Democratization of book reading

Democratzation of the Internet. How many times have we heard of this expression. Quite a few times I would think. For example, Google helps small business get the visibility that they would not have otherwise got. And that is a very powerful idea. In a swoop, the Internet (OK, technically not the Inter-webs but the various sites like Google, Lulu, eBay, Amazon, Yahoo and the rest) has created a level playing field. And these are large businesses that don’t even have a brick and mortar presence. Wait, you are reading this, wondering what it is that I am talking about. This is what the 90s was about. This was what computer magazines and business magazines were hailing when I was in college (yes, that was long ago !). But one area where there was no level playing field was books. And when I said level playing field, I don’t mean for the publishers or the authors or for the enablers like Amazon, but for people like me – the readers. And how is it the case you wonder ! And I shall explain.

The lack of level playing field is the access to books. In India, there was a very limited selection of books that I could get my hands on. In Bangalore, the sources of books were

  • Blossoms
  • Gangarams
  • Bookworm
  • Crossword

And the last one was more mirrors and mainstream books than anything else. I have nothing against Crossword, but somehow, I feel that their idea of having a coffee shop and a book store beside each other, like one can do in Borders in the US didn’t take off. And after a while, they did not, (for a good reason) allow readers to take books to the coffee shop. And in Madras, Landmark and the Moore market were my favorite joints (like any other book-lover from Madras can vouch for). And to digress a bit, the Landmark in Bangalore feels like a supermarket instead of a book-store. Atleast the one in Madras feels more like a book-store. And in Hyderabad, well, it was the Sunday street-side vendors in Abids. I have been told that the bookstores in Kothi alongside the women’s college have made way to development activities. Of course, I always felt that Hyderabad was the laggard when it comes to books; and no, Walden really is not a redeeming feature.

Given the above, one would think that there would be a large selection of books that would have been available. And that, my dear reader is where the story takes a turn. Even though the above had a selection of books, the buyer of the books did not have a choice. You had to look for a book and be happy with whatever you find (and sometimes you do find great books too, like hardbound versions from the 60s !). If you were looking for a rare book or for a esoteric new book, most likely you would be out of luck. One would have no choice but to look for the book on some site like Amazon / B&N / sometimes on eBay. The cost of the book (taking into consideration the exchange rate and the foreign transaction fees) would most often be shadowed by the cost of the shipping of the book. And when you are buying a book which converts to close to INR 1500, every penny for the shipping does make a difference. With me so far?

So what is the democratization? It is the e-book reader ! It might be the Kindle (which by the way is definitely worth the buy – more on that later), the nook, the Sony reader or any other reader. These e-readers, with an upfront cost, have removed the shipping costs out of the equation. And, that creates a market for the vendor (like Amazon), for the publisher (NoStarch for e.g.,) and savings for the reader. And this makes books available within the reach of most of the book lovers. Of course, as someone who loves paper books, I know that the e-book readers will never replace the joy of having a paper book and the memories that the book holds (like what Partridge says). But, what the e-book reader creates is the ability for readers to read books that they would not treasure the way they would treasure paper books. And an e-book reader is useful in another case – technical books. Off late I have not seen a technical book which can’t be used on a weighing scale. In such a situation, the e-readers help lighten the load – both monetarily and the weight-wise.
Given the above, what about the price point of the existing e-book readers? Do you think that the costs of those are manageable? For example, the nook sold for $99 recently and the basic kindle sells for $139. Is that too much of a price to pay for reading books? Can an reader with support for e-ink be created within a price point of <$100 ? If such a reader were possible, the list of features I would like to see on it

  • Support for e-ink. B&W is good enough. Don’t need a colour one
  • Support for epub, with mobi as an extended support
  • Better rendering of PDF documents – generally PDFs are not displayed as well as the native formats. Though this is not a strict requirement
  • Connects via USB
  • wi-fi would be a good to have and a basic browser would be enough
  • I am not sure about DRM for the books though. DRM is important for the vendor. I don’t know enough of the existing formats to know how their support for DRM is. At some point, DRM will become important for any e-book reader. So, I toss in DRM too.

