Short Story: Twitter Age

Instinct: A small pup follows you in a dark cold night on a deserted road

Guilt: You know you cannot help the pup and probably it will not survive until next winter

This post: Easiest (lamest) way to rid guilt 

Happy Birthday Dr Kurien

Notes from Lagos

Nigeria’s post colonial history has been turbulent. It has oscillated between military dictatorships and elected governments. While the former have been ruthless, the latter, typically corrupt, unpopular and eventually overthrown in military coups. The good news though, is that at present, Nigeria is witnessing a period of unprecedented growth under a democratically elected government led by a popular President, Goodluck Jonathan. Today, Nigeria celebrated its 51st independence day.

You don’t often come across a destitute in Lagos, which would suggest that occurrence of extreme poverty here is lower than in Indian cities such as Mumbai or Delhi. However, if you look at Nigeria’s macroeconomic data, you will realize that around 45% of the population lives below the poverty line, there is high income disparity (wikipedia reports a Gini of 43.7 for 2003), and the country gets a very low score on indicators such as the Human Development Index. Corruption is widespread and stark. A traveler to Lagos is likely to be demanded a bribe even before he lands. Lagos for visitors is an expensive city, especially when it comes to food and hospitality.

Most of the common people, one meets are friendly and warm. One feels a certain respect for them as one realizes the kind of challenges – conflicts, warlordism, corruption, poverty – they face as they go about building their society and economy.    

Microenterprise Financing by MFIs

Our analysis of the economic activities of microenterprises that can potentially be served by MFIs lead us to the following common contours of the products that MFIs can offer to microenterprises in enterprise clusters in general.

Nature of Facilities: The target microenterprises need finance for capital expenditures as well as for working capital. Accordingly, loan products for capital expenditures as well as working capital need to be provided.

Loan Limits: The targeted microenterprises have modest capital expenditure needs, as they do not desire to take excessive risks by borrowing excessive sums. Accordingly they can be served well by capital expenditure loans with the upper-limit at Rs 150,000. Similarly, these microenterprises will be served well by working-capital loans with limit at Rs 100,000. Sometimes entrepreneurs may be willing to finance a part of the asset through their own capital and hence may opt for lower sized loans.

Interest rates: The microenterprises have a high Internal Rate of Return (IRR) on their projects and are in a position to service loans which carry an interest between 24% and 26%. MFIs should offer loans to the microenterprises only if they can successfully provide products with these interest rates.

Repayment Periods: It emerges from our analysis that the microenterprises can comfortably service capital expenditure loans over a period of 12 to 24 months depending on their loan sizes. In some cases higher repayment periods not exceeding 36 months may also be considered. A repayment term of 12 months is also suggested for the working capital loan so that the microenterprise has adequate cushion. This is because even though the working capital cycles of the microenterprises may be less than a year, their payments are often delayed. A longer loan term would ensure that they are able pay the loan back without getting stressed.

Risk Management: In the case of capital expenditure loans which are utilized for creation of a productive asset, the MFIs may hypothesize the primary asset created. Also, MFIs may use the mechanism of joint liability or personal guarantees to manage the credit risk. However, the products they offer should not involve any other form of collateral.

Appraisal: Given the informal nature of these enterprises, they may not be able to provide statements of accounts. Under such circumstances, the appraisal of their business turnover would need to be made by independently verifying information from their buyers and suppliers. Also, experience in the enterprise, residence in the area, other existing liabilities as well as opinion of other microenterprises in the area should be included in the loan appraisal.

Documentation: Standard documentation pertaining to address (of the unit) and identity (of the owners) proofs need to be obtained from the potential clients.  Additionally standard loan documents pertaining to the facility being provided need to be executed. In case the loan is for the creation of an asset, a hypothecation deed pertaining to the primary asset may also need to be executed.

Emerging Paradigms - IRDP to SGSY to NRLM

The Integrated Rural Development Programme (IRDP) was launched by the Government of India in 1978. The focus in IRDP was provision of subsidized credit to the poor, to enable them to build productive assets and raise their income levels. 

