Reforming Nepal's Education Sector

By: Bikal Dhungel

This article deals about the education sector of Nepal. The first part will give some information about the current status of education sector and the second part will give recommendation about how to reform to improve the educational outcome in general.

Nepal is one of the least developed countries in the world with quasi non-performing education sector. The government has failed to play its part to provide quality education for all. As a result, private sector has emerged and growing continually which can fully replace the public education sooner or later. The education system of Nepal is as follows. Private schools start with Nursery, where 3 or 4 years old join and spend in total of 3 years before going to the first grade. There is a state examination at grade 10 called the SLC and after that, three specialization schemes are available where the students choose between Science, Commerce or Arts. After two years of education, students can choose to go to the University for Bachelors Degree. In public or government schools, it is slightly different. Student directly join the first grade, and do until 10^th grade. After that, students can choose the three schemes like the pupils in private schools. In government school pupils can choose between Mathematics or other subjects in 8^th grade.

There are about 80% public schools and 20% private schools in Nepal. Almost all private schools are located in cities. Talking about quality, even though the government school teachers get training as an educator, their performance is too poor in terms of teaching than in private schools. Very few private school teachers were trained. Moreover, public school teachers enjoy other facilities like fixed job, sick allowances, pension scheme etc whereas private ones do not. Still, the absenteeism is very high in public schools, about 20% in a year. In private, this is significantly lower. Teachers fear their job, so avoiding unnecessary absenteeism, providing bad teaching is less likely. Making it short, despite all the facility packages for teachers, quality in public schools are too bad whereas in private, they are not. One reason of this bad quality can be explained by the organisation of teaching and school policy. Public schools have fewer classes, they have no homework, and exams are held at the end of the year. Private schools have lots of classes, if a teacher is absent, classes can be held on the weekends, students get home works and the secondary levels even projects and there are three exams per year so that the school is more up to date about the students performance. Weak student get support either by the school or the parents can afford a private tuition. As a result, the perform better. Public school students come from poor family who do not take tuition and as the family themselves are less education, they cannot get support from the family.

The outcome of the education system can be seen in SLC result. Less than half of the attendees pass the Iron Gate. For number of years, the actual percentage remained between 35 to 45%. Students should score 32 out of 100 to pass. An informal rule is, if student score up to 27, 5 marks could just be granted. This implies, more than half of the students cannot even score 27% of the grade. This figure is way too poor. This shows the failure of teaching. Only about 30% students from public schools pass SLC. Most of them with very low marks. Private schools have higher pass percentage but given the facilities provided, the result is still not convincing. So, what is the consequences of this outcome ? The consequences are very serious. First, if more than half of all children every year are wasted, if their talents are wasted, this is a huge loss for the country itself. Second, when the children from rich families do better in schools, have better opportunities in the future, and the children of the poor continue failing, they will have a gloomy future, they will never come out of poverty trap and the inequality between the rich and poor will continue to remain. Further consequence of this is poverty. This can even invite violent conflict because the poor will always see themselves discriminated and the state is not doing enough to address their problem. Nepal has a huge population growth. Most growth is happening in poor families. Without better schooling and better perspectives for the future, the are forced to go to other countries in search of employment without regarding their health and other worse effects.

Before we go to second section, let is talk briefly about another problem, which is, 11^th and 12^th grade. Almost everywhere in the developed world, school doesnt finish at 10^th grade. Developed countries teach upto 12 or 13^th grade and only after that, the University will start. In Nepal school ends at 10 and as it is called Iron Gate and is seen as an achievement for students passing this Gate, students have a feeling of freedom after that. They think, they have grown up and use their freedom to do things that they were not allowed to do before. Most of the students do not perform well in 11^th or 12^th grade like in the school upto 10^th grade. Second aspect of this is the growing business of private colleges. They charge a lot of money, unnecessary fees and other extra costs. This mostly does not represent the facility they provide. This again is differed between Arts, Commerce and Science. The business of colleges has grown so massively that, the admission fee in an average college is more than 5 times the admission fee in an average school.

So, what can be done to Nepalese schools and education system ?

There are many aspects that need improvements.

1. Financing Education : A report by the Ministry of Education wrote that, the average cost per student in a month is about 3000 rupees for the government in public schools. In private schools on the other hand, it was only about 1200 rupees. This is the cost for the school, not the school fees. School fees are higher because schools also generate profit from this. But from this figure we can say that, if the government abolish all the public schools, pay the tuition fees of the students in private schools, the government is better off, and the students will also be better off because they can get quality education and the education outcome will definitely improve. This is a radical but an appropriate suggestion: Abolish all government schools.
2. Make schools 12 years: School should not stop at 10^th grade. It should continue until 12^th so that the greedy private businesses of high education cannot rob the public. Secondly, as the education simply continue, 11^th and 12^th grade can be organized more flexibly by providing more choices of subject, technical or non-technical subjects.
3. Exit Scheme for those interested in vocational training: students who want to continue the education further in the university can top up to 11^th grade, those who are for vocational training should have an opportunity to quit and participate in training. This gives more flexibility and the economy will have needed technical experts.
4. Perform the exam in regional basis: The SLC exams should not be held nationally at least not in the first few years. The curriculum should also suit with the geographic or cultural factors of the given area. Moreover, as the quality of education is not same everywhere, the best way of judging the student is to hold regional exams. Even if government schools are to remain, SLC exams should be held separately between government and private schools.
5. Introducing a Teaching Licence: Apart from the specialty of teachers in their field, there should be a compulsory training as an educator for the teachers. This training should include Child Psychology, Arts of Persuasion, Creative Works etc.
6. Independent Thinking Scheme: Education is not merely a collection of facts. Students should not be forced to learn things by heart, which they forget at some point anyway. Students should be taught the fundamentals, then independent thinking should be promoted. Things like group discussion, debates should also include so that the students learn to think of their own instead of repeating the facts.
7. Regular Breaks in Schools: Our mind has limited capacity. It cannot absorb facts for unlimited time. It needs break. After every 2 classes, at least a 10-15 minutes break should be there. Schools in developed countries have this scheme which they call study sessions.
8. Make water available in all classes: This has been ignored mostly but one important thing we should not forget is, water is a scarce good in developing countries like Nepal. Schools in Kathmandu mostly dont have clean water taps. Either students bring water from home, or they dont drink the whole day. Students in secondary level dont bring water. But they forget that not drinking water for a long day reduces their concentration and can even have negative impact on their health. Make water compulsory in schools.
9. Reforming Curriculum: Nepalese Curriculum is biased. They include exaggerated history which is nowhere to be found except in these books. This should change. There should be strict control on who writes the book, and the contents should be checked thoroughly. Either there should be same contents in all school is another matter of discussion but the aim of schools should not be to make everybody same but to motivate them to be themselves, have their own ideas etc.
10. Establish Teacher-Guardian Contact : Every month, there should be an hour or two meeting between the guardians and class teachers where they discuss the ongoing issues. In Germany, there is this scheme. It is called 'Parents Hour' where parents of certain students meet with the teacher and talk about how to deal with the given issue if there is something that needs to be changed. This improves school performance drastically.
11. Grading System: Grading should not only be based on the exams. It should also include class participation, performed homework, discussions and also exams.
12. Updated way of Teaching: Especially in the university level, courses should be offered according to the demand of time. Subjects that do not represent the growing demand of the economy should be reformed. For example, large fraction of people who came from government schools study Sociology because it is mostly the only available subject in government colleges. Subject offerings should be diverse.
13. Best Practices from Elsewhere: Today's age is a scientific age. More and more research are being done in education sector. When there is a proven way of better performance, the education system should be in a condition to adapt to the system. It also means that Laws should not be made to strict that it is hard to change. Etc

