May 19-23, 2008. Visit to Warangal & Khammam

I’m going to be honest - this blog submission will be long. So, for those of you who are not family or friend, or who lack adequate time, I’ve typed up an abridged version of our last week in India for your convenience: money, spices, parasites, motorcycles, tribal languages, buffalo, a Hindu goddess of death and destruction, and a 1000 year old Kakatiyan fortress which was cut out of black basalt and which was visited by Marco Polo. Here are some photos as well:










Here is a less abridged version of the week:
On Monday, Danashree, the woman coordinating my visit with SKS, informed me that I would get an extensive look at the company’s field operations. Apparently that meant that Jenny and I would be traveling 100 miles into the Indian wild to visit SKS branches in rural parts of Andhra Pradesh (AP). Our taxi picked us up from Cosy Homes (our guesthouse) and drove four and a half hours to Warangal.

The wildest part about the Indian wild was the freeway. If there is one law on the road, it is: Survive. Rickshaws, taxis, buses, trucks, motorcycles and ox-drawn carts all compete for space, whether it’s in the right lane, the wrong lane, or on the shoulder. Everybody is honking, and swerving around vehicles in front of them. Our taxi driver was a 21 year old kid, and was particularly aggressive. He would swerve into the opposite lane, and, just when we thought there was no hope of getting back into our lane, he would sneak in before a truck could nab us. I became very familiar with the term “Road King,” which is painted on the front of every Tata brand truck.

We arrived in Warangal at 11:30p.m., and checked into the Hotel Ratna. Our room was barebones, and came with a couple of lizards and a trail of ants leading to the drawers. Jenny had never showered in a bathroom that didn’t have some sort of separation between the shower and the toilet (maybe in Japan), but she got used to it and, by the end of our stay, she was commenting on how efficient the setup was.

Before diving into our experiences in the field, let me briefly explain the way SKS works, and why it is growing so rapidly. There are somewhere around 200 million “very poor” and “ultra poor” citizens in India alone. These people have no access to loans from banks, because they have no collateral. As several other microfinance institutions have done, SKS forms groups of these people, who all count on each other. If one person defaults on a loan, the entire group, consisting of 5 women, has to pay back the loan. If the group can’t pay back the defaulted loan, the larger “center”, consisting of 4-8 groups, has to come up with the money. Basically, the financial obligation keeps getting spread out thinner and thinner until it is not difficult to collect the loan. As a result, SKS has a 99.6% repayment rate. SKS works through women, because it is a goal of theirs to empower the female population in India. Many times, the woman’s husband is actually the one with the business idea. However, if his wife is the financier, there is more of a balance of power in the relationship. One of the stipulations of the loans is that the money must all be put to use within four weeks, or else the remaining money is taken back. This way, all of SKS’ resources are put to use more efficiently, and the women are not burdened with more financial obligation than they can bear.

Two of the things that really set SKS apart are their profit model, and their aggressiveness in organizing new groups, centers, branches, etc. Other microfinance institutions (MFIs), who acquire their funds through grants, donations, government, etc., have given many loans to the poor. Because the funding runs out, however, or the value of the money circulated depreciates, the MFIs are not terribly self-sustainable. SKS charges 12.5% interest on loans, and turns a profit. The money that they create is put back into the process. SKS has taken out loans from Citibank, ING, and a long list of other financial institutions, who pretty much rest assured that their loans will be paid back. One benefit of the profit model is that SKS can incentivize their sales team. Sales people get commission for setting up new groups, so they have a personal financial interest in combating poverty. There is a pretty amazing system of checks and balances in place so that corruption, bribery, etc. doesn’t occur. Another benefit of the profit model, is that about 50% of the sales force are sons, daughters, brothers, or sisters of one of the borrowers. Borrower and employee obviously aren’t responsible for each other in the system, but the direct employing of the poor is another way that SKS helps fight poverty.

So the field is set up like this: A group (5 women) is part of a center (4-8 groups),which is part of a branch (25-40 centers), which is part of a unit (4-6 branches) which is part of an area (10 units). A field staff member recruits the groups. He can then be promoted numerous times. Typically within two years, s/he will be recruited to branch manager, then to unit manager, then to assistant area manager. In rare cases, s/he could eventually become area manager, but that position is typically reserved for MBA graduates. The company has around 2 million borrowers, and it grew by 200% last year. They feel like this rate of growth is sustainable for at least the next few years. They have really only begun to saturate (that may even be a strong word) one of India’s 30 states. They are the largest and fastest growing MFI in India, and this is all only the beginning. They are just starting to roll out health and life insurance, educational loans, home loans, access to quality consumer goods at low prices, access to cellular phones, etc. I was honestly blown away by it all.

