to use SHGs exclusively is just going to make more people poor. In my view government is sticking to a model which is pre 1991 and doesn't make much sense in a globalized, connected economy.

Note: This post is about my thoughts & ideas and not of my employer's.

The Milk Network

India is going through a major bout of malnutrition. The government has been trying to fight this with schemes like mid day meals etc. They have been partly successful with these schemes. Still, there is a lot of poverty and malnutrition. Come 2013-14, we will have food security act providing 35 kg of wheat, rice and millet to almost 75% households in the country at Rs 1-3. This is a very good scheme to remove hunger. I believe this may remove a lot of hunger from this nation.

However, we cannot build a great nation just by removing hunger. We need to feed our young brigade with good nutrient food which should catalyze their growth as an individual, empower their minds to take us to the top. It is important for us to realize that feeding and educating the young India is like investing in the future. These kids today will make us a real superpower tomorrow. We need to feed kids with nutrients which makes their minds sharp such as vitamins, calcium, protein, sodium and potassium etc. Milk has all of these in very generous quantities. India is also a biggest producer of buffalo milk in the whole world with yearly production of 59 million tonnes.

How do we make sure all the kids of India have regular access to milk ?
I believe we need to build a milk network. A network of people who provide kids in India with free milk. 250 ml of a day to each and every kid in India. There are about 35 crore children in India below 15 years of age. This may exclude those who do not need free milk. This leaves us with about 15 crore such children (assuming a 40-50% poverty). Bottom line is, how much it is going to cost us ? 15 crore children, 250 ml each, at Rs. 3/packet for 300 days is 900 * 15 = 13500 crore/year or $3 billion/yr.

How big or small is this number ?
It is small if you consider that defense budget of India is about $32 bn/year. or that the NREGA this year was 39000 crore or about $9 bn or that Mr. Mukesh ambani's new home costs about $2bn! At the end of the day if we can get 10000 companies to donate an average of 50 lakh and 10 lakh rich Indians (in India and world wide) to donate an average of Rs. 50,000/year, we can surely make it work. We should also be able to get some grants and funding from big donor agencies. Govt. funding this is also a reality. However, this is a massive effort.

Or

we can look at a completely distributed and volunteer based model in which people(or housing complexes) start donating milk to few kids in the neighbourhood. This way may be a little fragile to start with but could be more sustainable and empowering. To integrate this to the milk network we can build an online space where people running this leaf of the network can feed data back to the network, ask for monetary help & guidance and share experiences & data. I believe it would be important for this network to monitor statistics such as weight of kids, school attendance etc to make a strong case that such a network really works in uplifting the society and get funding. I also believe that kids who will benefit from this scheme would later in their life would be more compassionate and able citizens of our country. It goes without saying that these kids would surely feed the network when they become able.

For now I have started giving milk to my dhobi's 2 kids and plan to put 3-4 more such kids in the roaster! I plan to pursue this idea if I get like minded people so please ping me if you are interested.

Ruby: Convert numbers to Indian currency format using regex

10000.to_s.gsub(/(\d+?)(?=(\d\d)+(\d)(?!\d))(\.\d+)?/, "\\1,")

Works on decimals too

I fear the future

Where robots drive the cars and do house chores, individual privacy would be non-existent, poor & unskilled will not have a place in the world, medical care would be super expensive, everybody would drive a car, media will be powerful enough to topple a government if the government doesn't favour the media and study of history, languages, cultures etc would be deemed unnecessary.

Humanity as we know it would cease to exist. I fear this future!

Google building self driving cars!

The latest funny/frightening news from Google: Building self driven cars. Toyota prius running with help from cameras, radars, GPS and Google's massive data centers. How does it fit into the whole "organize the world's information" thingy ?

Even if you stretch it a mile it won't.

I think Google has distracted itself from it's original path of being everything information. It shows in things like this and efforts to sell phones. The problem with that is that the world's information is still not organized. Not even close. They have not made search any better than it was (sorry instant doesn't count). Won't it be better if they could answer simple questions directly ? or do better job at image search or catalog searching etc ? In fact the google maps itself is not fool proof which these cars depend on!