IRDP evolved into the Swarnjayanti Gram Swarojgar Yojana (SGSY) which was introduced in 1999. SGSY hoped to cover all aspects of self employment (training, technology, infrastructure and marketing) and utilize the power of Self Help Groups (SHGs) of poor to overcome the deficiencies of IRDP. It also provided a role for NGOs, who apart from formation of SHGs, were also supposed to have a monitoring role. 

The National Rural Livelihood Mission has been initiated in 2010 to redesign SGSY. NRLM goes beyond self employment and includes wage employment as a means to reducing rural poverty. This follows from the realization that not everyone is able to utilize credit in a productive manner, and pushing credit can be counter-productive, particularly when assessment of repayment capacities have not been carried out. 

On Corporate Failures

Natwest WoodMac ‘s (now NatWest Markets) research concluded the following on corporate failures:

1. Aggressive expansion is a likely precursor to problems, particularly when this is accompanied by a rise in short term debt;

2. Dominant personalities often lead a company to doom;

3. Boardroom strife is also a leading indicator of trouble for companies;

4. Often fall comes after hype.

Interestingly this research was carried out in the early 90s. Subsequent events have only validated these conclusions. 

Literacy@74%

I grew up during a time when more than half of all Indians were illiterate. This was something that on the one hand caused you to feel inferior, on the other, also fired you on. It is in this light that the Census 2011 estimate of a literacy rate of 74% assumes significance.  An interesting aspect is the trend that the literacy rate has followed, which is quite linear. In the decades since 1940s, India’s literacy rate has gone up by roughly 10% every decade. If this trend holds true in the future, we should be able to achieve total literacy in another two decades. This in my opinion marks an orbital shift. In all probability, many other social indicators such as health (think of immunization, nutrition, sanitation), awareness regarding rights and privileges, will show an improvement. Add to this, improvement in skills that can be used to exploit new livelihood opportunities, to get some idea of what we are on to! 

Code of Conduct Assessment Reports in the Public Domain

We at M2i had always maintained that for micro-finance to sustain sound client management practices, which strongly emphasize on ethical behavior and responsible lending, were necessary. The code of conduct assessment is a pioneering initiative - a global first in the micro-finance domain. M2i has developed the code of conduct assessment tool utilizing its ADDO framework. We have so far conducted four COC assessments which had been commissioned by the Small Industries Bank of India (SIDBI). SIDBI has made some of these reports public. 

They are available on SIDBI's website.

The Onion Index

I have been thinking of an Onion  Index on the lines of the Big Mac Index.The Big Mac Index is published by The Economist as an informal way of measuring the purchasing power parity (PPP) between two currencies and provides a test of the extent to which market exchange rates result in goods costing the same in different countries. The Onion index, that would primarily be derived from Onion prices, can at once provide so many useful insights to the Indian Government:

1. an indicator of Government's popularity and approval rating

2. a lead indicator on whether the incumbent Government will be re-elected

3. an indicator of how much does the inflation pinch the common man

4. a lead monetary policy indicator on whether the benchmark interest rates will be raised

5. a lead fiscal policy indicator on whether government should come up with still more populist spending

Epilogue: My friend, Manu finds the idea of Onion Indices interesting. He says that two Onion Indices will be still more revealing - one with the farm gate onion prices and the other one with the retail (consumer) onion prices. The difference between the two (or the spread) will give us an insight into the state of our infrastructure. Brilliant idea Manu! This also ties up with our thoughts on the Infrastructure Requirement Index.

On Death

Our whole outlook towards death changes when we start viewing it as something desirable.  I think we all agree that death is desirable, but somehow, there is little acceptance of it. Or else why should euthanasia pose such a big moral dilemma. There is a general acceptance towards abortion in certain situations but euthanasia is considered a crime – I find this ironical. 

