Economic sustainability challenges facing the poor women of India

Citation

Prabhakar, G.P. (2011), "Economic sustainability challenges facing the poor women of India", International Journal of Public Sector Management, Vol. 24 No. 6. https://doi.org/10.1108/ijpsm.2011.04224faa.001

Economic sustainability challenges facing the poor women of India

Article Type: Interview From: International Journal of Public Sector Management, Volume 24, Issue 6

Leadership example from a not-for-profit public sector

Introduction

Modern day India is largely portrayed as an economic powerhouse but a vast majority of the billion-plus population is still deprived of the gains of economic prosperity. In view of this National Credit Fund for Women (Rashtriya Mahila Kosh) was set up by the Government of India in 1993, the organization is engaged in micro finance loans and land reforms for women organized in self help groups through government and non-governmental organizations (NGO).

This research paper also features an interview with Dr Sudarshan Synghal, former Executive Director of National Credit Fund (NCF) for Women, India.

Today the organization boasts more than 5500,000 women beneficiaries, about 55,000 self-help groups across 24 states of India (until the year 2006). Combined with micro-credit, health needs, skill up gradation, crop credit, land acquisition and leasing, etc. form part of NCF’s activities.

India, bureaucracy and problems

Anything on the Indian leadership scenario has to be unique because of the uniqueness of the nation, socio-political system, organization, vastness of the country and diversity of people. Being the biggest democracy of the world, leadership styles of leaders in India are quite varied and leaders face a host of highly complex challenges.

During the British Raj bureaucrats influenced and implemented government policies and decisions, they were chosen through a framework called the Indian civil services which after Indian independence was renamed as Indian Administrative Services (IAS). IAS prides itself in choosing the crème de la crème of the Indian students through a nation-wide entrance examination.

Indian leaders in general and bureaucrats in particular are marked by a high power distance and hierarchy rooted mostly in to the period of subjugation under the British colonial rule for over 200 years. Bureaucracy and red-tapeism has become the order of the day in most of the government run organizations, industries and departments. Preparation for 2010 Commonwealth Games is a shining example of tardy project management and leadership displayed by the Indian system in general. With a population of one billion plus India’s performance in Olympic games has been dismal. Corruption is often times credited for the poor state of governance in India. Weak judiciary and crippling infrastructure across the country cries for a swift and quick decision making mechanism. There is a huge divide between the thinking patterns and expectations of a growing and educated middle class vis-à-vis a mostly corrupt political and unnecessarily complicated and slow bureaucratic system. Shortcomings of these systems have become fairly apparent in form of countless terrorist attacks, including the horrific 26/11 Mumbai terrorist attacks in the year 2009, fake encounters of the innocent people by police (in Dehradun, Kashmir, etc.), embezzlement of funds by well-known politicians, religious riots instigated by political parties to suit their vote banks, rising naxal problem and so on. These internal problems are on top of rising external problems which India as a nation faces from its immediate neighbors which are both hostile and unsettled at the same time. These challenges come in form of military threats, terrorism, border disputes (Kashmir with Pakistan, and Arunachal Pradesh and Aksai Chin areas with China), resource-sharing, global recession, and changing geo-political dynamics towards Indians in other countries (e.g. Australia). In this context where there is an unequal distribution of prosperity and opportunities National Credit Fund for Women (Rashtriya Mahila Kosh) is a ray of hope for poor women of India to sustain their present and build a better tomorrow.

Literature review

Sustainability, governments and organizations

Escalating impact of organizations on their environment has brought the idea in context by putting a pressure on businesses to fit organizational activities into social and economical surroundings (Shrivastava, 1995a). Sustainable development is critical because there is a shift required by governments and businesses in India to focus on long term sustainable growth that considers not only economic gain for the rich but for the millions of poor.

The role of corporations and even governments in achieving sustainable economic development in the future has been recognized by the literature (Shrivastava, 1995b). The challenge therefore is to encourage organizations to implement corporate social responsibility solutions and include it in their objectives. This has given the opportunity for researchers to explore ways in which sustainability may be integrated as a strategic objective. The concept of sustainability is relatively new to organizational studies and has been defined as development that “meets the needs of the present without compromising the ability of future generations to meet their own needs” (World Commission on Environment and Development, 1987). Since then the concept have met an increasing criticism on its inconclusiveness and confusing multiple-objective nature and will remain subject of debate for some time still (Beckerman, 1994).

