Microcredit Miscarriage

Following a rather spirited discussion last week on the economics and politics of interest rate ceilings — albeit in a Malegam Committee context — I was directed to a recent NYT piece by Prof Muhammad Yunus (Sacrificing Microcredit for Megaprofits). In it, Yunus, Grameen Bank founder and Nobel laureate, lamented recent trends in microfinance, calling special attention to developments in India to highlight the sector’s missteps.

The Prof's premise is summarized thus: the model evolved in the 1970s in poverty-stricken Bangladesh as an alternative to the usurious stranglehold of moneylenders. Over the years, its success spawned emulators beyond its birthplace. However, the past decade’s structural shift in many parts of the world from non-profit to commercial lenders — he notably cited SKS Microfinance and its famous IPO — has resulted in "a new breed of loan sharks", striking at the sector's very raison d’être.

As arguments go, there is some merit in what Yunus postulates. One doesn't need to be a Mother India buff to be familiar with the shenanigans of the Friendly Neighbourhood Lala – he was the ogre of choice till Hindi Cinema discovered the hate potential of the political class. Replace him with a faceless corporation and supposed implications are shareholder avarice, dubious sources of funds, and rising operating expenses. All told, this image doesn’t sit well with poverty alleviation shibboleths.

Equally, the issue of lender profitability — the ostensible driver for the 'mission drift' — is hardly resolved. An impersonal intermediary like a corporation may not intuitivels understand the borrower’s financial lifecycle. Such compromised credit decisioning inherently increases risk of default. Worse, the absence of community relationships impairs the ability to manage delinquency, further skewing the risk equation. The cascading impact on interest rates creates a vicious cycle, potentially leading to lender collapse.

It is a grim picture. At the very least, this model shift requires all stakeholders to tread with extreme care, given its impact on the wider ecosystem. Certainly the last we need is sundry politicians fishing in troubled waters, à la AP. Yunus recommends an interest rate cap alongside a dedicated microcredit regulatory authority to oversee administration, accredit specialized microfinance institutions, and enforce] transparency in lending and collection practices. These sound sensible, in my view, but one major caveat: overzealous governments do not overreach, as is their wont, or misuse increased oversight to dole out favours to a chosen few.

Beyond these conditions lies the not-entirely-theoretical question of whether the intermediary must necessarily operate as a non-profit. Here lies the rub — the Indian experience has been most unfortunate. Simple, straightforward products (or agencies) have gotten twisted into something completely antithetical, hopelessly losing their purpose in a web of intrigue and shortcuts. Consider, for instance, the Money Matters fiasco where housing loans were subverted into a tool for highly leveraged speculation; or how the entire insurance industry got sidetracked into ridiculously-priced ULIPs instead of addressing the core opportunity in inadequate cover for the average Indian etc.

At the heart of these BFSI snafus is the buyer-seller information asymmetry — so designed less by accident and more by intent to keep the buyer in the dark. Microcredit has merely followed this trend. January, however, is too early to give in to cynicism wholly. Indeed, hope shines bright through the mutual fund example — an industry forced to pivot to retail equity investment instead of short-term corporate paper or load-driven easy pickings. Needed, it seems, are a few regulatory nudges. Keep the chin up, folks.

Carry On 2011

It is never easy to connect the dots in various socio-political and economic trends in the world around us; least of all as it limps back post after the massive upheavals a couple of seasons ago. On balance, at the dawn of 2011, the mood in India is sombre — the scars from a rash of high-profile scams last year have barely begun to heal. At the same time, we are much better off globally than where we ended 2009 (and most certainly 2008) — the world economy appears to have allayed double-dip recession concerns, with recovery on track even if not fully out of the woods.

What would this year be like? I can stick my neck out to venture that it may be more difficult than the one gone by, with initial momentum from a rebound mostly dissipated. Global deleveraging remains a long haul — as we speak, we have merely shifted private debt onto public balance sheets. Recovery, too, is multi-speed, with stars in Emerging Markets but concerns in parts of the West. In the QE2 context, this implies that fiscal stimulus will stay a while, notably in the US and EU. Equally (though this may not impinge on the Indian story much), the highly correlated rates of change in economic growth trends (even if actual values vary) demonstrate the intertwined nature of modern markets. Given the massive relative size of the First World economies, this means national fortunes remain inextricably tied together.