Given the advances in medical sciences, it is quite possible that human longevity will increase manifolds. I wonder what would be the societal attitude towards death then. There is evidence to suggest that death for many people is an excellent experience despite the outward appearance of misery. Possibly, there will then develop a market for services that make death a pleasurable experience. I can imagine advertisements that allure people with the notion of death instead of sex. And I can imagine a Freud like psychologist who will interpret human attitude towards death.

Years of Advice on Social Performance Did Not Help Indian MFIs When the Need Arose

I am really appalled at the pathetic thought leadership provided to organizations in the name of social performance advice! I feel sorry for investors who thought that this leadership will help them mitigate reputation related risks in socially sensitive sectors. I find it ironical how MFIs are now being blamed for indulging in bad practices, after having received years of tutoring on what constitutes social performance management. This is also an example of how bad thought leadership can put an entire industry at risk. Rather than ensuring that MFIs view sound client relationships as being central to this ecosystem, they were made to focus on select client groups on which social performance could be demonstrated. How foolish! 

Macro economics textbooks in India

Wonder why macroeconomics textbooks do not include the effect of leakages in government transfers, leakages in government revenues, and the overall black economy as such on national income, inflation, employment and interest rates. Has there been sound research in these areas and have these variables been explicitly modeled?

Assessing Ethical Microfinance: The ADDO Framework

The table below presents M2i's ADDO framework for assessing ethical lending by Microfinance Organizations. The ADDO framework has been developed by drawing on our interactions with over 50,000 microfinance clients and over 100 MFIs through our various engagements over the past four years. It gives us great satisfaction that SIDBI (the pioneering financial institution that seeded microfinance and helped greatly in its evolution) as well as Sa-dhan (the premiere network organization in the microfinance sector) are utilizing this framework in their Code of Conduct Assessments.

Approval (A)	Documentation (D)	Dissemination (D)	Observance (O)
Has the board approved the policies covering these codes of conduct principles?	Have the guidelines that follow from these policies been documented in the appropriate manuals?	Have the guidelines been disseminated across the organization through training and making available guidelines and manuals at the branches?	Are the guidelines observed in practice as found through interactions with a sample of clients?
Client origination	Client origination	Client origination	Client origination
Loan pricing	Loan pricing	Loan pricing	Loan pricing
Loan appraisal	Loan appraisal	Loan appraisal	Loan appraisal
Client data security	Client data security	Client data security	Client data security
Staff conduct	Staff conduct	Staff conduct	Staff conduct
Client relationship and feedback	Client relationship and feedback	Client relationship and feedback	Client relationship and feedback

The Death Penalty

Exploring the methods used for providing the capital punishment is an interesting exercise. If we go back a few hundred years in history we will find that women were burnt on stakes and men were hanged, drawn and quartered. The modern society debates the merits of capital punishment and at the very least explores humane way to end human life. Very interesting video link:

Humane way to kill!

Hits and Misses

Our ability to act upon an opportunity (or an advice) is directly related to our awareness about the facts surrounding it. For example, I feel my neighbourhood shops can significantly improve their business if they did as simple a thing as to create a page over a social network and invite folks, who patronize the shop, to it. Think of it, if they can get testimonials regarding their businesses, wouldnt more people be drawn to these shops, particularly in areas such as my neighbourhood, where almost everyone has a social network account and an email id. I made this suggestion to the owner of the Gym I work out at, genuinely concerned as I was for his business, given that there have been occasions when I have been the lone soul working out. He has a decent Gym, in fact, he has  better facilities as compared to some of the other more expensive places I have worked out at. I think his apprehension arises because 1. his awareness regarding the power of the internet is low, 2. he does not trust me enough (I dont trust my real estate agent) and 3. he hesitates in selling.

To generalize, I think for successful interventions either in the business or in the social development domain, it is important to address the three issues I have mentioned above - provide full information (and ensure that it is internalized), build credibility and help people overcome their potential-limiting inhibitions. 

What makes Gandhi special?

I think he possessed two very-very rare qualities.

