I keep coming back to the discussion on social collateral as it is the core model we follow in our microfinance business. The concept of the social collateral model consists of social capital (trust and network), group pressure and training and is used as a supporting mechanism to encourage loan repayments and support the borrowers in creating human capital and economic capital.

Implementation of the microfinance model by Dr Muhammad Yunus in Grameen Bank, its pioneer, opened up avenues for those who were struggling for survival owing to lack of financial capital or collateral but had the zeal and acumen to make a business successful. The way microfinance enabled small entrepreneurs to build on their dreams and enhanced their social and economic growth as well as their lives may not be comparable with other economic models so far. But what normally gets left out is the contribution of the social collateral model in other aspects.

Microfinance has constantly helped transform a job-seeker to a job-creator, thus impacting far more lives at the bottom of the economic pyramid. The structure of the social collateral model ensures that, jointly, a group of entrepreneurs ensures each other’s success trying to extend support wherever required. The social ties embed social capital and facilitate the collective actions of group members, allowing them to coordinate their repayment decisions and cooperate for their mutual benefit. This unique concept of collaboration at a micro-level is extremely encouraging to witness. The sisterhood extends much beyond business and helps in binding our social structure.

It would not be unfair to say that the success of the microfinance industry and its stakeholders banks heavily on the social collateral model. It has also created large numbers of jobs — for loan officers and risk assessors. These loan officers and risk assessors have the last-mile access to a large segment of the rural populace, especially the women, who never featured in our economic spectrum.

This relationship and reach of the officers of microfinance companies in rural India have been used on several occasions to power awareness programmes in financial literacy or even to distribute aid during calamities.

As we see, the direct and indirect impact of the social collateral model in microfinance has been much beyond keeping bad loans low. It has been playing a key role in nation-building as well.




It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair...

Charles Dickens' words, written in 1859, keep getting quoted even during moments of despair. However, right now it’s difficult to subscribe to the positives in the quote. With the coronavirus pandemic threatening to scythe through the world's population, nation after nation is trying to fight it with all that they have.

The containment strategy's prime weapon is the isolation of people—from the family and household level to entire communities and cities with "lock-downs". Every nation is trying to minimise human contacts between citizens, and one is at times reminded of the famous scenes from the Hollywood epic Ben Hur, based on Lew Wallace's book, considered the most influential Christian novel.

The story, set in Christ's time, shows how Ben Hur's mother and sister are afflicted by leprosy, and the attitude of people towards leprosy. Hounded and thrown out of cities, they created their own sad and at times violent "isolation wards" in caves and jungles shunned by people.

The situation for us is not this bad. However, it may not be much better as well. The isolation route, though important, has already started to hurt the economy. And this impact will soon be felt in the rural and rurban sector the hardest. According to the 2011 Census, India then had a workforce of 47.41 crore of which 33.69 crore were rural. Of the total rural workforce 35.3 per cent were casual. Which implies that if economic activity comes to a grinding halt, a huge population will be without any source of earning for a long time.

Given the fact that working in agriculture and related areas requires an intense degree of physical interaction— something the government is trying to prevent—their earnings will be jeopardised as of course by quantum, this sector will be the hardest hit. However, these would be the case for many others across India. These are early days and a guesstimate will not be proper now. But one thing is for sure: the coming days will be unprecedentedly tough — a time of hardship that our generation hasn’t experienced. One hopes that this anxiety is belied by the events in the coming days.

Stay safe and united in this crisis. Let’s fight it out together and abide by the advice put out by the government from time to time.




The business ecosystem in India has been going through major changes brought about by digitalization. With a mobile phone in every second hand, no business can ignore the way digital technology has become a major driver in business decision-making.As we start using mature technologies for business, the skill requirements in the organization get more diverse and may not always be found in-house.

If we assume that outsourcing core business competencies is not the best idea, and an organization is left with no other option but to upgrade skills, the big question that stares at us is whether we should train our existing team or hire pre-skilled resources.

The decision is never easy as there are many other aspects that we need to look at. An old associate is already in sync with the culture of the organization and has gone through the test of establishing credibility. Budget permitting, training seems the obvious path to making the associate conversant with technological advances. It is much easier to relate the technology training to the core competency.

