Creditable Lives: Microfinance, Development, and Financial Risk in India

By Sohini Kar

B.A., Columbia University, 2004

A.M., University of Chicago, 2006

A.M., Brown University, 2009

A Dissertation Submitted in Partial Fulfillment of the

Requirements for the Degree of Doctor of Philosophy

in the Department of Anthropology at Brown University

Providence, Rhode Island

May 2013

©Copyright 2013 by Sohini Kar

This dissertation by Sohini Kar is accepted in its present form by the Department of Anthropology as satisfying the dissertation requirement for the degree of Doctor of Philosophy.

Date______Lina Fruzzetti, Advisor

Recommend to the Graduate Council

Date______Catherine Lutz, Reader

Date______Kay Warren, Reader

Date______Patrick Heller, Reader

Approved by the Graduate Council

Date______Peter Weber, Dean of the Graduate School

iii Curriculum Vitae

Sohini Kar Department of Anthropology Brown University Providence, RI 02912 [email protected] 312-451-3632

Education Ph.D. 2013 Brown University, Providence, RI Anthropology

Dissertation: Creditable Lives: Microfinance, Development and Financial Risk in India Committee: Dr. Lina Fruzzetti (Chair), Dr. Catherine Lutz, Dr. Kay Warren

M.A. 2009 Brown University, Providence RI Anthropology

M.A. 2006 The University of Chicago, Chicago, IL Social Sciences

B.A. 2004 Columbia University, New York, NY Economics; French and Romance Philology, cum laude

Dissertation Research: My research centers on the intersection of political economy, especially development and finance, with the everyday ethics of kinship, community, and gender in urban South Asia. Based on 14 months of fieldwork in Kolkata, India, my dissertation examines how these for-profit microfinance lenders and poor borrowers negotiate the often-divergent ethics of financial sustainability and locally constituted obligations and personal relationships.

Research Interests: South Asia, Economic Anthropology, Anthropology of Finance, Moral Economies, Labor and Precarity, Anthropology of Development, Gender

External Research Awards and Grants 2010 National Science Foundation Doctoral Dissertation Improvement Grant 2010 Social Science Research Council International Dissertation Research Fellowship 2010 Wenner-Gren Foundation Dissertation Fieldwork Grant 2010 Institute for Money, Technology and Financial Inclusion at University of California Irvine Research Grant (Declined) 2009 Social Science Research Council Dissertation Proposal Development Fellowship

Academic Awards and Fellowships 2012 Watson Institute for International Studies Graduate Fellowship (1 Year) 2012 Brown University Sixth Year Dissertation Writing Fellowship (1 Year) 2012 IPK Cultures of Finance-Bruce Initiative Spring Conference Graduate Fellow 2011 Cogut Center for the Humanities Graduate Fellowship (1 Year)

iv 2009 Pembroke Center for Teaching and Research on Women Graduate Fellowship (1 Year) 2008 Brown University Anthropology Department Summer Travel Award 2007 Brown University Graduate Fellowship (5 Years) 2005 University of Chicago Tuition Scholarship (1 Year) 2004 Columbia University Departmental Honors in Economics

Publications Peer-Reviewed Articles Forthcoming [2013]. Recovering Debts: Microfinance Loan Officers and the Work of “Proxy- Creditors” in India. American Ethnologist 40(3).

Selected Academic Conferences and Presentations 2013. Credit and Worth: Financial Risk and the Moral Economy of Credit in India. Invited talk at George Washington University, Washington, DC.

2012. Uncertain Time: Temporal Disjunctures of Regular Repayment and Precarious Labor In Indian Microfinance. Panel on Precarious Labor and Precarious Life at the American Anthropological Association meeting in San Francisco, CA.

2012. Credit and Worth: Financial Risk and the Moral Economy of Credit. Graduate Student Workshop on Current Research in India at Brown University, Providence, RI.

2012. Corrupting Microfinance: Rethinking Financial Inclusion in India. Panel on “New Moral Economies in South Asia” at the 41st Annual Conference on South Asia in Madison, WI.

2012. Roundtable Participant for “Making Claims” Anthropological Engagements with Insurance at the American Ethnological Society Meeting in New York, NY.

2012. Corrupting Microfinance: Discourses of a Crisis. Panel on ‘"Reframing Development: Corruption, Crisis and Political Transformation in South Asian Literature and Culture" at the American Comparative Literature Association Meeting in Providence, RI.

2011. The Reluctant Moneylender: Microfinance Loan Officers and the Management of Ethical Risk in India. Panel on “Ethnographies of Financialized Lives” (co-organized with Llerena Searle) at the American Anthropological Association in Montreal, Canada.

2009. From Burra Bazar to Big Bazaar: Narratives of Inflation from the Marketplaces of Kolkata. Panel on ‘The Global Financial Crisis in Comparative Perspective’ at the American Anthropological Association in Philadelphia, PA.

2008. Measuring Citizenship: The Indian Census and the Management of the Muslim Population. Panel on ‘Ethnographies of the Record’ at the American Anthropological Association Conference in San Francisco, CA.

Language Skills Bengali (Native language) Japanese (Fluent, Level Japanese Language Proficiency Examination1 (highest)) French (Highly proficient)

Fieldwork Experience

v 2010–11 Kolkata, India: Twelve months of dissertation fieldwork on microfinance institutions. Attended weekly meetings of MFI borrower groups, conducted interviews with loan officers, MFI management, borrowers, commercial bank and government representatives.

2009 Kolkata, India: Six weeks of fieldwork conducting preliminary dissertation research on microfinance institutions. Conducted institutional-level study, including interviews with bank officials and representatives of microfinance institutions. Also attended microfinance group meetings.

2008 Kolkata, India: Six weeks of fieldwork conducting research on the effect of inflation in the city’s marketplaces for Master’s thesis. Conducted interviews with market vendors to document narratives of the experience of inflation and perceptions of crisis.

Teaching Experience Instructor, Brown University (Pre‐College Program) Summer 2010 Global Development

Teaching Assistant, Brown University Spring 2010 Violence and the Media Spring 2009 Introduction to Cultural Anthropology Fall 2008 Culture and Behavior

Professional Affiliations American Anthropological Association American Ethnological Society

vi Acknowledgements

To account for one’s debts is to acknowledge the webs of relationships that make

us who we are on this incredible journey. I will attempt here to do justice the many

people who have shaped my education and work in a myriad of ways. First and foremost,

I thank the women and men who are not named, but whose voices fill the pages of my

dissertation. They have graciously shared their time, knowledge, and kindness with me. I

hope that this dissertation shares in their commitment to strive for a better, more equal

future.

The intersection of Hope and Power where the Anthropology Department at

Brown University stands has been my academic home for the last six years, and I have

been enriched by my time there. In particular, I would like to recognize my committee:

Lina Fruzzetti has been an extraordinary advisor, and unfailing in her encouragement

through all my years here. Cathy Lutz has read innumerable drafts of everything, and provided invaluable feedback that has shaped my work. Kay Warren has enthusiastically supported my work through its development. Patrick Heller, as outside reader, has been a valuable interlocutor throughout the years.

Of course, this research would not be possible without funding that has enabled me to spend time developing the project, conducting fieldwork, and writing up. This research has been generously supported by the National Science Foundation Doctoral

Dissertation Improvement Grant (#1022746), the Wenner-Gren Foundation Dissertation

Fieldwork Grant, the Social Science Research Council International Dissertation

Research Fellowship (IDRF) and the Dissertation Proposal Development Fellowship

(DPDF) with funds provided by the Andrew W. Mellon Foundation. Graduate

vii fellowships from Brown University, the Pembroke Center, the Cogut Center for the

Humanities, and the Watson Institute have variously provided funding and space to

pursue my research.

My work, especially chapter 4, has been enriched through participation in the

Cogut Fellows Seminar (2010-11). Llerena Searle and Saiba Varma have read and commented on various parts of the dissertation and I am thankful for their keen insights. I am grateful to the talented James Doyle for creating Map 1.1 for me.

At Brown, I am incredibly grateful to Kathy Grimaldi and Mathilde Andrade for their unfailing help and cheer at the department. Jessa Leinaweaver, Paja Faudree, and

Sherine Hamdy have been wonderful additional faculty mentors in navigating the choppy waters of academia. In addition to providing solidarity during the challenging and grueling moments of graduate school, my cohort, James Doyle, Susan Ellison, Colin

Porter, Stacey Vanderhurst, Laura Vares, and Caitlin Walker have made these past six years fun. Katie Rhine, Christine Reiser, Andrea Mazzarino, Harris Solomon, Jennifer

Ashley, Kathleen Millar, Inna Leykin, and Yagmur Nuhrat have been wonderful demystifying the many vagaries of graduate school life. Sukriti Issar, Madhumita Lahiri,

Bianca Dahl, Bhawani Buswala, Josh Macleod, Andrea Flores, Emily Button Kambic,

Bianca Siravo, Yana Stainova, Alyce de Carteret, Chelsea Cormier, Katherine Marsh,

Karen Jorge, Sinem Adar, and Angelica Duran have all made Brown (and beyond) a terrific place.

In India, I would like to thank Jayanta Sinha and Kalyan Mitra for helping arrange contacts in the field. I am grateful to Anup and Rita Thankur for housing me in Delhi. I am incredibly lucky to have a wonderfully supportive extended family in Kolkata. I

viii cannot name everyone here, but I am indebted to everyone who made my time in India so memorable. In particular, I would like to thank Anjana and Asim Ghosh (Ranga Masi and

Meshomosai) for both housing me during shorter trips, and constantly making sure I was at home away from home.

Beyond graduate school, I am incredibly grateful to my friends who have provided ready escapes to a world beyond books. Yu Takayama has seen me through my ups and downs from elementary school through graduate school. Anusha Viswanathan,

Rachel Gozhansky, Amy Daniel, Jayanthi Daniel, Anjali D’Souza, Julia Macdonald,

Vicky Bostock, Joanne Golann, Olly Randall, and Oren Drori have been amazing friends throughout.

My final thanks are for my family. My sister-in-law Kaori Kar became a wonderful addition to the family, and a cause for welcome celebration this final year of graduate school. My brother Siddhartha Kar has been my champion throughout. Against every caricature, he is also my constant reminder that bankers can indeed be caring, wonderful people. Finally, my parents, Syamal and Rita Kar have provided much needed material and emotional support. They never blinked and have been unwavering in their support from the day nine years ago, after four years of studying economics in college, I told them I wanted to be an anthropologist.