1. He had an unwavering sense of purpose and he was not willing to compromise on it given the necessities of practicality - he'd rather be unreasonable than compromise. He'd rather pay the price of being impractical, than reap the rewards of being an opportunist. This made him extremely selfless;
2. He was supremely competent which made him extremely effective as a leader. He could capture the imagination of the masses, instilling self belief in them. And he did not need violent force to achieve it.

Any wonder then that Gandhi has been invoked in almost all popular movements related to human rights and freedom.

Bye-Bye, French Lie!

SKS continues to intrigue. Its a publicly listed company now and in its board , it has some of the most competent people. Still, the decision making in SKS appears arbitrary (or rather tailor-made to favor the founder):

December 2008 - SKS appoints Sursh Gurumani as the CEO

May 2010 - Gurumani gets a 50% raise for his performance

July 2010 - SKS's IPO is oversubscribed

October 2010 - SKS board sacks the CEO, Suresh Gurumani

The day's central story in the Economic Times is better than a Hollywood drama. Read the Economic Times story on SKS, and figure out for yourself.

Happy Reflections (My Dear Peer Group)

We are in a rather happy situation, isn’t it? After all we are the citizens of a powerful country growing at a rate of close to 10% annually – well there is a bit of a difference between 8% and 10% when it comes to GDP growth rates, but since these are happy reflections I have taken the liberty – with a very realistic chance that it will overcome economic backwardness and associated vulnerabilities. Those of us (everyone in my peer group), who are financially secure have the great opportunity to play a meaningful role in shaping our society and helping it overcome its gravest problems. But this particular post is not regarding the opportunity, it is regarding things from our past, things that we need to be thankful for.

Value System: We all started fairly poor – did not have an “economically” privileged childhood. What we had instead was a blessed childhood with our elders, teachers and parents emphasizing on the need to be hard-working, humble, polite and principled. Consequently, we all understand the importance of material possessions but these do not dictate the choices we make.

Glorious Traditions: We never had any doubts regarding our glorious traditions – be it religious tolerance, non violence, or overcoming unjust systems such as colonialism and “emergency”. 

Learning Society: Proud that we are of our traditions, we embrace progressive systems. We chose to be constituted as a secular democracy in 1950, we started liberalizing in the early 90s, we have satellites facilitating mobile telephony (we still do not have public toilets in sufficient numbers). We have not turned a blind eye to the corrupting influences of economic incentives and are using technology to improve transparency in public as well as corporate governance.

Tenacity: We have all overcome odds to be what we are today. Be it the higher education system that tried to tell us we were just not good enough or the prospect of unemployment because there weren’t enough government jobs, we didn’t let these things deter us. In fact these have only made us stronger as we brush shoulders with the best the world has to offer.

Look at it from this perspective - Is there anything that can stop us?

NCEUS report - contribution of the unorganized sector to GDP

Here is an interesting report by NCEUS task force on the estimation of contribution of micro enterprises to the GDP. NCEUS stands for National Commission for Enterprises in the Unorganized Sector. NCEUS has been set up to review the

1. status of unorganised/informal sector in India including the nature of enterprises, their size, spread, scope and magnitude of employment, 

2. existing arrangements for estimating employment and unemployment in the informal

sector. 

Pain at the Bottom of Pyramid

Fortune lies at the bottom of pyramid. This is being told to us repeatedly by reports, books, media etc. Yet, why there is so much lackadaisical attitude by the authorities towards the bottom? There are reports which says that MSME sector was not that much affected during the crisis as is the common perception (see this)

The paper says:

Comparative performance measure index for micro and small scale (MSEs) items and non- small scale (Non-MSEs) items is constructed to evaluate the performance of the industry groups during the period 2001-09, with a particular focus on the slowdown period of 2007-09. Econometric analysis is then performed to explain the causal factors behind variations in the MSE production index. The paper finds evidence that the cyclical slowdown in the industry that set in during 2007-08Q1, retarded the pace of growth in MSEs as well as Non-MSEs. However, MSEs have recorded relatively better performance than Non-MSEs during the slowdown period at least in the ten items under review. Econometric analysis shows that both domestic and external demand bears a statistically significant influence on MSE output. However, the impact of domestic demand is comparatively stronger. Interestingly, credit to MSEs has been found to be very significant, although the sign of the coefficient (negative in this case) is contrary to theoretical expectations.