Are there any other features that you think are a requirement for an e-reader?

Stay hungry, Stay Foolish

The title of the book was possibly inspired by the famous Steve Jobs Stanford University speech. I would have like to see a little more creativity in the title, instead of an insipid verbatim copy of the speech’s title. That doesn’t reduce the content of the book to anything less than it is, but it is an observation.

So, what is the book about ? The book chronicles IIM-A graduates who did stay hungry and may be a tad foolish too. These are the graduates who decided to be entrepreneurs and persevered to make it big. They made a big impact not only to themselves, but also to the idea they were pursuing.

First things first – this is not the usual serious business story chronicle. This was the opinion shared by someone else I know who is an avid reader. The storytelling doesn’t have the usual seriousness of books of this genre. I think this is a a good thing as this makes the book a light read but with a strong message in the content. A message that sticks !

The author of the book, Rashmi Bansal is an IIM-A graduate and an entrepreneur. She interviewed IIM-A graduates (graduates of the PGP program) who are in very successful positions as entrepreneurs. And that is where the kicker is ! It is not about IIM-A graduates who are earning crazy money as salaries, but those people who decided to try something on their own.

The book has 3 sections and in each section, the author tackles a different kind of an entrepreneur. The 3 sections are

  1. The believers – people who knew entrepreneurship was the ‘Chosen Path’. They got into this straight after their MBA or may be after working for a couple of years. And they held on, till they made it big.
  2. The opportunists – these entrepreneurs did not plan to take this path but then opportunity knocked, they seized it. An insight into those people who seem to prove that you don’t have to be a born entrepreneur.
  3. The Alternate vision – these are individuals who are using entrepreneurship to make a social impact

Each of the above has a lot of interesting stories. Stories of people who believed that they could succeed, sometimes failed, but still persevered.

My favourite stories are of Venkat Krishnan of GiveIndia, Vijay Mahajan of Basix and that of Sunil Handa of the Eklavya foundation. The first two are in the alternate vision category, having tried to use their skills from IIM-A to create a platform to further social impact and the last one is in the ‘believers’ section.

I would suggest this book. It beats the oft-treaded path of (mostly boring) entrepreneurship books. It doesn’t tell you how to become an entrepreneur (nor can any book of course). By chronicling the stories of various entrepreneurs, Rashmi Bansal has enabled people to learn from their stories. It is no secret that an IIM-A graduate has a huge advantage because of the educational pedigree, but that doesn’t mean that others don’t have a chance to be successful entrepreneurs by learning from them. Also, the book is priced INR 125, which makes the book a steal. So, go grab a copy. It might cost you a lunch and a dinner, but you can stay hungry but definitely not foolish after you finish reading the book (ok, yes, that was a last minute cheesy line added for dramatics. Happy ? ).

The Economics of Microfinance – a must read

Participating in the growth microfinance (even if it is not the commercial growth) is one thing, and knowing why one should do that is another. After all, one is bound to ask sooner or later, does this really work. And if it does, what are the various challenges in the field and if it doesn’t work, then why is it so. It is not just about the execution of randomized trials and saying that there is a positive or no impact. It is everything from, how much interest should one charge the lender, should loans be given only to women, and if so, does that model create a positive impact, what should be the funding model – should it be based on subsidies or would it be a self-sustaining MFI, and more. Questions like these are the ones that are tackled in this book. The authors – Beatriz Armendàriz and Prof. Jonathan Morduch are well known in the field of microfinance.

Warning: long read. For starters, this is not a general read. It feels like a textbook and I guess it might be a textbook in some schools. So expect a little dry read. That doesn’t mean that the book is boring. On the contrary, each chapter lets the reader on one of the aspects of the field. There are instances where the reader is left with an a-haa ! moment, understanding why certain things are difficult from an institutional perspective (like for example, does group lending always work ? How does one model returns for lending in such a scenario).

