Financializing Poverty

Labor and Risk in Indian Microfinance

Sohini Kar

• Publisher: Stanford University Press
• Year: 2018
• Print ISBN: 9781503605886, 9781503604841
• eBook ISBN: 9781503605893
• Edition: 1
• Topic: Social Sciences
• Subtopic: Anthropology
• Index: Social Sciences

Microfinance is the business of giving small, collateral-free loans to poor borrowers that are paid back in frequent intervals with interest. While these for-profit microfinance institutions (MFIs) promise social and economic empowerment, they have mainly succeeded at enfolding the poor—especially women—into the vast circuits of global finance. Financializing Poverty ethnographically examines how the emergence of MFIs has allowed financial institutions in the city of Kolkata, India, to capitalize on the poverty of its residents.

This book reveals how MFIs have restructured debt relationships in new ways. On the one hand, they have opened access to new streams of credit. However, as the network of finance increasingly incorporates the poor, the "inclusive" dimensions of microfinance are continuously met with rigid forms of credit risk management that reproduce the very inequality the loans are meant to alleviate. Moreover, despite being collateral-free loans, the use of life insurance to manage the high mortality rates of poor borrowers has led to the collateralization of life itself. Thus the newfound ability of the poor to use MFI loans has entrapped them in a system dependent not only on their circulation of capital, but on the poverty that threatens their lives.

CHAPTER 1

ENTREPRENEURSHIP AND WORK AT THE “BOTTOM OF THE PYRAMID”

“ONE DAY, Mr. Bose dreamt that his father—who had passed away when he was very young—came to him and asked what he had accomplished in his life. When he recounted everything he had done, including his successful banking career, his father asked, ‘So what?’ That,” explained Mr. Ray, “was the question leading to the micro-finance project.” Based in Kolkata, Mr. Ray, the regional chief operating officer (COO) of a Bangalore-based MFI, was telling me of his entry into microfinance after thirty-five years in commercial banking. In narrating his own journey, he traced that of Mr. Bose.

“I met my guru while working at Citibank,” explained Mr. Ray in the small, windowless MFI office—a world away from the sleek offices of global finance. He had left his comfortable job at a multinational bank to follow Mr. Bose, his mentor, into microfinance. Mr. Bose had been a successful international banker with a prestigious American master of business administration (MBA). He had worked in retail banking for a long time but became tired of the corporate “rat race.” Soon after the dream of his father, Mr. Bose met with Muhammad Yunus of the Grameen Bank and set about establishing his own MFI in India.

In this narrative, the transformation from a commercial banker to MFI founder is precipitated by an ethical encounter. The moral voice of Mr. Bose’s father, denouncing his achievements in commercial banking, turns him from the rat race to the more virtuous path of micro-finance. Going into the business of microfinance is not just a matter of economic rationality (i.e., the poor are profitable) but is inspired by the ethical dimensions of “doing something for the downtrodden.”

Yet throughout our conversation, Mr. Ray was careful to distinguish commercial microfinance as being part of the financial services industry, not simply a development-oriented NGO. This, Mr. Ray explained, enables borrowers to depend on the MFI as a sustainable institution. Moreover, investors support the MFI precisely because of Mr. Bose’s reputation as a banker, as now “many big names in banking are affiliated with [the MFI].” “Doing well” (financially) and “doing good” (socially)—the mantra of social enterprises—are inextricably linked in this narrative of microfinance. “The goal of the MFI is to make a profit, because,” noted Mr. Ray, “why would people invest in a company that is not profitable?” In fact, to keep the distinctions clear, and rather than attempt to do more social work through the commercial arm, Mr. Bose had established a separate NGO to take on these tasks. So, Mr. Ray explained, “there is the business side of micro finance, which requires cautious steps, and the other side is that of helping people.” As social enterprises, MFIs have to incorporate a double bottom line: economic and social.¹ As demonstrated in the conversation with Mr. Ray, the pursuit of these dual goals is often complicated. Further, there is ambiguity in how to account for the social side of the ledger. The moral duty to help the poor is shot through with concerns for a sustainable and profitable business, attendant to the risks of lending to the poor.