So, now that I’ve probably bored everybody but Mom away from the blog, let me get back to our first day in Warangal…

On our first day, Shailesh, a recent MBA graduate and an Area Manager in training, and Mahesh, the local Branch Manager, picked us up from the Hotel Ratna at 6:30 a.m. (everything starts early here because the loan disbursements take place outside and it gets up to 115 degrees in the afternoon). These two guys were honestly lifesavers. Shailesh speaks Hindi, English, French and something else, and Mahesh speaks Telugu and Hindi. The local dialect in Andhra Pradesh is Telugu, so between them, they could communicate between us and each other. Because Jenny and I had spent 2700 rupees the night before on a taxi from Hyderabad (a rip off apparently), we weren’t about to spend any more on a taxi to take us from place to place. We jumped on the back of Shailesh and Mahesh’s motorcycles and rode with them.

We first went to see the local branch office, which was in the upstairs room of a very average apartment building (The company is working for the poor, so office space isn’t lavish. Their main office in Hyderabad is in a house, not a big glass office building). We met the field staff, who were all leaving for their center meetings, and then joined one of them for a nearby center meeting, held on the roof of one of the women’s houses. We didn’t really know what to expect, so when we climbed the stairs and came out on the roof, to 30 women in saris, sitting in a semicircle, Jenny and I both had one of those, “I can’t believe I’m actually here” moments. The center had waited for us, and when we sat down, they began to recite the SKS pledge, which basically states that they will attend the weekly meetings and pay on time, that they will not accept bribes, and that they will use their loans for profit building purposes only (no weddings, parties, etc). After the pledge, we watched as the women received loans, made payments, presented new loan applications, etc. Shailesh explained everything to us, and answered all of our questions. We attended two more center meetings in the morning, and saw more of the branch office operations.

At night we went to Bahdrakali Temple, and drove around inside of Warangal Fort, which once housed members and leaders of the Kakatiya civilization. The fort walls are massive pieces of black basalt, and a sign near the middle of the fort explains that Marco Polo marveled at the civilization, their fort and its carvings, when he passed through India. The fort still houses thousands of people, and apparently people have to authorize occasional governmental checks of their property because pieces of gold are sporadically found in yards and fields throughout the fort.

On Wednesday, after attending three more center meetings in the morning, Mahesh, Shailesh, Jenny and I went back to Warangal Fort to get a better look at the sculptures and carvings. They really were some of the most intricate carvings I’d ever seen. There were small six-inch carvings of elephants that were detailed down to the beads on the harnesses. It was all pretty incredible, especially because it was out in the middle of the Indian countryside. We obviously would never have visited the fort and seen the carvings if not for our visit with SKS.
In the afternoon and evening we drove from Warangal to Khammam. We took in the sunset as we drove, and watched Indian farmers cutting hay in the fields. Khammam was a little greener than Warangal, and not nearly as crowded. It was nice to feel like we could walk around the streets and not worry about getting hit by a “Road King”.

On Thursday, we went around with members of the area office to the different center meetings, and saw how the area manager works to solve the problems created by the death of a borrowers husband SKS writes off the loan for these women, and returns the principal that the women have paid back. In the evening, we attended a training meeting in which all of the field staff from the surrounding area were being trained how to implement a new life insurance product into the system. The meeting was in Telugu, with a Hindi interpreter. The meeting also lasted three hours longer than Jenny and I had anticipated. It was one of the less thrilling experiences of our trip.

On Friday, we visited several more center meetings and the local area and branch office, before taking off for Hyderabad. One of the centers we visited was about 25 miles outside of Khammam, and as we drove in, we could tell that few (if any) Americans had ever been there. Most of the town members followed the taxi and watched as we got out of the car. We sat on a members roof, and while the meeting was going on, one of the area staff told me that the women were speaking in a tribal language that only their assigned field assistant knew. It’s a long way from English to Hindi to Telugu to that tribal language, I thought. Back at the branch office, the branch staff gave Jenny and me a plastic statue of Rama and a female goddess (Shiva?) as a gift, and had us write about our visit in a notebook. Our experiences in Warangal and Khammam were some of the most unforgettable of our lives.

Because of the harrowing experience of driving through the night with an unfamiliar taxi driver on Indian freeways, Jenny and I decided to travel back to Hyderabad by bus in the afternoon, with two familiar SKS staff members. It actually just worked out that way, but Jenny and I were very grateful that it did. We were able to relax on the bus, and we actually got to see all of the countryside that we had missed on our way to Warangal. The staff at Cosy Homes were excited to see us again, and they made us a pile of steamed rice with paneer masala and butter naan for dinner.