Services Offered By Microfinance Institutions Finance Essay - Free Essay Example

Sample details Pages: 15 Words: 4405 Downloads: 3 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? In the last 5 Years the Indian Microfinance sector has witnessed tremendous growth, during which Microfinance institutions were subject to hardly any regulation. Most of the Microfinance institutions during that period were only subject to prudential requirements; but there was no regulation to address fair lending practices, pricing, or operations. The combination of minimal regulation and tremendous growth in the sector led to an environment where customers were increasingly dissatisfied with services offered by Microfinance institutions, culminating in the Andhra Pradesh crisis in the fall of 2010. Don’t waste time! Our writers will create an original "Services Offered By Microfinance Institutions Finance Essay" essay for you Create order Leading up to the Andhra Pradesh crisis, microfinance institutions were experiencing a huge influx of equity and debt investment from both Indian and Foreign Financial institutions. Some Microfinance institutions were doubling their book size each year, aiming to reach more areas and customers. As institutions started scaling up quickly, MFI employee hiring and training processes were less thorough, resulting in employees who were involved in inappropriate collection practices and lending models that led to customer over-indebtedness. In August 2010, SKS Microfinance held the first initial public offering (IPO) for a microfinance institution in India, raising USD 347 million and drawing attention to the potential profits of the sector. Media reports took different viewpoints on the IPO, some celebrating the sector, and others characterizing the profits as taking advantage of the poor. Further reports cited links between Microfinance Institutions (MFIs) lending and suicides in A ndhra Pradesh. The incident culminated when Andhra Pradesh Chief Minister passed the Andhra Pradesh Microfinance Ordinance 2010, which includes a number of measures that greatly restricts microfinance institutions operations. As a result of the ordinance, and the general attitude towards microfinance in Andhra Pradesh, loan repayments dropped dramatically. Due to low repayment rates, microfinance institutions, with exposure to Andhra Pradesh, suffered significant losses. Banks stopped lending to microfinance institutions all over India, for fear that a similar situation would occur elsewhere, resulting in a liquidity crunch for microfinance institutions, which are largely dependent on bank lending as a funding source. With the sector at a standstill, microfinance institutions, microfinance clients, banks, investors, and local governments were calling for new regulation to address the prominent issues of the sector. The Reserve Bank of India (RBI) responded by appointing an RBI sub-committee know as the Malegam Committee. This committee aimed to address the primary customer complaints that led to the crisis, including coercive collection practices, usurious interest rates, and selling practices that resulted in over-indebtedness. The existing regulations did not address these issues, thus, who should respond to these issues, and how they should respond, was uncertain. This prolonged the general regulatory uncertainty and the resulting repayment and institutional liquidity issues. The Malegam Committee released their recommended regulations in January 2011. These recommendations were broadly accepted by RBI in May 2011, though specific regulation was only released regarding which institutions qualify for priority sector lending at this time. Additionally, an updated version of the Micro Finance Institutions (Development and Regulations) Bill 2011 is in Parliament, which aims to provide a regulatory structure for microfinance institutions operating as societies, trusts, and cooperatives. Although this shows that regulators are taking steps to address the crisis issues and resolve regulatory uncertainty, banks have not resumed lending to microfinance institutions as of July 2011. In this paper, we will analyze the strengths and weaknesses of the current regulatory structure in India, including the pending Malegam Micro Finance Institutions (Development and Regulations) Bill 2011. We will perform a case study analysis regarding how microfinance institutions are viewing and implementing the new RBI regulation, and conclude by offering a perspective regarding the future of microfinance regulation in India. Existing Regulatory Framework The current regulatory structure currently consists of the regulation prior to the Andhra Pradesh crisis, various state legislations, and the partial implementation of the Malegam Report by RBI. This section will also include recent proposed legislation, including items from the Malegam Report that have not yet been addressed by RBI and the Micro Finance Institutions (Development and Regulations) Bill 2011. Legal Structure A microfinance institution acquires permission to lend through registration. Each legal structure has different formation requirements and privileges. Microfinance institutions in India are registered as one of the following five entities: Non Government Organizations engaged in microfinance (NGO-MFIs), comprised of Societies and Trusts Cooperatives registered under the conventional state-level cooperative acts, the national level multi-state cooperative legislation Act (MSCA 2002 ), or under the new state-level mutually aided cooperative acts (MACS Act) Section 25 Companies (not-for-profit) For-profit Non-Banking Financial Companies (NBFCs) NBFC-MFIs NGO-MFIs, Cooperatives, and Section 25 Companies Microfinance institutions operating as a non-profit company operate as either an NGO-MFI, Cooperative, or Section 25. Each is structured slightly differently in terms of ability to accept equity investments and dividends. There exists little regulation that applies to these structures, aside from registration requirements. NBFCs The mainstream financial sector in India is divided primarily into two categories, banks and NBFCs. Banks adhere to much more stringent regulation than NBFCs because they are permitted to accept public deposits and are considered to possess systemic risk. The NBFC encompasses many different types of financial companies, which are all subject to the same regulatory 4 requirements. Many microfinance institutions have recently registered as NBFCs to take advantage of access to capital markets. Microfinance institutions operating as NBFCs account for the great majority of the microfinance market in India, with about 50 NBFCs responsible for 80 percent of all microfinance loans (by outstanding portfolio)4. NBFC-MFIs For-profit institutions that qualify for priority sector lending funds are registered as NBFC-MFIs. This NBFC sub-category was created by RBI in May 2011 as a way to classify NBFCs operating as microfinance institutions which meet certain requirements. Currently, it is unclear how many NBFCs will elect to register as NBFC-MFIs, and how many will continue to operate as NBFCs. Current Regulation Very little regulation exists for NGO-MFIs and Cooperatives, aside from registration with a local or state authority. Currently there is no regulator that oversees NGO-MFIs, Cooperatives, and Section 25s. RBI is the regulator for NBFCs. NBFCs are subject to some prudential regulation, including a minimum capital requirement, a capital adequacy requirement, and foreign investment restrictions. Since NBFCs encompass many types of financial institutions, microfinance institutions operating as NBFCs are subject to no specific regulation relating to lending, pricing, or operations. Recent regulatory discussion surrounds the partial acceptance of the Malegam Report by RBI in May 2011, where RBI created the NBFC-MFI designation. RBI stated that it broadly accepts the Malegam Committee recommendations, although specific regulation was released only to determine which institutions qualify for priority sector lending. The new regulation from RBI, currently, only applies to the newly creat ed NBFC-MFI category. Microfinance institutions operating under other legal structures face minimal regulatory requirements, aside from registration, though recent drafts of the pending Micro Finance Institutions (Development and Regulations) Bill 2011, has put all microfinance institutions under the jurisdiction of RBI. There has been dramatic change in the regulation of microfinance institutions recently, with much more change expected to follow in the coming months. We will discuss major regulatory points, including priority sector lending, deposit mobilization, access to capital, the Money Lending Act, and state level regulation. We will also discuss pending regulation, including portions of the Malegam Report which have not been specified by RBI, and the Micro Finance Institutions (Development and Regulations) Bill 2011. Priority Sector Lending Priority sector lending is a government initiative which requires banks to allocate a percentage of their portfolios to investment in specified priority sectors at a reduced interest rate. Currently only microfinance institutions registered as NBFC-MFIs are designated as a priority sector. The number of priority sectors has recently been reduced, which suggests that banks will rely more heavily on lending to microfinance institutions to meet the priority sector requirements. In order to register as a NBFC-MFI, an institution must meet requirements specified by RBI5. RBI requires that a minimum of 75% of a NBFC-MFIÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s loan portfolio must have been originated for income-generating activities. Additionally, an NBFC-MFI must have 85% of its total assets as qualifying assets (excluding cash, balances with banks and financial institutions, government securities and money market instruments). A qualifying asset is a loan which meets the following criteria: Borrowers household annual income does not exceed Rs. 60,000 or Rs. 1,20,000 for rural and urban areas respectively Maximum loan size of Rs. 35,000 (first cycle) and Rs. 50,000 (subsequent cycles) Maximum borrower total indebtedness of Rs. 50,000 Minimum tenure of 24 months when loan exceeds Rs. 15,000 No prepayment penalties No collateral Repayable by weekly, fortnightly or monthly installments, at the choice of the borrower An NBFC-MFI must also adhere to the following pricing requirements: Margin cap of 12% Interest rate cap of 26% Only three pricing components Interest rate Processing fee (maximum 1%) Insurance premium No penalty for delayed payment No security deposit or margin can be taken Banks are responsible for ensuring that the institutions receiving priority sector funds adhere to these requirements, with verification through a quarterly Chartered Accountants Certificate. Securitized assets may also qualify as priority sector assets if an institution meets these requirements. We assume that NBFC-MFIs must also adhere to general NBFC requirements. Accepting Deposits Current regulation stipulates that only NBFCs and Cooperatives are permitted to accept