Village Diary of a Heretic Banker

mine.

Introduction

I shall now therefore humbly propose my own thoughts, which I hope will not be liable to the least objection.

Jonathan Swift

This book is more a diary rather than an instructive guide. It has my own thoughts, but let me frankly admit they are liable to as many objections as possible. Fallibility has been the mark of all adventurers and I must honestly admit I had a fair share of disasters. My diary provides the flavour of my personal experiences as a rural banker, my professional safari through the jungles of my bank’s vast and deep network and its engagement with the poor in the remote crannies of India. It may serve as an antidote to much of the euphoria generated these days about the development programmes and the benefits of economic liberalization. But let me assure that it is a very faithful account.

I am a committed believer in the economic philosophy that guarantees equitable and just development. I have tried to faithfully portray the Indian rural development scene and document my personal experiences in a wide range of roles - grassroots worker, field officer, program manager, policy maker and academic. I have presented the facts plainly without any colour or gloss of ideology. I run the risk of rebuke from many quarters for my chilling candour. But I had grown so weary of the inane sophistry that marked the stance of my bosses, peers and fellow academics that I had become desperate for furrowing a new path.

My journey through rural India and through my three decade career in development finance was both rough and stormy as I kept rebelling against traditional approaches. The goal of my heretical act of questioning certain conventional assumptions was to shed light on the actual practices of the development sector that were not delivering the desired results and to prompt changes that could skew the odds in favour of the poor. My diary drifts and tacks like a sailboat but has a clear leitmotif. The seed around which the book crystallises is the intrinsic tenacity and grit of poor rural women that can be harnessed into energetic powerhouses to drive our rural society onto the road to prosperity. The book carries in its pages my poignant nostalgia for villages but it is also tinged at places with rage and despair.

Rural banking in India has been a great hurdle race ever since the government nationalised major commercial banks and mandated them to focus their thrust on villages. The official commandment to public banks was not just about barefoot banking, but was a directive to run into unfamiliar terrains to establish their flag posts. The expectations were that this would bring about both an economic and social revolution. The players were untrained and unwilling participants in the marathon. Their captains were equally unprepared. But the umpire was stubborn and unrelenting. He brought more players into the race and changed the rules of the game many times. At some stages, it appeared as if he himself had lost interest in the race. But the race continues, proceeding in different directions. The roadmap of financial sector reforms bypassed rural banking time and again despite repeated exordiums from developments pundits. Meanwhile the reconciled barefoot bankers continued to walk amidst the debris of the populist programmes. The official emphasis on financial inclusion keeps re-emerging in policy documents but little earnestness is shown by bankers in pursuing it on account of a plethora of constraints.

The eighties of the last century saw an unplanned and indiscriminate expansion of bank branches most of which later became an economic deadweight. Between 1977 and 1990, the Reserve Bank of India mandated that a commercial bank could open a new branch in a location that already had bank branches only if it opened four in locations with no branches. This regulation was part of a social banking program that tried to expand access to financial services in rural areas. The additional burden arising out of the mass opening of rural bank branches adversely affected the resilience and viability of banks. The extension of commercial bank branches was inspired by the need to fill credit gaps in the rural economy which the uneven and inadequate development of the cooperative movement had left. The politicians believe banks can bring economic revolution through rural credit, which is just like expecting a midwife to deliver a baby. In a developing country, it is not enough just to provide credit for production. Production itself must be increased with the adopting of improved technology.

The branches mushroomed and there was an exponential increase of rural branches of banks. Villages began to be courted by bankers. This phenomena gave rise to a popular adage: A village could be known as uninhabitable only if it did not have a branch of a bank. Such was the explosion of rural banking. The depth and outreach of the banking network in the late seventies grew at a sizzling pace on account of tough government mandates. This was at a time when the transport and communication infrastructure in the country was abysmally weak, unlike today when mobile phones, email, SMS and Skype enable you to communicate anywhere any time.

Financial market imperfections that limit access to finance are key in most development programmes. Lack of access to finance is often the critical mechanism behind both persistent income inequality and slow economic growth. Hence financial sector reforms that promote broader access to financial services should be at the core of the development agenda.

