What is mictrofinance?

I have been sick last few days. I have not had chance to enjoy the free four days. Folks here are planning some new year bash. I can't be part of that either. Not the best four days i would have had liked them to be.

However, For few months, i have been reading up on Microfinance and meeting folks in mfi industry. It's something of alternate studies that i'm getting to do at IIMA. One of the things i love doing at IIMA. Ofcourse, studies at IIMA is also valuable learning experience and has been greatest of value adds to me.

So here is the snippet of mfi (from my report on risks in MFI) the way i see...

So what is microfinance?

Microfinance is a buzzword nowadays. With Mohd. Unis receiving noble prize, everyone is keen to know what is happening in the microfinance world. Everyone wants to know what is so revolutionary about microfinance that a relatively unknown person can be rewarded noble prize. Everyone wants to know if microfinance can become catalyst to poverty eradication.

Anyone can guess from the word what micro finance can be. When financial transactions are performed in small (micro) amount, the activity is called microfinance. Though microfinance is synonymous with lending activity, microfinance also covers savings and insurance.

Micro itself is a relative word to the countries and geographies. In USA, micro activity could be upto $1000 or a bit more, but in India, the activity of size more than $100 (~ Rs. 4500) can also be considered above the limit of micro. Though stress in microfinance is on smaller amount transaction spreading across larger population.

So in short, microfinance is small amount lending, savings and insurance and other such financial activities for larger masses. Also for India a point to note is that the microfinance activities are mainly active in the villages, the urban areas have not seen much of the action.

Google search

We were talking about Google search an their competitors yesterday.

It seems vivisumo and few others are expected to give Google search run for their money. Not a single large competitor was discussed in our 5-10 minutes long debate. Is it surprising? May be not. When companies become large they looose their innovation/invention focus and become revenue oriented and become a just another competitor than a challanger.

It would be great to see how yahoo's panama stacks up against google.

One quick advise to search innovators...
why can't they have search that can be sorted by date (of creation of information), no of hits .. etc etc . Has no one told them it would be a great help?

Review: Fortune at the bottom of the pyramid : CKP

I bought the book Fortune at the bottom of the pyramid on Nov ’03. I went to Crossword at inorbit to buy “crossing the chasm” by Jeffery Moore. The helper could not find the book CC, so I bought the book BOP with the intention of reading it in longer flight to Vancouver and coming back flight from SFO to Mumbai.

I did not even finish half of the book in the journey, but finally I’m done reading main book. I’m yet to read the case studies though and watch videos accompanied in the CD.

Fortune at the bottom of the pyramid by CKP is a fantastic collection of success stories of companies working with masses in developing and under developed countries. The companies are few MNEs, Large national companies, family owned business and small regional players.

The book explores the commonalities of their success through case studies conducted by CKP’s students. These commonalities are not something path breaking, they are common sense often ignored by companies wanting to do business with masses (largely poor) in the under developed countries.

CKP rightfully argues that any company wanting to do business in India and Brazil will have to change the approaches it has been taking to reach out to mass customers who are at the bottom of the pyramid.

CKP sights examples of Reliance, ITC, Arvind eye hospital, HLL, ICICI, Casa Bahia, CEMEX to show the diversities of the companies, target masses and yet commonalities that has allowed them to be successful, innovators, leaders and growth seekers not to forget the path-breakers with first mover advantage.

Some of the important readings from Fortune at BOP

1. there is money to be made at BOP
2. Access to BOP is tough
3. BOP consumers accept advanced technology readily
4. Creating capacity ( or I would call it seeing capacity) – the onus is on the seller, the capacity is unrealized
5. The services and goods needed are not the same as traditional markets
6. dignity and choice along with trust needs to be built and offered by the seller

CKP also speaks about 12 principles of reaching out to market; most of these principles are truly relevant at least to Indian market. I cannot speak about Brazil, Mexico and other part of world, as I have not been there.

1. price performance is very important – BOP customers demand more
2. innovations (may) requires hybrid solutions – advance technologies + rapidly evolving infrastructure
3. the markets are large they need to be scalable to masses
4. resource conservation is a way of life in developing countries
5. deep understanding of functionality is must not just form
6. process innovations are just as critical as product innovations
7. self deskilling by seller is also must to design for unskilled markets
8. educating the customer on product usage may be required, be prepared for it
9. products must work in hostile environments (eg: changing voltages)
10. deep knowledge of diversity (language, skills, experiential level etc) is must to design a robust product
11. innovation of distribution method may also be required if one does not exist
12. Extensible feature and function would give a competitive advantage

I can go on and write about each case and learning from each of those cases. The book contains detailed case studies of each and some more companies I mentioned that I am yet to read.