deposits, though NBFCs must adhere to additional stringent regulations6 and Cooperatives are only permitted to accept deposits from their members, not the general public. The deposits limit for NBFCs is linked to the size of an institutions Net Owned Fund (NOF). No microfinance institution registered as an NBFC, currently accepts deposits because regulation requires that institutions must obtain an investment grade rating, which no microfinance institution has obtained. Uncollateralized loans are considered more risky by rating agencies, making it unlikely that microfinance institutions, utilizing joint-liability groups as collateral, or not requiring collateral at all, will be able to attain an investment grade rating. The Malegam Committee made no recommendations regarding deposit-taking, thus RBI is not expected to address this issue for NBFC-MFIs in the near future. Financing Restrictions Access to capital is determined primarily by an institutionÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s registration status. Some registration entities are better suited to access traditional financing, such as bank lending, equity, and more sophisticated financial products, while others obtain funds through donations, grants, or members. NBFCs can receive both equity and debt investments. NBFCs can raise foreign equity investment, though a minimum investment USD 500,000 restriction applies, which cannot result in more than a 51% stake in the institution. Grants and subsidized on-lending funds from domestic and foreign sources are not restricted provided that the foreign grants should not exceed the ceiling of USD 5 million per year. RBI regulates NBFCs that are not listed on a public stock 7 exchange. RBIÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s Foreign Investment Promotion Board (FIPB) has mandated the following foreign direct investment (FDI) for NBFCs: Maximum 51% FDI for companies with capitalization USD 500,000 or less Maximum 75% FDI for companies with capitalization USD 500,000 5 million No maximum FDI for companies with capitalization greater than USD 50 million Investors of foreign origin fall under the above restrictions for foreign capital, even if channeled through local semi-independent funds. Two of the main sources for domestic capital are currently SIDBI and NABARD, and emerging local microfinance focused funds such as Bellwether Microfinance Fund and Aavishkaar Goodwell7. NBFCs are also the only entities that attract more sophisticated financial options, such as securitization or non-convertible debentures, where additional RBI guidelines apply. RBI has not addressed any investment regulation regarding NBFC-MFIs, so at this point we presume that these institutions must adhere to the same requirements as NBFCs. Section 25 companies have difficulty attracting equity investments because they are unable to offer dividends and exit opportuniti es are difficult to predict. They can access External Commercial Borrowing (ECB) up to USD 5 million, though many Section 25s end up borrowing significantly less than the USD 5 million limit, due to leverage limitations. Other MFI forms cannot accept equity investments. Microfinance Institution Self-Regulation Microfinance institutions in India often voluntarily join an industry association, which acts as a commitment and guide for self-regulation. Microfinance industry associations have been developed to better discussion with policy makers, improve capacity building, and identify minimum standards of performance through institutional collaboration and commitment. An industry association will identify a code of conduct for its members, which will focus on fair practices with borrowers and among member organizations. This code of conduct will address lending methods, collection practices, institutional transparency, and training practices for member institutions. Often institutions will be required to develop their own code of conduct as well, which more specifically addresses how the institution will uphold the fair practices outlined by the industry association. Currently, the two biggest industry associations in India are the Microfinance Institutions Network (MFIN) and Sa-dhan. Both of these associations offer a great deal of resources, guidance, and forums for institution discussion so that the most pressing issues facing the industry can be collectively addressed. State Level Regulation Various requirements have been enacted to restrict and control microfinance practices at the state level. The most prominent state level regulations are the Money Lending Act and the Andhra Pradesh Micro Finance Institutions (regulation of money lending) Ordinance, 2010. The Money Lending Act, though originally intended to restrict the interest rates charged by money lenders, has been applied to microfinance institutions in some states. The Andhra Pradesh Ordinance was enacted in 2010 during the repayment crisis in Andhra Pradesh (AP), greatly restricting microfinance institution operations by including measures such as district by district registration, required collection near local government premises, and forced monthly repayment schedules. Pending Regulation: The Malegam Report RBI broadly accepted the Malegam Report8 and specified regulation detailing the requirements and institution must meet to qualify for priority sector lending. RBI has stated that it will release m ore regulation in the coming months. Some of the new regulation for priority sector lending is exactly the same or very similar to the Malegam Report recommendations, while other parts of