Category: finance

Microfinance as a tool for financial inclusion

Traditional microfinance and borrower welfare - IGC Growth Brief

Indian economy is one of the developing economies in the world and is expected to reach new heights in the coming decades. But a sizeable population of this economy particularly the poor, underprivileged, disadvantaged and vulnerable group of people does not have access to most basic financial services. Formal lending agencies often left the poor unbanked on account of high levels of transaction cost incurred in lending to the poor. Their access to formal banking channels was constrained to their resource base as well as the nature of formal credit institutions. The demand for collateral security that a micro- borrower did not possess, the credit worthiness of the poor, high transaction cost due to difficulties in screening, and unattractive business proposition due to tiny savings and loans, were the deterrents faced by the formal lending institutions in loaning to the poor. Consequently, the poor continued to be dependent on informal sector lending, paying exorbitant rates of interest or underselling the product and their labor power to the creditor. Formal financial system was less accommodative to women.

The realization that this sort of unequitable development could not lead to the well -being of the society raised the need for financial inclusion. Financial inclusion is delivery of financial services like bank accounts, savings product, remittances and payment services, insurance, financial advisory services and micro credit to weaker sections in rural and urban areas at an affordable cost. It also involves actions to provide access to formal financial system like nationalized banks. Government of India and Reserve bank of India have taken series of measures and have experimented various alternatives to take financial services to the masses, but the task is stupendous, hence the pace of work should be accelerated and sustained. Since the formal banking system was limited to collateral based lending, there arose a need for developing a new system for financing the marginalized sections.

Microfinance by providing small loans and facilities to those who have been excluded from commercial financial services, has wider scope in the area of financial inclusion. The basic idea of microfinance is that poor people are ready and willing to pull themselves out of poverty if given access to economic inputs. The need for informality in credit delivery and easy access is denoted by the fast growth of microfinance providers in reaching out to small borrowers. The major microfinance providers in India are SHG-Bank linkage model, Non- Banking Financial Institutions and some trusts. Among these initiatives Self Help Groups have emerged out as an efficient alternative as they are uniquely positioned among the beneficiaries. Many of them operate over a limited geographical area, have a greater understanding among the rural poor, enjoy greater acceptability among the people and have flexibility in operations providing a level of comfort to their clientele. This fills the existing gap between formal financial networks and unfinanced poor weaker sections which is the intention of financial inclusion.

The SHG-bank linkage program gained extensive acceptance amongst NGO community and bankers. Establishing one million SHGs, the NABARD envisioned covering one third of the rural population in India. By the year 2002–03, promulgations were made for linking 200,000 SHGs. Visually perceiving SHG-bank linkage program emerging as a major way of banking with the poor in the ensuing years, the task force on microfinance estimated that at least 25,000 bank branches, 4000 NGOs, and 2000 federations of SHGs involving 0.10 million personnel of these institutions would scale up microfinance to a great magnitude.

For example, in Kerala, Kudumbashree Mission has emerged as one of the renowned Self-help group initiatives on a worldwide basis. Even though it was incorporated with the mission of women empowerment, it has grown out as source for economic empowerment for the marginalized sections of the society. It has outnumbered several other financial institutions in the case of provision of microfinance and has emerged out as a reliable tool for financial inclusion.

Stages in the evolution of a business

Indian economy: Business optimism in India at near 8-year high: Report - The Economic Times

Business refers to the Organization or enterprising entity engaged in commercial, industrial or professional activities. Business activities have existed since ancient ages and over the period it has evolved according to the changes in its environment. Earlier it was limited to mere exchange of goods in return for other and then with the change in conditions it has reached to a stage where people could buy a good or avail a service from a seller who is miles apart even without face-to-face interface.

            In the era of globalization, the scope of a business is very large. There are several examples of businesses growing into huge enterprises from a small virtual venture which even lacked a physical existence in its early stages. Similar to the steps of a ladder, there are several stages like local business, regional business, national business, international business and global business.

Local business

Local business is the first stage of a business enterprise and it exists in the limits of a locality. A local area comprises of surrounding neighborhoods, adjacent areas where native community  lives. The local economy is the most primitive form of economy. It existed since ages. It focuses on a particular locality and acts according to the culture and traditions of the society. The customer base of a local business is very limited as its area of operation is only that locality.

Regional business

Regional business concentrates on different regions of a nation. A region is a unit on earth’s surface that has unifying and defining characteristics. It focuses on a regional area and provides a variety of commodities. It is a business between different areas within a country. Credit sales play an important role in this business. It helps in developing better quality infrastructure and transportation facilities

National business

National business is one that operates within the borders of a particular country. It has a business and customer base across a nation and understands the culture of the country. Since a national business has more locations than a local or regional business, it can be more competitive with its pricing. A nation is an organized political union of its member states.

International business

International business is business among different nations. Nations satisfy each other’s needs by supplying their surpluses and in return brings home the scanty resources. International means It means interaction between two or more nations. It is used as an analog to the word foreign.

Global business

It is a business which operates worldwide. It is the pinnacle of any business enterprise. Global means means entire Earth and not just one or two nations. It is synonymous to universal and worldwide. It has a wider scope than international business.

The basic idea to be imbibed from this topic is that no business becomes huge overnight. Just like human beings, a business also takes time to grow. Not all local businesses emerge out as global giants. Only those firms which could identify the changes in the environment and could act accordingly would be able to reach its pinnacle.

Taxation System and Reform of Taxation Policy

Source: thenews.com.pk

Attribution of compulsory taxes by government is main characteristic of financial system. Taxes are levies in every country to generate revenue. Rudimentarily to raise revenue for government expenditure, and for other purposes as well. Without taxes, government would be unable to meet demands of the societal needs. Taxes are crucial because government collect the revenue and use it to finance social projects.

Tax system based on equality module that rich in the society will pay more than the poor. According to Adam Smith’s four principle in his famous book ‘Wealth of Nations’. Adam Smith stated that taxes should be proportional to income, that is everybody should pay the same rate or percentage of his income as tax.

Another important principle of a accurate tax system as per Adam Smith laid a good deal of stress in his cannon theory of certainty. The tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, method of payment, the quantity to be paid ought all to be clear and plain to the contributor and to every other person.