I am grateful.

ix

CONTENTS

Curriculum Vitae iv

Acknowledgements vii

Contents x

List of Tables & Illustrations xii

1. Introduction 1 On Microfinance 5 The Financial Frontier 7 Credit and the Art of Making Do 14 The Social Life of Debt 19 Systemic Enfolding 22 Setting the Scene: Kolkata 28 On Urban Microfinance 34 Methodological Note 35 Methodology 38 Dissertation Chapter Outline 41

2. The Business of Development: Social Businesses and the Spirit of Ethical Capitalism 46 Tracing the Spirit of Ethical Capitalism 48 Social Businesses and the Development of the Bottom Billion 51 Of Charismatic Founders 58 On the Culture of Entrepreneurship 64 Ethical Limits 70 The Real Work of Business 74 Precarious Waiting 84 Chapter Conclusion 91

3. Risky Ventures: Banking and the Politics of Credit 93 The State and the Banks 96 Banking on Credit: A History 99 Microfinance Models: SHG Bank Linkage and MFI 107 From Social Banking to Financial Inclusion 111 Regulating Microfinance 117 Chapter Conclusion 125

4. The Reluctant Moneylender: Microfinance Loan Officers at the Peripheries of Financialization 128 Financial Labor at the Periphery 131 The Work of the Creditor 134 Producing Debt 137

x In the Shadows of the Moneylender and the Bank 140 Nonviolent Claims 145 Circulations of an Alienated Debt 148 The Emotional Labor of Debt Recovery 151 Care in Banking 156 Chapter Conclusion 158

5. The Domestication of Microfinance: Women, Empowerment and Middle Class Modernity 162 An Intellectual History of Social Capital and Empowerment in Development 165 Women and Credit-work 175 In Domestic Spaces 186 Middle Class Modernity 193 Chapter Conclusion 204

6. Credit and Worth: Financial Risk and the Moral Economy of Credit 207 The Moral Economy of Credit 208 Meditations on Risk 214 Risk and the Categories of Exclusion 225 Guaranteed Hierarchy 236 Chapter Conclusion 245

7. Death Insured, Life Precarious: Suicide, Insurance and the Valuation of Life 251 Insuring Risk 252 Life Insurance in India 261 Collateralizing Life 265 On Suicide 273 A Death is Announced 282 Temporal Disjunctures of Precarious Labor 287 The Cost of Living 292 Chapter Conclusion 296

Epilogue: Rethinking Financial Inclusion 298

xi

List of Tables

Table 1.1: Total Outstanding Credit (India) 10

Table 2.1: Businesses of Borrowers from DENA 78

Table 6.1: MFI Risks 223

List of Illustrations

Figure 1.1: Financial Flows of Microfinance - 9

Figure 1.2 : A settlement on the eastern periphery of Kolkata - 33

Map 1.1: Kolkata - 33

Map 1.2: Kolkata - 34

Figure 2.1: A couple in their grocery store [mudi dokan] - 77

Figure 2.2: A couple running a bookbinding business - 77

Figure 3.1: Commercial Lending and Microfinance - 108

Figure 3.2: Microfinance Models in India - 109

Figure 3.3: Swabhimaan Campaign - 115

Figure 3.4: Business Correspondents Model - 117

Figure 4.1: A loan officer updates all the passbooks and ledgers at a meeting - 135

Figure 5.1: Documents needed for loan - 182

Figure 5.2: Women waiting outside during a meeting in Kolkata - 189

Figure 7.1: Manual for LIC Premiums - 263

Figure 7.2: Billboard for LIC Advertisement in Kolkata - 263

xii CHAPTER ONE

INTRODUCTION The marketplace may well claim to set a price on what is priceless, but we are aware that it cannot determine the value of the priceless or grasp its boundless character. We know that no commercial equation will ever express the price of life, of friendship, of love or suffering, of shared memories—or the price of truth. Marcel Hénaff, The Price of Truth (2010: 17)

The room where the microfinance group meeting was usually held was under

construction, so we sat outside in the open. It was early March, the start of the summer,

and hot even at eight in the morning. Mithun, the loan officer I was accompanying, and I

had arrived early, and as the group members were appearing, one of the borrowers,

Bharti-Di, sat chatting with to me.1 In a faded maxi dress, her hair pulled into a bun, she

looked older than her 40 or so years. Deep lines framed the edges of her eyes, and her

mouth was reddened by years of chewing supari [areca nut].

“Sir,” she said, turning to Mithun, “I have to leave a little early today. I have to go to court for a dolil [land deed]. I’m going by myself… My husband usually doesn’t let me go anywhere. He always says, ‘No, I’ll take you.’ He thinks I’ll get lost or something!” she said with a wry laugh. “Your husband still doesn’t trust you?” quipped

Mithun, amused. “Oh, he beats me if I say anything,” she responded. “Everyone at home is scared of him. If my sons want anything, the come to me; they never ask their father; they’re scared of him, and when I say something, he hits me. My middle son tries to stand up for me. He’s the only one. He’s away studying now, but he’ll be back. When my husband hits me, my [middle] son tries to stop him. ‘Where is Ma going to get the money?’ he’ll ask. But the other two, they’re a little “thick headed” [matha mota]—my eldest and youngest sons. They don’t really do anything,” she continued, expressing

1 All names are pseudonyms, except where noted otherwise, in order to maintain the anonymity of my informants.

1 dismay at her sons who seemed to lack an understanding of her situation. As the meeting progressed I continued to speak with Bharti-Di:

SK: What are you doing with the loan?

Bharti: I have an old car now. I get about Rs. 1,000 per week from it now [as a hired car]. But I want to buy a newer car, so maybe I’ll get Rs. 2,000 per week instead. I’ll get part of the loan from the bank. I have two properties—one here, and one on Bypass [road].”

SK: Has it helped?

Bharti: I always ask the other women, why should you get beaten by your husband? [Borer kache maar khabe kano?] Don’t waste [pete pore khete noi; Literal translation: “eat”] the money; use it to stand on your own feet [nijer pae darate], start your own business!

SK: Does your husband say anything?

Bharti: I take care of my husband [Borke amii dekhi]. I bought a pipe for the car with the last loan. I use the money to take care of him.

I came here in my parents’ arms from Bangladesh when they fled.2 We had land in Bangladesh. But my parents died when I was still young. My husband is non- Bengali; but he is what god gave me [bhagavan ja dieche]. There is no love or affection [prem ba bhalobasha nei] there.

I’ve been in the group for about two years now. It used to be [another] office, but now it’s better with [this] office, which is closer.

SK: How did you learn about DENA [microfinance institution]?

Bharti: There’s always discussion among the women; when someone learns about a new place, they’ll share it, and so we find out. But we have to get good people to take loans; people with their own homes. I scold the people who are bad and exclude them [baad die di].

As the meeting drew to a close, she got up, “I have to go to the hearing now. They’re going to take a statement from me to take my name and information. The [land] deed is going to be in my name,” she said proudly in closing, before taking her leave.

2 During the Bangladesh’s liberation war to gain independence from Pakistan.

2 This dissertation is about microfinance or the business of giving small loans to

poor borrowers that are repaid in frequent intervals, most often weekly. Often, these loans

are targeted at women as a means of economic development and empowerment. I open

with this vignette about Bharti-Di because it represents the complicated role of microfinance loans in the lives of urban poor borrowers. On the one hand, Bharti-Di has found ways to utilize the loans, not only to support her family, but also to acquire land in her own name. She sees starting a business as possibility for women to escape abuse. On the other, she remains subject to domestic violence; she uses her income to support her abusive husband and unemployed sons. Ironically, it is her marital status—including the need of her husband as guarantor—that enables her to access the loans (Chapter 6). The contradictions in Bharti-Di’s narrative highlight the multiple ways in which microfinance has become an important source of money amid increasing precarity in India. Her ability to get loans is dependent on other borrowers, and she is vigilant in who is allowed into the group, adamantly excluding “bad” borrowers. Her story marks possibilities for change, though often ultimately producing outcomes that do little to improve the lives of borrowers. Bharti-Di is resigned to her condition of abuse from her husband and neglect from her sons, while hopeful that other women will escape the same fate.

This project then takes credit as a site of encounter (Faier 2009) between global finance, state and institutional norms and regulations, and the situated everyday practices of people whose social worlds would not otherwise intersect. In it, I trace the “cruel optimism” (Berlant 2006; 2011) that microfinance offers: the problematic attachment to debt as a possibility of escaping poverty, and the alarming constancy with which this is met by disappointment. Credit signifies, more than anything, the prevalence of lack in the

3 lives of most urban poor borrowers. In the everyday struggles to make ends meet, access

to credit can fill gaps in income, but it is only ever a temporary solution; and one that

accrues both monetary interest and accumulates social obligations, often adding to the

burden. The disappointment for most borrowers is that microfinance rarely fills the

income gaps, the gaps in adequate employment, or the gaps in paying for increasingly costly bills and fees under inflationary conditions. In an India that has seen rapid economic growth in the past two decades, the growing level of inequality between the rich and emergent middle-class and the poor remains a problematic structural feature

(Kohli 2012).

In attending to these disappointments, I do not mean to undermine the power or role of hope in the lives of many of my informants, including urban poor borrowers, MFI staff, state regulators and institutional representatives. Indeed, hope for a better future for themselves, for their children, and for the nation shape the “ethical imagination” (Moore

2011) and possibilities for social change.3 These hopes for a better future reflect, perhaps,

not what microfinance has achieved, but its very limitations as people find that access to

credit is not a silver bullet solution to problems of persistent inequalities. Borrowers such

as Bharti-di hope that microfinance will help her and other women escape domestic

violence; most often it does not. This is not to say that there are no successful cases of

microfinance helping women escape such situations, but overwhelmingly it does little

change a status quo. Similarly, individuals who use loans to pay for medical care, for

3 Moore notes that the “ethical imagination” is the “ways in which technologies of the self, forms of subjectification and imagined relations with others lead to novel ways of approaching social transformation” (2011: 15). Against the melancholia “when critique collapses into description,” (ibid: 4) the ethical imagination allows for an envisioning of new possibilities and forms of relationality.

4 private school, to tide over times of un- and under-employment says more about the state’s limited provision of healthcare services, education, and precarity, than the use of credit to create a billion entrepreneurs. I suggest that these desires, often revealed in ethnographic encounters, can provide important insight into the deficiencies of current development policies or models.

On Microfinance

With about 60 percent of the Indian population without access to formal financial services, the Indian government has promoted a “financial inclusion” policy since the mid-2000s. The policy aims to bring the excluded into the formal financial fold, namely through access to back accounts and credit. Microfinance has been one such area in the promotion of financial inclusion for the Indian government. Microfinance has grown rapidly around the world in the last two decades, often drawing on Muhammad Yunus’

Grameen Bank model in Bangladesh. In its early stages, microcredit referred to the provision of small loans to poor borrowers who lacked collateral to access credit from formal financial institutions (Yunus 2003). By forming small groups, poor borrowers could make up for the lack of material capital through social capital (e.g., group members could guarantee each others’ loans). In more recent years, microfinance refers to the more varied financial services that microfinance institutions offer to their customers, including savings and insurance, though credit remains predominant.

