Arbitrage Magazine - November 2020 - Finance & Investment Club | IIM Rohtak

Finance & Investment Club IIM Rohtak

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presents

November 2020 Vol 4 Issue 9

Our best read - How will blockchain disrupt Traditional banking

Special Mention: Impact on an Initial Public Offerings (IPO) and Finance during COVID 19 pandemic in India.

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INDEX

S.No.

Article

Page No.

1

How will Blockchain disrupt Traditional banking

3

2

Impact on Initial Public Offerings (IPO) and Finance during COVID 19

10

pandemic in India. Is COVID-19 that much effective?

3

Green Finance, Impact Investment, and the Challenges Faced to sustainable development

12

4

Modigliani & Miller propositions: The irreverence it takes to make Financial Decisions irrelevant

16

5

Feminine Finance

18

6

Primary research on the financial wellbeing of people in Niranjanpur village, Orissa

20

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How will Blockchain disrupt Traditional banking By: Sphurti Srivastava (Gargi College) Introduction Before I tell you how will Blockchain disrupt banking, let's first understand it’s working. A blockchain contains three elements: •

Data- Data stored inside a blockchain depends on the type of Blockchain.

•

Hash- Hash generates a value of a block in terms of letters and symbols. It is unique for each block.

•

Hash of the previous block- each subsequent block contains the hash of the previous block, thus forming a chain.

Data

Hash of the block Hash of previous Block Figure 1: A simple representation of a blockchain

Hash: 4B9P Previous hash:0000

Hash:8C9Q Previous Hash: 4B9P

Hash:3N6M Previous Hash:8C9Q

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The above figure represents a simple blockchain. To understan d its working, I have assigned these blocks random hash.

As you can see from the figure, block 3 points to block two and block 2 points to block 1. Block 1 cannot point to any block as it is 1 st in sequence. Suppose you try to tamper with data of block 1, changing its hash function from 4B9P to 5E4F. In this case, block two will no longer point to block1 as block one will have a changed hash that will not match the previous hash of block 2, and the chain will break, indicating that data has been tampered with. This makes it easier to detect data hacks.

Now let’s see how will Blockchain disrupt banking •

Remittance- Remittances are an expensive process. Apart from taxes, service charges are also payable on these remittances. In India, the commission paid to agents for facilitating remittances is 12.36%. This fee is high because three parties are involved - The central bank, correspondent bank, and destination bank. And the transaction may take up to 1 week to process. Through Blockchain, a public ledger will be created, accessible to everybody in the network. Each node in the network will have a complete copy of this ledger. Any modification to be made in the ledger would require validation from all other nodes. This means that transaction will involve only the two concerned banks, removing other intermediaries making the process faster and less costly.

Sources: Finextra Figure 2: Remittances through Blockchain (Process)

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The process can be understood more clearly using this figure. Suppose you are living in the U.S. and you want to remit a part of your income to a bank in Belgium. In this example, Bank D represents the destination bank, while bank B and bank C represent correspondent banks. In the traditional process, the transaction passes from Bank A and has to be verified

by Bank B and C before it reaches bank D, the destination bank. The entire process is done using the services of SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, a vast messaging network used by banks to send and receive information and money transfer. By using Blockchain, money can be transferred directly from Bank A in the U.S. to Bank D in Belgium, removing the intermediaries- Bank C, Bank D, and swift system. As indicated by bank B and bank C highlighted in red. •

Trade Financing- Trade finance is financial instruments use by companies to facilitate international trade and commerce. There is a lot of paperwork involved in the traditional trade finance process, such as bill of lading, certificate of origin, inspection certificate, etc. Again, there are multiple parties involved, and it is a time-consuming process. The clearing process takes up to 1 month. Blockchain will help in streamlining this process.

There will be no need to maintain multiple databases. Through Blockchain, all the information will be converted into a single digital document, which will be accessible to all the parties, and changes can be made accordingly. Here also Blockchain as a universal ledger.