 A successful function of an economy requires that the people, especially business class, must be certain about the sum of tax that they have to pay on their income from work or investment. The sum, the time payments of tax should not be certain but the time and manner of it’s payment should also be convenient to the contributor.

The Government has to spend money on collecting taxes levied by it’s collection costs of taxes and nothing to the national product, they should be minimised as  far as possible. If the collection costs of a tax are more than the total revenue yielded by it, it is not worth while to levy tax.

 Productivity of taxes when levied to generate sufficient revenue from the government. If few taxes imposed yield a sufficient funds for the state, they should be preferred over a large number of small taxes which are expensive in collection. Fair elasticity at any the government need of more funds, it should increase it’s financial resources without incurring any additional cost of collection.

Simplicity of tax system must be simple, plain and intelligible to tax payer. System of taxation should include a large number of taxes that is economical. The government should collect revenue from it’s subjects by levying direct and indirect taxes.

 Reforms in Taxation Policy

Source: canarahbsc.life

Tax Policy in India has evolved as an important component of fiscal Policy which had to play core role in the planned development strategy. Taxation Policy cannot be same always it keep on changing with changes in economic scope of the country. To structure and strengthen in taxation Policy various reforms we’re implemented and many are in stream like recent change was good and services tax was country’s biggest reform.

The taxation enquiry commission 1953 was the first comprehensive attempt to review the tax system, it design to structure. Holist tax system for the country; covered central and state also local taxes. In 1985, Government of India introduced long term fiscal policy; this policy led to Modified System of Value Added Tax (MODVAT) in 1986.

Economic crisis of 1991, tax reforms we’re initiated as a part of structural reform process. Tax reform committee recommend major reforms to stabilize economic turbulence in the country. Changes are Reflection of custom duty, Rationalize the capital gain tax and wealth tax, Reduce excise duty, bring the service sector in the VAT tax system, Improving quality of tax Administration, reduction of corporate taxes and reduce the cost of imported inputs.

Reform of Direct Taxes

The government brought consolidated direct taxes. The income tax act was passed in 1961. Direct Taxes Enquiry Committee was constituted to look into affair of direct taxes, tax reform committee (1991) has recommended various point to consolidated direct taxes and task force on tax Policy and administration gave explained path to reform direct taxes in country. National Securities Depository Limited (NSDL) established tax information network to moderate the collection, and monitoring accounting.

Reform of Indirect Tax

The indirect tax Enquiry report in 1977 recommended valuable reform in indirect tax regime. Initiated modified value added tax (MODVAT) for commodities in 1986 to replay the central excise duty, extend to all commodities through Central Value Added Tax (CENVAT). State replace sale tax and have Value added tax.

Life insurance corporation of India

LIC share Market Price: Life Insurance Corporation's market share falls below 70%

Life insurance corporation of India has initiated its initial public offer for five percent of its shares. It is one of the largest profit-making enterprises owned by the government of India. In this instance, it is important to know more about this enterprise.

LIC or Life Insurance corporation of India was started in the year 1956 in accordance with the Life insurance corporation of India act of 1956. As India was following a socialistic approach of economic development, LIC was introduced as an enterprise owned and operated by the government of India.

Story of formation

The Oriental Life Insurance Company, the first company in India offering life insurance coverage, was established in Kolkata in 1818. Its primary target market was the Europeans based in India, and it charged Indians heftier premiums. After that several companies emerged. The first 150 years were marked mostly by turbulent economic conditions. It witnessed India’s First War of Independence, adverse effects of the World War I and World War II on the economy of India, and in between them the period of worldwide economic crises triggered by the Great depression. The first half of the 20th century saw a heightened struggle for India’s independence. The aggregate effect of these events led to a high rate of and liquidation of life insurance companies in India. This had adversely affected the faith of the general in the utility of obtaining life cover. In 1955, parliamentarian Feroze Gandhi raised the matter of insurance fraud by owners of private insurance agencies. The Parliament of India passed the Life Insurance of India Act on 19 June 1956 creating the Life Insurance Corporation of India, which started operating in September of that year.

Structure

The LIC’s executive board consists of Chairman, currently M R Kumar, and Managing Directors, Vipin Anand, T. C. Suseel Kumar, Mukesh Kumar Gupta and Raj Kumar. The Central Office of LIC is based out of Mumbai which sits The Chairman, all four Managing Directors, and all Executive Directors (Department Heads). LIC has a total of 8 Zonal Offices namely Delhi, Chennai, Mumbai, Hyderabad, Kanpur, Kolkata, Bhopal & Patna.

Policies

Some important policies are:

LIC tech term plan

LIC Jeevan Umang

LIC Jeevan Amar

LIC Money back years

LIC New Jeevan Anand

Role of LIC

It has been a significant driver in creating the culture of investment in insurance. It has made insurance accessible to the economically weaker sections. The long-term schemes with affordable premiums made it highly attractive. The role of Life insurance corporation as an employer is also applaudable. It provides employment to many. More than all, many other insurance firms in India has benefitted out of the trust built by LIC.

Initial public offering

Finance Minister Nirmala Sitharaman announced a proposal to conduct an initial public offering for LIC in the 2021 Union Budget. The IPO opens on 4th May 2022 and closes on 9th May 2022. The Government of India will remain the majority shareholder after the public listing. Due to the scale of the offering and LIC’s ownership structure, the deal has been referred to as “India’s Aramco moment” in reference comparable importance and scale of 2019 IPO of Saudi Aramco. The latest development in the LIC IPO is the slashing of issue size from 5% to 3.5% of total equity of the company. LIC will open its IPO to the public on May 4 and the process concludes on May 9. Through this IPO, the Government of India, the sole owner of LIC, is now aiming to raise ₹21,000 crore, as opposed to raising between ₹65,000 crore to ₹70,000 crore by diluting 5% equity earlier, indicating more than 50% compromise on valuation as well. As per the IPO price band for 3.5% stakes for Rs. 21,000 crores, the valuation comes to around Rs 6 lakh crore.