These policies can change Nepalese education sector for better. Finally, they are just opinions. Not all are facts and opinions can also be biased.  

Not Misunderstanding Capital

By: Bikal Dhungel

These days, it is not uncommon to hear a lot about Capital, Capitalism etc. Many people call themselves anti-capitalists and even blame capitalism for the ills of the society. I am not sure if they have fully understood the meaning of Capital. I guess not. Neither the large majority of the general public. If the had understood, I think such a big generalised critic on Capital would not be there. The aim of this article is the explain what is capital in an informal way.

First, we need to be sure that Capital has few basic characteristics, it is productive, it is produced, it earns a return, its use is limited and it wears out, meaning that at some point, it cannot be used anymore. These characteristics I took from various sources. So, from this definition, we can derive that, Capital is for example the machines that we use in industries which produce something and whose use is limited. But also the building where the industry is located is a capital because it also contributes to generate income. Similarly, the tools that are available there, for example calculators, computers, and other devices can also be put under Capital. The more capital we have, the more production we can generate. For example, consider a farmer in a poor rural setting. He harvests the crops by himself, then bring it home, hits it against the stone so that the grains fall from the plant, then collects it, filters it, store it and finally he can consume it. In this case, he had no physical capital. Now consider a farmer in the US. He has a big tractor, a Capital, which harvests the crop , puts it in truck and the truck brings this in the store immediately and can be packed into sacks using other machines. He could perform all these tasks within few hours whereas the poor farmer in poor setting needs days or weeks to do so. From here, lets conclude that, better capital generates better productivity. This also explains why some countries are rich and why others are poor. Rich countries have higher rate of Capital per worker than poor countries. Only, one thing what we should remember is, this process of producing capital is also called investment.

Till now, we dealt about Physical Capital. But there is also Human Capital which is not material. The machine you used is a physical capital and your skill or knowledge about how to use that machine is human capital. The Human Capital of a doctor is his skills to perform an operation whereas the capital of a teacher is his skills to teach or his knowledge about a particular subject.

In today's world, the most important factors of production are labour and capital, which includes both physical and human capital. In the 18^th century for example, it was not labour and capital but labour and land because all people had was their land to sustain their life. But things are changing now. Because of the advanced technologies we have today, land is not as important as in the past. We have higher crop yields, we know better farming techniques and we can manipulate the crops with the help of bio-technology to use or consume according to our convenience. Also less than 1% of the workforce can work in agriculture to feed the whole country, at least in developed countries. Others are involved in service sector or industries. As fewer people work in agriculture and a large number can involve in other activities, innovation has increased because people do research in other areas. As a result, in the last 200 years, there were so many innovative inventions like never before.

So, Capital is good for everybody. The general belief among the economists is that, the accumulation of Capital is a key to economic growth. This theory was brought forward by W. Arthur Lewis after World War II who later won a Nobel Prize in Economics. He explains, the key to growth is Saving, which enables the economy to acquire Capital. The output from this capital can again be used to generate more capital. As the capital accumulation accelerates, we have growth. Growth in turn generates employment and employment generates income to the people, tax income to the government and the overall welfare will increase which we call the increase in human welfare.

However, we should also note that, accumulation of capital alone might not generate economic growth. At least, this was not the case in many developing countries. Other factors, such as education, inclusive participation in the economy where no one will be discriminated based on ethnic origin or gender or anything, technological change matter and most importantly, the economical and governmental institution. All these factors are separate area of specialization. For example, another Nobel Prize winning Economist Joseph Stiglitz has published influential papers about institutional economics and how and why institutions matter. In today's context, a combination of all these factors might be important to achieve economic growth. But, within this context, we should not ignore the importance of Capital. Being against Capital means telling not to use machines for production, telling not to use his skills to a doctor or lawyer or teacher. The argument that anti-capitalists make, that Capitalism has caused inequality is vague. Of course there is inequality in the society but is capitalism really responsible for that ? Suppose I have a brother who is unemployed, like me. So, both of us are equal. No problem so far. But If I study hard and became a doctor and earn half a million per year and my brother is still unemployed, this has caused a huge inequality. But is this a problem ? I could give some portion of my income to my brother and at last, we both are better off. But anti-capitalists tell that Capitalism is fault, which means, the skill I acquired as a doctor is faulty.

In a country, if such form of inequality exists, this might be because of unfair tax system, either income tax or property tax. Inequality also might exist because the government is discriminatory, i.e. It discriminates the ethnic minority or women etc. So, for every problem, we should see what the causes are, not putting the whole thing as verdict. This would mean that a football player plays foul, like Uruguay striker Suarez, and you campaign that Football has caused injury, so it should be banned.  

