Microfinance – Good, Bad and Ugly

Microfinance is a one of those ideas which has been around for a long time but people have shown a lot of interest in it only recently (trend link). Now a days most people understand what it is and usually have  lot of positive things to say about it. But like any other idea, it has those 3 sides – good, bad and ugly. I stumbled up on the last 2 only in the past few weeks. After reading Yunus‘s book – it was very inspiring to learn about Microfinance and how it is going to pull a lot of people out of poverty. I was a very firm believer in that. But I think the reality is far different than what we find in books.

Banker to the Poor

The other 2 books in context are – “A fistful of rice” by Vikram Akula and “Confessions of a Microfinance heretic” by Hugh Sinclair.

A Fistful of RiceConfessions of a Microfinance Heretic

Vikram Akula was a poster child of Microfinance – couple of years back, in 2007 when I learned about him – I was so inspired and I had dreams of going back to India and working for SKS Microfinance. I sent emails to SKS Microfinance about it but never heard back. The technology stack was all .NET so I couldn’t find a way to work for them. Later in 2008 I attended a talk by Vikram Akula at University of Chicago and was completely inspired. As I read his book – which showcases all the troubles he faced to start his firm – it stuck me how he was forgetting the basic tenets of Microfinance. He has been working in it for almost 10 years and was dreaming up to connect Microfinance with capitalistic market based profit making companies. His idea is cool on paper, but the implementation is wrong.

When you get to poor people who are way below the poverty line and you offer them these micro-loans – the core idea should be helping them. Just helping them. Not even thinking in terms of “Oh, I am here to rescue you out of your poverty-ness”. No. Just helping them and showcasing them certain best practices is what one can do. There is no way one person, one system can massively move people out of poverty. If you think a little deeper – the systems which we have in place are enablers of this poverty and poor people. Nothing within the system can really fix it. But if we go around trying to do so – it would be a failure.

Which is exactly what happened to Vikram Akula’s SKS Microfinance. Even though Yunus never liked linking Microfinance with for profit making companies – he couldn’t stop Akula. And in 2010 – SKS collapsed. When a lot of poor people who borrowed money and couldn’t pay back – started committing suicides – the AP Govt passed a law to ban all microfinance activity in the state, thereby bringing down SKS. When you bring in investors who are looking for returns there is going to be a pressure on the company to churn profits always. This in turn will put pressure on the micro lenders to perform better which is passed on to the poor people who are already struggling to survive.

Hugh Sinclair explains it much better in his book. He worked in various microfinance firms for about 10+ years and saw how the reality mismatches with the fantasy story that everyone is weaving around him. Poor people are struggling but they are also human. They have desires as well – the money they started to borrow – got used for one time entertainment values rather than use it as an investment. If you are poor and hungry, a entertainment is far more distracting than a entrepreneurial thought. They do want to get better but after their basic needs are met. So any money thrown at them will first go towards their basic needs and then to uplift yourself.  Maslow talked about this so long ago. Sinclair also talks about how big banks have gotten into microfinance which is a $70 billion market and trying to make hay day out of it. In all this Grameen Bank (not Grameen Foundation – checkout the comment by Hugh below!) is an exception. It also functions as a bank, because of some laws passed in Bangladesh and may be that is the way to go. A Microfinance company can become a bank after certain time or reaching targets and then start thinking of profits- rather the other way around where the big banks get in with sole motive of making profits on the back of struggling poor.

My next book I am planning to read is – Fortune at the Bottom of the Pyramid – which Akula says was his inspiration to try to make a profitable public company on top of idealistic mico lending company.

Fortune at the Bottom of the Pyramid

Agriculture Information Index

This is something thats been hovering over my head from the past 2 weeks. One of my extremely smart friend talked to me about this idea and without spilling a lot of details about it (since he still wants to pursue this as a business) – I want to give my 2 cents on this.

The idea is very simple – basically create a searchable index with a REST API in the front for the agricultural information for a certain region – in this case it would be some county/district in India. This index would be a subscription based one for people who want to sell services and goods to farmers in this farmland. That’s the idea – but when you get down to implement it – it’s an uphill task. Since I have been thinking about this I want to take a crack at this – in theory for now. The difficulty is in collection of data – it needs to be cheap but network connected. The one thing that comes to my mind when I think about it is – Raspberri Pi – RPi has made inroads to some serious business models from a hobby and I think a simple prototype can be built which have multiple sensors and can capture them and store it temporarily. This could further be powered with solar (yeah I know the cost might go up with this one). The networking part can be solved with a simple solution. The Rpi unit doesn’t need to be online all the time. It could be a simple app running in background on an Android phone which will collect data as you pass by Rpi and send it across to a central location. There is a lot of scope for innovation in getting the data out from fields to a central db.

