Where Angels Prey (4 page)

Prof Raman speaks in a measured tone as he meticulously exposes strategies used by MFIs that are both legally and ethically unsound. Despite his dispassionate tone, his disillusionment and anger come through clearly in his words.

“It was in the years following 2006 that foreign funds started flowing heavily into the MFIs, allowing further expansion of operations and the size of client portfolios. Consequent to the profit margins achieved by the MFIs, the value of their scrips skyrocketed in the market. However, the poor women clients, who had borne the risk of the business originally by way of investing their savings in the NGO, did not benefit in the least from this success story.

The shares owned by the women had been transferred back to the original promoters or employees of the MFI within a few years of their issuance at a far lower price. Compare that to the killing that the promoters and MFI employees subsequently made by selling the shares to the venture capitalists, investment firms, etc. These are some of the negative aspects of commercialization, and I rest my case.”

Bob is so busy making frantic notes that he doesn’t observe Kamineni’s reaction to Prof Raman’s observations. However, as the latter walks past Prasad Kamineni to resume his seat after the presentation, Bob notices Kamineni’s body language stiffen, even as he courteously nods at the professor.

“At the risk of sounding a bit crass, Wall Street’s interest in the microfinance sector seems to me a bit like a butcher investing in animal shelters.”

Wall Street observer Tom Moody has the audience tittering with his opening remark. Kamineni and other CIRIG officials are not amused.

In an attempt at striking a conciliatory note, Moody clarifies that
,
given the huge numbers of poor people in India, the sector offers a hugely viable and secure investment opportunity to the capital markets, particularly in the face of the global economic crisis.

“The microfinance sector, particularly in India, can even be called the sunrise industry. The global economic crisis had investors scrambling to uncover new, emerging opportunities that offered high returns on investment, besides. Given its spectacular showing, the microfinance sector presented itself as that opportunity. The poor seemed to be the most bank-worthy and proved to be a somewhat safe and secure investment alternative. India scored primarily because globally, it had the largest captive market of the poor. The spectacular success achieved by the East African Microfinance Bank IPO in Kenya in the months just preceding the crisis may have also encouraged investors who believed that this was a route that the Indian microfinance sector could well take in the years to come.”

Flashing a half apologetic smile at Kamineni, he adds,

“While SAMMAAN’s hugely successful IPO seems to lend credence to Wall Street’s belief, a careful analysis appears to indicate that the numbers just don’t add up and are out of sync with market peers. Stated differently, while the earning prospects at SAMMAAN are indeed attractive, I am not sure that they justify such a high valuation.”

Bob is watching Kamineni intently now, but the latter remains impassive right through Moody’s speech.

When Vincent Bell, a senior analyst with Enterprise Global, which has invested heavily in Indian microfinance, describes the inflow of commercial capital into the sector as a heaven-sent opportunity, Bob has a sudden mental image of Wall Street knights, dressed in flowing capes and astride white steeds, riding hard to bail out a sector in distress.... Blame it on a reporter’s natural cynicism!

James Henderson, a former central banker, remarks that policy makers all over the world are recognizing that financial exclusion is a risk to political stability.

“The financial sector is similar to a three-legged stool, where, if the law is the seat, regulations are the legs. One leg is safety and soundness, another is profitability and innovation, and the third is consumer protection. Each leg is equally strong and essential to maintaining balance. It is through effective and balanced regulations and rules that the system has retained its integrity, its edge and its ability to deliver capital where it is needed. The general consensus is that regulations should allow this more risky activity to be profitable. In that context, even countries like Brazil, Kenya, the Philippines and several others are light years ahead of India”

‘REGULATORYFRAMEWORK?’

Bob scribbles these words down before thickly underlining them. What about it? How much had it benefited Kamineni in achieving the numbers that he had? Bob mentally shakes himself as he realizes that he is already allowing himself to be influenced and forming opinions before even getting started.

“He may not be a knight in shining armour but there is no reason to conclude that he is a bluebeard!” he tells himself.

As the proceedings draw to a close, Bob walks up to Kamineni, who is already surrounded by a group of people who want more of his time and attention. Kamineni does not seem inclined to linger and excuses himself, saying he has a flight back home later in the evening. Unwilling to let go of the opportunity of an introduction, Bob presses his way forward and hands his business card to Kamineni. The name of the publication he represents does the trick, like always. Kamineni offers Bob an ingratiatingly charming smile as he pleads his inability to offer him time immediately.

Bob nods in understanding.

“Not a problem at all, Mr Kamineni. You’ll be pleased to know that I will be in India in a few days’ time. We are working on a story on the stupendous growth of the Indian microfinance sector and, in particular, the investments flowing in from the capital markets. Obviously, the success story of your IPO will figure prominently in the article. I would be most grateful if you can spare time for me in India. And maybe introduce me to your clientele, particularly those women who got a taste of corporate India when they accompanied you to the Bombay stock exchange!”