the regulation are entirely different than the committee recommendations. As a result, predicting the specifics of the new regulation is difficult, so below we have highlighted the drawbacks of major sections of the Malegam Report that have yet to be addressed. Over-Indebtedness A set of recommendations aims to enforce maximum indebtedness levels without the use of a customer credit information system. These include: MFIs can only lend to members of a Joint Liability Group (JLG) A borrower cannot be a member of more than one SHG/JLG Not more than two MFIs can lend to one borrower All of these limits restrict the choices of consumers. A consumer has the best knowledge of how much credit is he requires and how much he can repay. Though there is more individual risk, individuals will have more opportunities to meet their financial needs without these 9 restrictions. If this loan limit is imposed, the unmet demand from formal sources might force the consumers to borrow from money lenders and other informal sources with more severe consequences. Additionally, implementation of these requirements will be difficult since currently customers report their own indebtedness. Until a credit reference system is put in place, it will be impossible to accurately gauge household total indebtedness. Documentation and Transparency Documentation recommendations intend to increase transparency of product costs and risks, so that consumers are better informed to make decisions and compare products to those offered by other institutions. These include: MFIs must provide borrowers a loan card which shows the effective rate of interest, other terms and conditions of the loan, information which adequately identifies the borrower, and acknowledgements of payments received Effective rate of interest must be displayed in all offices, all literature, and on website Standard loan agreement These measures do increase product transparency and could greatly benefit the decision process of the consumer. The only concern is that when implemented, these requirements could potentially burden and slow the lending process, or provide too much information for less financially literate clients to interpret. Collection Practices Collection practice restrictions aim to stop coercive and abusive collection techniques, which were a major complaint of consumers leading up to the AP crisis. These include: Sanctioning and disbursement of loans should be done only at a central location Field staff should not be allowed to make recovery at customers place of residence or place of work All recoveries should be made at the group level More than one individual should be involved in sanctioning and disbursement Disbursement should be closely supervised MFIs and their management teams should be subject to severe penalties if coercive methods of recovery are used. Regulators should monitor systems for recruitment, training, and supervision of field staff Although these restrictions would reduce coercive and abusive collection techniques, they greatly restrict the operations of microfinance institutions, and may deter some lending methodologies that offer greater convenience to the customer. The r estrictions also do not allow for individual lending, which could be a beneficial product offering for customers. The best way to protect consumers from MFI collection malpractices is to have a well-functioning complaint redressal procedure, so that if inappropriate actions occur, the regulator and the institution can respond appropriately. Credit Information Bureau One or more Credit Information Bureaus should be established and operational as soon as possible All MFIs should be required to become members of a bureau MFIs are responsible for obtaining information from potential borrowers until bureau is functional The recommendations of the Malegam Committee focus on the important limitations of existing regulation. However, further amendments based on research and policy discussions must be made so that the regulatory framework optimizes the short and long term benefits to consumers and institutions. Pending Regulation: Micro Finance Institutions (Development and Regulations) Bill 2011 The Micro Finance Institutions (Development and Regulations) Bill 201110 is an updated version of an earlier bill drafted in 2007. The bill has been re-drafted several times, with the most recent draft released in July 2011 to consider the most recent RBI regulation. The bill addresses all legal forms of microfinance institutions, providing a comprehensive legislation for the sector. New regulation includes: Designation of RBI as the sole regulator for all microfinance institutions, Power to regulate interest rate caps, margin caps, and prudential norms All microfinance institutions must register with RBI Formation of a Micro Finance Development Council, which will advise the central government on a variety of issues relating to microfinance Formation of State Advisory Councils to oversee microfinance at the state level Creation of Micro Finance Development Fund for investment, training, capacit y building, and other expenditures as determined by RBI The designation of RBI as the sole regulator would be a positive step forward for the sector. Though the specifics of regulation are yet to be determined, having one respected regulatory who is acknowledged as in charge of all aspects of the sector would lead to a great reduction of regulatory uncertainty. If the bill passes, a greater challenge will remain; RBI must effectively regulate and monitor a great number of microfinance institutions that have