Kudumbashree and micro finance

Kudumbashree, a community organization of Neighbourhood Groups (NHGs) of women in Kerala, has been recognized as an effective strategy for the empowerment of women in rural as well as urban areas: bringing women together from all spheres of life to fight for their rights or for empowerment. The overall empowerment of women is closely linked to economic empowerment. Women through these NHGs work on a range of issues such as health, nutrition, agriculture, etc. besides income generation activities and seeking micro credit.

Kudumbashree differs from conventional programs in that it perceives poverty not just as the deprivation of money, but also as the deprivation of basic rights. The poor need to find a collective voice to help claim these rights. Kudumbashree was conceived as a joint program of the Government of Kerala and NABARD implemented through Community Development Societies (CDSs) of Poor Women, serving as the community wing of Local Governments. Kudumbashree is formally registered as the “State Poverty Eradication Mission” (SPEM), a society registered under the Travancore Kochi Literary, Scientific and Charitable Societies Act 1955. It has a governing body chaired by the State Minister of LSG. There is a state mission with a field officer in each district. This official structure supports and facilitates the activities of the community network across the state.

KUDUMBASHREE MICROFINANCE

 This system operates by encouraging women to form small homogenous groups under the SHG-bank linkage program. The members of these minute groups were encouraged to meet frequently and amass minute thrift amounts from their members. They were also taught simple accounting methods to enable them to maintain their accounts. Individually these poor could never have had enough savings to open a bank account. The first step in establishing links with the formal banking system opened up when the pooled savings enabled them to open a formal bank account in the denomination of the group. These were followed by frequent group meetings. Pooled thrift was utilized to impart lean loans to members for meeting their diminutive emergent needs saving them from debt traps/ money lenders who demanded unusually high rates of interest and accelerated their empowerment through group dynamics, decision-making, and funds management. Peer- screening effect was engendered as borrowers themselves undertook the task of credit evaluation and reduced the transaction costs, community members had much more preponderant information than banks. Peer monitoring effect induced group members to utilize their imprests in productive ways. The desire to preserve valuable ties induced borrowers to spend extra effort if compulsory to secure timely payments. These ties were valuable because they sanctioned members’ borrowing and provided business connections. Moreover, a very consequential feature of group-lending was the collateral effect. Gradually the pooled thrift grew and soon 11 they were adept in receiving external funds in multiples of their group savings. Bank loans enabled the group members to undertake income- generating ventures.

 The various microfinance activities taken up by Kudumbashree are:

  Thrift and credit operations

NHGs are instrumental in thrift mobilization, encouraging the poor to save and to avail low -cost formal credit. They facilitate easy and timely credit to the unreached. The amount of loan to members and the purpose for which the loan should be utilized are decided by the NHG. The repayment is collected weekly during the NHG meetings. It is estimated that the thrift mobilized is on an average Rs 40 per month per member.

Linkage Banking.

NHG-Bank linkage scheme is one of the flagship programmes of Kudumbashree. NABARD SHG-Bank linkage grading procedures are applied while selecting eligible NHGs for availing loan. The NHGs are rated on the basis of a 15 -point index developed by NABARD. Bank will provide loans to those NHGs who pass 80 % of marks in the grading.

  Matching Grant.

 Matching grant is an incentive provided to NHGs. This grant linked to amount of thrift mobilized, performance of NHG in the Grading and loan availed from banks. An amount of 10% of the savings of the NHG subject to a maximum of Rs 5000/- is provided as matching grant to each NHG. The grant is released based on their assessment rated using 15-point grading criteria developed by NABARD.

  Interest Subsidy for Linkage loan.

 Govt of Kerala has introduced a new interest subvention scheme to promote Bank Linkage Program among Kudumbashree Neighborhood Groups. Under this scheme all Kudumbashree NHGs are eligible for interest subvention to avail the loan facility at an interest rate of 4% on credit up to Rs. 3 lakhs. The interest subsidy would be provided as annual instalments to the NHGs.

KAASS.

KAASS, the Kudumbashree Accounts & Audit Service Society; is a homegrown enterprise to ensure proper account keeping in the community network. Each district has been furnished with a KAASS team that has been 12 drawn from commerce graduates and is guided by professional chartered accountants

  Digitization of MIS’ and repayment Info System (E- SHAKTI)

 Keeping in view the Government of India’s mission for creating a digital India, NABARD has launched a project for digitization of all Self -Help Group (SHG) in the country.

RBI ACCOUNT AGGREGATOR FRAMEWORK

What will the future of banking look like in the Gulf? - Arabian Business

The Account Aggregator framework, introduced by the RBI, aims to make financial data more accessible by creating data intermediaries called Account Aggregators (AA) which will collect and share the user’s financial information from a range of entities that hold consumer data called Financial Information Providers (FIPs) to a range of entities that are requesting consumer data called Financial Information Users (FIUs) after obtaining the consent of the consumer.

For example, if a user wishes to apply for a loan, the lender (an FIU) will require access to the previous financial statements of the user – which reside with the user’s Bank (an FIP) – in order to check their creditworthiness. Here’s how an AA will facilitate the flow of information:

  1. The FIU will request the AA to share the desired financial information.
  2. The AA will request the user for their consent to share financial information with the FIU. The Account Aggregator must interact with the customer using either a web-based or a mobile app-based client.
  3. If the user consents, the AA will request the FIP (the User’s bank in this case) to share the financial information.
  4. The FIP will transfer the information, which will be encrypted, to the AA, which will then transfer it to the FIU.

Roles of each party:

  • Banks act as financial data providers. They supply the data required for Reserve bank of India to create a database of the account data and create reliable rankings.
  • Lenders act as financial data seekers. The lenders or financial institutions who provide fund to people acts as the seekers or demands the data aggregated by the Reserve bank.
  • Non-banking finance corporations act as mediums of communication between banks and lenders and they are the links.
  • Third-party service providers work with AAs.

Process

  • An individual or business opens an account with an account aggregator. Then, they link their bank accounts, insurance policies, etc. — which are accounts containing the customer’s financial data.
  • The customer can provide consent to a lender to access their financial data through the NBFC-AA.
  • After consent is provided, the account aggregator seeks permission from the financial data providers to access the customer’s data.
  • The data is sent to the account aggregator, which, in turn, empowers lenders to better evaluate the customer’s financial profile and risk associated with providing a loan.