“That is wonderful news. We would be delighted to have you over at SAMMAAN. Look forward to meeting you in India then.”

He thrusts his own business card into Bob’s hands.

“This card has my direct number. Call me as soon as
you get to Hyderabad and we will be happy to offer you our hospitality.”

Bob thanks him and the two men shake hands before Kamineni leaves, accompanied by CIRIG officials.

As he looks around the room, Bob notices Tom Moody and Prof Raman deep in conversation with a small group of others. Dissonant voices always add colour and strength to a story. As Bob approaches the duo, he can’t help but feel pleased that his story seems to be taking shape even before he has left American shores.

“We need to go to the Principal Secretary’s office!”

It is his driver’s voice that alerts Rashid to his surroundings. A fairly senior bureaucrat, Rashid looks his part—with his bush shirt and corpulent presence. He is surprised. The government insignia on his car’s license plates usually guarantees smooth entry into any official premises.

The policeman tries to peer past the driver to catch a glimpse of Rashid.

“Saab is the CEO of TERP!”

The policeman is clearly puzzled.

“Arre… Trust for Eradication of Rural Poverty. Please don’t waste
Saab’s
time. He has to go to the CM’s house next!”

The mention of the Chief Minister works like magic and the car is allowed to pass through.

“What is happening, Gopal? Why is there such heightened security?”

The driver is surprised. Has his boss not heard the news?

“Sir, there is that procession today against the suicides,
na
! Also, they are threatening to bomb the Secretariat.”

Of course, the papers had carried reports. Rashid had been so busy mulling over the upcoming meeting that he had forgotten all about it. The Principal Secretary was a very business like man and did not appreciate his time being wasted. And certainly not at a moment like this.

The Andhra Pradesh Secretariat building is a rather fine piece of architecture, just a few years short of celebrating its centenary. It is the seat of power in the state, both legislative and bureaucratic. A high security zone even on normal days, today it resembles a fortress. There is a whole battalion of security personnel milling all over the place, doing a thorough check of anyone who attempts to enter the premises.

Rashid jumps out of the car even as it slows down before Sampreethi, the Secretariat’s L block, and dashes into the building, hurriedly flashing his ID at the security personnel who try to stop him. On normal occasions, he would have flexed his bureaucratic muscles a bit. But there is hardly time for that today.

Rashid glances at his watch repeatedly as he makes his way into the Principal Secretary’s office, where he is greeted by Subbalakshmi Srinivas, the efficient administrative assistant.

“Does he have someone with him or can I go in?”

She shakes her head.

“He’s waiting for you. Please go right in.”

He groans inwardly and hurries into the inner chamber.

The Principal Secretary, Maruti Rao, better known as MR, stands by the window, gazing at the large expanse of sun-dappled water that represents the Hussain Sagar Lake. Rashid doubts if he is appreciating the scenic view, though, since a frown mars his forehead. The frown deepens when
he sees Rashid enter.

“Sorry, sir. But the traffic jam was terrible. And then all that security! Sir, I believe the traffic has been disrupted in several parts of the city thanks to the procession of anti-MFI protestors. Of course, the intelligence report that Maoists may be mingling with the crowds and trying to bomb the secretariat, sir....”

Rashid comes to a halt as he realizes he is babbling. Maruti Rao looks irritated.

“We need to rush if we are to get to the CM’s house in time. No time for a chat. You can update me on our way there.”

With that, MR quickly walks out of his room with Rashid almost running behind him to keep pace.

They are soon seated in the car and heading towards the Chief Minister’s official bungalow.

“So, what is the latest?”

“There have been reports of four more in the last two days, sir!”

MR frowns.

“Why am I not surprised?”

“Sir, the MFIs are fully to blame. But the Maoists are, of course, working at the grassroots to rouse popular sentiment against the government on this. There has to be some swift and hard action.”

MR sighs before answering.

“We need to have a watertight case that will stand in a court of law.”

“Sir, the families of the victims would surely be willing to testify. In the guise of inclusion, they have allowed their greed to prevail and pushed more than fifty people to kill themselves so far!”

“Be careful, Rashid. You head a rival programme and the MFI lobby will only accuse you of misrepresenting facts.”

“Sir, the SHG model of microcredit has been in existence for over two decades. And we have no personal or vested interest in any case.”

“That is not how they will see it. They will come up with their own line of argument in any case, including how the government is trying to crush free enterprise to further its own obsolete programmes.”

The CM’s bungalow, a beautiful white building on Raj Bhavan Road, comes into sight and this puts an end to the discussion.

The guards have already been intimated of their visit and they wave the car through.