But retrained associates have to go through a learning curve and take time to deliver at peak performance, while a new recruit with the required skills might be able to implement the technology faster (though some training might also be needed here on the core competency and culture of the organization). It also needs to be borne in mind that not all existing associates can be trained. Unlearning is the toughest part of any learning process and sometimes is the biggest constraint. For example, an associate with a feature phone might not be able to pick up the operations of a smartphone application.

To sum it up, while there is no ready trade-off between training and fresh recruit, there is one aspect that can never be denied. Change is the only constant part of any business and we must embrace it readily.




For a long time now, the issue of empowerment has been at the heart of the strategy in the fight against poverty. The underprivileged live at the margin, eking out their daily sustenance. As has been repeatedly pointed out by various researches, including the one by Prof Abhijit Banerjee, who won his Nobel for his work in the field of issues related to poverty, the struggle at this level is to generate a surplus.

The ability to generate a surplus marks the difference between the one who is caught in the vicious cycle of poverty from the one who has moved on into the prosperity cycle. How does one generate a surplus? The simple logic is that she who has something left after taking care of daily needs—saving, in other words--is in a position to generate a surplus. The crux of the issue, therefore, lies in the answer to the question as to how this can be achieved by someone who barely makes her daily sustenance.

The only way to make the poor generate a surplus – to produce enough to create a marketable surplus – is to provide access to capital. The logic that has been missed for a very long time is the self-sustaining nature of poverty. This has been the major reason why poverty dogs the Indian economy.

A way out of the issue was sought through the subsidy route. It was thought that if the basic consumption needs of the poor are subsidised, they would probably be able to generate the needed surplus to free themselves from the grip of poverty. But the outcome has not been measurably satisfactory.

The other innovative route was seen in microloans through joint liability groups. I have discussed the merits of this route many a time in my previous blogs. But as it bears repetition, I will just add that this route creates a joint responsibility for creating a surplus. The members of the group are jointly responsible for paying the loan back and a failure by one will not be benignly tolerated by others as the onus, then, will devolve on the group.

It's now an accepted fact that this route--by creating access to funds and creating awareness about the productive deployment of funds--is proving to be more fruitful than others in fighting poverty. At the forefront, as an instrument of this fight, is the microfinance industry. Compared with other financial channels, this is a relatively new industry that saw a structured birth in India after 2011. Customer addition was at 16 per cent CAGR in September 2019, according to the MFIN industry data published in the 31st Micrometer, an MFIN industry publication.

The success says all. To get the poor come out of the dilemma of whether to sell their produce and starve or not starve and thereby stay in the perpetual vicious cycle of poverty, we need to include all of them in the microloan map.




The journey from micro-finance to small enterprise while keeping the growth momentum alive is not an easy path to travel. The challenge starts with the entrepreneur herself. In micro-enterprises, almost without exception, the entrepreneur is the owner, labour and accountant ̶ all rolled into one person. As the business grows, so does the workload.

The paradox of growth and growth itself becoming a hurdle sets in immediately. As the earning stream starts, the need to appropriate the entire earning for consumption increases. From my experience of working with micro- and small-enterprises, I have seen that this is the first critical juncture that decides the future of such enterprises.

The paradox of growth for a micro-enterprise lies in balancing personal needs against business needs. A micro-entrepreneur starts her enterprise at an earning level that is barely sustainable. Therefore, any earning growth at that stage has a high propensity to get appropriated into consumption. At times, the appropriation may be so intense as to even defy the first principle of business – "meet your cost obligations before dipping your fingers into the cashbox".

This has two consequences: a) the entrepreneur concerned cannot save up for expansion and b) her inability to balance the two forces sinks her into debt.

From the outside, it might sound trivial yet, trust me, this is a crucial differentiator between success and failure at this stage.

Sometimes, growth itself becomes another hurdle. This also is an interesting issue as the micro-enterprise sets on the growth path that could take it to the next level—a small-scale unit.

When an entrepreneur starts off at that level she gets ‘married’ to her business. As the tasks grow, she tends to absorb all tasks. At the initial stages, there is hardly any option. Without the money to hire people, an entrepreneur is forced to multitask and micro-manage.