Sources: Manahawkin Partners Group Research 2020 Figure 3: Traditional Trade Finance Transaction Vs. Blockchain Trade Finance Transaction

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To understand this process more clearly, the above figure can be used. We can see the difference between traditional trade finance transactions and blockchain-based trade finance transactions. The documents have to be verified by multiple parties to get clearing.

Using Blockchain, all the documents will be converted to a single digital copy, accessible to all the parties eliminating the need to get the documents verified from multiple parties as they can access it through Blockchain. •

Identity frauds- Identity frauds occur when another person uses the personal information of one person. An example of this can be when somebody uses your credit card, identifying number, CVV, or other information and withdraws money from your account.

Given this scenario, how will Blockchain help?

A blockchain is based on decentralized technology. It acts as a digital distributed ledger which is available to several computers across the network. This feature of Blockchain will help in reducing identity thefts. Once the identifying information is placed in a permissioned blockchain, only authorized parties will access it. Only they will be able to verify the transactions and ensure that the records are valid.

•

Home loans- Taking a home loan is a long, complicated process involving several intermediaries. In the traditional process, several steps are involved, such as

(i)

Application for a new loan

(ii)

Providing estimation of the loan amount to the borrower by the bank

(iii)

Providing the loan amount

(iv)

Collection of Interest Blockchain will help to streamline this process by providing accurate record keeping.

Loan estimates will be provided within three days of receipt of loan application with time stamps. Moreover, through Blockchain's use, there will be heightened payment tracking and better data accuracy in loan transfers.

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Sources: homeloanexperts Figure 5: Home Loan process through Blockchain The above process can be understood easily by looking at the above figure. As you can see, Blockchain has made the entire process faster and cost-effective by reducing many intermediaries with the result that Adam becomes a homeowner in 5 days instead of 42 days.

These are four major areas in banking which can be made more efficient through Blockchain.

Others can be made more efficient using Blockchain, such as hedge funds, the process of granting credit and loans, accounting and auditing, and so on.

Conclusion

In conclusion, I would like to say that Blockchain is a powerful tool that can be used to improve our banking system. Also, the level of savings that will be generated due to Blockchain is another added benefit. A significant problem that needs to be tackled with Blockchain is implementing it and doing away with the traditional banking structure. A blockchain represents a total shift away from the conventional ways of doing things. So,

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a more imaginative approach will be needed to implement it in the banking sector effectively.

References •

How does a block chain work? Simply explained (2017) https://youtu.be/SSo_EIwHSd4

•

Paul Shumsky (2020). How Blockchain is going to change the remittance in 2020 https://www.finextra.com/blogposting/18367/how-blockchain-is-going-to-change-theremittance-in-2020

•

RavishankarAchanta. Cross-Border money transfer using blockchain-enables by big data https://www.infosys.com/industries/cards-and-payments/resources/Documents/crossborder-money-transfer.pdf

•

Kkozyra (2020). 10 use cases of Blockchain in banking https://concisesoftware.com/10-use-cases-of-blockchain-inbanking/#:~:text=A%20decentralized%20ledger%20of%20transactions,directly%20on %20a%20public%20blockchain.

•

Verifi. Blockchain Banking and fraud prevention https://www.verifi.com/in-the-news/blockchain-banking-fraud-prevention/

•

Uday Kumar Mopuru. Banking on Blockchain: How the technology will help curb fraud https://www.wns.com/insights/articles/articledetail/624/article--blockchain-in-bankinghow-the-technology-will-help-curb-fraud

•

Ross Mauri (2017). Blockchain for fraud prevention: industry use cases https://www.ibm.com/blogs/blockchain/2017/07/blockchain-for-fraud-preventionindustry-use-cases/

•

Sources of image: https://www.mahanakornpartners.com/wp-content/uploads/2020/02/Traditional-TradeFinance-Transaction-vs-Blockchain-based-Trade-Finance.-Mahanakorn-PartnersGroup.png

•

Celine Chen (2018). Redefining financial lending with Blockchain https://www.plugandplaytechcenter.com/resources/redefining-financial-lendingblockchain/#:~:text=Robin's%20founder%20and%20CEO%20Yossi,and%20increasing %20assurance%20in%20refinancing.