Sustainability and search for a better world-order have been expressed by early work mainly focuses on issues such as value, transformation, social and moral considerations (Clark, 1989). A holistic view and a definition however had only emerged in the 1987 report “Our Common Future” presented by the World Commission on Environment and Development, known as the Brundtland Report, named after the chairperson Mrs Brundtland. It defines sustainability as “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. The concept, despite its broad definition, has since been adopted by governments and organizations worldwide. Critics of the concept in the organizational studies have quickly emerged questioning the idea and the subjectivity of “needs” (Beckerman, 1994), and the overall ideologically controversial nature of the theory.

Further studies have contributed in questioning its validity. First, its inclusiveness and that it encompass population, economic, technological and political variables to the equation. Second, equity, that is the distribution of resources and transference of costs between generations (Gladwin et al., 1995). Finally the issue of maintaining wellbeing that is ultimately relates to resource use in light of keeping the resilience of the ecosystem (Daly, 1990) that presents a great challenge, due to the complexity of interconnections between them.

Fuzzy definition and inconclusiveness in addition to the emphasis on sustainable development’s limitations have given way to two main interpretation of sustainable development. Nilsen (2009) defines weak and strong sustainable development as two different schools of thought.

Weak sustainable development (WSD) is where neither nature nor capital has a value, but they are instrumental in achieving the highest level of utility (Nilsen, 2009). The literature on WSD is part of the neo-classical view of economics that is also the main view of the Western world today focusing on maximizing the utility of human beings with little regard to the natural environment.

Strong sustainable development (SSD) in contrast (represented by the Brundtland Report) is a view in which the economy and the nature are considered to be complimentary, and are both to be sustained (Daly, 1990). Theorists have placed SSD in several recently developed theories such as environmental management and corporate social responsibility (Bansal and Roth, 2000) in an attempt to find a balance that benefits both the organization and the natural environment.

Leadership and culture

Leadership has been the focus of many people throughout history, from Plato in the West, to Confucius in the East (Turner and Müller, 2005). House (1971) developed the path-goal theory of motivation to bring together and assimilate earlier, unreliable findings on leader effectiveness. This is a contingency theory model that concentrates on the methods used to manage followers’ expectations through an emphasis on behavior and the environment. The leader will attempt to raise performance and motivation levels through satisfying followers’ expectations.

Müller and Turner (2007) state that a project manager’s leadership style is critical to project success and that different leadership styles are appropriate for different types of project. Therefore, Indian government needs to ensure they have a pool of project managers available, whose styles fit their values and are appropriate for the types of projects the company undertakes, poverty alleviation in this case. Odusami et al. (2003) have further established that, in the construction industry in Nigeria, project performance is related to the project leader’s qualification, leadership style and team composition, rather than on their profession.

Lowe et al. (1996) explored how transactional and transformational leadership affects effectiveness in an organization. They established that transformational and some transactional leadership was highly effective at all levels, that intellectual stimulation was differentially effective at all levels and that leader behavior was important at lower levels. Lowe et al. (1996) have carried out an objective meta-analysis of current literature, which is quantitative and deductive in nature. They note the lack of literature on the relationships of the various components of leadership in different settings; however, their paper included a good discussion on the limitations and methods of reducing bias in their work. A meta-analysis is used to reduce bias and a broad sample of literature is taken from all industries and cultures, both published and unpublished. The sample focuses more on leaders than subordinates, although it was felt that they may be slightly biased towards transformational leadership, as they carried out far less research into transactional leadership at lower levels of the organization.

Den Hartog et al. (1999) were part of a GLOBE study. It focused on exceptional leadership and found that, although culturally-contingent leadership characteristics exist, there are certain characteristics related to charismatic/transformational leadership that are generally agreed worldwide as factors of exceptional leadership. Holmberg and Åkerblom’s (2006) GLOBE study concentrated on exceptional leadership for middle managers in Sweden. They came to similar conclusions as Den Hartog et al. (1999), that both culturally-contingent and globally-endorsed leadership characteristics exist in Sweden. However, they further posited that culturally-contingent characteristics change slowly and, therefore, do not believe that a global convergence of leadership styles is taking place.

An interview with Dr Sudarshan Synghal

Interviewer

Please tell me about your education and career so far.

