Karambayam - And Quiet flows the New River

As one enters the Karambayam village, a small habitat in Thanjavur District, through the narrow roads with coconut trees on one side and a few open farms on the other side, the expectation rises to an extent. If banking can traverse through such remote roads and move towards the doorstep, it is certainly a welcome move in a country where less than 40% people in rural areas access the banking services.

“Pudhu Aaru” with the bright orange colours of Kshetriya Grameen Financial Services (KGFS) has unmistakable signs of its origin and denotes the new route taken by the IFMR team (Pudhu Aaru – New River). Since it was almost lunch time, women were in a hurry to conclude the transactions for that day. An affable young person was explaining the payment details due on that day, to a small group which was listening with rapt attention. Some of the members were carrying their ID cards (Fino Card), which is a clear winner because it is easily the best looking one among all the other cards like voter IDs, PAN card etc. (We will have to wait for Nandan Nilekani’s card/design for a while, though he says he would only design the unique nos). Yes … It is pouring PAN cards in this village of 3000 population. Why ? In the model followed by KGFS to bring ‘financial management’ to remote rural areas, savings are done via Money Market Mutual Funds (MMMFs) ( a quiet innovation) and the current rules necessitate PAN cards for the investors. And so, the KGFS team is quite enthusiastically facilitating the same, as it helps them in their KYC norms as well.

The ‘Wealth managers’- young, rural graduates, the front end relationship team will be trained in the nuances of wealth management and their targets will be to manage the overall financial health of rural families, limiting the variability of the funds at disposal rather than chasing loan/disbursement targets. As Dr Nachiket Mor, the mentor and inspiration behind the KGFS team, explained “Finance as Noise Cancellation Model” with his usual enthusiasm later in Chennai, one cannot but admire the first steps on the ground. It certainly works within the current regulatory environment and can only become better with better regulations.

KGFS is neither a co-operative bank nor a NBFC in classic mould, but it does deliver both services, itself being a Section 25 company. It is an interesting model, but has its limitations on the typical fine print options where the banks normally make their margins – interest rate calculations, charges for transactions, idle cash etc. Manageability of operating costs to have a reasonable return on capital and customer stickiness are going to be the key factors for replication. Operationally, the security and transportation of physical cash at the village might be an issue in future (Imagine the impact of an incident like cash mishandling/loss on the credibility of a new financial model among the customers. In rural settings, with temple hundis being under frequent attacks, one cannot be always sure, in spite of use of safes, insurance etc.). By design, there would be multiple transaction costs for KGFS – conversion of MMMFs, securitization charges (in future), cash management etc. But given that they are agnostic to the profile of the borrower (They are not specifically targeting poor households. Since KGFS operates only in villages where there are no other banks, it is bound to classify the entire village as without access to banking), the strategy of multiple products combining savings, loans, insurance targeted at the same family/household may payoff, as KGFS would be in a better position to assess the risks based on the gold mine of data. However, there could be a case for tie-ups with local post-offices, NREGA implementation agencies etc where KGFS can use its platform’s excess capacity for a fee.

Further, access to finance is a means to an end and not an end by itself in the journey of progress. So lets say KGFS is successful, and reaches out to 100% of the households in a village, then it is only an inductive reasoning rather than causative one, which leads us to believe that the economic progress would have happened. Given the mushrooming cases of simple yet logical step of SHGs lending to farmers at higher rates than their own borrowings from banks, real asset creation has to be matched at some point with financial asset growth/access. Cash-in-the-hands-of-poor schemes like Brazil and Mexico are probably evolution in developmental policies, but what will cash buy in a rural remote village, if there is no reliable service provider ? For example, Electricity ? Pure drinking water ?

Kallanai - for UNESCO Heritage ??

Most of the Tamilians have grown up on a nutritious diet about the greatness and more importantly the “accomplishments and antiquity” of their kings, their religion etc. But in general, it appears that adequate enquiries have not been made to purport them with scientific evidence. Kallanai – ‘Dam built with Stones’ is a classic example.