Over the past decade, microfinance has captured the popular imagination as a solution to the failures of state-led development. 2005 was declared the “Year of

Microcredit” by the United Nations, as an effort to reach the Millennium Development

5 Goals and in 2006 the Nobel Peace Prize awarded to Muhammad Yunus. Microfinance

has been lauded by popular figures such as journalist Nicholas Kristof, entrepreneur and

eBay founder Pierre Omidyar, and philanthropic organizations such as the Gates

Foundation.4 Major global financial corporations, including Citigroup, J.P. Morgan, and

Deutsche Bank have also invested in microfinance initiatives both as part of corporate

social responsibility (CSR) programs, and as a profitable investment opportunity. Further,

with the tightening of credit in the United States following the 2008 financial crisis,

microfinance has even emerged from its dominance in the global South to become a

source of credit for small businesses in the global North.5

In scholarly work, proponents of microfinance contend that financial inclusion

mitigates socio-economic disparities by incorporating the poor into more efficient and

hence income-generating markets (Banerjee & Duflo 2011; Collins et al 2009; Robinson

2001). Others have argued that even more than economic benefits, microfinance helps to

produce social capital, which in turn promotes women’s empowerment (Moodie 2008;

Sanyal 2009; Woolcock 1998). However, there is growing recognition—even among its

supporters—that microfinance is not a silver bullet solution to development, requiring

greater attention to its unintended consequences. As critics have pointed out, there

4 In 2005, Tufts University announced the Omidyar-Tufts Microfinance Fund. Omidyar gave US$100 million to Tufts University to be invested in microfinance initiative, with 50 percent of returns to be used by the university, and the remaining 50 percent to be reinvested in microfinance. In 2009, the Gates Foundation awarded US$700,000 to The Microcredit Summit Campaign in order measure the Campaign’s progress in alleviating poverty. In 2010, the Gates Foundation announced US$38 million in new grants for microfinance institutions. 5 In 2010, the New York Times reported that with the lesser availability of credit cards since the recession, and the declining value of real estate against which borrowers could get credit, small businesses have turned to microfinance institutions in order to access loans, typically less than US$35,000 with an interest rates ranging from 5-18 percent (Shevory 2010).

6 remain numerous problems in microfinance practices, including the creation of over-

indebtedness and debt cycles among borrowers, the reinforcement of gendered codes of

shame, and extreme levels of peer pressure among group members (Brett 2006; Karim

2011; Lazar 2004; Rahman 1999; Rankin 2001, 2002). This dissertation contributes to the

critical literature on microfinance, demonstrating how microfinance practices can

reproduce or reinforce forms of exclusions by gender (Chapter 5), class, and minority

status (Chapter 6). Further, it shows how over-indebtedness and the pressure to repay

loans can create unbearable conditions of living for poor borrowers (Chapter 7).

The Financial Frontier

On August 16, 2010 an unlikely group of women rang the gong to usher in the

day’s trading at the Bombay Stock Exchange. The women—Yadamma of Andhra

Pradesh, Indumathi of Karnataka, Kunti Patra of Odisha, Tayran Bibi of West Bengal and

Neelu Bai of Maharashtra—were all borrowers of SKS Microfinance, and their presence

marked the company’s initial public offering (IPO).6 Dressed in brightly colored saris, the five women presented a surprising departure from the typical suited? financial market players. Though the IPO offered hefty returns to its investors, it also demonstrated the extent to which finance capital had penetrated everyday life of the poor. In subsequent months, SKS and indeed the microfinance sector as a whole in India experienced a crisis, partly triggered by the success of this IPO. As a result, commercial banks that provide capital to MFIs became reluctant to extend further loans to the sector, creating a liquidity

6 The women were identified in the 2011 annual meeting speech by Vikram Akula. See Chairman’s Speech: http://economictimes.indiatimes.com/sks-microfinance- ltd/chairmanspeech/companyid-30587.cms. [Accessed September 3, 2012]

7 crunch for MFIs. Dried of cash, MFIs had to roll back their loans to the poor borrowers, many who now struggled to find alternate sources of credit (Chapter 3). Through microfinance, poor borrowers have been enfolded into financial markets with systemic consequences in the larger economy.

Ethnographic examinations of microfinance have provided key insight into the

local relationships between borrowers and lenders, including the creation of unequal

patron-client relationships (Ito 2003; Karim 2011; Rahman 1999). Yet the growth and

development of commercial microfinance has extended far beyond the dyadic

relationship between a borrower and a local non-governmental organization (NGO).

Microfinance’s popularity over the past two decades reflects its inherent coherence with

neoliberal modes of governance, relying not only on freer capital flows, but also the

promotion of self-reliance rather than welfare, and private rather than public sector

involvement (A. Roy 2010; Weber 2004). With the growth of the for-profit microfinance, commercial bank lending, private equity, securities, bonds, securitized debts, and investment vehicles have all flooded the sector. Far from the simple transaction between the borrower and lender, microfinance has become an intricate network of financial flows

(See Figure 1.1). This process of what scholars have termed financialization has significant consequences not only for the large institutions, but also borrowers who suddenly find themselves tied into much wider networks of finance with limited ability to influence them.

Figure 1.1: Financial Flows of Microfinance

8

9

Table 1.1: Total Outstanding Credit (India) Total Outstanding Credit by all Credit Institutions End-March Total Credit Annual Credit-GDP Outstanding Growth Ratio (Rs. 10 million) (Percent) (Percent) 1991 194,654 – 34.2 1995 347,125 22.7 34.3 2000 725,074 17.1 37.1 2001 794,125 9.5 37.8 2002 893,384 12.5 39.2 2003 1,077,409 20.6 43.8 2004 1,199,607 11.3 43.4 2005 1,481,587 23.5 47.4 2006 1,928,336 30.2 54.1 Source: Report on Currency and Finance (Reserve Bank of India 2006b: 129)

Since the 1970s, financial markets have expanded rapidly across the world as profit-making activities have increasingly focused on financial channels rather than production (Krippner 2011).7 Financial markets increasingly inform not just corporate decisions, but also fiscal and monetary policy, and affect individuals through systems of credit, pensions, and savings (Knorr Cetina & Preda 2005). In India, for example, outstanding credit expanded to ten times the amount between 1991 and 2006 (See Table

7 The financial system, as defined by Karin Knorr Cetina and Alex Preda is what: [C]ontrols and manages credit; in contemporary societies, the ultimate users of real capital rely heavily on others (investors) to provide the funds with which to acquire the resources they need. Investors make transfers of money to those seeking credit in the hope of reaping profits at later points in time; the debts the receivers of the funds incur are claims investors can make on future income and on economic output and development. Characteristically, these claims (which take the form of company shares, government bonds, etc.) and their derivatives are marketed and traded on financial markets—with the help of financial intermediaries (e.g. banks, brokerage houses, insurance companies) who package the deals, assume some of the risk, and facilitate the trading of claims and risks among market participants. (2005: 1)

10 1.1). The expanding process of financialization requires “the capitalization of almost

everything,” with the constant search for new assets that can be capitalized (Leyshon and

Thrift 2007). Our everyday lives are increasingly suffused with financial technologies,

from the securitization of debt to the creation of increasingly more complex derivatives.

Finance is no longer relegated to stock exchanges and investment banks, but informs and

shapes everyday life and finds cultural expression (Jameson 1997; Martin 2002; Spivak

1999).8

In recent years, social scientists have begun to explore this complex phenomenon

of financialization. The Social Studies of Finance group has examined the performative

nature of finance; that is, how economists and finance theorists “contribute toward

enacting the realities they describe” (Callon 2007: 315).9 Michel Callon and his colleagues have demonstrated the ways in which seemingly abstract theories as well as technologies come to shape the very objects they are supposed to describe or mobilize

(Beunza and Stark 2004; Garcia-Parpet 2007; Mackenzie 2007). However, as critics of

8 Jameson suggsts that the “radically new forms of abstraction” (1997: 260) related to the logics of finance capital come to shape cultural production. For example, with the intensfied competition in the film industry for viewership, previews now encompass the entirety of the film, reflecting the increasingly fragmentary nature of cultural production. Or as Martin argues, finane has emerged from the behind closed doors of banks to the ticker tape showing stock prices on 24-hour news channels “as if the modulations of equity prices were an EKG to the global body” (2009: 118). 9 In other words, social scientific knowledge is performative in the sense that Austin (1975) formulated certain phrases to have illocutionary force. For example, certain phrases, such as “I now pronounce you,” not only describes the act, it also “performs” the act in its statement. In a parallel manner, while economic theory describes the market, in its articulation, it also actively shapes it. As Mackenzie shows in his analysis of the Black-Scholes-Merton model for options pricing—for which the 1997 Nobel Prize in economics was awarded—the model “did more than simply express price patterns that were already there… there is reason to think that the use of the model altered price patterns” (2007: 65). Prices followed the model, argues Mackenzie, in part because of its very existence.

11 economic performativity such as Daniel Miller (2002) argue, this perspective ends up

producing “a defence of the economists’ view of the world and a rejection of the

evidence of how actual economies operate as available to anthropologists and

sociologists” (219). Performativity of finance effectively brackets out power and the

ideological foundations of the economic theories he studies, and accepts the easy

translation of theory into reality.

An emerging body of literature on the anthropology of finance has demonstrated

not only the social embeddedness of finance, but also the ways in which it is suffused

with power relations, ideology and faith, and shaped through practice (Fisher & Downey

2006; Ho 2009; LiPuma & Lee 2004; Lepinay 2011; Maurer 2002; Miyazaki 2013; Riles

2011; Zaloom 2006). Contesting the ways in which finance has been taken to be a

“natural reality,” these works show the ways in which financial discourses are

“historically contingent, and dependent on cultural practices of valuation” (De Goede

2005: xv; Poovey 2008). The universalizing abstractions of financial tools and products

belie their social and cultural constructions. This dissertation examines how abstracted

notions of creditworthiness and risk are constructed and negotiated in the everyday

interactions between loan officers and borrowers and informed by existing local social

and cultural beliefs and practices (Chapters 4, 6 and 7).

While providing critical insight into the process of financialization, these studies tend to remain concentrated on the experiences of finance practitioners in the global

North. However, financialization remains a global phenomenon, often radically transforming the lives of people in the global South (Elyachar 2005b). Indeed, financialization has also deepened inequalities, with speculative raiding by major

12 financial institutions at the cutting edge of “accumulation by dispossession” (Harvey

2003: 147; Tsing 2005). The growth and expansion of capitalism has required a continuous and evolving process of “creative destruction” that seeks higher efficiency often at the expense of labor (Schumpeter 1994 [1943]). With the growth in financial

transactions exceeding that of the underlying economy, global social inequalities have

been amplified (Hoogvelt 1997). As capitalist social relations are increasingly mediated

by speculation and risk rather than labor, people come to experience the crises of

capitalism more acutely in everyday life (Marx 1993b [1894]; Comaroff & Comaroff

2001). This “hypertrophy of ‘fictitious’ financial capital” (Lutz & Nonini 1999: 93) has

often violently marginalized and dispossessed populations. The “frontiers of capitalism”

(Tsing 2005) are not just the landscapes, but also the populations that remain outside of

the mainstream of finance, or the financially excluded. Increasing global financial flows

into microfinance has often served the interests of investors rather than borrowers.