Synghal

I came to Delhi as a little boy, my father used to work for Central Government. I went to Modern school and then St Stephen’s College where I did my graduation in economics and then to Delhi School of Economics for MA. After that I taught for two years in Hindu College in Delhi University. I wrote the civil services exam and I qualified in 1978. Since then, I have been working in this service wherever the government has sent me and that has included various jobs in the districts including Sub-divisional magistrate, additional district magistrate, district magistrate and also some project work involving tribals. Later on, I managed to get a PhD. from Boston University in economic development as a Ford Foundation fellow and that helped me to understand a lot about credit. After completing PhD the government sent me to MP (central province of India) Finance Corporation for a few years and now I am here with NCF looking after micro credit.

Interviewer

So, what are those mains areas, which gave you the exposure to identify the area and study micro-credit?

Synghal

See, one has been a field officer in India, and a lot of the work that is done now by the field officers is not just law and order. Much more of the time is spent on development administration, and part of development administration in the 1980s was to do with what is called the integrated rural development (IRDP) program and we were targeting a lot of individual beneficiaries under that program. One of the problems in the IRDP program, which I later learned has to do with what is called as adverse selection. In Economics, there is a concept of adverse selection. So, the banks by virtue of not having enough exposure to that level of rural life were dependent very much on the local leadership to bring out who are the deserving cases and that caused a great deal of adverse selection to take place which ultimately resulted in lot of loans not being repaid to the banks. When banks do not get repayments then bankers lose trust in the system and in the program. In this scenario, the question at the back of my mind was how do we really lend to the poor.

In fact, the title of my thesis for my PhD was “How in the world can we lend to the poor.” So, this is really a challenge and to me it seems that if one can over come this then it will be great achievement for the poor people of this world, especially in India. So, when I was in Boston one of the things that I came across was the study of Grameen (Rural) Bank, the Muhammad Yunus experiment and what interested me about that experiment and about the success of that experiment later was that it was an evolutionary concept, it was not a concept that was designed in a laboratory or in a planning commission. It was actually evolved by University Professor going to the villages and trying. He evolved a very successful program, which could take care of the people who had no formal education, who had no collateral and yet were excellent prospects from a banking point of view. So, he is not only able to lend to very poor people successfully but he is able to get repayments of the order of 98 percent to 99 percent, which made this a very remarkable program because unless you got repayments, programs are not sustainable. So, that kind of grooming to that particular area and my feeling was that there is so much poverty in this world that if we can have program which at least shows that it can be successful, conceptually if it is successful that it should not be difficult over time for governments in poor countries to accept it and to be able to help their people out. This has found favor in lot of Latin American countries, lot of South Asian and South East Asian countries have benefited from this program.

Interviewer

What is your advice in the direction of developing micro credit at the local level?

Synghal

I had in my mind the whole idea about what happens in rural life as I have spent several years as district officer. But I did not develop the micro credit program. I just studied it. But I was able to understand. I was able to relate to it very well. I was able to say that, all right, here is something, which is going to work and which has been working and hopefully, it can be replicated in India. If something has worked in Bangladesh which has lot of similar features as us, it should work in India. And wherever, it has been tried this movement of self-help groups has taken root. It is basically capacity building amongst rural people in organizing them in self-help groups and then when there are self-help groups, developing some habits of thrift and credit which is basically a precursor to taking slightly bigger loans from developing finance institutions. So, we encourage self-help groups to come up and we encourage them to start savings amongst themselves, which self-help groups then put in a bank account and then any member of that group who needs some help will take certain loan from the bank account of the self-help group. Later on, once they have some idea about savings and credits, they graduate on to slightly bigger institutional loans where they can buy an asset, which will give them income and they are able not only to increase their incomes but they are able to repay the loan and become people who are reasonably well to do.

Interviewer

In context of micro credit in India, how much do you think this could dovetail in with income generation programs sponsored by the government of India and its merger with the local panchayati raj (village self-governance) financial institutions on one hand and micro credit on the other? Do you think these institutions could kind of graduate from more than being just simple institutionalized moneylenders in a way?

Synghal

These institutions are basically not doing anything different from what the government is always wanting to do and that is, lend to people, poor people who may not have collateral and who still need some income generating activity so that they can fend for themselves. The question of which program can be successful in doing this and the trouble with a lot of the development block led commercial bank credit was that it found the wrong kind of beneficiaries who may have been people who were not really the needy ones and somehow they also evaded repayments because of their clout, and when they did not repay, it had problems.

Most of our beneficiaries for instance, are involved in milk cattle. So, it is ultimately taking on what the government did a long time ago, which was setting up milk routes and chilling plants. These people are now taking advantage of those investments; and the cows and buffaloes they can now buy as the result of loans and are able to give them enough income because they are now in the milk routes of operation-flood and lot of their produce is being marketed competently, value has been added to it because milk is chilled, converted into butter and so many other things.

