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To study the Scope of Information Technology And Microfinance in enhancing the Pace of Rural Development
SUBMITTED BY: Name: _Rohan Trikha
MBA-IB (2008-2010) Enrollment No. : A1802008653

FACULTY GUIDE Ms. Richa Goel Professor AIBS



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No task can be completed without proper guidance and encouragement. It gives me a great pleasure to express my deep sense of gratitude and reverence to every person who created a congenial atmosphere for successful completion of this research. I would like to express my high regards, my sincere gratitude to my faculty mentor Ms. Richa Goel for her able guidance, continuous support and cooperation throughout my project, without which the present work would not have been possible.

Signature (Student)

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This is to certify that Rohan Trikha, student of MBA-IB 2008-10, AMITY INTERNATIONAL BUSINESS SCHOOL, NOIDA, has submitted this DISSERTATION titled: Scope of Information Technology And Microfinance in enhancing the Pace of Rural Development. This is the original work done under my guidance, towards the partial fulfillment of POST GRADUATE DEGREE IN INTERNATIONAL BUSINESS. This work has not been published or shared with any educational institutions or university, for any consideration. I gladly accept the work done and recommend the same.

Signature (Faculty Guide) MS. Richa Goel

Signature (Student)

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Page No
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14 12 12 14

1. Executive Summary. 2. Introduction.................................................................

2.1 Micro-Finance. 2.1.1 Definition of Micro Finance .. 2.1.2 Demand of Micro Finance Services In India. 2.1.3 Demands for Credit

2.1.4 Mainstream Micro Finance Institutions.. 17 2.1.5 Alternative Micro Finance Institutions 17 2.1.6 The Problems Associated with Micro- finance. 17 2.2 Information Technology.. 19 2.2.1 Role of ICT in Rural Development. 19 2.2.2 Information Technology - Need of the Hour Rural Development... 20

3. Research Methodology


3.1 Primary Objectives 24 Studying the linkage between self help Groups and Microfinance in India. Analyzing the Mobile telephony in economic development. Analyzing is increased connectivity in India an Impact of Information and communication technology development. Role of IT in the Growth of GDP of India. 3.2 Secondary Objective 24 Analysis of Indian Rural Industry, study the impact of Information technology and Micro-finance and recommend measures to for future growth. 3.3 Hypothesis. 24 3.3.1 IT is enhancing the pace to learning and reducing the Illiteracy 3.3.2 IT is increasing connectivity all across India 3.3.3 Role of IT in the Growth of GDP of India 3.3.4 Mobile Telephony is leading to economic development. 3.4 Research Design. 24 3.5 Limitation.. 25 3.6 Data Collection. 25 3.6.1 Secondary data.. 25

4. Critical Review of Literature.. 26

4.1 Microfinance In India Issues and challenges. (By Y.S.P.Thorat) 4.2 Can Micro Finance Empower Women........................... (By Ranjula Bali Swain) 4.3 Information technology and rural development in India.. (By Nirvikar Singh) 4.4 The Role of Microfinance in Rural Micro-enterprise Development 27 29 31 33

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(By Prof. Dr. Hans Seibel) 4.5 Information Technology - Need of the Hour Rural Development (By Prof. Manoj dayal).. 34 4.6 Micro Finance in India 35 4.7 Role of Rural Organizations in Rural Development (By : Dr. Najamuddin).. 36 4.8 The Role of ICT in Governing Rural Development (By Anita Kelles-Viitanen) 37 4.9 The Role Of Mobile Phones In Sustainable Rural Poverty Reduction 38 (By Asheeta Bhavnani) 4.10 ICT and e-Governance for Rural Development 39 (By Prof. T.P. Rama Rao) 4.11 Rural microfinance and employment 40 (By: Isabelle Gurin)

5. Sector Profile 41
5.1 Micro-Finance 5.1.1 Introduction 5.1.2 The Evolution of the Micro-Finance Industry 5.1.3 Global Acceptance of Microfinance 5.1.4 SHG - Bank Linkage Programme 5.1.5 Challenges associated with SHGs 5.2 Information Technology 5.2.1 Introduction 5.2.2 Emerging Trends in IT Industry 42 42 45 47 51 52 55 55 55

6. Growth Drivers
6.1 6.2 6.3 6.4 6.5 Credit Demand of the Poor Poor can save Borrowing by SHG members Government policy and support Institutional credit and poverty

58 58 59 60 60

7. Major Micro Finance Instruments and Products 62

7.1 The core product types................................................... 7.1.1 Group lending.................................................... 7.1.2 Individual lending .............................. 7.1.3 A conceptual framework for microcredit Methodologies 7.2 Aspects of product design............................................. 7.2.1 Credit versus voluntary savings........................ 7.2.2 Dynamic incentives........................................... 7.2.3 Lending to women............................................. 7.2.4 Frequent transactions and short loan terms..... 7.2.5 Matching rates to costs..................................... 7.2.6 Limited product offerings and streamlined Procedures.. 7.2.7 Forced savings.................................................. 7.2.8 Credit life insurance.......................................... 63 63 69 70 74 75 77 79 80 81 82 83 84

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8. Policies & Regulatory framework

8.1 Relating to Micro Finance 8.1.1 Policy Framework for Micro finance system . (a) Self Regulation and Market Discipline. (b) Regulation through External Bodies. 8.1.2 Micro-Finance Institutional Structure in India.. (a) Mainstream Micro Finance Institutions (b) Alternative Micro Finance Institutions. 8.1.3 Key Focus Areas of Micro Finance Initiatives. 8.1.4 Global Targets of Micro Finance .. 8.1.5 Micro-finance Programmes. 8.2 Relating to Information technology............................ 8.2.1 Framework implementing IT in Rural Development. 8.2.2 Rural Development programmes

87 87 87 90 92 93 93 94 94 96 100 100 108

9. Key Players
9.1 Government of India 9.1.1 Protector and Provider Roles.. 9.1.2 Promotional Role 9.2 Department of Information Technology. 9.2.1 Vision 9.2.2 Mission 9.2.3 Objectives. 9.2.4 Functions

138 139 141 142 142 142 143 143

10. Findings & Analysis 11. Recommendations, Suggestions and conclusion... 11.1 Recommendations.. 11.2 Suggestions 11.3 Conclusion.. 12. Case studies............................................................
Case studies 1: Spread of the Self-Help Groups Banking Linkage programme in India Case studies 2 Micro finance The new mantra of rural Finance to reduce poverty . Case studies 3 Akshaya An IT dissemination Project.. Case studies 4 Kaveri an E-Governance Project Case studies 5 Implementation of e-Procurement Exchange for Government of Andhra Pradesh. Case studies 6 Nagarpalika in Gujarat...... Case studies 7 E-Agricultural Marketing (EKVI)

145 155 156 159 160 161

162 164 168 173 178 180

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Case studies 8 Lokvani-An effort to empower citizens.. Case studies 9 e-Kosh- Computerization of the Treasury Department..

184 186

13. References and Bibliography.

13.1 13.2 13.3 13.4 13.5 Websites Reports.. Research papers E- Articles. Case studies

190 190 191 191 192

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Chapter 1 Executive Summary

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Executive Summary
The Following is about the study conducted on the Scope of Information technology and Micro finance in enhancing the pace of Rural Development. India has been a welfare state ever since her Independence and the primary objective of all governmental endeavors has been the welfare of its millions. The policies and programmes have been designed with the aim of alleviation of rural poverty which has been one of the primary objectives of planned development in India. It was realized that a sustainable strategy of poverty alleviation has to be based on increasing the productive employment opportunities in the process of growth itself. Elimination of poverty, ignorance, diseases and inequality of opportunities and providing a better and higher quality of life were the basic premises upon which all the plans and blue-prints of development were built. Rural development implies both the economic betterment of people as well as greater social transformation. In order to provide the rural people with better prospects for economic development, increased participation of people in the rural development programmes, decentralization of planning, better enforcement of land reforms and greater access to credit are envisaged. So this study is regarding the role played by the Information technology in rural development. Information and knowledge is essential for the development and growth of any economy. In spreading the knowledge and Information, IT plays a major role. IT in the present scenario is has the following role. Online- Education: Various E-learning initiatives are providing education to a large number of populations. Increasing the connectivity with in and across the country Amity International Business School 9

Making different sector more efficient and productive Globalization Increasing Awareness Raising the Standard of living Health care Micro Finance can be defined as any activity that includes the provision of financial services such as credit, savings, and insurance to low income individuals which fall just above the nationally defined poverty line, and poor individuals which fall below that poverty line, with the goal of creating social value. The creation of social value includes poverty alleviation and the broader impact of improving livelihood opportunities through the provision of capital for micro enterprise, and insurance and savings for risk mitigation and consumption smoothing. Micro Finance help in rural development in the following ways Creating entrepreneurship Mobilizing the savings Employment generation Poverty Alleviation So, Information Technology and Micro finance are playing very significant role in enhancing the pace of rural development.

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Chapter 2 Introduction

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Mahatma Gandhi famously noted that India lives in its villages. If the village perishes, India will perish too. This truism about the social, economic and political development of rural areas is valid even today. Since a majority of our population lives in the villages, it is important that people in rural areas should have the same quality of life as is enjoyed by people living in suburban and urban areas for the balanced growth of the nation. Further there are cascading affects of poverty, unemployment, poor and inadequate infrastructure in rural areas and urban centers causing slums and consequential social and economic tensions being manifested in economic deprivation and urban poverty. This causes major imbalances in the society, thus hampering development. Hence rural development, which is concerned with economic growth and social justice, improvement in the living standard of the rural people by providing adequate and quality social services and minimum basic needs, becomes essential. In this regard, central governments policies and programs have laid emphasis not only on poverty alleviation, generation of employment and income opportunities but also provision of infrastructure and basic facilities to meet the needs of the rural poor. For realizing these objectives, selfemployment and wage employment programs continued to pervade in one form or the other. As a measure to strengthen the grassroots level democracy, the government is constantly endeavoring to empower Panchayati Raj Institutions or PRIs in terms of functions, powers and finance. Gram Sabhas, NGOs, Self-Help Groups and PRIs have been accorded adequate role to make participatory democracy meaningful and effective. Needless to stress further that since 70

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percent population of the country lives in the rural areas, lot of effort are required to encourage the development of these areas in order to reduce imbalances in the overall development of the country. Although rural development is given a high priority in all government proposals, the progress made is extremely slow and unsatisfactory. In this paper an effort has been made to understand the process of functioning of rural organizations in implementation of government proposals and emphasize on the role played by them in the success of these programs. The study has brought forward a number of lacunae in the system, which have been carefully examined and suggestions have been made to overcome the same.

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2.1.1 DEFINITION OF MICRO FINANCE Micro-finance refers to small savings, credit and insurance services extended to socially and economically disadvantaged segments of society. In the Indian context terms like "small and marginal farmers", " rural artisans" and "economically weaker sections" have been used to broadly define microfinance customers. The recent Task Force on Micro Finance has defined it as "provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas, for enabling them to raise their income levels and improve living standards". At present, a large part of micro finance activity is confined to credit only. Women constitute a vast majority of users of micro-credit and savings services. 2.1.2 DEMAND OF MICRO FINANCE SERVICES IN INDIA Due to its large size and population of around 1000 million, India's GDP ranks among the top 15 economies of the world. However, around 300 million people or about 60 million households, are living below the poverty line. It is further estimated that of these households, only about 20 percent have access to credit from the formal sector. Additionally, the segment of the rural population above the poverty line but not rich enough to be of interest to the formal financial institutions also does not have good access to the formal financial intermediary services, including savings services. A group of micro-finance practitioners estimated the annualized credit usage of all poor families (rural and urban) at over Rs 45,000 crores, of which some 80 percent is met by informal sources. This figure has been extrapolated using the numbers of rural and urban poor households and their

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average annual credit usage (Rs 6000 and Rs 9000 pa respectively) assessed through various micro studies. Credit on reasonable terms to the poor can bring about a significant reduction in poverty. It is with this hypothesis; micro credit assumes significance in the Indian context. With about 60 million households below or just above the austerely defined poverty line and with more than 80 percent unable to access credit at reasonable rates, it is obvious that there are certain issues and problems, which have prevented the reach of micro finance to the needy. With globalization and liberalization of the economy, opportunities for the unskilled and the illiterate are not increasing fast enough, as compared to the rest of the economy. This is leading to a lopsided growth in the economy thus increasing the gap between the haves and have-nots. It is in this context, the institutions involved in micro finance have a significant role to play to reduce this disparity and lead to more equitable growth. 2.1.3 DEMAND FOR CREDIT In terms of demand for micro-credit, there are three segments: At the very bottom in terms of income and assets, and most numerous, are those who are landless and are engaged in agricultural work on a seasonal basis, and manual labourers in forestry, mining, household industries, construction and transport. This segment requires, first and foremost, consumption credit during those months when they do not get labour work, and for contingencies such as illness. They also need credit for acquiring small productive assets, such as livestock, using which they can generate additional income.

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The next market segment is small and marginal farmers and rural artisans, weavers and those self-employed in the urban informal sector as hawkers, vendors, and workers in household micro-enterprises. This segment mainly needs credit for working capital, a small part of which also serves consumption needs. In rural areas, one of the main uses of working capital is for crop production. This segment also needs term credit for acquiring additional productive assets, such as irrigation pumpsets, borewells and livestock in case of farmers, and equipment (looms, machinery) and worksheds in case of non-farm workers. This market segment also largely comprises the poor but not the poorest. The third market segment is of small and medium farmers who have gone in for commercial crops such as surplus paddy and wheat, cotton, groundnut, and others engaged in dairying, poultry, fishery, etc. Among non-farm activities, this segment includes those in villages and slums, engaged in processing or manufacturing activity, running provision stores, repair workshops, tea shops, and various service enterprises. These persons are not always poor, though they live barely above the poverty line and also suffer from inadequate access to formal credit. One market segment, which is of great importance to micro-credit is women. The 1991 Census figures reveal that out of total 2.81 million marginal workers, 2.54 million were women and their further break-up shows that out of a total of 2.67 million rural marginal workers, 2.44 million were females. Further, many more women were willing to work. This has been corroborated by the results of a survey done by the National Sample Survey Organization (NSSO), 43rd round, which has revealed that there is a vide variety of work which rural women combine with household work.

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In the NSSO survey it has also been estimated that a large percentage of rural women in the age group of 15 years and above, who are usually engaged in household work, are willing to accept work at household premises (29.3 percent), in activities such as dairy (9.5 percent), poultry (3 percent), cattle rearing, spinning and weaving (3.4 percent), tailoring (6.1 percent) and manufacturing of wood and cane products etc. Amongst the women surveyed, 27.5 percent rural women were seeking regular full-time work, and 65.3 percent were seeking part-time work. To start or to carry on such work, 53.6 percent women wanted initial finance on easy terms, and 22.2 percent wanted working capital facilities, as can be seen from the table below: Source: (Table no. 1)

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2.1.4 MAINSTREAM MICRO FINANCE INSTITUTIONS National Agricultural Bank for Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), Housing Development Finance Corporation (HDFC), Commercial Banks, Regional Rural Banks (RRBs), The credit co-operative societies etc are some of the mainstream financial institutions involved in extending micro finance. 2.1.5 ALTERNATIVE MICRO FINANCE INSTITUTIONS NGOs, which are mainly engaged in promoting self-help groups (SHGs) and their federations at a cluster level, and linking SHGs with banks, under the NABARD scheme. NGOs directly lending to borrowers, who are either organized into SHGs or into Grameen Bank style groups and centres. These NGOs borrow bulk funds from RMK, SIDBI, FWWB and various donors. MFIs which are specifically organized as cooperatives, such as the SEWA Bank and various Mutually Aided Cooperative Thrift and Credit Societies (MACTS) in AP. MFIs, which are organised as non-banking finance companies, such as BASIX, CFTS, Mirzapur and SHARE Microfin Ltd. 2.1.6 THE PROBLEMS ASSOCIATED WITH MICRO-FINANCE Borrower Unfriendly Products and Procedures With a majority of the customers being illiterate, and a majority of them needing consumption loans and a majority of them requiring high documentation and collateral security, the products are not reaching the rural poor. Inflexibility and Delay Amity International Business School 18

The rigid systems and procedures result in lot of time delay for the borrowers and de-motivate them to take further loans. High Transaction Costs, both Legitimate and Illegal Although the interest rate offered to the borrowers is regulated, the transaction costs in terms of the number of trips to be made, the documents to be furnished etc. plus the illegal charges to be paid, result in increasing the cost of borrowing. Thus, making it less attractive to the borrowers. Social Obligation and not a Business Opportunity Micro-finance has historically been seen as a social obligation rather than a potential business opportunity. Financing to Alternative MFIs NABARD Act does not permit them to refinance any private sector FI and do any direct financing (NABARD's direct lending to microfinance NGOs so far has been out of donor funds), similarly SIDBI Act restricts it from extending loans to the agricultural and allied sectors, whereas many of the members of the self help groups are engaged in such activities. Legal and Regulatory Framework The policymakers feel that farmers and poor people need low interest and subsidized credit. Thereby we have regulated interest regime for the loans up to Rs 25,000 and Rs 2,00,000/- with an interest cap of 12 percent and 13.5 percent respectively. They believe that poor cannot save, they are unwilling to repay the loans, and the administrative costs of servicing them are high.

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Also small loans have been used as a tool for disbursing political patronage, undermining the norm that loans must be repaid. Thus the mainstream institutions feel that these loans are risky, difficult to serve and have a low or negative net spread. The Regional Rural Banks Act does not permit any private share holding in any RRBs, and the Cooperative Act of all states do not permit district level co-operative banks to be set up except by the state government. The result of these two laws together is that rural credit has been a monopoly of state owned institutions. 2.2 INFORMATION TECHNOLOGY 2.2.1 THE ROLE OF ICT IN RURAL DEVELOPMENT There are many examples about the role of ICT in strengthening rural livelihoods, providing market information and lowering transaction costs of poor farmers and traders. One of them is the Grameen Bank. iGrameen Bank, best known as a micro-credit institution, has also pioneered in ICT related activities with the poor. As poor people are often unaware of their rights, entitlements and the availability of various government schemes and extension services, ICT can also improve their access to the information they need. Through info kiosks or with the help of mobile phones farmers can access information on market prices or on extension services. Timing is often crucial when it comes to the sale of produce. Workers can also get information on available jobs and minimum wages. In a tribal district in Madhya Pradesh, in India the most commonly used services related to various grievances, market information and land records:

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The Gyandoot community network, aimed at creating a cost effective, replicable, economically self-reliant model for taking benefits of Information Technology to the rural population, is an intranet network using Wireless in Local Loop (WLL) technology to set up in 5 blocks with 21 kiosks, each catering to about 15-20 villages in tribal Dhar district in Madhya Pradesh. The success is largely due to targeting the information interest of the people: rates of agriculture produce, land record rights, computer training, caste certificates, online public grievance re-dressal, health services, e-mail, rural e-auction, matrimonial alliances, information on government programmes, information for children, online employment exchange, availability of applications for jobs, local weather report, e-newspapers etc. Between January 2000 and June 200l, 68500 villagers used various services. The most commonly used services were grievance re-dressals (41%), market rates (25%), land-records (20%). Interestingly, one out every six users of the network was illiterate with no knowledge of reading or writing. It is a disappointment that only 13 % of users are women. 2.2.2 Information Technology - Need Of The Hour Rural Development Information Technology is today becoming as important as roti, kapra, aur makan(bread cloth and house). In 40s people used to believe in secrecy of information. But in this new millennium, the concept is totally reserved. Now we like to share the information .Information is thus emerging as more and more power. Studies confirms that this field confidently predict that the poverty line will no longer be measured in terms of money, but in terms of information .This study examines the evolution of technology which is responsible for wide spread penetration of computer technology in to the social fabric.

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Primarily the need of efficiency in complex organizations led to greater to greater demand for availability of accurate and timely information. Information technology responds to this challenge. As rural development is concerned information technology has played a vital role. The SITE of India are palpa experiment of Indonesia are glaring examples of their rural upliftment. The SITE demonstrated the potential of satellite system to give a geographically and socio-economically diversified population, access to a wide range of information on agriculture, health nutrition and education. On the other hand the Chennai experiment on computer -aided agriculture extension system of M.S. Swaminathan research foundation is an innovative approach designed to test the relevancy of NITs under India conditions. In this experiment, the information shop, which is located in the village, collects the localized agricultural information through computerized networks and disseminated through electronic bulletin boards, video cassets and radio to formers. In addition computerization of rural information system projects (CRISP) in Gujarat was launched by the govt of India to test the feasibility of computerization of DRDAs for an effective implementation of IRDP.a case study conducted by Sshirin Mdon on CRISP showes that the introduction of microcomputers resulted in more empowerments among rural administrations. On the other hand ICAR has proposed a plan to modernize its agricultural research information systems(aris) with the help of NITs. For example, the VSATs, LAN,WAN are being installed and linked to its research institutions At the same time Karnataka state agricultural Marketing Board (KSAMB) has initiated activities to build a marketing information system, AGRI MARET by using INTERNET for providing domestic and global market information and agricultural commodities to farmers. Amity International Business School 22

On the other hand, Indian villages are facing numerous problems like poetry, unemployment, illiteracy, health and nutrition which will effectively hamper the penetration of NITs into villages. Hence, with the economic, social political and cultural development in the villages the technologies like teletext and video text, microcomputers may be used for communication with the farmers. Indian agriculture has drastically changed after liberalization, globalization, marketization and privatization. The shift towards commercial and export oriented agricultural demands information based approach to agriculture communication. Undoubtedly, the NITs offer great scope for collection and dissemination of agricultural and rural information. The experiments conducted by various industrialized and developing countries accumulated the rich experiences of information technology utilization in agriculture. Enriched with the abilities of interaction, demassification and asychronisation, these technologies opened up a new way to decentralized development. By considering operational contextual and strategic problems, there is a need to formulate a comprehensive strategic problems, there is a need to formulate a comprehensive strategy to use these technology in agriculture. This strategy must include the application of appropriate NITs at international, national, state, block and village levels.

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Chapter 3 Research Methodology

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Research Methodology
3.1 Primary Objective: Studying the linkage between self help Groups and Micro-finance in India. Analyzing the Mobile telephony in economic development. Is development in ICT leading to reduction in Illiteracy. Analyzing increased connectivity in India as an Impact of Information and communication technology development. Role of IT in the Growth of GDP of India. 3.2 Secondary Objective: Analyzing the impact of Information technology and Micro-finance on the Rural Development and recommend measures to for future growth. 3.3 Hypothesis 1. IT is enhancing the pace to learning and reducing the Illiteracy. 2. IT is increasing connectivity all across India. 3. Self help groups are propelling the growth of Micro-finance sector in India. 4. Mobile Telephony is leading to economic development. 3.4 Research Design Literature review Amity International Business School 25

This may be an attempt to summarise or comment on what is already known about a particular topic. By collecting different sources together, synthesising and analysing critically, it essentially creates new knowledge or perspectives. There are a number of different forms a literature review might take. 3.5 Limitations The research has been done studying relationship between two factors and keeping other things constant. The research conducted is completely based on secondary data, therefore, the authenticity of analysis and result is based on the authenticity of the secondary data. This Research is Based on the secondary data and the data is not collect first hand for the purpose of this study. 3.6 Data Collection 3.6.1 Secondary Data The secondary data are the data which have already been collected by someone else and which have already been passed through the statistical process. In this project the secondary data has been collected from various Reports Published on the Internet Information from proprietary online sources Data published in the trade and general press throughout the year Company reports and regulatory filings Journals

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Governmental Websites , references to these secondary sources of data are given in the bibliography segment of the report.

Chapter 4 Critical Review of Literature

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4.1 MICROFINANCE IN INDIA Issues and challenges (Author Y.S.P.Thorat)

The first thing to remember is that in India the history of rural credit, poverty alleviation and Micro-Finance are inextricably interwoven. Any effort to understand one without reference to the others, can only lead to a fragmented understanding. The forces and compulsions that shaped the initiatives in these areas are best understood in context of State and banking policy over time. Thus, for e.g., there were peasant riots in the Deccan in the late 19th Century on account of coercive alienation of land by moneylenders. The policy response of the then British Government to this problem of rural indebtedness was to initiate the process of organization of cooperative societies as alternative institutions for providing credit to the farmers as also to ensure settled conditions in the rural areas, so necessary for a colonial power to sustain itself. To achieve the objectives of production, productivity and poverty alleviation, the stance of policy on rural credit was to ensure that sufficient and timely credit was reached as expeditiously as possible to as large a segment of the rural population at reasonable rates of interest. The strategy devised for this purpose comprised: Expansion of the institutional structure, Directed lending to disadvantaged borrowers and sectors and Interest rates supported by subsidies.

