Higher ground of lending

THINK Micro Finance (MFI) and Grameen bank of Bangladesh comes to mind. Heard of SKS? Well they have replicated the same in India and are currently making an IPO to take this concept to the Upwardly mobile Urban Indian home.

There is a lot of debate on how to justify the concept of profit in a process that is basically one arising out of philanthropy. But is it really that simplistic a view?

Let us look at the social change being re engineered here:

1. Professional lenders against moneylenders

2. RBI oversight against none for moneylenders - makes it easier for NGO's to take up cudgels against unfair lending practices something which is non existent with the money lender.

3. Chance for the rural local entrepreneur to come out of generations of poverty and maybe just maybe take a fair shot at the emerging Indian dream.

4. Avoidance of exploitation - cases of money lenders taking people as bonded labour, human trafficking, child abuse etc was common practice - this should reduce over the next decade as companies like SKS spread their wings.

Personally I do not buy IPO's but this is one issue that needs support so go out there and subscribe. India's deliverance is not in the hands of the politicians but in the people's hands and the people have spoken by making micro finance a success story till date.

What is the support that is required from the RBI/ Govt?

1. Dont interfere other than what exists in the regulations currently for oversight.

2. Keep out the blood suckers like GS/ MS/ JPM etc by not allowing recourse to refinance for these MFI's other than Federal Govt agencies like NABARD, HUDCO etc and of course the RBI.

3. A separate ombudsman in each state who will liaise through the district collector so that the MFI's are not tempted to be become the new "moneylenders"

All in all I think the financial revolution in India is starting just about now. Jai Ho..

There's nothing more permanent than a temporary tax increase

A while back when crude prices were crossing all known levels and threatening to go beyond $200/ barrel, airlines came in with a "fuel surcharge" - guess what as crude prices are now at $72 these fuel surcharges remain!!

Similarly the government brought in temporary hike in rates of certain taxes to meet "social scheme costs" - these are today a permanent fixture.

The thing that the voting public needs to remember is that there is no free lunch and that the fiscal deficits of today have to be met by revenues generated in the "FUTURE". (unless of course you live in the American state of Vermont which is the only state that is not bound by any legislation to balance its books!!)

So get used to a regime of higher taxes and consequently higher prices for all goods and services. Also get used to seeing more "vice" businesses as these are the highest revenue grossers for the government. (Ironically this reflects on the voters taste to begin with). Dont be surprised if banned substances are allowed to be legally sold as long as the govt gets its share of the pie!!

So what can you as the voter do today to change the future? Start by balancing your books. Live within your means. Borrowing should be only for a house or for ones education. Cars, holidays and other "stuff" should be separately saved for.

For those "addicted" to plastic money - start using prepaid cards with zero possibility of credit on them.

Start a signature campaign to force the government to adopt a legislation to never run a deficit until 50% of all existing debts/ obligations/ liabilities of the govt are extinguished. (For the US that would amount to close to $4-5Trillion, For India that would be close to $400Billion)

Would this make life better as we know it - I dont know - but at least our children and grandchildren wont be cursing us when the country goes bankrupt one fine day!!