There are 10 chapters in the book

  1. Rethinking banking
  2. Why intervene in credit markets
  3. Roots of microfinance : ROSCAs and credit cooperatives
  4. Group lending
  5. Beyond group lending
  6. Savings and insurance
  7. Gender
  8. Measuring impacts
  9. Subsidies and sustainability
  10. Managing microfinance

The first chapter is an introduction to the traditional banking model and how it needs a big shift in processes when it comes to microfinance. The usual model of – have collateral – get debt – repay it – get the collateral back doesn’t work with microfinance. Also, the traditional model is not used for consumption . And like Stuart Rutherford mentions, consumption ((did not read Rutherfords’ book yet) as an end for microfinance is not necessarily a bad idea.

The second chapter is about how to and more importantly, why, intervention into the traditional credit markets is important. And by traditional credit markets, you can think of either the (evil ?) moneylender or the banks. This chapter also covers, among other things, the adverse selection (the asymmetry of information, wherein the bank knows very little about the riskiness of the project), the moral hazard (ex ante – how motivated are the borrowers to allow for a good return, ex post – how motivated are the borrowers to payback after the realisation of returns). Not only are these issues dealt with, the authors also model these issues into nice mathematical equations (ok, may be not so nice sometimes 🙂 ). This provides a good grounding into the interest level and return calculations.

The roots of microfinance talks about how this field was operational long before Prof. Yunus made it famous, albeit in a different form. The idea of credit cooperatives and the various auction models for getting the loans are discussed. On a personal note, I kind of understood how the credit society that my dad used to be associated with operated and how they’d determine the interest rates and distribution mechanism (of course, in his case it was a very limited audience and there wasn’t as much an asymmetry of information and risk involved. I digress.). The authors also design a simple model for a random ROSCA, and even though I must admit the equations do look intimidating, it is worth the effort to bend your mind to understand it because it gives an idea into the functioning of the ROSCA.

The next two chapters go in depth into the well-known and possibly the prevalent model of microfinance these days – group lending. Borrow in a group, mitigated risk and peer monitoring comes free ! Hmm, that sounds like a marketing campaign 😉 !  These two chapters discuss the various flavours (if you will) of group lending.

The chapter of savings and insurance discuss the lesser known (or is less famous !) aspect of microfinance – micro-savings and micro-insurance. Both of these areas are still growing areas (growing – with my limited sphere of knowledge). The authors don’t  spend too much time in the specifics of either of the fields.

The chapter of gender is about whether women are better customers of microfinance and if there is a larger impact (what Prof. Yunus calls the double bottom-line) by lending to women than to men. Again, this possibly is a topic onto itself, so the authors don’t get too much into specifics.

Measuring impacts is a chapter on the various ways to measure the impact of microfinance. Apart from the recent interest in randomized trials, there are other ways to measure the impact of microfinance. These are not dealt in depth, but the reader is given enough to understand how an impact study happens. Like the authors write in the section titled Addressing the selection problem in practice

In the following sections, we consider a series of related approaches to impact evaluation. The overview is not exhaustive and we do not aim to provide a full survey of impact surveys to date. Rather, we aim to point to key methodological issues and to gather several important results. The results to date are decidedly mixed, with some evidence of modest positive impacts of microfinance on income, expenditure, and related variables, while other studies find that positive impacts disappear once selection biases are addressed.

And this seems to be still an open issue, with recent studies still not being very conclusive, but giving enough evidence that there is a positive impact if not uniformly across households.

The chapter on subsidies is about the MFIs. It tries to answer a very simple (well, not so simple) question – should the MFI rely on subsidies or should they operate on a commercial basis. How does the MFI become sustainable ? This is an interesting topic and the authors do point out the open questions in this area. Questions that need more research to find the answers.

Managing microfinance is about managing the MFI. Managing how the loan officers evaluate the potential borrowers, setting expectations, devising incentives for the staff. Irrespective of the microfinance becoming the poster-child of relatively risk-free returns, there are issues in the management of the MFIs which are very important, like the story of Corposol.