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The institutional vehicles chosen for this were cooperatives, commercial banks and Regional Rural Banks [RRBs]. Between 1950 & 1969, the emphasis was on the promoting of cooperatives. The nationalization of the major commercial banks in 1969 marks a watershed inasmuch as from this time onwards the focus shifted from the cooperatives as the sole providers of rural credit to the multi agency approach. This also marks the beginning of the phenomenal expansion of the institutional structure in terms of commercial bank branch expansion in the rural and semi-urban areas. For the next decade and half, the Indian banking scene was dominated by this expansion. However, even as this expansion was taking place, doubts were being raised about the systemic capability to reach the poor. Regional Rural Banks were set up in 1976 as low cost institutions mandated to reach the poorest in the credit-deficient areas of the country. In hindsight it may not be wrong to say that RRBs are perhaps the only institutions in the Indian context which were created with a specific poverty alleviation micro-Finance mandate. During this period, intervention of the Central Bank (Reserve Bank of India) was essential to enable the system to overcome factors which were perceived as discouraging the flow of credit to the rural sector such as absence of collateral among the poor, high cost of servicing geographically dispersed customers, lack of trained and motivated rural bankers, etc. The policy response was multi dimensional and included special credit programmes for channeling subsidized credit to the rural sector and operationalising the concept of priority sector. The latter was evolved in the late sixties to focus attention on the credit needs of neglected sectors and under-privileged borrowers. Conclusion Amity International Business School 29

The financial sector reforms motivated policy planners to search for products and strategies for delivering financial services to the poor microFinance - in a sustainable manner consistent with high repayment rates. The search for these alternatives started with internal introspection regarding the arrangements which the poor had been traditionally making to meet their financial services needs. It was found that the poor tended to and could be induced to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need. The essential genius of NABARD in the Bank SHG programme was to recognize this empirical observation that had been catalyzed by NGOs and to create a formal interface of these informal arrangements of the poor with the banking system. This is the beginning of the story of the Bank-SHG Linkage Programme.

What do we mean by empowerment? When does the well-being of a person improve? In the feminist paradigm, empowerment goes beyond economic betterment and well-being, to strategic gender interests. As Mayoux (1998) suggests, empowerment is a process of internal change, or power within, augmentation of capabilities, or power to, and collective mobilization of women, and when possible men, or power with, to the purpose of questioning and changing the subordination connected with gender, or power over. Empowerment can range from personal empowerment that can exist within the existing social order. Thus this kind of empowerment would correspond to the right to make ones own choices, to increased autonomy Amity International Business School 30

and to control over economic resources. But self-confidence and self-esteem also play an essential role in change. Empowerment signifies increased participation in decision-making and it is this process through which people feel themselves to be capable of making decisions and the right to do so (Kabeer, 2001). Personal empowerment can lead to changes in existing institutions and norms, however, without the collective empowerment the personal empowerment and choices are limited, as Sen explains. The World Bank defines empowerment as the process of increasing the capacity of individuals or groups to make choices and to transform those choices into desired actions and outcomes. Central to this process are actions which both build individual and collective assets, and improve the efficiency and fairness of the organizational and institutional context which govern the use of these assets. Thus, as the World Bank (2001) report confirms; societies that discriminate on the basis of gender pays the cost of greater poverty, slower economic growth, weaker governance and a lower living standard of their people. The World Bank also identifies four key elements of empowerment to draft institutional reforms: access to information; inclusion and participation; accountability; and local organizational capacity. Conclusion Given this detailed investigation of women with respect to the control of resources, changes in behaviour and the decision-making reveals that many strides have been made in the right direction and women are in the process of empowering themselves. But examining the evidence on some key issues both within the quantitative household data and the FGDs, suggests that a lot needs to change to make women truly empowered. Based on the evidence along with a more strict interpretation of women empowerment, it is difficult Amity International Business School 31

to believe that a minimalist microfinance programme would have sustainable impact on the empowerment of women. SHGs, where a majority of groups are linked with the help of NGOs that provide support in financial services and specialized training, have a greater ability to make a positive impact on women empowerment. If women empowerment is to be pursued as a serious objective by SHG programmes in particular and the larger microfinance community in general, greater emphasis needs to be placed on training, education and creating awareness in order to achieve a larger and more lasting empowerment.

4.3 Information technology and rural development in India Author Nirvikar Singh; University of California, Santa Cruz
It may seem paradoxical that modern information technology (IT), associated in our minds with developed country markets and capitalintensive methods of production, has any relevance for a country where many millions still lack basic needs. Nevertheless, there are many efforts underway in India and other developing countries to demonstrate the concrete benefits of IT for rural populations, and to do so in a manner that makes economic sense. This paper outlines the conceptual and empirical case for the use of IT in Indias rural development. Section 2, provides a broad discussion of the potential role of IT in broad-based economic development. Section 3 examines the conceptual issues from the perspective of demand for, and supply of IT-based services to rural populations in a developing country. Section 4 discusses the lessons of some of the efforts underway in India, including the work of Aksh, Drishtee, ITC, n-Logue and TARAhaat. Conclusion

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This paper has briefly surveyed several initiatives to provide IT-based services in rural India. I have provided a broad overview of the economic impacts of IT, and gone on to examine demand side and supply side issues of successful implementation. In particular, I have suggested that there is a broad range of services that can be provided to a cross-section of rural households, even at relatively low levels of income. This creates challenges for implementation by posing choices for organizations, but also opportunities for creating niches. I have also provided a framework in terms of the supply side value chain, and used this to discuss the implementation of rural IT-based initiatives by several organizations. All the organizations discussed in the paper face common issues of implementation, but differ in terms of how they have been handled. There are differences in scale, connectivity technologies, services offered, revenue models, organizational structures, and so on. Clearly, focused efforts with substantial financial and organizational backing have a good chance of success. However, even startups that have put together the required competencies and resources through partnerships and slow organization building appear to have room in this market. There appears to be enough evidence now that it is commercially feasible to use IT to deliver services to rural populations either at costs that are lower than previous delivery methods, or in ways that make it possible to achieve delivery where none was earlier cost effective or feasible. Initially, the static savings from reductions in transaction costs may be of the order of a few percent of value added. However, the benefits from enabling new transactions should be an order of magnitude greater. In the long run, bringing rich information to the population of rural India, whether in the

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form of education, market prices, market opportunities, and more, can only have positive impacts on the material well being of rural masses.

4.4 The Role of Microfinance in Rural Micro-enterprise Development.

By: Prof. Dr. Hans Seibel The Basic Philosophy Agriculture is an important engine for economic growth in developing countries. Rural micro-enterprise is critical to that growth. So what role for microfinance? Major Areas of the Study Linking microfinance to rural micro-entrepreneurs Who are the Rural Entrepreneurs, and what is Their Demand for Financial Services? Strategies for financial institutions Business development services (BDS) Women in Rural Enterprise Recommendations Local resources mobilization matters Equity matters Legal framework for local financial institutions matters Effective supervision matters

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Informal finance matters (Informal financial organizations have never take up the development of the financial sector in the rural areas) Development matter Empowered women by enhancing their contribution to household income.

4.5 Information Technology - Need of the Hour Rural Development

By: PROF. MANOJ DAYAL Basic Philosophy Information Technology is today becoming as important as roti, kapra, aur makan(bread cloth and house) Major Areas of Study How in this age of information revolution, information technologies are being used in almost all walks of life. Today in every walk of life Computer Internet, Mobile global stationary fax, e-fax video text tele text video conferencing, teleconferencing, compact disk, digital camera, video display terminals, satellite, space craft, cable optical fibre, DTH etc. are turning out to be extremely important. Conclusion In 40s people used to believe in secrecy of information. But in this new millennium, the concept is totally reserved. Now we like to share the information .Information is thus emerging as more and more power. Studies confirms that this field confidently predict that the poverty line will no longer be measured in terms of money, but in terms of information .This

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study examines the evolution of technology which is responsible for wide spread penetration of computer technology in to the social fabric. Primarily the need of efficiency in complex organizations led to greater to greater demand for availability of accurate and timely information. Information technology responds to this challenge.

4.6 Micro Finance in India

Basic Philosophy In and out about Micro finance in India Major Areas of study Demand of Micro Finance Services in India. Demand for Savings and Insurance Services. Supply of Micro-Finance Services. Mainstream Micro Finance Institutions Findings Challenges in Micro finance Borrower Unfriendly Products and Procedures Inflexibility and Delay High Transaction Costs, both Legitimate and Illegal Social Obligation and not a Business Opportunity Financing to Alternative MFIs Legal and Regulatory Framework Conclusion After the pioneering efforts of the last ten years, the microfinance scene in India has reached a takeoff point. With some effort substantial progress can Amity International Business School 36

be made in taking MFIs to the next orbit of significance and sustainability. This needs innovative and forward-looking policies, based on the ground realities of successful MFIs. This, combined with a commercial approach from the MFIs in making microfinance financially sustainable, will make this sector vibrant and help achieve its single minded mission of providing financial services to the poor.

4.7 Role of Rural Organizations in Rural Development

By: Dr. NAJAMUDDIN Basic Philosophy How Important are the Governmental organization in the Rural development? Major Areas of study Significance of Government aided organizations in the rural development. Effectiveness of Non-Governmental organization Vs Governmental Success Story of Micro finance programs Conclusion Non-government Organizations working in the rural sector are at times more efficient than government organizations. The success stories of the above mentioned Non-government Organizations also bring out the fact that the voluntary sector is playing an important role in the development of the rural sector in India. The reason for these successes can be easily understood. Programs launched by government are keeping in view the whole of the country. This, at times does not fulfill the needs of a particular area, whereas an NGO working in that area is easily able to recognize the aspirations of the

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people and take necessary action. Thus, certain regions and states get developed sooner and others fall back due to want of proper approach and efforts for development. Thus, in rural development programs we should ensure peoples participation. It is necessary to ensure the involvement of people right from the start that is at the planning level and not merely during the execution of development programs.

4.8 The Role of ICT in Governing Rural Development

By: Anita Kelles-Viitanen Basic Philosophy Information to be used as a part of social action has to be reliable and relevant, also timely. Access to correct and relevant (and timely) information makes emancipatory and participatory action possible. Such information has a capacity to empower. It is knowledge. Major Areas of Study Role of ICT in Rural Development ICT No Substitute to Reforms ICT with the Rural Poor Conclusion It has been argued here that ICT can contribute to poverty reduction, if it is tailored to the needs of the poor and if it is used in the right way for right purposes and complemented with required reforms. Like all technologies, ICT offers tools and applications but no solutions. The solutions to the problem of poverty are what they have always been: economic growth, enabling infrastructure, the creation of livelihoods, social capital, education and healthcare, and sufficiently democratic government to

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ensure that economic benefits are not cornered by the powerful elites. By providing cheap and efficient tools for access to information and exchange of ideas and knowledge, ICT can become an enabling tool for wider socioeconomic development. When properly used, it can greatly increase the ability of the poor people to benefit from economic development and from development programs meant to help them.


By: Asheeta Bhavnani Major Areas of Study Why Information? Status of the Mobile Telephony Sector Impact of Mobile Telephony Global Trends Conclusion There is considerable evidence to suggest that the economic and social benefit of mobile telephony will be highest in rural areas, which currently have less telephony services. Both poverty and lack of information are common bed partners. Thus, the dissemination of information together with serving rural areas has double anti-poverty imperative. Studies have attributed multiple benefits to the mobile phone: from lowering negative aspects (e.g., corruption, crime, high prices) to raising positive aspects (e.g., levels of education, efficiency, health). Such benefits already witnessed in

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the developing world can also spread to the developing world, provided the right level of access and pricing are put into place.








By: Prof. T.P. Rama Rao Major Areas of Study ICT Infrastructure for Rural e-Governance Applications ICT Availability for Rural Applications Application Design and Reengineering of Backend Processes Findings Factors responsible for successful implementation and sustenance of ICT projects for social development: Degree of efficiency and transparency demonstrated in citizen services Extent of reduction in cost and improvement of convenience for citizens Extent of reengineering and improvement of back-end services Extent of Integration of backend processes with front-end and web site Degree of employee involvement and change management Amity International Business School 40

Amenability for Public Private Partnership (PPP) arrangement Strength of PPP arrangement in the application development Strength of PPP arrangement in the service delivery Enhancement of Revenue for the government and the service provider Technological robustness of the project

4.11 Rural microfinance and employment.

By: Isabelle Gurin Basic Philosophy Explore the linkages between rural finance and rural employment including diversification and migration Major Areas of Study Rural finance and rural employment: two challenges for rural development and poverty reduction. Controversies and knowledge gaps Conclusion Microfinance services are expected to contribute to rural development and poverty/vulnerability reduction. Emergency loans, savings and microinsurance are expected to mitigate vulnerability. Micro-credit is expected to strengthen local rural employment (diversification, self-employment, wage labor). Remittances are expected to improve the conditions of migration.

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While microfinance has been given much attention and resources by policymakers and donors, there are still controversies about whether and under which conditions rural microfinance can hold its promises.

Chapter 5 Sector Profile

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Sector Profile
5.1 Mirco-Finance
Indian microfinance sector is expected to grow nearly ten times by 2011 to a size of about Rs250 billion from the current market size of Rs27 billion, at a compounded annual growth rate of 76%. Microfinance in India started evolving in the early 1980s with the formation of informal Self Help Group (SHG) for providing access to financial services to the needy people who are deprived of credit facilities. The Report on microfinance is prepared emphasizing more. Microfinance is being practiced as a tool to attack poverty the world over. The term Microfinance could be defined as provision of thrift, credit and other financial services and products of very small amounts to the poor in rural, semi urban or urban areas, for enabling them to raise their income levels and improve living standards (NABARD 99). Microfinance Institutions (MFIs) are those, which provide thrift, credit and other financial services and products of very small amounts mainly to the poor in rural, semi-urban or urban areas for enabling them to raise their income level and

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improve living standards. Lately, the potential of MFIs as promising institutions to meet the consumption and micro-enterprise demands of the poor has been realized.

5.1.1 Evolution of Micro-finance Industry in India

Microfinance the new Mantra in Rural Finance The rural finance policy pursued in most developing countries beginning from 1950s was based on providing subsidized credit through state controlled or directed institutions to rural segments of population. Expansion of credit coverage through state interventions was based on various theoretical assumptions. Seibel & Parhusip (1990) mention that this approach was based on the premise that rural micro-entrepreneurs are unable to organize themselves; they need subsidized credit for increasing their income and are too poor to save. Yaron, Benjamin & Piprek (1997) have traced this traditional approach in rural finance leaning heavily towards direct interventions to Keynesian influence. Under this approach, in addition to the assumptions listed above, the key problem areas visualized in rural financial markets included a lack of credit in rural areas, absence of modern technology in agriculture, low savings capacity in rural areas and prevalence of usurious moneylenders. These distortions and imperfections in rural credit markets were sought to be addressed through Government interventions. With difference of range and degree, most developing countries from 1950s to the 1980s were home to interventions ranging from establishing state owned financial institutions, interest rate ceiling on deposits and credit, credit subsidy, directing credit to particular sectors and nationalization of private banks. Amity International Business School 44

This supply led approach in rural finance caused various qualitative issues such as concerns about financial viability of institutions on account of high rate of loan delinquency, cornering of subsidy by well off people in what has been described as rent seeking behaviour, continued presence of moneylenders, inability to reach the core poor and led to a reorientation in thinking around 1980s. United States Agency for International Developments (USAID) spring review of Small Farmer Credit in 1972/73, covering 60 reports on specific farm credit programmes in developing countries followed by a World Conference on Credit for Farmers in Developing Countries in 1975 organised by FAO were the first landmark events pointing the deficiencies of directed and subsidized credit approach. These thoughts got crystallized during the Colloquium on Rural Finance in Low Income Countries by USAID and World Bank in 1981 and shaped the emergence of new thinking in rural finance. Hulme & Mosley (1996)4 credit the counter revolution against Development Financial Institutions (DFIs) which were a prime symbol of Government intervention in rural credit markets to Ohio school as the economists5 at Ohio State University provided the theoretical underpinnings to the critique of past approach and contributed to transfer of these ideas into operational policies of World Bank. Emergence of micro credit in late 1970s and early 1980s in the backdrop of growing world attention on deficiencies of earlier approach in rural finance explains much of its dominant theoretical underpinnings. The initial micro credit innovations in disparate settings of Bangladesh, Bolivia and Indonesia8 demonstrated the success of micro lending to poor without collateral requirements. Amity International Business School 45

Rhyne (2001) observes that these interventions demonstrated techniques for lending to the poor with better outreach and cost recovery. Despite the contextual differences, the unifying thread of these early innovations lay in their certain common principles like reliance on character or peer pressure rather than collateral as loan security, leveraging social capital, positive incentives for repayment and interest rates that approached or covered cost. These innovations acted as catalysts for replication across the globe and their underlying principles continue to form the bedrock of microfinance interventions till date. The universal appeal of microfinance stemmed from its ability to reach the poor without social collateral and generation of near full recovery rates through what has been described as a Win-Win proposition. The mainstreaming of microfinance worldwide and its global acceptance in development community is based on this WinWin proposition. This concept of provision of sustainable financial services at market rates has been termed as Financial System approach or Commercial microfinance. The progress report submitted by Micro credit summit campaign10 indicates that as of Dec.31, 2004, 3,164 micro-credit institutions have reached 92.27 million clients translating into micro-credit interventions having reached 333 million poor families worldwide. The obsession with microfinance in development sector is succinctly captured by Remenyi (2000, p30), every bilateral donor and NGO seems to believe that it too must be involved in microfinance if it is to retain credibility as a development agency with an option for the poor.

5.1.2 Global Acceptance of Microfinance

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It is claimed that this new paradigm of unsecured small scale financial service provision helps poor people take advantage of economic opportunities, expand their income, smoothen their consumption requirement, reduce vulnerability and also empowers them (CGAP,2003; ADB, 2004) Former World Bank President James Wolfensohn said Microfinance fits squarely into the Bank's overall strategy. As you know, the Bank's mission is to reduce poverty and improve living standards by promoting sustainable growth and investment in people through loans, technical assistance, and policy guidance. Microfinance contributes directly to this objective. The emphasis on microfinance is reflected in microfinance being a key feature in Poverty Reduction Strategy Papers (PRSPs). Realizing the importance of microfinance, World Bank has also taken major steps in developing the sector. Formation of Consultative Group to Assist the Poor (CGAP) in 1995 as a consortium of 33 Public and private development agencies and establishment of Microfinance Management Institute (MAFMI) in 2003 are significant landmarks. CGAP acts as a resource center for the entire microfinance industry, where it incubates and supports new ideas, innovative products, cutting-edge technology, novel mechanisms for delivering financial services, and concrete solutions to the challenges of expanding microfinance. MAFMI was established with support of CGAP and Open Society Institute for meeting the technical and managerial skills required for microfinance sector. CGAP has been instrumental in shaping the dominant theoretical orientation of microfinance. The guiding philosophy behind diverse Amity International Business School 47

sphere of CGAP activities by way of dissemination of microfinance best practice, grant-making to Micro Finance Institutions, and fostering national-level policy on microfinance has been Commercial microfinance. The CGAP dossier on Best Practices and brochure on Key principles of microfinance succinctly capture the philosophy of insistence on full cost recovery through market based interest rates and higher recovery rate of micro loans. The influence of CGAP philosophy has also shaped World Banks thinking on microfinance. Current World Bank President in his message to CGAP annual meeting in 2005 acknowledged this by saying CGAP has helped build consensus around the fundamentals of an inclusive financial system. The CGAP Key Principles of Microfinance, endorsed last year by the G8, have this year been championed by Worldwide, as a result of the CGAP system, good practice is increasingly becoming standard practice. Other Regional multilateral development banks like Asian Development Bank also champion the cause of commercial microfinance. ADB (2000, pg 1-2) outlining its policy for microfinance lends support to the logic by saying to the poor, access to service is more important than the cost of services and the key to sustainable results seems to be the adoption of a financial-system development approach. The underlying logic offered in support of this is universally based on twin arguments i.e., a) subsidized funds are limited and cannot meet the vast unmet demand, hence private capital must flow to the sector and b) the ability of the poor to afford market rates. Though, various scholars like Morduch (2000) have brought out the flaws of this WinAmity International Business School 48

Win proposition like belief in congruence between commercial microfinance and poverty outreach, this paper will limit itself to analyzing as to how the focus on commercialization has relegated impact assessment to backstage.

5.1.3 Indian Microfinance Context

Indian public policy for rural finance from 1950s to till date mirrors the patterns observed worldwide. Increasing access to credit for the poor has always remained at the core of Indian planning in fight against poverty. The assumption behind expanding outreach of financial services, mainly credit was that the welfare costs of exclusion from the banking sector, especially for rural poor are very high. Starting late 1960s, India was home to one of largest state intervention in rural credit market and has been euphemistically referred to as Social banking phase. It saw nationalization of existing private commercial banks, massive expansion of branch network in rural areas, mandatory directed credit to priority sectors of the economy, subsidized rates of interest and creation of a new set of rural banks at district level and an Apex bank for Agriculture and Rural Development (NABARD) at national level. These measures resulted in impressive gains in rural outreach and volume of credit. As a result, between 1961 and 2000 the average population per bank branch fell tenfold from about 140 thousand to 14000 (Burgess & Pande, 2005) and the share of institutional agencies in rural credit increased from 7.3% 1951 to 66% in 199122. These impressive gains were not without a cost. Government interventions through directed credit, state owned Rural Financial Institutions (RFI) and subsidized interest rates increased the tolerance Amity International Business School 49

for loan defaults, loan waivers and lax appraisal and monitoring of loans. The problem at the start of 1990s looked twofold, the institutional structure was neither profitable in rural lending nor serving the needs of the poorest. In short, it had created a structure, quantitatively impressive but qualitatively weak. Micro credit emergence in India has to be seen in this backdrop for a better appreciation of current paradigm. Successful microfinance interventions across the world especially in Asia and in parts of India by NGOs provided further impetus. In this backdrop, NABARDs search for alternative models of reaching the rural poor brought the existence of informal groups of poor to the fore. It was realized that the poor tended to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need. This concept of Self-help was discovered by social-development NGOs in 1980s. Realizing that the only constraining factor in unleashing the potential of these groups was meagerness of their financial resources, NABARD designed the concept of linking these groups with banks to overcome the financial constraint. The programme has come a long way since 1992 passing through stages of pilot (1992-1995), mainstreaming (1995-1998) and expansion phase (1998 onwards) and emerged as the worlds biggest microfinance programme in terms of outreach, covering 1.6 million groups as on March, 2005. It occupies a pre-eminent position in the sector accounting for nearly 80% market share in India. Under the programme, popularly known as SHG-Bank Linkage programme there are broadly three models of credit linkage of SHGs Amity International Business School 50

with banks. However, the underlying design feature in all remains the same i.e. identification, formation and nurturing of groups either by NGOs/other development agencies or banks, handholding and initial period of inculcating habit of thrift followed by collateral free credit from bank in proportion to the groups savings. In accordance with the flexible approach, the decision to borrow, internal lending and rate of interest are left at the discretion of group members. Its design is built on combining the collective wisdom of the poor, the organizational capabilities of the social intermediary and the financial strength of the Banks. The success factors of the programme lie in it being beneficial for both banks and clients another example of Win-Win proposition. The programme is an attractive proposition for banks due to high recovery rates and lowering of transaction costs by outsourcing costs associated with monitoring and appraisal of loans. Records show a recovery rate as high as 95% for loans extended by banks to SHGs and a study sponsored by FDC Australia, it was observed that the reduction in costs for the bankers is around 40 % as compared to earlier loans under Integrated Rural Development Programme (IRDP). Similar findings in respect of commercial benefit of SHG lending to banks were reported by Siebel & Dave (2002). The programmes exclusive focus on reaching those sections of population, who were hitherto out of reach of financial system, has increased the coverage of poor. Non reliance on physical collateral and total flexibility in loan purpose and amount has also resulted in increased coverage of the poor and the marginalized.

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The programme has received strong public policy support from both Government of India and Reserve Bank of India. The importance attached to it by Government is exemplified by mention of yearly targets by Finance Minister in his annual budget speech as well as introduction of similar group based lending approach in governments poverty alleviation programme. The success of the programme in reaching financial services to the poor has won international admiration. World Bank policy paper28 hails the programme and states that it is particularly suited to India because the model capitalizes on countrys vast network of rural bank branches that are otherwise unable to reach the rural poor. 5.1.4 SHG - Bank Linkage Programme The SHG Bank Linkage Programme started as an Action Research Project in 1989. In 1992, the findings led to the setting up of a Pilot Project. The pilot project was designed as a partnership model between three agencies, viz., the SHGs, banks and Non Governmental Organizations (NGOs). SHGs were to facilitate collective decision-making by the poor and provide 'doorstep banking; Banks as wholesalers of credit, were to provide the resources and NGOs were to act as agencies to organize the poor, build their capacities and facilitate the process of empowering them. Impact of the SHG Bank Linkage Programme Given these quantitative achievements, what has been the impact of the programme.