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Impact on Initial Public Offerings (IPO) and Finance during COVID 19 pandemic in India. Is COVID-19 that effective?

By: Gaurav Kumar Gupta (Atal Bihari Vajpayee School of Management & Entrepreneurship, Jawaharlal Nehru University) The initial public offerings refer to how the company raises its capital by offering its shares to the public. This is the essential process which a company uses to go public. The Dutch East India Company was the first formally listed public company. This happened in 1602, "Going public" enabled the company to raise the vast sum of 6.5 million guilders. IPO is a way th e banks raise their funds and expand their businesses or provide funding to the other businesses and households, which leads our economy into a flow. Without an IPO method, the companies won’t survive, which means the economy suffers.

This method brings a big change to the corporations by giving a push towards investments , giving the public the right to act as an owner of the companies.

The company won’t be able to operate unless they don’t put investors first. Focus more on wealth maximization rather than profit maximization is essential. If not, then it will create a monopoly, which is going to harmful venom towards society. The IPO method changes the way of the business before, which brings a great change towards the economy.

The big change comes this year, and Covid 19 impacted everything. It changed the way the business operates. This impact brings so much challenge to businesses. The Indian GDP came down to negative—increased unemployment rate, which was never before. Companies lay off their employees to survive. The downfall of the economy. Let’s talk about IPO; is it increase or decline? Well, it's, of course, decline, the change. Why this pandemic affect India so much? Why India's GDP came down to negative, too much negative as compared to other countries, why is it? What India does wrong?

These are all the questions that were already asked by the government. The only answer is the ‘Covid 19’ pandemic. Is this answer enough? Is Covid 19 is much effective to change the way the business operates. Everybody knows the businesses always use digital methods to perform their operations. Why cut the salaries of workers involved in physical activities during this situation, and why not cut that much % of wages from the senior staff working from home with full comfort? If you are ever asked this question, you will get no obvious comments. If you see the problems carefully, the answers are already there. The system needs to work on it.

Yes, if you cut the same % of salaries to senior staff, you will definitely recover your losses. That cut will be enough. You don’t even need to cut your worker's salaries which were already paying less. See, all the answers are there.

This simplifies the Covid 19 pandemic in India.

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A new listing has declined this financial year sharply as the coronavirus epidemic, and the adverse economic impact has made financial markets less attractive to companies looking to raise money.

The epidemic also exacerbated the market situation. The first major board IPO of the year took place recently when Rossari Biotech's IPO was over-registered 79 times. Similarly, in the case of follow-up public delivery (FPOs), the country has seen 478 FPOs this year, so far, a 28% decrease from 660 FPOs in the same period last year. The famine-stricken YES Bank recently saw its FPO registered, mainly due to a dark response from retail investors.

All Indian stock exchanges have seen only 19 IPOs in the fou r months of the current financial month, a 62% decrease from the corresponding numbers last year, according to data obtained through the Bombay Stock Exchange (BSE). In the first four months of the FY20, the country had seen 50 new listings.

The Banking Sector may not be directly targeted. Still, as it is at the forefront of public attention, other sectors' impact has directly affected the banking and financial sector. Banks play an essential role in economic efficiency and provide funding to companies and individuals.

Therefore, the stability of businesses and individuals is important in the banking industry. In this case, global warming will have a huge impact on small and large companies. Business loans, especially of small and medium businesses, are at risk due to forced closure.