Consequences of Child Marriage

By: Bikal Dhungel

Child Marriage is a serious issue in developing countries. Also in developed countries it is present, though not so many cases. The UNFPA writes that every year, around 13.5 million girls get married before the age of 18, one third of them even before the age of 15. One in three girls are married before the age of 18. However, not only girls, but also boys gets married before 18. UNFPA writes further that 18% of Child Marriage involves under-aged boys whereas 82% are girls. It shows that, females are more likely to be married before the age of 18.

Child Marriage is not easy to eliminate as it is written on papers. Countries with high prevalence of Child Marriage have signed international conventions that criminalizes it but the countries have no capability to implement this country wide. Therefore, the causes of these should be dealt with to end this practice. Researchers claim that, it has less to do with the government rules rather poverty and gender inequality in general. Parents with lots of children especially daughters simply want to get rid of them by transferring the responsibility to the new family where she goes after marriage. Moreover, we should also not forget that especially in poor countries, it is not an easy task to take care of girls. Especially in the case of civil war or violence, incidences of sexual abuse becomes normal. So, marrying is an act of getting rid of this to some extent.

The consequences of Child Marriage does not limit within the family. The society, country and the international community as a whole bear the consequences of it. Fact is, girls are not treated equally as boys in poor countries and even worse treatment for the daughters in law. This has psychological consequences for girls. Teen age is an age to grow. When they are denied enough nutrition, their mental as well as physical development will suffer. In addition to this, if the girls give birth, the children are more likely to get mal-nourished and lack in other abilities in the future.

After marriage, most of them also quit school because they have to support in household works. Also other vocational training will not be done. As a consequence, they will continue to be in poverty trap. Other aspect of this is, there are enormous talents in the mind of children, both boys and girls but when the do not get a chance to use their talents, it is simply wasted. The whole world suffers from this wasted talents.

When the practice of Child Marriage becomes a culture, the children of today are also likely to do the same for their children. This circle can go on forever. A country cannot develop when a large portion of its population are trapped into such ties. So, governments should think about ending such practices. But then the question arises, how to end this trap. Are legislation enough ? The answer is no. As I already mentioned above, this is not about the problem of legislation. This is about women empowerment, about justice and about education.

In the village level, first of all, education for girls is required. After girls are able to think about themselves, a children's clubs should be formed where children from 6-18 participate and discuss about matters related to them. When any of the friends are to marry before 18, they should have a power to take the issue to village or district chief who will then take action against the parents who force their child to marry in early age. The clubs can first of all try to convince the parents who are about to do such things. When children get responsibilities and voices, they are likely to act for the good of children. Such children's clubs are successful in many places throughout developing countries.

In the governmental level, policies to end poverty helps as a contraceptive to child marriage in macro level. Other policies like population control by encouraging people to have fewer children, policies that ensure gender equality will also mitigate the system to some extent. So, no one can solve the issue alone. Children themselves, the family, community and the government, all four should be brought to discussion and policy implementation. We might not be able to eradicate child marriage fully but this will surely reduce this practice and we all benefit.  

Economic Success of Germany: Post World War II

By: Bikal Dhungel

The article deals about the economic success of Germany after World War II until today and tries to find out what were the mechanisms that made it so successful.

Let us first go back to 19^th century (1800-1900). It was the time when Industrialization spread throughout Europe. Iron industries, transport, chemicals had already begun to expand to commercialize. Germany, with its location in the heart of Europe was moving away from agriculture to industries. There were already many industries operating before the beginning of 20^th century (1901-2000). First of all, it is important to review the political structure of that time in the year 1900. There was an emperor, the Kaiser, Kaiser Wilhelm II. In the state level, there were still kingdoms, like the Kingdom of Bavaria, Prussia, Saxony and Württemberg. There were grand duches, duchies which does not exist today. Moreover, there were Colonian Governers. Yes, Germany too had Colonies. Cameroon, Togoland ( today only Togo ), German East Africa ( today Burundi, Ruanda and some part of Tanzania ), German New Guinea ( Part of today's Papua New Guinea ), German Samoa and German South West Africa ( today Namibia ). These Colonies were lost to allied powers after German defeat in World War I.

Along with the loss in World War I, Germany also lost a substantial part of its economy. Especially the heavy war losses it bear and the compensation it had to pay to the victors made it poor. John Maynard Keynes wrote a book in 1921 with the title ' Economic Consequences of the Peace ' blaming the Treaty of Versaillies for imposing unfair war compensation on Germany. He wrote that, this might radicalize Germany and might cause another World War. This was proved to be true. World War II indeed happen. The post World War I saw dramatic changes. Germany lost all its colonies, Hitler came to power, democracy was abolished and finally the big destruction took place. During the war, all major cities had gone astray. Additionally, there were heavy losses of industries, infra-structure and the inflow of refugees brought a tragic scenario in whole Europe. Destruction was also heavy in neighbouring UK and France.

World War II gave rise of the US as a Super Power. The US saw Western Europe as an ally and the economic stability of Europe was a strategic interest of the US. The secretary general came up with an idea of a plan to rebuild Europe. This was later called Marshall Plan, named on his own name George Marshall and the destroyed states got financial injection to rebuild. In the case of Germany, that money was intelligently used. The ashes were cleared off, bridges and buildings were built and a room to kick-start economic growth was made. For this reason, the US always remained as a good partner of Germany in times of need. But after that, all of the tasks were done by Germany itself.

In 1946, the GDP of Germany was the same as in the year 1897 according to Maddison data. From 1946 to 1948, the ashes of the war was cleared off and path to growth was made. As a result, Germany grew at an average of 6.5% from 1949 to 1973. A golden rule of Economics/Accounting says that, if you grow with 7% per year, in 10 years the income will double. So, from the year 1949 to 1973, the German wealth almost tripled. Also after that period, it continually grew. From 1974 to 1990, it grew with an average of 2.3%. The period of growth was termed as 'Wirtschaftswunder' ( Economic Miracle ) So, the question arises, what caused this growth ? How was it possible. First thing to honor is the economic policy of then Finance Minister, Ludwig Erhard who later became the Chancellor.