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The main findings are that: i. microfinance has reduced the incidence of poverty through increase in income, enabled the poor to build assets and thereby reduce their vulnerability. ii. It has enabled households that have access to it to spend more on education than non-client households. Families participating in the programme have reported better school attendance and lower drop out rates. iii. It has empowered women by enhancing their contribution to household income, increasing the value of their assets and generally by giving them better control over decisions that affect their lives. iv. In certain areas it has reduced child mortality, improved maternal health and the ability of the poor to combat disease through better nutrition, housing and health especially among women and children. v. It has contributed to a reduced dependency on informal money lenders and other non-institutional sources. vi. It has facilitated significant research into the provision of financial services for the poor and helped in building capacity at the SHG level. vii. Finally it has offered space for different stakeholders to innovate, learn and replicate. As a result, some NGOs have added microinsurance products to their portfolios, a couple of federations have experimented with undertaking livelihood activities and grain banks have been successfully built into the SHG model in the eastern region. SHGs in some areas have employed local accountants for keeping their books; and IT applications are now being explored by almost all for better MIS, accounting and internal controls. Amity International Business School 53

5.1.5 Challenges associated with SHGs Regional Imbalances The first challenge is the skewed distribution of SHGs across States. About 60% of the total SHG credit linkages in the country are concentrated in the Southern States. However, in States which have a larger share of the poor, the coverage is comparatively low. The skewed distribution is attributed to The over zealous support extended by some the State Governments to the programme. Skewed distribution of NGOs and Local cultures & practices. Prof. Sriram is going to present a paper on this and I would be delighted to hear what he has to say. Suffice it to say at this stage that NABARD has since identified 13 states where the Volumes of SHGs linked are low and has already initiated steps to correct the imbalance. From credit to enterprise The second challenge is that having formed SHGs and having linked them to banks, how can they be induced to graduate into matured levels of enterprise, how they be induced to factor in livelihood diversification, how can they increase their access to the supply chain, linkages to the capital market and to appropriate/ production and processing technologies. A spin off of this challenge is how to address the investment capital requirements of matured SHGs, which have met their consumption needs and are now on the threshold of taking off into Enterprise. The SHG BankLinkage programme needs to introspect whether it is sufficient for SHGs to only meet the financial needs of their members, or whether there is also a further obligation on their part to meet the non-financial

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requirements necessary for setting up businesses and enterprises. In my view, we must meet both. Quality of SHGs The third challenge is how to ensure the quality of SHGs in an environment of exponential growth. Due to the fast growth of the SHG Bank Linkage Program, the quality of SHGs has come under stress. This is reflected particularly in indicators such as the poor maintenance of books and accounts etc. The deterioration in the quality of SHGs is explained by a variety of factors including The intrusive involvement of government departments in promoting groups, Inadequate long-term incentives to NGOs for nurturing them on a sustainable basis and Diminishing skill sets on part of the SHG members in managing their groups. In my assessment, significant financial investment and technical support is required for meeting this challenge. Impact of SGSY Imitation is the best form of flattery but not always. The success of the programme has motivated the Government to borrow its design features and incorporate them in their poverty alleviation programme. This is certainly welcome but for the fact that the Governments Programme (SGSY) has an inbuilt subsidy element which tends to attract linkage group members and cause migration generally for the wrong reasons. Also, micro level studies have raised concerns regarding the process through which groups are formed under the SGSY and have commented that in may cases members are

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induced to come together not for self help, but for subsidy. I would urge a debate on this, as there is a need to resolve the tension between SGSY and linkage programme groups. One way out of the impasse would be to place the subsidy element in the SGSY programme with NABARD for best utilisation for providing indirect subsidy support for purposes such as sensitization, capacity building, exposure visits to successful models, etc. Role of State Governments A derivative of the above is perhaps the need to extend the above debate to understanding and defining the role of the State Governments vis--vis the linkage programme. Lets be clear: on the one hand, the programme would not have achieved its outreach and scale, but for the proactive involvement of the State Governments; on the other hand, many State Governments have been overzealous to achieve scale and access without a critical assessment of the manpower and skill sets available with them for forming, and nurturing groups and handholding and maintaining them over time. Emergence of Federations The emergence of SHG Federations has thrown up another challenge. On the one hand, such federations represent the aggregation of collective bargaining power, economies of scale, and are for addressing social & economic issues ; on the other hand there is evidence to show that every additional tier, in addition to increasing costs, tends to weaken the primaries. There is a need to study the best practices in the area and evolve a policy by learning from them. 5.2Information Technology 5.2.1 Introduction

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The success of Indian firms and professionals in the information technology (IT) arena during the last decade has been spectacular. Entrepreneurs, bureaucrats, and politicians are now advancing views about how India can ride the IT bandwagon and leapfrog into a knowledge-based economy. Isolated instances of villagers sending and receiving email messages or surfing the Internet are being promoted as examples of how India can achieve this transformation, while vanquishing socio-economic challenges such as illiteracy, poverty, and the digital divide along the way. Likewise, even while a miniscule fraction of the population has access to computers and the Internet, egovernance is being projected as the way of the future. There is no dearth of fascinating stories about IT-enabled changes, yet there is little discussion about whether such changes are effective and sustainable in the absence of the basic infrastructure that is accessible to the citizens of more advanced economies. The statistics speak loudly and clearly. Seventy nine percent of Indias population lives in villages without the basic amenities and infrastructure that can sustain a knowledge economy. While over 60% of the population is considered to be literate, note that the relevant definition of literacy that supports this statistic is being able to read and write simple words in any language, acquired with or without formal schooling. This criterion is so basic, that it is almost irrelevant in the context of a knowledge economy. Yet, the central and state governments in India are investing millions of dollars in promoting IT-based initiatives and the IT industry as vehicles of social and economic transformation. Are we putting the cart before the horse here? Even if substantial IT

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investments are justifiable, how must the IT revolution proceed so that the nation is benefited in a wholesome and balanced way?

Chapter 6 Growth Drivers

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Growth Drivers
6.1 Credit Demand of the Poor It is estimated that in India there exist approximately 7.5 crores poor households, out of which 6 crores are rural and 1.5 crores urban households. One estimate assumes that the total annual requirement of credit for the rural poor families would be at least Rs.15, 000 crores on the basis of a maximum need of Rs.2000/- per family. Another estimate for requirement of credit (excluding housing) is Rs.50,000 crores assuming that annual average credit usage are Rs.6000/- per rural household, and Rs.9000/- for poor urban household. An additional Rs.1000 crore is estimated to be required for housing per year. Apart from micro-credit, they require savings and insurance also. Meanwhile, bank advances to weaker section aggregated Rs.9700 crore during 1997-98. MFIs and SHGs are estimated to have provided about 137 crore (cumulative up to September 1998).

The above

scenario, suggests a vast unmet gap in the provision of financial services to Amity International Business School 59

the poor. Moreover, 36% of the rural households are found to be outside the fold of institutional credit. 6.2 Poor can save Savings by members of SHGs enumerated were around Rs. 4,72,66,484 ( Rs. 47.26 million), with average saving per Group working out to Rs. 9605 (US $200 approx.) during the reference period. It is interesting to note that this amount has come out of very small monthly contributions. Data show that in respect of 3922 SHGs (80%) the monthly contribution was upto Rs. 30 (about 0.6 US $) per member. The important point is that SHGS enabled the rural poor women even to save small amounts regularly and as a matter of discipline. In the absence of the SHG mechanism, it would have not been possible for the rural women to make deposits of a small amount of Rs 30 per month in a Bank. Even for the banks, it would not have been viable to transact such small and intermittent deposits. Not only was the saving regular, nearly 89 % of the SHGs had managed even to increase their monthly savings. The increase in savings contribution was upto Rs. 5 (about 16 % of the original contribution) for 73 % of the Groups. This can be viewed as an indicator of continued mutual trust among members and increasing desire to save. Moreover, the pooled savings were managed very well by the SHG members, initially for internal lending among themselves and later, to establish a credit linkage with banks and avail larger group loans. 6.3 Borrowing by SHG members Out of the total 73,454 members covered, 50,118 (68 %) were borrowing from the groups, implying access to credit by a large number of members. Those who had borrowed more than once after repaying old loans (active borrowers) constituted 63 % of the borrowers indicating that a substantial Amity International Business School 60

proportion of borrowers had used the first loan very well, repaid it and had further access to credit. Total loans mobilized by the members worked out to Rs. 17,87,20,624 (Rs. 178.7 million) with average loan amount per SHG being Rs. 36,318 and the savings to total loan ratio of 3.78. Forty four per cent of this amount was sourced as loans from the banks and the balance 56 % was from internally generated resources indicating the financial strength the SHGs have attained. It is also interesting to note that the poor are able to meet margin requirements of close to 50% from their group savings.

6.4 Government policy and support It is clear that the dominant theme so far has been of extending micro-credit through Bank-SHG linkages, with NABARD playing a leadership role and micro-finance institutions, mainly NGOs, playing a catalytic as well as enabling role at the gross root level. However, there is clearly an emerging new paradigm in the approach to micro-finance. It would be appropriate to recall that while the term micro-credit has not been strictly defined at present, it usually refers to the credits of very small amounts. However, for the purpose of exempting the micro-finance companies registered under Section 25 of the Companies Act from the core regulatory provisions attracted by NBFCs, such companies are required by RBI to be engaged solely in extending micro-finance up to Rs.50,000 for small businesses and upto Rs.1.25 lakh for housing in rural areas. The term micro-finance has been given a working definition by the Task Force on Supportive Policy and Regulatory Framework for Micro-Finance set up by NABARD in November 1998 as: provision of thrift, credit and other financial services and products of very small amounts to the poor in Amity International Business School 61

rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. It is, however, understood that the MFIs provide other non-credit services as well such as capacity building, training, marketing of the products of the SHGs, micro-insurance, etc. In this background, the following considerations are relevant. 6.5 Institutional credit and poverty In India, institutional credit agencies (banks) made an entry in rural areas initially to provide an alternative to the rural money lenders who provided credit support, but not without exploiting the rural poor. After the nationalization in 1969, commercial banks in the country took upon themselves a massive task of improving access of the poor to formal credit and accelerate the flow of credit to the rural economy. Their role in poverty alleviation was more appreciated when the Government, as a major paradigm shift, decided to launch a direct attack on poverty, through its special employment generation strategies and productive asset creation programs like Integrated Rural Development Program (IRDP)

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Chapter 7 Major Micro Finance Instruments and Products

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Micro finance Products and Instruments THE TERM "MICROFINANCE" includes the provision of a wide range of financial services to the poor: credit, savings, insurance, and money transfers. The microfinance movement to date, however, has heavily favored microcredit, so much of our analysis focuses on innovations in credit delivery. Throughout, our interest is in how products are designed for financial sustainability, which is when MFIs cover operational costs, costs of capital, and loan losses. 7.1 The core product types Group lending products are the ones most commonly associated in the public's mind with the microfinance revolution. They come in two major types: group and individual lending. 7.1.1 Group lending In classic solidarity group lending, which both Accin International and the Grameen Bank developed, borrowers are asked to form groups of three to seven members, most commonly five.

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Borrowers in a group are jointly and severally liable for all loans taken out, meaning they are each liable for the others' loans and any one of them can be held fully responsible for an outstanding loan. Typically the pattern of disbursements and repayments is regimented. In the classic Grameen model, payments begin immediately after disbursement, are due weekly, and are constant over the life of the loan. Entry into the regimen is staggered within a group: first two borrowers take their loans and begin to repay, then two more, then the fifth. When a loan is repaid, the borrower becomes immediately eligible for a larger one as long as all group members are in good standing and approve the individual loan requests. In the classic model, eight solidarity groups are federated into a larger group called the "center," which gathers each week with a loan officer to perform all financial transactions. The other major type of group lending is village banking, and was developed in 1984 in Bolivia by John Hatch, who went on to found FINCA International. Village banks bring together 15 to 30 people, give them a single loan, then delegate authority to them for on-lending to individual members. This delegation distinguishes village banking from most other forms of microfinance. Members elect the office holders of the village bank, who assume responsibility for conducting its affairs. Usually, loan sizes are allowed to differ among individual members. But all loans carry the same repayment and interest rate terms, and borrowers are generally offered a loan ladder, a sequence of 3 to 5 loan cycles with a maximum loan size specified for each cycle. For example, Compartamos, a profitable and fast-growing microfinance institution in Mexico, offers a three step loan ladder for its village banking product, with the first loan at most $150 and the third at most $1400.6 Village bank members act as co-guarantors and help decide Amity International Business School 65

how much each person borrows. Because the groups are larger than solidarity groups, village banking more frequently faces the problems that arise when there are large spreads in loan size within the jointly liable group, which can expose the poorest members to inordinate risk. To protect them, most village banking MFIs try to keep the maximum-to-minimum loan ratio below 10.7 Though distinct, the two dominant forms of group lending have much in common. Both have regular, compulsory public meetings, typically weekly or biweekly, where loans are repaid and disbursed and savings collected. In both kinds of lending, it is not uncommon for the attending loan officer to refuse to end the meeting until all scheduled loan repayments are madeby someone. Economists have taken note of one traditional feature of both forms of group lending, joint liability. The theoretical literature has viewed joint liability as a major technological innovation that reduces problems arising from "informational asymmetries" between lender and borrower. In both village banking and solidarity lending, groups self-select. Given members' superior knowledge of the character and economic circumstances of friends and neighbors, they can do better than the lender at screening out risky borrowers prior to the loan decision and monitoring loan use after. Though economists initially saw joint liability as the key innovation that kept repayment rates high, there were puzzling questions. If members knew that others in the group would make up their repayments if they defaulted, why don't they free ride on others and default more often? This highlights the peer pressure exercised in closed community groups, and the importance of reputation, honor, and shame. Honor is both a matter of public reputation and a private concept: the popularity of death insurance offered by some MFIs demonstrates that people in some cultures think they Amity International Business School 66

have failed their worldly and religious duties if they leave debt for their heirs. Case-studies have revealed that, MFIs that require joint liability usually do not enforce it. Instead, a common practice is to encourage other members of the solidarity group centerthe larger or "secondary group" that is not party to the formal joint-liability clauseto make up the default amount. Jain and Moore write: Secondary groups play a more specific role in facilitating loan repayment in the initial phase of some programs. When a member can neither meet loan repayment schedules nor source other money for this purpose, field workers encourage her to take a short-term, interest free and typically informal (but publicly known) loan from other member(s) of the secondary group (not especially the primary group) and agree to repay installments in parallel with the program loan. In the longer established [MFIs] and secondary groups, willingness to provide such temporary loans has declined over time. In such casespotential defaulters are expected to find alternate loan sources outside of the secondary group, and prior to the weekly group meeting to avoid disrupting it. This quote illustrates the multiple sources of peer pressure on the defaulter. First, the defaulter is identified in front of the entire village center. Second, she is put in a position where she must publicly ask for help. Third, she becomes responsible for the community center meeting being prolonged and any unpleasantness that might ensue. Lengthy meetings have been cited as an important reason clients drop out from group lending programs, so when a loan officer does not allow the meeting to end unless all defaults have been covered, it must add to the social pressure. The public nature of group lending and the resulting play of honor and shame thus appear to be more essential to timely repayment than formal joint liability. Consider the rapid growth of the

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Association for Social Advancement (ASA) in Bangladesh, which does group lending with individual liability. ASA's success is likely a reason that Grameen Bank dropped joint liability as part of its reforms around 2001, dubbed "Grameen II," but retained the rest of the credit delivery system, notably, regular public meetings.11 Even MFIs that do not employ either joint liability or regular group meetings for transaction purposes tap into this sensitivity to reputation for delinquency control: XacBank in Mongolia posts names of clients and their installment repayment reports on the walls of its branches.12 Peer pressure, it seems, is a broader concept than first assumed within a group liability context. It is not simply the pressure exerted by fellow group members who are afraid of losing access to future loans or having to cover loan delinquencies, it is pressure arising from public transactions in communities where individuals worry about reputations. And the discovery is not really new to microcredit; money lenders too have used public honor to motivate repayments. When interviewed, a woman street vendor who was a client of a group of moneylenders called "the Bombays" in the Philippines "noted that the Bombays always picked the busiest hour of the day to collect so that there would always be witnesses to her embarrassment." Experimental research is confirming the relative unimportance of formal joint liability. In an experiment run with the Green Bank of Caraga in the Philippines, Xavier Gin and Dean Karlan found that after borrowers in randomly chosen, ongoing solidarity groups were notified that joint liability had been dropped, repayment rates and other indicators of portfolio health showed no change in the following yearexcept that centers without joint liability attracted more new clients. It remains to be seen whether joint liability is similarly unimportant in the earlier, group formation stage, where self-selection appears to screen out bad risks Amity International Business School 68

(adverse selection). The experiments reported so far have been done only by switching existing borrowers, who already went through a joint-liability bound group building process. In sum, it is becoming clear that group lending works in part by substituting reputation for conventional collateralin other words, collateralizing reputation. (Section 1.2.2 describes "forced savings" which also function as collateral for group lenders.) Group lending is public banking for the poor, in contrast with private banking for the rich. The growth of ASA and the Green Bank experiment suggest the obvious: the poor like joint liability no more than the rich and accept it only when they have no better option. A relative of village banking is the self-help group (SHG) system that dominates microfinance in India. The system evolved from the efforts of NGOs to organize the rural poor, especially women, into groups for purposes of social and economic empowerment through group savings, education, and micro-enterprise support. NGOs train the group in saving, lending, and accounting, and then link the group with a bank where it can deposit its accumulated savings into a collective account. The bank then grants a block loan to the group, typically four times as large as the savings balance, for which members are jointly and severally liable.15 The group decides how, and on what terms, to distribute the loan to individual members. Self-help microfinance took off when the Indian government decided to support it through the National Bank for Agricultural Development (NABARD), which provides subsidized refinancing to banks for their lending to SHGs. Partly because several steps separate clients from NABARD, there are no national statistics on how many Indians participate in SHGs. In fiscal year 200405, 798,000 SHGs received bank loans, 539,000 for the first time, bringing the cumulative number of SHGs Amity International Business School 69

receiving loans to 1.618 million. At a typical 17 women per group, that suggests that up to 27 million women have joined SHGs.17 However, many of the SHGs may have gone defunct, and their members may have joined new groups, so this figure could be high by a factor of two or three. The success to date of SHGs in India is attributable to a combination of special factors: a proliferation of grass-root NGOs dedicated to the economic and social uplift of rural communities; a vast network of public-sector rural banks; the popular acceptance, even expectation, of state-subsidized poverty alleviation programs; and a committed champion in the NABARD. However, some of these same factors pose potential challenges to a further scaling up of the Bank Linkage Program, which still reaches only a small fraction of Indians. The central problem is the misalignment of incentives. Since the job of the partner NGOs is to form groups, not run them on an ongoing basis, they do not face the same financial incentives as MFIs to maintain portfolio quality. The professionalism and commitment to mission of the established NGOs that historically formed SHGs may have compensated for the perverse incentives. But as NABARD pushes for growth, the risk increases that new organizations will arise purely to form SHGs, and will not behave so well. In the worst case, they collude with borrowers against a lender for short-term gain. The misaligned incentives are why the private ICICI Bank, which has lent to 12,000 SHGs, is now moving to MFIs as a channel as it scales up in microfinance. 7.1.2 Individual lending Individual lending is the other major type of microcredit methodology. As its name makes obvious, it is built around more conventional lending relationships with individual clients. But in contrast with conventional lending, individual micro lending of course offers smaller loans, on the order Amity International Business School 70

of $1,000, and relies less on traditional sources of security, such as marketable collateral, credit bureaus, and formal legal recourse. It relies more on informal assessments of character and business operations. Group lending puts the burden of this assessment on the group through the group self-selection mechanism; individual lending depends on the loan officer to perform this screening. In dense urban areas, notably in Latin America, where social bonds may not be strong enough to support group lending, individual lending must tap into the borrower's social assets by forming a character sketch from interviews with friends, neighbors, and business associates. Gabriel Solorzano, President of Nicaragua's FINDESA, explains that his finance company extends not "asset-based credit" (ABC) but "integritybased credit" (IBC). Claus-Peter Zeitinger, founder of the German ProCredit juggernaut, which now operates in Eastern Europe, Latin America, and Africa, echoes Solorzano, calling his loans "information-based credit."20 Those phrases accentuate the contrast with conventional lending. But from the standpoint of group lending, individual lending looks relatively conventional. Indeed, there is no sharp line between individual microlending and more-conventional small business lending. Loan officers do assess clients' business operations with an eye toward current earnings and potential earnings if the proposed investment is made. They do often accept or require physical collateral, mortgages, or credit scoring. Bank Rakyat Indonesia (BRI), one of the world's largest micro-lenders, only lends individually, and requires titles to land, buildings, motorcycles, or other property as collateral. Given the low market value of most assets pledged, however, MFIs prefer to use such collateral as a threat rather than a way to cover losses from default. The incentive to repay is rooted in the high Amity International Business School 71

replacement cost of the pledged asset to the household and by the borrower's desire to avoid the social shame of having his or her household items seized in front of family and neighbors. As Solorzano puts it, FINDESA "doesn't want a used, rusty refrigerator. We lose two thirds of the value when we seize collateral." It is only when lending to small or medium enterprises that loan sizes may be large enough for collateral to become valuable in the traditional sense. 7.1.3 A conceptual framework for microcredit methodologies This bare-bones introduction to microcredit offerings does not convey their full complexity, variety, and dynamism. Nor does it touch on other financial services, including savings, insurance, and transfers, that MFIs are increasingly offering. It suffices, however, to ground an important observation about the nature of the challenge for microfinance practitioners, and their response to the challenge. Specifically, the dominant microcredit products can be seen as arrayed along a spectrum. At one end of the spectrum, loans are smaller, more costly to provide relative to loan size, and are only made practical by shifting certain tasks onto borrowers. At the other end, loans are larger, cheaper for the MFI to administer, and more convenient for the customer. They also go to the relatively better-off. In general, lenders face three costs: financial (costs of capital), default (which appears in accounting through loan loss provisioning), and operational or transaction costs. The last two are more under the MFI's control, and the last is disproportionately high for small loans, thus dominating in microfinance. A $100 loan does not cost ten times less to administer than a $1,000 loan. So the poorer the borrower, and the smaller the appropriate loan, the higher the cost per dollar lent. Figure 1, based on data from MFIs reporting to the Micro Banking Bulletin (MBB) for 2004, Amity International Business School 72

shows that village banking has the highest costs relative to the amount lent while individual lending has the least. To rein in costs per loan and make small loans practical, lenders must squeeze operating costs where they can and shift costs that remain onto borrowers. Figure 2 shows the result: on a per-loan basis, village banking MFIs keep their spending the tightest, although its delegation of responsibility is also a form of empowerment. Solidarity group lending puts somewhat fewer costs onto borrowers, since loan officers work directly with all clients and shoulder some responsibility for collection from borrowers having difficulties. It compensates by imposing more routine on the credit relationship, in order to speed transactions. Individual micro-lenders absorb much more of the underwriting, monitoring, and enforcement costs themselves. In viewing these Figures, bear in mind that all but a core of dedicated poverty focused solidarity lenders have moved into the mixed individual-solidarity category, and may not be representative of solidarity lending per se. For example, the true typical loan size for solidarity lending is probably between those shown in Figure 2 for solidarity lenders and mixed ones, and above that for village banking, as is the case in a 19992002 sample reported by Robert Cull, Asli Demirguc-Kunt, and Jonathan Morduch. Important subcomponents of the potentially transferable operating costs are for underwriting (loan approval), monitoring of use and repayment, and enforcement. Group lending shifts these responsibilities onto borrowers. Borrowers in turn will only accept them to the extent that they need capital and have no better alternative. And it is the poorest who have the fewest alternatives. The less-poor, on the other hand, will opt for individual lending and larger loans. The bottom line in the bargaining between lenders and borrowers are that individual lending is unattractive for lenders at the low Amity International Business School 73

end of the loan scale as too expensive, while group lending is unattractive to borrowers at the high end as too burdensome. As a result, village and solidarity banking serve the poorest while individual lending goes more to the less poor. Table 1 has the numbers behind these charts. These data suggest that commercially successful microfinance programs are designed not just to maximize direct impact on their clients. It is not simply the case that village banking, say, is more prevalent in rural Mexico than individual microcredit because village banking, with its emphasis on empowerment, happens to do a better job of helping rural Mexicans. Rather, in a successful MFI, the choice of basic product type is an adaptive responsive to what could be called the business environment. Central to the adaptation is a choice about how much cost to ask clients to bear.

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Source: Micro Banking Bulletin: 2004 Benchmarks, available at marks[2].xls.