This chapter discusses the emergent culture of entrepreneurship as it undergirds both the popularization of social businesses and the idea that micro-entrepreneurship can serve as a means to escape poverty. It interrogates the extent to which the practices of both MFIs and poor workers intersect with the ideological premise of entrepreneurship. First, I examine how the stories that social businesses tell, especially foundational narratives—official and unofficial—sustain the ideological premise that these companies are doing good socially while doing well financially. Centering on the founders, these narratives also celebrate an emergent entrepreneurial spirit in India. Effectively, this culture of entrepreneurship ideologically bolsters the current growth of social enterprises.

Second, I explore how social entrepreneurship has coincided with the explosion of “bottom-of-the-pyramid” (BOP) capitalism. Under this paradigm, the poor are no longer considered just passive objects of state-led development but active market participants as consumers and entrepreneurs themselves. The BOP goods and services, stretching from consumer goods to banking, have transformed the poor into new sources of capitalist accumulation. The extent to which the poor have benefited through BOP finance, however, remains unclear. Finally, I look at the precarious conditions of labor, now coded as micro-entrepreneurship, in the informal economy.

FOUNDATIONAL NARRATIVES

One morning, as we went from one group meeting to another, Dinesh, a loan officer at DENA, recounted the story of Mr. Basu, the founder of an MFI where Dinesh had previously worked. Mr. Basu, explained Dinesh, had started with about Rs 18,000 to begin doing business in the district of Howrah, neighboring Kolkata. When he began, there was such demand for money from the people and pressure to provide loans that he did not know what to do. At the eleventh hour, his wife gave him her wedding jewelry to get more money to give loans. When Mr. Basu hesitated to take her jewelry, his wife said, “If you can make people smile with this, then that is an ornament enough for me.” Dinesh had come to microfinance by chance when, while waiting to take the examinations for the much coveted civil service jobs, he had applied to and gotten a place at Mr. Basu’s MFI. For Dinesh, the foundational narrative offered a way for him to make sense of and give meaning to his job as a way of doing good for others.

As did Dinesh and Mr. Ray, people working in various levels of the business recounted their narratives about the foundational moments of microfinance. While a version of Mr. Ray’s narrative is publicly available in a newspaper interview, Dinesh’s retelling is not officially documented.² However, rather than attempt to verify these stories, I am interested in understanding how these and other foundational narratives shape employees’ and popular perception of microfinance.

In these two narratives, the protagonists—Mr. Bose and Mr. Basu—have significantly different personal and institutional origins: the former comes from an elite international education and work experience in a multinational bank, while the latter is from a middle-class background with a grassroots experience in microfinance. However, the two narratives have similar structural elements: both protagonists are pushed by close kin to further pursue their work to do good for the poor. These are key turning points for the two men in the foundation and development of their MFIs.

The transformative moment is also present in official foundational stories. Two autobiographical works, Muhammad Yunus’s Banker to the Poor (2003) and Vikram Akula’s A Fistful of Rice (2011) describe moments of revelation and transformation that lead to the founding of the Grameen Bank and SKS Microfinance, respectively. For Yunus, an encounter with a young woman in rural Bangladesh who was unable to buy supplies in bulk pushed him to think about microcredit.³ For Akula, it was a woman who was turned away by the NGO where he worked that drove him to scale up lending through his for-profit MFI.⁴ The figures driving the transformation in these two cases were poor women rather than close kin. Like the popular narratives, these autobiographical accounts of foundational moments demonstrate how deeply moral and financial rationalities are entangled in shaping the corporate histories of microfinance.

All four of these narratives draw on a form of sentimentality, or “the emotionally suffused experience of sympathy for others”; sentimentality implies a form of selfhood that “takes shape through its immersion in the well-being of others” (Black 2009, 270). As in the stories of poor borrowers that Shameem Black examines on the peer-to-peer lending site Kiva, foundational narratives rely on sentimentality to drive the development of MFIs.⁵ Each founder is inspired by a sentimental connection to do something for the poor, and it is sentimentality that structures the ethical dimension of the MFI. As Black contends, however, sentimental accounts can gloss over structural forms of inequality.