Banks involved at present are:

These are the banks which act as the data providers:

State Bank of India

 ICICI Bank

Axis Bank

IDFC First Bank

 Kotak Mahindra Bank

 HDFC Bank

 IndusInd Bank

Federal Bank.

Advantages

  • Data scattered around the financial system can be made available under a single database.
  • This helps the institutions build a better understanding of potential customers and tailor their services accordingly.
  • It also enables the free flow of data between banks and financial service providers.
  • Helps financial institutions to make better assessment of creditworthiness of individuals and thus make better loan decisions.
  • Helps to eliminate the limitations of credit rating agencies.
  • Helpful for creditworthy customers

Disadvantages

  • It faces the issue of data privacy.
  • It is proposed as a self- Regulator framework, which would be an issue.
  • This data could be used for several other purposes.

FINANCIAL INCLUSION

Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and lower income groups at an affordable cost. Financial inclusion, broadly defined, refers to universal access to a wide range of financial services at reasonable cost. These not only include banking products, but also other financial services such as insurance and equity products.

INDICATORS OF FINANCIAL INCLUSION

As per the general laid down standards following are the key indicators of financial inclusion:

 · Formal banking system

This refers to the existence and usage of banking services which are regulated by formal mechanism.

· Formal credit

The usage of formal or recognized credit providers indicates the presence of an inclusive financial system.

· Insurance

Apart from formal lending and depositing the citizens will also have access to proper insurance providers in a well inclusive financial system.

· Savings options

 An inclusive financial system should provide attractive options to deposit the saved funds irrespective of the customer background.

 · Modern banking

Each and every user should have access to modern banking services like electronic banking, mobile banking, internet banking, etc.

FACTORS AFFECTING FINANCIAL INCLUSION

Access to financial services have been recognized as an important aspect of development and more emphasis is given to extending financial services to low-income households. The lack of financial services limits the range of financial services and 7 credits for households. There are multiple factors which have affected the access to financial services, like

· Place of living

 The area of operation of banks are limited to some specific geographical areas which leaves a significant portion of the rural population unbanked.

 · Absence of legal identity and gender biasness

 Due to lack of financial independence and unemployment there exists a bias on the basis of gender in having access to formal financial services.

· Limited knowledge of financial services

 Illiteracy and lack of proper knowledge about banking system has led to reluctance towards formal banking practices among deprived classes.

· Level of income and bank charges

 The charges and fines levied by banks make them less attractive for some classes of society.

 · Rigid terms and conditions

Since formal banking system is subject to strict rules and regulations, many finds it difficult.

 NEED FOR FINANCIAL INCLUSION

 Financial inclusion broadens the resource base of the financial system by developing a culture of savings among large segment of rural population and plays its own role in the process of economic development. Further by bringing low -income groups within the perimeter of formal banking sector, financial inclusion protects their financial wealth and other resources. Financial inclusion also mitigates the exploitation of vulnerable sections by the usurious money lenders by facilitating easy access to formal credit.

India is a nation with a major chunk of the population living under vulnerable conditions. So, it is the duty each and every privileged section to lift the conditions of the underprivileged. Financial inclusion will pave a path of uplifting the society and empowering the people.

Green consumerism: New way of life

Green Consumerism: Importance, Examples and Strategies - Conserve Energy Future

We all are consumers in some way or the other. Even before we are born, we are consumers and this cycle completes only after our death. In this era of consumerism, it is extremely difficult for one to not be a consumer and being a consumer is something to be ashamed of.

Even though being a consumer is not bad, exploitation by consumer is something to worry about. Unlike a socialist economy in a capitalist world, the producers produce what the consumers demand. So, the responsibility vested with the consumer is rising day by day. When a consumer makes an irresponsible choice, he is encouraging the producer to be exploitative. Realising this power of consumers, a new term has originated, green consumer.

Who is a green consumer?

A green consumer is a person who makes a wise choice. They buy a product or avail a service after considering the environmental impact. They check the components of the product, the environmental effects of the product and such aspects in detail.

Economic, social, and cultural forces have set the framework for green consumerism. This is because it is a social attitude and movement in the modern era, especially aimed at encouraging people to be more aware of the firms’ production processes and only to buy or use products and services that do not harm the environment. For this reason, green consumerism has created a balance between the buyers’ behaviours and the organizations’ profit objectives as it mostly based on the sustainable and pro-environmental behaviour of consumers.

Why is it important to be a green consumer?

From second half of the twentieth century, world has started its efforts for environment conservation. Even though commerce and industries are one of the largest contributors to environment degradation, they were the last to act for environment protection. One such arena is green consumerism. In a world which spins on the axis of consumerism it is important for a consumer to make environment friendly choices. Also, there is shift in the mindset of the businesses from seller centric to consumer centric approach. Recognizing this immense power vested with them consumers could influence the market to produce environment friendly goods. Also, the fact that environment degradation could lead even to the extinction of humankind has opened the eyes of general public.

How to be a green consumer?

  • Use paraben free products.
  • Use cloth bags and don’t demand plastic carry bags.
  • Promote organic goods.
  • Avoid using synthetic materials that could harm the world
  • Avoid pollutants while choosing products.
  • Use recycled products.
  • Avoid the practice of use and throw.
  • Give importance to energy efficiency.
  • Practice modern methods of environment protection.
  • Shop according to the need.
  • Minimize paper usage
  • Check energy labels in daily utility products
  • Avoid using bottled water
  • Reduce electricity consumption
  • Reduce your carbon footprint
  • Check for environment friendly certification.

Ultimately change of mindset is the most significant factor in green consumerism. It requires people to avoid certain comforts and embrace the difficult but fruitful path. It is the duty of consumers to influence the producers to shift towards a greener path. The consumer is the king in the present scenario. They should use their power for the good of the world.

Let us all strive to act green for a better future. We should lead a sustainable living and preserve what inherited for the coming generations.

How to spot a pyramid scheme. 

