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Showing posts from November, 2012

Understanding Savings Monitors

In January this year, four of us made our way into a little hamlet called Beerasandra, in Kolar District in Karnataka. This was to be the first Pilot Village of the Savings Monitors Project. We had already identified individuals who would be a part of our Saver Sample and those who would be part of our Monitor Sample in this village. One of the persons we were interviewing, Gowrappa was part of our Saver sample. Beerasandra has a small temple where the village folk often gather. Gowrappa is a priest and has been working there for several years. When we explained our project to him and told him he would have to give us a 6-week Savings Goal which he should try and meet in this time period, his answer was Rs 50. 

We told him we would open a bank or post office account if he didn’t have one and he would have to save that money in this account, Gowrappa was very happy. He didn’t have any account and was glad that we would be bearing the expenses of opening the account as well as helping wi…

Building a Microfinance Sector that is Accessible to Persons with Disabilities

2:02: We begin with: Harisha Varatharajah from Handicap International. Attitudinal barriers to people with disabilities in microfinance. Handicap International (FRENCH, NOT ABLEIST) tries to find a sustainable approach to provide microfinance to the differently abled. They try to integrate access into the mainstream MFIs, not set up a different system.
2:03: They set up a program in Gujarat, to help people increase savings & credit access, encourage MFIs to stop being ableist. Disability is just not physical/superficial, there are so many ways, and so many skills differently abled people have! So true.
2:04: MFIs they worked with have changed…some changes are verifiable with data, others less so (higher self esteem). Did they randomize? Did they just do a post-intervention study? RANDOMIZE GUYS,
2:05: Uh oh, ATTRITION BIAS STRIKES AGAIN! Two NGOs dropped out to international organizational “issues”.

Leveraging the Cooperative Infrastructure: Potential for Delivering Microfinance Services

11:47: Cooperative banks were the first; NABARD promotes connections between SHGs & cooperative banks. We’re trying to get people to open accounts with banks.
11:48: Cooperative banks are involved in the MFI sector; SHGs 15% accounts are in coop banks in the country. WB, AP, Karnataka, Maharashtra have taken the lead, but it’s not enough. There are 14,000 coop bank branches;  including urban branches would be 18,000, and a huge number of cooperative federations, MACs; if all of them are involved, there’s great potential available for MFI
11:50: 3% => 6.84% NPA level has risen; we should be keep it low :/
11:51: MFIs borrowed from coop banks in the 90s. NABARD encourages this?
11:52: Most banks go into CBS in March 2013
11:54: The Rabbobank delegate is talking about her take on cooperatives.

What Does the Poor Need?: Aligning Products and Services

1:41: CGAP lady Alexia from CGAP starts. “Echo system of providers that meet this range of needs”
1:45: There is a whole audience participation sequence to illustration that demand is mysterious—we don’t always know what customers want.
1:48: Shout out Naciket Mor! Customizing products for customers!
1:49: It’s a market problem: we don’t know the size/scope of the market for financial services. That's why we need research, folks. 
1:50: Fast moving consumer goods—P&G does a really good job of catering to demand. “connect and develop approach”
1:52: Silicon Valley shout out!  Google is creative! Hell yeah it is!  #bayarea

ACCESS Conference: Reducing Vulnerability of the Poor -Health Insurance

-500 million people have no access to specialist care as 80% of specialists live in urban areas. 40% of hospitalization expenditure of the poor is managed by borrowing money or by selling assets.
-Health insurance has penetrated only 3% of population due to high premiums, poor service delivery, and exclusion of diseases.
-Health insurance schemes in India include state schemes (for tertiary care-expensive illnesses) and RSBY (secondary care), which is heavily utilized.
-Use of technology (hand-held/mobile devices) are a good investment because they become a source of data and can be used to prevent fraud.
-Dr. Arjun (of SAS Poorna Aarogya Healthcare)  is a surgeon and shared a personal experience. While he was operating, he was called out to help a 3 year old girl who had come in for emergency care. The girl's parents earned Rs. 60/day and the consultation fee was Rs. 100 (or almost 2 days of labour). When she was diagnosed, the parents didn't have enough money to buy the appropri…

Microfinance India Summit 2012: “Financial Streams Dry Up!”