I mean milk has been a remarkable success story. I was in Bihar (an Indian state) last month and I believe that one of the few corporations in Bihar that is doing very well is their milk federation. The concept is very sound and dovetails very well with what the government objectives are and I think the government now understands. The finance minister mentioned in a past budget speech that micro credit is an area where the government is very keen and especially, NCF for women and micro credit is an area where they are very keen to see that the scope of this experiment increases and I am sure that as the years go by more and more people will be able to benefit from this particular kind of lending.

Interviewer

Why was para-banking (chit fund operations) not successful, which is also a form of informal banking in the Indian context? I am just talking of it as a banking option to formal banking system.

Synghal

I think that the para-banking people were not based so much on productivity. It was based more on a concept where previous deposits are paid back high interest from future deposits. So, unless you have productivity, this money that is being poured into rural areas, unless that is finding productive employment, money cannot be repaid with interest indefinitely. It is not sustainable in my opinion. One of the reasons why you find that film making pays a lot of money because there is a great deal of risk attached with it, not everybody knows whether the film is going to be successful or not. So, in that sense lot of that money was going into activities like this rather than into income generating activities where real people are involved in business. Sustainability is key for a country of India’s size, we cannot expect to run a program for a couple of years and then forget about it. It has to be a program that runs for three or four decades before you can see any reasonable change in people’s living standards.

Interviewer

When you took over as CEO of NCF for women, what was the kind of vision that you articulated?

Synghal

NCF is a very interesting experiment and it basically endeavors to do, what Grameen (Rural) Bank has done in Bangladesh and follows more or less the same pattern. The emphasis is that we will try to develop income-generating activities for women. This is devoted to women and women in our opinion are a very special group who should take advantage of micro credit. It is interesting to know that in Bangladesh where there is no such clear emphasis to begin with, 94 percent of the beneficiaries are women. So, it is because of the nature of women’s involvement in economic activity that they find the micro credit program much more acceptable. The reason is that:

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  Micro credit gives small loans and women are usually able only to absorb small loans. If women take very large loan, she may find that she may be unable to absorb it and to effectively repay the interest and the principle.

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  Women are also better credit risk for the lender. Because women are known to spend whatever income they generate on nutrition for their children and medicine, education, house building. All of these add productivity to the family and in a sense it is also empowerment. Ultimately, it is basic needs for families like education, health, and a sense of empowerment that comes to these families.

So, women have taken advantage of these program much more than men have because some how over the years they have realized that this programs suits women’s needs much more than it suits the needs of men folk. As a result of these women taking advantage, we have been able to generate a lot of self-help groups, comprise of women alone and these women are then given some amount of training in the activity that they would like to have. Then they take the loan from the intermediaries that we have developed who are basically non-government organizations. They help us to disperse these loans to these women and to do the accounting for us in self-help groups and to repay the loans. As a result we have now about 1,000 intermediaries who are working with us and we have about 500,000 women who have taken advantage of NCF’s loan schemes.

Interviewer

What was the kind of mandate that you had when you took over and how did you look at it from your own perspective?

Synghal

To me it seems that here is the concept that has the ability to deliver on a long-term basis, a product which is sustainable and which can yield good results in the long run. NCF can be an engine for achievement in India and can achieve what Grameen Bank has done in Bangladesh. It is an enormous challenge in one sense that the number of poor women in this country is very large and we have only scratched the tip of the iceberg, but we have done it successfully. So, we feel that here is a program that can be replicated. It is easy to replicate it now, which is just a question of organization, the organization has to grow as the program grows. That is real challenge before me now. I think in next five years, if we will grow at reasonable pace of about 40 to 50 percent a year, we should be a fairly big organization at the national level. We should have offices all over India very soon and we should have the ability to pursue those areas that have so far not been covered by programs of this kind. Especially, people in the areas like north-east of India and Kashmir. We hope that we can focus on theses states and help them along just as people of the South India have benefited from this program.

Interviewer

I guess another related issue is the concept of diversification of income generation programs.