Then there are human problems – like vandalism and people stealing these things away for copper in it. This is going to be tricky. The farmers are mostly poor and they would need a incentive to keep these Rpi’s buzzing and collecting data. I think there is a scope here to involve a CBO or a micro lending company to turn this into an interesting investment option for the farmers. Imagine treating Rpis as cattle and as the data gets collected they would get paid some amount. It might be less than what they can make over cattle – but this one would be reliable and more recurring. Also the fact that the data might actually help them find the resources like fertilizers etc faster and might raise their land value is pretty convincing.

That’s just a small sample of what I think about the Agri data. I would love to jump into something like that and build a nice usable prototype if I have enough backing.

I did explore a very similar idea in Education area with another friend of mine who is equally skilled and passionate about bringing in cheap hardware and rich content to teach kids in remote areas – but that’s another blog post.

I think if you scale back and take a look at bigger picture – the bigger index is the social index – which would be hard to create but with incentives and some good planning it would be possible to create a social aspect index of Indian rural area which would then help other CBO and NGOs to be able to target specific issues at grass root level in the areas they want to.

The possibilities are unlimited and my imagination is buzzing!

It is written

If you are Indian you implicitly know when someone says “It is written”. If that word kinda triggers some far far memories, don’t worry I will help you with it. I know as being an American or a non-Indian you are heavily influenced by “Slumdog Millionaire” – I know I know, it was a great movie but using that to bucket all Indians isn’t a good idea. So, anyhow – in that movie at the end of it – like after the whole movie ends – the last scene freezes and the words ‘It is written’ appear.

So what does it really mean? Let me tell you what it usually means and then we will deal with what it really means. Indian people are predominantly religious. A majority of them are Hindus. All Hindu’s scriptures and holy texts have a theme. This underlying theme has some key points and they are:

  • We are all recycled souls in a new body
  • Depending upon our Karmic debt we are born and re-born in various places as various people over aeons.
  • The fate, i.e., where you are born and what will happen to you is pre-determined based on your Karma.

This is the core of all the spiritual philosophy of Hindu belief. Everything else is just masked up stuff to explain this again and again. Don’t believe me? Checkout Ramayana, Mahabharata – those mythologies are nothing but a dramatic version of the above core principles. Bhagavad Gita however has less drama and more explanation and teachings on the above beliefs.

So when Indian people say “It is written” – they mean the fate is sealed and they have no choice. There is no escape.

I personally think that is the wrong interpretation of those words. No matter how hard I tried to rationalize, I can’t convince myself to believe that. I believe the part that we are re-cycled souls – yes Mozart is re-born and living somewhere at this moment. I believe in Karma – every little thing we think, do and speak accumulates Karma and that kinda propels us into the next life form we will take up. But I don’t believe that this Karmic bond is fixed and it’s all already written down.

I think what is written is – opportunities to escape the past karma, what is written is – risks to take from the existing conditions, what is written is – that unique subjective feeling you have when you realize that you *get it*. I think all our lives we build walls around us – physically, mentally and emotionally. These walls prevent us from our best things that we can ever be. Of course there is a lot of risk in bringing down these walls. There is a lot of pain and hurt beyond them. But they also hold our personal freedom and happiness. They also hold unbound opportunities beyond those walls.

I think that is what is written. The thin karmic walls will try to contain us and protect us emotionally, mentally and physically – so that this cosmic drama on this world stage keeps moving. But it’s not written that we are not allowed to go beyond them. I believe people who break these walls and face pure pain – eventually release all the emotional trauma of being a Human Being. Through pain we gain freedom. Through risks we achieve our goals.

Now, this isn’t me judging others from a pulpit. I am equally a victim of those walls. In fact this post is to remind myself again and again that how fragile are those karmic walls and how powerful is my strong will. I am about go on a tumble ride and I accept this with all my grit and faith.

The sorry state of Customer Support in India

Customer support for any service in India sucks. Big time. I am sure there are some exceptions, but most of the major players who run businesses there have the most crappy customer support. I know a lot of American companies use Indian companies for their call center – but I think it’s not all that good as it may sound. If you think, you calling Dell customer support sucked big time because some guy “Ray” (who probably is Raghav in real life) didn’t answer all your questions, try calling a Indian business customer service.