However, the 2008 crisis and subsequent turmoil in the global economy have

revealed both the dominance of and fractures in the current financial system. Backlash

against the bailout of banks at the expense of citizens and growing inequality in a

financialized economy have inspired the transnational Occupy movement, politicizing

what has long been the de-politicized arenas of finance and economics (De Goede 2005;

See also Graeber 2011b; Ho 2012 on Occupy movements). For some, the crisis signifies

the end of American financial hegemony, and a shift toward a multipolar world with

emerging economies such as China, India, and Brazil less dependent on the United States

(Dumenil & Levy 2011). As finance is normalized in these places, their discourses and

practices have to be understood and analyzed within the context of these shifts in the

13 global political economy. Microfinance is an example of the way in which the lives of those at the periphery are incorporated and shaped through finance capital. However, it is not simply a story of top-down imposition; rather, I explore the multiple negotiations at various levels through which financialization is experienced, accepted and contested.

Credit and the Art of Making Do

Sumit came in limping to the meeting, complaining of his injury. The other women scolded him for attending, asking why he could not have just sent the money over with someone. Sumit hobbled to the nearby sofa, as the women borrowers sat on the floor. He was the husband of one of the borrowers of the group and an optometrist

[chokkher daktar]. Sumit had sustained his injury when he fell from the third floor of his house that was under construction. He had gone up there early one morning when it was still dark to see the work that had been done the day before. But he slipped, falling first onto telephone lines, trees and bushes before hitting the ground. He was fortunately not severely injured. One of the borrowers explained that it was because he spent most of his time “with god” [thakur nie thake].

Sitting on the sofa, Sumit spoke about his understanding of and experience with microfinance:

Another demerit [of microfinance] is that the interest rate is actually higher than banks. Anyone with a little bit of education can do the math to see that they are paying such high interest rates. But, since there is no other option, we have to turn to this [microfinance].

The big banks that offer lower interest rates require you put up something [collateral] in order to get a loan. You need specific documents like the IT [income tax] file or pay slips that some people don’t have… Banks have housing loans, educational loans, agricultural loans, but nothing really for people in the city. There are only business loans, and you need to have documents or a

14 mortgage to get those. […]

Also, you are always under pressure to pay back the loan. But sometimes people take loans when things are good, but what happens when there is a problem? I have to travel around a lot to work, including to rural areas for work, and see these things there as well. For example, people might be promised a job through NREGA [National Rural Employment Guarantee Act], but what happens if they don’t get work? Or if someone is a rickshaw-wallah [driver] and there is a bandh [strike]. Suddenly they don’t have a day’s income. But then they still have to pay back the loan, even though they have no money to do so. People always need money, but when they get the loans, they have to show that is for a business purpose; even if they are borrowing for other reasons, like a wedding.10

Sumit’s comments are a powerful reminder of the unequal terms on which loans are

offered to the poor, even through microfinance. It is most often the poor, who both most

need credit and are least able to afford it, who are burdened with the highest rates of

interest (Williams 2004). Further, they highlight the conditions of perpetual lack and

financial insecurity—of constantly needing to make ends meet—under which people take

these loans.

With the 1991 liberalization of the economy in India, there has been a growing

informalization of labor with the closure of many state-run industries (Gooptu 2007;

Planning Commission 2008).11 Simultaneously, as agriculture absorbs less and less of the rural workforce, rural-urban migration has risen rapidly. Without stable waged labor, close to 90 percent of India’s population still work in the informal sector (Breman 1996;

De Neve 2005; Harriss-White 2002). With its goal to produce entrepreneurs,

10 The Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) was introduced by the central government in 2005 to offer livelihood security in rural areas by guaranteeing 100 days of wage labor in a fiscal year. 11 Between 1994 and 2005, employment in the organized public sector decreased by 0.7% per annum, while organized private sector increased by 0.58%, leading to an overall decrease in organized sector employment by 0.31%. This is in contrast to the growth in overall organized sector employment by 1.2% per annum between 1983-1994, with public sector accounting for 1.53% growth and organized private sector accounting for 0.44% growth per annum (Planning Commission 2008: 67).

15 microfinance operates within the informal economy, rather than offering employment in

the formal organized sector. The informal economy is a complex entity, and despite the

slippage between informality and illegality, the sheer scale of the informal economy

reflects its centrality rather than marginality to the global economy (Nordstrom 2001;

Elyachar 2005a). The informal sector can be seen to serve as the “economic space” that

accommodates the surplus labor that has been excluded from capitalist modes of

production that can also operate as a political force (Sanyal & Bhattacharyya 2009).12

However, the recognition of the “informal economy” as its own domain can relegate the poor to “self-help” or empowerment-based models of development that minimize state intervention in development and welfare (Elyachar 2005a; Sharma 2008). Development, including employment, is no longer seen as something that the state should work to provide, but something that already exists in the informal sector.

However, for the urban poor, work in the informal sector remains precarious, and household income can fluctuate from day-to-day or month-to-month. An emerging body of scholarship has examined the growing scale and experiences of precarity in the global economy (Berlant 2011; Muehlebach 2011; Muehlebach & Shoshan 2012; Wacquant

2008). With increasing instability of regular employment as modeled under Fordism, precarious or insecure, flexible, temporary, and casual labor have become normalized.

Yet, as others have argued, this particular discourse of precarity “does not translate on a

12 Sanyal and Bhattacharyya (2009: 38) distinguish the surplus labor of the informal economy from 1) wage labor that the capitalist exploites; 2) the reserve army of labor; and 3) non-capitalist producers tied to capital by sub-contracting. The authors suggest that this surplus labor force of the informal sector pose “the problem of livelihood on a scale that exceeds the redistributive capacity of most post-colonial nation states” (ibid). To this extent, the informal sector can also operate as a political force in the post-colonial social landscape.

16 global scale as a descriptor of contemporary labour precisely because of its connection as

a political-analytical concept and mobilizing device within predominantly European-

based social movements responding to the erosion of the welfare state” (Neilson &

Rossiter 2008: 55). Moreover, the conditions of precarity are experienced differently in

the global South (White 2012), and often these conditions are not as novel in the existing

informal sector as they are in post-Fordist societies (Cross 2010).

Rather than contributing to productive (i.e., business-related) activities, microfinance borrowers often use credit to tide over consumption expenses under precarious conditions. At the same time, the regularized repayment of the debt becomes unbearable when regular income is unstable. Debt for many women borrowers was part of a “tactic” by which they could make ends meet, though never in a way to challenge the unequal terms of the financial system (c.f. de Certeau 1984; See Chapter 5). Despite a few cases of success stories where individuals have created successful businesses, I have found that as a development strategy, microfinance largely fails to provide sustainable employment to many. Yet the demands of regularized repayment under conditions of insecure income can create conditions of social suffering as people struggle to repay debts while managing other everyday and unexpected expenses (Chapter 7).

I was attending a meeting that was held in the verandah of the house. Two teenage children jumped over the group members who were assembled, as they busily got ready for school. Knowing I was studying in the United States, the women joked about whether

I could get them loans from the US, since there was so much money there. Another woman laughingly asked whether I could just take her to the US instead. Such comments are perhaps not unusual for anthropologists working in areas of poverty. However, over

17 the laughter, another of the women, more seriously stated that there were no really poor

people in the United States: “Even the poor have many cars and own big houses.” Her

comment was poignant not because it highlighted relative poverty, but because it pointed

the role of consumer credit in the United States. Since the 1970s, indebtedness has

transformed family life with the increasing availability of credit to the high risk or “sub- prime” sector. With stagnating labor market, consumer debt became a way to make ends meet for many working class families, paying for homes, education, healthcare through debt (Medoff & Harless 1996; Rajan 2010).

Microfinance has been popularized under the framework of credit as a human right and as a tool for development,13 and critiqued for drawing poor people further into

cycles of debt. Rather than marking it as unequivocally good or bad, it is perhaps

important to locate microfinance within a larger body of scholarship on working class

credit (O’Connell 2009; Taylor 2002; Tebbutt 1983). As Sean O’Connell, writing of

working class credit in Northern Ireland argues, “every form of consumer credit

associated with the working class has proved controversial, but none more so than

moneylending. Its mention conjures up lurid images of 'shylocks', 'blood suckers,'

'usurers', and 'loan sharks'” (2009: 131). Paradoxically and “to the repeated frustration of

outside observers, their [doorstep moneylenders’] customers frequently demonstrated an

appreciation of these systems (even, in some cases, those of unlicensed moneylenders)

13 This is reflected especially with the awarding of the Nobel Peace Prize to Muhammad Yunus and the Grameen Bank rather than the award for Economics. Yunus has publicly stated that credit is a human right. Similarly, in his influential work Development as Freedom, Amartya Sen argues for greater equality in access to economic facililities, or the “opportunities that individuals respectively enjoy to utilize economic resources for the purposes of consumption, or production, or exchange” (1999: 39) Of these, Sen suggests that “the availability and access to finance can be a crucial influence on economic entitlements that economic agents are practically able to secure” (ibid).

18 focusing on convenience, rather than cost” (ibid: 288). As I demonstrate in Chapter 5, in contrast to the intended creation of financially independent women entrepreneurs through access to credit, borrowers often justify their loans in terms of their broader social and cultural obligations—often-gendered identities and middle class ideals—as “good” wives, mothers, and neighbors. It is this tension between the need and desire for credit despite its often-exploitative dimensions that requires further teasing out in the analysis of microfinance.

The Social Life of Debt

The success and popularization of microfinance has relied on two key features that reduce transaction costs: 1) the use of social capital among group members; 2) having loan officers go to the neighborhoods rather than have borrowers come to the MFI offices. Both of these factors attend to the particularities of lending to the poor who are deemed higher risk because of the lack of material collateral and the need for increased monitoring of borrowers. In the absence of material collateral, social capital is intended to serve as a form of collateral, while regular interactions between borrowers and lenders helps to maintain high rates of loan recovery through close monitoring. Yet in both cases, the relationality of debt produces forms of sociality that extend beyond the financial obligation.