The sentimental narrative, moreover, masks a subtler ideological move: Yunus does not simply give money to the poor woman. In his account, he explains that she does not want charity (Yunus 2003, 48). Similarly, Akula wants to find a way to end poverty through profitability. He writes that to help poor women like the one he encountered, he needed to bring more money into microfinance. His solution is to focus on investment: “Why not bring the circle around, making it possible for donors—or investors, as the case would be—to make money from supporting microfinance?” (Akula 2011, 53). Both Mr. Bose and Mr. Basu also turn to establishing for-profit institutions as their primary focus. In effect, what emerges from each of these encounters is a reinforcement of capitalist market logics that implicitly critique welfare as handouts and as unsustainable. Sentimental narratives then require disentangling in terms of their ideological work in sustaining a culture of entrepreneurship that celebrates self-sufficiency over dependence on the state’s provision of services for the poor.

Through the use of sentimentality, narratives of social businesses are not just stories that blatantly celebrate the free market, but they do so in ways that can be harder to disentangle from other discourses. Corporations are “deeply invested in their stories in telling their histories” as part of their social identities, and these stories often invoke tropes that “obfuscate the actual relations of production and division of labor that they must organize and regulate” (Bose and Lyons 2010, 8–9). Investment in this narrative is particularly important for social businesses such as microfinance that must sustain their identity of doing well and doing good.

THE CULTURE OF ENTREPRENEURSHIP

Social businesses, however, have emerged amid a larger social and cultural shift in the celebration of an entrepreneurial disposition and ethos. In India, a growing number of television channels are dedicated to twenty-four-hour news coverage of business and finance, from the English-language NDTV Money, CNBC-TV18, and ET Now, to the Hindi-language Zee Business and CNBC-Awaaz. Additionally, there is a growing popularity of business degrees and valorization of business figures. All of these examples mark a palpable transformation of the Indian middle class into what Arjun Appadurai, in the American context, has called “business junkies” (2015, 65), where everything from home ownership (mortgages, financing) to sports (franchising, trading players, team ownership) has become increasingly subject to business analysis, while start-up entrepreneurs have become heroes.

The dissemination of business knowledge in Indian everyday life, however, happens in its own social and cultural context. A form of entrepreneurial personhood has always existed within South Asia, where mercantile ethnic groups and castes often structure the identity of the individual engaged in business (e.g., Fox 1967; T. Roy 2010; Weeratunge 2010). Members of the mercantile castes have an advantage over other castes by mobilizing capital through existing social connections (Damodaran 2008). Though professions can no longer legally be predetermined by caste, caste-based and ethnic networks continue to influence everyday economic and professional life in India.⁶

Lining the shelves in bookstores and on sidewalk stalls across India are books and magazines hawking knowledge about how to succeed in this new economy through business and entrepreneurship. One such nonfiction bestseller in India is journalist Rashmi Bansal’s (2011) I Have a Dream: The Inspiring Stories of 20 Social Entrepreneurs Who Found New Ways to Solve Old Problems. The introduction of the book documenting successful social entrepreneurs consists of short paragraphs almost poetic in form. Bansal identifies the traits of social entrepreneurs as “a new breed of people” who “think like entrepreneurs but feel and work for the cause of society” (ibid., author’s note). There are, according to Bansal, two kinds of people: “thinkers,” who do not do anything about poverty or inequality because they “believe the world is a neat place, with boundaries”; and “feelers,” who will give something, “if not a coin, at least a moment of compassion.” Social entrepreneurs are “thinking-feeling individuals”; they are able to transcend this divide to help bring about change by applying the principles of business. Social entrepreneurs, for Bansal, are neither demanding radical social change, nor are they iconic figures themselves; social entrepreneurs are not like Mother Teresa but are “people like you and me . . . using the principles of business, to create a better world” (ibid.). In other words, social entrepreneurs can be a bridge between the sentimental and free-market rationale.

