Wednesday, May 03, 2006

That vs Which

Grammar has been the bane of many. I am no different. My time in High school class was split between understanding the life cycle of stars, the force needed to lift a rock inside an elevator and wondering what my gracious mum gave me for lunch today. English was never my favorite or least favorite subject in school. I plainly chose to ignore it. It is definitely not funny now that my knowledge of grammar is based on what I "feel correct". My brain refuses to see the sentences in terms of syntax. No wonder if there was an award for most green lines in a Microsoft word document I would win hands down. But I have started my GMAT struggle and trying to unlearn . Giving finishing touches to my Noun, Verb and Pronouns. By the end of this week I aim to familiarize myself with basic rules and then the real struggle begins.

Tuesday, May 02, 2006

Microfinance*-A powerful tool

Vikram Akula is the news these days for the right reasons. The ex McKinsey man is using IT to make much needed money available to people in need. I think he is doing a fantastic job. The fact that he came up with the whole system and had the guts to implement it is outstanding. On the same lines I was reading through Stanford GSB site(one of the schools I am interested in) and stumbled upon Center for global business and economy . It had an interesting take on Debt relief or Aid.
I am a chemical Engineer by profession and have studied economics only in high school but I am greatly interested in economics and its implications on socialization. The paper brings up some very interesting points. The central emphasis being that debt relief that worked wonderfully for "Brady Countries" may not work very well for HIPC's (Highly indebted poor countries". Brady countries were primarily Latin American countries which during the period of 1980's were in high debt and were unable to pay this amount. Brady a U.S. treasurer came up with the plan to basically pardon their debt. HIPC are mainly African nations that are in a much worse situation today. The paper makes several interesting observations:
  1. Debt relief could only work if this pardon can promote economic efficiency by improving incentives for investment and growth.
  2. HIPC don't have enough social infrastructure to promote investment even if their debt is relieved. Or in other words debt relief could work for a country which has a relatively developed social infrastructure.
  3. Although at first (although to me) debt relief seemed like a loosing situation for creditor. I mean if I pardon my debt what could I possibly gain from it. But you would be surprised to know if you pardoned a bit of the debt it will actually improve your chances of getting the rest of the money back. The idea is to reduce the debt on the debtor to an extent that it leads to strengthening of the debtors situation (obvious), leads to better market perception (people have more confidence in you) and hence invest more money (fostering new investment).
  4. Aid works better than debt relief for HIPC.
Now while reading this I thought why can't International funding bodies like world bank invest a chunk of the money in microfinance schemes?. If we take the case of India. India has a strong social infrastructure now. Government is powerful and stable however the difference between rich and poor is still large. Can't you make a part of investment in mirofinance and the rest to the country? The advantages of microfinance is in a way similar to what debt relief was trying to do but for individuals.
  1. Microfinance schemes are in a way independent of sudden fluctuations in country economy due to bad policy making.
  2. In a country where there is a huge divide between people. Using funds to build railways, airports is definitely gonna help. But something needs to be done at the level of poor farmers. Recently there was a lot of news about cotton farmers committing suicide. If one could make the women independent no matter how small the money is, it changes a lot of things.
  3. The strongest argument is credit lending has worked for so long. We use credit card everyday. If you are intelligent enough to make the right use of it I don't see how it cannot work.
Electronic microfinance idea like that of Vikram Akula would make the process much easier.
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