I think I know the reason why too. India is the only nation with more number of people under 25 yrs old. There are as many people under 25 in India as there are in US – the whole population. This means a lot of cheap labor. The kind of people you come across in customer support are the fresh graduates who are out of school and are willing to work for Rs.3000/month. They are good at reading out the instructions but that’s hardly any customer support!

I had 2 bad customer support issues while I was in India last month. I wanted to buy a 3G-to-WiFi dongle from Vodafone (a major cell service provider in India, which also owns 45% of Verizon here).  I called customer support and this is how it pretty much went–

Me: Hi, I would like to know more about your MiFi device.

CS: Huh? Sir, please tell me your vodafone number.

Me: I don’t have any vodafone number, I am calling in to find out more details about your product.

CS: (Silence. This probably isn’t listed in their script. Now the person is on their own and I had an inkling that this is not going to end well)

CS: Sir, if you don’t have a vodafone number, why call no??

Me: I want to find out more details abou the MiFi device.

CS: Let me check with my manager sir.

….I wait for some time.

CS: Sir, thank you for holding. Please go to a nearby vodafone store for details.

Me: Huh? Why can’t you tell me over the phone? I just need to know the price and other details.

CS: We don’t have any details about it, you will walk to the nearest vodafone store.

Me: Hmm. That’s weird, you are the customer support for your company. Anyhow, ok can you tell me the nearest store address?

CS: Tell me your address.

(I told them my address)

CS: Sir, the nearest store address is – so and so…

Me: Can you tell me the store’s phone number, so that I can call in and check if the device is available.

CS: Sir, it is our policy not to store any phone numbers of our stores!

Me: You are kidding me. You literally meant for me to walk to the store!

CS: Yes, sir.

Me: That’s crazy, you don’t have any information about YOUR OWN product. And you don’t have the contact number for the store which MIGHT sell YOUR product.

CS: Yes, Sir.

Me: Pulling my hair (or in my case, scratching my head). I don’t believe this.

CS: Thank you for calling Vodafone.

That’s how it ended. I never got that MiFi device, because the site for vodafone was advertising it but it wasn’t being sold at all!

There was another crappy incident of how IndiGo airlines stole my camera but it’s another post.

I  believe that the reason why these Indian companies can afford to have such a crappy customer support is because of such a huge population, if they lose 10 customers, they gain 10 new customers. So, they don’t have to try hard to keep the existing ones or try get new ones. There are very few operators at that level and because they don’t have the draconian 2 year contracts like US does, people always switch phone companies. It’s very normal and the customer support isn’t there to help the customer, but to just lodge complaints and do nothing about it.

This is the sad state of customer support in India. It’s prevalent everywhere, and there is nothing you can do about it. I sometimes wonder, what would happen if someone starts a customer support service firm who can help customers like Zappos does here – I wonder if that will ever give edge to companies there?

Hues of Memories

Finally I got access to some decent internet. For a country seeped in IT, it’s kinda ridiculous to have an easy internet connection. Better start with low expectations.

So far the trip to India has been quite wonderful. I always like how I feel when I get here the very first moments. It’s like my brain has been away from home long enough to forget about so many things. And when I get back all those memories just pounce back. When we landed it was early morning and as we drove from Airport to home – all these memories just play a beautiful sonata in my mind. “There is the place where I used to hang out”, “There is that galli where I walked every day for an year to learn Hindi through tuition”, “There is that old debilitated house where we used to live when I was a kid”, “There goes the road where I fell off my cycle and broke my teeth”

It’s a whole different set of them when I get home. Seeing my mom – makes me feel like I am home home. We have been living in this house from the past 25 years – tiny pockets of memories locked in every corner waiting to be triggered. I love all of it. Even though a lot of the house and the neighborhood has been re-arranged I can still see the old things that used to be there instead in my mind.

The feelings stay with me for a day and then my mind gets used to it. Everything is normal and it’s like I never left the house. I adapt and get my self lost in the oldness of these new feelings.

The number system of India

Relax for a moment and think about numbers. Everyone has certain feeling attached to them. There is something about them we feel but we can’t put our finger on it. If you treat numbers purely – just as symbols and remove all the meaning, feelings associated with it – then it turns into a whole new science. This is what Bertrand Russell was trying to do using numbers to define the fundamentals of Mathematics.

But today I am not going to dwell into that aspect. I want to talk about the peculiar Indian number system. Peculiar but useful in it’s own way. Different countries treat numbers in different ways and I believe that the meaning, feelings you associate with numbers is linked with the practices and culture around you.

I am going to list few (partial list) idiosyncrasies of Indian numbering system. Some are funny and some are mysterious. Here we go:

1. Age:  This bothered me a lot for a long time. Only recently I have come to add some meaning to this. Let me give you a visual with an example. Say a baby is born in India.