However, with growth, in most cases, the entrepreneur keeps micro-managing the growing business the same way. Her inability to delegate, a habit that sticks, creates inflexibility in the business. It becomes so dependent on the entrepreneur that even the smallest decision can be held up if she falls ill.

Entrepreneurs often don’t realise how critical this can be to the business as it grows from micro to small. From strategy to production line, if an entrepreneur controls all decisions, she adds a big risk factor to the usual mix of business risks. Growth itself becomes a threat to business in all such cases. My advice to such entrepreneurs is to learn how to delegate from the early stages. Share decision responsibilities while retaining the reins.




Shabnam (name changed) had to suffer the pain of selling toys and snacks that she couldn’t afford for her child.

The youngest in a household of five siblings and being the only daughter, one would have thought that life for Shabnam would be easy and fun-filled. But the social construct and her family’s poverty dished out a different story for her.

The elder brothers and their wives treated her as a burden. Manual labourers all, Shabnam was seen as a burden in a household that struggled to live a day at a time. She was married off at an age in which she was supposed to be in school and to play with her friends.

Her husband’s family lived in a neighbouring village and was just as poor. The story for her, therefore, remained the same. Within a year, she had become the mother of a daughter. She couldn’t provide a son.

One day, she found her husband bringing home a second wife. The next thing she knew, she had the choice of going back to her parents with her daughter or get thrown out on the streets. With her daughter in mind, she chose to go back to her mother, knowing fully well the step-motherly treatment that awaited her.

Back in her parents’ home, her sisters-in-law treated her like their maid. But one of her brothers took pity and gave her Rs 200, a princely sum for them, to buy lozenges and sell to the boys of the village school.

She started off with her business. Being a mother, it was a pain not to be able to offer her daughter a lozenge that she was selling. Giving away one single piece would have meant that much less of earning. She was noticed by a local NGO involved in sustainable development work. She was given Rs 5000 to set up a roadside stall. She started selling tea, toast and omelettes as the customers demanded. While she couldn’t yet afford an egg for her daughter, she was selling omelettes to her customers, dreaming every day of a future in which her daughter would go to a proper school and wouldn’t have to face her plight.

Shabnam’s story doesn’t get repeated much. Subsequently, she got micro-loans, and her father gave her a small piece of land that couldn’t be put to any use by their reckoning. She built a tea stall on that plot and got a refrigerator from a soft drink multinational. She is saving. And yes, she gets to provide proper food to her daughter.

Hers has been a story of grit and leveraging every single bit of help to create a sustainable income stream. But there are a million others who suffer what no parent should suffer – not being able to offer even a simple lozenge to their child while selling it to others.




The carrot or the stick? What should one use to improve an employee’s performance? This question is as complicated as the chicken and egg conundrum.

Let me start by owning up that I am yet to come across a universally accepted solution to this unique issue. While influences on humans are more individualistic, an organisation cannot have different policies for different employees. To standardise, it is essential that we assume one and keep a close eye on its implications while staying nimble to make course corrections when necessary.

Performance has always been measured against an SOP and an associated target. Any deviation in the interim had met with actions that clearly conveyed the management’s disapproval. Appreciation was conveyed through the periodic appraisal process with either monetary rewards or career progression.

However, as we move from the industrial to information to the social engagement era, expectations of regular feedback have increased and team members want an immediate response to their actions. Monetary or career-related rewards, while still having the highest impact, are no longer the sole motivators.

We have a school of thought — and a strong one — advocating that negative feedback such as reprimands have a long-term adverse effect on employee morale and should be avoided at all costs. A disgruntled employee can spread negativity across the team. The best way of motivating the team is to ensure that there are proper incentive policies in place that drive the performance towards a positive impact.

But there is another school of thought that wants serial deviators to be brought back into the mainstream. Many organisations invest substantially in their employees to upgrade their skills, and parting ways is not always the best option. The group tends to advocate a balance between reprimand and incentive.

I also come across a new group of professionals who are totally against any incentive policy. This group feels that incentives are counterproductive to team building. Individual incentives make a team member selfish, as the person no longer wants to share knowledge or strategies of good performance with the rest. For team incentive, there is always a group of high performers who feel deprived if the reward is divided equally.

As I have said earlier, I do not have any definite stance on this critical question. It has always been the most complicated challenge in any entrepreneur’s life.

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