In the end, I need to conclude that Covid 19 has impacted the IPO’s and finance, which leads to a great impact on the Indian economy. As you can see, everything is interconnected with each other, but we can’t only blame the Covid 19 pandemic for impacting our economy. There is somewhere the system is also responsible. So, we need to prepare ourselves for these kinds of situations in the future because we can’t say that, like Covid 19, some other problems won’t arise and impact our economy, so we should prepare ourselves before getting impacted by this kind of situation.

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Green Finance, Impact Investment, and the Challenges Faced to sustainable development.

By: Deepti Narsawat (IIFM Bhopal) As the world prepares itself for a fight against natural disasters, global warming, and climate change, green financing has evolved as a major step to attain sustainability and mitigate environmental changes.

Green financing is the financing of public and private projects or funding policies that aim to attain sustainability and are environment-friendly.

The sustainable development goals set by the United Nations General Assembly can be fulfilled efficiently if the focus is shifted towards green financing with proper risk management and strategic planning.

The green bond market is emerging, and the data shows that there was a 21 % increase in the year 2019 as compared to 2018, which indicates the growing interests of investors and potential of the market, but when we look at the target set up by UNDP for attaining the 17 SDGs the investments are still low.

A myth exists in the mind of investors that the return rate of green investments is too low, and it involves huge risks. Also, the idea of green financing is still not pretty clear, and a lot needs to be done to attract investors and mitigate risks associated with the investments.

The basic requirement is to standardize the green bonds and rate the green investments to know the bond’s credit quality. This creates a transparent interface for the investors, and

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they can make a safe bet. Moreover, this may protect investors from companies that practice greenwashing.

When an investor invests in a green project or a company practicing sustainability, he may not necessarily be focusing on the monetary risks involved. Rather he tries to measure the impact of the investment.

Impact investment is a measure of the change a project or a company brings to the environment and assessment of the environmental risks involved; the impact investment sector is definitely growing very fast; however, to attain the targets of sustainable development and to develop a robust green market the mainstream investors need to invest a portion of theirs in the green projects.

It is observed that the impact investing ecosystem has a large number of investors from high net worth individuals, family offices, foundations, and development finance institutions; the investors who face liability constraints are not willing to invest in green projects because they fear that the investment may not deliver intended returns.

To attract more green investments and make it a potential market, we need to address the impact ecosystem's common gaps and pain points.

Effective intermediaries, a common exchange platform(green stock exchange), advisers, and involving credit rating agencies to rate the impact made can help.

However, the green investments largely vary across geographies; China and Europe, for example, have large amounts of investments in green projects; however, India and Brazil lack behind in green financing projects.

Source: Shakti sustainable foundation report.

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The above figure indicates that the Indian green companies raise capital for their projects through debt financing and the financing done through equity is 21% . It is pretty evident that debt financing may lead to over-borrowing, tax evasion, and a less stable economic environment, moreover for an investor who is looking for impact investment, the companies raising funds through debt financing may not be a good option . Some of them may be involved in tax-evasion activities, ultimately leading to public money getting used by private owners, which won’t sound good to an investor.

The incentivization of debts often leads to an increase in the non-performing assets of a company and a high debt to equity ratio, which again makes it hard for the investors to invest.

The above-shown figure was published by Economic Times showing the increase/decrease in the debt-equity ratio of companies in FY2017, the metal & mining sector and the power sector potential sectors for green investment had an 11% increase in the debt-equity ratio, FY19 again reported a higher debt to equity ratio as reported by The Business Standard.

The financing of projects through grants is just 11%, which shows low funding by the public institutions, projects that are new and experimental often require research and strong financial support, funding through grants can help such green projects to succeed, with proper institutional framework and policies for green financing.

The Greening of banks has already started in India with SBI approving green projects and promoting sustainability; however, at the same time, the Indian banks are facing financial instability because of increasing NPAs and consumer shifts towards the stock market for the investment purpose. This is leading to low profitability of banks; it is now important for the banks to perform a thorough risk analysis while financing the green projects and include climatic factors and other natural factors as important components while performing the stress tests.