His economic policy focused on Capital Accumulation. There was a huge investment on forming capital that was used to increase production. When production grows, labors tend to migrate from agriculture to industry. Agriculture that time had lower productivity. So, when people started to work in large scale production, their productivity grew which gave a huge boost in gross domestic product. A rising productivity increases competitive advantage which in turn will increase trade and export. Worker produvtivity increased by an average of 5% from 1950 to 1970. As productivity increases, wages increases and purchasing power increases. As purchasing power increased, domestic demand increased and the economy grew even further. Soon after, as the economy grew, the German population was unable to supply the labors required. Hence, the Guest Worker Schemes was introduced that brought millions of workers from Italy, Spain Greece, Turkey and Yugoslavia. Apart from that, the finance minister had reformed the currency from Reich Mark to German Mark. The new currency was devalued in the initial stage that helped to achieve competitive advantage. But as the economy and purchasing power grew and the Germans started to demand normal as well as luxury goods, it gave birth to 'Life-style Economy' and the growth of service sector. Automobile, Machinery, Electric Goods, Chemicals grew rapidly and they were the drivers of German export. Already in 1953, Germany had a trade surplus of 1 billion.

We should also consider that, growth of production alone is not enough to sustain economic growth. Other reforms are required as well. Then comes the role of institutions. Institutions provide the rule of the game in the society that supports growth. European Payment Institution was established to liberalize trade in Europe. A Central Bank, today called Bundesbank was established to maintain currency stabilization and to oversee credit institutions. This is extremely important. An undisciplined financial institution can ruin the economy in massive scale. The Recession of 2007/2008 was primarily caused by the financial sector that involved in irresponsible lending. So, the role of Deutsche Bundesbank was immense in stabilizing the economy. Internationally, the Bretton Woods System and The General Aggrements on Trade and Tariffs ( GATT) today called World Trade Organisation was established to support in trade rules and international payment systems. Within Germany itself, the financial institutions played important rule. Frankfurt am Main was made financial hub, with the few large banks located there. The system of Sparkassen ( Cooperative Banks ) is the unique character Germany has today. Sparkassen are quasi state banks but are autonomous in their policies. Their main goal is to support the small and middle scale industries locally. The profit they generate are again used for social purposes. This means that, they do not involve in profit maximizing businesses or any kind of speculation but limit in their goal of helping businesses and keeping the economic life stable.

Moreover, the geography of Germany is favourable for economic growth. It is a country that has a shared border with nine countries in Europe, a North See and the Baltic See. The internal trade are supported by Rhein, Elbe, Danube Rivers. There are fantastic highways and railway lines that connect the cities. The big Hamburg Harbour makes possible to trade directly across the Atlantic. The internal factors like Political Stability, fair distribution of resources and social security are not to be undermined. Apart from the East West Conflict, the country remained stable most of the time. Fair distribution means tax justice which was based on mutual solidarity. The high earners paid higher taxes and low income citizens enjoyed other rights. Social Security is another uniqueness that makes Germany special. In the mid 19^th century, Bismarck established the social welfare system. The unemployment benefits, benefits for students, women, handicapped etc ensured that no one in the society feel discriminated, both socially and financially. Still today, Germany has one of the most human social policy in the world. Education is free for all. Also when you were born in a poor family, you can grow up to become rich. The equality of chances helped the country as a whole. There are other insurances which gives people the feeling of security. This is important because when the future is insecure, people tend to save a lot and invest little and consume less in the present. Due to lower consumption, production will be lower as well. When production is lower, employment creation will be lower and unemployment grows, tax revenue will be lower and the economy tend to go into recession. So, in the German context, it was avoided by social security system.

When we come back to the industries, the motor of growth, there is a unique culture of 'learning by doing'. Learning by doing is the major factor of innovation and productivity. It creates specialization. Specialization creates competitive advantage. Germany has a dual education system, one that is based on Universities, another, called Ausbildung, a Vocational Training which is quite popular where the youths will be trained in the industries to work there. More people go for Ausbildung than for the Universities. In addition to this, the honesty of citizens, their work ethics and the feeling of responsibility towards the society helps to maintain the culture of work.

So, to conclude everything, it was not a single factor that contributed the growth of Germany. It was mainly the specialization of firms, their culture of learning by doing scheme, the government support of the firms and the government take over of things that could not be done by the industries. This include, the collection of data, which could be used by firms and institutions. Think tanks, bureau of statistics, financial institutions all played their role well whose main aim was economic growth that was shared by everybody. Moreover, it was the Marshall Plan that gave a boost, the growth of technology, population and immigration, culture of saving, social security system, favourable geography, human capital, healthcare system, strong work ethics, political stability, trade openness etc etc as well as many factors contributed to economic growth. As a result, Germany stands today as second largest exporter in the world, hub for technological progress and a countries that is known for its high quality of goods in all sector, automobile, electronics, chemicals etc. Other nations can learn from Germany. Not all traits are possible to copy, but they can choose at least some to improve their economy.  

Fall of Traditional Banking

By: Bikal Dhungel

This article is not about rich countries. This can be generalised for poor countries but I deal with the situation of Nepal.

Nepal has no problem with liquidity. Financial Institutions have money but only the problem is, they dont want to lend. Why they dont want to lend is because the large portion of borrowers lack collateral. Without collateral, it is hard to get any fund from financial institution. However, every economist or development expert knows that, availability and access to financial sector is crucial for economic growth. Without an opportunity to borrow, the poor will never come out of poverty trap. As they cannot get fund from traditional banks, they turn to landlords or other unconventional way of borrowing mostly with very high interest rates. Countries have recognised this problem and step in to lend the poor either directly or through the schemes like Micro-credit, which was first introduced by Bangladeshi Economist and Nobel Peace Prize winner Mohammad Yunus.

Access to finance and credit is vital for poverty reduction. The poor need liquidity to come out of poverty trap. This might be for investment in businesses, education, health or buy other goods. In the present situation, they borrow from friends or neighbours or other family members. Poor also go to moneylenders who charge very high interest, sometimes as much as 100%. The interest rate in traditional banks would be much lower. But still, they dont lend to the poor. Reason for this, as above mentioned, the poor dont have collateral. Also if the banks would lend them, normally poor borrow a very tiny amount leaving the banks with less profit. The transaction cost is higher hence lending is not lucrative. Also in the case of default, banks do not want to run after the poor as it is time and money consuming and the gains from this are tiny.