7.2 Aspects of product design

HAVING INTRODUCED THE major product methodologies and a way to think about them, we embark on a more thematic survey of product design, still with an interest in choices that have been made that advance microfinance as a business proposition. Although this is not our focus here, some of these design choices, such as targeting women, may also directly serve social ends. The business problem for MFIs can be stated most broadly as finding ways to keeps costs near or below revenuesbut that generalization is vacuous and needs unpacking. The real challenges include:

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Building volume. The ability to spread fixed costs of lending operations over a large portfolio helps lenders reduce their operating costs as a percentage of assets (outstanding loans). Keeping loan repayment rates high. Searching for defaulters and cajoling or threatening them into repaying is extremely expensive for small loans. Moreover, especially with group lending, default can spread, since people will ask, "Why should I repay if she did not?" This contagion effect is a downside of the intimacy of group lending; it puts a premium on nearperfect repayment rates. Retaining customers. Even the most efficient MFIs find it hard to cover costs on the smallest accounts; most need to cross-subsidize them from larger loans to clients who have proven their ability to pay. This makes it essential for MFIs to grow with their customers, moving to progressively larger accounts. Charging rates commensurate with costs. High interest rates are a wellknown and controversial aspect of microfinance. But MFIs cannot succeed in the commercial sense if they do not cover their costs, or at least come close, so that subsidy dependence does not limit scale. Compliance with prudential regulation. Banking regulations have much to say on what financial institutions can and cannot do. Most MFIs, for example, can only take deposits from people who are borrowing even more from them at the same time. Minimizing scope for fraud. In large organizations composed of small branches physically linked by weak transportation and communications infrastructure, monitoring branch activities to prevent internal fraud is a major challenge, all the more so in countries with a culture of corruption in business and government. Amity International Business School 76

7.2.1 Credit versus voluntary savings

Stuart Rutherford eloquently reminds us that "financial services for poor people are largely a matter of mechanisms that allow them to convert a series of savings into usefully large lump sums." Most poor people do set aside money, if in small amounts and irregularly, not because they have income left after meeting basic needs, but because their needs include larger purchases like medicine or clothing or spending at religious and family ceremonies that cannot be matched by the uneven trickle of income. Indeed, while the capacity of the poor to borrow and save may be surprising, their need to do so is greater than it is for the better-off. Precisely because their incomes are tight, ways to manage mismatches between often-volatile incomes and consumption can be a matter of survival. Saving and borrowing, though seemingly opposite, are actually similar in helping households convert small payments into larger lump sums.28 Which is better depends on the use for which the lump sum is needed. If funds are required for household consumption smoothing in the presence of volatile income, then savings may be a cost-effective, less risky alternative to borrowing. If, on the other hand, funds are needed for investment, then credit provides quicker income gains. Microcredit is commonly defined as a vehicle for micro-enterprise. Numerous stories of clients who have struggled out of poverty by their own entrepreneurial efforts have been documented. Assuming that microcredit finances micro-enterprise, then the willingness of the poor to keep borrowing at high interest rates suggests that rates of return on borrowers' projects are even higher. In fact, microcredit often finances consumption. It is generally accepted that many poor people borrow at even higher interest rates from moneylenders for consumption, so willingness to pay cannot be Amity International Business School 77

assumed to demonstrate profitability of investments. In practice, MFIs, like Money lenders, require high-frequency, regimented payments on a schedule unrelated to the gestation periods of investments. And when MFIs do directly assess repayment capacity, they do so based on current income and assets rather than assumed returns from the proposed investment. Since money is fungible, it can appear to go for one purpose while actually serving another. If a borrower would have used her own funds to invest in a cow but instead takes out a loan for that purpose, then what the loan really does is let her put her own funds to some other, new purpose. In general, no sharp line separates the financial affairs of a poor household from the enterprises its members pursue. MFIs cannot expect their loans to only finance investment. Direct surveys of clients reveal a wide spectrum of uses. Though contrary to the original spirit of micro-enterprise lending, borrowing to finance and smooth consumption can be a very good thing. In a study of a payday lender in South Africa (not ordinarily considered an MFI, but analogous in offering short-term loans without collateral to poor people), Dean Karlan and Jonathan Zinman find that extending credit to applicants who would otherwise just miss qualifying reduces the number of times someone in the family goes to bed hungry. But to the extent that clients borrow to smooth consumption, voluntary savings seemingly offers a viable alternative, since it equips poor households to manage income volatility without the stress of debt. Ideally then, clients should have opportunities to save along with opportunities to borrow. To quote Malcolm Harper, chairman of India's Basix Finance Group, "most people, including the poor, want to have savings nearly all the time and to be in debt less frequently." Researchers have confirmed that even the poorest households are willing and able to save, and that the existing informal methods (jewelry, cashAmity International Business School 78

under-the-mattress, rotating savings and credit associations (ROSCAs), etc.) do not provide sufficient means for them to save. They carry considerable risks, of theft, inflation, fall in asset prices after natural disasters, and so on. Also, while the ability of the poorest to profitably utilize credit for microenterprise is still an open empirical question, the desirability of promoting savings to act as buffers against income volatility, especially for households for whom such volatility can threaten survival, cannot be denied.

7.2.2 Dynamic incentives

Almost all MFIs start small with new clients, offer bigger loans if the first ones are repaid, and so on. Group lenders, in particular, follow highly standardized and rigid loan ladders which specify a maximum loan size for each loan cycle. Economists say that these expanding cycles create a "dynamic incentive" for clients, because what a client does today affects her options tomorrow. Jain and Moore point out that in solidarity lending, staggering the entry of group members into the lending cycle amplifies dynamic incentives. For at any given time, at least one member is just a few months away from repaying one loan and getting a bigger one. She has a particular incentive to keep the group going by making sure all her fellow members remain in good standing. Progressive lending, by gingerly testing the waters with a new client, can also be viewed as another way to winnow out risky customers. As a rule of thumb, because of economies of scale in loan size, MFIs do not fully cover their costs until the third or fourth loan to a client. But progressive lending is also worrying, in that for borrowers who lack the capacity to repay, it may create a powerful incentive to go to a second lendera moneylender or another MFIfor a bridge loan, to be repaid as soon as the new, larger loan comes through from the first lender. It can thus feed a cycle of debt, Amity International Business School 79

concealing, deferring, and exacerbating the ultimate confrontation with trouble. Successful MFIs therefore cannot rely on dynamic incentives alone to keep the portfolio healthy, but must also use other mechanisms, whether the "shame factor" of group lending, networking in the community, or ongoing assessment of repayment capacity to check unsustainable loan growth. More generally, lenders create dynamic incentives whenever they offer better loan terms down the road as a reward for on-time repayment today. In another experiment in South Africa, for example, Karlan and Zinman found that offering a borrower a lower interest rate on his next consumer loan had a huge impact on repayment of the current one. Individual lenders have harnessed dynamic incentives most effectively because they do not have to deal with the restrictive loan ladders of group lending and can more freely tailor individual loans in terms of lending periods, interest rates, and repayment schedules. And in scaling up, they do not need to worry about imposing inordinate risk on poorer, jointly liable fellow borrowers.

7.2.3 Lending to women

The face of microfinance is usually a woman's. Some MFIs, like Crecer in Bolivia and Kashf in Pakistan, lend exclusively to women.41 But while 89% of the borrowers of the median solidarity group lender and 94% of the village banking lender are female (in the 2004 MBB survey), only 54% of borrowers of the median individual lender are. Why the gender split between individual and group lenders? One reason may be that it is a matter of mission. Poverty focused, group-oriented MFIs target women with their tiny loans because their oppression only compounds their poverty in limiting options in life. And women are more likely to channel the support to their children. The larger loans of individual lenders may go more for enterprise Amity International Business School 80

investment than consumption smoothing, and men dominate in the sphere of commerce. Figure3. Share of borrowers who are women by lender type (median), Micro-Banking Bulletin survey, 2004

However deserving and appropriate women may be for microcredit, this is not the only reason they have gotten more of it. MFIs that target women draw inspiration from Grameen. But in Grameen's early years, men actually dominated. As Yunus and his team refined the methodology, they shifted toward women. The focus became official in 1985. BRAC, the giant Bangladeshi NGO, moved on the same path after it entered microcredit. After 13 months of field work in Bangladesh, anthropologist Aminur Rahman of the University of Manitoba came to the conclusion that the immediate reason for the move toward women was practical. For cultural reasons, women were more sensitive to protecting the reputations of their families, perhaps precisely because of their relative lack of power. As a

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result, in rural Bangladesh, at least, they repay more reliably. One loan officer explained to him that, "In the field it is hard to work with male members. They do not come to meetings, they are arrogant, they argue with the bank workers and sometimes even threaten and scare the bank workers." Women, he was told, are more vulnerable and submissive, and less mobile, thus easier to track down if they do not pay. The very attractiveness of the public meetings for women largely barred from public fora may give MFIs leverage.

7.2.4 Frequent transactions and short loan terms

Borrowers use microcredit for a wide variety of uses, from financing weddings to paying for day to day consumption needs to investing in productive activities. Investment activities in turn range from substituting for high-interest supplier's credit, which can pay dividends in a single day, to buying calves that will not generate returns for months. Yet micro loans almost always require frequent, regular payments that start immediately after disbursement. And they usually mature with six or twelve months. Microcredit, then, is poorly matched to many common investments. Clearly the frequent payments and short terms are pragmatic. Allowing microcredit borrowers to pay all principal and accumulated interest in a single transaction years after disbursement would invite disaster, just as it would for home mortgages. Much of the discipline that one hopes for from a loan would evaporate. Likewise, the need to immediately repay filters out prospective clients in the same way as forced savings. Thus, microcredit often restricts itself to those who already have enough income to repay the loan from other sources, regardless of the success of any new enterprise they pursue. Again, we see MFIs designing a structure that selects less- risky borrowers and elicits compliance from them. Amity International Business School 82

7.2.5 Matching rates to costs The microfinance world was once intensely divided over the question of whether interest rates ought to be subsidized, to help the poorest, or not, so that MFIs can grow faster. The debate cooled somewhat as the icons of poverty focus, such as Grameen, reached operational self sufficiency. We do not take a position on that question. Rather, we merely observe that if the objective is commercial viabilityor being close enough to it that the need for subsidy does not throttle growthrates must be high enough to cover most or all costs. In accepting this mathematical reality, we recognize that there is such a thing as interest rates that too are high though defining the threshold is both difficult and beyond the scope of this paper. How high the interest rates actually are in any particular case can be difficult to ascertain. Indeed, one has to conclude that one common design strategy is to obscure the true cost. Perhaps for simplicity, MFIs often state their interest rates on a "flat" basisthat is, relative to the original loan amount. But if an MFI makes a $100 loan to be repaid in equal installments over 50 weeks, then over the course of the year the average balance is only about $50. Thus the effective interest rate, relative to the average balance, is about twice what it appears to the nave. In addition, MFIs may charge origination fees, force savings that earn below-market interest or none at all, or sell credit life insurance at high prices. The best, systematically collected measure of the interest rate, then, may be the gross portfolio yield, an MFI's ratio of income on loans to loans outstanding. In the 2004 MBB sample of 302 MFIs, individual lenders reported a gross portfolio yield of 32.0% at the median (24.9% after adjusting for inflation), while solidarity lenders charged 41.7% (32.7% after inflation) and village banks 48.9% (39.1% after inflation). These figures Amity International Business School 83

understate the actual charges to the generally slight extent that arrears reduce yield. Since they are medians, half the solidarity lenders earn more than 41.7% and half the village banks earn more than 48.9%.

7.2.6 Limited product offerings and streamlined procedures

An unfortunate side-effect of frequent transactions is high administrative burden. It is therefore imperative for MFIs to streamline transaction processing. One way to do this is to limit field officer travel time per client. In urban areas such as the Dhaka slums where Safe Save operates, it is practical for field workers to go door to door; Safe Save reports that its officers visit up to 200 clients a day. Field workers for individual lenders in urban Latin America also typically spend much of their time visiting clients where they live and work. But in somewhat less-dense areas, most MFIs insist that clients come partway to the loan officers, through regular meetings. Thus, in addition to making banking a public event, the meetings facilitate mass production. A group field worker can bicycle into a village, process a large number of transactions, and move on. In Bangladesh, workers follow highly regimented schedules, typically visiting two to three centers each morning to manage the weekly meetings. The loan repayments and savings collected at the meeting are taken back to the branch office at noon, where the worker logs all the transactions, leaving enough time in the late afternoon to follow up on either new group formation or members with payment arrears.

7.2.7 Forced savings

A common element in classic solidarity groups and village banking is compulsory, or "forced," savings. Forced savings are collected during the group meetings, usually pay no interest, and cannot be withdrawn until the

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member exits the group. In effect, they accelerate loan repayment so that toward the end of a loan cycle, the MFI is actually in debt to its clients. Compartamos collects 10% of each loan and FINCA-Nicaragua collects 32% of the individual loan as forced savings. Compartamos collected the savings when a loan is granted and returns them at the end of the loan cycle. FINCA-Nicaragua, has borrowers make he savings in equal installments at meetings and does not returned them unless the borrower exits the village bank. Both MFIs also have recourse to village bank forced savings in the case of loan default by a village bank member or if the entire village bank fails. MFIs offer two main reasons for collecting forced savings: 1) to serve as cash collateral for loans, and 2) to inculcate the habit and discipline of regular saving. From the way forced savings are actually structured, however, the collateral explanation appears most compelling. The habit and discipline of regular saving can equally well be inculcated by offering voluntary time deposit accounts (analogous to certificates of deposit), or by commitment savings accounts, where each client chooses to commit to depositing a fixed sum at regular intervals. If, however, forced savings are premised that the poor are unwilling to save unless forced, then this is clearly a false premise since ample evidence now exists that the poor are both willing and able to save. The cash collateral motive does make sense. Forced savings reduce MFI financial exposure when a village bank or a solidarity group center ceases to function. Indeed, the threat of losing savings can deter such failure. The fact that MFIs often do not return forced savings till a member leaves the program thus makes business sense. Similarly, using forced savings to cover the missed payments of individual clients helps the MFI recover losses. And by making the entire group center or village bank share the financial cost of default, social pressure is exerted Amity International Business School 85

on clients to make timely payments and to offer cross-loans to each other to cover the shortfall when difficulties arise.

7.2.8 Credit life insurance

In addition to compulsory savings, some group lenders require borrowers to buy credit life insurance, which covers their debts if they die. Grameen Koota, a solidarity group MFI in India, has members pay a total of 2% of the loan amount in equal weekly installments into an "Emergency Fund" that is used to write off the outstanding loan balance if the borrower dies. In addition, $11 (Rs. 500) are paid to the family for funeral expenses if the deceased borrower had been with the MFI for less than one year, and double that amount for a longer membership period. Like forced savings, credit insurance helps both clients and MFIs. It helps clients, of course, by reducing risk. It reduces risk for the group because the members are protected from having to choose between running after deceased's grieving family or covering the loss themselves. For the MFIs, it lowers the risk from death of borrower. It also earns fee income at low administrative expense. Indeed, Grameen Koota's 2% fee seems high when you consider that the break-even price of credit life insurance as a percentage of the loan balance, assuming no transaction costs, equals half the percentage of borrowers who can be expected to die during the loan repayment period. For example, if an MFI lends $100 each to 100 women and one can be expected to die on average, half-way though repaymentthen the loss would be $50, or 0.5% of the $10,000 total lent, and a 0.5% fee would cover insurance costs. Seen through this lens, the 2% fee on one year loans implies an expected death rate of 4%/year, which seems unrealistically highor another way of raising the effective interest rate. FINCA-Uganda, a village banking MFI, has pioneered a life insurance product in Uganda that seems more forthright, Amity International Business School 86

costing less and offering more in a riskier environment, where HIV prevalence is high. It began in 1996 in partnership with the American Insurance Group (AIG). FINCA-Uganda charges its clients 1% of the loan amount as the cost of insurance, of which half is paid to AIG and half retained by FINCA. In the case of the client's accidental death, not only is the outstanding loan is written off but the heirs receive a substantial $1100. (If the death is not by accident, only the loan is written off.) There is a $600 pay-out for the accidental death of a spouse, and $300 for a child.58 The product turned out to be so profitable that by 2004, AIG Uganda was selling credit life insurance through 26 MFIs in Uganda, Tanzania, and Malawi, and was projected to earn just under $200,000 from the product, 25% of total earnings

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Chapter 8 Policies and Regulatory Framework

8.1 REGULATORY FRMEWORK OF MICROFINANCE INSTITUTIONS (MFIs) 8.1.1 Policy Framework for Micro finance system A salient feature of MFIs has been that they have sprung up spontaneously to meet a market demand similar to the creation of micro-businesses. These institutions which have been set-up at first as small village based voluntary associations to cater to each others needs have gone through an evolutionary process to become sometimes national level MFIs. Despite varying sizes, MFIs handle other peoples money and, therefore, the viability and solvency of these institutions have become a crucial issue in MFI policy frameworks. Given the fact that they function as depositories for the most vulnerable groups at the bottom of the income pyramid, a failure of an MFI Amity International Business School 88

may entail greater social costs from a welfare point of view than that of a higher level lending institution. The policy response to the need for establishing a regulatory mechanism for MFIs has basically taken three approaches: (a) Allowing MFIs to self-regulate and bringing them under strict market discipline; (b) Regulating only large MFIs which have a systemic impact on the entire financial system or the microfinance market; (c) Bringing all MFIs into a regulatory net so as to establish a viable microfinance system. Each of those approaches have their own merits and demerits and therefore a country should choose very carefully the most appropriate system, since both regulation and non-regulation entail differing costs on the society. (a) Self Regulation and Market Discipline Self regulation requires MFIs to follow and adopt internal control, good governance and proper disclosure systems so that the sustainability of MFIs would be ensured through self motivation. Hence, in the long-run, it is the self regulation that ultimately preserves the viability of an MFI. This is because, however much external regulation is employed, without internal stability, an MFI would not be able to survive in a hostile market environment. The following are the important elements of self-regulation of MFIs: (a) Adoption of proper internal control systems to prevent, detect and deter fraudulent behaviour on the part of MFI employees. It is equally important to maintain strict discipline among employees as a deterrent to fraudulent behaviour.

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(b) Practicing self-restraint in the behaviour by clearly pre-announcing the policy of an MFI. (c) Commitment to continuous improvement of the management quality so that an MFI would gain capability of withstanding adverse external shocks and going through difficult periods. (d) Team-work should be promoted in order to capitalize on the full potential of workers and thereby ensure the sustainability of its actions. (e) Installation of good management information systems so as to procure timely data for making informed decisions, giving advance warning of impending disasters and preventing adverse developments within the organization. The self-regulation should be coupled with a policy of subjecting MFIs to market discipline to realize the best results for the system. The market discipline would help an organization to develop itself on a sustainable basis, solidify its operations and attain the necessary resilience to withstand or absorb adverse external shocks. Since the market discipline operates on the basis of rewarding well doers and punishing ill-doers, it requires to automatically close-down MFIs that fail to maintain the required market norms. It is however of interest to assess the welfare cost of such automatic closing of ill-performing MFIs. The continuation of an ill-performing MFI with outside support would generate two basic economic issues: moral hazard problem and adverse selection problem. The presence of either of these problems is injurious to the long-term well-being of a viable MFI system. The automatic closing of an MFI resolves both problems simultaneously. It reminds MFIs that they should stand on their own (elimination of moral hazard) and that they cannot expect to gain by forming MFIs to receive public funds (absence of adverse Amity International Business School 90

selection). The MFIs that could continue to pass the tests of the market are efficient, viable and sustainable. Hence, the welfare gains to the society by subjecting MFIs to market discipline are substantial. The loss to the society would be the loss of the financial savings of the poor who would have been indoctrinated into savings habits by a micro-finance program. The resultant loss of confidence of the participants in the microfinance systems in general and MFIs in particular would adversely affect the success of microfinance based poverty alleviation programs. This is, however, a short-term impact and could be eliminated through an effective insurance system. In view of the net welfare gains involved, it is best that MFIs are allowed to be self-regulated and subject to market discipline in order to maintain their liquidity, stability and solvency in the long run. Any external regulatory mechanism could only supplement this main pillar of ensuring the long-term sustainability of MFIs. (b) Regulation through External Bodies The response of the authorities who are skeptic of the virtues of selfregulation and market discipline has been to bring MFIs under the umbrella of a governmental regulatory mechanism. The coverage of the regulation varies from regulating only the large MFIs with a systemic impact at one end to all MFIs that form the MFI net of the country at the other. Since all MFIs have their origin as non-governmental organizations (NGOs) and NGOs do not have an equity ownership, the management of an MFI has the incentive to abuse its powers to work for a self-fulfilling objective either individually or as a collective group. This apparent deficiency in the NGO evolved MFI model has made the authorities cautious of allowing such MFIs to handle other peoples money, specifically, the poor peoples money. Amity International Business School 91

Hence, as the production of a public good, attempts have been made to maintain their stability and solvency by introducing a regulatory mechanism for MFIs. Whatever the scope of regulation, MFIs could be regulated by authorities by adopting two methods. 1. Establishment of a Government Regulatory Authority to Regulate MFIs In this method, a separate authority to be established by the government would regulate and supervise MFIs which are brought within its purview. In view of the high cost involved and the need for minimizing the burden on tax payers, the authorities sometimes choose to regulate only the large and national level MFIs which could exert a systemic impact on the financial system. In other options, the regulatory arm could be extended to all MFIs so that the government takes responsibility for maintaining a stable, viable and solvent MFI system for the benefit of the poor. The establishment of a separate governmental authority for regulating MFIs is justified on the following grounds: (i) The need for a distinctive regulatory approach for MFIs, in view of the significant difference between MFIs and higher level financial institutions; (ii) The recognition of the need for having a lighter regulatory structure for MFIs which are fledgling institutions and vulnerable to market vicissitudes; (iii) The need for preventing the normal banking supervisory authorities from being overstretched by having to regulate a large number of MFIs as well. When a separate regulatory authority is established for MFIs, such authority, adopting a system of differential regulatory methods, should be given full

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powers to approve or disapprove MFIs, call for information, examine books and other records and issue directives, guidelines and regulations to MFIs. 2. Outsourcing the Supervisory Work of MFIs to Outside Bodies In view of the large number of MFIs operating in a country, it is neither practicable nor cost-effective for a single regulatory authority to attempt at covering all MFIs. To minimize the costs, but at the same time, maintain the required efficacy, the supervisory work could be outsourced to other organizations such as accounting and audit firms, whenever there is evidence to suggest an impending crisis in the MFI system. In addition to the cost minimization, this method has the following merits: (i) The ability to engage specialists who are specifically competent and skilled in the products, affairs, operations and businesses of MFIs; (ii) The flexibility of resorting to supervision whenever the need arises, thereby avoiding a continuous and regular supervision; (iii) The possibility of effecting the required supervision through a lean body at the center To facilitate the adoption of this method, it is necessary to prepare the guidelines, benchmarks, norms and internal control systems in detail so that the outsourced supervisors could follow a uniform method of supervision. It is also advisable to introduce a separate accounting and auditing standards system for MFIs, since such standards applicable to normal financial institutions may be too stringent and prohibitive for MFIs. The regulatory mechanisms of MFIs should, of necessity, be based on both self regulation and market discipline and external oversight by a supervisory and regulatory authority. The two approaches are complementary to each other. Hence, in the absence of either approach, the other cannot deliver the required results. 8.1.2 Structure of Micro-Finance in India Amity International Business School 93

India also has followed a policy of non-regulation of MFIs formally. The requirements applicable to MFIs do not go beyond, as in other non regulating countries in the region, the administrative and simple accounting requirements of charities, trusts, etc. The country has been relying on selfregulation as an effective way of ensuring the proper functioning of MFIs. Given the need for streamlining microfinance and promoting it as an effective tool for poverty alleviation, ADB (2000) has made the following proactive recommendations to be adopted by the Reserved Bank of India (RBI): (i) RBI should promote understanding that higher interest rates provide increased access to finance for the poor rather than exploiting them; (ii) RBI should initiate action to bring the needed legal framework for MFIs; (iii) RBI should establish prudential regulation and supervision structures for MFIs which are appropriate to their size; (iv) RBI should develop prudential norms and reporting standards for MFIs. Micro-Finance Institutional Structure in India The different organizations in this field can be classified as "Mainstream" and "Alternative" Micro Finance Institutions (MFI). (A) Mainstream Micro Finance Institutions NABARD National Bank for Agriculture and Rural Development, Small Industries Development Bank of India (SIDBI), Housing Development Finance Corporation (HDFC), Commercial Banks, Regional Rural Banks (RRBs), the credit cooperative societies etc are some of the mainstream financial institutions involved in extending micro finance.