There are other concerns too. The most critical is commodities — oil should already be giving sleepless nights to all energy-deficit governments. It is the tip of the iceberg — most essential items, notably foodstuffs, have high-strung demand-supply equations that can poop the 2011 party. Equally worrisome are rising inflation and asset bubbles threatening to derail the Emerging Markets narrative. Last but not least, the EU has to manage a mismatched fiscal belt-tightening (austerity measures in Greece and others that actually need monetary elbow room; and the absence of any in Germany, France — economies that can afford tighter policy!) and the Euro’s Draupadi-like nature. Obviously — an outside chance, nevertheless — a sovereign debt default will set the cat among the pigeons.

Not unlike 2010, the key remains a coherent, calibrated, and effective policy response. This is also my biggest concern. In a multi-speed recovery world, domestic political pressures can easily upset the current global consensus. Such a breakdown is not unimaginable. It could manifest as First World protectionism born of persistent structural unemployment, or as rampant Chinese assertiveness. In fact, how the world manages an unavoidable rebalancing of global power would be this decade’s most significant megatrend, apart from the transnational commodity supply crisis and the ogre of terrorism or localised discontent.

No doubt we will watch much of these trends unfurl this year and going forward. In my first post in 2011, however, I sign off on a happy note — a tribute to Mankind's achievement on two fundamental metrics — average income and life expectancy, over the last two centuries. Go watch!

Rest Easy

The calendar's fourth quarter is notable for its disproportionate share of festivities — occasions when circumspect purse strings loosen, accumulating significant expenditure that greatly aid the cause of private domestic consumption. This is an established phenomenon in the West, building to a Christmas peak, with accepted socio-cultural-economic benefits. Not merely due to an Anglophile tilt, but India too has had Q4 turn into a consumer marketing delight lately, albeit with twin summits on either end. Again, of all shopping destinations, if there be one where such a dance of disposable incomes and Westernised lifestyles should be most conspicuous, Millennium City Gurgaon must possess strongest credentials!

Someone stepping into SRS Value Bazaar at Sohna Road, however, will likely make a strong case for the reverse. Rewind a month and the paucity of options in the neighbourhood, plus burgeoning household earnings, meant that grocery shopping at this establishment was a lecher's delight (of the too-close-for-comfort kind often observed in your average DTC bus). Crowded to the core with sundry shoppers and ill-trained staff, one was forced to jostle through narrow aisles and tightly packed shelves, all barely a moment away from disintegration into total chaos, to get to check-out lanes that stretched to eternity. Yet, come last week of December and far from an upswing in the footfall frenzy, you may well discern a pall of gloom, the droopy shoulders of salespeople a telltale sign of dropping revenue.

So what has changed? The retail epicentre of the neighbourhood seems to have moved to a new postal address: Easy Day — newly established a mere block away. In fact, with Wal-Mart pedigree under its wing, this shop appears to have drawn an expanded clientele (with very obvious results on Sohna Road traffic — in any case prone to highly excruciating gridlock). This shopper upsurge may partly be driven by a novelty factor, or high voltage entry-strategy advertising, but there is a suggestion of more. My thesis posits that the underlying promise in Wal-Mart’s discounter positioning (in our notoriously price-sensitive market), and its comprehensive one-stop-shop concept has helped pull crowds. In point of fact, one must note too that discounts currently offered are minimal and shopping experience — the raw janata rush, indifferent staff etiquette, and serpentine queues — differs little from SRS. Yet, for now, Gurgaon’s yuppie and not-so-yuppie populace is voting decisively with its feet (and wallets).

Easy Day and its kin may well have a grander, more systemic destiny to fulfil. Over recent posts, we have agonised over a lasting fix for India's food security. Yet, despite an immediate inflationary crunch and glaring medium-long term supply inadequacy, our current Government's response remains spasmodic at best — unless, of course, one were to go by those conspiracy theorists that see a deliberate, nefarious design in repeated policy and administration failures. In any case, GOI's assertions of control are rendered meaningless by WPI (and more acutely, retail inflation) metrics with unfailingly sorry regularity.