In poor countries where the banking culture is not well established and where only selective businesses and political elites have access to finance, the problem of adverse selection remains high, which means, the ability of banks to select good borrowers from bad ones. So, in such an environment, moneylending by the local moneylenders gain popularity. In a typical village for example, the moneylenders also live in that particular area. So, they have local knowledge, meaning that they watch the borrower in regular basis. Chances of misuse is lower and the loan repayment can be transferred to generations. This is an advantage for the lenders but if the borrowers cant read and right, this can cause a serious problem. There are many inter-generational poverty trap based on such lendings. The grandfather had borrowed some money sometime and to pay that back, his son or even grandson should work for free at the lenders fields and the credit never finishes. This is why the program of Microfinance gained popularity. Micro finance charge little bit more interest rate than traditional banking, sometimes even lower rates are applied but they are not 100% and never passes over to the borrowers children or grand children. The default rate in microfinance is lower than traditional banking.

What is especial about it is that, this is basically a group lending. There are few people in a group and to borrow money, they need an ok by other group members. The members monitor the borrower closely because if she fails, their credit rating will be bad, giving incentive to spend the money intelligently. Microcredit has over 97% women, may be because women are careful money managers. And frequently there are group meetings where they discuss about the current situation, business possibilities, how the current business is running, etc. This scheme was extremely successful in terms of lending. In 1997, there were about 8 million users worldwide, in 2010, it grew to 140 million. There was a huge savings available in south asia wide and the scheme was expanded into other financial services as well. In 2009, there were almost 600,000 micro finance institutions in Nepal and the number was growing. To shorten it, Microfinance indeed changed the lives of millions which traditional banking sector couldnt. Still, the long term impact of it is still to be seen.

However, Microfinance is not without controversies. There were rumors that institutions use Mafia methods to recover loans, using brutal methods like physical harm. Others point that many microfinance institutions are profitable so why do they still charge high interest rates. But interest rates differ in different places. Then there is an issue of long term impact to economic growth. Some people use it for investment but some for consumption. Those who use it for consumption, are likely to be trapped in debt, so how to deal with these issue is a matter of discussion. But there are still some evidence that microfinance was able to reduce some poverty. Yet, the great change is still to be seen.

The aim of this article was to show that, as large portion of the population is poor in Nepal, they are using Microfinance scheme because it is more suitable for them. Even though the importance of big banks will remain, their share in lending is decreasing day by day. However, if they fail to come up with creative finance packages, they might be out of business because what we see as successful models of cooperative banks in Europe had a similar origin like Microfinance. The most successful story of saving associations are in Germany. The German Sparkassen is quasi state institutions who are autonomous in some degree but operate under an umbrella of national board. They are called the lending institutions to the middle class. They basically support local businesses and even the profit are retained and can be used for social purposes. They are non-profit institutions but not fully. It has proved to be a successful model. During the financial crisis of 2007/2008, the Sparkassen were able to maintain their liquidity and they survived the crisis without any problems. However, even in Germany, it doesnt mean that there are no big banks. There are several big banks but it will not be appropriate to compare Germany with Nepal. What I mean to say is, where there is a problem, there will be a solution. Where the traditional way has failed, innovation prevailed and it will gain importance even further in the future.

Rise of Corporations

By: Bikal Dhungel

Left and right wing sympathizers and critics of globalisation have one thing in common, their views about the Corporations and the capitalistic behaviours of these corporations. In some points, they are right, especially the growing power and their global character. When we look at the top 100 economic entities of the world, the 2012 figure shows that, only 49 are countries, and 51 are corporations. Many corporations are richer than nation states. For example, Exxon Mobil is richer than South Africa or Austria, British Petroleum (BP) is richer than United Arab Emirates, Volkswagen, one of the thousands of companies in Germany is richer than another EU state Czech Republic, General Motors is richer than New Zealand and Siemens is richer than over 100 countries of the world. The story goes on. As corporations grow, their political weight grows as well, either in the form of indirect influence or direct lobbyism. Also their impact in the economy grows. However, this is broadly seen as positive because corporations also generate large number of jobs, are a major source of tax income for the governments in terms of income tax of its employees or corporate tax. Corporations like Walmart, Tesco or UPS have millions of employees. But also public bodies come in front on the list of largest employers, like the United States Department of Defense, which is the largest employer of the world with 3.2 million employees including the US Army, and the People's liberation army of China, which hires 2.3 million people according to 2008 data.

The current form of corporations is a phenomenon that started in the beginning of twentieth century or slightly before that. The early corporations grew massively. The Standard Oil Corporation of the US, which belonged to John D Rockefeller made him the richest man in human history who possessed 292 billion dollars in today's money. He was almost 6 times richer than Bill Gates. Similarly, Ford Motors is another example which grew ever after it was established. The Great Depression and World War II largely reduced the number of corporations, however, after that, many other joined. After the growth of BRIC states, yet others arrived and recently since the internet boom, IT giants came to dominate the world. Companies like Apple and Google are among the top corporations with highest revenues. But in general, Oil Corporations fully dominate the list, probably because oil are connected with other types of corporations. Automobile Industries, Production etc directly depend on oil, so any price turbulence will directly impact them. Where the future of oil industries is heading to is going be an issue in the future as the amount of available oil is decreasing and the investment in green energy is gaining popularity.

Coming back to the issue to anti-corporatism, the left and right wing sympathizers base their argument on history. Most of them are true might these arguments might not be valid today globally. Going back to the history, it was not the United Kingdom that colonized India in the first hand. It was British East India company that involved in peaceful trade with India, which included both Pakistan and Bangladesh that time. In the time of 150 years, it gained popularity and established itself as a rich company that also influenced local policy. The British East India Company got a right to collect tax and other facilities given by the Mughals. Slowly, it started to help the fall of mughals and soon after found itself as a main force in Indian politics. With many such issues, the East India Company was dissolved fully in the mid 19^th century and then the United Kingdom took direct control of India. Similar practices could be seen elsewhere, for example in South Africa. In the twentieth century, corporations continually intervene in local policies according to their wants and demands. In 1951 Iran, there was a democratically elected president Mohammad Mossadegh, who wanted to nationalize the Iranian oil. The Anglo Iranian Oil Corporation ( today British Petroleum, BP ) toppled him and installed the monarchy under Mohammad Reza Pallavi who ruled until the Islamic Revolution under Ayatollah Khomeni. During this period of Pallavi's rule, the Anglo Iranian Oil Company made billions of dollars in profit. Elsewhere, for example in Nigeria, The Royal Dutch Shell and other Oil Companies are responsible for the bad governance in Niger Delta. The government is extremely rich whereas the oil revenues never come to the public, as a result, the inequality is extremely high. Developing Countries where there are huge natural resources, there is bad governance, who are believed to get funds from corporations to stay in Power. Like Democratic Republic of Congo, which is rich in resources, like Coltan, the material used to make Laptop Computers. One exception is Botswana. Despite having large amount of Diamonds, the UK educated head of government helped to retain an accountable government which divided the wealth of nation in a fair way. Due to this reason, Botswana has the highest per capita income in Africa and is seen as an example worldwide. Unfortunately, the story is quite opposite in most of other countries.