Kallanai is always linked to the Chola King Karikal Valavan , thanks to the text books and one is a little disappointed that there is nothing except a nice statue near the present day Kallanai as a record of his exploits. Said to belong to 2nd Century AD, this oldest functioning water structure is certainly a marvel and in my view should have had the UNESCO heritage tag ahead of the trinity of Thanjavur/Darasuram/Gangai Konda Cholapuram temples atleast on account of its chronology. A quick visit to the UNESCO website reveals that a man-made structure like Kallanai would have certainly qualified, but there is a catch.

First the stories as we know : The king built this dam with hewn stones to divert the waterflow to avoid loss of crops due to floods in the downstream Cauvery. Unfortunately, we don’t seem to have historical records researched well enough to know in detail about the dam, its builder and the structure or the date. References are abundant in literature but UNESCO (and may be even GoI ) may not consider it as a historical evidence. Many of the references available in the internet also use terms like ‘Said to be...’, ‘ believed as ..’ etc citing other sources, eventually becoming a circular reference.

In this context, it is remarkable to know that a PhD thesis has become a key source of analysis and that too emanating from an IIT. Chitra Krishnan has done a remarkable job of modeling the workings of the anicut. “….By combining such varied sources as a farmer’s family archive, letters from British engineers, her own field measurements, and scale-model research, she succeeded in reconstructing this artifact that then tells stories about Indian agricultural history as well as hydraulic innovations”. Her main argument is that the structure was built with a lot of knowledge about the flow of water, taking advantage of its natural flow, imaginative use of slopes to control sedimentation etc, but the later day administrators have destroyed it because of lack of understanding.

After the British arrived, they had to intervene as the original structure could not deliver its utility (due to vagaries of time, uneven maintenance). Sir Arthur Cotton (who later went on to design the famous Godavari barrages) who was just 20 years old when he arrived at Kallanai to study the water structures, took part in the design modifications later in 1839. There are three additional strucures today covering Cauvery, Vennar and Kollidam that one cannot even see the ‘original kallanai’. A helpful engineer at the site informed us that it is still the same structure at the Foundation and the other structures have been built around it and even pointed to its ‘right’ direction. But there are a few that argue that the Kallanai referred in literature and the present structure are two different things. I wonder why we cannot conduct an underwater study to know the facts and publish it for the benefit of all of us. In absence of concrete evidence, one cannot hope to get pass the rigorous evaluation process of UNESCO. The process is very clear with the State initiating the application process and making a claim, followed by a panel of experts ascertaining its validity based on the evidence presented. As an aside, the application for the temples of Darasuram and Gangai Konda Cholapuram to be included was made only in 2004, even though the UN resolution, to which India was also a signatory, was passed in 1972.

Karaikkal & Tranqebar - History and Mythology

One can see a combination of mythology and history at work within a few miles from each other in the south eastern coast of India. At Karaikkal, (which is part of Pondicherry and also has a well planned township) there is a temple for Karaikkal Ammaiyar alias Punithavathy. The story depicted on the walls of the temple dedicated to her clearly states the names of her parents, her groom and their profession etc but is largely silent on the dates or the current day evidences. She led the Bhakti movement prior to the arrival of Adi Sankara or the other Nayanmars. The myth is that she converted herself into a skeletal form and trekked to Kailash on her head. It is also said that Sundarar, a later day Nayanar refused to enter a village she passed by, as he did not want to disrespect her by setting his foot where her head has treaded. She has a pride of place among the 63 Nayanmars being the sole lady devotee (though there are other ladies in the list, they are either wives/mothers of other Nayanmars) and was the only one who had the fortune of being referred as “Ammaiye ! (mother)” by God himself. She is also credited to have authored many innovative lyrical forms and poems in praise of the Lord. The origin of her story dates her what is considered as the dark ages of ancient Tamils (around 5th century AD) , but there is still an annual festival called Mango festival where hordes of mangoes are brought in by the devotees, recalling that she was blessed with a divine mango from the God, as if it happened yesterday.