So, how does this book stand. Well, it is a must-read if your interest is more than as a lender / borrower. A 9 out of 10. Each chapter has quite a few open questions which still need answers and the authors clearly mark such areas (like interest calculations, measuring impacts, ‘mission-drift’ in subsidies’ cost-benefit analysis).

The book is like a textbook, so it does require some amount of patience. One problem I had was the usage of non-standard symbols in the mathematical equations. They might be standard symbols in Economics, I am not sure, but I found it little-to-lot annoying. The explanation for the equations though, is crisp, and the authors do mention the reference if you really want to get to the gut of the result. Oh, by the way, the reference list is amazing. I guess one can spend a life time just with the reference list :). Like always (sigh!) I didn’t work on the exercise problems. I am hoping that I will do that when I start re-reading individual chapters. Yes, I think this is a book which will require more than one read. Pick your area of interest, or if you don’t have any, solving the exercises and the reference should let you find it. So, go ahead and get the book. And looks like the second edition is out !

JSON support to Kiva .NET toolkit

JSON support for the Kiva .NET library

If you are interested in microfinance, then it is very likely that you’d know about Kiva. And if you know about Kiva, then it is possible that you might know that they have provided public access to their data via web-services. And once they did it, there were toolkits available in most of the languages.

One of the implementation that caught my interest was the Kiva .NET. I never worked on C# earlier, so I thought this might be a good project to start with. The reasons

  1. It’s a toolkit – so it is compact
  2. There is already an implementation for XML that was done by the original author
  3. I wanted to write some code using LINQ, even if it was not working off DB data sets

So, given the above, I added support for JSON data in the Kiva.NET library (can’t locate the link where the Kiva folks mentioned that they would release the JSON format first and then the XML for the API). Nevertheless, the JSON format support has been added.

Most importantly – this code is seriously beta. The reasons are

  1. The code is not backward compatible with the existing Kiva.NET implementation. Almost all the objects have changed with
    1. Attribute names (members of the class) have changed to make it possible to deserialize the JSON data (more on this further)
    2. For some objects, as the data returned by Kiva has changed, the object layout also had to change
  2. Exception handling is not done
  3. I did not check all the APIs to see if the XML implementation is full-featured as the JSON one
  4. Productizing the API is not done i.e.
    1. Versioning of the library
    2. Proper comments and documentation
    3. Test suite for the toolkit

But the code does work :). In the zip file attached, the KivaTest project has a very simple main() to test each of the APIs. Also, this requires atleast JSON.NET 3.5R5 as it has support for non-public default constructors. Thanks to James for adding this (you can follow the discussion here).

Coming to the point about the attribute names being changed. The reason this was needed because I was deserializing the JSON object using JSON.net and the library tries to match the attribute names with the JSON data. As mentioned in the Kiva API specifications, the variable names are separated with an underscore. The initial implementation of the Kiva .NET library didn’t use underscores for the attribute names. That is why my changes are not backward compatible. I did check the resolver interface in Kiva.net, but that is used to piddle with the attribute names of the objects but not with the JSON data. What I am looking for is to modify the JSON attributes so that I can remove the underscores for the attribute names before deseralizing them into Kiva objects. I am certain it must be possible, just that I am a n00b when it comes to C#, so will dig more and find out.

Will have more updates in the coming days based on how the owner of the library reviews my changes ! The patch file and the zip file for the changes are here

The patch file and the source zip with the test client are uploaded as part of the post.

Is thinking by numbers the new way to be smart?

Most of the people who shop online are now used to the recommendations that they see on their page based on previous purchases. And this is not just purchases, recommendations for movies on Netflix is another place where one sees the usual, you might enjoy / you might be interested in / you might want to buy sort of recommendations. And at times, they do reveal some interesting nuggets of information – information that the consumer otherwise would have little knowledge of (like finding a less known book on Amazon based on your purchase of a book in one subject).

So, the question one would ask is, how are these recommendations created? And part of the answer lies in the book by Ian Ayres – Super Crunchers. The part of the answer that lies in this book is the what instead of the how. The author is an econometrician and hence don’t expect any number crunching algorithms in the book. Rather the book is a monograph on the subject of number crunching to help businesses in various decision making.