I have one reservation. How can you club Micro with Small and look at them at an aggregate level? The statistics may hide the pain at the real bottom or at the bottom of bottom. See today's Busines Line editorial. It says:

The Karnataka numbers point to what one might have suspected anyway — that the bulk of the credit has been cornered by medium-scale units.

I suspect this may be a pan India phenomena. We need to nurture the bottom. The data must be available at a very disaggregated level in regular frequency by RBI or by Ministry of MSME. Let's segregate the first M from the MSME. Fortune lies there and we must focus on Micro enterprises. That is the way to provide employment to vast rural youth.

A Brilliant Publication by RBI

RBI has relased its report on Currency and Finance yesterday. Over the years, this particular title has covered a wide variety of issues and what amazes me is its coverage. The elegant writing style and depth of analysis makes it a good reference source for researchers.

The list is shown below:

1. 1998-99 The Structural Transformation of the Indian Economy
2. 1999-2000 Financial Sector and Market Integration
3. 2000-01 Revitalising Growth
4. 2001-02 Stock taking of the Reform Process and its Outcomes
5. 2002-03 Management of the External Sector in an Open Economy Framework
6. 2003-04 The Evolution of Monetary Policy
7. 2004-05 The Evolution of Central Banking in India
8. 2005-06 Development of Financial Markets and Role of the Central Bank
9. 2006-07 and 2007-08 The Banking Sector in India : Emerging Issues and Challenges
10. 2008-09 (Current) Global Financial Crisis and the Indian Economy

This year's publication has focused on the current global crisis and the lessons learned.The forward written by Dr. Subir Gokarn says this:

Every crisis provides us powerful lessons. What we carry forward from this crisis is the need for some new regulatory and supervisory institutions with emphasis on a system-wide approach,some new objectives for the central banks, importance of communication, transparency and coordination in central bank functioning, a new design of the international financial architecture and renewed faith in some of the safeguards adopted by the emerging market economies. This crisis has raised questions about the adequacy and efficacy of the current international financial architecture to prevent and manage global crises. In fact, the speed and intensity with which the US subprime crisis exploded into a global financial crisis and then into a global economic crisis has led to a whole new debate on dominant tenets of macroeconomics and has challenged established views on self correcting market mechanisms and the role of public policy. The depth and breadth of the crisis tested the limits of conventional and unconventional policy options available to policymakers around the world.

This particular volume is a must read for MBAs who have specialized in MBA (Mortgage Backed  Assets).

Power of Context

I have come across a speech by Dr. Subbarao, Governor, Reserve Bank of India. He is simply brilliant in his elocution. In my last posting, I have raised questions about the role of finance in an economy. Dr. Subbarao has delivered a speech linking ethics with finance. His broad views are - Ethics is contextual and varies from person to person. However, there is no such water tight compartmentalization as these set of people are extremely ethical and others are not. It shows great spatio-temporal and individual variations. He argues that People in the field of finance are not highly unethical as compared to people from other parts of life/society. There may be greater temptation due to involvement of pecuniary interest.

In the context of the current crisis, I find his observation quite fascinating. As per my understanding he argues what is legal need not be always ethical. Ethics is above the mundane law. To quote Dr. Subbarao:

At one level, it is possible to argue that nobody in the entire chain did anything legally wrong. But that is too simplistic an argument. We do not govern our behaviour simply by what is allowed by law or regulation. Our code of conduct should be held to a stricter test. Was the behaviour of actors across the chain of the financial sector fair, ethical and moral or was it swayed by the opportunity of making quick profit afforded by information asymmetries? Were sub-prime borrowers adequately warned that there is a good chance that asset prices would fall? Did investment advisers tell their clients of the risk they were taking in buying MBAs and CDOs? Did credit rating agencies not compromise their standards and cut corners? In sum, were professionals in the financial sector legally right, but only legally right and morally wrong?

