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Observe the poor May 22, 2008

Posted by bmcculley in Microfinance.
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DIsclaimer: This is a long post.  Sorry.  I don’t know how to do an excerpt with a “read more” link.  I also don’t know how to be brief.

My mentor told me to observe the poor. “Armed with this map, you will visit and observe the clients of microfinance, so that you do not forget why you are theorizing. Watch how they sit. Watch how they use their hands. Then, return and we will talk about it.” He handed back the detailed map that Katie had given me. I live on page 46, and so do thousands, maybe tens of thousands, of poor people. He had indicated a few intercrossing streets, just a three-minute walk north of my home, where he said I would find the poorest: a slum. I wondered if he knew the area personally, or if he could just tell.

That was Thursday evening the 15th. I woke Friday with the sun – 5:19 am – partially due to remaining jetlag but also simply because of the light and sounds that pierced my windows. I went to the bathroom, switched on the geeza – an electric personal water heater above the shower holding maybe five gallons – lay awake in my bed until 6:00 and then took a shower. After the shower, I called Katie and we talked until 8:00 – my planned start time. I had drawn my route on my map, complete with arrows. It seems silly now, but I thought of a study Bible cartographer marking Paul’s first journey.

My intention to start at 8:00 was thwarted by a sudden onset of weakness and nausea. I lay back down on the foot of my bed, lifted my shirt to expose my belly to the fan blown air, and rested. I’m impressed with the ceiling fans here. Very well balanced. At high speeds they wobble less than my bedroom fan in Georgia. At 8:55, I felt much better. I think I was just overheated. I no longer bother to turn on the geeza. A cold shower feels much better in this heat.

So, an hour late, I set out. I held my map book, folded back to the relevant page, and my small, white, three-ring binder that serves as my journal, from which I’d removed a page and paper-clipped it to the front for easy note taking. As I reached a microenterprise, I would mark the location on the map with a letter and begin my notes with the same letter. Right now, referring to the map is not necessary. I can still picture each shop vividly. I could find them without trouble. But all memory fades, and I may need to return for further study sometime and may need to distinguish between shops.

The only specific directives of observation given to me were those two mentioned before: “Watch how they sit. Watch how they use their hands.” I wasn’t convinced these were crucial factors – the secret keys to successful repayment of a microloan? – but I didn’t want to disappoint my mentor, so I tried to take special note of them. In addition, I noted the volume and nature of the inventory, any purchases I witnessed, how cash was handled, how production occurred, etc. I visited nine shops that morning. Below is a transcription of my notes, with additional reflective commentary in parentheses.

A – Small shop. Fewer wares than most. (Although this is my “first” shop, I had already seen many in my preceding two days since arriving. They’re nearly everywhere.) A young man sits and messes with his ringtones. There is a black phone in the shop. Many young women crowd into a taxi: at least seven in the backseat. They are wearing bright clothing. Several men stand around a car – a Suziki M****. (I deduced later that the word M****, masked to keep my location a bit more secure, is actually the dealership, not the model. I don’t know what the model was.) Two sit on a ledge – one is lying down. They are smoking. (Ok, admittedly not much commentary on the shop here, but that’s because I was new at this and the shop was uninteresting. The young man with the cellphone conducted no business. His shop was on the street with a tarp overhanging, rather than in a structure. Perhaps he was awaiting more inventory or still setting up – though the way he lifted the phone to his ear every few seconds between button pushes told me he was more interested in polyphonic goodness.)