Reading the short book my impression: it is a must read for anyone who wants to cater to the masses market. Each of the rules I mentioned is key to designing good and services for masses. It is not a strategy book but the knowledge and experience adds to strategy.

It helps tobe in india who you know

Few days ago, My car was involved in an accident. Driver ran into the accident. I was not in the car and had no knowledge of it for sometime. As soon as i got to know about the accident, I went to the scene with Saurabh. The pic is from his camera.

I was to go to Bhavnagar and Rajkot the same week. The whole of my vacation week was wasted in getting car fixed. Except i got to go see the innovators.

I spent few days getting the quotes. The quote varied widely in price. Guess what?, the range of quotes were Rs.5K, Rs. 8K, Rs. 13K, Rs.25 K and Rs.35K.

The first three quotes were from folks whom I knew. It really helps in India who you know. The information asymmetry here is a big problem. However, if you know some one who knows the way around, life becomes easy.

Innovators Dilemma : To continue innovate or to innovate and build a business around it

I met two innovators yesterday. Their innovations are not in the high tech area. In India these innovators are called grass root innovators. They attack the problem that the big businesses have not solved. Either out of ignorance or not considering it sustainable the big businesses have not reached out to them. Out of these two, one is an innovator turned entrepreneur and another is an innovator who continues (and wants) to be an innovator.

Mr. Mansukhbhai is an innovator who has spent about 10+ year working on innovating a machine that allows better/faster/cheaper cotton striping and he has made a business out of making this machine. He has turnover of good healthy 1+ crores a year.

The other gentleman, Mr. A patel is in an innovator who loves to be an innovator He is not as rich in Rs. term as Mr. Mansukhbhai, but Mr A has innovated to solve common problems of life such as natural water cooler that cools the air and allows to drink cooler water. Mr. A has a lot of other innovations under his belt and continues to innovate.

There were some commonalities between both these gentlemen. Both began by saying the did not go to school (traditional) to learn innovation, both were not that grateful to the system who may have helped them in creating their ideas to real life products, both had fear of mistrust working with others, both seemed to be good at understanding problems of people they worked with but when it came to the their potential markets they did not know the world around, both attributed their success to their hardship and their learning from school of life and not traditional system.

While there were commonalities among both there were also individualities of each of these innovators, they had their own way of developing idea(s) and enjoying success. They had their own attitude and aspirations. They had their own way of looking at a problem and solving the problem. They also had their own way of picking and choosing innovations.

More on mansukhbhai and Mr A Patel to follow…

Is recession in offing, the debate continues?

Few days ago, I wrote about is the recession coming? The same topic has been debated all over the world; at the business news shows, business forums and the WSJs of the world.

Some of the key indicators that shows recession is in offing are ..

• US is still the largest economy of the world with a ¼ of the world consumption across the board - any sneeze to US may affect globally
• US dependency on china is ever increasing and is highest at $2.2 Billion trade gap
• Depreciating dollar v/s Chinese yuan and the Euro
• Fed is increasing interest rate but the mortgage rates and the long term rates for the 30y bond remains the same (low)
• Inflation is still a concern
• Consumer confidence is taking swings up and down
• Us automakers are not doing so well
• The biggest of all, the housing market is certainly sluggish if not called on death bed
• Oil is also a large concern, US may be largest of the ethanol consumers but it’s oil dependency has not been reduced. With India and china competing for the same reserve, the situation has not bettered if not worsen.
• Possible WTO case against china – a backlash from china could be bad for world economy.

Is US Fed treating the symptom (Inflation)?

A month ago, FOMC said they are worried about inflation and it is a matter of concern. This week, at FOMC meet fed said that they are worried about housing market slowdown. It sounds like feds worried about too many things yet they are symptoms. Underlying cause could be something else. Could the cause be something else?

Could it be Liquidity in the market. Is it that global markets, a stronger force than ever before would have changed the rules of game? Private equity is at peak, hedge funds are going long in the market. Is it that Feds can't easily control Liquidity anymore by just tightening the interest rates? Do they have to do something else to curb the liquidity in the market?