A pyramid scheme is a fraudulent system of making money based on recruiting an ever-increasing number of “investors.”  The initial promoters recruit investors, who in turn recruit more investors, and so on. The scheme is called a “pyramid” because at each level, the number of investors increases. The small group of initial promoters at the top require a large base of later investors to support the scheme by providing profits to the earlier investors.

Let’s assume the following: Founder Mike sits alone at the top of the heap, represented by the number “one.” Assume Mike recruits 10 second-tier people to the level directly below him, where each newbie must issue him a cash payment for the privilege of joining. Not only do those buy-in fees funnel directly into Mike’s pocket, but each of the 10 new members must then recruit 10 tier-three members of their own (totaling 100), who must pay fees to the tier-two recruiters, who must send a percentage of their takes back up to Mike. According to the hard-sell pitches made at recruitment events, those bold enough to take the pyramid plunge will theoretically receive substantial cash from the recruits below them. But in practice, the prospective member pools tend to dry up over time. And by the time a pyramid scheme invariably shuts down, the top-level operatives walk away with loads of cash, while the majority of lower-level members leave empty-handed. It should be noted that because pyramid schemes heavily rely on fees from new recruits, the vast majority do not involve the sale of actual products or services with any intrinsic value.

Unfortunately, these types of scams sometimes prey on people who need income quickly. For example, if you lost your job and are having a hard time finding a new job, you might be more willing to look into an opportunity that offers a fast return. But avoid the temptation to overlook the feeling that something is too good to be true. Instead, take a moment to calm yourself so you can make a legitimate plan after losing your job. Go over your budget—or create one for the first time—so you can manage your money in the best way possible while you try to increase your income.

How to Spot a Pyramid Scheme

Pyramid schemes and MLM sound a bit alike, don’t they? Here are some signs of a pyramid scheme, provided by the US Securities and Exchange Commission, to help you understand whether you’re considering a scam or a legitimate MLM opportunity:

  • You’re not selling something real. Legitimate MLMs sell tangible goods—many times there’s a ready-made market for them.
  • Get-rich-quick promises. If you’re being offered overnight success, get-rich-quick guarantees, or passive income promises, it’s probably too good to be true. People who make money with legitimate MLMs put a lot of time and effort into their businesses.
  • The company can’t prove it generates retail income. If the business can’t show you financial statements that demonstrate income from the sale of product, it could be generating all its income from recruiting people into the pyramid.
  • Strange or unnecessarily complex commission processes. Legitimate MLMs have easy-to-understand, product-based commissions.

The Bottom Line

Pyramid schemes are illegal in many countries. The model of profiting by using the network effect often traps individuals into recruiting their acquaintances, which can feel slimy for everyone involved and can ultimately strain relationships. Some people may shoot their shot each time and invest in multiple schemes losing money each time. Victims of pyramid schemes are often embrassed into silence and keep blaming themselves for not being tenacious enough to earn the promised returns, when in truth it’s the system that is faulty. Get rich quick schmes never work and will allways have some strings attached to it that can put people into legal trouble. Vigilance and knowledge about where your money goes are important factors that people must know, preventing them from falling pray for traps like the pyramid scheme.

sources – https://www.investopedia.com/insights/what-is-a-pyramid-scheme/ https://www.credit.com/blog/what-is-a-pyramid-scheme/

All you need to know about an Economic Recession.

The National Bureau of Economic Research (NBER) defines a recession as “a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade.” A recession is also believed to be signalled when businesses cease to expand, the GDP diminishes for two consecutive quarters, and the unemployment rate rises. The nature and causes of recessions are simultaneously evident and uncertain. Recessions are, in essence, a cluster of business failures being realized simultaneously. Firms are forced to reallocate resources, scale back production, limit losses, and, usually, lay off employees. Those are the clear and visible causes of recessions. There are several different ways to explain what causes a general cluster of business failures, why they are suddenly realized simultaneously, and how they can be avoided.

What Causes a Recession?

Some recessions can be traced to a clearly-defined cause. For instance, the recession of 1973-1975 began as a result of the 1973 oil crisis. However, most recessions are caused by a complex combination of factors, including high interest rates, low consumer confidence, and stagnant wages or reduced real income in the labour market. Other examples of recession causes include bank runs and asset bubbles.

Psychological Factors of a Recession

Psychological factors are frequently cited by economists for their contribution to recessions also. The excessive exuberance of investors during the boom years brings the economy to its peak. The reciprocal doom-and-gloom pessimism that sets in after a market crash at a minimum amplifies the effects of real economic and financial factors as the market swings. Moreover, because all economic actions and decisions are always to some degree forward-looking, the subjective expectations of investors, businesses, and consumers are often involved in the inception and spread of an economic downturn.

Economic Factors of a Recession

Real changes in economic fundamentals, beyond financial accounts and investor psychology, also make critical contributions to a recession. Some economists explain recessions solely due to fundamental economic shocks, such as disruptions in supply chains, and the damage they can cause to a wide range of businesses. Shocks that impact vital industries such as energy or transportation can have such widespread effects that they cause many companies across the economy to retrench and cancel investment and hiring plans simultaneously, with ripple effects on workers, consumers, and the stock market. There are economic factors that can also be tied back into financial markets. Market interest rates represent the cost of financial liquidity for businesses and the time preferences of consumers, savers, and investors for present versus future consumption. In addition, a central bank’s artificial suppression of interest rates during the boom years before a recession distorts financial markets and business and consumption decisions.

What Are the Indicators of a Recession?

Economists determine whether an economy is in recession by looking at a variety of statistics and trends. Factors that indicate a recession include:

  • Rising in unemployment
  • Rises in bankruptcies, defaults, or foreclosures
  • Falling interest rates
  • Lower consumer spending and consumer confidence
  • Falling asset prices, including the cost of homes and dips in the stock market

All of these factors can lead to an overall reduction in the Gross Domestic Product (GDP). The European Union and the United Kingdom define a recession as two or more consecutive quarters of negative real GDP growth.