India today has an emerging market for green investments. However, we face a lot of issues, and there is a huge scope of improvement, and a large number of loopholes need to be addressed.

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A proper institutional framework to move green investments into the mainstream, a robust economic environment is to be created, proper policy design for financing the projects must be done, transparency must be supported, the focus must be on increasing the returns and creating an impact by avoiding dirty investments.

Sustainability is the future we are looking for, and green finance is the step to make our future a better place.

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Modigliani & Miller Propositions: The irreverence it takes to make Financial Decisions irrelevant.

By: Akshay Pai & Rupali Jadhav (SCMHRD, Pune) In 1958, professors Franco Modigliani of MIT and Merton Miller of the University of Chicago published their paradigm-shifting paper in the June issue of the American Economic Review. Innocently titled “The Cost of Capital, Corporate Finance, and the Theory of Investment,” the paper went about knocking down prevalent financial wisdom for decades after publication. Like an explosive revelation, the theory singed decades of conventionally accepted practices with its ‘irrelevance propositions.’ In the succinct 30-page article detailing their work, the two professors elaborated transformational new ways of reforming the conventional corporate finance approach that earned them a well-deserved Nobel prize in Economics. Though the Nobel Prize is never disputed, the theory has had its fair share of critics, with most of the criticism being centered around the lack of practical applications of the theory, which requires far too many assumptions to be grounded in appreciable reality.

This arcane (for most management graduates) theory, which is a mystery shrouded in an enigma wrapped in a puzzle for finance novices, can be brought down from its lofty perch in economics to the practicalities of Dalal Street and everyday life by concentrating on what the theory is, why it matters and how knowing about it can impact you.

What is M&M Theory?

The revolutionary theory peddles the astounding supposition that under the right assumptions - financing decisions are irrelevant, cash management is unimportant, capital structuring is unhee ded by the market, dividend policy is immaterial, financial risk management is peripheral at best, shareholding patterns don’t hold any importance and last but not the least, diversification is not a business necessity.

The theory achieves this impact through two enigmatic propositions, which are deceptively simple at first glance.

Proposition I: Under the right assumptions, the firm’s total market value is independent of its capital structure.

That is to say - the market value is independent of the percentage of debt or equity in its capital structure.

The proposition stresses that the value of the firm is determined only by the left half of the balance sheet (the composition of assets) rather than the right half of the balance sheet (the composition of equity and debt).

Proposition II: Under the right assumptions, the firm’s cost of equity increases in proportion to its debt-equity ratio. The greater the presence of debt in the capital structure, the greater would be the expected rate of return expected and demanded by the equity holders.

What Real-World applications does the theory have?

The reason why these propositions were so revolutionary is that they went against the core tenets of Wall Street in the 1960s, which was maximizing returns. Firms used (and still use) leverage to maximize shareholder returns by adjusting debt levels providing financial and operating flexibilities. M&M propositions proposed that in an idealized world (the real world for economists!), leveraging debt will not work miracles. The ideal capital structure would be one that best bolsters the operational parameters of the enterprise, and not the one which would supposedly provide best return to investors. The theory proposes the total market value for levered and unlevered companies remain the same given a level of risk and operations and firmly puts the onus of value creation on the company’s operations and not on its finances.

The theory is controversial because like most economic theories out there it is based on a multitude of assumptions, most of which involve conditions difficult to create or maintain in actual financial markets. The

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assumptions involved in the theory are – information is symmetric, markets are frictionless and efficient, investors are rational, cashflows remain unimpacted by financial policies (no bankruptcy), there is no taxation (corrected in a later version of the theory). These assumptions led to a generation of scholars investigating the theory, and some tried to improve it by bringing it down from the ivory tower and lofty ideals of economics to the metric-driven world of Wall Street.

