[A Shorter version of this review was published in Business Standard, 09 December 2010]
A Fistful of Rice: My Unexpected Quest to End Poverty Through Profitability
Harvard Business Review Press, 2011
pp.191. Price Rs.495.
[With a bonus reference to Assessing Microfinance: An Investigation of Whether Microfinance Reaches the Very Poor, by Vikram Akula, PhD Dissertation submitted to University of Chicago in 2004]
This is not the best of the times to be writing about Vikram Akula’s book. He is still hanging on a roller coaster that he got on to in 1998 and has seen the world turn topsy-turvy around him. For somebody who has been living life of a celebrity for the past few years, the party was planned well: There was a blockbuster IPO, the quiet period had ended and with business processes well in place, he would have moved on a book promotional tour before differences arose with his CEO Suresh Gurumani [whom he acknowledges rather warmly in the book] leading to Gurumani’s sacking and the regulatory cyclone hit the state of Andhra Pradesh, where his operations were concentrated.
While one could argue about the ideological position that Vikram takes in the book about how best to serve the poor, it would be very unfair to use his story to make a case against the model of microfinance he practices. However, what would be of interest to us is how this thought process evolved in Vikram’s life. Why does he call his quest as “unexpected”, if that was what he believed in right from the beginning? For somebody who says “I bought a one-way plane ticket to Hyderabad and packed a single gym bag with clothes. I wanted to travel like Mahatma Gandhi – no unnecessary attachments, no excess material goods….” [p.20], to a recent interview where he says.. . "I've made a tonne of money… more than I ever thought I would make in my lifetime and my kid's lifetime combined….” is a long ideological journey indeed.This is not the best of the times to be writing about Vikram Akula’s book. He is still hanging on a roller coaster that he got on to in 1998 and has seen the world turn topsy-turvy around him. For somebody who has been living life of a celebrity for the past few years, the party was planned well: There was a blockbuster IPO, the quiet period had ended and with business processes well in place, he would have moved on a book promotional tour before differences arose with his CEO Suresh Gurumani [whom he acknowledges rather warmly in the book] leading to Gurumani’s sacking and the regulatory cyclone hit the state of Andhra Pradesh, where his operations were concentrated.
But the book is an incredible story of Vikram Akula’s journey from a comfortable New York to rustic Narayanakhed. For somebody who has had a rather comfortable life in New York to come back and re-discover his roots and to work in trying circumstances, fighting a difficult terrain, hostile bureaucracy, insurgency of the Maoists, and local politics certainly has not been easy. For those who believe that Vikram was an overnight success, this story is indeed an eye opener that it took almost a decade and a half of uncertainty and hardship to and even a brush with personal bankruptcy to achieve what he has. To pick up an idea from Muhammad Yunus from the not-for-profit arena, to struggle around the implementation aspects and suddenly to be recognized as the face of Indian microfinance, [while people like Ela Bhatt and Vijay Mahajan remained in the background] – much before SKS achieved scale is no mean achievement. Vikram has worked hard, very hard to be where he is.
Vikram uses his internship with Deccan Development Society [DDS] to lay the foundations for his argument of a scalable commercial model of microfinance. The argument is that the poor have no time for lectures on empowerment, and while they care about education and health initiatives, they also want to get on with life here-and-now [p.43]. This argument is similar to the one that has been extended by Shafique Chowdhary of the extremely successful microfinance initiative ASA of Bangladesh. The evolution from an inefficient all round developmental intervention of DDS to a focused efficient single point intervention carried out by SKS is understandable. Given that the arguments of providing access to financial services to the poor is a laudable business; that this business is less exploitative and provides access with dignity, and is completely voluntary in nature, why is a person like Vikram amidst many controversies?
The answer for this also lies in how the book is constructed, and also on how Vikram’s other writings are constructed. Vikram uses Foucaultian discursive approach to discuss the dominant discourse in microfinance and dismisses the existing models in his thesis submitted to University of Chicago. Using that approach, we could try to understand the text and subtext of Vikram’s book. While the book starts with a woman in a purple saree asking a life changing question as to why she is not getting microcredit while being poor, it ends with a woman showing off her colour television, thanks to SKS not only giving her successive loans, but also inadvertently creating a job for her son.