Synghal

Actually, the specific concept of micro credit, per se, does not look at integration with in an income generation process, does not think about integrating it in terms of market economy or global economy. It is more of a local economy thing because the capability of these women is limited. They are basically taking advantage of the skill that they have, which is survival skill. They do not have any college degrees or experience of working in an organized sector but they have managed to survive. How they managed to survive is by doing odd jobs. So, what the program of micro credit seeks to be is to make it easier for them to carry out these little income generating survival programs. To give you an example, lot of women work in preparing “tiffin” in Mumbai (Bombay). Now, what these women do is that they borrow money from the local Bania (moneylender) to buy lentils, rice, etc., which they will cook and at the end of the week they will go to him and repay him the loan. At that point of time he is going to charge them the price of his products (rice, etc.) and even charge them with a hefty rate of interest and this is an inter linked transaction. Rural India does not have moneylenders sitting in their offices. The moneylender comes out of an inter-linked transaction and the women end up paying them 50 percent of interest for a week. Here, if we could give her a little bit of money upfront with which she could buy the basic things from the grocer and pay him upfront, she would have a much better bargaining power and then it would be much easier for her to take the rest of the income home and use it on herself and her children. So, this is what the program seeks to do and that is why we are not really counting women who have got any special skills, women may be doing things like vegetable vending or saree vending or women who are running a tea stall, or a snack stall or a goatery or a piggery, milk producers, honey bee farming, etc. So, these are the kind of activities that women are involved in. The income generated is small but it is more in proportion to the amount of loan they take and therefore it is very lucrative for them to be able to take the advantages of whatever activity they have undertaken and take the income home.

Interviewer

Do you think this model integrates with the global marketing economy, which is so dominating today?

Synghal

Actually, there are some attempts being made. For instance I was telling about the honey experiment (apiculture). We have financed a large number of women in Rajasthan, Bharatpur in the Mewat region and what is happening there is that lot of exporters are now sitting there waiting for the honey. So, we find that here is very easy linkage because honey is now been in great demand in the western countries. So, we find certainly that great deal of interest amongst these people because honey does not require any raw material, it just require bees and you let them loose and even on mustard flowers we can produce excellent honey. So, you do not have to have mangoes and lychees orchards; even on ordinary mustard flower will produce honey, which is very good. So, somebody was saying that we are soon going to be the land of milk and honey, which we traditionally were.

Interviewer

I think this could be one kind of attempt to integration at this level …

Synghal

It is difficult, but it may come about. Like in the case of milk, in the case of honey or in the case of kolhapuri chappals (fancy footwear for women) or in the case of some product which has recognition. Khadi (handmade) is getting recognition now. So, there are some areas where marketing is enormously helpful. It is a question of marrying technology and marketing skills with the activities that are being carried out by people at grass-root level that will help ultimately to produce world-class products because in the global economy you cannot sell unless your product is world class. Nobody is going to buy that product because it is produced by poor women. It has to be world class, it has to be competitively priced and it has to perform. We have to provide them with latest technology and with good marketing skills. All this costs money and should be recovered from the beneficiary. There will be a stage where large numbers of groups decide to network together and they may be able to take advantages. So, you may have for instance a program of let’s say, honey of the kind that exist in milk today. Milk is almost networked all over the country. Same thing may happen in another area and then we will have world-class products, which we can sell.

Interviewer

Going back to the Grameen (Rural) Bank model, they diversified in rural telephony, etc. are you thinking on those lines as possible diversification.

Synghal

We as NCF for women are in the business of finance; we do not want to go out of the area of finance. We would like the borrowers to decide what exactly they want to do. Now what we are saying is that, all right, one of the things that can be profitable for young women is to take a computer course. So, why can’t she take this particular loan as an education loan? So, we have no hesitation in doing that. In the same way if somebody can set up little telecom kiosk or cyber café, we would welcome that. The only thing is that we would like them to have some experience, some training. We would advise her to learn a little bit and then take a loan otherwise she will get herself into trouble. That is my reading of this situation. You see we would not hinder anybody’s aspiration.

Interviewer

Will you facilitate that … I mean do you think you will have some kind of consulting on how and which people should choose what kind of occupation?

Synghal

We would have no hesitation in financing this kind of thing and my experience tells me that if you interfere too much with what these people are trying to do then you take away their own ability, initiative, concept and that can complicate things because then they becomes dependent on you for advice every time and where these people are located these are real hinterland people and is very difficult to access these people all the time. So, really they are on their own most of the time. We would like to be able to give them some kind of input at the beginning but we still would like that they should depend on their own skills.

Interviewer

So, the delivery mechanism has been purely through the non-governmental organization.