previously been subject to very little regulation . Current Regulation Limitations Much of the new regulation following the Malegam CommitteeÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s proposals will be released in the coming months, so we will refrain from further commenting on the current lack of regulation relating to certain issues that will certainly be addressed. Rather, we will focus our analysis on the limitations of the regulatory structure to problems with enacted regulation and issues that we suspect that RBI will not address, specifically the lack of clarity regarding central and state regulatory jurisdiction, implementation of priority sector lending qualification, the margin and interest rate caps, institution funding restrictions, and the inability of institutions to take public deposits. State vs. Central Regulatory Jurisdiction Uncertainty A major limitation of the current regulation is the lack of clarity regarding central and state regulatory jurisdiction. During late 2010 and early 2011, both Andhra Pradesh and Gujarat passed legislation barring specific microfinance practices within the state, requiring specific consumer protection policies and capping interest rates. States currently have great discretionary power as to how to interpret the Money Lending Act. Stability and confidence will elude the sector until this regulatory ambiguity is resolved. Implementation of Priority Sector Lending Qualification A second limitation is the implementation of the new RBI requirements regarding priority sector lending, particularly with regard to borrower income and borrower indebtedness. Since there are no tax filings or credit reports for the majority of microfinance customers, this information is often reported by the customer. Thus, customers have incentive to misrepresent their income and indebtedness in order to qualify for a loan. Without a functioning credit bureau, these customer characteristics requirements are impossible to accurately enforce. Margin and Interest Rate Cap Another limitation is a universal margin and interest rate cap could be detrimental for the sector, since it would most likely result in the reduction of financial services in various areas and populations where returns would not justify the operating costs. An interest rate cap should take into account various factors that typically affect the cost of operation, such as area of operation, average loan amount, legal form, and size of the microfinance institution. When interest rate caps have been implemented on microfinance services in other countries, microfinance institutions have pulled out of rural areas, stopped serving the poorest of the poor, increased the average loan size, and have had difficulty remaining solvent11. Lack of Funding Diversification Lack of diversification of funding is also problematic for microfinance institutions due to current regulation regarding access to capital. Microfinance institutions are highly dependent on lending from Indian banks, which was problematic when all of the banks stopped finding microfinance institutions to be credit-worthy during the AP crisis. Though microfinance institutions may diversify lending amongst Indian banks, these banks tend to view the microfinance sector very similarly, resulting in a lack of diversification benefits. Finally, allowing microfinance institutions to accept public deposits would add a source of funding diversification and benefit the customer. Customers may be able to better smooth consumption and resist the temptation to spend if they have access to a savings product. Regulation should permit institutions that meet reasonable prudential qualifications to accept public deposits. An alternative to the current system would be to base the strength of a 13 microfinance institution on ratings that come from agencies or methods that specialize in the unique microfinance lending methodology12. MFI Response to New RBI Regulation The Centre for Microfinance interviewed over 30 MFIs in the summer of 2011i, asking them about their response to the recent regulation and their perspectives on the sector in general. In this section, we will generally review the responses, and look at three institutionsÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸ responses to highlight some individual issues arising as a result of new regulation. Overview Overall, the surveyed MFIs reported that national regulation has been needed for a long time. They feel that the new RBI regulations are not clear or well communicated, and the banks that previously acted as sources of funding are more cautious and selective in offering financial support. However, MFIs felt the RBI regulation could protect MFIs against the implementation of restrictive state legislation. One of the primary concerns expressed by the interviewed MFIs involved how equitable the new regulations will be for institutions of different sizes. A Section 25 organization stated that the uniform policy would be more difficult for smaller MFIs to adapt and adhere to if applied to all, resulting in smaller institutions being pushed out of the market by more flexible larger organizations. There is also question over how difficult it will be for new start-up microfinance organizations to meet the demands of the market. Several MFIs have also expressed concern over the requir ement that a minimum of NBFC-MFIÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s loan portfolio must be used for income-generating activities. Several MFIs have recognized that a large proportion of clients use loans for