Behind the slightly catastrophic title of one of this morning’s break-up sessions stood a very interesting problematic. Indeed, the panel conducted by Vineet Rai, an equity investor specialized in microfinance investments, was set to address three questions that are fundamental to the understanding and future of the microfinance industry: Where had the funding drought that affected MFIs following the October 2010 crisis come from?And most importantly: How did we deal with it, and what lies ahead in terms of funding for micro-credit providers?

These questions were successively taken on by six high-rolling panelists: (1) CS Ghosh, the Chairman and Managing director of Bhandhan Services,(2) Dr. Alok Pande, Director of the Department of Financial services at the Ministry of Finance, (3) S K V Srinivasan, ED of IDBI Bank, (4) P K Saha, Chief General Manager of SIDBI, (5) S Sengupta, CEO of Arohan Financial Services and (6) Prashant Thakkar, Global Business Head, Microfinance, at Standard Ch…

Banking on Self Help Groups: What Can We Learn For Its Second Stage Strategy

11:15: SHGs introduction by “Srinivasan”. This is a panel discussion, featuring all men, which is pretty ironic given that SHGs are primarily intended for women. This guy is really optimistic about this session, which is an hour and a half long. The video quality makes the panel discussion look like a silent film.
11:16: “Ajay” has written a book on SHGs, and is proceeding to give a speech. He’s starting with a “statement”. What ever happened to the SHG model? I don’t know Ajay, but I think we’re going to find out.
11:18: “53% of rural households have been covered by SHGs” This number sounds really, really large. What does coverage even mean? Now he’s saying coverage is 200% in some states and union territories. I may not know a lot of math, but I know that you can only cover 100% of an area… “In some ways the numbers don’t square”.
11:19: He’s citing some study which found only 51% of SHG households were poor, across all types of SHGs. Though logically, if you just study SHG membe…

SPARK Presentation: Savings Products - Understanding What Works

In this Spark session, Nikhil & Kenny throw light on how behavioral economics and  observations from studies on marketing and technology can be used in designing better savings products for lower income communities. The session also highlights features of savings products from impact evaluations around the globe.

Look out for CMF's upcoming video documentary on Savings next month!

Understanding Chhattisgarh’s livelihood landscapes through PRADAN’s initiative

In a series to understand the ground realities of livelihood opportunities for the poor, CMF is currently interviewing a set of recognized practitioners. In our first episode, we feature Saroj Mahapatra, Programme Director, PRADAN - Chhattisgarh. PRADAN is a non-government, non-profit organization which works across seven of the poorest states in India with more than 2.68 lakh rural families to improve lives of the rural poor, by instigating systems that expand sustainable livelihood opportunities.
Chhattisgarh is one of the poorest Indian states according to the measures defined by the Human Development Index (HDI). PRADAN aims to organize women from rural families into Self Help Groups to enhance their sense of agency and livelihood capabilities for developing secured livelihood opportunities.
Agro-climatically, the entire state of Chhattisgarh falls in the category of Zone VII (Eastern plateau and hills zone) and can be subdivided into three sub agro-climatic zones. North and South C…

Is Safe Box all you need to save towards the next savings goal?

Helping the poor save more towards a specific goal, could be as simple as providing them a safe, secure device for savings – something as simple as a Piggy Bank or a Safe Box.Sounds too simple? 

Based on a RCT conducted by Dupas and Robinson (2012) in Western Kenya, providing the poor a Safe Box increased informal savings for health services by as much as 66%, compared to the comparison group. The experiment took place in Western Kenya with 113 ROSCA (Rotating Savings and Credit Association – where a group of individuals meet for a set period of time to save and borrow) participants, who were randomly assigned to treatment or control. 