Providing better financial access to the non poor micro and small entrepreneurs can have a strongly favourable indirect effect on the poor. Spillover effects of financial developments are likely to be significant. Hence, to promote pro-poor growth, it is important to broaden the focus of attention of finance for improving access for all who are excluded.

While the positive social and economic impacts of nationalization were quite evident, the experiment was also an eye opening lesson in the disaster that mindless bureaucratic programmes can become. Most development programmes are a grim reminder of how mechanically trying to meet targets can completely undermine the integrity of a veritable economic and social revolution to such an extent that a counter-revolution can be set into motion. But we refuse to learn lessons particularly because populist politicians consider it a sure way to burnish their electoral fortunes.

The poor have skills, are politically conscious, and are aware of the need for schooling for the children and taking care of their health and also planning a future for their families. However, their lack of income makes it impossible for them to monetise their skills and thereby improve the quality of their life. Providing investment capital for additional income generation can unlock their potential to solve many, if not all, of the manifestations of poverty. This has to be supplemented by skill development, proper marketing support and appropriate monetary compensation for their skills and produce.

During my efforts in development finance and rural development work for over three decades, I have seen projects and strategies succeed as well as fail. I have seen misguided project designs, poor implementation and squandering of large sums of money. But I have also witnessed incredible achievements. When development works well, it can transform lives by providing the underprivileged the capital and knowledge that can open up opportunities for them and reduce their poverty.

The development community seems constantly and restlessly in search of a singular approach that will solve poverty, unveiling new buzzwords every few years only to toss them aside. The fundamental flaw with this system is that each new approach fails to break out of the underlying technocratic and specialized paradigm.

We must understand that there is no precooked blueprint for replication. Individuals can make a difference in fighting poverty when ways are found to institutionalize creative ideas. Replication of successful models continues to be a guiding mantra of development programmes. But an associated caveat when examining specific experiences with replication in mind is the personal charisma of inspirational leaders and organisational synergies, both of which are not readily transferable. We must respect the fundamental truth that charisma and passion cannot be transfused. We need to have charismatic and highly motivated leaders to lead programmes. It is equally important that we must appropriately reward and recognise good performance so as to further enhance the quality of leadership. Leadership finally remains the most crucial element of the success of any new initiative. There is vast difference in being a rural banker by choice and in being one by chance. So is the case with any other development institution or agency. Imposing of unwilling leaders has been the bane of most development programmes.

There is a glut of information on rural development. There is now a mountain of scholarship and a huge circuit in operation: dissecting statistics, furrowing through the libraries, wracking the brains and pontificating. Most development finance academics are researchers with little real world experience. Leadership in rural development programmes is a clinical art and people need experience. The fact is that what works in Haryana does not seem to work well in Bihar. What works in India is not automatically transferable to Peru and vice versa. It is not certain as to the exact reasons for the different disparities, but can be mainly attributed to cultural, social, economic and structural differences.

Consultants have for long been the key people in policy mechanics and there have been many incidences of glaring overdependence on them. It is extremely necessary to moderate the reports and prescriptions of consultants with ground realities that can be ascertained from grassroots leaders. There are those who have been making points that if the consultants are so confident of their advice, and plans, why they themselves don’t execute it. The old adage about teachers gets changed slightly: Those who can, do; those who cannot, consult. I feel consultants must seek a more active engagement with the poor so that they have a truly authentic feel of the reality. We must remove our academic blinkers to get an accurate picture of the society we want to serve.

I have been inspired mostly by people who have followed their printed blasts with long tiring journeys in inhospitable terrain to demonstrate their solidarity with these people. Consultants have never lived down the description of them in Robert Tomasend’s Up the Organization as people who borrow your watch in order to tell you the time. There are too many consultants willing to give advice most of which is descriptive and very rarely contains prescriptions. This is the hubris of the consultant who believes he can wear down the problems with sheer studiousness. Consultants are like burnished glass: they live their whole lives off the reflected glory of the organisations whom they were privileged to provide consultancy. They keep on using the word holistic very liberally like the way the environmentalists use the word sustainable. It’s the world’s most pretentious word I have ever come across. Consultants have abused its original connotation and stripped it of its dignified place in development lexicon.