Thus, in lamenting what ails Indian Agriculture, it is time to shift focus away from reactive tweaks that is the wont of democratic governments, and abandon hope for one-size-fit-all solutions. Instead, we need to address the supply chain in bite-sized increments. The most conspicuous vulnerability lies in storage and distribution — we squander a shameful 20% (likely more) of the food we produce, an abysmal state of affairs by any account (Animal Farm). Granting that our sarkari agencies are scarcely up to the ask of delivering needed-as-of-yesterday supply chain upgrades, the logical conduit for capital and knowhow (cold storage infrastructure, for instance) remains FDI in retail. Hence the pitch for Easy Day and its brethren – the systemic benefits from aggressive backward integration.

This is not an easy cat to bell. We cannot wish away the fears, imagined or otherwise, of thousands of traditional kirana establishments, facing the threat of being overrun. Au contraire, we ought to take a leaf from China’s playbook on extracting its pound of flesh when framing market access and FDI policies. Let organized retail serve a national imperative — aligning policymakers, producers, and customers — to ensure the best deal. And in time, perhaps, technology will deliver required irrigation and yield increases — structural productivity improvements that cannot fructify in one easy day.

Dal is Meat (rhyme Small is Big)

My idea of a delectable meal often presupposes a meat-rich diet. This has worked well for the foodie in me, providing latitude for wide — some would say wild — experimentation in cuisine and ingredients over the years. Indeed, it would be difficult to think of occasions in the past that would have found me averse to conspicuous consumption of the non-vegetarian kind. It is equally easy to remember my preaching from the pulpit to those deprived of similar indulgences.

Alas, what use is a tale without a twist, and mine came up against one via marriage when my dedicated six-seventh carnivorous pursuit met its match. (Incidentally the existing Tuesday exception was likely on account of historical habit more than purely religious reasons.) To cut a long story short, one could be pardoned for thinking my last post — Dal, Not Boring was my first on food; built around an eminently vegetarian delicacy — to be an ‘inspired’ choice! Yet, extenuating domestic circumstances (an outvoted minority status) apart, my alibi is a mehengayi-dayan discussion pending from that post. Indeed, not only is the virus of inflation agnostic to dietary preference, but its acute focus on foods hurts dal as much as chicken, making a complete mockery of the Great (Veg/Non-Veg) Divide.

With this backdrop, let me hark back to the RBI Q2 Monetary Policy document that was mentioned in my last post. The central bank's pointed concerns about food inflation expressed therein are a good starting point to appreciate the worrisome situation (in case you missed your grocery bills these last few months). Terming it 'structural', the Review referred specifically to prices of protein-based foods (despite policy tweaks and good monsoons, inflation in this segment "remained persistently elevated" mid-20s; six months ago it was a whopping 34%). What officialese did not make explicit was the fact that the uptrend is over a year old — meaning this inflation is working off an already high denominator. The resultant compounding effect on end-consumer wallets is, naturally, stark.

It is not difficult to discern the roots of 'structural demand-supply mismatches' the RBI laments, or to build a case for future worsening. Demand is up, driven by a burgeoning population and changing consumption patterns (economic progress whets the appetite for more nutritious food). Neither of these is likely to recede — in fact one can well expect significant upside in each. At the same time, we are faced with what the RBI calls 'inadequate supply response', meaning there is little relief on the other side of the economic equation. Specific to dal, none of the three global producers (US, Oz, Burma) displays any urgency to increase areas under pulse cultivation. (We could, of course, collectively root for a dietary switch towards meat — but that puts at stake much more than my personal domestic discord!)

As a conundrum, it is a desperate one — what else could be more compelling for a nation languishing at #67 in 85 countries on the Global Hunger Index? Unfortunately, the much-required sense of urgency seems thus far missing from all stakeholders — policymakers, producers, consumers, et al (and certainly in our TRP-happy mainstream media, preening with self-proclaimed righteousness, but content to sell the day's news). The logical solution would be for Indian agriculture to step up, even if its immediate ability to do so remains fairly suspect. Otherwise, declared national goals like a Security Council seats are rather meaningless.