Critics have chosen the following three avenues of attack to negate the theory’s importance – the tax shield effect, the agency and bankruptcy cost debates, and the fact that information by its very nature is asymmetrical. Modigliani and Miller accepted the tax shield deficiency in their original work and modified the theory to account for corporate taxation. The other two critical points, while not directly addressed in theory, only exist as sore issues because the financial markets don’t function the way they are supposed to function, the blame for market and regulation inefficiencies can hardly be passed on to Modigliani and Miller.

Why do MBA grads and future CXOs need to know about M&M theory?

Modigliani and Miller’s theory brings the balance sheet from out of the boardroom and onto the production floor, by positing the company’s value creation to be a function of its operations rather than its financial structuring. In professor Modigliani’s own words, the best thing the theory did was teach future generations of CXOs that the prevalent concept of management existing to maximize profit or shareholder returns could be wrong. Instead, they could aim to maximize the market value of the firm by running it better, which is, after all, what the market likes. M&M Theory has had a second coming with the rise of ESG considerations in funding and financing that has taken place in the last deca de. The assumptions involved in the two propositions lead critics to question the base practicality of the theory. However, the theory that proves pretty much everything else irrelevant holds its relevance even after half a century of scrutiny and s kepticism.

The starry-eyed MBA students of today (like the authors) will be joining the workforce in the post-Covid pandemic era, with markets all over the world facing the most desolate and darkest of all depressions in history. This will inevitably lead to a tightening of purses, and credit may well be made available on the basis of salt of the earth numbers like operational returns and asset valuations rather than glossy figures on the right half of the balance sheet and easy to manipulate financial metrics.

The M&M theory also offers another parallel to Andrew Sheng’s famous quote regarding financial engineering and real engineering in the cult classic ‘The Inside Job’ – “Why should a Financial Engineer be paid 4 to 100 times as much as a Real Engineer, the Real Engineer builds bridges while the Financial Engineer builds dreams… and when those dreams turn out to be a nightmare, other people will pay for it.”

The M&M Theory helps put to bed the age-old question - Is it Financial Management that creates value to the firm, or is it the Engineering line and staff that create value, which is then maximized by the management’s decisions.

Sources: Modigliani, M., & Miller, M. (1958). ‘The Cost of Capital, Corporation Finance and the Theory of Investment.’ The American Economic Review Gifford, D. (1998). ‘After the Revolution.’ Banking & Capital, MarketsBerkeley, H. N.D. Course notes on introduction to corporate finance. http://faculty.haas.berkeley.edu/parlour/Teaching/corp_intro.pdf [Google Scholar]

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FEMININE FINANCE By: Yukta Sharma (Shri Ram College of Commerce)

Do you know that until 2018 a woman had not been nominated for an Oscar in Cinematography?

A few days back, I read an article celebrating the anniversary of Rosalind Franklin [1]– the woman whose contribution to the world of DNA Study still helps scientists and historians to conduct their researches. Even so, in the middle of the 20th century, her work was not recognized because of her gender. After her death, she much deserved Nobel Prize was awarded to three men who based their study on her work themselves.

Even in the 21st century, discrimination on the basis of gender is still prevalent. From carpentry to firefighting, electricians to engineers, computer programmers to cinematographers - many sectors still remain male-dominated. Though there has been an increase in the number of opportunities available for women, we still have a long way to achieve equality. Moreover, male-dominated workspace is an issue of the developed countries as much as it is an issue of the developing and the backward countries

One sector that is imperative to the functioning of any economy is finance. In order to have a stable and healthy economy, a balanced and sound financial sector is needed. But even with the due importance given to this sector, less attention is paid to its male-dominated culture.

Worldwide, a majority of people believe that women are just not “interested” in fin ance. This just drives home the fact that not only households but workplaces are too riddled with stereotypes. And if one comes to think of squeezing out these stereotypical norms, that itself is going to be a hard feat to achieve. Though the world now has seen a number of female leaders but with the drive to fight for equality and to acquire an equivalent footing, less attention is paid to such inherent presuppositions.