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(B) Alternative Micro Finance Institutions These are the institutions, which have come up to fill the gap between the demand and supply for microfinance. MFIs were recently defined by the Task Force as "those which provide thrift, credit and other financial services and products of very small amounts, mainly to the poor, in rural, semi-urban or urban areas for enabling them to raise their income level and improve living standards." The MFIs can broadly be classified as: NGOs, which are mainly engaged in promoting self-help groups (SHGs) and their federations at a cluster level, and linking SHGs with banks, under the NABARD scheme. NGOs directly lending to borrowers, who are either organised into SHGs or into Grameen Bank style groups and centres. These NGOs borrow bulk funds from RMK, SIDBI, FWWB and various donors. MFIs which are specifically organised as cooperatives, such as the SEWA Bank and various Mutually Aided Cooperative Thrift and Credit Societies (MACTS) in AP. MFIs, which are organised as non-banking finance companies, such as BASIX, CFTS, Mirzapur and SHARE Microfin Ltd. 8.1.3 Key Focus Areas of Micro Finance Initiatives Goal 1 Eradicate extreme poverty and hunger Goal 2 Achieve universal primary education Goal 3 Promote gender equality and empower women Goal 4 Reduce child mortality Goal 5 Improve maternal health Goal 6 Combat HIV/AIDS, malaria and other diseases

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Goal 7 Ensure environmental sustainability Goal 8 Develop a global partnership for development 8.1.4 Global Targets of Micro Finance Programmes Target: 1 Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from hunger Target: 3 Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling Target 4: Eliminate gender disparity in primary and secondary education, preferably by 2005, and to all levels of education no later than 2015 Target 5: Reduce by two-thirds, between 1990 and 2015, the underfive mortality rate Target 6: Reduce by three-quarters, between 1990 and 2015, the maternal mortality ratio Target 7: Have halted by 2015 and begun to reverse the spread of HIV/AIDS Target 8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases Target 9: Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources Target 10: Halve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation Target 11: Have achieved by 2020 a significant improvement in the lives of at least 100 million slum dwellers

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Target 12: Develop further an open, rule-based, predictable, nondiscriminatory trading and financial system (includes a commitment to good governance, development and poverty reduction both nationally and internationally) Target 13: Address the special needs of the Least Developed Countries (includes tariff- and quota-free access for Least Developed Countries exports, enhanced programme of debt relief for HIPCs and cancellation of official bilateral debt, and more generous ODA for countries committed to poverty reduction) Target 14: Address the special needs of landlocked countries and small island developing states (through the Programme of Action for the Sustainable Development of Small Island Developing States and the twenty-second General Assembly provisions) Target 15: Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term Target 16: In cooperation with developing countries, develop and implement strategies for decent and productive work for youth Target 17: In cooperation with pharmaceutical companies; provide access to affordable essential drugs in developing countries Target 18: In cooperation with the private sector; make available the benefits of new technologies, especially information and communication technologies 8.1.5 Micro-finance Initiatives 1. Backward Regions Grant Fund (BRGF) BRGF is designed to redress regional imbalance in development. It was launched in February, 2006 and covers 250 districts in 27 States. The Amity International Business School 97

Rashtriya Sam Vikas Yojana which covered 147 districts has been subsumed into BRGF. The fund provides financial resources for supplementing and converging existing developmental inflows into the identified districts, so as to: 1. Bridge critical gaps in local infrastructure and other development requirements 2. Strengthen, to this end Panchayat and Municipality level governance with more appropriate capacity building for participatory planning 3. Provide professional support to local bodies for planning, implementation and monitoring their plans 4. Improve the performance and delivery of critical functions assigned to Panchayats The Programme has two components namely, a district component covering 250 districts and Special plans for Bihar and the KBK districts of Orissa. This allocation was Rs 3,600 crore in 2007-08. Strategy BRGF focuses on implementation of the process of participative planning. Centrally sponsored schemes have specific sectoral objectives and targets. BRGF can be used to supplement them through a comprehensive macro approach cutting across sectors and meeting inter-sectoral requirements. Salient features of the BRGF Programme: BRGF consists of two funding windows, namely, a Capacity Building Fund and a substantially untied grant. The substantially untied grant is to be distributed among the districts as follows: (a) every district will receive a fixed minimum amount of Rs 10 crore per annum, and (b) the balance allocation under the scheme will be made on the basis of the share of the population and Amity International Business School 98

area of the districts in the total population and area of all the backward districts. Each Panchayat or Municipality within the backward district concerned will be the unit for planning under BRGF. Plans prepared by each Panchayat or Municipality will be consolidated into the District Plan by the District Planning Committee. 2. Special Provisions for Schemes for Schedule Caste and Schedule Tribes: Training of educated youth, pre-recruitment training for paramilitary and other security forces, provisions of tractors and agricultural implements to self-help groups, construction and allotment of shops and provision for setting up of secondary schools, colleges, hostels and industrial training institutes. 3. Special provisions for States and Districts: Special provisions have been made in the guidelines for the districts in J&K, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura which do not have Panchayats. The traditional village-level bodies and institutions in these districts will plan and implement the programme in these areas. 4. Major anti-poverty, employment generation and basic services programmes Pradhan Mantri Gram Sadak Yojana (PMGSY) PMGSY was launched on December 25, 2000 as a 100-per cent centrallysponsored scheme with the primary objective of providing all-weather connectivity to the eligible unconnected habitations in the rural areas. The programme is funded mainly from the accruals of diesel cess in the Central Road Fund. In addition, support of the multilateral funding agencies and the domestic financial institutions is being obtained to meet the financial requirements of the programme. Up to December, 2007, about 1,42,750 kilometre-long road Amity International Business School 99

works have been completed with a cumulative expenditure of Rs. 27,382.24 crore. 5. Indira Awaas Yojana (IAY) This scheme aims at providing dwelling units, free of cost, to the poor families of the Scheduled Castes, Scheduled Tribes, freed bonded labourers and also the non SC/ST persons below the poverty line in rural areas. The scheme is funded on a cost sharing basis of 75:25 between the Centre and the states. During the current financial year Rs 4,032.70 crore has been earmarked for release to DRDAs under IAY for construction of 21.27 lakh houses. As per the information received from the state governments, 9.39 lakh houses have been constructed up to November 2007. 6. Sampoorna Grameen Rozgar Yojana (SGRY) SGRY was launched on September 25, 2001. The objective of the programme is to provide additional wage employment in the rural areas as also food security, alongside creation of durable community, social and economic infrastructure in the rural areas. In 2007-08 up to December 31, 2007, the number of person-days of employment generated under SGRY was 11.6 crore while the Centres contributions in terms of cash and food grain component up to December 31, 2007, were Rs 1,142.27 crore and 9.55 lakh tonne respectively. Under the special component, about 0.55 lakh tonne of food grain have been released to calamity-hit states in the current year up to December 2007. The SGRY programme in 330 districts has already been subsumed in the National Rural Employment Guarantee Scheme (NREGS) (200 districts in the first phase during the year 2006-07 and 130 additional districts in the second phase during 2007-08). The SGRY programme will be entirely subsumed in NREGS with effect from April 1, 2008. Amity International Business School 100

7. Swarna Jayanti Shahari Rozgar Yojana (SJSRY) In December 1997, the Urban Self-Employment Programme (USEP) and the Urban Wage Employment Programme (UWEP), which are the two special components of SJSRY, were substituted for various programmes operated earlier for urban poverty alleviation. The fund allocation for the scheme was Rs 344 crore during 2007-08 and Rs 256.41 crore has been released up to December 4, 2007. During 2007-08, under USEP, 0.44 lakh urban poor were assisted to set up micro/group enterprise and 0.60 lakh urban poor were imparted skills training up to the end of November 2007. Under UWEP, the man-days of employment generated was 6.77 lakh up to the end of November 2007. Cumulative coverage of beneficiaries under the Community Structure Component was 358.13 lakh up to the end of November 2007. 8.2 Information Technology 8.2.1 Framework for implementing IT in rural development Rural IT: Conceptual Framework We examine the potential for rural IT use, both from supply and demand perspectives. On the supply side, we examine the technical and organizational issues that arise for delivering IT-based services to rural populations in India. On the demand side, we examine the potential benefits that IT can bring to these populations, if the implementation is successful. We begin with the demand side, as a way of motivating the supply side issues. Figure 1: Rural Household Economic Decisions

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Potential sources of demand for IT-based services can be framed in terms of a simple flow diagram representing the decisions of rural households. We will treat a typical household as engaged in farming, though this will not be true for all of them. Figure 1 presents a simplified representation of the various economic decisions. Operations Inputs Selling Consumption Human capital Saving Beginning from the left of Figure 1, input decisions include material inputs such as seeds, fertilizer and pesticides; and capital inputs such as tractors and land (whether through purchases or rentals); as well as the credit required for such purposes. The focus of analysis will be market transactions for inputs. In all cases, there is a potential for benefiting through improved information about prices, quality and availability. Labor is also an important input, but the labor market has special characteristics that reduce the importance of such information in rural contexts. Operations include decisions with respect to quantity and timing of inputs. A crucial aspect of agricultural operations is risk management, as both the weather and pest incidence are extremely variable. Ex ante decisions in the

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face of uncertainty, as well as ex post responses to realizations of uncertainty are both important. Predictive and technical information are both important for agricultural operations. Continuing to the right of Figure 1, marketing of outputs primarily requires price information. Increasingly, producing for sale also requires knowledge of quality requirements in different markets. Selling of produce provides income for consumption, investment and inputs (the reverse arrows in the figure), as well as generating information that affects input and production decisions. Non-production decisions of households can be roughly divided into pure consumption activities, as well as human capital investment in education and health. The boundary is fuzzy, since even basic food consumption has nutritional impacts and therefore a human capital component. These activities generate impacts on operations, since they affect the quality of decision-making, as well as household labor inputs: we indicate this with the vertical arrows. While poorer households may be severely limited in their consumption, a significant proportion of rural households in India have incomes sufficient to support some discretionary consumption. In some cases, consumption may be only superficially discretionary social norms may dictate spending on activities relating to marriage and other life cycle events. Finally, the rightmost box captures household saving, again something that is not feasible for all rural households, but is an activity of growing importance. Saving may be for consumption smoothing, investment, or precautionary reasons. Even this simplified and summary picture of rural households economic activity illustrates that they engage in a broad range of transactions and decisions with economic impacts. What is noteworthy besides this complexity is that many decisions are made with very limited information, and that market interactions are often subject to high Amity International Business School 103

transaction costs, due to imperfections in information, as well as high transportation costs, inefficient intermediation and time delays. High transaction costs will always prevent marginal transactions from being undertaken; in extreme cases, the market may fail to function at all. Given this scenario, the role of IT can be understood in terms of reducing transaction costs, as well as improving the efficiency of decision making within households (both as producers and as consumers). Reductions in communication and transaction costs are particularly beneficial where they can allow new markets to develop, in the sense that existing goods and services, otherwise restricted to urban areas, or to a very limited segment of rural populations, now can be offered to broad crosssections of the rural population. Examples include financial services, particular types of education, health services, long distance communications, and expertise on a range of production-related decisions. Whether this can be done in a sustainable manner depends on the supply conditions for ITbased rural services. It must be further understood that the activities outlined, in Figure 1 and the accompanying discussion, take place within a particular institutional environment. This includes private actors as well as governments. For example, farmers may obtain credit and inputs, as well contract their output, to private commission agents, even in the presence of government procurement and government-run local markets. Governments play a major role in subsidizing inputs, providing infrastructure, and enforcing property rights. To the extent that these activities are also subject to inefficiencies, it may be the case that, in order to be successful, IT-based interventions geared towards rural households will have to simultaneously alter the institutional environment, or else achieve sufficient scale and scope in order to impel changes in it. We will take this up later in the paper. Amity International Business School 104

Figure 2: Value Chain for IT-Based Services

Turning to the supply side, we can illustrate the various stages of decisionmaking and delivery of IT-based services in terms of a typical value chain, as shown in Figure 2. At each stage of the chain, the IT components include a mix of hardware, software and services. In addition, the creation of an organizational structure and value network is a Organization and partners Power and connectivity Computing/ peripherals Applications HRM and CRM critical first step, while managing human resources and customers is vital for successful final implementation. We next discuss each of the components of the value chain in Figure 2. The organizational structure typically requires commercial goals of profitability to be built in. This is easily done through a standard corporate structure. It is clear that, for scalability, some minimum size of the organization is required. In addition, there are fixed costs of innovation that can be spread more effectively across a larger organization. Social goals can be incorporated in two ways. For organizations that are dedicated specifically to rural IT-based services delivery, controlling ownership of the corporation by a non-profit entity provides the social focus. For existing corporations with broader businesses, social goals may enhance reputation, meet corporate social responsibility guidelines, or otherwise be consistent with the mission and

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values of the organization. In other words, including social goals may make good bottom-line business sense. For both types of organizations, building the right capabilities requires some effort. Creating what amounts to a brand new infrastructure for rural IT service delivery requires a broad mix of skills, and finding talented and trained people who can be effective in a role that mixes entrepreneurial tasks with corporate line responsibilities, all in an unfamiliar rural environment, can be a challenge. One solution to the potentially insurmountable problem of collecting the necessary talent and skills is to enter into partnerships with other organizations that may provide specific pieces of the overall package that is needed: application software, content, maintenance services, technology, marketing, and so on. These partnerships can pose their own problems, particularly in goal alignment and consequent performance monitoring requirements. Of course all these organizational issues are well recognized in management writing and experience: what is important is to recognize their criticality in a setting that has more typically been the arena of pure social service entities such as governments and NGOs. It is also critical to recognize that the organizational innovation required in this case is an order of magnitude greater than the task of selling consumer goods in rural areas, something that is now accepted as a given in India. The greater complexity and variety of the services being delivered through IT is the root cause of this difference. The second stage of the supply chain in Figure 2 concerns access to electric power and Internet connectivity. In both cases, a major constraint is the failure of the public sector to deliver adequate power and telecommunications to rural India. Privatization has helped in the case of telecommunications, as has technological change. In fact, innovation in Amity International Business School 106

digital communications technologies is the foundation of all rural IT-based service delivery. While conventional telephone connectivity has often proved inadequate for Internet access in rural areas, because the quality of existing voice lines is too poor to sustain data transmission, several innovations provide alternatives that are likely to be cost effective. These include wireless in local loop (WLL), fiber optic cables, and high powered versions of Wi-Fi (802.11 wireless standards). The Internet boom in the United States clearly played a role in pushing down costs and speeding innovation in fiber optics and wireless transmission. In some cases, VSAT satellite connectivity has been used for Internet access, but it is not very cost effective. The major challenges for connectivity are likely to be regulatory, having to do with interconnection to the main network, and with maintenance, rather than with the fundamental technological choices and implementation. Electric power is more of a problem, and this is true throughout India. Battery backups are a very partial solution to the lack of reliable power supplies, and solar technologies may be more promising in the near future: they are already in use in existing rural IT efforts. The difficulty is that having to rely on these alternatives and backups unnecessarily raises costs of operation. Of course this is true for all of Indias economy. It is well recognized that the power sector is the major bottleneck, with capacity well short of demand, and the quality of transmission and distribution remaining poor. The third stage of the supply chain is the most straightforward, because of the standardization of components of desktop computing and peripherals, rapid technological improvements, falling costs of production, and, most recently, price reductions resulting from changes in tariffs on imported Amity International Business School 107

hardware. It is now possible to fully equip a single computer rural Internet kiosk for less than Rs. 50,000, including CD drive, printer, scanner, power backup, and web cam. Potentially, the highest cost component is the operating system, since Windows enjoys a virtual monopoly on the desktop. However, Microsoft seems to have concessional pricing for socially oriented developing country initiatives, and this helps to reduce costs. The operating system is still typically in English, but as long as simple drills can take kiosk operators to local language applications and content, this is not a substantial usage barrier. One can conclude that this stage of the supply chain is easiest to implement, with a highly standardized, almost cookie-cutter approach although ongoing maintenance can be a challenge. The major business decision is whether to have more than one computer per kiosk, but experience suggests that one is sufficient for almost all situations, at least in the beginning. The next stage of the supply chain, namely applications, presents more challenges. The range of possible applications is vast. Many IT-based services require non-IT logistics or processes as complements. Availability of local language software becomes more of a constraint. There is much more variation across localities, not just regions. Delivery of services or development of content often stretch the resources and expertise of the primary provider, and require varied partnerships or other contractual relationships. Deciding the sequencing, scope and sophistication of various applications can be a major challenge, since many of the services are being offered for the first time, or are being delivered in novel ways that challenge existing institutional frameworks and relationships. Pricing for low income markets, where market penetration is limited in any case, and where some services may be perceived as public goods that are traditionally un-priced, Amity International Business School 108

presents another major challenge. In the case of financial services or government records or services, substantial government cooperation may be required, raising political and bureaucratic hurdles. In some ways, of course, the essence of the success of the rural IT-based-service business model depends on the selection, quality and pricing of the services being offered. What is interesting is that a substantial amount of learning has occurred in this arena, in just a few years. The final stage of the value chain in Figure 2 refers to human resource management (HRM) and customer relationship management (CRM). In this context, these more general terms take on specific focuses. Training of rural kiosk operators, whether they are formal franchisees or independent farmer operators, becomes a key aspect of the delivery model. Training the field personnel at various levels (village and district hub) is also critical. Gathering customer information on usage patterns (nature and timing of use), revenue streams, and responsiveness to pricing, social acceptance, and so on is also vital, as these are brand new markets in terms of the nature of service delivery. Furthermore, being able to respond to this information with appropriate and timely changes in strategy is also necessary for successful implementation. One might expect that a labor surplus developing economy such as Indias would not have a problem with the more labor-intensive tasks at either end of the value chain as it has been mapped in Figure 2. However, it seems that these value chain activities are the most difficult to carry out successfully, because those with the requisite skills are more likely to be taken up by more traditional corporate organizations, in urban environments. This does not minimize the challenges associated with technical implementations and adaptations for rural areas, whether in software, hardware and maintenance. Amity International Business School 109

However, solutions in these cases are often one-time and replicable, whereas building organizational expertise involves much more of a situation-specific or local approach. We have so far provided a general and abstract discussion of the various aspects of supply and demand of rural IT-based services. In the next section, this discussion is made more concrete and specific, through an assessment of several initiatives in India.

8.2.2 Rural Development programmes

Information Technology in the Rural Development IT Information Technology has always been on the forefront of any development since its inception. So, in the field of Rural development it has also played a very crucial role. Following are the various rural IT initiatives that have been undertaken

1. Common Service Centres (CSCs)

A Scheme to facilitate establishment of 1,00,000 broadband internet enabled Common Service Centres (CSCs) in rural areas of the country has been approved by the Government. The Scheme has been approved with an estimated cost of Rs 5,742 crore and is being implemented in Public Private Partnership mode. The CSCs are one of the three infrastructure pillars of the National e-Governance Plan and would serve as the physical front end for delivering government and private services at the doorstep of the citizen. The Empowered Committee has sanctioned proposals from 26 States with a cost of Rs.1,585.63 crore.

2. Common Service Centres (CSCs)

The Government has approved a Scheme for facilitating establishment of 100,000 broadband internet enabled CSCs in rural areas of the country. This

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Scheme has been approved at a total cost of Rs 5742 crore, and is being implemented as a Public Private Partnership. The CSCs are one of the three infrastructure pillars of the National e- Governance Plan and would serve as the physical front end for delivering government and private services at the doorstep of the citizen. Proposals for 26 States have been sanctioned by the Empowered Committee at a total cost of Rs.1585.63 crore. Currently three states (Jharkhand, West Bengal & Haryana) have awarded the work and implementation of CSCs in these States is underway. Another three States Bihar, Tripura & Gujarat) have also awarded the work and the implementation in these States is expected to begin shortly. In additional seven States, the work relating to bid evaluation of SCAs has been completed and it is expected to award the work shortly. Further, RFP for setting up of 100,000 CSCs is expected to be issued shortly.

3. Community Information Centres (CIC)

Department of Information Technology (DIT) had taken up an initiative for the setting up of Community Information Centres (CICs) in the hilly and farflung rural areas of the country with an objective to bring the benefits of ICT to the people for socio-economic development of these regions and to alleviate the digital divide between urban and non-urban areas. The CIC projects taken up in North East were for the setting up of 487 and subsequently 68 CICs, at block level, in the 8 North-Eastern States i.e., Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim. This initiative was extended to Jammu & Kashmir, Andaman & Nicobar Islands and Lakshadweep Islands.


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Under the UNDP sponsored project ICT for Development (ICTD), four themes for ICT applications in development sector were identified, namely, integrated citizen services, enhancing rural livelihoods, transforming governance and womens empowerment. In line with these themes, 12 pilot projects were approved and provided initial financial support. Most of these projects are at advanced stages and a few of them are in operational stage. One of the projects has already been commissioned and is providing 26 different G2C and B2C services to local citizens using single window through a network of 17 centres spread across Bangalore and is to be replicated in other towns. Similarly more than 25 G2C services are being provided through I-CoSC kiosks in Shimla. Through DRISTI pilot initiative improved transparency and accountability of the (Panchayathi Raj Institutions) PRIs has been achieved in Burdwan district of West Bengal and the State Government is replicating the same in 17 districts. Also in East and West Godawari district of Andhra Pradesh livelihoods opportunities including adoption of better agricultural practices and education and health services are being augmented in rural areas through videoconferencing with experts. In Mysore district through another pilot initiative the project has empowered rural women through capacity building on use of ICTs for creation of audio and video content on womens issues and using community broadcasts and listeners clubs. The remaining pilot initiatives are scheduled to be completed by June 2008.

5. India Development Gateway (InDG)

India Development Gateway (InDG) project being implemented by C-DAC Hyderabad aims to provide responsive and credible information products and services in local languages catering to the needs of rural communities. As part of the project, a multilingual portal ( has been Amity International Business School 112

developed which hosts information related to agriculture, health, primary education, rural energy and e-governance and provides information in four languages -Hindi, Tamil, Telugu and English. Further, InDG has established partnerships with over 60 stakeholders from Government, civil society, academia and private sector for content sharing, validation, and translation and outreach activities. Also events such as consultative workshops, community level ICT awareness meetings and capacity building of village kiosk operators were organized as part of InDGs outreach activities. Over 1100 development professionals and village knowledge centre operators participated in about 15 events, held in the states of Andhra Pradesh, Tamil Nadu and Jharkhand.

6. Media Lab Asia

The Media Lab Asia has been set up by Government of India, Ministry of Communications and Information Technology as a not- profit organization under section 25 of companies Act with an aim to bring the benefits of the most advanced information and communication technologies to the common man and the needy people. Media Lab Asia is working on the paradigm of collaborative research in the task of developing relevant and sustainable technologies and bringing them to the daily lives of people. It is operating through national network of Research laboratories (Technical, Medical, Management, NGO. Domain Experts etc., 58 numbers at present). Its objectives include Multidisciplinary R&D, Proof of Concept, Pilot Testing and Deployment through Public Private Partnership (PPP) model. Media Lab Asia's application development is focused on use of ICT for healthcare, education, livelihood generation, empowerment of the disabled and providing rural connectivity. The Media Lab Asia projects are generally Amity International Business School 113

centered around these themes. Media Lab Asia is identifying technologies that can be taken to the land for deployment and it is implementing deployment projects.

Achievements during the year 2008-09

Currently handling 75 projects in 1500 villages, in 12 States with 58 Collaborators where 200 researchers are working. Large number of persons have been trained in ICT under the projects & 125 papers have been published. 3 persons have received their Ph.Ds and 5 patents filed. Nine technologies are being transferred to more than 10 interested parties for large scale deployment. Work is going on for 4 National Deployment initiatives. Awards Sanyog has received National Award as best adaptation to cost effective technology for persons with disabilities. Media Lab Asia (Project: Sanyog) has received NASSCOM Innovation Award 2007, for "Market Facing Innovation Emerging Companies" category. Media Lab Asia has been listed in NASSCOM's top 100 IT innovators. e-Sagu has been awarded "The Manthan Award 2007 - India's Best eContent for Development category.

7. ICT for Healthcare

Sehat Saathi- Portable Model of Primary Healthcare Delivery: Sehat Saathi is a rural telemedicine system that can be used to extend medical care to patients in the remote parts of the country. The model provides for frontAmity International Business School 114

end contact through a suitably trained non-medical person; back end support from doctors, pathologists and other health professionals for diagnosis and treatment. The pilot deployment of Sehat Saathi (ophthalmology module) telemedicine software has been done at Primary Health Centre (PHC) Chaubepur (Kanpur) in collaboration with Ministry of Health and Family Welfare. An expert eye treatment provided to more than 700 patients over a period of 6 months. The transfer of technology of Sehat Saathi (Ophthalmology module) system is in progress. Development of wireless integrated biomedical devices for rural healthcare: The objective of the project is to develop affordable wireless integrated biomedical devices for rural healthcare. These wireless integrated biomedical devices are useful in the mobile telemedicine system for providing treatment to the patients in the rural areas. The biomedical equipments are integrated using wireless technology. The field trial of wireless network and telemedicine system has been taken up at Ettimadai Campus. Adaptive & Automatic Insulin Pump: The objective of the project is to develop affordable automatic insulin pump based on MEMS (microelectro- mechanical systems) mechanism and a biosensor for estimating blood glucose level. It is useful for development of affordable drug delivery system. The software logic of the pump is useful for computing drug dosage for automated injection through coupling of the biosensor to MEMS (microelectro- mechanical systems). The design of insulin pump and biosensor for blood glucose measurement has been done and the development of the same is in progress.