The emergence of finance technologies reflects the increasing abstractions in the market. However, money—in both its physical sense and its abstractions—remains socially constructed and interpreted. While recognizing how new financial forms transform societies, scholars have shown how market and monetary relations remain

19 socially embedded (Polanyi 1957; Granovetter 1985; Krippner 2001). Challenging the

reductionism of scholarship on finance to quantification and mathematical modeling,

anthropologists have argued that nonquantifiable elements (e.g. social relations, ethics)

continue to define money and finance and not just “traditional” economies (Maurer

2005a; Elyachar 2005a). Tracing the genealogical development of ideas about money,

Jonathan Parry and Maurice Bloch argue that in its representation an abstraction that

destroys sociality, money is “nearly as much danger of being fetishised by scholars as by

stockbrokers” (1989: 3).14 Parry and Bloch argue for closer scrutiny of money in the

entire transactional system and within the context of the local cultural matrix. Indeed, the

ethnographic inquiry into money and monetary forms has complicated the picture of the

“great transformation” and the perceived loss of sociality in economic relations in

modernity (Maurer 2006). People earmark money differently, signifying not equal value,

but different kinds of social and moral values (Zelizer 1994). Moreover, as Jessica

Cattelino (2008) argues “popular and scholarly theories of money’s abstracting and

deculturalizing force blind us to the ways that people undertake political acts of valuation

14 Tracing the genealogical development of ideas about money, Parry and Bloch (1989) note its three distinct treads of theorization: 1) from Aristotle to Aquinas and Marx, the condemnation of money and trade as opposed to household self-sufficiency; 2) from Mandeville to Adam Smith, that money is the basis for social prosperity and happiness; and 3) from Simmel, the intermediate position that money can be an instrument of freedom. However, Bloch and Parry argue that money does not have “an intrinsic power to revolutionise society and culture” (ibid: 3). Analysis of the entire transactional system requires looking at both long-term transactional orders “concerned with the attempt to maintain a static and timeless order,” and “short-term exchanges associated with individual appropriation, competition, sensuous enjoyment, luxury and youthful vitality” (ibid: 24). Long-term transactions reproduce not just economic systems, but political, cultural and social norms and values.

20 in the course of exploiting money’s fungibility” (2008: 3).15 Thus money gets interpreted, utilized and made meaningful in different and often contradictory ways (Chapter 5).

Usury, or lending on interest, has negative connotations historically and cross- culturally. From Aristotle to Marx, lending on interest and the profit motive represent the point at which money begets money, and “short-circuiting the networks of reciprocity”

(Henaff 2010: 66). The proliferation of credit markets has been one of the cornerstones of financialization, requiring increasing abstraction and social distance of debt relationships.

However, anthropoologists have consistently shown the relationality inherent to debt

(Peebles 2010). Debt binds people across time and space in obligations of reciprocity

(Elyachar 2005a; Graeber 2011a; Langford 2009; Malinowski 2002 [1922]; Mauss 2000

[1954]; Munn 1992; Roitman 2005; Schuster 2010; Shipton 2010). Such obligations often mark positions of inequality and hierarchical domination of the debtor by the creditor

(Bourdieu 1977). Debt also creates affective bonds and moral obligations between individuals, and sometimes as “unbearably obligating relationships” (Han 2004: 177).

The success of microfinance requires sustaining high levels of peer pressure— positively coded by many development theorists and policymakers as social capital—on borrowers by other group members. Social capital theory celebrates the benefits that people attain from membership in particular social groups (Portes 1998; Woolcock &

Narayan 2000). However, when people are unable to repay their debts, there are often tears not only in the social relationships, but also unbearable pain for the individual, as revealed in the intimate relationship between debt and suicide (Chapter 7). The close

15 Cattelino shows how Seminoles exploit the fungibility (exchangeability) of money to “selectively convert casino revenues into other forms of value” (2008: 2), including efforts to sustain the community’s cultural ways of life.

21 interactions of loan officers with borrowers are also meant to create affective pressure in

order to maintain high levels of loan recovery (Chapter 4). However, loan officers have to

navigate the complicated demands of ethical practice and financial sustainability.

Constantly trying to create distance with the reviled cultural figure of the moneylender,

loan officers have to sustain not only high levels of financial return for the MFI, but also

their sense of an “ethical selfhood” (Pandian 2009: 16). The loan is therefore not a

singular financial transaction, but one that has to be sustained through various forms of

sociality and the ethnographic project brings these forms of interactions to the fore.

Systemic Enfolding

In recent years, the concept of social businesses that have double, sometimes triple bottom lines—economic, social and environmental—has taken off (Chapter 2).

Further popularized by management specialist C.K. Prahalad’s The Fortune at the Bottom of the Pyramid (2010), corporations increasingly see the poor as a market opportunity, leading to a proliferation not only of social businesses such as MFIs, but also social investment funds. In other words, it is possible to “[do] well by doing good” (Prahalad

2010). As a more inclusive form of capitalism, social businesses such as microfinance enable what Ananya Roy calls the “ethicalization of market rule” (2012a: 106). Rather

than the state providing welfare, corporations are encouraged in provide or invest in

financial services, health, education, and housing to poor with the expectation of a return

(O’Donohoe et al 2010; Sinha & Subramanian 2007).

In transforming the poor into a market opportunity for corporate investment,

profitability remains a key determinant, while taking on too much risk is dangerous

22 territory for the corporation or social business. Thus, even under this new inclusive

framework of capitalism, there are people who are simply not valuable as customers.

Successful financial inclusion necessitates the continued exclusion of the marginalized.

MFIs therefore spend significant time and effort is to ensure the creditworthiness of

borrowers. In other words, MFIs seek to lend to low-risk borrowers. For financial

institutions this fact is not only unsurprising, it is encouraged and desirable. With

microfinance increasingly tied to the formal financial sector, extensive lending to such

high-risk borrowers would destabilize the financial system, leading to crisis. The 2010

microfinance crisis revealed the way in which credit bound together the lives of the urban

poor with banks and financial regulators in new and unprecedented ways. Even as

borrowers found it harder to get new loans, the effect was not simply in the financial

“downstream” (Poon 2009) as financial institutions faced sudden changes in their

financial assets.16

As more and more people are incorporated into the formal financial sector

through a process I call “systemic enfolding”, they are tied into systemic risk. Systemic

risk is an economic concept where “a trigger event, such as an economic shock or

institutional failure, causes a chain of bad economic consequences—sometimes referred

to as a domino effect” (Schwarcz 2008: 198). While the extent to which microfinance

constitutes a systemic risk is still debated, in light of increasing financialization, people

and institutions are enfolded into the financial system and subject to possible knock-on

16 For example, in 2011 Larsen &Toubro (L&T) Finance repeatedly delayed its IPO due to instability in the stock market, including the microfinance crisis. Since 2008, L&T Finance—a subsidiary of the engineering and construction corporation—had also begun work in the microfinance sector, accounting for five percent of its total loan book (Economic Times 2011d). In other words, a crisis in lending to the poor had systemic consequences for a much larger financial institution.

23 effects of a trigger event.17 On the one hand, as the 2008 Sub-Prime Crisis in the United

States demonstrates, systemic crises can not only bring down financial institutions (e.g.,

Lehman Brothers), but also drastically trigger a wider economic downturn, affecting the lives and livelihoods of millions. Systemic risk is a powerful argument for maintaining stability in the financial system. However, systemic risk is perhaps also a powerful argument for maintaining an unequal status quo.

Numerous scholars have written about the role of risk in modernity (Beck 1992;

Collier et al 2004; Douglas 1992; Ewald 1991; Patel 2007). As “the statistical probability of an outcome in combination with severity of the effect construed as a ‘cost’ that could be estimated in terms of money, deaths or cases of ill health,” (Boholm 2003: 160) risk can be understood as a mathematical way of knowing the world. Risk analysis and management has grown with the emergence of statistical calculability and related forms of governance (Foucault 1991; Hacking 1990). Risk has become something both to be embraced (e.g., stock markets) and to be avoided or minimized (Baker & Simon 2002).

This tension is prevalent in microfinance, a sector that aims to provide credit to a segment of the population that is deemed too risky by commercial banks. Yet MFIs can only do this by minimizing their exposure to risk through credit risk analysis (Chapter 6) and insurance practices (Chapter 7). While such measures are necessary to maintain the stability of the financial system, such risk management practices require further examination in relation to the role of microfinance in meeting the development goals.

17 In the draft Microfinance Bill (Lok Sabha 2011), microfinance was designated to have systemic importance. However, the Bill (Lok Sabha 2012) that was finally tabled had excluded the provision for the microfinance sector to be monitored in terms of systemic risk.

24 Social structures can often perpetuate existing hierarchies and forms of inequality.

Whether expressed in terms of economic inequality or class distinction, structural inequality highlights what Pierre Bourdieu terms the “race in which, after a series of bursts in which various runners forge ahead or catch up, the initial gaps are maintained

(1984: 160-161). Everyday practices reinforce these differences between groups of people, creating mundane forms of oppression or violence (Farmer 2004). Although

Bourdieu highlights class, structural inequality can also be identified in terms of other forms of social difference including race or ethnicity (Balibar & Wallerstein 1991). In

Kolkata, women, Muslims, and non-Bengali migrants are all subject to forms of structural inequality, whether through patriarchal norms or discrimination against minorities and migrants. These everyday forms of inequality are experienced as some are deemed less creditworthy than others—not on a financial basis, but informed by existing social and cultural evaluations of worth (Chapter 6).

Yet these forms of discrimination exist entangled with the concept of systemic risk. On microfinance, Katherine Rankin questions why “in spite of expectations about the capacity of microfinance programs to transform existing gender ideologies, in at least two respects, they seem to have the effect of entrenching, not challenging, the gender division of labor and power” (2002: 16). The management of systemic risk demands that because of the interlinkages between financial institutions, an adverse event can lead to a systemic crisis. Structural inequality also depends on the system-wide interlinkages that perpetuate hierarchies. In other words, both systemic risk and structural inequality both maintain an existing system. In order to avoid an adverse event, systemic risk management requires adherence to a certain status quo, whether it is the exclusion of

25 people deemed high risk, or the constant threat that systemic crisis will wreak havoc in our social world. In effect, the entrenchment of existing ideologies is often sustained by the fear that a collapse of such a system will lead to crisis.

With systemic enfolding drawing in more and more of the world, is there now a system that is “too big to fail?” I suggest that the systemic nature of finance and the structural form of inequality call for rethinking risk. That is, to what extent does risk management stabilize an unequal system? Managing risk means containing the unexpected or the uncertain, or “conceptually translat[ing] uncertainty from being an open-ended field of unpredicted possibilities into a bounded set of possible consequences” (Boholm 2003: 160). Truly radical change is foreclosed upon by what is known and knowable through practices of risk analysis. This is not to advocate a banking system without regulatory oversight in relation to risk or risky lending that can lead to crises; indeed, due diligence measures are necessary to avoid predatory lending to the poor. Rather—and within the scope of this dissertation—it is an argument to rethink microfinance as primarily a form of working class credit. It is an argument to demand less of microfinance as a tool of development, and to regulate it with the same considerations as other financial institutions. Rather than turn the complex work of development over to social businesses or corporations, rethinking risk is an argument first and foremost for the state to take the risk of including those who otherwise be excluded by continuing to provide forms of welfare and social support that does not depend on market forces.

However, this project also works to bridge two theories of the economy: one of capitalist expansion and one of its ethical and moral dimensions in socially embedded,

26 everyday practice. While attending to the influence of expanding finance capital, by focusing ethnographically on the encounter between field staff and borrowers I examine how the embodiment of economic agents can both reproduce structures of inequality, while also creating space to negotiate and at times challenge hegemonic market forms.

The “singular thingness” in broad theorizations about the expansion of capitalism fails to capture “the many fissures, contradictions, historical particularities, and shifts in imperial processes” (Lutz 2006: 593) as well as the “friction” of global connections (Tsing 2005).