Bansal concludes in the introduction that while “the bank balance you have on earth will remain, when you depart[,] your karma, you carry forward” (2010, author’s note; emphasis in original). Using the somewhat ironic analogy of a bank balance, she draws on the popular understanding of the Hindu and Buddhist concept of karma—that present circumstances are predetermined by previous actions and that current action can shape future ends—to make a case for social enterprise.⁷ In making this argument, Bansal assumes the legitimacy of making profit. Thus, she writes of a world where “profit does not equal greed” or “where ‘I’ does not mean crushing ‘them’” (ibid.). The argument stands that profit can be good as long as it does not crush “them.” Forget class struggle—the message suggests—accumulation can exist without exploitation due to the thinking-feeling social entrepreneur.

While Bansal works karma into the entrepreneurial disposition, others have adapted independence leader and critic of Western capitalism Mohandes K. Gandhi as a model leader, strategist, and innovator.⁸ For instance, Arun Maira, the former chairman of Boston Consulting Group in India, who has served as a member of the Indian Planning Commission, turns to Gandhi in his argument for a more local model of business management. Speaking to the online news site Rediff, Maira notes, “We keep feeling that models of people in the West are the ones we should follow. In a way, we remain subservient to the leadership values and models of the West” (quoted in Ganapati 2003). Maira—strangely echoing postcolonial critiques—is insistent that Western corporate models cannot be used in the Indian case. Rather, he suggests, we need to turn to Indian leaders as a model for business leadership. He argues, “In business, empowerment is all about making sure everyone is connected to the organization’s goals. Gandhi has a way of doing that: making sure that everyone in the cause is connected to the goal” (ibid.). Finally, Maira turns to aligning capitalism with Gandhi’s vision of India:

In the last few years, there is a thinking that capitalism is not just about creating wealth, but you have to take care of the shareholders and stakeholders, too. Many years ago, this emphasis on the interests of the stakeholders was labeled socialism. So, Gandhi’s ideas and the lessons learnt from him are not totally different from what corporate India would like to do. (Ganapati 2003)

The corporation’s wealth creation cannot occur apart from wider social concerns. In identifying the populace as shareholders and stakeholders rather than citizens, Maira simultaneously reworks the relationship between the state, its citizens, and corporations, and indeed between capitalism and socialism. Businesses have to be concerned as part of management strategy with doing good and balancing the interests of both the corporate shareholders and the stakeholders of society more broadly.⁹

Rather than a singular teleology of capitalist development, Luc Boltanski and Ève Chiapello define the spirit of capitalism as “the ideology that justifies engagement with capitalism” (2005, 8, emphasis in original; see also Weber 2001). Thus, the culture of entrepreneurship in India is a distinct ethos, not necessarily a globally legible one. Capitalism absorbs its critiques, but in a distinctly Indian way, drawing together existing notions of mercantile castes and ethnicities, Gandhi, and ideas of karma. Anthropologists have long examined the capitalist encounter with noncapitalist societies and the process of enfolding greater parts of the world into the capitalist system (Nash 1994; Taussig 1980). Other scholars have subsequently argued for the need to study the hybrid forms of capitalism that emerge in these encounters rather than privilege the “Eurocentric assumption that the Midas touch of capitalism immediately destroys local indigenous economies and cultures” (Yang 2000, 481; see also Bear et al. 2015; Li 2014; Tsing 2005). Historical analyses of economies in the colonial encounter challenge universal models of capitalist transformation, demonstrating the role of indigenous capitalists in the process of transformation (e.g., Birla 2009; R. Ray 1995). Rather than reproduce a singular grand narrative of global capital, attention to the local particularities and historical contingencies reveals the dialectical processes through which global capital interacts and intersects ...

Table of contents

• Cover
• Copyright
• Title Page
• Series Page
• Dedication
• Contents
• List of Abbreviations
• Acknowledgments
• Introduction: Enfolding the Poor
• 1. Entrepreneurship and Work at the “Bottom of the Pyramid”
• 2. From Social Banking to Financial Inclusion
• 3. The Reluctant Moneylender
• 4. The Domestication of Microfinance
• 5. Financial Risk and the Moral Economy of Credit
• 6. Insured Death, Precarious Life
• Epilogue
• Notes
• References
• Index
• Series List