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Resource shared healthcare delivery system using telemedicine at Tirur taluk Mallapuram, Kerala: The objective of the project is to develop a test model for taking telemedicine for addressing primary healthcare in a sustainable way. The telemedicine centres of the project are identified as suggested by Department of Health and Family Welfare, Government of Kerala. The overall architecture consists of 4 Telemedicine Tirunal Specialty of Centers Medical (Medical Sciences College and HospitalThiruvananthapuram, Medical College Hospital- Kozhikode, Sree Chitra Institute TechnologyThiruvananthapuram, Regional Cancer Centre-Thiruvananthapuram), Telemedicine remote Centres and Data centre at Thiruvananthapuram. The specialty centres and remote hospitals are connected to the KSWAN with Wi-Fi technology. The doctors at Specialty Hospitals and patient at the PHCs can communicate using the videoconferencing facility supported by this network. The specialty hospitals and the PHCs are accessing the data centre resource using Wi-Fi connectivity. The web based telemedicine software is developed on open source frameworks. Low Cost Mobile Telemedicine Facility at Cherthala - Alappuzha district of Kerala: The objective of the project is to develop a model for affordable mobile telemedicine system for primary healthcare. A Mobile tele-clinical van with necessary medical equipments goes in a predefined schedule to the rural areas (20 villages in Cherthala taluk). The mobile telemedicine van will have a basic set of medical diagnostic equipments, a Doctor, Nurses, Lab technicians and driver cum attendant. The wireless connectivity is provisioned between the van at specified locations and the Specially Hospital for connecting the patents to the Amity International Business School 116

doctor at the hospitals. The design of the Mobile van has been completed and the development and deployment of the system is in progress. Development of low cost feature rich telemedicine terminal: There is a nationwide public healthcare infrastructure already established in India. This infrastructure can be fortified by augmenting them with ICT technologies and services to address primary healthcare more effectively. A project has been taken up to development an affordable and appropriate terminal for telemedicine solutions for primary healthcare. The telemedicine terminal would have provision for high quality videoconferencing, interfaces for selective medical diagnostic equipments, local storage, LAN/WAN connectivity and Ethernet functionality. The equipments will be locally maintainable and portable. The telemedicine system will be robust and user friendly for the patients-doctors and affordable for primary healthcare. The design of telemedicine terminal is completed. Development of the telemedicine terminal is in progress. Rural Health Management Information System: A project has been taken up for developing a model for IT based health services at grass root level by strengthening the health data collection and synthesizing relevant information for healthcare management at 20 PHCs/CHCs/BPHCs of Tirur Taluk of Mallapuram, Kerala. Handheld devices are used by health workers for capturing data from the field. The data collected by the health worker will be uploaded in the network. This will from a health database for Health Management Information System. This data can be used for timely reports, alerts, work plan and other purposes like research, census etc. A pilot deployment of handheld devices has been done by Media Lab Asia for health data collection by health worker at Ballabhgarh, Haryana with AIIMS, New Delhi. Amity International Business School 117

8.ICT for Education

Content in Schools - Portal GYANPEDIA.IN Content in School (CIS) initiative is aimed at enabling school education in India through content creation, aggregation and dissemination using ICT tools and a bottom up approach. The objective of the project is to provide a Virtual Platform for country wide content exchange programme for School Community children as well as teachers. The target is to cover 300 schools in seven districts of 3 states through the project. ICT in Classrooms in Rural Schools The teachers (more than 250 teachers) of the Government Schools including Kendriya Vidyalaya and Navodaya Vidyalaya in rural areas of the state of Andhra Pradesh have been trained on Content creation using open source tool and about 150 content modules (polished + unpolished) on five subjects (Maths, Physics, Chemistry, Biology and General Science) have been developed. The authoring tool "SQUEAK" has also been localized in the regional language. 15 workshops have been conducted. The project at Mizoram & Karnataka is covering the subjects of Science for classes IV-VII using teacher centric software models. Teachers in 15 rural schools in Karnataka are using these modules for more than one year. Installation of software & teachers training in 40 rural schools in the State of Mizoram have been completed and the schools have started teaching by using the specific software content. In another project, out of the 8 districts in Mizoram, IT training is being carried out in 5 districts. Over 300 students have been trained for CCCA (Certificate Course in Computer Applications) for School children and DOEACC 'O' Level courses. Development of Virtual Labs: 40 Virtual Amity International Business School 118

Demo Experiments in Physics for class V-VIII have been developed in collaboration with IIIT, Hyderabad. The project on "Development of Virtual Lab for Life Science Experiments for Higher Secondary Education" has been taken up. The work on portal has also started with sample experiments uploaded. The project on "Design, Development & Deployment of Mobile & Internet based Math Prep- Guide Application" has been taken up. Sample content uploaded on the portal and mobile device. The project on "Development on Multimedia based Pre-Primary Teachers Resource kit for English & Hindi" has been taken up Sample content sourced from various agencies has been put on the portal.

Use of ICT in Vocational Education and Training

Media Lab Asia has initiated a project to evolve a National program for application of ICT for Vocational Education & Training. This is in continuation of work to evolve a plan for application of ICT for Vocational Education & Training where more than 2500 vocations have been identified. The final reports on Agriculture and School Education sector are available. The recommendations and reports are under finalization for the Tourism & Hospitality and Media & IT sectors. The background papers on Technical/Engineering, Artisans/Craftsmen/Cottage Industries, Healthcare and Retail are ready. Four National level workshops have already been conducted in collaboration with Top National Level Agencies, GOI, Universities, Medical Colleges etc., to identify the vocations which need immediate attention and highlighting various possible vocations in each of the sectors and the vocations which immediately require ICT interventions. Amity International Business School 119

Transfer of Technology (ToT) in ICT for Education Sector The following technologies are being deployed on large scale through different organization. Samvidha: An offline Internet access system for personalized content access & presentation for education & literacy for illiterate adults & rural children. Transfer of Technology in progress. Sahayika (The knowledge network): It deals with Ontology building tool, with an interface to create new ontology for any subject. It is available in Bengali & English. It provides concept based as well as topic based navigation of content. Transfer of Technology in progress. Content Authoring Tool: This is a Tool in local language based on 'Squeak' and to train teachers to use / to develop content, about 12 virtual lab experiments in physics are also available. Transfer of Technology in progress. Life Skill Training Tools for Nomadic Tribes: It deals with ICT based Primary Education/Life skill training to children of Nomadic tribes & underdeveloped communities with flexibility of development of course content as per user need in local languages & local context. Transfer of Technology in progress.

9. Rural Connectivity
Ashwini This project has established a broadband wireless network based on 802.11 b/g Wi-Fi technologies, connecting 32 village centres in East and West Godavari Districts of Andhra Pradesh with hub at Bhimavaram town. This facilitates access to broadband connectivity in more than 115 villages benefiting a population of more than 5 lakhs spread in approximately 4,000 sq kms. This project delivers high quality services Amity International Business School 120

like e-Learning, e- Governance, e-Medicine, e-Health and e- Education to rural areas. It also provides connectivity backbone for rural BPO's in "GramIT" project and "e-Sagu" (for personalized agroadvice) project in the region. Services/training presently delivered are Mathematics and Spoken English classes for 8th to 10th standards, Telemedicine, Computer Literacy Classes, Livelihood services like embroidery and saree painting, and crop advise services. Multi-site videoconferencing is effectively used on this network to provide interactions between domain experts and the people in the villages. A revenue model has been devised which has started generating revenue from the field towards achieving sustainability.

10. ICT for Empowerment of Disabled

National Interactive Disability Portal: MLAsia in collaboration with Rehabilitation Council of India (RCI) - (a statutory body of Ministry of Social Justice and Empowerment), New Delhi has developed a comprehensive Interactive portal. The portal will contain the following information: National Disability Register Online courses through LMS run by RCI. Repository of Braille ready-Text, Audio files, etc. List of MSJE offices, Special Schools, NGOs Special Educators. All Government policies, Schemes & circulars related to disabled people. Availability of Assistive Devices & its details. Programmes of RCI. Satellite & Internet based national network for education, training and empowerment of the Disabled: Satellite uplink and studio has been Amity International Business School 121

set up at RCI premises. The DRS facility at 220 centres has been installed and the regular live interactive tele-conferencing program has started from October 2007. ICT enabled Integrated Assessment Tool, for Mentally Retarded Children: This is a project to develop "ICT enabled Integrated Assessment Tool, for Mentally Retarded Children" which has been taken up in collaboration with C-DAC, Thiruvananthapuram. Shruti-Drishti project is to enable visually impaired to access the electronic documents from the conference website in speech and Braille form. Deployment work of "Shruti-Drishti" system developed under DIT grant has been taken up in collaboration with C-DAC Pune and Webel Mediatronics Limited. Large Scale Deployment under ICT for Empowerment of Disabled : A number of organizations have shown their interest for large scale deployment and commercialization of Sanyog, Shruti and Vaani under Public-Private enhancement. ICT for Livelihood Generation Development of cost-effective solution for Community Radio Station (CRS) and its deployment for livelihood generation: The project envisages development of a low cost solution for Community Radio Station, to be deployed at five Agricultural Universities in India and assessment of its impact for improved methods of agriculture, education and social development. The five agriculture universities identified are Narendra Dev University of Agriculture & Technology, Faizabad; Birsa Agriculture University, Ranchi; Indra Gandhi Krishi Vishwavidhalaya, Raipur; Tamil Nadu Agriculture University, Coimbatore and Chaudhary Charan Singh Amity International Business School 122 Partnership (PPP) model including requirement

Agricultural University, Hisar. Community Radio & TV System for community development: In another project with Byrraju Foundation, 3 community radio stations and community TV centres will be designed, developed and commissioned in Guntur, East & West Godavari districts of Andhra Pradesh. This will be used as a medium to disseminate content. People from more than 80 villages in these districts will participate to develop content on women & child empowerment and other relevant areas. Digital Ecosystem for Agriculture and Rural Livelihood: A system has been developed for providing a multimedia platform for creation, sharing and dissemination of agricultural information among farmers and experts. It has created an ontology based agricultural vocabulary database in Hindi with more than 28,000 agricultural terms. This Agricultural vocabulary is based on Agrovoc in English developed by Food & Agriculture Organization (FAO). Discussions have been held with Indian Council of Agricultural Research (ICAR) for large scale deployment and implementation of Agrovoc in other Indian languages. A Kisan Blog for accessing of farming information by farmers including an Audio blog and digital agronomy portal for decision support has been developed. This project is being incorporated with the project entitled 'Integrated Agricultural Services Programme' (IASP) of Media Lab Asia for large scale deployment. Polysensors: This project aims at providing a lowcost and easy method of testing water for impurities, with rugged and tropicalized sensors. Polysensor instrument can advise whether water is suitable for human consumption. Currently, it can measure seven types of impurities in water

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viz. pH, Chloride ion, Nitrate ion, Electrical Conductance (EC), Total Dissolved Solids (TDS), Fluoride and Salinity (amount of NaCl). The instrument is battery-operated and portable for field use. The lower limit of sensitivity of the instrument is as low as specified by WHO. The Technology has been transferred on non-exclusive basis to an industry. aAQUA: An archived multilingual multimedia Question Answer based communication system aAQUA (almost All Question Answered) is a multilingual online question and answer forum which provides online answers to questions asked by farmers and agri - professionals over the Internet. The portal receives questions from all over the country and abroad. It allows users to create, view and manage content in their native language. Using this, a farmer can ask a question on aAqua from a kiosk (cyber-caf); experts view the question and answer back, providing solution to the problem. It is available in English, Hindi and Marathi. Being Unicode compliant system, it can support other languages also. aAqua also allows users to register from mobile phone and queries may also be posted through SMS. This technology is being transferred to an Industry. Agro-Sense: This project is aimed to investigate, design, develop and implement a sensor-based wireless mesh network in a pilot scale to monitor the parameters like temperature, humidity, rainfall and wetness of soil etc., in real time for better management and maintenance of agricultural production. This project is using Zigbee technology to implement wireless adhoc mess network. The project focuses on development of low cost device.

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It will be a part of agro service plan for providing personalized agri advices like localized measurement of agri and environmental parameters and connect to weather insurance, crop insurances, etc. e-Sagu: e-Sagu is an IT-based personalized agricultural advisory system. The advice by the experts is provided at the farmers door step on regular basis from sowing to harvesting. This helps to reduce the cost of cultivation and increases the farm productivity as well as quality of agro commodities. At present the system is covering crops such as cotton, chillies, rice, groundnut, castor, red gram and fish. Content development for other crops for other regions is under progress. A revenue model with collection of subscription from farmers has been implemented for testing sustainability. Experiment is going on to deliver the agri advices through SMS. An application has been filed for patenting the technology. e-Sagu has been awarded "The Manthan Award 2007 - India's Best e-Content for Development". Integrated Agri Services Programme (IASP): The Integrated Agricultural Services Programme (IASP) aims to apply information and communication technology (ICT) as an enabler to provide a bouquet of value-added and need based services to farmers through a network of village level kiosks. The IASP aims to integrate the Media Lab Asia projects on agriculture viz. e-Sagu, DEAL, aAqua, Polysensors and Agrosense for large scale deployment including services such as finance, insurance, input retail and agricultural procurement so as to make the kiosk a one-stop-shop for the farmer. Detailed Project Report is under preparation. Gramin Gyan Kendra: A project has been taken up to develop models for use of ICT to improve social infrastructure and public interaction. Amity International Business School 125

Multimedia programs would be developed for applications in agriculture, carpet industry, local art and craft, horticulture, chunar ceramic works, cultural heritage, Banarasi saree, embroidery, primary healthcare, stone sculpture, ayurvedic and traditional medicines, folk literature/music and local culture, looms and weaving. Gramin Gyan Kendra's (GGK) would be established using self help groups in rural areas of Vindhya region around Mirzapur district for creating access to information. Identification of NGOs for being associated with GGK has been done and development of multimedia contents in specified areas is in progress. The linkages with external agencies are being established. Project Chetna The project aims to build enabling ICT platforms for empowering women and children in rural communities. Deliverables of the project include multimedia content on 10 development themes i.e., Life Skills, Compulsory Education, Health, nutrition, child care, age care & HIV/AIDS, SHG / VO capacity building, content for women entrepreneurs, Legal rights & duties, financial literacy and livelihood skills. As a part of its strategy and attempt to serve the communities better and empower them, 3 Community Radio Stations & Community TV Centres being established. e-Galla - A Low Cost Retail Management System: The purpose of this project is to develop a low cost retail management system for small & medium retailers. 'Galla' will be a scaled down version of Enterprise Resource Planning (ERP) tool for small shops. Initial survey of existing systems used by traders, requirements analysis of traders across different domains, feasibility study of using existing hardware for Galla device

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and study of existing open source automation software has been completed and initial Galla device prototype has been developed. Digital Craft Revival: CHIC is a Computer Aided Design (CAD) tool for enhancing the productivity of the Chikankari designers. CHIC allows capturing of Chickankari motifs in digital form, use of these motifs to create new designs with fast turnaround time, engrave the designs directly on to the blocks. This allows creating library of traditional Indian & Persian designs for use. CHIC is 'cost-effective' and less 'timeconsuming' as compared to the existing traditional methods and can help in creation of better designs. This system is being field tested in Uttar Pradesh. Now plans are being made for large scale deployment in a sustainable way. Private companies are also showing their interest in deployment of the software. This is ready for commercialization. Now this CAD system has been extended to Carpet design.

11.Technology Development for Indian Languages Programme (TDIL)

Language technology development in India has today reached a stage, where it has a potential to generate utility applications, benefiting the masses, which will enable people to access and use IT solutions in their common language. Department of Information Technology (DIT) has further encouraged users and developers of Language Technology solutions by providing certain basic information processing tools like fonts, open office, e-Mail client, internet browser, dictionary, conversion utilities, etc., free of cost, which will motivate users to use them to solve their basic problems and help developers to build advanced solutions. This will definitely boost up and leapfrog Indian language technology

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development and their deployment in a very fast way. Software tools and fonts for 10 Indian languages namely Hindi, Tamil, Telugu, Assamese, Kannada, Malayalam, Marathi, Oriya, Punjabi and Urdu languages have been released in public domain. These software and tools are tools are also free-downloadable from the website Similar software tools and fonts for other Indian languages are being developed consolidated. The world is in the midst of a technological revolution nucleated around Information and Communication Technology (ICT). Advances in Human Language Technology will offer nearly universal access to information and services for more and more people in their own language. India is multilingual country with 22 official languages and 10 scripts. It is therefore essential that tools for information processing in local languages are developed and be made available for wider proliferation of ICT to benefit the people at large and thus paving the way towards "Digital Unite and Knowledge for all" and arrest the sprawling Digital Divide. TDIL Programme The major objectives of the programme are: To develop information processing tools to facilitate human machine interaction in Indian languages and to create and access multilingual knowledge resources/content To promote the use of information processing tools for language studies and research To promote use of Information processing tools in Socio-economic sectors e.g. e-Governance, e-Rural prosperity & e-Learning

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To consolidate the developed Indian languages technologies into innovative user products and services To promote collaborative development of futuristic technologies leading to innovative products and services. Focus Areas Development of technologies in multilingual computing areas involves intensive indigenous R&D efforts due to variety of Indian languages. The focus areas of the TDIL programme may be divided into following domains: Translation Systems Cross Lingual Information Access and Retrieval Linguistic Resources Human Machine Interface systems Language processing and Web tools Localization and content creation Standardization. Achievements of the TDIL Programme During 2007-08 Technology Development through Mission Mode Projects Six Mission mode projects in consortium approach are being continued for the development of: 1. English to Indian Language Machine Translation System (Consortium Leader: CDAC Pune; Domains: Tourism and Health). The language pairs involved are English-Hindi, English-Marathi, EnglishBengali, English- Oriya, English-Tamil and English-Urdu. 2. English-to Indian Language Machine Translation System based on Angla-Bharti Technology (Consortium Leader: IIT Kanpur; Domains: Amity International Business School 129

Tourism and Health) The language pairs involved are English-Urdu, English- Punjabi, English-Bengali and English- Malayalam. 3. Indian Language to Indian Language Machine Translation System (Consortium Leader: IIIT Hyderabad ; Domains: Tourism and Health) The bi-directional language pairs involved are Tamil-Hindi, TeluguHindi, Marathi-Hindi, Bengali-Hindi, Tamil-Telugu, Urdu-Hindi, Kannada-Hindi, Punjabi-Hindi, and Malayalam -Tamil. 4. Cross-Lingual Information Access (Consortium Leader : IIT Bombay; Domains: Tourism and Health), The languages involved are Bengali, Hindi, Marathi, Punjabi, Tamil, Telugu and English. 5. Robust Document Analysis and Recognition System - Printed Text OCR (Consortium Leader: IIT Delhi) for Indian languages for Indian scripts namely Bengali, Devanagari, Malayalam, Gujarati, Telugu, Tamil, Oriya, Gurumukhi, Kannada, Nepali and Tibetan. 6. On-line Handwriting recognition systems (Consortium Leader : IISc Bangalore): For Devanagari, Bengali, Tamil, Telugu, Kannada and Malayalam scripts.

12. Drishtee
Like many firms begun in the infamous dot-com era of the late 1990s and early 2000s, Drishtees roots come from a strong ability to recognize opportunity combined with an expertise in designing and delivering technology. Started in the year 2000 in Dhar (Madhya Pradesh, India), Drishtees first project was to develop and implement a web-based software for Gyandoot, an e-governance initiative to deliver government services to the rural poor at their doorstep. Gyandoot rapidly

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gained international recognition, leading to the Stockholm Challenge Award later that year. More importantly, Gyandoot sowed the seed of Drishtee by providing its founder, Satyan Mishra, with the vision that ICT and rural entrepreneurship could spread across rural India, leveraging technology and new business models to offer solutions for rural development. Since then Drishtee has been recognized every year. Gyandoot provided an intranet for 33 village information kiosks, offering a range of mainly e-governance-related services. The most prominent of these is land record certificates, which are needed by landowners for transactions such as sale or leasing of land. While Gyandoot was a specific local initiative, involving heavy support from the District Collector, Drishtee has attempted to take that model and rapidly replicate it across the country. Currently, Drishtee has over 100 rural Internet kiosks in several states, run by franchisees according to a revenue sharing arrangement. In Drishtees case, a kiosk has, at least initially, just one computer. The set-up cost is in the range of Rs. 50,000.

13. Aksh
AKSH was incorporated in the year 1986 as Private Limited Company. It was converted into a Public Limited Company on 13th March, 1994. Aksh is essentially a fiber optic cable company, with its core competence in laying and maintaining cable. Its revenue model is driven by the content and data that can be delivered over this cable. Therefore it has an interest in increasing such content delivery. Aksh Optifibre in association with BSNL, has launched its IPTV brand icontrol, in Kukus of Jaipur district, the first IPTV ever to be launched in rural India. Simultaneously, Aksh has also announced the commercial launch of icontrol in Rajasthan (Jaipur), which will now enable BSNL Amity International Business School 131

broadband customers to avail IPTV service. Subsequently in 6-8 weeks this service will be available in other cities of Rajasthan. icontrol is a television connection that allows the viewer to watch the programmes as per their convenience with more than 120 channels, and an extensive movie library with Hollywood and Bollywood titles at no extra cost, providing an economical medium of entertainment both to urban and rural India.

14. n-Logue

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n-Logue was launched to fulfill the need for Internet and voice services in every underserved small town and village in India. The potential demand for Internet services in these areas is huge and largely unfulfilled. n-Logue proposes to service this demand throughout the country. While Aksh and Drishtee are mostly active in north India, n-Logue has its origin and chief presence in the south. It is a for-profit corporation, with majority ownership residing with a nonprofit organization. The main Amity International Business School 133

impetus for n-Logue came from the IIT Chennai research group headed by professor Ashok Jhunjhunwala. This group has been responsible for a stream of hardware and software innovations that enable rural IT-based service delivery, through connectivity and applications. However, technology is only the first leg. The second leg is a business model, which allows this kind of set-up to scale up to 6, 00,000 villages. The issue that needs to be addressed is in villages where affordability is low, is can a business scale? Telecom operators have declared rural connectivity an unviable business. The clue to a successful business comes from what was done in the mid 80s in India. During that time, urban area telephony was very difficult. People had to endure a 7-8 year waiting period to acquire a telephone connection. This was particularly difficult on the lower middle class and poor people. At that time, an innovative idea was developed find a shop in every street in an urban area and convert it into an operator-assisted telephone booth or a PCO. The PCOs were set up at street corners at a distance of about 50 metres from the closest residential areas and were manned by an operator who kept it open for 16 hrs a day, 365 days a year. The presence of these PCOs addressed the issue of distance and no one was required to undertake a long journey to avail of their services. Such PCOs spread rapidly. The approach made connectivity viable and pervasive while it also created a stream of entrepreneurs. The success of the PCO revolution can be gauged by the fact that until recently, 25 per cent of Indias telecom income came from these PCOs. Today, 300 million people who do not have a telephone in their house, use these PCOs. The lessons learnt from the PCO revolution were several

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aggregation of demand, presence of entrepreneur-driven business, proximity to a facility for greater access. These three factors provide the basis of a viable business model for rural ICT. Demand aggregation would address issues of affordability, while the entrepreneur and the easy access would ensure a steady stream of users.

15. Biomass energy for rural India

The project was signed on 8th May, 2001. The project period extends upto December 2010. The project aimed at overcoming technical, financial, institutional, information and market barriers to promotion of biomass energy. The project would provide integrated services through decentralised generation and distribution of electricity for catering to various end uses in village areas. This will be done through

Production of electricity through biomass based gasifier systems for providing electricity for home lighting, pumping of drinking water, irrigation of dry lands and running of small rural industries. Production of biogas from cow dung and leaf litter for providing cooking gas to all the households.

The project would develop and promote "marketing of end-use service package" such as irrigation facilities along with improved agricultural technology package coupled with development of skills of endusers, to increase the household incomes. This would enhance the paying capacity of the rural households. The cost recovery models and mechanisms that would be developed by the project would offset investment risks perceived by the

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private sector, leading to financial sustainability and replication of the bioenergy packages developed by the project

16. Indian Biodiversity Information System (Responsible Organization: Indian Institute of Remote Sensing)
The objectives of the project are preparation of biome/ecological zone maps using satellite remote sensing data, incorporating topographical details and biogeographical classification of India; landscape characterization to identify disturbance gradient and prioritise area (bioprospecting) for biodiversity conservation. Number of effort to characterise vegetation cover, fragmentation, disturbance and biological richness across the landscape is organised in the form of Biodiversity Information System (BIS). Field samples of key ecological characters have been used for geospatial extrapolation. The species data base has been linked with above spatial details. BIS allows identification of gap areas, species / habitat relationship and helps in biodiversity conservation planning by setting priority areas. Detailed site specific field inventories with this database can be used for identifying areas for bio-prospecting. Analysis made presents full range of distinct natural communities and ecological status at landscape level. The landscape capable of maintaining the viable population species, sustain important ecological process and services that maintain biodiversity are also mapped. Results presented can form the basic guideline to plan floral and faunal inventories in future. The dataset can allow monitoring and forecasting changes through extinction models using multi-temporal data, modeling of which can help in studying the impact of global change in different landscape. Finally the approach can Amity International Business School 136

be extended to study genetic and species diversity in biologically rich sites for prioritizing focus on bio-prospecting.