Following James Carrier and Daniel Miller’s challenge to seek an “alternative to economic analysis” rather than “an alternative version of economic analysis” (1999: 35), this dissertation I try to “re-humanize” (ibid: 39) people’s encounters with the abstractions of the market in everyday life.

Similarly while the Social Studies of Finance have been important in opening up new spaces of inquiry, it often “does not challenge economic theory but, rather, fills in certain gaps” (Miyazaki & Riles 2005: 321). The anthropological task is therefore to take failure of economic theory as a sign of the inherently emergent, unstable and indeterminate nature of market forms.18 In other words, economic theory cannot fully capture the complexity of people’s economic lives as they unfold and are revealed in the everyday interactions observable ethnographically. The study of money and financial forms requires examination of the less perceptible or obvious ways, with both critical and

18 While anthropological and sociological investigations of the market continue to reveal the embedded nature of the economy, the discipline of economics—focused on abstractions and mathematical modeling—remains enormously powerful in the contemporary world, influencing government policy, finance theory, and popular imagination (Carrier & Miller 1999). However, as Fourcade (2001) shows in her comparative analysis of economics as a discipline in Germany, France, Britain and the United States, contrary to the often taken-for-granted notion of economic science as a universalistic paradigm, the discipline was differently shaped in each of the contexts.

27 emancipatory potential (Graeber 1996; Hart 2001; Cattelino 2008). Against its

hegemonic representations within the discipline of economics, I draw on an

interdisciplinary framework from the social sciences and humanities to understand the

alternative moralities—and currencies—that people employ in making everyday economic life meaningful.

Setting the Scene: Kolkata

The city of Kolkata (formerly Calcutta), the capital of West Bengal, sprawls from

North to South on the eastern bank of the Hoogly River.19 Despite its centrality under

colonial rule, since independence, the city has been described in terms of its decline,

decay and poverty (Fruzzetti & Ostor 2003; Hutnyck 1996; Roy 2003; Thomas 1996).

While some dispute its origins, the general consensus is that Calcutta was established as a

port, including fortifications, in 1690 when Job Charnock of the East India Company

leased three villages. However, as territorial claims of the English traders expanded, they

came into conflict with local rulers. The defeat of the ruling Nawab Siraj-ud-daullah in

the 1757 Battle of Plassey turned control of Bengal to the East India Company. Calcutta

remained the “second city of the British empire” (Chakravorty 2000: 61), and a thriving

center of cultural, political and economic life, until the capital was moved to Delhi in

1911.20

19 In 2001 the city’s name was officially changed from the Anglicized Calcutta to the Bengali Kolkata. I use Kolkata in contemporary usage, but refer to Calcutta in the historical context. 20 Calcutta was the center of the nineteenth century movement known as the Bengal Renaissance, which included social reform movements, literary and artistic work, as well as nationalist activities.

28 Industrial growth began with the establishment of jute mills in Calcutta in 1855.

By 1919, there were 76 operating jute mills in Calcutta, which recruited migrant labor

from the north, namely what are now the states of Bihar and Uttar Pradesh (Chakrabarty

1989; Fernandes 1997). Many of the migrant labor resided in slum settlements that

formed around the mills. Jute remained a mainstay of city’s industry into independence,

but demand for jute was globally in decline. Partition in 1947 effectively cordoned off the

jute-producing region (in East Pakistan) from the mills in Calcutta. Moreover, post-

Independence economic policy was driven by import-substitution industries, often based

in smaller cities. The core cities such as Calcutta served as “centers of regional and/or national administration (with increasingly large bureaucracies in the public sector, and expanding offices of the private sector), trade and commerce, small scale industry, and

services in general” (Chakravorty 2000: 62). With the hinterland of Calcutta remaining

unindustrialized, industry stagnated in the city, providing few employment opportunities

for the city’s expanding working class.

Kolkata has also had a unique political situation in India, with the Communist

Party of India-Marxist (CPM) in power with at leftist coalition (Left Front) for 34

consecutive years from 1977-2011. The success of the Communist party depended in part

on the increasing labor militancy in the jute industry in the 1960s and 70s (Fernandes

1997; Gooptu 2007). While the CPM came into power in 1977, by the early 1980s the

labor movement was facing a backlash from mill owners who threatened closure and

forcing workers to accept whatever terms they dictated, including the increasing

casualization of labor (Gooptu 2007: 1925). Rather than defend workers’ rights, trade

29 unions “appeared to be more and more complicit with employers and as mere appendages

of political parties,” (ibid) ensuring electoral success for the CPM.

The overall industrial sector in West Bengal has been in decline since independence. Reasons included partition, national policies such as import substitution, pricing policies, the labor movement that discouraged private investment, as well as the

CPM’s prioritization of the rural areas (Kohli 2012: 206). Moreover, while brought to

victory by the militant labor movement, the party soon moved to temper its radicalism in

order to attract industrial investment to the state. Liberalization of the Indian economy in

1991 further impacted the stagnating industrial growth in West Bengal. The reforms also

led to “the rise of ‘competition States’ within India’s federal democracy” (Corbridge and

Harriss 2000: 158). With the demise of the state-led development model, states sought to

attract investment in competition with each other. The political response has been a move

to “New Communism” that seeks to be “as comfortable with global capital as with the

sons of the soil” (Roy 2003: 10). A number of high-profile cases of the state’s

accommodation of industry in Nandigram and Singur highlight this tension between

private investment and populist demands for redistribution.21 These conflicts culminated

in the defeat of the CPM in the state assembly elections in May 2011.

In addition to ongoing rural-urban migration from the hinterlands, Calcutta

encountered two waves of mass migration: first, at Partition and the creation of East

Pakistan (now Bangladesh); and second in 1971 with the Bangladesh Liberation War. In

21 In 2007, 14 people were killed by state violence in the village of Nandigram over the creation of a Special Economic Zone for an Indonesian chemical plant. The same year, popular protests mobilized against land acquisition for the Tata car factory led to the closure of the factory for the world’s cheapest car and its transfer to a different state. (See Banerjee et al. 2007; Chandra 2008; Patnaik 2007.)

30 this “city of refugees and migrants” (Ray & Qayum 2009: 36), an estimated 4.2 million

people entered West Bengal as refugees between 1946 to the mid-1970s, mostly settling

in the urban center of Calcutta. Both forms of migration have provided a steady stream of

labor to the mega city. The 2011 national census recorded 14.1 million people in the

Kolkata urban agglomeration, with a decadal growth rate from 2001 of 7 percent.22 As the city expands outward, the influx of migrants has intensified Kolkata’s urban problems, including the provision of housing and sanitation, potable water, as well as employment.

Despite the need to address the needs of the urban poor, there is also growing middle-class activism toward creating a “world-class” city.23 This idea of the post-

industrial city, developed in the West, “is driven not by manufacturing but by finance and

a host of producer services” (Chatterjee 2004: 142). The literal landscape of Kolkata has

been shaped by these new financial flows, with the development areas such as Sector V

and Rajarhat to attract investment and create hubs for IT and financial services. While

such sectors provide employment for the middle-class, there are few new jobs for the

working class, with the exception of construction labor. As Partha Chatterjee argues, the

22 According to the Census of India (2011), an urban agglomeration is defined as “a continuous urban spread constituting a town and its adjoining outgrowths, or two or more physically contiguous towns together with or without outgrowths of such towns.” Further, it identifies a Mega City as an urban agglomeration of more than 10 million. Mumbai (18.4 million) and Delhi (16.3 million) are the two other mega cities in India. 23 For example, there have been a number of city “beautification” projects that include the demolition of street vendor stalls. Operation Sunshine was one such project that occurred in November 1996 when police and municipal authorities and police demolished street-side stalls across Kolkata in an attempt to “clean-up” the city over a period of two weeks. It was reported that approximately 1,640 stalls were demolished and 102 vendors were arrested (Chatterjee 2004; Roy 2003). These movements reflect what Arvind Rajagopal describes as “the confrontation between the majority, who dwell and make their livelihood on the street, and the minority, who view the streets as but the circuitry of the formal economy in which they themselves work” (2001: 92).

31 political cost of this new model of urbanity is that it does not offer opportunities to the working class, and that “unlike the middle class produced by state-led industrialization is unlikely to produce an expanding middle class” (2004: 144). In the absence of such formal sector work, the informal sector remains central to Kolkata’s working class.

However, as Aihwa Ong argues, in Asian cities “the tendency is no longer simply to turn to Western prototypes, but rather to develop from homegrown solutions to Asian metropolitan challenges, distinctive urban profiles, political styles, and aesthetic forms”

(2011: 13). The particularities of local culture and society are reflected in the new urban forms. In Kolkata, the hegemony of the Bengali upper- and middle-income bhadralok class has also shaped the city’s identity. As Tithi Bhattacharya argues, “‘Bhadralok’ as a historical term expresses [a] legacy of theoretical disagreements in its definitions,” (2001:

162). There is an extensive literature on the constitution, historical legacy, and contemporary role of this group in shaping Kolkata (Chatterjee 1993; Donner 2008;

Ghosh 2004; Karlekar 1986; Kaviraj 1997; Ray & Qayum 2009; Sarkar 1992). By the nineteenth century, the British, followed by the Marwari community from Rajasthan, controlled much of the city’s commerce. The Bengali upper- and middle-income groups came to fill much of the administrative sector, but also controlled much of the city’s intellectual and cultural life, dominating Bengali gender and work ideologies (Chapter 4).

These social, cultural, political, and economic conditions have continued to shape

Kolkata’s urban development today.

32

Figure 1.2 : A settlement on the eastern periphery of Kolkata (Photo taken by author).

Map 1.1: Kolkata

33

Map 1.2: Kolkata © 2012 Google

On Urban Microfinance

Given the emergent importance of India’s cities, both the government and private sector have focused on urban policies and markets. In 2005, for example, the central government announced the Jawaharlal Nehru National Urban Renewal Mission

(JNNURM) targeted at improving urban infrastructure and basic services to the urban poor, and reforming urban governance. As projected by McKinsey, with 40 percent of the

Indian population living in cities by 2030, and expected to account for around 70 percent of gross domestic product (GDP), the urban sector has also attracted private sector investment (Sankhe et al. 2010).

Yet in microfinance and financial inclusion more broadly, the focus has largely been on the rural sector due the government’s focus on agriculture, creating a “rural bias” in credit to the poor (Nair 2009). Moreover as identified in the National Bank for

34 Agriculture and Development’s (NABARD) report on financial inclusion, “there are no clear estimates of the number of people in urban areas with no access to organized financial services. This may be attributed, in part at least, to the migratory nature of the urban poor, comprising mostly of migrants from the rural areas. Even money lenders often shy away from lending to urban poor” (Rangarajan 2008: 17). Urban microfinance then poses its own set of problems. While there are numerous studies on microfinance in rural India (Karmakar 1999; Moodie 2008; Sanyal 2009), the effects on the urban sector remain understudied, despite the growing interest in the urban poor. This dissertation emphasizes these urban concerns, particularly given the overdetermined nature of microfinance geared toward rural areas. Thus, for example, in the crowded slum settlements, there is often little space to conduct group meetings that lead to positive impact of social capital (Chapter 5). Or, urban poor populations are seen as higher risk because many are migrants, or simply as less deserving than the rural poor (Chapter 5).