The story can go on but what I would like to mention here is, corporations are not bad everywhere. There are also good corporations. Corporations are the major investors in research and technology that improves our life. The appliances we have today were all made by corporations. With an exception of internet, which was made for the US Army, almost no innovation comes from the side of the government. But even in internet, it was refined and made better by private corporations. Also most weapons technology come from government side but the development of weapons should not be received as a positive development because at the end of the day, they are made to destroy human lives. Only a very small portion of them are used for providing security.

The recent developments in IT sector already gives a signal that large scale corporations will grow. As the ones in the past which involved in mal practice, corporations these days are mostly good. Today's age is information age, every single action will reach the corners within a matter of seconds and also for the corporations, being green, being ethical, being social will generate more profits because people tend to prefer them in comparison with firms that do otherwise. Corporate social responsibility has grown to be an integral part of many big firms. So, firms are adjusting to a new role as a player in a society that cares for social well being along with profit motive. Hence, the criticism of right and left wing people might not be valid anymore but sooner or later they should realise that they are themselves dependent on the technologies invented by corporations and can hardly live without it. What they should also understand is that corporations will continue to grow and this time, the most of this growth is likely to be for positive cause.  

If I were a Yogurt

By: Bikal Dhungel

This poem was written for a girl with whom I was together. She loved Yogurt so much , sometimes more than me and I wished sometimes that I could be that Yogurt. This was dedicated to her.

If I were a Yogurt
I would wait for you in the supermarket
Until you come and buy me
Along with a black tea


When I sit in your bag
After you buy me and bring me home
I would watch your face and relax
And on the way, I would watch the people who come


When we reach home
We are already together like two lovers
I would still feel your touch
Though outside me, there are covers


Sometimes I would stay on your table
Watching you changing your dress
And silently feel the smell of your body
Though I might be in problem or stress


When you eat me……
Sometimes I would stay long on your tongue
And feel your tongue as long as possible
Sometimes I would fall down on your breast
While you try to insert me inside your mouth


Oh, how lucky I would be, to be your Yogurt
I would be your only best
It is in your stomach where I rest
And the same sweet tongue what I everyday taste


In your life, in your body, in your soul
In your fantasy, in the dreams, in your goal
No matter where I stay, your Pant or Skirt
Baby, I would like to be your Yogurt

Problems of Measuring Poverty

By: Bikal Dhungel 

There are over seven billion people in the world. Out of this, about 2 billion are regarded as rich, or at least they live in high income countries. The next three billion are in middle income countries, which is again divided into two parts, upper middle income countries and lower middle income countries. The next two billion are called poor. This 'poor' is according to the definition of high income countries.

How do we determine this 'Poor' or define 'Poverty' is an issue of discussion. In most of European countries, people earning less than 60% of the average income are considered as poor. In the developing countries, there is no such figure but normally the institutions like World Bank and IMF use the $1.25 per day threshold. Those below this income are poor. But in general, developing countries call 'rich countries' assuming that everybody living there are rich. Of course they are richer than an average individual in developing countries but in terms of purchasing power of their income, almost one fifth of Europeans are poor. Some regions have higher numbers and some have lower.

Concerning developing countries, as I mentioned above, the $1.25 is also measured in monetary terms. That means, if a person has enough lands to support him and his family and no problem of hunger but if he does not sell his crops and has no cash, he is regarded as poor. Additionally, the purchasing power parity of the currencies itself differ in many places. With $1, you can buy a loaf of bread in the US whereas it can buy much more in other countries. The difference between the poverty in developing countries and developed countries is that, if you have no cash in the US, you are likely to starve because over 95% people are not farmers, or they do not grow their own foods. So, they have to buy it. In contrast, most poor countries have a very high level of subsistence farmers. Though they do not have cash, they should not worry for foods. Same sort of problem arises when measuring unemployment rates in developing countries. Normally, the husband goes to work, wife cares about the households and take care about the children etc. She works full time in household but does not get paid. But this is a work too. The story looks bit different in rich countries. Both husband and wife works, a third person is hired to take care of the child and perhaps another person for cooking purposes etc. At the end of the day, it is almost the same thing. Only the work of a lad in rich country was valued monetarily but not with the woman in a poor country. So, in the statistics, she will appear as unemployed.

Leaving the issue of money aside, the next challenge is about non-monetary indicators. How is poor health rated ? It is likely that poor health will turn into a financial burden in the future pushing someone into a poverty trap. How is education valued ? Should these indicators, basically called Human Capital included in measuring poverty ? The answer is yes and no. One can measure poverty for the short term based on the figures about poverty headcount ratio or number of unemployed people today and for a longer term which also includes human capital indicators. In practice however, it is more difficult to agree on which method to choose. While doing household surveys, households will be chosen and the data are taken for the whole household and often the average will be calculated. But taking an average can be dangerous because in practice, not all the members of the family are equally rich or poor. When it comes to extended family living under one roof, it becomes more difficult. It is not necessarily true that all member of household have equal welfare. Same is true for a country. We take per capita income as an indicator about the welfare of a nation, but this might not represent the true story. Within the US, the per capita income of Maryland is twice as much as Mississippi. If you put half of your body in a 70 degree water, which is almost boiling and half inside a zero degree refrigerator, your average body temperature will be 35%, which seems to be absolutely normal. So, we have to be careful with averages.