17. ITC (E choupal)

E Choupal is an initiative of ITC Limited (a large multi business conglomerate in India) to link directly with rural farmers for procurement of agricultural / aquaculture produce like soybeans, wheat, coffee, and prawns. E-Choupal was conceived to tackle the challenges posed by the unique features of Indian agriculture, characterized by fragmented farms, weak infrastructure and the involvement of numerous intermediaries. ITC stands out as a large Indian corporation serving global markets. Its kiosks are called e-choupals, and they have several differentiating features. The key distinguishing factor is that the e-choupals are totally designed to support ITCs agricultural products supply chain. This gives them a focus that is not present even in EID-Parrys kiosks in Nellikuppam. In addition, the e-choupals are totally owned and set up by ITC, with the operators not having any investment or risk of their own. Furthermore, e-choupal operators are, because of the focus, always substantial farmers, and therefore always male. All these features make the e-choupals different from the previous three initiatives. The principle of the e-Choupals is to inform, empower and compete. 1. Elimination of non-value added activities 2. Differentiated product through identity preserved supply chains 3. Value added products traceable to farm practices 4. E-market place for spot transactions and support services to futures exchange There are 6,500 e-Choupals today. ITC Limited plans to scale up to 20,000 e-Choupals by 2012 covering 100,000 villages in 15 states, servicing 15 Amity International Business School 137

million farmers. The e-Choupal system gives farmers more control over their choices, a higher profit margin on their crops, and access to information that improves their productivity. By providing a more transparent process and empowering local people as key nodes in the system, ITC increases trust and fairness. The increased efficiencies and potential for improving crop quality contribute to making Indian agriculture more competitive. Despite difficulties from undependable phone and electric power infrastructure that sometimes limit hours of use, the system also links farmers and their families to the world. Some sanchalaks track futures prices on the Chicago Board of Trade as well as local mandi prices, and village children have used the computers for schoolwork, games, and to obtain and print out their academic test results. The result is a significant step toward rural development.

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Chapter 9 Key Players

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9.1 Government of India

Governments recently have shown a growing interest in microfinance. An increasing number of countries are adopting national policies and strategies for microfinance, and governments are funding a plethora of new projects at the retail level. This article explores the optimal roles government can play to foster permanent financial access for the poor. What do we mean by government? Domestic public actors that play a role to promote access to finance fall into three broad categories:

Representatives of national and local executive branches (e.g., financial policy regulators and supervisors, telecommunications regulators, line ministry staff, heads of state-owned financial institutions, provincial governors, and other appointed officials) National and local legislative representatives (e.g., parliamentarians, mayors, and other elected officials) Members of unions, political parties, and other socioeconomic political organizations

What roles do governments play? Our simple, though not perfect, framework synthesizes the menu of policy interventions for supporting inclusive financial access into three broad and sometimes overlapping government roles (the 3 Ps): What is the ideal policy mix? Because all roles are not equally effective and some interventions may actually harm financial inclusion (e.g., by discouraging private-sector Amity International Business School 140

delivery of services), governments need to be well informed of the risks and benefits of the specific interventions and tailor their use to specific barriers that impede permanent financial services for the poor. CGAP has identified global trends on the performance of several of these policy interventions. However, the optimal policy mix for a country will depend on its specific situation (e.g., stage of financial sector development, political regime, economic situation, etc.). The capacity of its public institutions and staff is also a key factor. 9.1.1 Protector and Provider Roles Based on global analysis, we believe governments role as Protector is the most essential, because it builds trust and addresses imbalances between customers and financial institutions. A countrys regulatory authorities have an important mission of developing appropriate prudential regulations or adapting existing banking regulations to protect the solvency of large institutions that collect deposits from poor people and, ultimately, to protect the savings of poor people. However, regulatory ambitions must be balanced with the capacity available in-country to supervise, especially when determining which organizations should face prudential supervision. New protection challenges arise with the introduction of new products (e.g., home mortgages, consumer loans), delivery channels (e.g., branchless banking), and players (e.g., nonbank finance companies, telecommunication companies, retailers). Protective regulation must be proportionate or appropriately light touch if it is to protect consumers against serious abuse while not prematurely impeding access or innovation.

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Other examples of effective protection include regulation to increase the transparency of the sector. In Cambodia, requiring MFIs to publish effective interest rates has increased client awareness of credit costs, fostered competition, and encouraged efficiency gains, all of which have contributed to significant drops in interest rates over the past few years. From a global perspective, although performance of state-owned financial institutions and programs varies, we see engagement of government as direct Provider of financial services (especially subsidized credit) as one of the least efficient policy interventions for sustainable access. Recent World Bank data show state-owned banks operating in 73 out of 102 countries and comprising 15 percent of total banking assets. State-owned retail financial institutions (SORFIs) usually combine financial and policy objectives. Although these institutions typically are expected to at least break even, they often do not (because of policy objective challenges); they tend to perform relatively better on outreach than profitability. Many SORFIs have required massive periodic recapitalizations, demanding extensive public funding that could have served other policy purposes (e.g., health or education) or created incentives and support for private institutions to deliver pro-poor finance. A recent CGAP study of 26 SORFIs found that those institutions with stronger outreach often performed better financially. Having the state act as provider of financial services also may create unfair competition (e.g., by offering subsidized credit) and erode the payment culture (if collections are more relaxed). Although quantitative evidence is scarce, SORFIs may play a more positive role in providing payment or savings services than subsidized credit.

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Recent CGAP research highlights the magnitude of government-funded programs at the retail level. With programs in over 50 countries, governments are a substantial source of funding in microfinance, possibly at levels equal to or, in some cases, much higher than funding from developed countries. Even though the announcements are often larger than the actual implementation, these programs could detract from sustainable access in their effort to increase outreach (De Montesquiou, El-Zoghbi, and Latortue 2008). 9.1.2 Promotional Role Governments have many options to serve as Promoter of financial inclusion. This role is less familiar and warrants further exploration. Indirect promotion tools include policies and investments that benefit the microfinance industry while not focusing exclusively on it (e.g., promoting fair competition, strengthening the national payment system). Governments also may promote the microfinance sector more directly by developing a national microfinance strategy, establishing local wholesale facilities that provide MFIs with financial and technical assistance, or by supporting so-called priority-sector lending as is the case in India and Brazil. The jury is still out on the effectiveness and efficiency of these tools to address different types of access gaps. Recent CGAP research shows that national microfinance strategies have increased dialogue among key stakeholders, promoted good practices in many cases, and helped assess the situation on access to finance. However, most strategies were found to be based on weak diagnostics that exclude key financial-sector actors. Many strategies adopt unrealistic action plans and are championed by institutions that may not have the full capacity, mandate, Amity International Business School 143

and/or power to coordinate the industry. The national strategy for the Kyrgyz Republic offers a positive example among the 29 national strategies reviewed by CGAP (Duflos and Glisovic-Mezieres 2008). Although governments can play a useful role in financing microfinance institutions, many donors, investors, and practitioners voice concerns that Local Wholesale Facilities (LWFs) may create disincentives for the commercialization of microfinance by continuing to subsidize both strong and weak institutions, even after the sector is developed. While LWFs have boosted the early development of the sector in some countries, in some cases, these structures can create disincentives for saving mobilization by providing long-term subsidized loans. Their relevance may also fade as new investors and commercial banks become willing to provide finance. Bosnia offers a positive example, where good practice principles have prevailed as the sector matured.

9.2 Department of Information Technology

9.2 .1 Vision e-Development of India as the engine for transition into a developed nation and an empowered society. 9.2.2 Mission e-Development of India through multi pronged strategy of e-Infrastructure creation to facilitate and promote e-governance, promotion of Electronics & Information Technology- Information Technology Enabled Services (ITITeS) Industry, providing support for creation of Innovation / Research & Amity International Business School 144

Development (R&D), building Knowledge network and securing Indias cyber space. 9.2.3 Objectives e-Government: Providing e-infrastructure for delivery of e-services. e-Industry: Promotion of electronics hardware manufacturing and IT-ITeS industry. e-Innovation / R & D: Providing Support for creation of Innovation Infrastructure in emerging areas of technology. e-Education: Providing support for development of e-Skills and Knowledge network. e-Security: Securing Indias cyber space 9.2.4 Functions Policy matters relating to Information Technology, Electronics and Internet. Initiatives for development of Hardware / Software industry including knowledge based enterprises, measures for promoting IT exports and competitiveness of the industry. Promotion of IT and IT enabled services and Internet. Assistance to other departments in the promotion of E-Governance, EInfrastructure, education. Matters relating to Cyber Laws, administration of the Information Technology Act. 2000 (21 of 2000) and other IT related laws. Amity International Business School 145 E-Medicine, E-Commerce, etc. Promotion of Information Technology education and Information Technology based

Matters relating to promotion and manufacturing of Semiconductor Devices in the country. Interaction in IT related matters with International agencies and bodies. Initiative on bridging the Digital Divide, Matters relating to Media Lab Asia. Promotion of Standardization, Testing and Quality in IT and standardization of procedure for IT application and Tasks. Electronics Export and Computer Software Promotion Council (ESC). National Informatics Centre (NIC) All matters relating to personnel under the control of the Department.

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Chapter 10 Findings and Analysis

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1. Role of IT Sector in the Growth of Indias GDP Table No. 1

Years 1998-99 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 GDP at Market Prices
1751199 2754620 3149407 3586743 4129173 4723400 5321753

IT sector Revenue in Rs crore 21014 118,290 152,420 190,300 244,000 295,820 368,220

IT Sector Rev. to India's GDP( as %) 1.2 4.3 4.8 5.3 5.9 6.3 6.9

Source: Reserve Bank of India Handbook of Statistics Note: GDP figures are at Market Price Analysis The above table shows that the GDP at Market price and the IT sector revenue are show in a direct relationship. And the contribution of IT sector revenue in the GDP is also increasing as shown by IT sector revenue to Indias GDP.
"Growth of IT sector and the GDP at Market Prices"
6000000 5000000 4000000 3000000 2000000 1000000 0 199899 200304 200405 200506 200607 200708 200809 GDP at Market Prices IT sector Revenue in Rs crore

(Formulated by Using the Above Data on Ms. Excel)

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2. Increased Investment Lead to the fall in the Illiteracy Table No. 2

Years 2001 2002 2003 2004 2005 2006 2007 2008 Youth Literacy Rate % of Total 76.4 Youth Illiterate Population in India 48,713,348 Total Production of IT and ITES(in crore) 63290 88290 118,290 152,420 190,300 244,000 295,820 368,220




"Increase in Investment in IT lead to Fall in Illiteracy"

100,000,000 10,000,000 1,000,000 100,000 10,000 1,000 100 10 1 1 2 3 4 5 6 7 8 Youth Illiterate Population in India Total Production of IT and ITES(in crore)

(Formulated by Using the Above Data on Ms. Excel) Analysis Above graph shows that with the increase in investment in the IT the Illiteracy is decreasing. This proves a negative relationship between the Investment in IT and the Illiteracy.

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3. Employment Generation an Impact of IT Development Table No. 3

Years 1991 2001 2002 2003 2004 2005 2006 2007 2008 Number of IT professionals(In Thousands) 56 430 522 670 841 1045 1790 2010 3030

Source: %20professionals%20factsheet%202006

Number of IT professionals(In Thousands)
10000 No. Of IT professionals 1000 100 10 1 1 2 3 4 5 Years 6 7 8 9 Number of IT professionals(In Thousands)

(Formulated by Using the Above Data on Ms. Excel) Analysis The above graph shows the role of IT in the generation of employment over the years. IT and ITES have been consistently providing the employment opportunities.

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4. Role of IT in enhancing the pace of International Trade of India

a. Growth in the Exports of Software from India.

Source: Information Technology Annual Report 2008-2009 07-08.pdf Analysis The above graph shows the growth of the exports of the software for India and increasing contribution of the IT sector in International Trade.

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b. Growth of Electronics and IT exports from India

Source: Information Technology Annual Report 2008-2009 07-08.pdf

Analysis The Above Graph shows the consistent growth in the Exports of the Electronics and IT products and services.

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5. Role of IT in Increasing the connectivity in India

GARUDA Network Connectivity

Analysis The GARUDA High-Speed network is a Layer 2/3 MPLS Virtual Private Network (VPN) connecting select 45 institutions across 17 cities at 10/100 Mbps with Stringent Service Level Agreements with the service provider. This Grid is a precursor to the Gigabit speed nationwide Wide Area Network (WAN) connecting high performance computing resources and scientific instruments for seamless collaborative research and experiments. The High Speed Network is being established at all the Garuda partner institutes in close collaboration with ERNET who is also responsible for the operation, maintenance and management of this network. Amity International Business School 153

6. Mobile Telephone Penetration vs Per Capita GDP

a. Mobile telephony penetration and Internet usage

b. Increase in GDP at Market price

Table No. 4
1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

GDP at Market Price

569624 654729 752591 865805 1015764 1191813 1378617 1527158 1751199 1952036 2102314 2278952 2454561 2754620 3149407 3586743 4129173

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Source: Reserve Bank of India Handbook of Statistics Note: GDP figures are at Market Price
GDP at Market Price 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0
19 9 19 0-9 9 1 19 1-9 9 2 19 2-9 9 3 19 3-9 9 4 19 4-9 9 5 19 5-9 9 6 19 6-9 9 7 19 7-9 9 8 19 8-9 9 9 20 9-0 0 0 20 0-0 0 1 20 1-0 0 2 20 2-0 0 3 20 3-0 0 4 20 4-0 0 5 20 5-0 06 6 -0 7

Amount in Crore

GDP at Market Price


(Formulated by Using the Above Data on Ms. Excel) Analysis The above two Graphs show the Positive relationship between the Number of Mobile subscribers and the GDP at Market Price.

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7. GDP Per Capita vs Mobile Penetration Table No. 5

Source: Universal Access how mobile can bring communications to all, GSM Association study conducted by Intelecon Research, 2007, The Above graph shows a Direct Relationship between the GDP and the Mobile penetration in India. And both are showing increasing trend.

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Chapter 11 Recommendations, Suggestions and conclusion

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1. Increase the diversity of the Micro financial institutions
Micro financial Institutions are the delivery vehicles. These are the Access points for poor people to get financial services and are exploding in three ways: Leading microfinance institutions with social origins at their core are scaling up, Banks and other institutions with commercial origins are using their branch infrastructure to reach out, and Partnerships between socially-oriented microfinance institutions and banks are being forged to leverage each other's comparative advantages. Because Micro financial Institutions are the primary Institutions for providing the financial services to the poor so, these Institution should diversify and provide more and more diverse services.

2. Overcoming geographic concentration in microfinance

Another issue of concern is that microfinance in India continues to be skewed in its geographical distribution. The underlying causes for this include the general malaise in the economy of the central, eastern and north eastern states, with very little resultant demand for credit among the subsistence poor, and the absence of good quality NGOs, that are willing to initiate microfinance programs in these states (there are a large number of small NGOs but all of them with limited experience and outreach) So there is a need for expanding the reach of microfinance to states in central, eastern and north eastern India.

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3. Micro financial Institutions should Clear target its clients

It is very important to ensure proper targeting of clients. The dual pursuit of social ends and financial profits is an ongoing tension for all in microfinance. While in our analysis of SHG Bank Linkage indicates that the model has so far successfully targeted the poorer segments, mission drift is a common fear as pressures mount to serve richer clients with larger loans (and thereby to earn higher profits per loan since transaction costs per rupee tend to fall with loan size). Keeping focused on its target population is thus critical to the success of microfinance in India, as elsewhere.

4. Engage the Informal Economy

Up to 80% of people in India derive their incomes from the informal sector, thus the need for good financial mechanisms to support wealth creation and financial services in this sector.

5. Grow Domestic Deposits: Mobilize Micro-saving

Cost effective, secure and accessible micro-savings services feed impoverished, cash-strapped economies, and improve the lives of those living in poverty. So, the growth of domestic deposits should be encouraged and should be properly mobilized.

6. Invest in Women
Because of the interconnection of financial power, poverty and women, microfinance has an active role in improving economic equality. Increased economic power enables women to improve other areas of their and their childrens lives. So, one of the focus area for the Micro finance initiatives is building Women entrepreneurship in the rural areas. Amity International Business School 159

7. Develop Local Private Sectors and Invest in Innovation

Microfinance is the progenitor of local private sector development. Microfinance feeds small and medium enterprise development, both propelling the growth of micro enterprises but also fueling the expansion of suppliers and vertical infrastructure needed by larger businesses. Because microfinance creates increased wealth for low-income individuals, it also creates new consumers and markets for businesses of all sizes.

8. Develop Rural Areas and Invest in Food Output

Financial sector access and microfinance are essential for growth in impoverished rural areas.

9. Improve Health Services

Microfinance can contribute to financing health initiatives and create wealth for low-income people so that they can afford health services. Healthy clients also reduce credit risk.

10. Microfinance in Unleashing Entrepreneurship

So, Micro finance should Make the Business Work for the Poor.

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In microfinance, the availability of hard financial sector data to answer the simple question of who has access to what, and what is the quality of that access? is nearly impossible to come by. Access to microfinance is stifled by a lack of fiscal, regulatory and supervisory policies to promote rather than stunt deep, broad and inclusive financial sectors. IT related Infrastructure should be developed by the Government. Government should also provide incentives to the private players who are supporting the development of the infrastructure in the rural areas. Development of effective websites to enable rural youths to learn everything at the click of a mouse. Specific Websites catering to the needs of rural people should be developed. Regular workshops and multiplicity of training programmes may also support the use of IT as a device for employment. NGOs and government agencies should go hand in hand for development of computer literacy programs. Colleges can adopt villages for their development. Financial assistance should be available for the IT related development in the rural areas. Private players should go in for Micro financing ventures to support the development of the Rural India. Financial Assistance for self-employment should be made more accessible.

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Almost 70% of Indias population resides in the Rural India. Mahatma Gandhi famously noted that India lives in its villages. If the village perishes, India will perish too. This is very true so in order survive and grow it is of vital importance to develop the rural India. Since a majority of our population lives in the villages, it is important that people in rural areas should have the same quality of life as is enjoyed by people living in suburban and urban areas for the balanced growth of the nation. In order to carry out the balanced and sustainable growth the two major pillars are Information technology and financial assistance to the rural people. The above two help in the following: Spreading Education Eradication of extreme poverty and hunger Knowledge creation Combating HIV/AIDS, malaria and other diseases Spreading awareness Generation of employment Increasing the standard of living Increasing the connectivity of the rural area with the Urban area Promoting gender equality and empower women Reducing child mortality Improving maternal health Ensuring environmental sustainability Achieving universal primary education

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Chapter 12 Case studies

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Case Study 1: Spread of the Self-Help Groups Banking Linkage Programme in India
The SHG - Bank Linkage Programme is a major plank of the strategy for delivering financial services to the poor in a sustainable manner. The search for such alternatives started with internal introspection regarding the innovations which the poor had been traditionally making, to meet their financial services needs. It was observed that the poor tended to come together in a variety of informal ways for pooling their savings and dispensing small and unsecured loans at varying costs to group members on the basis of need. The SHG Bank Linkage Programme was started as an Action Research Project in 1989 which was the offshoot of a NABARD initiative during 1987 through sanctioning Rs. 10 lakh to MYRADA as seed money assistance for experimenting Credit Management Groups. In the same year the Ministry of Rural Development provided PRADAN with support to establish self-help groups in Rajasthan. The experiences of these early efforts led to the approval of a pilot project by NABARD in 1992. The pilot project was designed as a partnership model between three agencies, viz., the SHGs, banks and NGOs. This was reviewed by a working group in 1995 that led to the evolution of a streamlined set of RBI approved guidelines to banks to enable SHGs to open bank accounts, based on a simple inter se agreement. This was coupled with a commitment by NABARD to provide refinance and promotional support to banks for the SHG - Bank Linkage Programme. Amity International Business School 164

Initially there was a slow progress in the programme up to 1999 as only 32,995 groups were credit linked during the period 1992 to 1999. Since then the programme has been growing rapidly and the number of SHGs financed increased from 81,780 in 1999-2000 to more than 6.20 lakh in 2005-06 and 6.87 lakh in 2006-07 (table below)

NABARD, in association with GTZ, conducted a study, in 2005, on the comparative performance of SHG Bank Linkage Programme vis--vis other priority sector credit. The findings are based on the data received from 27 commercial banks, 192 RRBs and 114 cooperative banks participating in the programme. One of the important observations of the study was that 1.44 million SHGs had loans outstanding of Rs. 4,200 crore with the banking system. 2.63 million SHGs had saving accounts with the banks and the savings outstanding was Rs. 2,391 crore. To cover all the 50 million odd poor households in India, the existing number of SHGs will have to be more than doubled and the extent of credit to the members of each SHG will have to be increased substantially. Outcomes Reduced the incidence of poverty through increase in income, and also enabled the poor to build assets and thereby reduce their vulnerability. Amity International Business School 165

Enabled households that have access to it to spend more on education than non-client households. Families participating in the programme have reported better school attendance and lower drop out rates. Empowered women by enhancing their contribution to household income, increasing the value of their assets and generally by giving them better control over decisions that affect their lives. Reduced child mortality, improved maternal health and the ability of the poor to combat disease through better nutrition, housing and health - especially among women and children. Contributed to a reduced dependency on informal money lenders and other non-institutional sources. Facilitated significant research into the provision of financial services for the poor and helped in building capacity at the SHG level. Finally, it has offered space for different stakeholders to innovate, learn and replicate. As a result, some NGOs have added micro-insurance products to their portfolios, a couple of SHG federations have experimented with undertaking livelihood activities and grain banks have been successfully built into the SHG model in the Eastern Region. SHGs in some areas have employed local accountants for keeping their books, and IT applications are now being explored by almost all for better management information systems (MIS), accounting and internal controls.

Case Study 2: Micro Finance and Poverty Relief in India

A significant amount of the underprivileged people in India is somehow able to tailor their financial resources in a way that they can realize their ambitions vis--vis their houses or other plans. However with the Amity International Business School 166

introduction of micro finance in India, the standard of living of the poor section of the population is expected to improve (Patil et al., 2008). Micro finance services are designed to help the underprivileged to increase their earning, consolidate their properties and even gain a decent financial stability in life. The advantage of availing the micro finance credit over the more traditional means is the unwillingness of the later to serve the underprivileged people (Singh, 2008). Grameen Bank . A Role Model in Microfinance Yet another monsoon season was approaching; but Joshuna Begum (Begum) unlike her neighbors was not worried about her house getting damaged during the monsoon. Her house now had a tin roof, mud walls and wooden windows, a luxury in rural Bangladesh. Earlier, Begums house had a straw roof and bamboo walls, which used to get damaged in the monsoon season, forcing the whole family to live in the kitchen. She got her hut repaired with a loan from the Bangladesh Grameen Bank (Grameen Bank). Begum wasnt the only one; there were thousands of people in rural Bangladesh who had improved their living conditions with the help of the microfinance programs of Grameen Bank, a pioneer in microfinance. Grameen Bank helped thousands of poor Bangladeshi women to improve their lives by extending loans to them to start their own enterprises. By 2003, it was reported that between 33-48% of Grameen Bank borrowers had moved above the poverty line. By 2003, with 1,170 branches across Bangladesh, Grameen Bank was seen as a role model for microfinance all over the world. The Grameen Bank model was replicated across the world . not only in developing countries like India, Pakistan, and Vietnam, but even in developed countries such as Australia and the USA, where similar schemes were set up to improve the lives of the urban poor. However, the Amity International Business School 167

Grameen Bank also attracted criticism from the media and economists all over world. Analysts pointed out that there was no proper monitoring of how the loans were utilized; it was reported that the loans availed of by women were used largely for consumption rather than for investment purposes. Analysts also pointed out that the accounting methods used by Grameen Bank were not in accordance with industry standards, and that the bank did not provide full details about its financial position and loan repayments position. The Success Story of Grameen Bank The Grameen Bank model was one of the most widely researched microfinance models all over world. The Bank had four tiers, the lowest level being branch office and the highest level being the head office. The branch office supervised all the ground activities of the bank such as organizing target groups, supervising the credit process and sanctioning loans to members. For every 15-22 villages, a branch was set up with a manager and staff. An area office supervised around 10-15 branch offices. Program officers assisted the area office to supervise the utilization of loans and their recovery. All area offices were under the purview of a Zonal Office. Each zonal office supervised around 10-13 area offices and all zonal offices reported to the head office situated in Dhaka. Grameen Bank operated on the principles of mutual trust, supervision, accountability and member participation. Unlike commercial banks, which granted credit on the basis of collateral security, Grameen Bank did not demand any security for extending credit. The interest charged by Grameen Bank was higher than that charged by commercial banks, but lower than the interest charged by moneylenders.