I believe to answer these questions does not require great effort. It needs a little bit of soul searching, a little bit of courage, a little bit of honesty towards yourself.

It reminds me a great vedic story of India - the story of Lord Shiva and Bhasmasura. Being pleased at his severe penance Lord Shiva had granted him a boon that whatever he would touch with his right hand would be reduced to ashes. Bhasmasura wanted to test this boon and said "Lord, you have granted me the boon alright, but how will I know it is true? Once you disappear now, I will not be able to get you for the next few hundred years perhaps. I would like to test your boon. This is a mountainous, snowy area. For miles around there is no object that can be touched. Therefore, come forward. I will touch your head and see if what you say is true". Perhaps, Bhasmasura knew that he would become more powerful once Lord Shiva disappears for forever.

Well, I have cited this story for two reasons - A. (In case of Shiva) one may fall victim of his/her own actions if he/she is not adequately thoughtful of his/her actions. If you leverage yourself too much, you may see the value of your assets plummeting to zero one day. If you run excessive fiscal deficit, you may become bankrupt and people may brand you as Pigs (no disrespect towards the Pigs though!). If you mis-sell your product, you are only entering into a repo transactions which you have to buy back ultimately when the value is negative. B. (In case of Bhasmasura) Great responsibility must come with great power. If you try to misuse of your power, then you may be the next one to be ruined by the more powerful.

Please read the speech. Each of his lines is quite powerful.

Role of Finance

What is the role of finance in an economy? Can 'finance' in itself be a goal of optimization in the economic planning? Can the growth of 'financial sector' in itself lead to national economic prosperity? These questions are pertinent to ask although it sounds naive and amateurish. 'Finance' is a means to achieve 'real' growth. You need finance to start your business, build your home or buy a motor vehicle. Finance is a mechanism to reallocate resources from those who are having excess to those who need it. It is the fuel to kick start the engine. What happens when Finance itself becomes the overriding goal of a society? You create 'Finance' then more 'Finance' on 'Finance' and then more.......till the edifice collapses. You start to believe that 'Finance' is real and real is a mirage. That is the crux of the current crisis. In the era of globalization, there can be specialization like some countries may focus merely on building the service sector enterprise and some may build factories and machines. But, as long as the level of opacity is less and there are mechanisms to inspect, scrutinize and certify the 'Finance' instruments, one feels safe and there is no imminent danger. However, when the complexity level increases and you fail to understand what you are buying, then a simple 'hoax' call may lead to a bank run or other financial chaos. It is more about 'trust' than anything else. This is a perfect time to re-look the entire development models of developing and advanced countries. Especially in India, we need more schools, more bridges, more factories and more health care facilities. We need Finance to develop all these. However, Finance should be a tool to achieve all these not a goal in itself. I think the policy makers when they are in doubt must refer to Gandhiji's talisman:

Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man [woman] whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her] to a control over his [her] own life and destiny? In other words, will it lead to swaraj [freedom] for the hungry and spiritually starving millions? Then you will find your doubts and your self melt away.

More on this next time.

In the name of Reform

Much water has flown under the bridge since my last post. There are signs of growth stabilization. Developing countries are recovering at a faster rate than the OECD countries. EU nations are again under a debt trap. Lot of stabilization measures have been initiated. We need to wait and watch the unfolding of this new debt ridden problems. There are lots of talks about REFORMS. It has become a buzz word. The latest being the cut of power of FSA (Financial Services Authority) of U.K. It has become a kind of subsidiary to the Bank of England. Seemingly impossible are now becoming possible. It reminds me of the view of the Austrian Economists - they view the economic calamities as Tuneup Cleaner - it cleans the unnecessary elements from your system. There is a lot of noise in India also to streamline the regulations (latest being the SEBI-IRDA spat and the Ordinance). Do we need to overhaul our system? I will continue to write on this subject.For the time being I would like you to go through a paper (I am not adding any adjective). The title of the paper is: Financial Sector Reform: Realities and Myths by R H Patil (Download the paper).