Or is it just fears and markets are taking it’s course and recession is no where in the sight?

We(indian) are resilient people (Are we?)

I read few days ago in times of India that most mumbaikar feel proud about leaving past tragedies such as bomb blast and two floods in two years. They cherish their so called resiliency. I question it.

My colleague, Col Ajay Sharma shared an article (attached) and the though got triggered again, are we resiiant or ignorant about pain of family of people who died in bomb blast, of families who lost lives and everything in floods.

Is it not an irony? Our country celebrates forgetting all that happened in floods and the bomb blast and cherishes the feeling of forgetting. We pride on moving on. But by not remembering such things and learning lessons, not honoring heros are we becoming ignorant individualistic community.

We all like to talk about Katrina and compare that to Mumbai floods. But in USA some one is still working on finding why it happened. Another Katrina has not happened since than in US, partly cause of mother nature blessings and partly because of their preparedness. But in Mumbai the story was different we had it once again this yeat. And if we just stay ignorant it'll be one more and many more.

You decide, are we resilient in this aspect or are we not?

--- Col Ajay Sharma’s forward …

Star versus 'Star'

The body of Major Manish Pitambare, who was shot dead at Anantnag , was cremated with full military honours at Thane on Wednesday

On Tuesday a news swept across all the news channels 'Sanjay Datt relieved by the court'. 'Sirf Munna Not a bhai' '13 saal ka vanvaas khatam' 'alhough found guilty for possession of armory, Sanjay can breath sigh of relief as all the TADA charges against him are withdrawn'

And then many experts like Salman khan saying 'He is a good person. In other news, Parliament was mad at Indian team for performing bad; Greg chapel said something .....; Bomb scare in gorakhpoor express; and Shah Rukh Khan replaces Big B in KBC and Sonia asked PM to consider reducing petroleum prices. But most of the emphasis was given on Sanjay Datt's "phoenix like" comeback from the ashes of terrorist charges.

Surfing through the channels, one news on BBC startled me, it read, Hisbul Mujahidin's Most wanted terrorist 'Sohel Faisal' killed in anantnag, India. Indian Major leading the operation lost his life in the process. Four others are injured.

It was past midnight, I started visiting the Indian channels, the ones who are 'Sabse TEZ', but Sanjubaba was still ruling. They were telling How Sanjubaba pleaded to the court saying 'I am the sole bread earner for my family' 'I have a daughter who is studying in US who will look after her'. And then they showed how sanjubaba was not wearing his lucky blue shirt while he was hearing the verdict. Also how he went to every temple and prayed for last some months. A suspect in Mumbai bomb blasts, convicted under armory act.....was being made into a hero.

Major Manish H Pitambare got the information from his sources about the terrorists' whereabouts. Wasting no time he attacked the camp killed the Hisbul mujahidin's suprimo and in the process lost his life..... To the bullets fired from an AK47......

He has a wife and a daughter (just like sanjubaba), age .....18 months.

Major Manish never said 'I have a daughter' ...before he took the decision to attack the terrorist hide out in the darkest of nights?

He never thought about having a family and he being the bread earner

No news channel covered this since they were too busy hyping a former drug addict, an actor in real and reel life, a suspect who's linked to bomb blasts which killed hundreds. Their aim was to show how he defied the TADA charges and they were so successful that his conviction in possession of armory had no meaning. They also concluded that his parents in heaven must be happy and proud of him......

Parents of Major Pitambare are still on this earth and they have to live rest of their lives without their beloved son. His daughter won't ever see her papa again.

Definition of a Star has changed Major... it really has. So sanjubaba always has a gun in every one of his movies then in real life if he has an AK47 then what's the big deal we are used to see him with some ammunition without it he's just a 49yr old hero so he did it for us.....so that we feel normal;

Even if one of the bullets from one of such AK47's took a Real Star's life ........

but sir bole toh ..... tension nahi leneka. Aapun ko thoda bura laga. Apun pure din aapke baarein mein socha. Sach bataun kya aapun dukhi matlab ki senty ho gaya isliye ye likha.