With her water buffalos, and a home front kirana store her poverty is eradicated and mission accomplished. Or is it?
For instance let us take this excerpt from the book: “Often, when we started …. people decided to test us by willfully not paying. But we instructed our loan officers not to leave the meeting until the repayment came in…. This had a powerful social effect. The entire village would realize there was some issue…..And that person would lose izzath – lose face. Losing face is a fairly devastating thing in a village context, and people will do anything to avoid it.” [p.76] something that ensures repayment and discipline could also be termed coercive if one crosses the line. Clearly there could be a whole debate on where the elusive line is. Vikram does offer a solution for borrowers who faced hardship, but the solution lay not in a pro-active action on the side of SKS but an action that gave the community a lesson on co-operation on how they should bail each other out in case of difficulty, while there is no mention of what SKS would do pro-actively in case of a default.
We could also look at another instance where the loan taken ostensibly for purchase of a goat was kept to buy food. His lieutenant tells the customer “Buying food doesn’t generate income, so you’ll be no closer to getting out of poverty that way. Either buy a new goat, or give us back the loan money” [p.82]. How does his organization expect people out of poverty when they cannot even buy food, but are expected to run an enterprise? The contradiction that we see in this instance has been the pattern of contradictions that Vikram has had to live with. This is where the dots in his discourse lose the connections.
The third interesting discourse in the book is about interest rates where Vikram says “… we actually could have charged much higher interest rates than we did, while still significantly undercutting the moneylenders. But our goal was not to be extractive; it was to make enough profit to cover our costs and fund further growth..” The numbers of SKS as of 2009 and 2010 does not seem to reflect the benevolence in pricing. Of course, if the market can bear it, there is no need to show benevolence in pricing, but to constantly reaffirm the aspect that efficiency gains were passed on to the customers certainly need closer scrutiny. The hard fact that comes out is that the proportionality of transfer of reduced costs to borrowers is not in sync with the gains accruing out of increased efficiency.
So, are we quibbling about the claims made in the book without having an appreciation of what the SKS model is delivering? To be fair to both the promoter and the organization, SKS has indeed shown how a cookie cutter model of microfinance, inspired by Starbucks, McDonalds and Coke could scale and work. It has reached more clients than many of its competitors, scaled fast and shown the potential to hold out. It certainly is not the most profitable [Spandana and Share turn out better numbers] and its yield ratios are also lesser that the two [indicating that it is somewhere in the middle of the exploitative scale, with organisations like BASIX being even less exploitative!].
But we have to realize that this model is hardly justified by the discourse that we get in the first half of the book. The first half of the book tries to look at the clients in their eyes, peep into their hearts and tries to live the life of a client, by using participatory research methods to find out when agricultural would pick up, the wage payment pattern and employment days [p.72]. Having started with methods that were client centric, what made SKS shift to the model where he is obsessed with the idea of cutting meeting times using stop watches, village routes being scheduled on a single road [p.103]? Great management idea, great gains in efficiency, better bang for the buck.. but does not answer the question that the woman in purple saree asks in the beginning of the book.. What happens to the poor families who do not fall on the SKS highway? This is a contradiction that seems to haunt SKS throughout the book.
The move of SKS from client-poverty focused model to an investor-prosperity focused model is rapid. It is so rapid that the stories of several clients committing suicides because of coercion, is brushed aside as clients who had not defaulted to SKS but must have borrowed from rogue MFIs. For a person whose life changed because of a question asked by a woman in a purple sari, seventeen client suicides should have led to a deep introspection and review of business practices. But the SKS response is like the style of the book: more assertive and less reflective.
The contradiction in the life of Vikram Akula will appear even more stark when we do a reading of his PhD dissertation “Assessing Microfinance: An Investigation of Whether Microfinance Reaches the Very Poor” where he almost slams the for-profit models, while maintaining that the double bottom line is important for this activity.