consumption, rather than productive purposes. The MFIs responded with mixed opinions in regard to the interest rate and margin cap. While several of the institutions described the margin as reasonable, one MFI reported that these new restrictions on margins and interest rates are too stringent, and they will limit product innovation. Additionally, operating costs vary across regions, and these caps may not be high enough to support initiatives in remote areas. Another institution stated that the margin cap would act as an incentive for MFIs to scale up at a greater rate. One aspect of the regulation to which all MFIs responded positively was recommendation for the creation of a credit bureau and the mandatory membership of all MFIs. Currently, an appraisal of a clientÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸s credit-worthiness is expensive, timely, and often inaccurate. Many MFIs felt a credit bureau could act as a more accurate tool for reviewing indebtedness and repayment history. The Future of Regulation The latter half of 2011 will be telling for the future of the microfinance regulatory regime as RBI further clarifies the acceptance of the Malegam Report and its role with regards to microfinance institutions operating as NGO-MFIs, Cooperatives, and Section 25s. Regulation will surely be 17 refined as microfinance institutions implement the new requirements and consumers and regulators see a theoretical framework put into practice. The initial round of RBI regulation in 2011 aimed to assuage consumer fears and create an environment where bank lending will presume by directly addressing borrower indebtedness and loan pricing. We suspect that as the sector returns to a state of normalcy, some of the more restrictive requirements will be lessened or eliminated. In the meantime, the regulation seems to heavily favor larger institutions who can adapt to the changes more easily due to economies of scale, advanced MIS systems, and higher operational efficiencies. As a result, we ma y see smaller institutions failing or consolidating in the near term. We may also see more innovative companies and microfinance models that aim to circumvent the new regulatory structure, especially since an institution can continue to lend to microfinance clients as an NBFC with no new regulation. Regulation will respond to these innovations as well, either by endorsing them or disallowing them, depending on fairness and the success of implementation. The great benefit of the Andhra Pradesh crisis and the resulting call for regulation is that the sector has seen the consequences of a model that is not customer centric. Institutions, investors, and regulators agree that though there is profit to be had, microfinance services are aimed at ultimately improving the status and livelihood of the poor population. As the sector develops, regulators must be sure to address the issues we have highlighted: implementation of priority sector lending requirements, diversification of fundi ng, and acceptance of public deposits. As we move forward, regulators will ensure that microfinance institutionsÃÆ' ¢Ãƒ ¢Ã¢â‚¬Å¡Ã‚ ¬Ãƒâ€¦Ã‚ ¸ operations and objectives are ultimately to serve and benefit the customer.

Personal Narrative Personal Experience - 1768 Words

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Social Work Rationale Essay On Goals And Contexts Example For Students

Social Work Rationale Essay On Goals And Contexts 1. When analysing an artwork what is to be gained from considering the social context in which it was created? Are there possible drawbacks to this methodology? Provide clear examples to substantiate your argument. When analysing artwork, in any form, there are often times social contexts in which can be interpreted. Not always does the history behind the painting need to be revealed to fully understand the concept of the artwork, yet it is helpful in determining if the artwork is truthful in its representation. Although in analysing artwork it is likely that there are drawbacks to considering the social context. To illustrate this point, Im going to use the visual arts as my medium of choice. Understanding the social context can be an important tool. An advantage of knowing the history of the painting or sculpture can really enrich our knowledge, being in the 20th soon to be 21st century, about some of the social periods from previous times. It can demonstrate how traditions were carried out, how they had an impact on the different social classes. Its a visual teaching aid of a sort. Even in the time period of which the artwork was created can be used as a tool to show how the life was in different parts of the world. It was also used as a hammer in the realist movement to show the upper classes that life for the poor was horrible. The visual arts is the only medium in which the pictorial image creates a universal language in which anyone, regardless of nationality or social class can interpret. The text which is created by this language often creates a context which is left open to interpretation. Contexts are created by the artist, critics, judges, the public, essentially, any one who views the work and forms an opinion relating to it. The contexts stem from subject or content of an artwork, and are usually facts regarding the content. Yet, the contexts almost always have backgrounds themselves, therefore making the original contexts, texts. This will be more clearly illustrated later. The chain is seeming to be a never ending process. There are always more conditions to the previous ones. All context, therefore, is in