B – A much more densely packed shop in the alley. (The first shop, A, was on the street. While this “alley” is on the map, one car could conceivably fit, though it may not be able to make turns and certainly couldn’t turn around – visions of the first Austin Powers dance in my head. There are smaller alleys, not even on the uber-map, jutting off this one that lead to residences.) A closed shop next door – Healing Point – confirms the address. 1/1, A**** 2nd Lane, ***. (Until this discovery, I wasn’t 100% sure I was correctly following my charted course.) Long strips of small packages – looking like individually wrapped condoms – are prevalent in shops, and this one is no different. I think [they are] detergent packets. Chips also hang in front. An older man sits on the step, chewing/eating something dark green. (Later, at another point in the city, I saw some green leaves soaking in a clay pot beside one of the fruit stands. I think this is what the older man was chewing. Perhaps it’s like tobacco.) He watches me watch him and write. A younger man sits behind the counter. I can’t see his hands. They are interested in me. (The older man left his step and came across the alley to look at my scribblings up close.) I will move on. (I don’t want to be a disturbance, but I know that I stand out and draw attention. As I walked away, a man approached the crowd that was beginning to form and announced “Hello. What is going on?” in English, though not especially directed to me. I just kept moving.)

C – The shopkeeper is on the phone. It rings again. A man bathes on his step with lots of lather. (It is a common sight to see men bathing around the manual water pumps, but don’t think they are naked. They typically wear long pieces of cloth that have been wrapped into something like shorts. As a result, I haven’t noticed much body odor here. Then again, there are plenty of other smells that probably dominate that one.) A woman washes clothes. (…by pounding the wet, sudsy article into the sidewalk, flipping the mass over, and repeating.) [The shopkeeper] sits on a stool in the small second room of his shop. This shop appears to have even more wares, even though it is farther from the main road. It doesn’t have an address. (When I returned to discuss my observations with my mentor, he agreed that urban poverty in unplanned cities – cities that grew from villages – is generally a function of distance from major roads. Near the epicenter, as you move away from the thoroughfares, the alleys get narrower and this is where the poorer people live – sometimes ten to a room. The paradox of more wares in a further shop indicates that, one, I wasn’t that far from the main road and I wasn’t yet in one of the narrow alleys, and, two, the principle is a generality and not expected to hold in all circumstances. Also, more wares are not necessarily a sign of less poverty since the shelf life of the product may be long. Failing to turn over his large inventory, he may be in debt to his supplier. I was looking for an address because I figured an established shop that could invest in permanent signage would indicate relative wealth.)

D – A shop operated by a woman. Down the [narrow side] alley, a man shouts at a bottomless baby. (This was the first exposure I had seen since arriving. I have since seen much more. I have seen the poor use the sidewalk as their toilet. I have seen just the leftovers. I have seen the not-so-poor use trashy areas as their urinal, with little regard for who might be able to see them. The baby’s older sibling repeated the admonition of the man – perhaps to put on some pants. The baby toddled off with his pacifier secure.) [The shopkeeper woman] is receiving a delivery – two huge white sacks. The delivery man bends under the weight. A woman weighs potatoes from a huge orange sack. The shopkeeper laughs loudly w/ glee. She hands the potatoes in a sack of folded newspaper. She opened a ledger book before allowing the buyer to leave. She has glasses. (My mentor said this was likely a grocery shop, and that the newspaper sacks were perhaps made by a family member, or perhaps purchased from a microenterprise that uses discarded newspaper as its input. He said that the woman may leave the shop when it comes time to cook for the family, assigning a child to man it. This family shop model might maximize revenue, not profit, because they have low labor costs and simply need cash flow.)

E – A man buys a detergent pack, and gives a few rupees to his son to buy a sweet. He can’t open the package. A young man (named Havarati) asks me about my business. I explain that I’m observing shops. He says he has a shop at [a northern] market. After they leave, I watch the shop. A man fake kicks his friend in the neck and forces him to smoke. (This was as amusing as it sounds. After displaying remarkable flexibility to effortlessly lift his foot to the side of his friend’s head, all while standing precariously on a narrow step, he waited until his friend had exhaled and put his cigarette to his friend’s lips by surprise. The friend gasped in shock and took a puff. It’s the scenario every drug-free child of the 80s fears – “What if I’m forced to smoke?” Nancy Reagan would be appalled. All this excitement occurs on the steps of the man’s shop.) Many crowd on the steps, such that I can’t see the owner. He sits low. Most do. I may not be able to observe from quite the planned distance. (This area of the side street was fairly wide – definitely wide enough for a car because my back was to a gated driveway. A motorcycle pulled up as I was finishing my observations.)

