I gobbled this book in two sittings.
And that does not happen often. With all the school work at that, something’s gotta be extra special to capture my short attention span like that. This is one of them.
A Fistful of Rice by Vikram Akula. The tagline says “My Unexpected Quest to end Poverty Through Profitability”. Just right up my alley. As Vikram talks about his gung-ho vision to eradicate poverty through the ways of microfinancing, I was transported to my admission interview to another business school a lifetime ago. The year was 2007, recently finding out about Kiva.org, I asked the interviewer what the school has to offer on getting to know more of microfinancing for developing countries. The woman on the other side of the pond promptly responded “We have a student run club that is focusing on that. And in fact there’s this and this events coming up” she was then fired out a series of events and how she happened to be involved in that club. I could hear the excitement in her voice, and I was sold. Too bad it didn’t work out.
My fascination toward Kiva though, and microfinancing, stayed for a while and just like many other interests, took a back seat when life took charge with its dramas and happenings. Now I am out of the so called developing country that I somehow have a soft spot for and yet again I find myself attracted to ways and things that perhaps I could get my hands dirty for the better of the said country.
Vikram Akula, who was born and raised in the States, had managed to find his way back to India in his twenties, to the dismay of her parents who did all they might to get their butts out of India, and poverty. Within 10 years, Vikram had managed to develop a microfinancing system that lend out hundreds of millions dollar (Extrapolated from the $75 million dollar lent out when they only had 300 thousands members) for 8 millions households in India. Averaged at 5 people a house, that’s 40 million people. Forty. Million. Indonesia has 250 million people. 40 millions. Is a lot. He managed that by doing a for profit loan for the poor. Yes. For-profit. And the CEO got paid a decent 100 US grand. So it’s functioning just like any other typical business. Only this time it’s tapping the poor. Tapping? Or helping? Exploiting? Or helping? Now hear this out.. Practically the main points I consider to be very exciting from my novice if not naive point of view.
SKS (the name of his organization/ microfinancing body) charges 28% per year for the loans. Outrageous! You say. Even your sharky credit card only charges 15%. Or 18% if you’ve been bad. Ok. First, the organization had to borrow money at 11% from the bank, the ‘distribution’ costs reaching out the millions people was around 12%, obligatory reserve for default at 3% and to make it profitable for the investors, there need to be a 3% profit. (I’m not sure why 3% is attractive but I’m not gonna argue here….) Second, the rate of loan paid in time is 99.4% (from the book). The rate of default is much much smaller than your average commercial banking. Third and most importantly, the people who pay these 28% interest can actually still make good profit since they do not pay tax, they usually use their family to work, hence not much cost of workers, and turn around of profit is very quick since there’s no infrastructure costs as the business types are usually stalls/shops infront of the house or even just getting a goat to later sell the offsprings and milk. It works! And considering the next best option is a much higher rate loanshark or a faraway commercial bank that require extra (as in super extra) money to reach, SKS could’ve charged a lot higher than 28%, yet they don’t.
There, I just gave out the meat of the book.
But hey. There’s more! Ha.
So how did they get 99.4% loan payment? Following Garmeen’s footsteps, they divided the women into groups of 5. If one of them failed to pay up, none of them gets a loan until the loan is paid. Smart, eh? How does SKS cover so many regions, households and still growing and growing? So Vikram practically looked into Starbucks, McDonalds for operational cues. Two months loan officers on the job training, enforcing punctuality on the women (who were specifically chosen to minimize risk, btw) whenever they entered a new region. And many more. I don’t know how much I can spill before somebody slap me on the wrist for copyright infringement. All I have to say is that Bill Gates, Warren Buffet and a gig at McKinsey made a quick but impactful stint in the book. And that’s just a ‘Whoa…… ‘ moment.
Never been good in keeping something amazing a secret, I just feel this huge urge to share this! And if you had the slightest interest in fighting poverty (Yes, calling all beauty pageant contestants out there), read this book if it’s the only book you’ll read this year.
Though to be fair, I had a bit of doubt with the last few pages of the book when SKS started incorporating business into their ‘distribution’ system that reach a previously untapped market. They started bringing cellphone companies, retail chain focused in the traditional market etc into the picture, obviously tapping the readily available distribution network. However, no harm seem to be done when he then started talking how they talked to the villagers on their needs before working with the industry at large in tailoring the products to them. All is well in my book.
I am going to leave you with a quote from the book “That was the moment I knew, beyond doubt, what I would do when I got older: I wanted to come back to India and help people like those boys get out of poverty. Why should I have an easy, comfortable life while others, by luck of the draw, had to struggle so hard to survive?” He said that after seeing two boys eating leftover food from a cousin’s wedding in India.
He was seven.
Fourteen years later, he really did come back. And within ten years he was well on his way getting way more than two boys out of poverty.
Where are you. Where you want to be. And what are you doing about it.
Vikram seemed to have figured it all out at the age of seven. Crystal Clear Vision.
How about you?
More details from Amazon.