itself, textual. This concept of all context in itself textual is a post-structuralist strategy. A man named Derrida is a man who has developed this idea that the post-structuralist concept of every statement made, can be interpreted in infinite ways, with each interpretation triggering a range of subjective associations. Every statement has an association, therefore its a sort of domino effect. He also says that no matter how precise a work strives to be, the absolute meaning can never be found due to this never ending sequence. To better illustrate this concept, I have chosen a painting from the mid-nineteenth century. It was painted by a french artist in 1854 named Jules Breton. It is called The Gleanersfigure 1. The gleaners were impoverished women who picked the left-over wheat from the farmers fields after they had been ploughed to bake bread for their families. In this painting there are numerous women whos arms are brimming with wheat. The women are beautiful, healthy looking. The children even seem happy running around playing next to their mothers. There are many contexts which can be extracted from The Gleaners. A major influence would be the revolution in France in 1848. Perhaps the gleaning laws enforced in 1851, even the physical health of the gleaners. For arguments sake, lets take the physical health of the gleaners to show how a statement can trigger other associations. The physical health of the gleaners in the 1850s could be researched in the reports from the army conscripts. The conscripts were usually poor men who wanted a secure and stable job. These reports showed that most of the men were of poor health and diseased. These reports can be associated with who was writing the reports, officers? The associations never cease. We can never fully determine what the health was of the gleaners because every context we take will lead to another context. The key point in this image is the womens arms being full of wheat. If I were a bourgeoisie in the 19th century viewing this painting, I would think very little of it. It is exceptional in technical accuracy. Lenacpeo: The Years Together (A Fictional) EssayFrom the formalist perspective we can look at everything but the content: colour, how the shapes relate to one another, do the forms fit in space, etc Yet another drawback. If the viewer is concerned with the context of the form and not the content, then the context is skewed again. The formalist perspective concentrates on form, basically. The curve of the gleaners backs bend with accuracy. The shadows created by the figures and the amount of wheat that they carry that the sun in setting in the west. We dont know for sure what Jules Breton wanted to convey when he painted The Gleaners. We can assume certain circumstances and backgrounds, but the key word is assume. When determining a social context of a work of art its strictly an assumption and is only one of the many, many contexts that can be derived. Yes, works of art, especially realist works, can give the twentieth century some sort of clue as to what life was like in the 1850s. Yet, we cant take everything we view as the truth. It has to be at face value. If one were to look at Bretons version of The Gleaners and then at Courbets version, we would see exceptionally noticeable differences. So what are we supposed to assume as the truth? The answer is we dont choose either one as the truth. We have to look in between and find a happy medium in which we can understand and be satisfied with by either doing background research on the painting or simply not regarding either to be truthful and just moving on. Its very hard, nearly impossible to fully understand a social context for a work of art. In this instance, with the gleaners, through documentation, we can determine which work of art was a little embellished towards pleasing the critics. Sooner or later we have to just look no further along the association line than is absolutely necessary. The vision can get too cloudy if the context wants to be understood completely. There are various and numerous drawbacks to considering the social contexts. The major one, being stated, is that all context is itself textual. Its too hard and labourious to attempt to comprehend the mannerisms and customs of the eighteenth century. We werent there to experience it so we have to be happy with just reading and viewing about it. Then there is the subjective aspect. There are different viewers, different intentions from the artist. Who determines what the message was? Is it the artist, or the viewer? Is one more important than another? Its all very subjective. Perhaps the artist intended one central idea yet the viewer captures another. Which one is more correct? The formalist perspective is the opposite to the post-structuralist concept. The formalist focuses on the form and colour, whereas the post-structuralist is based on concept and circumstance. So there is another way to look at things. These concepts can be applied to almost any art medium. It is not necessarily restricted to the realist period or even the visual arts. Literature is an art form which is easily examined and studied through these concepts. In fact, most of the philosophies and theories have been derived from and for literary sources. It is easy to juxtapose literary sources with visual art due to the visual arts being a wordless book. Many things can be said about a work of art without any facts being known about it. But the one thing that I am confident about, is the social contexts in which art works are created are complicated and subjective.

