This is not the best of the times to review Vikram Akula’s book. He is hanging on a roller-coaster ride that started in 1998 and has seen the world turn topsy-turvy. For him, a celebrity, the party was well-planned: His organisation SKS Microfinance had a blockbuster IPO, listed at a premium, and he would have moved on a book promotional tour before differences led to the sacking of SKS CEO, and a regulatory tsunami hit the state of Andhra Pradesh, where his operations were concentrated.
The book is a story of Akula’s journey from comfortable New York to rustic Narayanakhed. His rediscovery of India was not easy. For those who believe that Vikram was an overnight success, this story is an eye-opener. It took a decade of hardship, a brush with personal bankruptcy and physical threats to achieve this success. To pick an idea, struggle with implementation and be recognised as the face of Indian microfinance is no mean achievement. Akula worked hard to be where he is.
While one could argue about the ideological position on how best to serve the poor, it is unfair to use his story to make a case against commercial microfinance. A reading of his dissertation (2004) and the events that have unfolded later, gives an indication of why he calls his quest “unexpected”. Unfortunately, the book does not connect these dots. While we know that it is unexpected, the details as to what led to the change of heart are not filled. From saying “I bought a one-way plane ticket... packed a single gym bag... to travel like Mahatma Gandhi …no excess material goods… .” (page 20), to “I’ve made a tonne of money… more than I ever thought I would make in my lifetime and my kid’s lifetime combined… .” (Interview with Business Standard), is a long, ideological journey.
Akula’s internship with Deccan Development Society (DDS) lays the basic arguments: The poor have no time for lectures on empowerment; they care about education and health but they want to get on with life (page 43). Therefore, move from an all-round development to a single-point intervention of microfinance.
The book starts with a woman in a purple saree asking Akula a life-changing question: Why is she not getting microcredit while being poor? The answer: Scale. The book ends with another woman showing off her colour television set, thanks to SKS loans, and an inadvertent job for her son. With loans buying her buffaloes and a kirana store, her poverty is eradicated. Mission accomplished. Or is it?
Poverty is a complex phenomenon. To understand where Akula comes from, I take three quotes from the book: “When we started... people decided to test us by not paying... We instructed our loan officers not to leave... until the repayment came… The entire village would realise 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.” (Page 76)
In an instance where the loan was taken to buy a goat but kept to buy food, his assistant 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.” (Page 82)
The third is about interest rates: “…we actually could have charged much higher interest rates… while… 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 SKS controversy is also about coercive lending and the first quote shows a thin line between coercion and persuasion. The second instance is even more intriguing when there is a toss-up between current consumption/survival and future income. The third quote is not borne out by SKS’ numbers as of 2009 and 2010 — the proportionality of transfer of reduced costs to borrowers is not in sync with the gains accruing out of increased efficiency.
As the book claims, SKS has indeed shown how a model inspired by McDonald’s could scale up, reaching more clients than competitors. It is not the most profitable (Spandana and Share turn in better numbers) and its yield ratios are lower (putting it in the middle of the exploitative scale, with organisations like BASIX at the lower end). But all this contradicts the discourse that we get in the first half of the book where Akula tries to look at clients in their eyes, peep into their hearts and live their lives, using participatory methods. Starting with client-centric methods, why did SKS shift to an efficiency-obsessed model, cutting meeting times using stop watches and scheduling village routes on a single road (page 103)? What happens to the poor families which do not fall on the SKS highway?
The move from a client-poverty-focused model to an investor-prosperity-focused model is rapid. It is so rapid that the stories of several clients committing suicide because of coercion are brushed aside as clients who had not defaulted to SKS but must have borrowed from rogue micro-finance institutions. For a person whose life changed because of a question asked by a woman in a purple sari, 17 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 book is titled A Fistful of Rice but the cover picture shows two palms full of rice, a classic mismatch endemic to Akula and SKS. Is it delivering more than the promise or promising more than the delivery? It is for the reader, and for history, to decide.
mssriram@gmail.com
A FISTFUL OF RICE
My Unexpected Quest to End Poverty Through Profitability
Vikram Akula
Harvard Business Review Press
191 pages; Rs 495