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The difference between the interest earned by the Grameen Bank and interests paid by it on the loans taken from commercial banks was used to cover the operational costs of the Bank. When Grameen Bank started, many felt that it would soon fail; but on the contrary the bank expanded its operations very rapidly. From 15,000 borrowers in 1980, the membership increased to 100,000 in 1984; by 1991 it had 910,842 members, and by 2002, the number increased to 2.3 million. From a figure of US $498 in 1976, the banks total disbursements increased to US $170.39 million in August 2002. The loan repayment rate was reported to be 95%. The high repayment rate was probably a result of peer group pressure, and the Grameen Banks rule . that for availing of fresh loans, earlier loans had to be repaid. Another important factor that led to high repayments of loans was social pressure. Creditors. knocking at the door for loan repayments was considered disgraceful among Bangladeshis. It is believed that the above factors led to the success of Grameen Bank, which also succeeded in improving the lives of its members. Many research studies indicate that Grameen Bank bought positive changes in the lives of thousands of rural Bangladeshis. The landless poor benefited the most from the Grameen Bank movement. The landless poor, who earlier worked as agricultural laborers, acquired land for their own farming activities after becoming Grameen Bank members. According to a World Bank study conducted in 1994, Grameen Bank had improved the position of women in rural Bangladesh. Women members of Grameen Bank were more confident and socially aware than their non-Grameen Bank counterparts.

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Case Study 3: Akshaya An IT dissemination Project An Initiative of the Kerala Government

The Akshaya project is the first district wide e-literacy project in India and one of the largest known Internet Protocol (IP) - based wireless networks. It leverages the comparative advantage of Keralas high rate of literacy and progressive social framework along with an already advanced telecom infrastructure. It aims to achieve the twin goals of social development through access to computers in rural areas and financial viability through market - driven entrepreneurship. However, tension between these goals within the State, and for entrepreneurs and potential consumers makes it difficult to run a financially sustainable ICT kiosk project that also meets social development goals. The difference between consumers and entrepreneurs perceptions and the ways in which each group defines and prioritizes social development and financial sustainability complicates the implementation of the project. Also experiments of creating entrepreneurship through Franchise Model and looking at the programme as another avenue of employment creation were self-defeating. Key Objectives - To develop networked Multi-purpose Community Information (Akshaya) Centres to provide ICT access to the entire population of the State - To make at least one member in each family e-Literate - To develop infrastructure to provide sustained e-literacy and other facilities like email and Internet telephony - To accelerate the development of local content relevant to the population. Amity International Business School 170

- One of the primary differences between Akshaya and other projects is its scale of operations. It covers the 33 million population of Kerala and aims at making 6.5 million persons e-Literate. Thus, the Akshaya project has three focus areas: 1. Facilitate the access to technology for all sections and regions; 2. Develop competence and skill-sets to enable use of IT by all sections of society, and, 3. Content provision in Malayalam on topics of local relevance. Benefits Akshaya is a social and economic catalyst focusing on the various facets of e-Learning, e-Transaction, e-Governance, Information and Communication. Since the locations of these tele-centres is strategically planned and spatially distributed to cater to the people in even the remotest part of the district, they form a powerful network to bring the benefits of all e-Governance initiatives to the common man. The telecenters have the potential to provide G2C, G2G, C2C, B2B and G2B services and can act as decentralised information access hubs and service delivery points. Benefits in Malappuram district Trained more than 5.9 lakh people, more than 50 per cent of the trainees are women. Online certification: e-Literacy-5.9 lakh studied, 25,378 certified e-Vidya- 46,750 studied, 6500 certified Nearly 3000 direct employment opportunities created. Computerization in primary co-operative banks and societies, small shops and business establishments and schools and educational institutions. Various e-Governance services like e-Payment (bill payment), e-Krishi (agriculture being linked to market), e-Parthi (online bill payment) etc. have enabled the Government to offer its services more effectively. Even though Amity International Business School 171

over 25 per cent of Akshaya centres have closed down, it is inappropriate to term the project a failure. The very fact that 450 centres are functioning across Malappuram, braving the initial unforeseen hiccups, is a tribute to the project. But the State Government, now replicating the project in other districts, should not overlook the problems that these centres encountered. And offering a helping hand to those in trouble, rather than just washing its hands off, would send a positive message to potential Akshaya entrepreneurs in other parts of the State.

Case Study 4: KAVERI An Initiative of the Karnataka Government

Initially meant only for property registration, KAVERIs scope has been extended to the registration of firms and societies and marriages. Attempts are also being made to successfully link it with the Bhoomi Project so that land records can also be accessed from the SRO (Subregistrars Office) instead of having to go to taluk offices. The KAVERI project of Karnataka won the best e-Governance Project award for the year 2004 at the 40th annual conference of the Computer Society of India (CSI). Similar initiatives that have been successfully implemented in other states are CARD in Andhra Pradesh, HIMRIS in Himachal Pradesh, and PEARL in Kerala. Key Objectives KAVERI is the first public-private partnership project to be implemented in Karnataka since 2003. The hasslefree procedure seeks to automate and streamline the workflow. The system aims at providing conclusive proof

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of authenticity of documents, afford publicity to transactions, prevent fraud, provide a facility for ascertaining whether a property has already been transacted, assure security of deeds and titles in case the originals are lost or destroyed. Moreover, the implementation of the project would pave the way for transparency in the department and enable more effective monitoring. It is also expected that this project would enhance revenue collection in the State and would lead to an improved, efficient and user-friendly administration. As improvement over the Maharashtra model, the following innovations were introduced: Automated kiosks for calculation of the guidance values by the public. Computerised token system as against the manual system in Maharashtra. Data stored on both CDs and microfilm as against the storage of data on CDs alone in Maharashtra. Maximum involvement of departmental staff to: a) facilitate smooth transition from the private operator to the Department once the contract period is over, and, (b) to run the operations under all exigencies. Establishment of the Central Record Room at the head office level and Registrars in districts to ease the space availability in the existing offices, thereby leading towards a paperless office which is an ultimate aim of e-Governance. Benefits The kiosks (CCCs) provided adequate information about the documents to be carried to the Sub-Registrars office and accept complete documents for

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presentation, thereby reducing the percentage of pending paper work of department employees. It also reduces the burden on application software in preserving records on hard disk. Introduction of the electronic token system assigns a particular time to the applicant to present his documents, thus reducing unnecessary crowd gathering in the Sub- Registrars office and introduces a systematic manner of document registration.

Case Study 5: Implementation of e-Procurement Exchange for Government of Andhra Pradesh

PPP works best If it combines the skill sets of public and private partners - domain expertise of the Government and software and delivery skills set of the private sector. If risk-return option is chosen by the private sector who is willing and in a position to deploy funds vs. Government which desires a risk free option where only its domain expertise is used. Open platform-level playing field and fair competitive platform for the suppliers. Smart governance - though increased transparency, monitoring and control of the entire procurement process. Key Objectives of e-Procurement The key objectives of the e-Procurement solution are enumerated below: Demand Aggregation The ability to aggregate Government departments demand to leverage buying power with the suppliers

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Reduced Inventory Costs Improved planning and management of inventory leading to lower levels of inventory, thereby reducing costs Internal Arbitrage Ensuring consistency in goods and services costs at the best price across all departments at the item level Consistent and Sustainable Vendor Development Enabling prequalified vendors the opportunity to access other Government departments Transactional Effectiveness Eliminating or automating non-value adding steps within the procurement to enable efficient and effective processes Reduction in Total Cost of Ownership Understanding the supply chain and life cycle costs in procurement to establish value adding supply relationships leading to reduced cost of doing business for both Government and industry Effective Tender processing Use of different types of e-Auctions to get better deals Open Platform Level playing field and fair competitive platform for the suppliers Smart governance - Increased transparency, monitoring and control of procurement process Outcome of the Initiative The e-Procurement project has achieved most of the objectives that it was set-up to achieve: Transaction volume of Rs 33,400 crore in three years from over 12,000 tenders on the platform

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Reduction in average tender processing time from an average of six months to 36 days Increase in average number of bids received per tender from 3.4 to 4, reflecting an increase in participation from supplier community Elimination of cartelisation as reflected by a sharp increase in supplier participation in some of the cartelised areas of the State Empowerment of small and medium suppliers as they need not visit the department to purchase the tender documents or to submit their bids Increased transparency as bids are opened online and bid opening is visible to all the suppliers online The system has reduced subjectivity in tender evaluation by building smart forms that do preliminary technical evaluation of bids Instant online MIS is available on all the tenders, supplier participation and the results to all the departments and the Government. Significant cost savings - above Rs 2,000 crore due to discount quotes Elimination of paperwork as the bids are submitted online and the files or documents move in electronic form for required authorisation. Empowerment of bidders, streamlining of processes and a strong Management Information System are the other commendable achievements. Benefits of the e-Procurement System Transparency: In a e-Procurement system, the tender documents are hosted on the web site for free downloading from the day of publication of tenders; this has eliminated the bidders dependence on department

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officials for issue of tender documents. Availability of information online to the bidders has eliminated the human interface with department officials in pre and post tendering activities. This has in fact helped reduce subjectivity and corruption. Information on the transactions, the status of evaluation and award of contracts is automatically made available to the bidders on the portal. Transparency in the procurement processes has improved the Governments image and reduced instances of adverse media reports. Shortened tender cycle time: Automated work flows and simplification of processes have improved the internal efficiency of procurement departments and significantly reduced the tender lead times from 120 days in the conventional mode to 36 days in the e-Procurement mode. Reduction of lead time has contributed to early completion of projects and reduction of cost overheads to departments as well as to the suppliers. Cost Saving: The departments reaped significant cost savings Rs 255 crore (20 per cent reduction in cost) for the procurement transactions done through the exchange during 2003-04 and around Rs 2,000 crore in 2004-05 and 2005-06 due to the competitive environment created by the e-Procurement platform. While the offline procurement carried out for civil engineering works in World Bank- assisted projects in the State have resulted in receiving tenders which are 10-15 per cent higher than the estimated cost, the online procurement for similar works in other departments done over the e-Procurement platform has resulted in receiving tenders which are 7-10 per cent less than the estimated value of the work, thus saving tax payers money.

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The Government departments have also saved significant amounts (Rs. 3 crore) on advertisement costs for column-centimetres in the media as eProcurement tender notices are substantially shorter and contain only basic information on the name of works, estimated costs and the URL of e-Procurement site for further details. Empowerment of Bidders: Earlier, the suppliers had to physically scan several newspapers to keep track of tenders called by the various departments. The e-Procurement exchange makes available all the procurement requests emanating from various departments available to the suppliers at one source free of cost. Due to the project, suppliers are able to participate effortlessly and remotely in the Governments bids, round the clock, enabling them to apply for tenders of a large number of departments at greatly reduced costs of transaction. All the transactions are performed in a secure environment and every bidder is required to use his digital signature to participate in the bidding process on the eProcurement platform. As of now, 5,929 digital certificates have been issued, which is the highest for any State Governments e-Governance portal. Elimination of Contractor cartels: The electronic tendering process has been made completely anonymous and only after the opening of bids, does anyone come to know the names of the participating bidders. This has prevented the suppliers from forming cartels and has facilitated wider participation from genuine suppliers. Elimination of supplier syndicates/ cartels ensured a level playing field to suppliers. The supplier is benefited by way of more opportunities and Government departments get the best value for taxpayers money due to the competitive environment created by e-Procurement. Amity International Business School 178

Streamlining of processes: At the outset, an effort was made to standardise the procurement processes, including forms, practised by various departments, especially for the Works departments. Today, all of them follow common tendering processes and forms for Works tenders. Even these processes are being re-engineered to further improve the efficiency and curtail subjectivity in tender evaluation by the departments. A similar exercise is underway for products as well. Management information system: The e-Procurement platform has a very strong Management Information System (MIS) component. This has improved the availability of information to the departments for monitoring and reviewing the public procurements. Earlier, collection of information from various procurement entities spread across the State was time consuming and its integrity was doubtful. Now the eProcurement MIS provides the departments real time quality information. Senior bureaucrats in Government and public representatives have access to the information from this portal at the click of a mouse.

Case Study 6: Nagarpalika An initiative of the Gujarat Government

Vejalpur is one of the urban conglomerates outside the limits of Ahmedabad Municipal Corporation (AMC), but falls within the jurisdiction of the Ahmedabad Urban Development Authority (AUDA) . Currently a B class municipality, it is shortly to be designated as A class, based on the 2001 Census. General administration, certification/ licensing, taxation, accounts, solid waste management (SWM) and complaint redressal for water supply, street lighting and other services were carried out manually in the Amity International Business School 179

municipality. Shortage of staff was an excuse for tardy performance and there would always be a demand for additional recruitment. Citizens suffered from the usual delays and harassment associated with a less responsive and uncooperative municipality. Property tax collection suffered and there was lack of transparency in the system. Key Objective One Spot Non Stop Convenience at City Civic Centre and Internet The major objective of total e-Governance through city civic centres is to treat all citizens like customers of a large corporation. The duties enumerated in the Citizens Charter have been brought under the electronic process and made user-friendly and interactive. The other objective is to establish Citizen Convenience Centres where the citizens can easily access information on services, file complaints and make tax and utility payments. Results The results achieved have been as follows: e-Governance model comparable to any metro city in India Administration transformed to being peoplecentric Reduction in delays and increased promptness in delivery of services On-line monitoring and control encouraged municipality to go for privatisation of four major services On line office administration, monitoring/control mechanisms and service provision introduced; led to time management and paperless office administration Three civil centres established for time-bound complaint redressal, service provision and accessibility at fingertips

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e-Governance contributed to the municipality being the first ULB to achieve 100 per cent compliance with the first four steps of MSW Rules 2000 General administration staff performed well with the same strength as before no fresh recruitment even against retirement Firm step towards implementation of double entry, accrual based accounting system in progress Citizens proud of Vejalpur municipality in terms of transparency, accountability, service delivery and above all, exemplary dedication and team work of the elected wing.

Case Study 7: E-Agricultural Marketing (EKVI) An Initiative of the Madhya Pradesh Government
Mandis are central to the functioning of the marketing channels for agricultural products. They act as a point of contact between farmers and traders. Buying and selling transactions are conducted by commission agents and are based solely on verbal agreements and mutual understanding. The mandis, unfortunately, have not worked as optimal procurement channels since the market is created, manipulated and managed by agents. To overcome these deficiencies, Internet - connected kiosks, known as eChoupals, have been set up by ITC where farmers are provided with the latest weather reports and apprised of local and international prices and best practices in farming. They also serve as procurement and purchase points, allowing farmers to not just sell their produce but also to buy agricultural inputs and consumer goods. This initiative in Madhya Pradesh became an Amity International Business School 181

ideal vehicle to communicate directly with the farmers and thereby bypass the inefficiencies arising out of agents intermediation and collusion. It provided farmers with better information regarding prices and reduced their transaction cost (reduction in travel cost plus losses incurred due to use of the Mandis manual scales). Thus, e-Choupal not only provided an alternative marketing channel but was also a competition to the existing mandis. Thus, to prevent mandis from becoming redundant, their computerisation was sought by the Government of Madhya Pradesh. EKVI (e-Krishi Vipanan) is the e-Agriculture Marketing project taken up by the Government of Madhya Pradesh as part of its e-Governance initiative to facilitate the farmers of the State in taking informed decisions for selling their produce. Madhya Pradeshs agricultural marketing framework is unique as it consists of two distinct sets of measures: Development and regulation of primary markets, popularly called mandis. Regulation of market through a series of legal instruments. If both the functions performed by the activity centre/ Agriculture Produce Marketing Committee (Mandi) are complementary to each other, it would lead to fulfillment of the provision and objectives of the step. Also, faith would be instilled in the farmers to use the system as well as to get fair returns for their produce. This necessitated efficient, transparent and diligent working of the Mandi office so as to facilitate prompt availability of information, reports, and analysis to the users and seekers. It was, therefore essential to graduate from the present manual process to an ICT enabled process. Objectives Amity International Business School 182

The EKVI Project was started with the objective of professionalising and reorganising the agricultural trading business of the Mandi Board through cost-effective digital infrastructure using the latest advancement in ICT. It aimed at collection and delivery of real time information on-line to make operations more effective and totally transparent, benefiting all stakeholders (farmers, traders and Government) and empower them with accurate and timely information for effective decision making. The infrastructure developed is designed to create grain-less mandis by removing the need for movement of agricultural produce from the farmers premises to the mandis. The enhanced competitiveness of Indian agriculture induced through such a market-led IT based model is envisaged to trigger a virtuous cycle of higher productivity leading to higher rural incomes and capable of creating and meeting vibrant future market requirements as well as facilitating farmers risk management. Benefits to stakeholders The benefits accruing to the various stakeholders are: To the Farmers: Availability of latest information on rates, arrivals etc. in various mandis. Choice to decide when and where to sell Sell the produce at door through e-Trading Reduction in losses due to transportation and handling To the Traders: Transparent procedures Single window disposal Reconciliation of daily sales, accounts, transit permit

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Availability of rates in various mandis will help in offering competitive rates to farmers Reduction in transportation losses To the Mandis: Instant reconciliation of accounts, transit permits receivables and payables Effectively monitor its activities Facilitate implementing contract farming Ensure transparency in operations To the Government: Speedy collection, analysis and dissemination of information to farmers and traders Improved tax revenue collection by collating this data with commercial tax, income tax, etc. Instantaneous access to even remote locations through VSAT connectivity, which can be effectively lead to good governance through dissemination of information. The development of the e-Mandi module has helped the mandis carry out the transactions outside the mandi premises and effectively capture the transactions as well as provide the information on rates and other matters to the farmers and traders. Also, it has integrated private initiatives to purchase produce in places other than the Mandi, but still obeying the law of the land. The confidence of farmers in the mandi system has improved considerably and the suspicion on private initiatives is reducing once the farmers have come to know that they too are part of the recognised system of the State. The tendency to evade mandi fees has reduced considerably because the Amity International Business School 184

traders now know that the automated system is capable of tracing the transactions. The module covers all the basic procedures of accounting for the mandi, including Cash and other accounting books, accounts receivable and payable, budget preparation and analysis of income and expenditure statements, and, reconciliation of bank accounts. It also handles tasks related to administration of the mandistaff details, gradation lists, etc., payroll management and generation, advances and recoveries, pension management, employees service record and other related reports. The software is useful in preparing the voters lists of farmers and traders and enables the analysis of voters profile in a mandi. Based on the above data the software will generate various physical and financial reports on a daily, fortnightly, monthly and yearly basis. Daily/monthly data for rates/arrivals would be directly uploaded from the mandi on to the Mandi Board web site. The software at Naka would cross check Anugya Patras authenticity at Naka points.

Case Study 8: Lokvani-An effort to empower citizens An Initiative of the UP Government

Sitapurs (Uttar Pradesh) Lokvani is a Service Oriented e-Governance system which attempts to provide efficient and responsive online services to the common people and seeks to increase transparency and accountability in Government procedures. The old, manual system made it mandatory for citizens to visit the district headquarters or tehsil for any simple transaction with the Government and for redressal of their grievances. Due to the bureaucratic and hierarchical model of functioning, even ordinary Amity International Business School 185

documents such as birth, death, domicile, caste and income certificates were difficult to obtain and the entire process was time consuming. The conventional administrative mechanisms were constrained by their inability to reach out to most of the citizens and the process of service delivery was marred with red tape. The inadequacies in two such systems are highlighted below: Tehsil Dependence on Lekhpal for land records. Delay and corruption in obtaining copies of land records. Unnecessary secrecy leading to land scams. Redressal of public grievances Applicant cant track the progress of his application. Lack of effective monitoring system for senior officers. Problem of approaching the district headquarters from remote places regarding applications/grievances. The only way out of these issues is to use technology effectively to make governance more accessible to citizens. Project Objectives Lokvanis vision is to give strength to governance for combating corruption and putting in place policies and investments to drive public and private sector-led growth and maximise domestic resources available to fund district development strategies. It is a commitment to people to give them transparent, credible and accountable systems of governance, grounded in the rule of law, encompassing civil and political as well as economic and social rights, underpinned by accountable and efficient public administration for multiphase development of the people.

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The objective of this project is to eliminate the digital divide and connect people to strategy makers in a seamless manner. Thus, in operational terminology, it is making people aware of Government services and world aid available to them. It is delivering qualitative and quantitative information to every person in the administration as well as to every target beneficiary. Its goal is to connect people through Lokvani for raising their living standard by providing health facilities, employment, awareness of human rights, environment to grow, education opportunity, and, corruption free governance.

First successful G2C project in UP Recently Lokvani received Golden Icon Award from Government of India under the service delivery category It was one of the few best practices of the country, which were presented before the Cabinet Secretary, GOI in Vigyan Bhavan, Delhi. Demonstrated before IAS trainees at Lal Bahadur Shastri National Academy of Administration (LBSNA), Mussorie Lokvani has been widely quoted and discusses in leading national magazines and newspapers like India Today, Outlook, The Times of India, etc. Lokayukta, UP also praised Lokvani for its services to citizens of Sitapur UP Government has issued a Government order to replicate it throughout the State The President of Lokvani has won the Dataquest e-Governance Champion award in New Delhi recently. Amity International Business School 187

Case Study 9: e-Kosh- Computerisation of the Treasury Department An Initiative of the Chattisgarh Government
The Treasury is the focal point of the initial financial transactions of the Government. For efficiency and transparency in financial management, any Government depends primarily on timely preparation of accurate accounts. In the pre-computerisation era, when accounts were prepared manually, delay in preparation of monthly treasury accounts was a regular feature. Moreover, it was difficult to verify their accuracy. As numerous discrepancies crept into treasury accounts each month, it became extremely difficult to tally the treasuries figures with those of banks. This resulted in the delay in preparation and submission of error-free treasury accounts. To overcome these difficulties, the Chattisgarh Government sought the computerisation of the treasury department. Key Objectives of the e-Kosh Model The major objective of the system is to monitor, control and execute financial transactions (payments and receipts) of the State Government and compilation of financial statements/reports for the State Government and AG. The other objectives of the project are: To develop a web-enabled, easy-to-use software to automate the entire procedure pertaining to the activities of the Treasury Department To provide information on actual receipts/payments on a day- to- day basis to the Finance Department so that the actual finance position can be made available which is vital for planning purposes

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To provide IT-enabled services to the end-user, who may be a pensioner, or a department that submits bills for payment using the state-of-the-art technology To provide complete transparency of the treasury procedures to the consumer base so that the consumer can get the benefits of real governance Benefits accrued from this project 1. Online communication of budget allotments to DDOs from Budget Controlling Officers 2. Misclassification of heads is checked through software 3. Online bill passing in consonance with sanctioned budgets in case of budgeted bills 4. Non-budgeted bill passing is checked through software 5. Daily merging of sub-treasury data with district treasury data for preparation of accounts with respect to payments, receipts, pension payments, issue of cheques, payment status of cheques 6. Online updating of payment status from every treasury/sub-treasury at the central server 7. Processing of pension cases streamlined at JD offices 8. With the help of information on scheme-wise expenditures, the departments are able to monitor the budget requirements. 9. Internal efficiency is improved, eliminating manual maintenance of records 10. Implementation of Payments sub-system has ensured that all the manual procedures are translated in a systematic and classified manner

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11. Implementation of Receipts Sub-System with establishment of proper linkage between Payments and Receipts modules 12. Integration of Deposit Accounts with payments and receipts sub-systems provide the required information 13. Integration of Pension payments at treasuries and works accounts to provide complete accounting information needs of the treasuries

Chapter-13 References and Bibliography

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Websites PID=936&EID=482 IsEmpowermentFourAreasofPractice

Singh, Nirvikar (2007), Information Technology as an Engine of BroadBased Growth in India, in The Information Economy in India, ed. Parthasarathi Banerjee and Frank-Jrgen Richter, London: Palgrave/Macmillan.

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Can Microfinance Empower Women? Self-Help Groups in India RANJULA BALI SWAIN81, DEPARTMENT OF ECONOMICS, UPPSALA UNIVERSITY, May 2007. NABARD, 2005: Progress of SHG Bank Linkage in India, 20042005, Microcredit Innovations Department, NABARD. Pitt, M., S. R. Khandker, and J. Cartwright, 2006: Empowering Women with MicroFinance: Evidence from Bangladesh, Economic Development and Cultural Change. The World Bank, 2006: Social Capital, Empowerment, and Community Driven Development.

Research papers
The Role of Microfinance in Rural Micro-enterprise Development Prof. Dr. Hans Dieter Seibel University of Cologne, Bhatnagar S.C., E-Government: From Vision to Implementation A Practical Guide, SAGE Publications Pvt. Ltd., New Delhi, 2008. Satyanarayana J., E-Government. The Science of the Possible, Prentice Hall of India Pvt. Ltd., New Delhi, 2008. Information Technology - Need of the Hour Rural Development, By Professor & Chairman, Dept. of Mass Communication, Guru Jambheshwar University, Hisar (Haryana), 2008.

E- Articles

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The Role of ICT in Governing Rural Development By Anita KellesViitanen, 2005. The Role Of Mobile Phones In Sustainable Rural Poverty Reduction, By Deepak Bhatia, June 15, 2008. World Bank. 2006. Information and Communication for Development. Global Trends and Policies. World Bank, Washington DC. World Bank. 2007. Agriculture for Development. World Development Report. 2008. World Bank, Washington DC. ICT and e-Governance for Rural Development Prof. T.P. Rama Rao Center for Electronic Governance, Indian Institute of Management, Ahmedabad, 2007. Micro Finance in India and Millennium Development Goals : Maximizing Impact on Poverty, 18th September,2009. Rural microfinance and employment. Do processes matter? Project financed by Agence Nationale de la Recherche, 2008 2010.

Case studies f

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