As the two wait in the anteroom to the CM’s office, MR points to the files that Rashid is carrying.

“I hope you are carrying documentary proof of one or two of these MFI-related suicide cases?”

“Yes, sir. There is information on as many as seven of them here.”

MR nods as they wait to be summoned in. He hopes the documentary evidence will convince the CM of the need for urgent action.

Rashid starts flipping through his papers like a student outside an examination hall. MR can’t help but feel somewhat amused at his junior colleague’s obvious nervousness.

Just then, the door opens and the CM’s private secretary beckons them to enter.

Rashid jumps, almost dropping the file in a hurry. MR gives him a calming look before walking into the room.

The CM and his cabinet colleague, the Rural Development Minister, are already seated. The officials greet them with the customary deference before gratefully taking their seats.

The CM, a former footballer, is of athletic build. The rural development minister, who belongs to the moneylender community, is prosperously plump.

“How did things turn so bad all of a sudden? Why was the administration at the ground level not alert to the goings on?” asks the CM.

“Sir, it is obviously not an overnight phenomenon. The MFIs’ activities have clearly gone unchecked for some time now, thanks to the perception that they are our partners in change.”

The CM is perceptibly disturbed.

“I understand that development initiatives need to be able to sustain themselves. But growing at the cost of the very lives that they swore to better?”

MR is only too aware of the CM’s way with words. That and his oratory skills have won him both hearts and votes in the last thirty years of his political career.

“True, sir. The situation is quite grim and getting worse as we speak. And of course the Maoist threat is only compounding it.”

The CM glances at MR at the mention of the Maoists. He knows of his history with them. MR was among the seven officers kidnapped by Maoists while visiting a village in their stronghold territory where a dam was to be constructed. He had successfully negotiated their freedom, with some help from the government, of course, but was since identified as someone who had some influence with them. In fact, writing a book on the incident was on MR’s post-retirement agenda, but that would have to wait for another three years.

“So what are we going to do about them? And I mean the suicides, of course.”

MR looks up as the CM shoots the question at him. Nodding his head, he points to Rashid.

“Sir, Rashid will apprise you of the situation first. He has prepared detailed case studies of the seven suicides triggered by the actions of the MFIs. He is ready with a presentation.”

Rashid is taken aback. He had thought he would be required to chip in with a few odd statistics here and there. He never expected to have to make a presentation!

“Sir...that is...the situation is very grim, sir.”

The CM cuts in rather abruptly.

“I don’t think we have time for long stories. Keep it quick and short. We need to be looking at corrective actions.”

Rashid is half relieved that he will not be expected to expound at length.

“Sir, nine people have died in Warangal and Ranga Reddy districts due to harassment by MFI agents.”

The Rural Development Minister decides to offer an opinion.

“These MFIs are like leeches that bleed people dry. First, they over-lend and then they arm-twist people into repaying the loans at really high rates of interest. They even put my moneylending caste to shame!”

The CM is not particularly impressed by the minister’s efforts to seek brownie points for his caste. But when caste and coalitions are what help governments in India stay in power, it is important to ignore irrelevant details.

“Looks like the government and the Maoists are fighting the same evil for a change, eh Marutigaru?”

The CM looks at MR with a half-smile. MR nods, fully aware that the CM is trying to test his allegiance. Who is he to disappoint him?

“Indeed sir! The Maoists have a history of locking horns with informal financiers. That was made amply clear to us all those years ago when they took us captive at Gurtedu. But of course, the onus is now ours.”

The CM acknowledges this with a nod before gesturing to Rashid to continue.

“Sir, in almost all the cases, there has been an instance of over and multiple lending, There has been indiscriminate lending and gross violations of all ground-level procedures, sir.”

The CM turns to MR.

“I want a report from across the state. Get your teams in all the districts to file a report on all such instances within their purview within the next 48 hours.”

He turns back to Rashid.

“I want TERP to come up with a comprehensive report on the causes of the suicides.”

He finally turns to his cabinet colleague to issue another set of directives.

“Consult with the Ministry of Law on the status of the existing laws that apply to MFIs. Get hold of the Memorandum and Articles for some of these MFIs and have our legal experts study them. Talk to the Federal Banking Regulator and see what they advise on treating the MFIs as common moneylenders under these circumstances.”

He returns his attention to MR.

“About this threat...have they targeted the MFIs directly? Or are they reserving all their ire for the government?”

“Sir, they have issued a direct threat to them. Here, I have a copy of a newspaper report on it.”

The CM seems perturbed as he scans the report.

“Have you alerted the police and the home ministry on this? We need to provide the MFIs security whatever be their crimes.”

The CM closes his eyes and pinches the bridge of his nose.

“And keep the media at bay until we come up with a plan of action.”