Venezuela Essays (1065 words) - Northern South America, Venezuela

Venezuela As early as 1522 Spanish invaders reported that the Carib tribes in Venezuela used a black, gooey substance for many purposes. The viscous material was crude oil. It was not until the 1950s, however, that oil production began in Venezuela. Oil accounts for a quarter of the nation's gross domestic product and three-quarters of export earnings, and Venezuela is South America's leading producer and one of the few non-Arab members of OPEC. There are also substantial coal reserves, and exploitation of the recently discovered Guasare Basin field is expected to add 10 million tons to annual production. The political instability of the early 1990s shook foreign investor confidence, but Venezuela has emphasized trade links with other South American countries. The mid- to late 1990s saw a series of public and private sector strikes for higher wages. In addition to participation in the G-3 agreement with Mexico and Colombia, Venezuela has a free trade agreement with Colombia and has expressed the desire to become part of the North American Free Trade Agreement between Canada, Mexico, and the United States. The election of Hugo Chavez as president of Venezuela raises the question of the unraveling of the political system in all of Latin America and reveals the disillusionment some are feeling about worsening social conditions that have not improved under democratically elected governments. Venezuela began its democracy 40 years ago with an unusual pact between the country's principal parties that guaranteed an institutional stability not known in the region at that time. But, at the same time, the leaders of the country never diversified the country's economy, instead choosing to rely heavily on its oil revenues. As a result, the Venezuelan economy is highly susceptible to the world market's price fluctuations and has not diversified enough to create jobs and allow for funds for programs of social support to combat the rising unemployment and levels of poverty in the country. Chavez's victory also reflects the growing discontent with Venezuela's traditional political system. But it also demonstrates a phenomenon that is happening in other parts of the continent where leaders with an authoritarian bent are also gaining support.? (Internet-Britannica) Imports: Machinery and transportation equipment, chemicals, basic manufactures, manufactured goods, foodstuffs, mineral fuels and lubricants, animal and vegetable oils. Total Imports: $10,827,000,000 (1996); $11,199,000,000 (1995); $8,277,000,000 (1994). Exports: Petroleum and refined oil products, aluminum, iron ore, bauxite, basic manufactures, chemicals, foodstuffs, machinery and transportation equipment. Total Exports: $23,149,000,000 (1996); $19,408,000,000 (1995); $16,560,000,000 (1994). Population: 23,242,000 (1998 estimate) Largest Cities: Bogota (capital), Cali, and Medellin Currency: Bolivares; 100 centimos = 1 bolivar Languages: Spanish is the official language, but Indian dialects are spoken by some of the 200,000 Indians in the remote interior region. Religion: Roman Catholic - 96%; Protestant - 2%; other - 2%. Location: Venezuela is located on the northern coast of South America; Colombia lies to the west, Brazil to the south, Guyana to the east, and the Caribbean Sea to the north. National Capital: Caracas Climate: The Venezuelan climate varies according to region, but ranges from tropical to moderate. The rainy season lasts from May through November. The average annual temperature in Caracas is 69 F. (internet-google) The things that I would like to do in Venezuela would include, watching a bull fight, go golfing, fish for peacock bass, eat a lot of good authentic food, and take a guided tour through the amazon. One of the favorite forms of entertainment is the "toros coleados", where two groups of expert brave riders compete with each other at downing a bull by catching it by the tail and throwing it to the ground. The competition takes place in a festive atmosphere, where music is played between bulls and abundant food and drink is served. Bullfights The "Nuevo Circo," in Caracas, is one of the four major bullrings in Latin America, where bullfighters must perform in order to be fully recognized. Many other "plazas de toros" (bullrings) are also very famous. Maracaibo, San Cristobal, Maracay, Valencia -among others of ten feature first-class bullfights during their festivities. It is sunshine in the afternoon at the plaza, teeming with people and "toreros" risking their lives in front of the bulls, accounts for an interesting experience. Venezuela has a very good breed of fighting bulls (Taurus) and excellent "toreros". The only Latin American bullfighter that has been immortalized in Spain is Jose Giron from Venezuela, who has a statue in Madrid. Giron was the first in a family of toreros who became a dynasty and even created a style of their own. (internet-infoseek) ?El Pavon,? the Peacock Bass in Spanish.