The Right Kind Of Giving

One of my ex-colleagues, whom I happened to bump into during my morning brisk walks in the Sanjay Gandhi National Park, seemed to be doing his bit of ‘giving back to society’ each Sunday morning.  I would spot him carrying a large bagful of ‘jeera-butter’ – a bakery product he brought along to distribute to all those residing in the slums inside SGNP, every weekend.  He even urged me to come along with him to help him distribute it on one occasion, which I gladly did on a couple of occasions.  I observed that he was really enjoying all that he was doing – if children came rushing, he would tell them to queue up. He would tell an old, infirm lady not to bother getting up and coming over and go over and hand over some to where she was seated.  When I told him I appreciated is kindness, he said in fact, he was doing nothing at all and really wanted to do much more!

Then one Sunday morning, he was walking down the long road to Kanheri caves empty-handed and he seemed forlorn, drifting without a purpose.  When I inquired what had happened, he told me that the security guards had seized the packet and warned him not to bring any such foodstuff inside the Park! I gathered later, that the Forest Officer in charge was of the opinion that several kind-hearted visitors to the park were actually “spoiling” the slum-dwellers by offering freebies.  Another regular morning walker justified his stand citing that such practices make them lazy and deter them from striving to improve their living standard through hard work in life!  He mentioned that he always preferred offering to foot their education expenses to his relatives back home in the village, but never offered free money for day-to-day expenses. 

On other occasions, I have been the recipient of advice not to give any money to the begging children at traffic signals.  “They are being planted by gangs – they just handover the money which could be funding nefarious criminal activities – don’t give them any money” is a common line we urban residents hear from our all-knowing friends.   So how exactly can we help these faces of obviously destitute people on the street that we see each day, one wonders? Give them food to eat, says another!  So there we are back to giving food and making them lazy!  What do these kids need? Perhaps what they really need is a rebirth into more fortunate well-to-do families? Or an NGO to spring up and teach street kids and turn around their fortunes?   So we come home and write a cheque to an NGO who does good work for the less privileged and satisfy ourselves that our urge to help them has been met – if not fully, at least partially!

The nation is today at the same cross-roads – I am not alone!  Ever since the Food Security Bill was tabled, experts have been telling us why this Bill will make our people lethargic and how the future of the country could be bleak if an entire population got free food!  So are we saying that our current public distribution systems, mid-day meal programs for the weaker sections, other freebies that States like Tamil Nadu (famously, and other states too), have been making our people choose a life of leisure instead of struggling hard to come up in their individual lives?   I do not subscribe to this view.  There are enough incentives such as better housing, better education for their children, getting well-paid jobs in more organized sector jobs – in short a better lifestyle beckons those who wish to rise in this world.   It is also seen that whereas many millions do hopelessly struggle and fail to make it, several stories of small-time rickshaw drivers have featured in newspapers for their children securing ranks in competitive examinations. 

Basically, if any government scheme meant for the abject poor is implemented properly, it would only help the lower strata of our society to save their meager earnings to educate their children and come up in life.  The newly introduced Food Security Bill is not a game-changer in that respect – we know of State Governments like Chattisgarh and Tamil Nadu already having implemented a fairly substantial food distribution system already.  One need not grudge them their rightful, nor need to worry about “spoiling” these poor people, while relishing our gourmet meal at a multi-star hotel.  As a taxpayer of the country, one would rather have our taxes go for such causes than to fund subsidies that aid fuel-guzzling SUVs that I cannot afford, what say?

The only real problem then is that of insufficient funds with the Government to meet the obligations the nation has taken upon itself – the ‘fiscal deficit’, as they call it.  Now that could be a rather sticky problem to face - for the next government, that is.  One really worries whether the FSB is effectively rolled out across the nation or not?!  But one thing is certain, large-hearted donors running NGOs will continue to feed the people who need it – and hopefully reach out to more and more deserving and needy people of our country for several years to come!

The nation has done its bit of giving away well before the “Joy of GivingWeek” observed in India in the first week of October each year.  It is now our turn to pick and choose the cause and the suitable NGO that we would want to support.  Hunger is not everything, right?

Are Investors Con-Prone?