Abhi aaj paper mein aaya ki woh parliament mein 'lagey raho munnabhai' dikhane wale ....us din dekhna bhai...... pure parliament mein sab saarein sansad honge. koi walk out nahi karega par bhai uska koi gurantee nahi hai kya pata .....agar hamare sansad indian cricket team ke selection pe lad padein?..... . Kya bhaai point hain naa ? AAre haan apun ko yaad aaya ....woh sansad pe hamla karnewala koi afzal tha ....use abhi fasi hui ...ya nahi hui .....jaane do apun ko kya...... kuch log marein ..... sansad ko bachatein hue ...but bhai unki daughters toh india mein hich sikhti hain naa aapke jaise amerika mein nahi toh tension nahi leneka.........

--- end of forward…

Karma capitalism

Recently, I came across a businessweek article called Karma capitalism. The article reminded me of a book I read when I would be about10 or 15. The book was called "Theory of Karma".

Theory of Karma was written in Gujarati titled "Karma no siddhant". The book was an easy interpretation of Geeta, the text Hindu's consider holy. It's other thing only few hindus follow the book.

Some of the key learning from the "theory of karma" that i still cherish and try to use are

1. Every action has equal reaction (but the reaction may not come right away) so if you do bad thing and get away now, it does not mean you may not have to pay later.
2. Actions matter but your thoughts also matter, it's equally important to think good as to do good.
3. be selfless and don't get impulses cloud your judgment.

It looks like the new thing in US business is following bhagvvad geeta. The BW article says "Art of War" is thing of the past and karma is what business leaders are listening to. One of the reason the BW author thinks this is happening is, the % of the education community in US schools. About 10% of professors at places such as wharton, kellogs are of Indian decent.

It'll be fun to see how far does the karma theory goes. And does it become next art of war.

Oil from sands ..

If some one were to tell you that people are generating oil (the petrol/gasoline) from the sand. Yes sand! I may not have believed it if I had not watched video on CNN. Yes, in Canada they are generating oil from the sands.

In Alberta Canada, there is this belt of soil that has oil in it. As if some one spilled oil on a bed of soil. Yes there is a refinery there that separates oil of out the sand and sells it.

When the oil reached $40 a barrel the oilsands became viable and now it’s a profitable option at $60 a barrel. The current capacity is 250K barrel per day and expected to go up to 3 million barrel per day in 2012.

Ofcourse, it’s drop in a bucket to world requirement but one more innovative (or may be not so innovative) source of energy(oil)

see the full story

Is recession coming ??

In finance and economics, we learn that when long market shows depressive rates than short ones it's a sign of recession...

But if recession is coming, why is wall street having 10 out 11 monthly increases of indices?

Oh yes one more thing, the US$ to Euro rate is not doing good either. which mean some one does not like US treasury and that some one is dumping it in the market or US is printing more and more money :-)

A paradox ....

mind mapping

About four five month's ago, I got introduced to mind mapping technique. A technique that allows to structure the thoughts that we carry in our mind. I also use it for things like analyzing cases that we do the problems that i face or things i plan to do.

One googling i found a tool called freemind. Freemind is an opensource tool. Since than putting thoughts in a mindmap has been fun. The tool is though a primitive tool compared to commercially available tools in the marekt, but does the trick.

Review "Accidental investment banker"

Accidental investment banker, a good book to know about how investment banking industry has operated in last decade, especially on wall street. For an outsider like me, the book gives a birds eye view on what’s the industry like? What’s the job role like.

The book explores history of Goldman Sachs and Morgan Stanely the two venerable firms on the street. For an MBA student with interest in finance, The feeling was like speaking to an I banker and having candid conversation on what’s good in the job what’s bad in the job, what’s working and what’s not working these days.

According to author, Sidney Weinberg (on whom I plan to read soon) and his relationship banking may be gone form the industry. But I believe it’s still one of the important aspects of any business. I know at least dozens of folks who would vouch for this.

The events such as Merry Meekar's, Curry's and Phill purcel's gives another insight on how the wall street is not different than our world (exception ofcourse money). The incidents of NJ senator Corazon and the sec and Henry Paulson are also interesting and knowing the looser side of today’s winners.

On the missing part I felt like it was one person’s point of view who had villains identified strongly and who also had his heros. Though full credit to author on identifying weaknesses of his heros right upfront.

The book also felt a bit drag on morgen Stanley chapters. May be because there were more misses than hits there. Impact of 9/11 was not much talked. Though,


Overall a book to read …