Impact of Covid-19 Pandemic on the Economy

In February 2020, the National Bureau of Economic Research (NBER) announced that according to their data, the U.S. was in a recession due to the economic shock of the widespread disruption of global and domestic supply chains and direct damage to businesses across all industries. These events were caused by the COVID-19 epidemic and the public health response. Some of the underlying causes of the two-month recession (and economic hardship) in 2020 were the overextension of supply chains, razor-thin inventories, and fragile business models. The pandemic-related recession, according to NBER, ended in April 2020, but the financial hardship caused by the pandemic is still impacting Americans.

For simpler understanding-

https://www.youtube.com/watch?v=SwaCg7Gwtzw: All you need to know about an Economic Recession.

Defining tourism in modern world

Career in Travel and Tourism- Top 6 Jobs Around the World - Leverage Edu

Tourism is one among those economic activities that existed since the ancient times. During ancient and medieval era people travelled to experience the cultural differences. Over the time tourism has also evolved and has become a significant contributor to the national income of many countries. There are many nooks and corners of the world which solely depends on tourism and its allied activities for their living.

Earlier the main motive behind visiting places were to see and experience their culture along with enjoying the natural beauty of the area. But, in this era of globalization the scope of tourism has widened and many nations are trying to gain a competitive edge in this industry. Let us take a look at various types of tourism now prevailing around us:

Cultural tourism

Cultural tourism is a type of tourism that allows the tourist to participate in local cultural activities, like festivals and rituals. As a result, the tourist can enjoy a genuine cultural exchange with the locals.

Religious tourism

Religious tourism, spiritual tourism, sacred tourism, or faith tourism, is a type of tourism with two main subtypes: pilgrimage, meaning travel for religious or spiritual purposes, and the viewing of religious monuments and artefacts, a branch of sightseeing.

Environmental tourism

Environmental tourism typically defined as travel to destinations where the flora, fauna, and cultural heritage are the primary attractions. Responsible ecotourism includes programs that minimize the adverse effects of traditional tourism on the natural environment, and enhance the cultural integrity of local people.

Health tourism

Health tourism is a form of tourism that consists of patients traveling to other countries to get medical treatment or assistance. It comprises all the services associated with tourism like transport, accommodation, and hospitality.

Culinary tourism

Culinary tourism is the focus on food as an attraction for exploration and a destination for tourism. Although food has always been a part of hospitality services for tourists, it was not emphasized by the tourism industry until the late 1990s.

Adventure tourism

Adventure tourism is defined as the movement of the people from one to another place outside their comfort zone for exploration or travel to remote areas, exotic and possibly hostile areas.

Enotourism

Enotourism, oenotourism, wine tourism, or vinitourism refers to tourism whose purpose is or includes the tasting, consumption or purchase of wine, often at or near the source.

Rural tourism

Rural tourism focuses on actively participating in a rural lifestyle. It can be a variant of ecotourism. Many villages can facilitate tourism because many villagers are hospitable and eager to welcome (and sometime even host) visitors. Agriculture is becoming highly mechanized and therefore, requires less manual labor.

Sports tourism

Sports tourism refers to travel which involves either observing or participating in a sporting event while staying apart from the tourists’ usual environment. Sport tourism is a fast-growing sector of the global travel industry and equates to $7.68 billion.

Eco tourism

Ecotourism is defined as “responsible travel to natural areas that conserves the environment, sustains the wellbeing of local people and involves interpretation and education”

Agritourism

Agro-tourism refers to people visiting working farms or other agricultural operations for the purpose of enjoyment, education, or other active involvement. Agri-tourism encompasses a wide variety of activities and provides a means for farmers to diversify and supplement their income.

Sustainable tourism

Sustainable tourism is defined by the UN Environment Program and UN World Tourism Organization as “tourism that takes full account of its current and future economic, social and environmental impacts, addressing the needs of visitors, the industry, the environment and host communities.”

Space tourism

Space tourism is a type of space travel that allows individuals to visit outer space for the purpose of recreation or leisure. Suborbital flights, orbital trips, and missions to distant planets are all examples of space tourism

Business tourism

  Business tourism is the provision of facilities and services to the millions of delegates who annually attend meetings, congresses, exhibitions, business events, incentive travel and corporate hospitality.

India is a country with wide scope for tourism. It should try to incentivize the emerging trends in tourism industry and strive to be a global leader.

Need for switch from physical to human capital

Human capital refers to stock of ‘skill and expertise’ embodied in humans. Human capital is as important as physical capital for economic development. Human capital formation is the process of adding to stock of human capital over time. Human capital can be developed through creation of skilled, trained and efficient labour force by providing better education, health care facilities, etc. Highly skilled people can create new ideas and methods of production. Thus, expenditure on education, on health and on on-job-training are key instruments of human capital formation. Expenditure on education is one of the most important way of enhancing and enlarging a productive workforce in the country. Expenditure on health can create more efficient and more productive human capital. Further, on-the-job-training helps workers to update skills. Training enhances the productivity and is expected to accelerate the process of human capital formation.

Human Capital and Economic Growth

When we talk about economic growth, human capital is the main reason for the accelerated growth and expansion for many countries that provide investment in human capital. This gives the best advantages to these countries for providing the best situations for work and lifestyles.A significant advantage in generating a stable environment for growth is that the nation has the expanded high-quality human capital in fields like health, science, management, education, and other fields. Here, the main components of human capital are definitely human beings, but presently, the principal component is a creative, educated, and enterprising person with a high level of professionalism.

Human capital in the economy manages the central portion of the national wealth. Hence, all researchers consider that human capital is the most important resource of the community, which is more powerful than nature or wealth. In most countries, human capital determines the rate of development, economic, technological, and scientific progress.