The author does take the reader through an interesting journey of where all number crunching is being used and their potential implications. He talks about the constant strife between the intuitionist and the number crunching analyst. He augments that strife with a lot of examples, examples from industries as diverse as the medical diagnosis to Hollywood scripts. From concentrated government spending1  to affects of direct instruction. All and more of areas in our everyday life are discerned by the author to show how the decision making is being wrested by the super-cruncher. He also talks about the mistakes that can happen due to the number crunching (talks about Acxiom – one of the biggest companies you haven’t heard of  and Choicepoint) and the potential implications.

All in all, it is an interesting read. If you are tech-savvy then most of what the author mentions might not be new news to you. But what is important and that is the key point of the book I think is that the author concentrates on the implications of number-crunching. One of my favourites is the personalized news engine. If at all the news portals could narrow down the news that can be delivered to a user (given the user’s preferences), then wouldn’t that create a myopic view of the world for the reader? For example, if I am interested only in politics and technology wouldn’t I be missing a lot of important news (say) about world events? Then wouldn’t my judgement of things be severely biased? And what happens if a society as a whole starts to behave that way? In the same vein, if the marketers are able to cater to each user (given each user’s preference), then, can it happen that the firms of tomorrow can succeed in catering their message to the viewer? Sociologically, the implications of such a situation are not small. Like the PBS documentary – The Persuaders, mentions, could it be that common good will make place for individual preference? After all, if there is somebody willing to listen and cater to each one of us separately will we have a problem with that?  Something to be pondered about isn’t it?

My rating for the book a 7 out 10. The flip side of the book being that sometimes there seems to be no strong link across the chapters. Even though it is all about super-crunching, there were times I felt the discussion drifted away. The upside is that this is not a voluminous book and is definitely an interesting read. So pick it up when you get time.

1. In Season 1, Ep11of Numb3rs, Charlie Epps tries to solve a murder of someone using Sabermetrics to decide on federal spending. Even though this is fiction, it also shows the interest governments have in number crunching to decide on welfare programs.

Is it real P2P lending on Kiva?

The microfinance blogosphere was a little perturbed by the apparent misleading of Kiva about how the P2P lending works. Another story being the viability of microfinance; but more on this later. The cause for the concern in the microfinance community and more specifically the lenders on Kiva was whether the money they were lending was reaching the intended borrowers. And according to David Roodman, it happens around 4.3% of the time. So, the answer to the question is not an emphatic no, but it is not a yes either. And that NYTimes picked up the same topic generated even more interest (no pun intended !) in whether Kiva was being completely transparent.

Very briefly (you can read the post by David Roodman for  more details), the borrower to whom you think you are lending as a micro-lender on Kiva is most probably not the borrower who will get your money; though the money does reach the MFI and it will eventually be disbursed to some other lender. This is not something that was very clear to most of the Kiva lenders and some of them were disappointed by the revelation (as noted in the comment section of David’s post).

What is important to note is that Kiva was not lending ex post from inception. It was something that they had to do to handle the scale of operations. And this can be seen  with RangDe. RangDe is relatively smaller compared to Kiva RangDe’s lending is ex ante i.e the loan is disbursed after the wait period. In case there is a shortfall RangDe fills it from its funds. On a side note, I would be interested in knowing if the funds that are collected till the disbursal for a micro-loan generate any interest while they are parked with RangDe. I would like to see the good folks at RangDe write about it on their blog.

Of course, the fact that the loan was already disbursed should not cloud the fact that the money is not being misused or channelled to something else. The monies are still with the MFI, but that the entrepreneur whom you think is going to get it not going to get it. This is not a big problem on Kiva because there is no ROI, but it will be a major concern if there is a ROI that is involved, like on RangDe or MicroPlace. More on that in a different post.