Dal, Not Boring

Vir Sanghvi's Rude Food is an occasional staple of my weekend reading. To get to it is not always a cakewalk, though — one must navigate past other HT Brunch features that are often hopelessly inane. Of course, Shri Sanghvi himself, his broad repertoire on his sleeve, is capable of giving any self-respecting foodie more than enough cud to chew. Frequently, his fare is extravagantly esoteric in choice of subject and idiom, more daunting than delectable for the average seasoned traveller. Yet, when confining himself to playing patron versus patronising, his entrée does justice to his vaunted gourmand credentials — even the pungency of his strong opinions tickles the buds and makes for mild intellectual exercise appropriate for Sunday mornings. In either case, the studiedly exclusivist stance is unmistakable.

This week, though, Rude Food was positively brilliant. It swung the spotlight on humble, ubiquitous dal, justly extolling its virtues as the quintessential Indian dish. As Sanghvi points out, though content to play second fiddle to other offerings, the dal does not suffer from a lack of variety. All forms of Indian cuisine profess a version and each civilisation coming into contact with it has enriched its canon. At one level, it is in fact quite interesting how hard-pressed one would be to find dal-oriented eateries when one considers how every household carries its individual specimen — and even the occasional cook's experiments have elevated its pantheon. (My mother for instance, not exactly given to much adventurism in the kitchen, still cooks a memorable dal, and so one would suspect for many mothers, spouses, and chefs of varying culinary expertise across the nation.)

However, there is one facet that Shri Sanghvi barely scratches the surface of — owing, perhaps, to his proclivity for intellectual snobbery, or simply his relative munificence. This is the continued spiral of rising dal prices and its clearly deleterious consequences on household budgets (one speaks equally from personal experience, of course). In fact, this has worried no less a body than the RBI, going by the commentary in its Q2 FY11 Monetary Policy Review. Well merited as it may be, it is too early in the weekend to attempt this fuller discussion tonight. Let me, therefore, leave that for later — perhaps tomorrow, after being fortified with my ritual Saturday khichdi lunch!

Say Cheese!

There's something to be said for junior siblings who harbour grandmotherly ambitions — not only are their intentions unfailingly above-board, but they often provide you with eminently sensible advice. My younger sister, forever trying to overtake the years that separated our births (and not merely due to her head-start in child-rearing), gave me one such invaluable tip some moons ago. In sum and substance, her insight was to forsake still photography in favour of video when trying to capture intimate moments with my newborn.

The logic, as most parents will readily recognise, is simply this: perfect as the cherub may be, one can never quite manage to make them pose, camera at the ready in the manner one desires to capture; or be able to whip out the camera in time to catch the pose they already have. Consider, too, how consumed one is by an overarching desire to capture those magical moments for posterity or future viewing pleasure. As such, among general early parenting tutorials, this visual arts lesson is worth its weight in gold. (There is a school of thought that directly posits Heisenberg's Uncertainty Principle to be an offshoot of this inability of subject and equipment to align!) The handycam, video-enabled digicam, or (increasingly) the mobilephone camera in video mode, therefore, are God’s gift to parentkind. You point, click, and whirr — you're away!

But whoa, you still have to lug the equipment along; test your hand-eye coordination; and of course keep one hand otherwise engaged, and not in petting one’s progeny or restraining them from mischief! Last month, however, going through some internal communication on digital trends and practices, my attention was drawn to a brand new product. Looxcie, as this device is called, is a camera crossed with a Bluetooth handsfree audio earset. Perched on your ear, Looxcie’s camera records all you see, all the time — and if you spot something worth capturing (or sharing online in our post-FB quasi-voyeuristic times) you click a button — to save, edit, or instantly upload the immediate 30-sec clip to your favourite social networking site.

Now you may be justified in calling this premature, but my argument is that the Looxcie represents a new level in the evolutionary relationship between humans and machines. Like many digital products, it fundamentally makes technology seamless by reducing disruption in your daily life and habit during its use. We thus take a step closer to the body itself becoming our computing interface.