Nevertheless, consultants do have a role to play. There is always something of continuing value about bringing an outsider in. If the consultant is experienced, he or she can sniff out problems. A wide knowledge of the way many other organizations have coped with similar problems can help provide solutions that the organizations by themselves could never have stumbled across. In addition, consultants can act as disseminators to the real world of the latest thinking in the academic and practitioners’ worlds and of their own often considerable inner research.

Poverty reduction is not a discipline. You can’t get somebody from a university who has done a Ph.D. in poverty reduction. Nor is there a talisman for eradicating poverty. It may not be possible to locate a common denominator for a successful rural manager. It may also not be possible to lay down a standard blueprint for a rural development programme. From their own experience, rural banking veterans can spell out the ingredients that one may need to be successful. But the new managers shall have to work out their own recipes for blending these ingredients in the right proportions. There is so much cultural diversity even in neighbouring villages that a blueprint for one village may need a drastic change for a village next to it.

The policy makers who dominate most discussions on the problems of the poor keep waxing rhapsodic about the great possibilities of their plans and strategies serving each sentence like an expertly bowled cricket ball. They release their epigrams like pet doves. The palatial décor of the conference rooms is what is talked about in ostentatious tea breaks. Conferences are substituted for work. Perquisites are substituted for truly earned rewards — and there are no penalties for corruption, laziness and divisive rabble-rousing. Adept at diplomacy and wordplay, these leaders obscure the real concerns behind a fog of jargon and euphemism.

No wonder the villages distrust all these urbanised gentry who jeep themselves into the village, complete with their pageantry, exhorting the local population to produce fewer babies and more food for the benefit of their urban brethren. There is no mention of the exploitative prices for their produce, that has been the key cause of their impoverishment.They deliver these messages to the villages, and hastily jeep their way back to their urban environment. The policy wonks and mandarins keep barricading themselves against the political or journalistic assaults with their trained staff ringfencing them. They would make a valiant and often brilliant pitch to sway the young lot but mostly the pitch would be badly off key. Much disservice has been done to the cause of rural development on account of this schizoid approach: alternating engagement and withdrawal. It is easy to dish out lectures on development finance; but it is an arduous experience to practice it.

Though much rural development is welcomed by the whole population and does not involve outsiders in personal risk, much also involves conflicts of interest where the weak are dominated, exploited and cheated by the powerful. Where that happens, many of the rural poor and those who work with and for them face abuse, discrimination and danger; the bravest and most direct are often threatened; some are assaulted; and some are even killed. There is much innovation and even heroism and sacrifice by staff of banks and development agencies known only to villagers and other staff, which is not only left anonymous but undocumented. Even when programme results are reported, the names and actions of the individuals who made the process successful on the ground are seldom known.

We should really applaud and honour ordinary men and women, who have nobody to back them, yet are working doggedly to keep projects rolling. Nobody can fathom the mental and physical suffering they and their families are undergoing. I doubt whether outsiders like me, protected by passport, police and the state, can be justified in urging others to risk their livelihoods, their families’ well-being, or their lives. To take risks for oneself is one thing. To encourage others to do so is quite another. As Adlai Stevenson has so pithily commented: It is easier to fight for principles than to live up to them.

The failure in practice of so many normal professional solutions points to re-examination of the perceptions and priorities of professionals — those normal, non-poor, urban-based elites who define poverty and what should be done about it. The other is to examine the perceptions and priorities of the poor themselves. Neither has received much attention in anti-poverty discussions. Most professionals — politicians, bureaucrats, scientists, academics and others, and including ourselves — have plunged into debate and action in the middle, without questioning what has brought us there, what we are conditioned to see and to believe, or what others see and believe. We have had neither time nor incentive to examine ourselves and our predispositions, nor that of the poor.

There are development panjandrums and authors and writers on rural development and planning who arrogate to themselves the right to hand out certificates on best practices. These people shut themselves from the world and give lengthy opinions on the basis of reports and statistics appearing in journals. I have found even senior executives turning into glib talkers on poverty. Even while publicly proclaiming their commitment to a public cause, they don’t hesitate to speak in a different voice at internal forums.