Making agriculture viable in India

While reading this synopsis of the talk by Dr. B.D. Sharma on NgoPost, I came across an interesting point (which of course is the viewpoint of the OP of the post)

His romanticism with the agrarian economy and a hope that India would return to times when agriculture dominated the economy is something which is completely misplaced.

Before I write about my thoughts on the above, let us look at the key point of the post – the viability of agriculture in India. The two key points which work against agriculture are

  1. Under-valuation of labour prices at two levels. This, as we are very well aware of is rampant. I agree that policy makers need to not look at farming as an unskilled profession, thereby reducing the minimum wages being paid to the farmer. Given our reliance on the monsoon and proper irrigation facilities, the farmer is faced with more decision making than, let’s say a software developer working with or without a spec, whatever the degree of separation from what is required (I have been a software developer for a while,  so I think I can speak with some degree of confidence).
  2. Compound interests for agricultural loans. This is, in my view a bigger problem than (1). If the farmer who has only few months for farming his crop is lent at interests compounded, one bad monsoon would leave him and his family reeling. It is surprising that the banks and the rural institutions are not willing to consider better terms for lending to the farmers. My thoughts on this:
    1. A run-of-the-mill credit rating mechanism will not work in this case. A credit rating which considers atleast the following can help control the rate of interest
      1. economic condition
      2. family size
      3. amount of land owned vs. amount of land on which (s)he is tilling
      4. geographical region (an area like Punjab with rich soil can’t have the same index as a region like South TamilNadu)
    2. Microfinance might not be the best fit for lending funds to farmers. The increased rates of interest that farmer pays, make this option not very attractive. Though, if the MFI is willing to lend under a simple interest, for long term loans the farmer might be willing to borrow from the lender.

Given the above, I think there is a definite need for revisiting the perception of the populace and the policy makers about agriculture. Given the continuous influx of unskilled workers as day wage earners to cities, this not only creates economic pressures but also social pressures. Sadly, both the policy makers and the government seem to be ignoring this aspect. The government’s knee-jerk reactions won’t help the agriculture sector in the long term. And food security is something that can’t be taken lightly. As Earl Butz commented in the King Corn documentary, the surplus food that America has, is it’s best kept secret. And it is true too. The lesser one spends on food as a percentage of the total earnings, the more that one has to invest in other things. Of course, Earl Butz’s comment was in favour of industrialized farming, which is not the best of the option for India, as is corporate farming.

This brings us back to the  question of – should agriculture be treated like an industry to determine the wages?

Now, back to the point I raised at the beginning of this post. Is it romanticism to believe that the Indian economy can’t be an agrarian one? One shouldn’t equate an agrarian economy to a non-industrialized or non-service (if there were words like that) economies. India’s industrialization, post-independence has been rather limited. We still, I think, have a long way to go with respect to industrialization. And our so called service economy is concentrated in very small pockets of the nation (Bangalore, irrespective of the interest it generates from the media abroad is not a representative sample of the shining India). So, given the big-picture impact of agriculture, I think, there should be more investments in agriculture in the years to come. Come to think of it, if the government were to create institutions like the IITs for agriculture, even taking into consideration the brain-drain that’ll happen, there will be a percentage of the bright minds in the country staying back and creating a positive influence on the sector. I think energies are being spent trying to fight for statehood (sic.) rather than exercising jurisprudence in allocating the monies that states already have.

Microfinance as a business

If the term Microfinance brings images of charity, of handouts; then think again. Could it be possible that a business be created around microfinance. After all, if banks and financial houses can make big money by lending and investing money, then why can’t these big numbers be scaled down to the micro-entrepreneur? Can a business be build around that?

These are some of the aspects that the authors of this paper deal with. The first question to ask is – is there a market for microfinance. And the answer from the paper seems to be – yes, there is. Paradoxically, it is the poor who need to save more and borrow more than someone who is well-off. And the authors also provide evidence that for most part (geographical factors also play a part in this), the poor are willing to save money and borrow it when required. Then the challenge for the MFI (microfinance institution) becomes not just serving its clientele but to do it in a sustainable manner. Can the MFI recover its costs; what are the average margins that a MFI can realistically expect to achieve?