The Ig-Nobel and Market Predictions - Experts or Astrologers

"The first Ig Nobels were awarded in 1991, at that time for discoveries "that cannot, or should not, be reproduced".  The wikipedia post on these prizes makes an excellent read, something that should not be missed at all.See Wikipedia on Ig-Nobel. I sincerely hope some researcher coveting the Ig-nobel prize shall compare the accuracy of predictions made by "expert" traders with those made by astrologers regarding market movements. They can get all the required data on moneycontrol.com.

Transparency is the crying need as we embrace market based reforms

Markets function when profitable private sector enterprises are transparent in revealing who really owns them and benefits from the profits. Be it the recent disclosure regarding how promoters of large MFIs in India have benefited from the high RoE churned by these institutions, that has created an adverse impression that affects the sector as a whole, or the muck surrounding the Indian Premier League. The positive is that the ownership patterns are out in the open. If the law allows for opaque functioning of any enterprise, it will invariably lead to corrupt practices with the complicity of corrupt lawmen.  The scale will be enormous in case these happen to be for-profit enterprises operating at a significant scale. Conversely if enterprises function in a transparent manner and disclose their ownership structures, innovations will ensure that goods and services that earlier classified as public/merit/club goods will also be adequately provided for by the market.

(Only?) Markets can provide for sanitation services in India.

A recent UN study has found that cell phones are more common in India than toilets. Private sector has ensured the availability of cell phones at prices that are attractive to the masses in India. Had it been for the public sector telephony would still have been the privilege of the elite. Sanitation (toilets) in India has been treated as a merit or a public good - something that the private sector cannot provide for.

It may be worthwhile to explore the business model of DMT mobile toilets (http://www.dmttoilet.com/aboutus.htm ). DMT is a for profit entity that has exploited technology to make available mobile toilets. Quite clearly these toilets are easy to maintain and require significantly lower investments as compared to the fixed structures that we have in India. While Sulabh was a pioneering concept, the technological model needs to be evolved. Also, a transparent for-profit model will ensure that these services are provided for adequately.

(I am sure CKP would have wanted to do a case study on DMT. I hope I am able to write one and post it on this blog as a remembrance post.)

CK Prahalad is no more.

CK Prahalad is no more. He was a professor of Corporate Strategy at the Stephen M. Ross School of Business in the University of Michigan. He is best remebered for his "bottom of the pyramid" argument.  I had met him in a workshop where I had the privilege of being a resource person alongside him. Many in my circle would criticize him for presenting poor as a business opportunity. I held him in high regard for the same reason. He was the inspiration behind this blog. 

Thoughts from an excruciating train travel

Things that lift the heart:

A fast moving goods train, at 90 kmph

Smooth roads in the rural hinterlands

Smiling women-micro entrepreneurs who have worked their way out of poverty

Cricket team India - the best test team in the world

Kind words that give hope 

Mero gaam, Manthan (1976) (folk version)

Kurien's management genius is hard to replicate. We are talking about a person who has helped align the livelihoods of over 1.7 million women with the creation of one of India's most valuable brands - Amul.
However, I think his failing lies in his rigid faith in cooperatives as the sole means to building something like Amul. In doing so, he rejects the very idea of capitalistic finance.
Agreed, that capitalistic organisations cannot by design retain the same social focus as cooperatives, still, their ability to attract private capital and scale up, without getting too political in the process enables them to have a much greater impact. Amul remains an exception as it was created under exceptional circumstances by exceptional people. Tata, Reliance, Airtel and SKS microfinance are more commonplace.
Cooperatives definitely have a place, but I have come to believe, that their institutional superiority is a function of easy availability of capital (a prosperous society) and good governance system (an evolved society). Cooperatives therefore, I am inclined to think are better suited to maintaining "social development" as against aiding "social development". Capitalistic organizations that follow the rule of the market (and hopefully with regulatory supervision to ensure that this is not the same as the rule of the jungle) are better at bringing social development.