Tranqebar, which has a unique place in the history of Tamil Nadu, if not India itself is about 15 km from Karaikkal. This small port town is where the first protestant preacher Bartholomew Ziegenbalg, landed in the early part of18th century at the age of 24, when Aurangazeb was still ruling Delhi, thanks to a real estate deal between Danish East India Company (Yes….they also had one) and Raja of Thanjavur in 1620. Having experienced firsthand that he cannot survive in TamilNadu without the language (many people opine that it is true even today!), he proceeded not only to learn the language, but also managed to be the first printer/publisher in TamilNadu of the biblical material including the first New Testament in 1715. It must have taken a lot of courage and conviction to sail across the oceans and then proceed to execute the plans, all before the age of 36 when he died. Very interestingly, around the same time Veerama munivar –(born as Constanzo Besci of Italy, he landed in Madurai in 1711) a Roman Catholic missionary- was working in TamilNadu probably composing the immortal ‘Thembavani’ (written on Jesus , it is considered as one of the Tamil classics). Imagine if these two Europeans had met and debated about their respective faiths in Tamil !! Aurangazeb would have loved to join such a debate in the tamil bastion of Madurai, if only he knew the language !!!

There is a Danish Fort still on the coast of Tranqebar and a few remnants of the erstwhile harbour. In true Tamil tradition, there is a statue for him alright, but there is not much awareness about the original mission. There are a host of Churches and schools in that small area near the beach which continue the educational services even today. Friday Holiday policy of the keepers meant that we needed to skip visiting the Fort, as it was locked. Hope it is kept open on Sundays, the only reason that could justify a Friday holiday ! When the search for the Buddhist Chudamani Vihara (of Kalki's 'Ponniyin Selvan' fame) took us to Nagapattinam which is about an hour drive , the same Friday factor was at play. Enquiries about the remains of the Buddhist vihara elicited understanding and sympathetic nods for our enthusiasm, but the locals preferred to admit that they heard the story for the first time from us. Due to paucity of time, we had to move on , but not before locating the local museum which informed that they are also closed on Fridays.

Kollumangudi - Pointers to the future

It was almost 9 pm on a rainy night at we entered the Desicrew's Rural BPO delivery center at Kollumangudi, near the town of Mayiladuthurai. With helpful directions from the staff, we could wade through the rains and the darkness to reach the center. I was pleasantly surprised to see that many of the Crew members were young women from nearby villages/town and in spite of the professionalism expected out of BPOs, they were probably sending out messages for the future. It is a well organized center with separate bays for different processes and one could not see an airconditioner reflecting probably the low cost, spartan model espoused by Desicrew. Attempts have certainly been made to elevate the quality of delivery and today it even has an online process supporting customers on realtime basis. Interaction with young minds always stimulates the thinking and when one spotted an MBA and two engineers among a sample of 15 people, one does ponder about the shape of things to come in the future.

Rural BPOs are in the news again after HDFC’s decision to acquire a 26% stake in one of them. It has been in the making for a few years now with some exceptional success stories including the one I was associated with – GramIT. We had an interesting mix of models being presented at the first national Rural BPO conference hosted last year at Hyderabad. It included a few kiosks doubling up as rural BPOs, centers running from homes, centers with ISO/Six sigma project certifications, centers run by Government, all women centers etc. With Kiran Karnik, former chairman of Nasscom, providing the keynote address and a list of eminent speakers from corporates of the likes of Tatas,CISCO,Wipro,HSBC,HDFC, it provided a platform to exchange views and chart out future strategies. Some of the predictions made during the conference are unfolding right now and 2009 and 2010 are going to be two watershed areas in their evolution.