Coming back to the issue of poverty, the term 'income' should be defined before we measure who is poor and who is not. All income cannot be translated into monetary terms. When we go further, we should also consider the possibility of poverty due to poor health, lower level of education or air pollution that is sure to cause negative impact on health in the future. It is also not true that world class institutions like the IMF and World Bank are not aware of this issue. They know it very well, that is why there is always two calculation of GDP, one real GDP and one based on Purchasing Power Parity. The read GDP of Nepal is $743 but the GDP based on Purchasing Power Parity is $2310, over three times more. So, when evaluating the poverty of a nation, these factors should be taken into account.  

Conditional Cash Transfers

By: Bikal Dhungel 

Aid Agencies and National Governments are looking for ways to generate best results from development aid. Aid Effectiveness has become a serious challenge as a large part of aid are 'wasted'. This has gave birth to some outspoken critics like William Easterly and Dambisha Moyo whose main argument is, ' why is Africa poorer than 40 years ago despite aid in all these years ? '. There is no doubt that there are other issues connected to it which makes difficult to achieve appreciated results. Aid are mostly targeted to poorest people in any country but as life is not only about money, other infrastructures, healthcare, better education etc are also required to achieve better result. Giving aid to one sector does not always help because poverty is multi-dimensional. When we provide the poor with better nutrition, this is not enough because, what to do after that ? To come out of the poverty trap, support with education, health, and other entrepreneurial activities is required. There is also an assumption that focusing on entrepreneurial support is enough because when people are financially secured, other development will follow. However, the importance of health and education will continue to remain.

Along with many other tools to realise development, Conditional Cash Transfer (CCT) is a very important one. CCT simply means paying cash to poor people or families but with conditions, for example, 'if you get money, you have to send your children to school, you have to immunize your children or yourself, you have to stick to hygiene etc '. This scheme has already been implemented in over two dozen countries, among them, also middle income countries who target to reduce poverty. The basic conditions attached to cash transfers are regular health check visits for the receivers, vaccination, courses on nutrition etc. The largest program so far was in Brazil where 11 million people get conditional cash transfers and the expenditure for the government is about 0.5% of the GDP. Most important advantage of CCT is that it addresses both short-term as well as long-term poverty. In the short term, poorest households get cash injection which will help them to fulfill their basic needs whereas in the long term, the money they receive will cause better health, better education etc. Moreover, as conditions are put, it is less likely that the poor will use this money in wasteful things like Alcohol or for Dowry etc. the poor decide the best use of the funds themselves and the market profits by the increase in sell because of the increased purchasing power of the poor.

As CCT were only introduced recently though they are gaining popularity, the outcome is yet to be seen. However, short term assessments in few countries of South America has shown that CCT have positive impact.

There are also issues that makes CCT difficult for example the lack of information, impatience, no self control and a natural tendency to procrasticate. Poor people can simply postpone things like Health Check-ups because the effect of vaccination can only be seen in a longer term. So, a monitoring body is required in this case.

This policy of CCT seems to be simple but it not that simple to implement. First of all, the eligibility criteria should be chosen carefully, either it should be given only to the poorest of the poor or also to low income families. There are issues like the misuse of the funds, especially in those countries with bad governance records.

Researchers studying such programs to check the feasibility in other countries often point to the difficulties to evaluate such programs. In natural sciences, it would be easier in such cases. There will be treatment group who gets the intervention and there will be control group that does not and after the trial period, one can simply look at the differences in outcome to find the effectiveness of the intervention. Difficulties in social science is also that they are facing number of other real life changes which might impact them as treatment group. So the result is likely to be biased. Up to now, economists have used econometrics techniques to evaluate the policies in one place but there is another challenge of external validity, which means, if the results can be applied to other times, places or settings.

When a country wants to implement CCT, it should do a feasibility check first, either it will be successful or not. But another problem in social sciences, it is almost impossible to do experiments in such a scale. It is expensive. It also requires a strong political support and if it does not work ,there will be heavy criticisms and lots of money will be lost, that could be used for other purposes. Due to financial constraints faced by least developed countries, losses in such policies can mean government change, which the ruling political parties do not want to risk.

The study of areas where CCT has already been implemented has generated positive results. There was increases in school enrollment rates, increases in preventive health services, increases in nutritional diets, decrease in child labour etc. On the other hand, there are also limitations, for example, after getting cash transfers, the poor will obviously demand more healthcare but if the quality of healthcare itself is bad, this will be a waste of money. Moreover, there are also poor people in the society who have no children, or who are in temporary shocks. They need the cash injection too but do not qualify for it.

Despite all such limitations and criticisms, CCT is an innovative idea that will have a long term impact on human development by better education, better health and better nutrition and due to special focus on women, successful results are likely. Research has shown that women are careful household managers. Giving money in the hand of women will improve the health of children more than they do when you give the money to men, who tend to use that for alcohol, cigarettes etc.  

Tip of an Iceberg

By: Bikal Dhungel 

Humans have a tendency to over-simplify things. We say lucky to a person who has reached a zenith of his career without even guessing with which cost he achieved this. We dont know this. We only see what he has achieved. The famous Thomas Edison quote express this nicely, ' I did not fail, i just found 999 ways which do not work ' before discovering a working light bulb hence revolutionizing human society. When the indian Economist, Amartya Sen won the Nobel Prize for Economist, people thought, ' oh the lucky guy ' but only few knew his contributions to the field of economics for over five decades. We only see the tip of an iceberg, what people have achieved, rarely the whole story.

Second point I want to mention is the story of credit to one person. Taj Mahal was built by Shahjahan in India. In fact, it was built by tens of thousands of laborers who will never appear anywhere. Similarly, the Pyramids of Egypt were built by thousands of other laborers, many of whom lost their lives while building but they again will not appear anywhere for whom the credits goes. In the present day, Bill Gates, who revolutionized the Computer gets credit for all the developments in this sector. But in fact, thousands of engineers who worked for him are equally liable for the credit. Be it Apple, be it any other brand, there are many hands behind the success.

Coming to the academia, I recently finished reading the World Development Report published yearly by the UNDP that reports on various issues related to development. This years report was about the Economic Psychology called ' Mind, Behavior and Society '. What readers see is only the report but behind that report, there are hands of hundreds of researchers, data collectors who worked throughout the year to prepare that piece which we or any institutions can read and refer to for future research.

