The Hindu, 10/09/05: Strengthen rural cooperative
credit structure, says Manmohan Singh
... The financial revival package (of Rs. 15,000
crores) for revitalising cooperatives would have to be
shared among the Centre, the States and cooperative
credit institutions. "States unable to provide their
share may be allowed to raise resources through market
borrowings or similar sources." ...
... Union Finance Minister P. Chidambaram said there
was a consensus on three of the eight major
recommendations: minimum capital requirement,
technical assistance and the implementation mechanism.
However, States had to amend their Cooperative
Societies Act to improve the situation.
Agriculture Minister Sharad Pawar said the
re-capitalisation formula would lead to certain
cooperative institutions being excluded but would not
close the door to a fresh institution being organised
or to amalgamation and mergers at the grass roots

PIB, 09/09/05: PM’s remarks at the interactive session
with state governments on revival of co-operative
credit structure:

Indian Express, Front Page, 10/10/05:
INDIA EMPOWERED TO ME IS Building world class
infrastructure, both social and physical
... We must engage many more of our people in the
economic mainstream, by giving them access to the
tools they need to participate in the nation’s
development. A key element of this process is access
to financial services for the under-served segments of
the population in both rural and urban areas...
(KV Kamath was at the party thrown for Bill Clinton by
Mulayam Singh Yadav)

--- on 31/08/05
--- Gita Dewan Verma <> wrote:

--- wrote:

This bandwagon started with..self-help groups
(SHGs), usually involving low-income women. ...
federations of SHGs...Corporates began tying up...
outsourcing some part of production activities to
them, and also saw them as good markets for
low-priced consumer products. ...
(MFIs) park their funds in banks... began


from banks, making them happier still. So now,
international financial institutions and capital
markets smell an opportunity to lend, recover and
The question is: what and where are these
microenterprises that support these elaborate
financial structures? What goods and services do
they make which the corporate sector is not


doing? Is it all just a financial bubble with very
little productive activity at the core? Or is it
hiding a very exploitative structure where the
actual producers are getting very little returns


their labour, exploited by the providers of credit
and buyers of their goods and services? ...

re the ET report poonam posted
A capital market for the poor,curpg-1.cms

along with another
Govt allocates Rs 40,000 cr for social schemes

So. govt puts in 40,000 cr into *social sector
schemes*. that presumably indicates expected surplus
spared at household level. USA foundation sees 30 -
60,000 cr potential for micro-mini loans. to me,
looks like hope of mopping-up!!

what I find very interesting is the desperate
insistence on *demand* for microfinance. the
capital-market item tells us that till 2004 end MF
*industry* had touched measly 1600 cr. they have
industriously at it for quarter century, which is
enough for actual demand to express itself even
without cajoling! and they have been at it with
investments and SJSRY type investments and sundry
other investments that insist saving-&-credit groups
empower women / communities; I was told SEWA even
enrolled while routing earthquake relief in Gujrat!
yet chaps commissioned by the USA foundation
potential demand of 20 to 40 times - on basis, it
seems, of keenness to service it!!

By way of demand side assessment, the item refers to
some poverty (or rather purchase power) estimate to
convey that 80% of Indian families are poor and
and says it is *now widely acknowledged* (must mean
that a couple of commissioned studies and Standing
Committee Report on SJSRY and what the PM ordered,
etc, have concluded on the right note that has been
intoned at a couple of seminars!) that MF *has
numerous families to lift themselves out of poverty*
(to which I say oh-really?show-me! I posit,
for the urban situation, that MF is incapable of
enabling lift-out-of-poverty and is not even
safety-net type succour in times of distress and is
exacerbating poverty at household level by wasteful
investments (go see Sewa Nagar where hawkers are
made to take MF for designer kiosks called
rehdis-without-wheels to which designer wheels are
being welded that may well be demolished; or recall
any of the many MF-ed in-situ enterprises that got
demolished in slum clearance) and at policy level
diverting attention from anti-poverty equity (rather
than new-fangled inclusivity) imperatives).

On shaky need-n-demand foundation is constructed a
tenuous line of argument that goes: (a) there is
demand for MF *services*; (b) this cannot be met by
traditional sources (which presumably include the
till-lately celebrated donor and state funded MF);
MF *industry is transforming rapidly. Professionally
managed, profitable leaders are emerging from a
fragmented marketplace of thousands of MFIs* (the
partners of the USA foundation are named!); (d)
unspecified *evidence* shows these *poverty-focused*
MFIs are *high growth* and *cost-efficient* and
*highest portfolio in sector* (usual I-am-so-g-o-o-d
hard-sell); (e) Yet these *leading* MFIs in India
having to *struggle* due to a lack of capital (how
unfair! how uncaring India! how naughty thousands of
MFIs making leading ones struggle!); (f) so banks
should stop retailing finance to the poor and
wholesale it to MFIs (leaders, not proles, among
MFIs); and (g) domestic capital market should
participate (noblesse-oblige?), to *facilitate*
the USA Foundation has set up a Capital Markets
in February 2005 (Aha! *that* explains the sudden
downpour of studies on micro-mini-monies this year!)

The 40,000 cr committed to *social-schemes* is down
the drain anyway since there is no worthwhile scheme
to absorb it (eg, rejecting the suggestion for
education funds including 2% cess to common school
system required by law in Delhi, MoHRD has submitted
in court that all that moolah is for other things).
Freudian slip in the social-schemes item /
press-release reveals intent of *maintaining* the
problem, on which is predicated the success of MFI
expansion to 30-60000 cr industry (with likely
multipliers in anti-social rather than social
considering that trade in debt-security is also on

Opportunities appear to arise now for the employment
guarantee bill (for which Ms Gandhi is currently
poster-girl with all congressis feeling obliged to
shout thankyou-madam on ugly hoardings all over the
place that urban-aesthetics walahs are not
about). They could commission more tripe to figure
how to make MFIs and ancillary *industry* and also
other intermediation *industry* labour-intensive!

I am not economist / economist-planner. but I am
qualified planner specialised in housing and the
urban-poverty circus was born out of distorting
low-income housing interventions at the time I was
Senior Fellow in HSMI/HUDCO handling that research
training area. The particular distortion was very
central to my reasons for quitting the purportedly
premier urban R&T institution that had begun to
endorse rather than inform policy. And I have seen
SHGs up close through quick-and-dirty qualitative as
well as good old quantitative research methods (I am
qualified researcher), and nit-picked SHG
in my training workshops (I am qualified trainer).



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