While researching the correlation between gender diversity and finance, I came across this engrossing paper“Stock Market Reaction to Female CEO Nominations: Is the Market Gendered?” by François Longin and Estefania Santacreu-Vasut (2019) [2]. As the name suggests, they have talked about how the stock market is “gendered.” Their findings report that when a female CEO is appointed, the females react positively (they buy stocks), while the males react negatively (they sell stocks). As the number of male participants is higher in the stock market, naturally, a majority of the stock market would react negatively to the appointment of female CEOs. Hence, gender differences give way to gender biases.

The negative reaction is also due to the biased perception towards the possession of cognitive and noncognitive skills. Science has proven that gender differences do exist. Females are proven to be more verbally fluent, whereas males are considered to be better at mathematical reasoning. Recent researches have also stated gender differences in the bargaining styles and level of overconfidence. Howeve r, these

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differences do not prove the incapability of any gender to participate in a stock market efficiently. Moreover, a lot of banks on how the brain of a child is impacted and how this development affects his or her skills in later years. A research [3] specified the impact of the society on the growth of child’s brain. It was frightening to discover that a majority of parents were found to believe less in their daughters’ mathematical abilities.

Unrecognized talent at a tender age forms preconceived notions in a person’s mind, which might prevent one from experimenting with new career avenues. Research also suggests that cognitive skills that show gender differences may be quite malleable.

Another alleged reason for the underrepresentation of females in the financial market is that women are considered to be more risk-averse [4]. In the 20th century, experiments were conducted, which proved that men are more willing to take risks, and women who want to maintain stability in their households would not be as willing to do so. But recent researches claim that such a difference might have been exaggerated. This directly correlates with the rise in educated women, which makes them capable of making well-informed decisions and hence take risks.

Education still remains one of the topmost priorities to eradicate these differences. In many countries, women tend to contribute more to the management of household expenses. Imparting financial education to women and increasing their participation in financial markets becomes important to benefit households and communities.

The need for a diversified workforce cannot be stressed enough. An influx of fresh ideas and different viewpoints will not only help in the growth of the financial sector but will also smoothen the processes involved. Although financial inclusion alone cannot bring absolute gender equality , equality in providing basic services for development can prove to be a huge growth catalyst in the coming years.

Hopefully, as we progress, gender studies would not just be restricted to male or female.

As quoted by Maya Angelou, “We are more similar than different” – the world needs to adopt this view and only then can we overcome our disagreements.

Works Cited [1]https://indianexpress.com/article/explained/in-covid-year-why-unsung-heroine-of-dna-rosalindfranklin-needs-to-be-remembered-for-more-6521851 [2] https://genderfinance.net [3]http://www.educationalneuroscience.org.uk/resources/neuromyth-or-neurofact/girls-and-boyshave-different-cognitive-abilities [4] https://www.researchgate.net/publication/270576031_Women_and_Finance/link/54ae5f220cf2213c5fe 444a6/download

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Primary research on the financial wellbeing of people in Niranjanpur village, Orissa By: Prajwal Khandelwal_(Xavier University, Bhubaneswar) Methodology The data which is used in this article is Primary data, which is collected in the village name Niranjanpur, Orissa near Xavier University campus. The data is collected by the personnel interviewing and observation of the respondent.

Problem Faced There's a village named Niranjanpur near the Xavier University campus in Bhubaneswar. There is a community living in a village called the Behera community that has been living there for decades. After doing the survey, it was found that their income was consistent over the past 20 years. Due to limited income, there is no growth in their living standard. The majority of the population in that community is in dairy farming. It was found that milk yield from their cattle is very low as compared to milk farmers from various states like Haryana, Gujrat, Punjab. The reason this came to be known after the survey: •

• •

•

People are afraid to take debt from any financial service as they think they will be in a debt trap; it is due to a lack of financial knowledge. Still, the lack of financial availability restricts them from purchasing a good breed of livestock and increase income.

People do not have good breeds of livestock as they are unaware of the benefits of good livestock breeds, and they mostly use desi breed in the rural area.