Parallels are being drawn between the rural BPOs now and the IT sector in the late 80s/early 90s in terms of potential to alter the employment landscape, lack of infrastructure, customer skepticism, lack of availability of trained manpower, wage arbitrage etc. While there could be some lessons, in my view, the crucial difference is about the integration of domestic IT/BPO market. The IT sector had an almost exclusive focus on the export market till recent times, which had a significant impact on the margins for years to come. Because of current excess supply in the BPO segment and the focus on domestic customers and Governments, the rural BPOs are going to be under pressure for their margins almost from their birth stages. This would be a key factor during the scaling up process and they would do well to focus on their core strengths, which is unleashing the human potential. In the short term, cost will be the differentiator, but they can quickly build their IPs around their geographies. It is not about generating local data bases which can be sold to some MNCs, but creating a knowledge driven system which integrates the local political system, economy and relationships. For example, their skills have to evolve to aid or deliver what organizations like Census department or NREGA team or the local engineering/medical colleges might need. Knowledge about the local village and its ecosystem itself is a vital ingredient. In the continuum between the information kiosk and a commercial BPO delivering to an export market, the players should be cognizant of this space as well.

Consider the economics for potential of Rural BPOs in terms of employment and revenues :

A center of about 50-75 seats can be set up to cater to the available labour pool for every 20 villages. This will create about 4 million rural employment at an average wage of over Rs.4000 per month for the entire year and impact about 20 million rural people directly.
To put this in perspective, compare this to NREGS : Average 45 days of employment @ Rs.80/day (ok.. it is now Rs.100/day) created in the last three years for 20 million households. Only 4 million households have managed the mandatory 100 days. Amount spent was over Rs.40,000 crores ! Even the entire BPO industry's employment is hovering around 4 million mark after two decades.

Is there a market ?
The total PBT of Corporate India is reported at US$142 bn for 2007-08. If we can estimate that the profit margin will be atleast 15%, then the expenditure on processes like Customer care, HR, Finance which can be outsourced will be atleast US$40 bn (5% of total expenditure). Of this total pie, even if we assume a tiny market share, say 2.5%, for the rural BPOs, it is still over US$ 1 bn.

So, what can the Government do ?
Allocate a major portion of Rural Development Budget and work out another subsidy for attracting corporate investment ? No. It can easily use a portion of its NREGA budget (5.8% to be precise of budgeted Rs.39,100c r) and convert that into equity/mezzanine finance. Since Rural BPO has been proven as a commercial model, it will attract both debt and equity from the investors and with a leverage of 1:3 or 1:4, we can do this across the country. And to kick start the whole process, it can mandate that every department will outsource atleast 1% of its work to rural BPOs, which itself will be more than the domestic corporate demand. This is not going back to ‘reservation’ days, but leveraging Government’s reach and capacity in a new way, as there will be a saving of 25%-30% for every rupee outsourced.

On the other hand, it may not be appropriate to derive the budget from NREGS, as the focus of the scheme is different from the labour pool likely to be relevant for the Rural BPOs. But it is the same geography we are talking about. There was an announcement in the previous year’s budget about National Skills Development Corporation with an equity of Rs. 1 cr from Government of India and a corpus of Rs.1000 cr. This project could easily become a launch vehicle for the NSDC, as it also envisaged raising funds to the tune of Rs.15,000 cr from the market.

N Panjampatti - Symptomatic

Our desire to visit the scene of action led us to N Panjampatti, which is one of the villages in Tamil Nadu where Gandhigram Trust has implemented several programs. Throughout the visit, our query on the reason for the N in the name of the village did not elicit any reply. The name is quite misleading as we could not see any signs of ‘panjam’ (famine) there. On the contrary, it looked almost like a large, busy township with a few NGOs and SHGs visible almost everywhere (Official population : 6530, No of households : 1554).

The kind gentleman from the Gandigram Trust took us to visit the SHG groups, but at the end of half a day, a sense of disappointment could not be avoided.

In the first center , there were about six women who were making papercups in a machine that operated on electric power. They stated that they could make about 250 cups a day which implies a revenue of Rs.100 per day @ 40 paise per cup. They were to be paid Rs.50 per day for their labour and even without adding other costs, it certainly did not look promising to sustain.