There is a catch, of course — and it is surely not the device’s five-hour storage limit. As our real and virtual worlds collide, the Looxcie as an accessory for the self is sure to find many takers. Yet, not all of us may be equally comfortable playing Dante to its Beatrice — lest Divine Tragedies result.

Baal Ki Khaal

This one is dedicated to two childhood friends, each with canine companions that went by the name Snowy. Both wore crowns of flipped-up tufts of hair that settled into a more orderly mop by the time it reached the back of their heads (though one believed he took after Shashi Kapoor!). Both wore their principles on their sleeves, embodying all that was thought good in boyhood — much the sort that mothers made examples of. And both were only too willing, in their inimitably individual ways, to battle lengthening odds in a world where childhood innocence was rapidly fading away.

The first of the duo now sports a mildly sparser mane, perhaps in deference to the ravages of time. Even as his contemporaries get cynical with age, his spunk has not dimmed much: he remains almost idealistic to a fault. Peddling counsel in a premier brainwasher outfit (AKA strategy consulting), his worldly ambitions revolve around Pedder Road, desiring future lodgings in its vicinity. Meanwhile, he plays proud papa to a precociously gifted child. On meeting old partners in crime, he debates residential choices in modest Mumbai versus garish Gurgaon (purely in sq ft terms), but mostly signs off ruing lost opportunities to ride the real estate boom at either. The script has, alas, not altered much in a few price correction cycles. Yet, the world would be so much a better place if even a fraction of his fantastic ideas were to change address from his first-class brain to take up abode in the world without. My best to you, Mr M — and here's hoping that, some day, the letter does not stand for Muddle too.

The other hero, equally principled but a tad more action-prone, has the privilege of staying unsullied by tests of time accorded only to fictional characters. He occasionally comes to mind, larger than life, when trying to hook my 14-month old to Cartoon Network for a few moments of domestic calm (and yes, we shall rue this TV pitch later). Meet Tintin, who last week made it to Indian mainstream media with news that his canon is to be translated into Hindi (whatever took them so long!).

Those good tidings came with some trepidation too. For the sake of the hordes of new friends — née fans — he shall inevitably add in the new Indian avatar (he already does Bengali), one hopes that Tintin stays Tintin, even as his supporting cast and the books adopt new name tags. This is important — this space has argued against avoidable tinkering with Enid Blyton's legacy earlier. Equally, word-play is intrinsic to the pleasure of reading Tintin: its characters indulge in malapropisms, spoonerisms, cuss-words-that-aren't, et al (google them if needed) hence in great danger of being lost in translation.

Fortunately, two differences can be discerned upfront. Firstly, the Famous Five body of work existed and was accessible to the young English reader; and changes focused on style rather than substance, presentation tweaks presumably due to audience inability to appreciate the books' context. Tintin in Hindi, on the other hand, explores new readership vistas. Secondly, the English versions, where my friendship with the evil-fighting Belgian reporter took root, too were (brilliant) adaptations from the original French. The Tintin team has been there, done that (Hindi is translation # 58, with over 200 million endorsing sales).

Given all this, my sense points to largely unaltered plots, even as some props take into account Indian sensibilities. Hence Snowy, originally Milou, becomes Natkhat and Thomson and Thompson (AKA Dupont et Dupond) turn Santu-Bantu without much ado (unless you believe that Bianca became Mallika Castafiore for Sherawat reasons — her crooning 'Abhi To Main Jawan Hoon' perhaps for our other protagonist, the adorable Mr M — we ought to easily settle that one)!

And what better way to test the hypothesis than to check for Captain Archibald Haddock's colourful curses — 'dus hazaar tadtadate toofan' (ten thousand thundering typhoons) is easy; 'karodo karod kasmasate kaale kacchuve' (millions-and-millions-of squirming-black-turtles, replacing the iconic billions-of-bilious-blue-blistering-barnacles) sounds a wee bit of a compromise. There may be more (difficult to replicate 'Thomson with a P like in psychology' in a Santu-Bantu milieu) but intent remains the ideal touchstone (one learns from you sometimes, Mr M) of my vote today. A thumbs-up for the Tintin effort, therefore — and no elitist position caught up in (what Tintin's catchphrase 'Great Snakes' has changed to) 'baal ki khaal'!