By attending to these particularities of the urban condition, I show how existing models can fail to address the needs of the urban poor.

Methodological Note

Anand, a branch manager, and I waited in front of the house where the next meeting was to be. A harried looking older woman said that Daisy, the woman whose house the meeting was to be held in, had gone to buy fish at the market, and the place was locked. “Why did she go shopping now?” demanded Anand. “She should know to go early or after the meeting.” The woman rolled her eyes, “And you know her, she’ll take forever to get back; probably talking to people, and you know…” I asked Anand if there

35 were any problems with Daisy. “Nothing right now,” he said, “but she’s going through some difficulties and we’re not sure about her situation in paying off the loan. Her

[Daisy’s] husband just left—walked out of the house, including the child.”

The older woman finally returned, still without sign of Daisy, but with the key to the house. So, we all went in as the other women arrived for the meeting, transforming the private space into the public meeting space. As we waited, Anand picked up a stuffed doll on the bed, observing that these could be quite expensive. After a while, Daisy finally arrived—a plump, smiling, young woman. “What kind of fish did you buy?” asked Anand, as she listed three different kinds, and chattered about what she would make with the fish. Later, Anand explained that he had asked what kind of fish she had bought as an indirect way of understand if she had enough money or not: “See, she’s bought three kinds of fish, so that means the situation is not yet that bad. If it were very bad, she would have bought maybe one; when there isn’t much money, people have to cut back on things, even food.” In our conversations, Anand told me that the key was to ask the same question in different ways.

Over the course of fieldwork, I was often struck by parallels between my research as an anthropologist and the work of loan officers. My own “field” intersected with what loan officers called the “field,” namely the group meetings and houses of borrowers. As I asked loan officers about their work, I also gained methodological insight that has helped me in my own work. As with Anand’s explanation of the fish, the interpretive methods of the MFI staff were often sharp, original and insightful. In another case, I asked Putul, another branch manager, about cases where she had not given a loan. “Yes,” she responded. “Just yesterday we had to say no to someone. She just pointed out a house and

36 said that is mine. But when we went there, she sort of sat in a corner and seemed

uncomfortable with the place. I asked for a glass of water, but she seemed sort of

hesitant. If it really were your own house, you wouldn’t hesitate to get a glass of water.

You could tell it wasn’t her house. It turned out she was a schoolteacher in the

neighborhood. All her documents—her voter ID, ration card, etc.—were for another place. But she knew someone here, who said she should join, but everything else was for somewhere else.”

These observations made by Putul and Anand requires a keen understanding of local cultural practices, even more than double-checking forms and studying financial histories. In anthropological work, “studying up,” (Nader 1972) in the form of research with experts as subjects has provided important insight into the intersection power and knowledge (Carr 2010; Gusterson 1997). Others have identified the ways in which anthropologists, as experts, produce their subjects (Chun 2001; Clifford & Marcus 1986).

In recent scholarship, Annelise Riles (2011) and Hirokazu Miyazaki (2013) have argued for recognizing the theoretical insights that subjects can provide in understanding social phenonomena.24 However, I suggest that research with experts such as loan officers can

also provide methodological insight into how to understand the social world that we

examine ethnographically. This is not to say that the observer should fully embrace the

particular tactics used by such experts, particularly where they may contradict research

ethics. Nevertheless, the kinds of questions and strategies of inquiry that these experts use

can provide ethnographers a meaningful framework within the context of the local social

24 In his ethnography of finance professionals in Japan, Hirokazu Miyazaki aims to “explore where dialogue and collaboration may take place between social theorists and financial market professionals” (2013: 7). Miyazaki considers his subjects as “cotheorists and cocritics of capitalism” (ibid).

37 and cultural world to conceptualize and further develop methodological strategies.

Methodology

This project was aimed at understanding the social construction of creditworthiness by taking microfinance as a site of encounter between global finance, state and institutional norms and regulations, and the situated everyday practices of urban poor borrowers. In other words, how do microfinance institutions (MFIs) determine riskiness of borrowers (i.e. who are the “ideal” borrowers), and how does this assessment in turn shape the everyday lives of both loan officers and borrowers? I identified three main research objectives for this project: 1) identifying institutional norms and notions of ideal borrowers; 2) tracing the social life of debt; and 3) discovering if credit leads to development. By examining the ways in which both borrowers and lenders of microfinance negotiate the often-divergent ethics of financial sustainability and the demands of everyday social obligations, I sought to bridge two anthropological theories of the economy: one of its capitalist expansion and one of the social embeddedness of economic life.

I sought to address these driving research questions through 12 months of fieldwork in Kolkata, India, and drawing on ethnographic methods of participant observation, formal and informal interviews and discourse analysis. Working primarily with one Kolkata-based MFI that I will call DENA, I attended the weekly meeting of borrower groups as participant-observer. The borrower groups are the units through which MFIs operate: individual women belong to groups consisting of 10-30 borrowers.

Each group meets once a week during which loan officers collect weekly loan

38 repayments. In order to gain a comparative perspective, I visited three different branch offices of this particular MFI in different parts of city, spending about three months at each. The branch offices were not chosen randomly, but in consultation with the head office, which granted permission for my fieldwork. Two of the branch offices were located on the eastern peripheries of the city, which contain a mix of old and new slum settlements (bustees). One branch was located in the heart of North Kolkata, which consists of mostly older settlements. The three branch offices also provided variance in the staff: one (A) had a female branch manager, with mixed gender loan officers, while the other two (B & C) had male branch officers. However, B had all male loan officers, C had mixed gender loan officers. All required loan officers to reside in the branch office for six days a week (See Chapter 4).

Through DENA, I visited 92 different groups, some repeatedly. Participant observation during these meetings provided important insight into the everyday practices of microfinance (e.g. the technicalities of what actually happens during the meetings), the social networks (e.g. husbands, children, parents, in-laws, neighbors) on which women rely on and navigate in order to maintain current and ensure future loans, and the problems associated with maintaining creditworthiness (Chapters 5). These interactions with the borrowers also provided opportunities to interview the borrowers and learn more about their experience of microfinance.

I also accompanied the loan officers during loan applications and house verifications, both of which offered insight into the ways that MFIs determine the creditability of a borrower (Chapter 6). Attending to these practices helped to elucidate the process of determining creditability of urban poor borrowers. For example, in

39 addition to the formal application in which the borrower states her gross and net income,

as well as the intended purpose, the potential borrower is also judged by a two-step

verification—one by the loan officer and one by the branch manager—as well as confirmation from existing group members. This second process includes informal assessment of a person’s creditability that is not immediately apparent in the formal application form.

In addition to the MFI, a for-profit commercial venture, I spent some time with a non-profit organization that provides microfinance as a Self-Help Group (SHG). The

SHG model is the alternative to the for-profit MFI and is also subsidized by the Indian government, and investigation of this model provided comparative insights (Chapter 2).

For example, while the MFIs are able to offer lower interest rates through scale, they rarely offer alternative forms of support such as livelihood training or support women’s rights.

Over the course of the year, I attended workshops and a national conference in

New Delhi organized by Sa-Dhan, the largest industry association for microfinance in

India. In addition to being a way to meet various people associated with microfinance, these meetings provided important insight into the major concerns faced by the microfinance industry (Chapter 3). Through this participation, I was also able to interact with scholars who work with the association, and was able to speak to them and share some aspects of my research. In addition to continued monitoring of news, including the release of a number of key reports, I conducted interviews with MFI staff, policymakers, and representatives from commercial banks that lend to MFIs. These interviews helped to develop the background for understanding microfinance in India, as well as to understand

40 the linkages that connect urban poor borrowers in Kolkata to the financial flows of global

capital through banking.

Another area of research that emerged while conducting fieldwork was the issue

of “social businesses” and the “bottom of the pyramid approach” (Chapter 2).

Microfinance as a social business embraces the concept of entrepreneurship not just in

terms of its institutional identity, but also the aspirational goal for its borrowers.

Moreover, in post-Liberalization India, the entrepreneurial spirit has been heralded as the

making of the new economy, in minting both millionaires and millions of micro-

entrepreneurs. I examine how the concept of “entrepreneurship” exists as an ideology and discourse in contemporary India.. In addition to observing and speaking with such small business owners, I met with the director of the Enterprise Development Institute, which is affiliated with the Bengal National Chamber of Commerce & Industry. The Institute provides training to both established businesses, as well as urban poor youth to encourage them to start their own businesses. I also met with faculty at the Indian Institute of

Management-Calcutta to learn about the culture of business and entrepreneurship in

India.

Dissertation Chapter Outline

In Chapter Two, I examine microfinance in the context of an emergent capitalism

(Sunder Rajan 2005). With the popularization of “social businesses” and the “bottom of the pyramid” as a viable market opportunity, this chapter traces the development of what is considered a more ethical capitalism. Social entrepreneurs, such as the founders of

MFIs, who serve a double bottom line of financial profit and social welfare, are

41 celebrated as the future of development. However, even as the poor are encouraged to

become entrepreneurs themselves, I examine the precarity of working in the informal

economy. While the culture of entrepreneurship as cultivated by government policy as

well as social businesses encourage the poor to become more self-sufficient, it

simultaneously ignores the desire of many to attain more secure forms of livelihood.

In Chapter Three, I trace the history of microfinance in India. In contrast to work

that situate the origins of microfinance with the Grameen Bank in Bangladesh in the

1970s, I argue that microfinance and financial inclusion more broadly have to be

understood within a longer history of banking practices. This history includes the role of

moneylenders under British colonialism, the development of social banking post-

independence, and liberalization of the banking sector in the 1990s. This history has led

to the creation of multiple models of microfinance in India, including the SHG

movement, the commercial MFIs and new banking correspondent (BC) model, with different political stakes. I argue that the 2010 microfinance crisis in India has to be understood in light of intersecting political interests and commercial expansion of MFIs.

Stronger regulation of the microfinance sector, which remains an ongoing debate, can

only emerge from a thorough understanding of the political role of banking.

Chapter Four focuses on the role of MFI staff, particularly loan officers and

branch managers who interact with borrowers regularly, collect repayment, and

determine creditworthiness. While recent scholarship in the anthropology of finance has

centered on work of elites (Ho 2009; Miyazaki 2013; Riles 2011; Zaloom 2006), this

chapter examines the labor of microfinance staff at the peripheries of finance. Loan

officers try to distinguish themselves from the culturally negatively marked but socially

42 embedded moneylender as employees of the formal banking sector. However, as “proxy- creditors,” they must produce and alienate debt relationships in order to create abstracted loan products. However, because debt is inherently relational, loan officers navigate and negotiate the ethical demands of such relationships by demonstrating care and desiring respect. As microfinance becomes increasingly financialized, including through processes of securitization, I argue that loan officers must make sense of the traces of relationality that remain even when the debt is passed on as a loan product.