Analyzing the BC Model (Part IV) – Policy Recommendations to Improve its Functionality

[Terminology: Banking Facilitators (BFs) disseminate education on bank products and collect documents from clients on the bank’s behalf, along with offering a host of other products.]
Our first post in the series discussed the significant advantages of using information and communications (ICT) technology based models for promoting financial inclusion and in our second and third posts, we discussed reasons for the low usage of No-Frills accounts and the problems faced by each tier in the BC model itself. In the last post in this series, we’ll discuss some policy recommendations to improve the functionality of the BC model and improve its financial viability.These policy recommendations aim to solve operational problems with an objective to improve the functioning of BCs and make the model sustainable.

The demand-walah argument that the take-up of the model could be low simply because of a lack of demand for formal savings from the poor may be countered with a slightly paternalistic, sup…

Financing higher education in India - Education Loans can never be the only solution

In my previous blogs, I have spoken in great length about the need for public expenditure in higher education. In this section, I would like to highlight one of the most preferred options for financing higher education in India, namely ‘Education Loans’.
Off late, education loan has been one of the most popular sources of financing higher education in India.

Education loans are provided by both public and private banks under the following structure:

Loans for 4 lakhs INR or less do not require any kind of collateral by the bank.Loans for more than 4 lakhs INR are given by banks only upon provision of collateral by the lender.

Problems with Financing Higher Education in India

The debate surrounding around the issues with financing higher education is primarily because ‘education’ is considered to be a quasi- public good. It is a public good because the benefits out of it largely affect society through human capital formation and knowledge. However, it is also considered to be a private good because it provides a platform for the individual to generate regular income for themselves through their skills. This theoretical divide in the concept of education has led to policy makers and practitioners have different perspectives about financing higher education. Historically, the financial burden of education was borne by both State and Central Government. But, as pointed out previously, the amount of expenditure spent on education sector by the Government has been reducing over the years, which has created a huge investment gap. This trend in public expenditure has serious policy implications. Firstly, the reduction in public expenditure has forced institutions,…

How is higher education financed in India?

Within the economics literature, education is considered to be one of the classic public goods (Grace, 1989). Public good is a good where benefits of engaging in the activity are accrued not just to the individual, but to society at large and thus is susceptible to under/over provision.For example, an informed and educated citizenry can engage more ably in the democratic process, ultimately leading to a more effective government.Unfortunately, only some of this benefit is accrued to the individual. Left to their own devices, individuals would systematically underinvest in this activity from the perspective of greater society, ultimately leading to worse outcomes for all.In a situation where the market-based solution is essentially guaranteed to deliver an inefficient allocation of resources, it is unsurprising that the central Government of India (GOI) considers education to be one of the country’s key priority sectors. 

As a result, the GOI has spent a significant amount of time, mone…

HiH Self-Help Group Training - Dreaming Big!!

CMF Picture: HIH Trainer explaining the rules of the game I recently attended a self-help group (SHG) training session organised by Hand in Hand (HiH). Before getting into the specifics, let me give you a little more insight into the training sessions provided by HiH. HiH is an NGO which provides a range of services to the poor and creates sustainable impact through community driven development programs. One such effort from HiH has been to offer microfinance loans to SHG’s to empower their lives and bring a positive change in their livelihoods. However, HiH believes that providing loans alone will not serve the purpose if the SHG members do not know how to utilise these loans effectively. To bridge this gap, HiH provides extensive training to SHG’s in order to make them more capable to put these finances into good use.

Informally Successful? - A Fish-seller's Tale

Here is an interesting tale of savings from a fish-seller I have known for quite some time. His reliance on informal savings is interesting as it has helped him supplement not only his livelihood but also enhance it further. Earlier, this year, he bought a house worth Rs 24 Lakh.  
(Picture Courtesy:, solely representative of the story)

Data vs Ideology - what works for the poor?