On day 1, when the baby is born. He is 1 day old.

The parents are happy and life goes on. Something magical happens when the baby crosses 2 weeks. Let’s look at it in a little detail. Here is the breakdown of 4 weeks.

As you can see (assuming 4 weeks in a month) there is a tipping point that tilts the age of the baby which kinda gets stuck with him for the rest of his life. Here is what happens.

As the baby crosses 2 weeks mark (sometimes 10 days mark) – suddenly out of nowhere the baby is 1 month old. I have no idea how this is logical (my explanation follows later). It also happens so fast that it’s impossible to detect. There would be some God motherly like figure in the family and some given day within the 1st month- she would use baby’s age in a sentence in such a way that she implies that baby is 1 month old! Trust me on this, I have a lot of these elderly ladies in my own family.

Now even before the baby is 1 month old, he is ALREADY ONE MONTH OLD. Here is another visual to give you some more perspective. This is the timeline for a typical year.

The thing you need to understand here is as the months progresses – the child is always more older than he technically is. When he is around 10 months old (I mean like finish 10 months) – the same old lady would be back and call the child 1 year old. WTF? Now immediately after his 1st birthday cake – he starts to be 2 year old till his next birthday cake!

So, when a Indian person tells you that he/she is 25 years old, you should always (98% of the time) assume that he/she is actually 24 years old and in his/her 25th year.

I know this is weird. We Indians might look like we are rushing to age and reach that nirvana our Gods have been promising us. But trust me – we are humans as well – like any other person we would like to be forever young! But why follow such a weird system then? What is the benefit attached to being always older than you actually are?

I can only think of only one reason. And here it is – India is a very religious country. I have met only few Atheists there. And with religion comes a lot of rituals. Every child has some ritual associated when they are – 3 rd month passing, 5th month passing, 7th month passing, 9th month passing, 11th month passing, 3rd year passing and on and on.

You see a pattern? There are rituals attached to the passing month, not to the end of the month. Meaning, I can shave my daughter’s head ONLY when she is in her 9th month or 11th month or when she is 3 years old. (Yeah you can’t get it shaved in any other months as it would incur bad omen on the child! and what parent would want it?). So, if you are following a lot of ritual associated with your child’s passing month then you would count his/her age in the same way.

I think that is the reason why our counting of age is so lopsided. There is a method to it’s madness.

2. Storeys: I am not sure whether you guys know it or not. We Indians invented zero. Prior to that romans had their crazy system which was useless when it came to division. Egyptians were smart and had something in place but no zero/nada/zilch. The arabs took our zero and created the decimal system.

So in India when we count the storeys in a building it’s always – ground floor, 1st floor, 2nd floor and so on. Some elevators (lifts) also have zero on them indicating that it’s the lowest floor. So imagine the Indian who is fresh off the boat – trying to get to 42nd floor. He is going to miss it by 1. This again, I don’t know the reason why it’s like that but I am guessing it’s because we like to use the zero. It’s also cultural. I bet Google India has the zero floor and all the geeks there grok that!

3. Temperature:  Ok, this one is weird. And I don’t know why. I have noticed that we follow metric system when we want to indicate cold and imperial system when we want to indicate hot. Like we would say – “It’s very hot today, the temperature is 108 degrees” – which is implying Fahrenheit. And we would say “It’s very cold tonight, Delhi is like 8 degrees” implying Celcius.

I have no idea about the disparity here. May be we want to use higher number for hot and lower number for cold! But everything else is completely metric – kilograms, litre etc except land. Land is still measured in Acres. Mostly the farm land. That is the only exception I have come across.

4. Distance: Ok, this one is funny. Ask any American the distance between SF and LA they would say “About 7 hours”.  Ask any Indian the same question they would say “About 350 miles”

This is a big gotcha for Indias. You see, you guys (Americans) measure distance using time because you have freeways. When you say ‘about 7 hours’, it pretty much takes 7 hours – depending on your bladder and eating habits of course. But for us Indians we don’t have the luxury to mesure distance in time. We can’t! Because our infrastructure is busted and half of our animals live on the road. There is no guarantee that I can go from point A to point B in certain amount of time. Because there are frigging way too many variables. All I am guaranteed is that I will reach point B sometime but don’t know when.

The ONLY TIME we Indians measure distance in time is when we use trains to travel. Unlike American rail, Indian rail is HUGE for the area it covers. Indian rail has 1.6 million employees, yes thats double the number of people who live in San Francisco. Take that Amtrak! So, anyhow – the trains pretty much run on time and there are a lot of trains which go overnight. So, in that context we Indians say – it takes a night to go from point A to point B.

