RDVP Class 10/18/2004

Srinivas Sukumar substituted in for Stuart today (who was presenting at a conference at Harvard). The readings were on the topic of India and included:

1. India's Soybean Farmers Join the Global Village (NY Times Jan 1, 2004)
   
2. Debts & Droughts Drive India's Farmers to Despair (NY Times June 6, 2004)
   
3. The Best Job in Town by Katherine Boo, The New Yorker
   

We started off by describing how we had connected with/learned from the readings; Dipak mentioned the inequality observed in wealth and IT access. For me, it was the attitude toward debt and the extremes of failed repayment (suicide); following on that theme, Jose said that it was more tragic because in many cases the failure was due to circumstances beyond the farmers' control, like weather. Sukumar said that the personal nature of the transactions, which impacted the entire family's reputation, was part of the reason default was taken so seriously. Carlos spoke from his personal experience that as long as you continue to make an effort to repay, lenders will generally work with you. Margarita speculated that people needed more "successful" narratives that showed alternatives when conditions turned bad. Sumkumar cautioned that microfinance might create a bubble of money that could burst later, having unintended consequences.

We talked a bit about suicide as a response, with Mans pointing out that suicide benefits paid to the family sets up the wrong incentive, and if it really is weather that's problematic, they should try to shift the risk to larger entities that could bear it (e.g., weather insurance). Sukumar pointed out that Grameen typically does forgive loans under disaster conditions, that should be built in as part of the cost. Dipak argued that suicide was not unique to loan defaults, but a larger part of the fatalistic culture. Greg wondered whether India had an equivalent of the "Horatio Alger" (building ones' self up from nothing) story. Sukumar said there was, but it was more community oriented (the hero lifted his whole village with him). Helen pointed out that in China, as in India, people's caste or class really did limit their aspirations and capabilities. Durga pointed out that there's no social security in India, which Sukumar followed up to say that the equivalent of Chapter 11 didn't exist either.

Renee shifted the topic to talk about the cultural impact of offshoring, which Sukumar agreed was huge: the $200 monthly income for call center reps is a huge amount of disposable income, since the cost of living with parents is effectively 0. Loren Berlin, a guest visiting from UNC and with experience in working at ACCION in microfinance, agreed with Margarita's assertion that people will do things that aren't in their own economic interest in order to protet their family. Loren took the point even farther, saying that people favored the familiar, and some were strongly anti-Grameen, just because it was different/unfamiliar. This was evidence for Sukumar's point that it's hard to change culture/government, and that to have successful projects, we needed to understand the systems in place and work within them.

Greg argued for a market mechanism to provide coordination among non-profits. Not the same market that for-profits live in, but one in which the beneficiaries can give feedback showing which organizations best serve their needs. We considered alternative ways of achieving that coordination, with Loren pointing out that some foundations (e.g., Rockefeller) are, by virtue of the programs they fund and the collaboration they "encourage" among their portfolio of donees. Sukumar pointed out that the coordination could happen at 3 levels:

1. Foundation / Funder
2. NGO's or
3. Customer / Served community

Margarita said that the lack of shared knowledge among NGO's, the rarity of mergers, and the competition for funding led to a fragmentation that hurt progress in solving the issues. Carlos raised concerns that the market doesn't provide all the answers; people get cut out of the market, and we shouldn't assume that everywhere else has the same mobility or market development that we experience in the US. Mans echoed Greg's point that this "market" for non-profits was different than the economic one in which for-profit firms compete. He said we need some token "pieces of paper" or "squirrels" which people can award to good NGO's who can then demonstrate to funders that they're meeting the true needs of the community.

We moved from there to the blurring line between profits and non-profits, with Sukumar talking about the "for benefit" model where organizations move resources and people and delivering service in a cost-effective way, but plow any profits back into the operation to increase the scope of its served population. (e.g., Aravind Eye Hospital). Greg had seen a couple instances of non-profit foundations having for-profit subsidiaries that use accumulated net income to fund the non-profit's mission. Loren said that Accion was rolling out an investment fund, and countries like Peru have social investment funds that communities can tap for their projects.

The profit/non-profit blur also shares a competition/cooperation side. Greg said that competition works well in the "economic" market, where driving cost out benefits society. In the more "creative" markets, however, cooperation is key, and traditional market mechanisms don't provide the right incentives. Brij Kothari (RDVP '04) claimed that funders were responsible for being the judge for competition among NGO's and should clear out the field by not funding the ineffective ones. Dipak stated that they were--the foundations are paying attention to NGO's overhead rates and performance on metrics. Greg pointed out that much of the challenge behind collaboration is the high cost of communication; as tools get better, access increases and tariffs go down, we should see more cooperation. Indeed, the open source movement is an example of that. Carlos warned against extrapolating from open source, claiming that the circumstances (millions of beneficiaries from a project) are too uncommon to generalize. Sukumar agreed with the basic point that access to information is critical, and the tendency of projects to focus on Infrastructure rather than Information is unfortunate. Renee said that it was not just making the information available, but seeing how people USED it. Dipak said that the spread of TV has raised people's expectations.

In response to a question from Durga, Sukumar said that it takes 20 years to get from market creation to profit, (10 years of tech development, 10 years of roll-out to scale) so a company that wants to benefit either needs to have deep pockets to fund 20 years of losses, or a buisnes model that lets the company make profits in various niches along the way.