Synghal

The non-governmental organization is one conduit. We are also giving loans to milk federations, to poultry federations, to municipal corporations, to women development corporations with state government. So we welcome any kind of conduit, any kind of intermediary who has some experience in working with self-help groups and there are many of them now. The bulk of our agents are still non-governmental organizations that have been active in the sphere. But that is no bar as far as we are concerned and we will welcome any initiative. In fact, in time we would like to set up our own branches in rural areas so that we can have direct interface with the self-help groups and perhaps, we will be able to cut out the intermediary cost that is now being paid to the non-governmental organization.

Interviewer

So, is NCF in a way kind of the front end for the formal banking sector, especially, as far as the rural sector is concerned?

Synghal

No, it is not that the banks have stopped functioning, it is just that they are trained to lend at certain levels. The transaction cost in banking is pretty much the same whether, they are lending out one million rupees or lending out one thousand rupees. So bankers by virtue of their size will not find it economical to deal with loans of small sizes and the transaction cost in banks are immense. The banking sector has not excluded itself. National Bank for Agriculture and Rural Development (NABARD) has brought out a scheme where they are also lending micro finance through commercial banks and lots of people have taken advantage of those schemes through the commercial banks.

Interviewer

NCF is a kind of parallel model to that model or is there some integration?

SYNGHAL

Let me put it in this way that NCF attempts to do what the Grameen Bank does and NABARD through the commercial banks is also trying to do; but the delivery mechanism is a little different. They are using the commercial banks while we are using the non-governmental organizations (NGOs). So, it is ultimately the same beneficiaries. The synergies will emerge in that we have a lot of officers, we borrow from them and we have interaction with them, they have an arm called Bank Institute for Rural Development, which occasionally advises us on lot of things which they have been doing. We take advantage of whatever research and learning experience they have had. Being a very large organization, there is a lot we can learn from NABARD. There is lot we can adopt. For them, it is one of many things but for us it is exclusively micro credit.

Interviewer

When you took over at NCF, what do you think were the kind of strengths, which it had in terms of an organization?

Synghal

I think NCF’s strength is that we have penetrated into areas which are very difficult normally for an organization based in Delhi and not having branches in the states. Their selection of intermediary has been excellent and some of those intermediaries have grown with the NCF over the years like the NGOs. Some of them are doing excellent work in the field and I think that they are blessed that they have been able to serve these poor people in those areas so well. So, we have that enormous strength in that we are holding hands with a very large number of people who are connected to the grass roots and they are real assets. They also have good organization here. In fact, that we have developed a good appraisal system which is largely the result of very excellent team that we have developed here i.e. some bankers and some social workers who understand what micro credit is all about. Now, it is easy for us to carry on this work. All that, I feel, is required now is that we have to increase the scope of what we are offering.

Interviewer

Any major barriers, deficiencies, which you have come across?

Synghal

Major barriers are basically the amount of money that we can use. Ultimately, the program is only as good as how much the government will let us spend, how much the government let us advance and the challenge is that we must recover that and use it again. If we find that lot of the money is not recovered then the strength of the program to sustain itself is reduced. That is really the challenge. My own understanding is that we must have more branches at rural levels so that we can directly interface with the self-help groups. If we can do that then we make the cost of the credit less for the borrower. This also makes it easier for us to know when a self-help group is in trouble rather than wait for the NGOs. I mean that remains to be seem and I feel that so far the NGOs have done good work. So, we would not like to take away from that what NGOs have done but there are many areas where the NGO momentum has not picked up especially, in north and in the east of India. There, if the NGOs are not active, we will have to have our own network. So that is the real challenge to make this a truly national program.

As far now, being a government organization, the finances have come entirely from the budget. We have a corpus fund from the central government, which we employ and so far the corpus is not needed to be replenished. But, in fact, the corpus is growing. But the emphasis is that we must take more money and be able to increase the scope of the program. We are hoping that in a couple of years we will be able to double the size of our corpus and our activities.

Interviewer

Do you think government is stopping private lending as banking concept?

Synghal

I do not think so. In fact, government is very keen on this particular kind of lending largely because it is giving to borrowers without subsidy and without a subsidized interest rate. This is exactly how lending ought to be that the government gives money at a rate, which is market driven and the government gets a return on it. So to that extent the government is in fact boosting this particular sector and this is really now the priority sector of the government.

Interviewer

How do you think about the local bodies’ response to your action? Have you tried any kind of integration of local bodies like the panchayati raj (village self-governance) institution, which are now constitutionally mandated?