The best advice I can proffer to young managers is not to drain themselves in sterile debates, but to keep focussed on action at the grassroots:

Much to cast down, much to build, much to restore;

Let the work not delay, time and the arm not waste;

Let the clay be dug from the pit, let the saw cut the stone,

Let the fire not be quenched in the forge.

(Choruses from the Rock – T.S. Eliot)

I firmly believe it is possible to eliminate poverty in our country—provided we re-examine the received wisdom of our assumptions. The poor are poor not because they are unskilled or illiterate but because they cannot retain the returns of their labour. They neither own capital, nor does anyone give them access to credit, except on the most unreasonable terms. They live on the edge, in constant fear of a catastrophe or tragedy. But they have no insurance because insurance companies consider them a losing proposition. The State’s social safety nets are not only grossly inadequate but mired in corruption and bureaucratic red tape.

We need to bring in the poor to the conversation. Interventions that take the end user into account almost always have better success rates than top down decision-making ones. Many social enterprises are still not talking enough to their poor customers to find out what they really want, and too often policy makers have no idea what their end beneficiaries really need. Let us hope that the expanding use of technology across all segments of society will help to create platforms for exchange of ideas, so that people can better express their needs and there is a more meaningful exchange of information,.

The message in this book is that there is no grand, universal formula for poverty reduction. The battle has to be fought on several fronts and what works in one place does not necessarily work everywhere. The way forward lies in grassroots field experiments for understanding the causal relationships in poor people’s behaviour and in learning by doing. My faith in poor people’s ability to climb out of the poverty rut is unshakeable and my core belief is gradualism. I believe that lasting social change most often—and perhaps always—comes slowly rather than in a burst of revolutionary fervour. It is this belief that has shaped my work. I also believe that lasting change can be effected only when women are given equal opportunities for financial empowerment. If you’re poor, you’re disadvantaged; but if you’re poor and also a woman, you are doubly disadvantaged. A poor rural women’s status is best portrayed in Maya Angelou’s poignant words:

I’ve got the children to tend

The clothes to mend

The floor to mop

The food to shop

Then the chicken to feed

The garden to weed

I’ve got shirts to press

The tots to dress

The cane to be cut

I got a clean up this hut

Then see about the sick

And the cotton to pick

Shine on me, sunshine

Rain on me, rain

Fall softly, dewdrops

And cool my brow again

In this book, I have said things which may sound critical, wounding, and even angry. In expiation, I can say that I have been as bitter about many societies, including my own. I do not mean to be hurtful to a warm and generous people who have never been other than kind to me; wherein I have seen things cruel and hostile it is because they are cruel and hostile to India itself.

Speaking out, I felt, would relieve me of a load of agitated thoughts and emotions.

Speak, your lips are free.

Speak, it is your own tongue.

Speak, it is your own body.

Speak, your life is still yours.

See how in the blacksmith’s shop

The flame burns wild, the iron glows red;

The locks open their jaws, And every chain begins to break.

(Faiz Ahmed Faiz)

This is not to say that I have been estranged from my bosses or peers. I set out to write this diary because I wanted to tell the story rather than let it ferment into discontent. I firmly believe that my younger colleagues would be able to put the lessons herein to good worth. The more important part, however, lies in the opportunity this diary affords to publicly acknowledge the debt I owe to so many people: villagers, volunteers and the staff of banks, government and development agencies who put up with some of my wild adventures in the rural planet and made serious attempts to give them both workable and doable shape.

This book is built entirely on anecdotal evidence. I never wanted to submerge the central idea in a deluge of statistics nor did I want to swamp the readers with mind-boggling figures. These figures are available in tomes and tomes of government reports already. I was keener to profile the trajectory of individual lives of grit, tenacity, determination, and above all, the honesty which is what has given the women in this book the status of star borrowers in the eyes of bankers. There is a minefield of data, but it has not been able to generate the sort of wisdom that can guide us meaningfully. To quote T.S.