Nate Silver –the man who challenged American political pundits to follow math- not their guts. I might sound full of pride- but this is probably that time when all researchers are probably finding some Nate Silver in themselves.
Picture Source: Vanity Fair

To Commit or not to Commit: Perspectives from a Research Paper

As part of the savings month, we at CMF have also been reading and discussing various academic papers. Last week, I happen to lead the discussion on a paper that dealt with the aspect of commitment savings. Given that farmers or the rural poor do not usually engage in formal savings products due to various reasons. It is interesting to note that various studies lead to the point that there are many takers for such products. Understanding the psychology and behaviour of the rural poor is the key to understanding why the take up of formal savings products loses to informal mechanisms.
(Picture Source: Wikimedia Commons, just for representation purposes)

Improving public welfare programs through village participation

In my last post, I raised questions about the measures to reduce corruption in a program of immense scale like MNREGA. This week, I want to shift the focus a little by trying to point out where exactly one form of corruption is likely to occur. With it, I would like to cite an innovative approach from an NGO that improved transparency and efficiency in the program at a local level.
As clichéd as it may sound, information campaigns, when spiced up with necessary ingredients, might serve as a powerful tool to raise public awareness. The pros and cons of adopting participatory measures like awareness and empowerment of local villagers, especially in ensuring proper delivery of public service goods has been highlighted in many academic studies including Stiglitz (2002), Bardan and Mookherjee (2006), and the World Development Report (2004) which emphasizes on “putting poor people at the center of service promotion”. Olken (2007) uses two different forms of awareness drives in Indonesia in a…

Shanti’s Savings Story – Moving from informal finance to formal finance

My name is Shanti and I live in 15 kms outside Varanasi. I have a small family with 3 children – Ruby who is 8, Rahul who is 7, and Rishu who is 1.5 years of age. My husband Kisna, is a Rickshaw puller, and I work in the neighborhood cleaning houses.  Our total household income is around Rs. 6,000 per month as we struggle to make our ends meet.  Six months ago a lovely madam, named Rita Madam came from an NGO and told us about the importance of saving – little by little, and sooner than later. Rita Madam gave us other useful advice about what savings products exist for low-income families like ours, who do not have easy access to banks in the area; now I am finally on my way to managing my money better.

Why can't Saraswati save? Understanding her dilemma!

Saraswati- an urban maid making Rs. 7,000/ month dreams of sending her children to college one day. Whenever asked why she is working, she proudly replies, “so that my children get better education”- yet- she fails to save a lump sum amount of Rs. 10,000 that she needs every year for her children’s tuition fees.

Who are we saving? What are we saving?

"I don't earn enough to save!", "I have too many debts!", "I think savings require a huge amount to be set aside" ... How often do one come across these statements? In my experience as well as from what I have heard from my friends in the city, be it just college graduates or MBA graduates, there are often many excuses as to why savings is a difficult albeit a misunderstood affair. Is the case same for the poor? Why are poor people not using formal savings products? What or where does the problem lie?

At IFMR, I recently made a presentation on Savings: Perspectives from various studies as part of the Savings month at CMF. This November will witness the CMF blog dish out various posts/articles on this theme. We at CMF will be emphasizing on how studies on this theme (as well as stories/anecdotes from the field) has helped us understand the psychology of the poor when it comes to savings and what bearing does this have on the future. Though the presentat…

Can “Text Messages” from the Bank help you save more?

Barring a few committed ones, we all struggle to save more towards our future expenses, vacation expenses, retirement savings, kids’ college tuitions and so on. Reasons cited by literature range anywhere from lack of self-control, lack of attention, and time inconsistent preferences.

As Karlan, McConnell, Mullainathan and Zinman (2011) state, people are able to adequately predict savings needed for regular consumption, but usually forget or under-save for lumpy expenditures in future such as an unplanned concert ticket. This statement assumes that people have perfect knowledge about their future income, and people are more likely to forget about their future expenses than their future income - calling this behavior a lack of attention.

When people overlook such lumpy expenses, they over-consume today; and to meet future lumpy expenses, they either tend to forgo their regular expenses, or borrow. Though it may seem that such small lumpy expenditures do not matter in the large scheme …

Analyzing the BC Model (Part III) Why isn't it Working? - Assymetry Between the Model and Agent/Client Needs