Synghal

Yes, these self-help groups that are developed are also in those areas and intimately connected with the rural panchayat (council of five select villagers). So, in fact, there is no bar on some of these institutions and the local elected bodies are also taking credit from NCF through it intermediaries.

Interviewer

Is this happening? Are you strategically targeting them?

Synghal

Not necessarily. We are quite happy to work with NGOs. The concept of panchayati raj is that the people, who are elected, usually are the people who are better-off, but our focus ultimately is on people who are not so well-off. The advantage is that if we empower these poor people then they can at least in the future hope to stand up to well-off people.

Interviewer

This is the kind of direct attempt through NGOs, which might even be to some extent bypassing the panchayati raj.

Synghal

It could be, we do not have any strategy as such to bypass them and we have no intention of bypassing them but we ultimately seek to empower poor people and the process of empowerment may result in new leaders emerging as opposed to landed leaders. The difference is that we are lending to people who do not have collateral, who do not have land. Traditionally, in Indian society landed gentry has been the ruling class even in villages. So it could help emerge an alternative leader in that village. We have no problem if such people are in fact coming up, if some of these women who we finance come up as true leaders then you will not have this concept of what are called sarpanch-patis where the husband really represents the elected lady sarpanch (an elected position reserved for women at village level). So, I think it will be great if we could actually have some cases where women stand for election in panchayats (village self-governance council) from the women who have been helped by micro-credit institutions.

Interviewer

Specifically coming back to NCF, what do you think are the organizational changes that you are planning to implement?

Synghal

NCF is essentially an organization which is looking to making an all India impact. We are national in name and we would like to become national in fact. So, the challenge has been that we must go from being an organization that is predominantly working in the South of India to an organization that works nation wide. Second, in order to increase the scope and expansion of this program, we are trying to see that some of the people who have worked with us in the past, we are able to help them to extend their coverage with more financial support.

Interviewer

So that means NGOs, which might have grown up with you and delivered well is built up further to expand to other regions.

Synghal

So, rather than looking for collateral or bank guarantees, we are looking at the track record. For example, if somebody has taken loan from us for last eight or nine years and they have delivered every time, then we would like to take them further on their track record and give them larger amounts. This is an innovative kind or procedure, banks would normally insist more on collateral, whereas we are looking more at track record and their ability to deliver. The self-help group members themselves are always welcome to take repeat loans. One of the strength of the self-help group is that it is a peer pressure situation where the group does not get repeat loans if some of their member default. Therefore, the groups try and help out the other members. The second advantage of the self-help group is that there is lot of networking going on. So, if one member has done well, he will use his business to help other people. I was studying this program for my PhD. I had actually interacted with some groups and attended some of their meetings and I found that one of them was thrown out of job and another person would help him find the job or take him over as an assistant for a little while and help him out with a certain amount of income generating activity. The underlying theme for this is that the groups must be self-selected. One of the reasons why the bankers do not find worthy lenders is because the bankers are urban and the potential beneficiaries are rural. There is very little common interface. But the group members are all living in the same village and they have been living together for decades. They know exactly what is the financial standing and the risk profile of another villager. So, when they take on that villager as a group member to which they themselves belong, they make sure that they take over the right person. This process of self-selection reduces the problems of adverse selection and that is one of the inherent strengths of group process. The second thing is that because they are all stand to lose if one of them defaults, they make sure through networking that none of them defaults.

Interviewer

As an organizational change, is it possible to attempt formal linkages with the formal banking sector?

Synghal

The question facing us now is that whether we should also allow commercial banks to distribute NCF credit or not. I see no objection to that, because lot of the banks in India are now having branches in very remote rural areas and we see no reason why we cannot give them some refinancing facility where they have done the same kind of work which we would have liked to do. NABARD is doing lot of refinancing. We could learn from NABARD on that score and try to do the same.

Interviewer

Coming to you, what is your strength as a leader?

Synghal

Basically, it is a question of the years that I have spent in rural India and I think that this service that I belong to is still essentially a rural service because we spent so many years in rural areas. We understand the strengths and weakness of our own rural delivery system and that strength comes with the officer when he moves to the central secretariat. I think that one can take advantage of this early learning experience. One can deliver a lot of good, one can advise the political leaders on all the lot of good such schemes can do, which in my opinion are schemes that are sustainable. Apart from that, I have been fortunate to study abroad and I have got a PhD in micro credit. So I am lucky that I am posted where my skills can be best utilized and that helps me and it helps the organization that I serve.

Interviewer

Whom do you admire as a leader contemporarily?