There was another group making school bags , but did not get the bulk order from the local schools, probably their main market. Here the ladies were paid Rs.25 as allowance and they said the surplus will go to federation which will again be ploughed back into the SHG to justify the lower wages. And not unlike their Dravidian parties, this group has already split twice and all of them are claiming the same original name of Mullai.

We were informed that the community took upon the sanitation (ofcourse through SHG) issue and they even got a President or Chief Minister award for the same. It was a public toilet complex with a tank for storing water and provisions for washing/drying clothes like the stone platform, clothesline etc. The group has made enough money @ One Rupee per person, to even extend the area with a new compound wall. Closer observation made us realize that the popularity of the place was more for the uninterrupted water supply and the comfort for washing the clothes of the entire family, rather than any particular interest in the sanitation. Adjacent to this complex at a distance of 300 m is another one which was lying closed and we were told that it was run by Panchayat and hence it was so!

The most interesting and enterprising example came when we were taken to a “Flower mill” operated by a group of four women(it also has the same dependency on electricity from the State). Among the items that were ground in that flour mill were the usual chilli powder, idli/dosa batter, but the hot seller was the One Rupee rice made available through PDS. The rice was mixed with millet and converted into cattle fodder which was then ‘exported’ to and other places at Rs.8 per kg. Long Live the PDS and the penchant for One Rupee items.

Here it is important to note the role played by the ecosystem of bankers, well intended NGOs like Gandhigram Trust (and may be some of the middlemen too) in ‘Facilitation’ of bank loans to all the above mentioned SHG groups. The scheme works neatly. One Lakh as grant and Two Lakh as Loan and everyone is happy. I guess the repayment days are far away in horizon ! One is not against the SHGs flourishing, but unfortunately the achievements of SHG are being measured in terms of loans disbursed and no of groups than the outcome or the impact.

Gandhigram - Symbolic Start

It was a coincidence that the first stop during my recent roadtrip in rural TamilNadu was at an organization founded in 1947 symbolizing the start of new India’s journey. I was surprised to know that there were two individuals behind this private initiative, as the general impression is that the Gandhigram was an institution started by the Central Government. It took the daughter of a powerful business family (though widowed young at 12, she was encouraged by her husband’s wishes to study further and re-marry) and a Shanktiniketan product to start Gandhigram. Dr T S Soundram, who went on to qualify as a medical practitioner from Delhi and later served as a deputy minister of education in the Union Cabinet headed by Jawaharlal Nehru, was certainly made of compassion for the underprivileged. She then married Dr G Ramachandran, a pioneering gentleman freedom fighter with farsighted outlook (whom Gandhiji cited as a key reason for his endorsement of Travancore movement) and even had the marriage blessed by Gandhi himself. The Gandhigram started on an inspired note when a landlord donated a vast track of land, which gathered momentum and eventually 125 acres of land was donated by the villagers. It is located near Dindigul on the NH-7 betwen Dindigul and Madurai. Gandhigram soon expanded into a gamut of activities ranging from running hospitals to educating widows to orphanages to Agriculture.

With this backdrop, no doubt it has grown into a model where bus loads of tourists visit almost every week from all over the country to learn from. Because of the parentage and the team of dedicated people who are involved, it has retained a prominent place in the minds of Government and NGOs for social service. Today, it is the first stop for a pilot for any of the projects conceived by agencies like CAPART, NABARD, RUTAG,KVIC etc. Almost all major political leaders have graced the institution and its work. The excellent work done/being done in the areas of health and education have tansformed many rural lives. But if one looks at the scale of economic impact of the development models, none is visible other than riding the SHG wave like many other less distinguished entities. Given the headstart, it is bound to raise expectations, but perhaps the focus was not on economic issues for a long time, given the non-existent access to healthcare and education in the early 50s and 60s.