Each passing day, newspapers and TV channels report how some unscrupulous business house offering miraculous money multiplying “opportunities” to the public vanish into thin air, leaving investors licking deep wallet-wounds. Some retired senior citizen even report to have lost all their hard-earned life-time savings, which they had invested in various get-rich-quick schemes.   Reading such reports, one wonders what is it that makes such ‘scheming’ business houses successful, although the press has been time and again reporting Ponzi schemes which inevitably do the vanishing trick leaving investors in the lurch.   Don’t such repeated acts of financial cheating make us investing folks all the more wary of tall promises and urge us to ask ourselves how these businesses can offer such high returns in such a challenging business environment  and deteriorating domestic economic conditions? 

The success of such schemes can be attributed several layers of urban and rural population which have been rising slowly but steadily from their hitherto hand-to-mouth existence up to a reasonable earnings and living standards due to changing economic fortunes.  They do have investible surpluses (however meager), which they would want to put away for a better future, but do not have even the basic knowledge of investment, let alone financial prudence!  This translates into thousands of lower middle class households eking out a living in Tier-III towns having small surpluses that are looking for a good return on their small savings.  Private finance firms promoted by business houses exploit these conditions and plant ideas of how their schemes could help them beat inflation, whereas bank FDs offer interest rates lower than inflation, eating away into their savings!

Although every Indian is truly challenged on this count of inflation eating away into interest bearing relatively safe bank deposits, the fact remains that the more important aim of any investor - capital protection - is thrown to the winds, while attempting to beat inflation! Loss of capital is one aspect that every investor, big or small, needs to be concerned about.   Return on investment is not the only criteria – return of investment is paramount.  This is because while comparing investment options, a small investor takes this as a given and does not even think of such tragic eventualities as loss of capital.  In reality, this question ought to prop up in the minds of small investors each time an offer with super-duper returns on their investment are offered to them!  Another question that investors do not ask is: How come these business houses can offer such high returns in a competitive business environment? Obviously, overwhelming greed seems to pip investment rationale, even to those who are better equipped with the fundamentals of investment.

There is one important aspect that unscrupulous scheme offers bank on - that investors would not mind investing a small portion of their investible surpluses in such schemes.  It is tempting to try it out with smaller amounts and then invest higher amounts in such schemes, if they taste success.   Invariably, this trick seems to work for conmen! Several small investors trying out their hand at such get-rich-quick schemes (offering as high as 5%-10% per month at times), translates into cash-flows of several Crores of Rupees for such business houses!   Most of the investors barely recover their invested amount, yet what is more intriguing is that once they find that the 2-3 months returns have indeed really been paid to them, their faith in the scheme soars sky high, prompting them to invest more!  

A simple back-of-the-envelope calculation would tell us that even @10% per month, in 3 months they have got only 30% of their investment back – and although it is too early to judge them on return of capital, there is a mistaken sense of belief only because they did what investors least expected to be true – that they would give 10% per month, when banks cannot offer that even in the whole year! What is more, they even rope in other relatives and friends to invest in the scheme citing their own “success”.  This is indeed a disastrous step, as, unwittingly one has now begun canvassing for the promoters of these schemes, while risking souring of relationships if the company defaults on payment of interest or principal repayments.

The basic problem is that most of us undergo education at schools and colleges, in which “investor education” is not a subject taught, as this is not part of the syllabus in any stream.    Fundamental aspects of investment such as return on investment, safety of invested amount, liquidity and capital appreciation, investor rights etc. are least understood subjects and are learnt only the hard way – by losing money! The man who put in all his lifetime savings into such schemes had just to learn about the adage of financial prudence - “Do not putting all your eggs into the same basket” – and remembered it when it mattered most. 

Several such small investors make fly-by-night financial product offers hugely successful by lending their small and big investments.   Conmen regroup and form other financial syndicates to come back again and again to the public to raise monies, only to vanish again and reappear in different avatars.  How long will this conning activities continue?  Both widespread investor education and strong regulatory controls on raising public moneys are the need of the hour.   Each and every one needs to know that “Too-good-to-be-true” Schemes are just that – Scams!  One fervently wishes that enlightened members of the public ought to pledge not to support such schemes with even One Rupee of their hard-earned money.   Instead one could donate that rupee saved for a good cause, if one would like to kiss it goodbye anyway!

Social entrepreneurs and activists have been educating the lay public by way of street skits, Magicians have been debunking fake religious heads for performing “miracles” that are nothing but a sleight of hand. They are spreading the word not to repose “blind faith” on those claiming supernatural powers. Similarly, some financial “wizards” seem to be offering “miracle financial products” to struggling masses and they too ought to be debunked in a similar manner.  More recently ad campaigns on television channels on several social ills that one must guard against e.g.  Consumer protection body has launched a series of successful “Jaago Grahak Jaago” ad campaigns on all TV channels. Investor protection campaigns need to be propagated on the same lines. 