To be able to be sustainable, a MFI needs to be able to create products that can help it sustained returns; returns that can be reinvested into more communities. The various kinds of products that MFIs offer are discussed in the paper. The core product types are

  1. Group lending – money is lent to a group of individuals who are part of a community. The social pressure between the people ensures that the % of loans that are defaulted is minimum
  2. Individual lending – here the emphasis is on the individual, like any other loan product.
  3. Village banking – instead of the MFI deciding on where the money goes, the money is lent to a group of villagers and they decide where they would like the money should go to. This consortium (more a cohort actually) ensure that the repayments of the loans are not missed

Each of the products has its advantages and disadvantages. Grameen bank, for example concentrates a lot on group lending. The type of product is largely determined by the geographical location of the clients. In a rural environment, it might be easier to allow for group lending, than in an urban one where individual lending might be a preferred approach.

Another important part of a MFI’s success apart from the product design considerations is the MFIs view of itself – how does it structure its management. How does the MFI train its employees, should there be a strong command-control structure, or should the retail offices be allowed to have more freedom with only a general direction given by the parent office. What about compensation and incentives to its employees. That is a very important consideration if the MFIs have to keep its people motivated. Even though, the average person who is going to work for a MFI is not there just for the salary, that doesn’t mean that the incentives don’t factor in heavily. The authors talk about two metrics for incentives. One, the accounts per (field) officer and the second, outstanding portfolio (money to be repaid) per officer in currency terms (i.e. in INR / $ / some currency).

The final factor that affects MFIs is the environment in which they are operating. Regulatory hassles are not trivial for a MFI. Given that the interests that MFIs charge is not very far from what the evil moneylender charges, there might not be too many people who espouse the opposition of the MFIs by the governments. The authors narrate an incident, wherein the Chief Minister of Andhra Pradesh, India accused the MFIs of charging ‘moneylender’ interest rates and using ‘unethical recovery measures’. The minister went on to launch a plan to regulate MFI interest rates. These regulations have a huge impact on the commercial viability of the MFIs. Given the thin line that MFIs have to walk, between their no.1 priority of social empowerment and then commercial success, regulations of this sort can tarnish the image of the MFIs. And in the defence of the government regulation, allowing the mushrooming of MFIs can create an unhealthy appetite for commercial success ignoring the primary purpose.

Given these challenges, one does question the commercial viability of MFIs. At this point, there seems to be not enough proof that MFIs are commercially successful. But given the social impact, the numbers seem to indicate that they do have a considerable, if not silver-bulletish impact on empowering those people for whom credit is hard to come by. And it is not always very easy to measure social success that were caused by microfinance and only by microfinance. Various factors along with microfinance could have had a positive impact. AFAIK, there is no study that shows that microfinance as an area of Economics has always resulted in positive change. But while waiting for such studies to happen and the numbers to be churned, you could do your little bit by investing in a micro-entrepreneur. Head to RangDe and make an investment, as little as INR 100. And once you are done with that, you can read this paper; it will give you a 1000ft. view of microfinance.

Origins of Rangde !

The video on YouTube talks about the origin of RangDe and the ideas that the founders had before they decided on micro-credit (RangDe doesn’t cover the gamut of micro-finance yet !). The founders – Smita  and Ramakrishna share the 4 ideas that they had, and that was rather interesting to know

  1. A for-profit firm that certifies establishments that they are child-labour free
  2. A firm that allows for an non-exploited form of access to domestic help. (My note: people in India are very well aware of domestic help, and most are not sensitive to the right treatment of them, and that includes the majority of the middle class)
  3. Social media – a channel that focuses on the social aspects of development issues (My note: very true about the videos made in India not viewed by Indians, more on this later)
  4. A micro-credit organization

Watch the video, atleast to steal some ideas ;). And here is the embed video of the interview

P.S:  This is part of the wonderful interviews by D.Murali, Deputy Editor of Business Line, and his channel on YouTube, pitstop4performers