Like many other players in the social sector, there is no financial information available on their website, but the annual report thankfully has the balance sheet and income and expenditure statement (which is again a rarity in the sector). The sustainability is not in doubt with almost 50% of income being generated from its own services coupled with a wide variety of assets, endowment funds, investments etc, but in absence of breakups, 50% expenditure in Institutional salaries (other than program expenditure) and almost 40% of assets in Fixed Deposits and Bank accounts do not augur well for efficacy. May be the proximity to Government and the multiple cross holding structure among the various entities like university, trust, society etc all in the name of Gandhigram have acted as dampeners. Though the Secretary of the Trust, a committed elderly gentleman who was a former civil servant, was proud to state that Dr APJ Abdul Kalam visited them on the third day after his tenure as President of India was over, I would have been glad if he had narrated a few achievements of the institution with the same pride and tone.

The Broken Tusk - THE Stylus

A word about the contents before we begin. Rural India, Economics, Technology, History, Religion and Philosophy have been the key factors that have shaped my outlook so far. So you are likely to be subjected to all of the above, not necessarily in that order. There is no guarantee that one or more will not be mixed up in the same story either. So, it is “Reader Beware” from now on.
Let me start with the first story, which is the reason for the title, by borrowing it from that master story teller, Rajaji.
Time : Sometime in BC or a few millennium ago or in some aeon
Lead actors : Ved Vyas, the main author/arranger of Mahabharata and Lord Ganapati
Act/Scene : The story of Mahabharata is about to begin and Vyas is on the look out for someone to write down his own blog of 100,000 poems/verses.
“
Brahma extolled Vyasa and said: "O sage, invoke Ganapati and beg him to be your amanuensis." Having said these words he disappeared. The sage Vyasa meditated on Ganapati who appeared before him. Vyasa received him with due respect and sought his aid.
"Lord Ganapati, I shall dictate the story of the Mahabharata and I pray you to be graciously pleased to write it down."
Ganapati replied: "Very well. I shall do as you wish. But my pen must not stop while I am writing. So you must dictate without pause or hesitation. I can only write on this condition?'
Vyasa agreed, guarding himself, however, with a counter stipulation: "Be it so, but you must first grasp the meaning of what I dictate before you write it down."
Ganapati smiled and agreed to the condition. Then the sage began to sing the story of the Mahabharata. He would occasionally compose some complex stanzas which would make Ganapati pause a while to get at the meaning and Vyasa would avail himself of this interval to compose many stanzas in his mind. 'Thus the Mahabharata came to be written by Ganapati to the dictation of Vyasa.
“

In the process of capturing the verses of the Mahabharata, it is believed that his pen had broken due to the speed, and in the urgency of taking down the immortal words flowing from Ved Vyas, Ganapati snapped off his tusk as a replacement quill ! The broken tusk thus became The Broken Tusk – which represents a writing instrument or a tool that facilitates learning. It does symbolize Discrimination – ability to distinguish what is real and what is unreal. The tusk also denotes the universe i.e. the Maya, according to Mudgala Purana, standing for the creation and durability.

This blog will therefore capture the stories about ideas, people and places first hand and like the Ganesha’s stylus, it would not stake claim to the stories (they belong to Ved Vyas and the real people), but would facilitate recording and retelling of the same. And hopefully I will keep that part of the deal where the understanding precedes the writing. Any errors and acts of omission and commission would henceforth lie with the tool and not the author.

If you are wondering that the posts in this blog start with the name of the places, yes that is by design, as the travel always triggers a lot of molecules in my system to observe and synthesise. The geography also ensures that the ideas are not abstract, even though there would be a few degrees of freedom lost because of implementation efficiencies. Given my limited experience in the hinterland and non-existent one in writing, there are bound to be issues. I have already discovered that being editor and the author at the same time is very demanding and there are always going to be alpha and beta errors. The length and the frequency of the posts are not defined and like my current favourite author Nassim Taleb, it is one of the preconditions of the author to the editor. So, sit back and enjoy the chronicles and if you find something good or bad, pl do drop in a word.