On one hand, tighter regulations are needed to ensure that any firm raising money from public gets his proposed scheme approved from the Government before embarking on the offer. Also, the Government through the various branches of the Public Sector Banks could also take up this cause of investor education and spread prudent financial decision-making skills to small investors so that the savings can be brought into the mainstream economy instead of losing it all to scam operators.  The investment programs could be structured by SEBI, RBI and other regulatory bodies jointly.  Instead of promoting complex financial products like mutual funds, investment-cum-insurance products which are all too confusing even to the financially savvy amongst us.  

Jaago Niveshak Jaago!

© Gopinath Mavinkurve 2013

Blogger's Post-Script:  Editors of newspapers, magazines and online editions of publications are requested to feature this post for wider reach.   The post has been written in public interest and the blogger would appreciate any effort to spread the word around in any manner that they deem fit. Thanks!  Wishing everyone Happy and Safe investing! 

Book Review: The Good, The Bad and The Wierd

Book Review - The Good, The Bad and The Weird

A debut novel by Eknaath Nagarkar

Available on Amazon.com Kindle Version – can be downloadedon PC/laptop Kindle reader

The story, set in Bangalore is about a pious, upright, honest teacher, Thonse Shivaram Rao (popularly known as “Meshtru”)  who has helped many youngsters of all communities and have mould their early part of their lives. Many of his student grow to become well-known figures in their chosen fields, but they all have great respect and regard for Meshtru, who after his retirement heads the JGI Foundation for philanthropic purposes, formed by the successful industrialist Janardhan Rao (popularly known as “Johnny”).  

When a struggling student seeks help to pursue his aspirations for medical education, Meshtru plays an instrumental role in getting him a seat and Vikram Jahagirdar (Vicky) feels indebted to Meshtru even when he strikes it big in the USA some time soon.  A group of well-intentioned NRIs fired by the love of the mother-land plan to do something for the education of the millions back home, which culminates in the formation of a Foundation in which monies collected worth close to a Billion Dollars are planned to be utilized for the worthy cause of education.

The Indian counterpart who is entrusted with the task of this proposed foundation, Akshay Karnad, a Chartered Accountant and a son of a cabinet minister of Karnataka opens a proprietary concern to receive the moneys collected ‘pending registration of the trust’ which would be in due course.  When the function to inaugurate the Foundation’s activities is organized with invitees including ministers of the Karnataka Government with a view to get vast tracts of lands, the ‘surprise announcement’ of dedicating the project to Meshtru backfires!  Meshtru wonders why a dollar billion would be needed to help education of the poor millions here – he did it on a paltry sum and these figures are heard only in case of scams!  His speech aborts the project and the generous donors are advised to support the ‘Ekal Vidyalaya movement’ and the ‘Friends of Tribals Society’ instead of such ambitious projects.

Akshay Karnad’s project, Kalpavriksha Foundation in the meanwhile had taken off into the building and construction activity in which the organization gains immense popularity for being honest, not supporting any bribe giving inspite of being in the construction line and delivering quality homes without charging escalation project costs!   The good reputation of the group’s contribution to society is so rapidly spreading through the media that the growth of the organization is done through Akshay and his wife roping in most of their relatives – all successful professionals working in reputed organizations to join Kalpavriksha.

A residential complex adjoining the corporate office becomes the hallmark of the group and a committed team brings in all their life-time savings along with their lifetime commitment to support the organization they join with full faith in the Karnad couple’s leadership.   However things change over time, and the inmates of the residential complex are learnt to be up to strange behavior lately which is rather uncharacteristic of the community they belong to - such as ill-treating their parents, pulling out children from schools, not attending community events to avoid mingling and other cult-like behaviours.   A middle-writer finds out all about these strange goings-on and tries to have this reported in newspapers – but how can his unsubstantiated stories with the complete lack of complainants be taken up against a Goliath in the construction business known for his honesty?

Do read this book to find out how the committed Meshtru plays a role in stopping the mindless destruction of social values by a cult being forced on hapless employees of a reputed organization ably aided by other members of his community and to set things right.  There is immense drama, action and detective work involved all along as you will read beginning to end this unputdownable thriller churned out by Eknaath Nagarkar in his own narrative style that grips you all along!

Rating: 4.5 / 5