F – Finally, a different kind of shop. A tailor! M.S. Tailors is painted on the green shutters. He has a sewing machine but is hand-stitching. He pays me no mind – just watches his stitching. It looks like he’s stitching a button hole. Some kids stop to watch me write. They have a goat on a chain leash. (It tried to eat my notebook paper.) The shop owner sits on a stool. His shop is the first since the first where I can see his legs, so I can confirm it is a stool and not a chair. (You can see how seriously I took the command to “Watch how they sit.”) He has shirts hanging in the back of his shop [as inventory]. I don’t think he just mends. He is older – silver beginning to show in his hair. His hands are likely leathery from years of work, but I can’t see for sure. His legs cross beneath him.

G – A furniture maker! (I was really surprised to find this level of enterprise in what seemed like a long way from the main street.) “Reliable Construction” – 14 A A**** 2nd Lane. A large goat sits on the steps. There are three young men in the shop. One lies down. One sits on a drawer and sands another [drawer, not man] with a block. Another [man] sits (on his legs?) in the back and holds a sanding block while talking. Their construction looks reliable and skilled, though they are young. They pay me no mind. They haven’t accomplished much except talk in the past five minutes.

H – The most spacious shop yet. (I had turned a corner and was near a main street again.) I’ve been at it for about an hour, and I’m a little tempted to retire to [the coffee shop]. I have only visited one street in detail. There is room in the shop for several customers. Some kids gather. A young woman uses the shop’s red boxy telephone. I smile at the kids and they walk off a few feet chattering. The owner sits on a [white] plastic deck chair. He distributes change from a drawer and his shirt pocket. (This shop also had a spare light bulb socket hanging above. The transaction I witnessed was the sale of a compact fluorescent, which was shown to be in working order by inserting it in the socket before money changed hands.)

I – A leather goods mini-factory in a building! (Ok, I’m a nerd to get this excited, but I really was surprised and amazed to stumble on this shop. It was also fun to be exploring the fundamentals of microeconomics again.) When I look through the barred/chicken wired windows, they stop and stare back. The piles of shoe soles and thong straps in the window caught my attention. There are piles of finished shoes where a man was sitting. I also hear a small motor – perhaps a sewing machine. (Actually, it was the sound of the small motor that first caught my attention.) A man serves me chai in a small plastic cup. (I initially took the cup by the sides and the thin plastic walls did nothing to retain the heat. It all passed to my fingertips and I handed it back to the man to hold by the rim. Then I repositioned. My mentor had explained, after offering chai at our first meeting, that the boiled water in chai is sufficient to kill any bacteria that would harm my sheltered western digestive tract. So, I wasn’t very concerned taking chai from a stranger.) A man with a Muslim hat asked about my work. “Which department?” I said “Myself.” (That interaction actually immediately preceded the chai offering, and my answer seemed to satisfy.) They allow me to see the inside [of the mini-factory]. It is cool because of a large fan, if poorly lit. They have an assembly line for shoes. (One young man, perhaps age 18, draws with chalk on the back of a piece of leather. He cuts the outlines into rough rectangle sections and passes them to two young men for precise trimming. Those pieces are passed to another young man with a steel weight. He uses the weight against a slab to fold over the edges of the leather for a nice finished look. In this room, they offered me tobacco and I declined. I didn’t observe the next handoff, but I suspect the disparate pieces were sent upstairs for sewing. I saw at least two sewing machines and seamsters. When the leather was finished, it was sent back downstairs to be glued to an oversized rubber sole. That involved two people – one to apply glue to the rubber and one to apply the leather to the sole.) They appear to be ladies shoes. I don’t think these are the poorest. Perhaps the workers are. I asked, and they are men’s shoes. (So much for my fashion sense.) “Kyle’s” is the brand. (Changed, in case the brand is peculiar to my location.) Sandy would be impressed w/ the scissor skills of the youngest – cutting out the foam insoles. They are for a different shoe than the leather sandal being made. A boy pushes a younger boy on to me. I say [“It’s ok” in the local language]. The young man gluing the leather to the oversized sole motions. I think he’s telling me to tell the little kids to leave. However, perhaps he’s telling me to leave b/c immediately afterward, Kyle himself showed up. I stood from my pretzel-legged position and shook his hand. He had a long orange shirt and white pants. (He also had a graying beard. I said “Kyle?” and he nodded. However, that doesn’t mean he was the namesake, since I now know the brand is famous.) He motioned to the door – I said [“Thank you” in the local language] and left, before visiting the upstairs w/ multiple sewing machines. It was a little scary. I was vastly outnumbered – maybe ten to one – even if they were very friendly. I was removed from the safety of the street into a building. (At the very least, I was disrupting the productivity of Kyle’s employees, so it was reasonable for him to ask me to leave.) I took my invitation to exit as an opportunity to retreat (rather than retire) to [the coffee shop]. (Much of the entry above was written in the coffee shop in retrospect because of my hasty exit.)