It all boils down to – if we are driving, we don’t know when we will see you. If we take a train, we will see you tomorrow morning.

5. Time:  Finally the time. Our perception of time is very very different – I want to write more about it but I think it will take it’s own blog post because it’s connected at so many levels – philosophically, mentally, spiritually etc,. But I would say this – Salman Rushdie‘s quote in his amazing book – Midnight’s Children, sums it up.

“No people whose word for ‘yesterday’ is the same as their word for ‘tomorrow’ can be said to have a firm grip on the time.” 

And the word he is referring to is – “Kal” in Hindi. Depending on the context it can mean yesterday or tomorrow! Go figure.

August 15th – The day I got my freedom

Every Indian is aware that August 15th is our Independence day – back in 1947 India became an Independent country as well as was divided up based on religion thus causing the bloody partition. It signifies freedom after 400 years of colonial rule. We may not be doing great things yet, but I am sure we enjoy the freedom that we have. Just visit India once to see how its been used and mis-used.

I will always remember August 15th not only for what it means to be an Indian but for what it means to me personally. Long time back (oh God, one sign I feel really old is that – this feels like a long time memory). After I finished my college/MBA in 1998 – I was like any other Indian student. Full of dreams and no sense of reality. I was sure that I would be able to find a job of my dreams and just find that ladder to climb up in the corporate world. So naive I was, but then who isn’t when they are 23.

You should know that India is a very populous country. I mean very. To get a sense of it – ask any guy who is trying to get a job. I used to go to an interview (publicly open to anyone qualified) and then find myself standing in a line with like 200 students in front and back of me. Forget getting to actually have an interview – after 4-5 hours of waiting they would ask us to go away. This was the situation (and sadly it still is for many) for me. I tried my best to find a job for about 6 months and nothing happened. But good thing I was hungry (think I still am). When reality dawned on me I realized that I will have to work it through the lower rungs to get to a place which I like.

And so it happened through my friend I got a very small job (paying about $65/month). The job was in an Internet Cafe. For those of you who enjoy un-interrupted Internet access now – an Internet cafe is a place where you pay hourly to browse internet. Since there was no way I can have my own internet access at home, as it was expensive – I jumped on the opportunity to work there. By work I mean, just making sure all computers are turned on and working fine – make entries about people coming in and sitting at the cash register now and then. I was ok with it. I was looking forward to what it means for me – an opportunity to learn so many new things.

The place sucked like hell. The job was hard – manual labor. I showed up at 9 am and left for home only after 9pm. Sometimes I slept over at work – because there were people who would come in to browse (mostly porn) after 12am. The cafe was open all 24 hours. More than that it was filled with politics. My boss was abusive and constantly putting me down to get more and more work from me. He was kind weird too. More than anything else I hated was the politics. Every employee there was kinda brain washed to manipulate someone for something. They took advantage of my naiveté and made me work like a donkey.

I was completely helpless. Here I was trying to make a career in software but stuck in a place where I have no control on anything and I couldn’t even get close to any programming environment. I spent all day (and sometimes all night) helping people to browse and learn what Internet is. How to use Altavista, Yahoo chat (messenger) and ICQ.

My only way out was to learn something on my own in my own time (I think this trait stuck with me till this date). So, I joined a course to learn Java every evening. My friends were making fun of me about how I am spending more money learning Java than making it on a monthly basis. I was un-deterred. I knew this would show me a way out. So for 3 months everyday I would leave work at 6 and go to a class and try to learn frigging Java (I despise it for various reasons which came up later).

This gave me some confidence that I can escape this crazy job and also make it on my own. So finally after about 10 months of abusive job on August 15th 1999 I woke up (It was supposed to be a holiday for everyone except for people who work there) and decided that I won’t be going to this pain in the butt job any more. I went right back to sleep. My dad was worried as to why I am not up – but I think he was relieved at some level that I am ending this painful experience. I got like 10 calls from my boss threatening me but I didn’t feel anything. I was so happy inside and just didn’t give a shit.

So on this day about 12 years back I became mentally free – which led to the transformation of my life. So powerful was change in my life – that in the following month – me and my friend took a gamble and went to Singapore for work and succeeded in establishing a career. It took me 40 days to do what I really wanted, but my mind was shackled for almost a year in a painful job.

Every year I feel more happy about the choice I made on this day and thank my stupid courage that pulled it off. I will never forget this day.

Jai Hind. 🙂