Let us look at this quote from the thesis:
“As for the reasons why microfinance does not reach the very poor, there are three factors. The first is emphasis on financial self-sufficiency which leads MFIs away from the very poor. The second is group liability, which leads the moderate poor to exclude the very poor, who have a high risk of default. The third is the strict repayment schedule and tough penalties for default, which lead the very poor to exclude themselves.
“The first of these three features – the goal of financial self-sufficiency – is the biggest barrier. The problem arises because for an MFI to be financially self-sufficient, it must increase its total loans outstanding…. One easy way to achieve a higher loan outstanding is by increasing the size of the loans…
“So the desire to achieve financial self-sufficiency is a slippery slope to a movement away from the very poor. This is done in two ways. MFIs end up working in less poor regions or working among less poor in a poor region.[p.24]
The dissertation continues to examine the declaration of the Microcredit summit of 1997, which wants to target 100 million of the world’s very poor families with microfinance for self employment, which Vikram finds “incorrect and outlandish” [p.36]
Vikram in his thesis offers a solution to the problem of not being able to reach the very poor by offering the SKS model as a counterexample of microfinance, an experiment that reaches the very poor while having achieved operational self-sufficiency [profits are not mentioned here]. In offering SKS as a successful example, he does caution that with scale the organization might lose focus from the very poor including a candid admission that some of the later branches the ratio of the very poor has indeed reduced [p.116]. However he elaborates as to how a drift could be avoided and the commitment – espoused by the founder/leader has permeated through the incentive structures where the staff lose their entire incentive bonus for the month if they fail to achieve the target of getting all the 90% of the incremental clients from the category of very poor [p.117] and how this applies not only to the field officers, but up the hierarchy.
The thesis itself raises a larger moral question of a conflict of interest. How could a person study a problem and then turn around and offer a solution in an organization that he has promoted and has been heading? To attribute the success to his own leadership skills is at best preposterous. How can a person be his own evaluator and use that to gain a doctorate? Somewhere down the line we find that the University might have erred in permitting this methodology from a pure point of a conflict of interest [notwithstanding the issue that the methodology could be rigorous]. When Vikram uses the word ethical position vis-à-vis the allotment of the second round of capital, it does not come out with a sense of conviction to these values. Or possibly we do not understand the concept of conflict of interest at all. Everytime an issue is thrown at him, the response ranges between his ethical or moral stand to a legal stand. I suppose, SKS and Vikram are legally correct in what they are doing. Let us grant that and then look at the larger debate on the moral fabric of the person and the organization the person heads.
Unfortunately by the time we come to his book of his “unexpected” quest this entire discourse is lost as he moves into the Google territory where he talks about providing access of his client database to players like Metro cash and carry, Airtel, Nokia, Bajaj Allianz, Cavincare and Wipro…[p.165 of the book] to sell their wares on a win-win-win model – where the client, SKS and the commercial establishment all win.
This is not only a huge and unexpected transformation from a young professional who came in the quest of working for the poor, a young professional who questioned the traditional microfinance models and their lack of focus on the very poor, a young professional about whom Vijay Mahajan says “we [Mahajan and Vikram] have differed over several things over the years but we still share a warm relationship. Earlier he thought I was too commercial and now I think he is too commercial.” [Interview with Forbes India, August 10, 2010].
There is a very honest attempt by Vikram to justify his model of work as an end in itself of portraying a successful business. In this the book does a great job. Vikram has a flamboyant style of writing that is convincing. However, there is a huge connect that is missing between the dots… What happened between December 2004 when Vikram submitted the thesis which in its tone and tenor would have ripped the current day SKS to shreds and 2006 when he returned and changed the face of SKS remains a black box. That is the unexpected turn in his life and it would have been great to know why Vikram moved to this extreme commercial model. There must have been some pressing reasons for the transformation of Vikram Akula and I suppose the microfinance community and the world at large would have greatly benefitted it Vikram had been candid and reflective on this, rather than be assertive.
I end this review by looking at the cover of his book. It is titled “A Fistful of Rice”, the picture shows two palms full of rice, a classic mismatch that is endemic to Vikram and SKS. Is it delivering more than what he is promising or promising more than what he can deliver? The choice is for the reader, or should be left for history to decide.