SYNGHAL

I think I am very favorably inclined towards people like N.R. Narayana Murthy. I think that we have not had that kind of leadership in India. Entrepreneurship, leadership and integrity are not always seen together. When you hear of all these scandals happening all over the world you are impressed with somebody who is not only a good entrepreneur but also a good leader. Another person I admire is Dhirubhai Ambani, he cared a lot for his shareholders. So, I think the people who care for people they work with are the people I admire.

Interviewer

Any organization that you admire?

Synghal

I admire any organization that has its objective in helping people. For example, Self Employed Women Association (Sewa) and some Indian milk federations (see Dr Verghese Kurien). So, organization that have come up and which are helping people on a very large scale and helping people help them. The government has found it very easy to run a scheme where you are giving people money for capacity building or money for promotion of something which is really a grant. But if you tell them that this money has to be used productively and has to be returned with interest, that is the real test of whether the scheme is really sound. These organizations have produced schemes and produce people who can deliver on that. These are the organizations which have done India proud.

Interviewer

Do you think central government operated schemes are always more reliable?

Synghal

My personnel feeling is that by insisting on a lot of things being done by government, we have taken away the local initiative. For instance, lots of ponds in India were maintained by local panchayats and local people. Now when the government came in after the independence (of India) then all those works were taken over by the government and since the government functionaries do not always live in those villages, not all the works were well maintained. The local people lost interest because they were told that this is the government program. We are trying to get back into the old mould where we take local initiative; we take people participation as part of the progress and part of the effort. When we recognize that in order to recognize the talent that these people have, we are rewarding those people in different ways, and that I think will ultimately, mean a new kind of resurgence in the Indian economy. It is not just a few thousand corporations that are now busy producing wealth. You have millions and millions of people who in their own little ways are producing wealth in India.

Interviewer

How do you think rural India would integrate in knowledge economy?

Synghal

I think that would not take too long. The spread of media has made it possible now for rural India to understand exactly what the world is all about, what urban India is all about and they are all eager now to take the advantage of whatever opportunities are coming there. Because, you will find that there are lots of education institutions coming up in rural areas, whether they are run on commercial principles or they are run on principles of charity. Many people are taking advantage of these institutions because education is now recognized as a very good investment by rural folk. The results of some of the programs we have done in Madhya Pradesh in the field of rural education have shown that all parents would like to send their children to school, provided that there is a school. So, wherever this experiment has come about the people have been empowered to create schools for themselves and they have done so. I think that will be the real revolution when people are able to have a basic education and then they are able to take advantage. Some six handloom weavers have gone into Indian Institute of Technology (IIT (a premier institution)) from one of these states and its great achievement for them. If they have basic education only they can do wonders and think about all the talent which is still lying untapped in rural India. So, we must create assets from our numbers, like Japan has done. Rather, than thinking of the population as a problem. It is more of an asset if it can be used productively. That is, I think, ultimately how we are going to integrate the rural economy into the knowledge based economy and the world economy. I do not see a reason why it cannot happen in next ten or 20 years.

Interviewer

How could you sum up your philosophy of management?

Synghal

I think that managers are basically custodians of trust for the government’s agenda. If it is a private corporation, then it is the shareholders’ agenda. In fulfilling the trust, the manager must ensure that he not only fulfills the objectives for which the organization has been set up but also delivers good value to the stakeholders. (Interview ends.)

Conclusions

Poor people in India, especially women, face social exclusion as rich are getting richer due to economic boom but the economic benefits are not reaching the grass root levels. Role of government, both at state and central level, becomes imperative in ensuring a rounded development of all. Also NGOs and business organizations, both in the private and public sector, need to be more effective and contribute in money and resources to improve the plight of poor women. If the situation does not improve sooner, it seems quite likely that problem like that of Naxalism may spread to other parts of India.

Although the program that Dr Synghal is describing in his interview – Rashtriya Mahila Kosh – has innovative aspects such as promoting land rights for women but because of the nature and complexity of India it may not be possible to exactly replicate what has succeeded elsewhere. Inspirations can definitely be drawn from Muhammad Yunus who founded the Grameen Bank in Bangladesh or from Ela Bhatt who founded the self employed womens’ association in India.

Limitations of this paper

Micro-credit and its impact on women is a highly contentious issue. The references to various programs mentioned in this work are very context specific – a lot of explaining would be needed about the milk cooperative, and other programs.

Guru Prakash PrabhakarBristol Business School, University of the West of England, Bristol, UK