They do not have access to good Cattle feed as compared to states like Gujrat, Haryana, Punjab as they prefer to go with traditional practices of grazing only, but in other states, they more focus on Balance feed, which includes proper carbohydrate, protein, and vitamin in livestock which will ensure proper milk yield.

They also show rigid behavior to change their old practice of raring the livestock and adoption of new technology it is due to a lack of technological knowledge.

It was found that some big milk farmer does not adopt new technology or methods, better cattle feed for livestock and thus whole community or Small and marginal milk farmer mostly follow the big farmer as they set an example for them. They follow big farmers. To change practice, we need to provide knowledge to the big farmer in a rural area so that they can set the example for whole society.

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Response Survey Questions

Inputs from Respondents Details

Respondent

Mamta Rani Behera

She is the wife of Ranjit Behera

Region (Rural / Rural Urban)

Located at approx. 3-4 km from XUB

Family details

A family of 7

Husband, Wife – 12th pass, Mother of Husband; 1 child studying other of 3 years only

Age

38

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Location

Niranjanpur

Near XUB

Education

12th pass

Discontinued education after that.

Means of Livelihood

Selling of milk and other dairy products

The women help rear the cows, and the produce is sold either to other sellers who use it for making milk-related products like cottage cheese and ghee or for selling it to households for consumption purposes.

Type of Cows (Breed)

Desi Cows

3 Desi Cows

Cattle Feed

Grass grazing from nearby fields and a mixture of the processed by-product of rice and pulses

Labour Requirements

Only family members involved

The family help each other in the same

Household Income

Not able to give an exact figure

Profit after expenses was about Rs 30009000/-

Input Costs

60 kg for Rs 1300/- for cattle feed

Profit

Very less profit. More during The price per litre of milk is Rs. 35-40 festival season.

Finance / Loans

No loans

Livestock Insurance

No Insurance of the cows

Production Outputs

Milk They sell 12 litre milk per day

No loan or external finance has been taken

Per day output of milk: they produced 12ltr milk from their cows

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Action Taken Mr. Ranjit, the head of the Behera community, does not want their children to spend their lives with the scarcity of resources and poor living conditions. Mr. Ranjit has the great will to change his family's living standard and income. He is a milk farmer and selling milk to different households. Mr. Ranjit has no idea how to increase his revenue from a limited resource. When these things are happening to Mr. Ranjit, a microfinance company named BASIX is trying to penetrate that village. BASIX is a microfinance institution concerning for promotion of livelihood through financial inclusion. Initially, BASIX has sent some executives to the village Niranjanpur.

Still, they failed to get the trust of villagers, and also, the villager is afraid to take any debt as they think they will be in the debt trap. After some time, the BASIX is able to gain the trust of Mr. Ranjit and convince him to take financial support for improving livelihood. After seeing Mr .

Ranjeet taking a loan from BASIX, some more households from that community joined BASIX. By seeing Mr. Ranjeet, head of community, taking a loan from BASIX, develop a sense of trust among various households in the community.

After BASIX intervention Mr. Ranjit explains how he is able to increase income by taking a new breed of Jersy cow, which has more yielding capacity and will help to increase income. BASIX has also provided knowledge about how he can increase their livelihood with proper financial support. After the BASIX intervention, Mr. Ranjit improves his income and living condition. He purchased Jersy cow and maintained a good quality of feed to livestock. After some time, his milk production increased from 12 litres to 40 litres, and his livestock has increased from 3 to 6 , which led to increasing their income. After seeing the progress of Mr. Ranjit, many people from that community contacted BASIX for financial help, which is now helping the whole Behera community to grow.

Lesson Learnt In order to ensure that the livelihood of people grows through financial inclusion. The financial institution needs to develop a sense of trust among people living in the community. Suppose we succeeded in creating a sense of confidence among people or community. In that case, it will ensure the growth of the institution and also the growth of people or community.

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