So, that was my first official assignment of the summer. When I reported back to my mentor on Monday, he praised my keen observations and suggested I continue, though more casually. We talked for a couple hours and he answered some of my questions. He also suggested I choose a research question or two to focus on this summer (and beyond). More on that soon.

Microfinance – a primer May 5, 2008

Posted by bmcculley in Microfinance.
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Besides keeping family and friends assured of my well-being halfway around the world, one other purpose of this blog is to document my crash course in the practice of microfinance in South Asia. I’ve been in contact with Creditwatch (permanent link on the right) via their Chief Economist Dr. Rajesh Chakrabarti, former Georgia Tech Assistant Professor of Finance, now teaching at the Indian School of Business. He introduced me to Dr. Pradip Har, Director of Creditwatch. Over the summer, under Dr. Har’s indirect instruction and facilitation, I will be studying several methods of microfinance currently in place in South Asia.

Microfinance is more than just extending credit sustainably to the poor. In its broadest sense, it includes all desirable financial services (savings, counseling, insurance, investing, etc.). However, small loans (micro by western standards) constitute the most famous examples. The varying actors – lenders and borrowers – do much to distinguish the methods. Sometimes banks lend directly to individuals. Sometimes non-bank financial companies lend to groups of tenant farmers in joint liability. Often NGOs lend to groups of 10-20 women with their pooled savings as collateral. The business plan of the lender can also serve to differentiate things. Sometimes the lenders seek a profit. Other times it is the best kind of charity – helping the hard-worker help themselves (note the permanent Five Talents link also at the right).

It was at a Five Talents presentation a couple months ago that I learned of another amazing benefit of microfinance. When the poor are empowered to take charge of their lives financially and escape poverty; when they no longer go to the local loan shark charging 12 times the interest of the microfinance institution; when they are educated about money, business and have hope of providing a better future for their children; then they are much less susceptible to the lies of the trafficker who would take their children. Microfinance is tangibly helping to cut off the human supply lines to the evil trades of bonded slavery and the forced prostitution of minors.

I have much to learn, yet I’m very excited to take what little I know from reading and cement it in the context of real lives. I hope I get to meet the successful as well as the hopeful.  It’ll make for some great stories.

…the moon sees me May 1, 2008

Posted by bmcculley in Staying Connected.
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Chris Rice (not the URC Modeling manager at GEICO) has a song on his Amusing album called “I See the Moon”. It’s a song about a song- an old lullaby his mom used to sing about missing far away loved ones. His paraphrase chorus is

I see the moon, the moon sees me.
The moon sees the one that I want to see.
God bless the moon, and God bless me,
And God bless the one I’m longing to see.

That is, seeing the same moon can be a connecting point for friends around the world – “over the mountains, over the sea” as the original lullaby puts it.

As you follow this blog, it’s my hope that we stay connected. I want to share my experiences and impressions of South Asia, but I also want to hear your impressions and the things going on in your life. Please post comments. I have to approve them before they will appear on the site, so if you want something to be private, just say so in the comment and I’ll keep it hidden.

Also, please take a moment to look at the moon, wherever you are.