We often forget that some books written by someone might be their life time work. The big data about income, per capital and other economical issues from the year 0 till today for many countries was collected/guesstimated by Angus Madison. Economical data are only available since few decades. Research that needed data from the past are then based on the estimates on Madison's data. He spent his whole life collecting these data from various sources including novels from the past. The ground-breaking book from Thomas Piketty about the inequality in today's world, 'Capital in the twenty first century ' refer frequently to Jane Austin's novels that reflect the life in Britain two centuries ago.

The lesson from this article is simple: do not over simplify things, look deeper. Do not just see the result, try to find out how much effort was put on it. Last time I saw an interview of Diane Nyad, who swam from Cuba to Florida, without having a break, without a shark cage. She did this in 52 hours. For me it was an impossible thing to swim continually for 52 hours. It was not her first effort, she tried many times but finally succeeded. What thrilled me even more is, how much she had to practice for that, to swim 52 hours non stop, what a motivation and a gut to achieve she have had. Though, no one see that, people only see that she reached the shores of Florida in 52 hours. However, the largest part of her life was spent practicing for the journey.

Understanding the whole story would help us better understand the success.  

Achieving Development in One Year

By: Bikal Dhungel

This article has been written in Nepalese political context. Since the establishment of democracy, Nepal never had any single Prime Minister who remained a full term, most of them left in less than a year. As a result, development projects suffered. Development project takes a longer time horizon. It needs a careful planning after a timely survey about the feasibility of the project. Then comes the challenges of resource utilisation and implementation. In one year, it is barely possible. So, the government simply ignored development. It launches 'business as usual' budget that is not oriented towards economic prosperity. This will not generate any results, any growth or any prosperity. It will impede growth. When the governments know in advance that their time is going to be brief, all they do is to enrich themselves and their kins. This political clans are better off but the country people are worse off. So, this article gives a small hint what can a government do if it is to stay one year or two years if it wants to get credibility for having kick-started growth.

To make the issue simpler, consider your own life, or imagine a life of anyone you know. There are many issues in your life which are really important, for example the food you eat, your character, your moral intelligence, your good looking body, your hairs and obviously your education and your skills. I dont know which one of this is most important for you. For some people, having a good character is most important whereas for others, a good look is important and for others, education might be important. Imagine, you wake up everyday, 2 hours you spend on eating the best food you like, then you practice good character for another hour, then you work on your body by doing exercise or going to gym, other two hours you clean your house because cleanliness is also important, then you study 3 hours, spend another 2 hours to acquire skills and remaining time you go to buy foods talk with your parents or friends, then you sleep. With this routine everyday, you might end up having a big problem in the future because you are doing everything but not specialising in anything. As a result, you are probably a jack of all but master of none. The society does not care about jacks, they care about masters. A Baker is a master of backing and he makes money out of it. A teacher is a master of teaching who will also make money out of it. Likewise, A doctor, engineer, pilot, mechanics, they have their own specialisation. To acquire this specialisation, they must have spent some handsome amount of time. To be a doctor, one should go to college for at least 5 years. In this 5 years, she should work like hell. Most students even dont sleep well and dont have social life. All they have is library time, labs, readings etc. And in five years, they become masters. Then their skill pays off, they become rich and should no more spend long days in the library. They work and remaining time, they can spend time doing things they like. If they would have a routine as mentioned above, working on character, taking time to eat food and studying only 2 hours a day, they might take 20 years to finish studying Medicine.

What I want to tell from this story is, a country is same like an individual. To become rich, it should specialise on producing some goods. In economic terms, its called comparative advantage. It should only produce one good where it enjoys comparative advantage and import others. Now lets come back to the government. The job of the government is to pay a path to growth so that the country can achieve economic growth. Specially if it has so limited time, it should not try to solve all the issues. It should not use the limited resources it has on wide range of things where it cannot generate considerable success. It will only be a drop in the ocean. Rather, it should focus only on the sector where there is a possibility of growth. It should identify a sector where it can achieve growth, then invest only there. Of course basic things like healthcare and education is important, but a country should not try to solve all the social problem in the fixed term because at last, there will be no result and the money will be gone and again people will blame that the government has failed. In today's context, it is seriously important to bring technology home. Only bringing foreign technology through foreign direct investment or other forms of technology transfer, can a country kick-start growth. So, a country like Nepal should focus only on increasing productivity by bringing better technology.

What evidence shows in this matter is, when a government target social problems first before economic development, a large amount of money is required, which developing countries often lack. Even if it became successful for example in achieving 100% literacy rate, perfect equality of wages, best governance etc, what then ? What after that, there are no new jobs available which will make no sense in having equality or best social indicators. Even the governments should ignore good governance goal, they should only focus on economic growth. The opportunity cost of concentrating in social policies is huge. They cannot afford to be socially just but economically poor. In the case of depressive economic situation, no matter how social the country is, that will lead to civil war in extreme cases. To be democratic first and then grow or to grow first and then become democratic is the dilemma developing countries face today. No country that achieved high economic growth was a democracy. Only when they were rich, democracy started to flourish. Moreover, take the example of Somalia. You cannot go to Somalia and talk about empowering women, installing democracy and creating equality. Empty stomach needs food, for food you need jobs, growth, then only democracy sustains. Otherwise, it will only be a waste of time and money trying to install it. So, first message I want to give to donors, especially developed countries are, do not waste your money in improving good governance, democracy etc in least developed countries. If you really want them to be prosperous, concentrate on growth. Target a sector that is likely to achieve growth.

What the developing countries can do themselves is, find out why the particular sector which is likely to be your comparative advantage is failing to develop. Find out what are the bottlenecks of it. Then discuss how you can prevent this bottleneck. Then bring the policies, reform your financial sector if necessary. As long as you do not provide financial liquidity to those who have good ideas, you will never grow. Once you bring policies, check the feasibility and then implement it. Then monitor it. If it works well, continue supporting, if not, withdraw the support and concentrate on other sector but be fast.

Having said that, from personal experience, I say that the culture of political parties is one of the main bottleneck of developing countries. When you take a long time to bring a new policy, change this but while you change, make sure that the policy or law change is being misused by particular person, company for their own profit in the cost of society.

To make it short, when there is a government like Nepal that generally exist only for a year, if you concentrate in one sector that will generate growth, you will be successful than when you try to solve all the problems from the past. Specialize, focus, dont be a jack of all, be a master of one.