(i) Inventions, innovations, and technological improvement

 (ii) Higher productivity of physical capital

 (iii) Raises production

 (iv) High rate of participation and equality

 (v) Improves the quality of life

The difference between human capital and physical capital

Both forms of capital formation are outcomes of conscious investment decisions. Decision regarding investment in physical capital is taken on the basis of one’s knowledge in this regard. The entrepreneur possesses knowledge to calculate the expected rate of return to a range of investments and internationally decide which one of the investments should be made. Physical capital is the outcome of the conscious decision of the owner the physical capital formation is mainly and economic and technical process. A substantial part of human capital formation takes place in one life when she or he is unable to decide whether it will maximize her or his earnings. Children are given different types of school education health care facilities by parents and society. The peers, educators and society influence the decisions regarding human capital investment even at the tertiary level, at the college level. Human capital formation at this stage is dependent upon the already from human capital at the school level. Human capital formation is partly a social process and partly a conscious decision of the possessor of the human capital. The owner of a physical capital, does need not be present in the place where it is used; a bus driver who possesses the knowledge and ability to drive the bus should be present when the bus is used for transportation of people and other materials physical capital is tangible and can be easily sold in the market like any other commodity. Human Capital is intangible it is endogenously built in the body and mind of its owner. Human Capital is not sold in the market; service of human capital is sold and hence there arises the necessity of owner of the human capital to be present in the place of production. Physical capital is variable from its owner where does the human capital is in separable from its owner. The two forms of capital differ in terms of mobility across space. Capital is completely mobile between countries except for some artificial trade restrictions. Human capital is not a perfectly movable between countries as movement is restricted by nationality and culture. Physical Capital formation can be built it even do import, human capital formation is to be done through conscious policy formulations in consensus with nature of society and economy expenditure by the state and the individual.

Both forms of capital depreciate with the time but the nature of depreciation differs between the two continuous use of machine lead to depreciation and change of Technology makes a machine of solute. Human capital, eating but can reduce, for large through continuous investment in education and health on the job training. This investment also facilitates the human capital to cope with change in technology which is not the case with physical capital. Natures of benefits flowing from human capital are different from that of physical capital. Human Capital benefits not only the owner but also the society in general. This is called external benefit. Educated person can effectively take part in a democratic process and contribute to the socio economic progress of a nation. Healthy person, by maintaining personal hygiene and sanitation, stops the spread of contagious diseases and epidemics. Human Capital creates both private and social benefits where as physical capital creates only private benefits. That is, benefits from a capital good flow to those who pay the price for the product and services provided by it.

Importance of Human Capital Formation:

Although the accumulation of physical capital is quite important in the process of economic growth of a country but with the passage of time, it is being increasingly realised that the growth of tangible capital stock depends extensively on the human capital formation must get its due importance.In the absence of adequate investment in human capital, utilisation of physical capital will be at low pace, leading to retardation of development.Prof. Galbraith observed, “We now get the larger part of our industrial growth not from more capital investment but from investment in men and improvements brought about by improved men.” Unless these developed economies spread education, knowledge, know-how and raise the level of skills and physical efficiency of their people, the productivity of physical capital would have been reduced at this moment.

Most of the underdeveloped countries are suffering from low rate of economic growth which is again partially resulted from lack of investment in human capital. These underdeveloped countries are facing mainly two basic problems. They lack critical skills very much needed for the industrial sector and again have a surplus labour force.Thus human capital formation wants to solve these problems by creating necessary skills in man as a productive resource and also providing him gainful employment.In order to remove economic backwardness of the underdeveloped countries as well as to instill the capacities and motivations to progress, it is quite necessary to increase the level of knowledge and skills of the people.Thus in the absence of proper development of the quality of the human factor, the underdeveloped countries will not be able to attain the desired rate of progress.

Takeaway

Economic and social benefits of human capital formation and Human Development are well-known. The spread of education and Health Services across different sectors of the society should be ensured so as to simultaneously attain economic growth and equity. The need of the hour is to better it qualitatively and provide such conditions so that they are utilised in our own country.

New era of socially responsible toys

Buy Wooden Shape & Number House: Educational Puzzle Set Toy – Shumee

A child’s play is not simply a reproduction of what he has experienced, but a creative reworking of the impressions he has acquired.

~Lev Vygotsky

As rightly quoted by Soviet psychologist Lev Vygotsky a child not only reproduces what he has experienced but also shows the impressions they have formed through their actions. That time has passed when people believed that a child cannot understand the things happening around them. Due to this misconception, very less effort was taken to make shape their concept formation in a socially responsible manner.

As a result of the research conducted around the world people have reached to a conclusion that childhood is the period when a major portion of the concept formation takes place. This realization has developed a demand for toys which could contribute towards a positive outlook development. Realizing this rising demand several brands have shifted towards developing socially responsible toys.

Let us look into some examples:

Barbie dolls

Mattel Inc., the company producing Barbie dolls, has released a wide range of inclusive dolls which are different from conventional dolls. The company has introduced dolls of three sizes slim, broad and original. It has also released dolls in wheel chair as well as with artificial limb. The company has also tried to make it more inclusive by providing dolls in different skin tones, hair types and eye color. Apart from this, they have also introduced Moschino Barbie which caters towards boys, thereby breaking the stereotype that dolls are not meant for boys.

Lego

The company which sells building blocks have decided to make their products gender neutral after realizing the need for gender equality. It has also promised to shift from plastic packaging to other alternatives. The company’s initiative to produce sustainable bricks will also contribute towards reduction of carbon footprint of one of the biggest toy manufacturers.

Mega bloks Green Town Line

It is a set of carbon neutral construction toys for preschoolers. Mega Bloks bought carbon offsets from the Darkwood Forests conservation project in Canada to get this label. The manufacturers have specified that the toys are made from a minimum of 56% plant-based materials rather than plastic.

Hasbro

Hasbro is a company dealing with wide variety of toys and they adopt a whole lot of activities towards sustainability. Its major initiative is to replace plastic packaging with environmentally friendly materials. It also provides provisions for recycling the toys by collecting the toys and creating new toys from them. It also checks for the environment assessment of their suppliers.

Colors of the world- skin tone crayons

This is a pack of crayons which provides twenty-four shades. What makes it different from other crayons is that it has 24 skin colours from extra light to deepest. It helps to develop a sense of inclusion and generate a non-discriminatory mindset among the children. It helps children to realize that it is normal to have all shades of skin and not strive for achieving the so called “ideal” skin shade.

Similarly, several companies have initiated different measures to make their toys inclusive and climate conscious. The indigenous toys of our country could also be an alternative in this new era.

Being grownups, it is our duty to promote ethical products and thereby assist in positive concept formation of our upcoming generation.

Let us make use of the available resources and pave way for a compassionate, inclusive and climate conscious generation.

Make in India

All You Need To Know About 'Make In India' - iPleaders
source: Google

As India is completing her 75th year of independence, the government has put all its focus on making India self-reliant. In 1950, since the very first plan formulated by planning commission, self-reliance was given due importance. From a broken agrarian economy India has built up an economy which is seventh largest in the world. However, the fact is that it is not sufficient to meet the growing needs of 140 crore population of the country.

India is forced to depend on other nations to meet many of its needs even at present. This solidifies the need for an initiative to boost India’s production. Recognising this urge, the government of India has initiated the scheme termed “Make in India”.

Make in India aims to promote the manufacturer to develop, manufacture and assemble products domestically. It not only emphasizes on production but also focuses on innovation and research. Under this scheme government provides market for goods made in India and also markets them in international markets. “Make in India” had three stated objectives:

  • to increase the manufacturing sector’s growth rate to 12-14% per annum;
  • to create 100 million additional manufacturing jobs in the economy by 2022;
  • to ensure that the manufacturing sector’s contribution to GDP is increased to 25% by 2022 (later revised to 2025).

In order to achieve this objectives government of India has initiated several programs like:

Sagarmala

Sagarmala Programme aims to provide enhanced connectivity between the ports and the domestic production& consumption centres. The programme envisages unlocking the potential of waterways and the coastline to minimize infrastructural investments required to meet these targets.

Bharatmala

The Bharatmala Pariyojana is a centrally-sponsored and funded Road and Highways project of the Government of India.[1] The total investment for 83,677 km committed new highways is estimated at ₹10.63 lakh crore, making it the single largest outlay for a government road construction scheme.

Digital India

Digital India is a campaign launched by the Government of India in order to ensure the Government’s services are made available to citizens electronically by improved online infrastructure and by increasing Internet connectivity or making the country digitally empowered in the field of technology.[1][2] The initiative includes plans to connect rural areas with high-speed internet networks. It consists of three core components: the development of secure and stable digital infrastructure, delivering government services digitally, and universal digital literacy.

Freight corridors and Industrial corridors

These are infrastructure projects to facilitate easy movement of goods as well as infrastructural setup for business investments

UDAN RCS

Ude Desh ka Aam Naagrik (Hindustani for “Let the common citizens of the country fly”), known by its acronym UDAN (Hindi for “flight”) is a regional airport development program of the Government of India and part of the Regional Connectivity Scheme (RCS) of upgrading under-serviced air routes. Its goal is to make air travel affordable and widespread, to boost inclusive national economic development, job growth and air transport infrastructure development of all regions and states of India.

Last two years was the period when we realised the importance of self-reliance the most. During lockdown when international borders were closed there was shortage of many goods. On successful implementation of this initiative India could be able to meet its own needs along with the needs of the world. So let us hope that on the eve of 100th year of independence India would be a global leader with an economy sufficient to meet the demand of the world.

Let us conclude on the note that self-reliance is the most important thing a country as well as an individual should strive for.

CAN COMMERCE GO GREEN?

https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.itweb.co.za%2Fcontent%2Fj5alr7QaXJO7pYQk&psig=AOvVaw2iREPnrEK5Dq-jaHMsCtiy&ust=1650781846280000&source=images&cd=vfe&ved=0CAwQjRxqFwoTCLDxoeXHqfcCFQAAAAAdAAAAABAI
Source: Google

The color green is often associated with sustainability and environment protection. Similarly, when we refer to commerce, we often associate it with exploitation of environment. But with change in time commerce has also realized the need for going green.

Recognizing the urge of the hour commerce has also developed a whole lot of initiatives. Recently, several branches of commerce have evolved with the idea of going green. These require the co operation of entire community as it involves an overall shift in the practices.

Let us look into some of these areas:

Green consumerism

Green consumerism deals with the process in which consumers demand products and services that have undergone an eco-friendly production process or one that involves recycling and safeguarding the planets’ resources. The green consumer is an opinion leader and a careful shopper who seeks information on products. Including information from advertising about the green aspects of products. If you want to be a green consumer start with small initiatives like avoid demanding plastic carry bags, start using paraben free products, etc. There Is a direct environmental impact of green behaviors. The growing environmental hazards, associated with the ever-growing consumption of such poisonous produces, have been creating several health-related problems, giving way to greater concerns over the consumption of these products among the people.

Green governance

The inculcation of green initiatives with corporate governance is termed as green governance. In India the provisions of Information technology act have led to the growth of green governance. The act promotes usage of digital documents and provides legal validity for digital signature. It has also laid down provisions for regulating hard copy of documents. Similarly, several initiatives are adopted around the world in the field of corporate governance to promote green initiatives.

Green marketing

Green marketing is the marketing of products that are presumed to be environmentally safe. It incorporates a broad range of activities, including product modification, changes to the production process, sustainable packaging, as well as modifying advertising. It not only refocuses, adjust or enhance existing marketing thinking and practices but also provides a substantially different perspective. In a broader sense, eco marketing belong to the group of approaches which seek to address the lack of fit between marketing as it is currently practiced and the ecological and social realities of the wider marketing environment. 

Green finance

Green financing is emerging as on equivalent to socially responsible investing Eco-investing or green investing, is a form of socially responsible investing where investments are made in companies that support or provide environmentally friendly products and practices. These companies encourage new technologies that support the transition from carbon dependence to more sustainable alternatives. Green finance is “any structured financial activity that has been created to ensure a better environmental outcome.” Green financing could be promoted through changes In  countries regulatory frameworks, harmonizing public financial incentives, increases in green financing from different sectors, alignment of public sector financing decision-making with the environmental dimension of the Sustainable Development Goals, increases in investment In clean and green technologies, financing for sustainable natural resource-based green economies and climate smart blue economy, increase use of green bonds, and soon.

Along with the shift in global thoughts, commerce and its allied activities have also moved towards green alternatives. Recognizing the need for climate resilient initiatives we all should assist the businesses in adopting the above initiatives.

Rather than putting the blame on a particular industry or sector, let us all join our hands in making our earth greener. Ultimately it’s the implementation of these initiatives that matter the most.