In Chapter Five I examine how borrowers experience and interpret microfinance

in light of the intended purpose of women’s empowerment. Proponents of microfinance

have often pointed to social capital as enabling women to overcome gender

discrimination both by serving as a form of collateral and by creating social networks for

women to rely on. While social capital is often expected to just exist, I argue that access

to credit requires the labor of women who must not only build and maintain these

networks, but also manage the time taken weekly meetings with other forms of domestic

labor. Moreover, I argue that this perspective undervalues the power of the hegemonic

Bengali middle class ideology that encourages women to be good wives and mothers.

Thus, despite the possibility for creating change in gender inequality, microfinance can

create conservative outcomes as loans are enfolded into existing social and cultural norms

of middle class patriarchy.

Following from the previous chapter, Chapter Six argues that the conservative outcome of microfinance is also tied to the need to minimize risk for the creditor. Beyond the financial reasoning, I argue that loan officers also rely on the moral economy to determine who ought to get loans. While appearing objective, risk analysis enfolds

43 multiple forms of social discrimination and hierarchies. Thus, loan officers tend to

discriminate against Muslim borrowers, reinforcing existing forms of exclusion, while the

overall system of requiring male guarantors ensure the dominance of patriarchal norms.

Even as MFIs turn to more formal systems credit risk management, such as credit

bureaus, I show that this data is always already produced through these existing forms of

social and cultural knowledge that can exclude people.

Chapter Seven traces the intimate link between debt and death. Analyzing the requirement for microfinance borrowers to buy life insurance, I argue that MFIs are able to collateralize the loans against the lives of borrowers. While higher mortality rates are used as justification for requiring life insurance, this system of risk management can have unexpected outcomes for borrowers. In particular, as borrowers face enormous pressure to repay their loans, death—often suicide—becomes perceived as the only way to escape debt. However, the discourse of debt-related suicide in India is often over-determined by the farmer-suicide problem. While recognizing the tragedy inherent to debt-related suicide, I argue that the political and media focus on death obscures the reality of living in increasing conditions of precarity. One such area is the increasing costs of healthcare.

Many borrowers have loans to pay for healthcare, or find that sudden medical expenses can impede the ability to repay existing loans. These events and expenses require attention not at the moment of death, throughout the everyday struggles in which people attempt to make ends meet.

In sum, this dissertation traces the ways in which the moral economy of credit is co-constituted through the institutional imperatives of MFIs and the global financial system, and the existing social world of borrowers and lenders in Kolkata. I aim to

44 highlight how the financial interests intersect with ethical concerns, both in terms of producing a new spirit of “ethical capitalism,” but also reinforcing existing ideologies of class, gender, and religious difference. While questioning the ability of microfinance to institute real social change, the chapters highlight the gaps and spaces in which people negotiate, question, and challenge existing forms of inequality. By attending to these hopes for the future, I aim to provide insight into the ways in which to harness the possibilities of positive change that emerge at the intersection of people’s financial and moral worlds.

45 CHAPTER TWO

Industry or Movement?: Social Businesses and Spirit of Ethical Capitalism

Because the bank balance you have here on earth will remain, when you depart.

Your karma, you carry forward. -Rashmi Bansal (2011) in I Have a Dream: The Inspiring Stories of 20 Social Entrepreneurs Who Found New Ways to Solve Old Problems

On our way to a group meeting one morning, I asked Amit, a loan officer, how he

had come to work in microfinance. He replied that he had first learned about and became interested in microfinance when Muhammad Yunus won the Nobel Peace Prize in 2006.

After he had finished college, Amit saw an advertisement for a job with DENA, and having been curious about microfinance and its role in helping the poor, he decided to apply. However, once he had joined, he was not sure anymore of the extent to which microfinance was helping address issues of poverty. “It’s just a business,” he said, with a wry smile and shrug. “And for the borrowers?” I asked. “Getting loans had become an addiction [nesha],” he replied. Did he think that microfinance was doing anything to help the poor? “Maybe for ten percent,” he answered. “For the rest, it doesn’t do anything.”

In March 2011, I attended the annual National Microfinance Conference in New

Delhi. It was organized jointly by Sa-Dhan, one of the major microfinance industry associations, and the Federation of Indian Chambers of Commerce and Industry (FICCI).

With the theme “Re-Engineering Microfinance: Need for New Products and Policies,” the conference was, according to the invitation letter, to “provide a space for us to re- affirm ourselves as a Collective, resolve the present glitches that the sector is facing and to re-create the future” [emphasis in original]. Over the duration of the two-day conference, various industry leaders, bankers, policymakers and bureaucrats discussed

46

the state of the industry. During the question and answer part of a session on Financing

Microfinance, one of the members of the audience spoke up in frustration: “Why keep

talking about this as an industry? This [microfinance] is a movement.”25 As with Amit’s

resignation that microfinance had turned out to be “just a business,” this comment also

reflected a core tension in microfinance and its identification as a social business: was its

primary aim to establish itself as an “industry” or a “movement,” and what was the

significance of this distinction?

In this chapter, I take microfinance as an example of a larger trend in both

corporate and development worlds towards social businesses. In the first half of the

chapter, I examine how in their identification as social businesses, for-profit microfinance

institutions (MFIs) have to address a double bottom line: economic and social.26 The pursuit of these dual goals can often be blurred, resulting in confusion over what is at stake. For social businesses such as MFIs, the double bottom line has to be sustained through the ideological underpinning of what I will suggest is “ethical capitalism” as embodied in a particular incarnation of the entrepreneurial figure. Moreover, these ideological and discursive frameworks of capitalism in the service of economic and social development have material consequences for their intended customers and beneficiaries: the poor. In the second half of the chapter, I address how these ideologies of entrepreneurship and ethical capitalism intersect with the lived realities of precarity in the urban slums of Kolkata.

25 Ananya Roy (2012b) reports a similar occurrence at the 2011 Microfinance USA conference. 26 This is sometimes talked about as the triple bottom line, including environment. For the purposes of microfinance, it is talked about as a double bottom line.

47

Tracing the Spirit of Ethical Capitalism

Against the Marxist emphasis on economic materialism, Max Weber, in his classic work The Protestant Ethic and the Spirit of Capitalism (2001 [1930]), traces the

serendipitous intertwining of emergent capitalism with the Protestant ethos or

prescription for the conduct of life. For Weber, it is the “interdependent influences

between the material basis, the forms of social and political organization, and ideas

current in the time of the Reformation” (ibid: 49) that shaped the emergence of

capitalism. The convergence of the ethical and economic led to the formation of the

bourgeois economic ethic in which following pecuniary interests was a duty, and

“unequal distribution of the goods in the world was a special dispensation of Divine

Providence” (ibid: 120). Despite the initial religious influence, Weber saw the gradual

disenchantment of the world through the process of rationalization. Thus, while religious

beliefs and practices worked to build the “tremendous cosmos of the modern economic

order,” it has now been absorbed into the “technical and economic conditions of

production” (ibid: 123). The victory of modern capitalism then occurs with the shedding

of the religious beliefs that undergirded its development in the West, transforming the

Protestant ethos of the calling into the infamous “iron cage” (ibid). Thus, for Weber once

the ethos of capitalism has been rationalized, it no longer needs the ideological buttress of

religion to sustain it.

While disenchantment marked the ultimate triumph of capitalism for Weber, recent scholars have traced the processes of re-enchantment that mark modernity (Ritzer

2005). There are now new kinds of magic and ethics that enliven capitalism, from the

Romantic ethic that fostered consumerism (Campbell 1987) to occult economies of

48

millennial capitalism (Comaroff & Comaroff 2001) and emotional capitalism (Hocschild

1983; Illouz 2007). These works suggest the rationalization that Weber poses has been partial and fractured at best. While recognizing these provisions, Weber’s analysis is a powerful reminder of the continuing need to attend to the intersections of the ethical and material dimensions of economic life.

This is not to say that capital has not been triumphant; rather, it is to suggest that its forms of expansion have often been more complex and absorbed into the social fabric of everyday practices and ideologies (Boltanski & Chiapello 2005). Indeed, as Slavoj

Zizek writes, the “uncontested hegemony of capitalism is sustained by the properly utopian core of capitalist ideology” (2009: 77). Utopia, in effect, is enfolded into the possibilities of capitalism itself, rather than in alternative social systems. Take, for instance, the statement made by K.C. Chakrabarty, the Deputy Governor of the Reserve

Bank of India to the Economics Times:

“Our dream of inclusive growth will not be complete until we create millions of micro-entrepreneurs across the country," he [Chakrabarty] further said. The RBI deputy governor reiterated that social capital creation can also be profitable. "While much of social capital creation has been driven by idealism and the non- profit sector, a view that is fast gaining ground is that creating access to essential services and products for under-served communities—rural or urban, below or above the poverty line, can be profitable," Chakrabarty said. (Economic Times 2011b)

Chakrabarty’s claims highlight the imaginings of this kind capitalist utopia. Here, the dream of inclusive growth is equated with the creation of self-sufficient micro- entrepreneurs rather than welfare provisions. Moreover, it is the appeal of profitability, not idealism that drives this dream. Thus, the movement toward social businesses depends not on an alternative to capitalism, but very much within its framework.

However, Arjun Appadurai suggests that Weber’s conception of the “spirit” of

49

capitalism “does not mean its explicit doctrines, or its ideology, or even less specific

technical orientations to market, profit, and calculation. He means something less formal,

more dispositional, and moral, something that also makes sense of its crystallization in a

particular ‘ethic’” (2011: 519). Closer to Pierre Bourdieu’s formulation of habitus,

Appadurai argues that the spirit is “external to and prior to any and all of its distinctive

devices, both technological and institutional” (ibid). Thus, in the era of financialization,

the dominant ethos is of a disposition that tends “toward exploiting uncertainty as a

legitimate principle for managing risk” (ibid: 525).27 Meanwhile, Luc Boltanski and Eve

Chiapello define the spirit of capitalism as “the ideology that justifies engagement with capitalism” (2005: 8) [emphasis in original]. Using pragmatic sociology, Boltanski and

Chiapello examine the practices of justification, including moral reasons, by which capitalism is legitimated. Drawing on these two formulations of a contemporary spirit of capitalism, I examine how microfinance and social businesses more widely are informed not only by economic rationality, but a disposition and system of justification that defines an emerging ethos of “ethical capitalism.” I use the term “ethical” here without a normative judgment. In other words, I am not suggesting that ethical capitalism is “good” as opposed to other forms of capitalism. Rather, I use the term to connote the way that

27 Risk may not be the only ethic guiding contemporary capitalism. Consider, for example, the “investor’s ethic” of a former executive of Bain Capital as described in a piece by Adam Davidson (2012) in The New York Times: This constant calculation—even of the incalculable—can be both fascinating and absurd. The world Conard describes too often feels grim and soulless, one in which art and romance and the nonremunerative satisfactions of a simpler life are invisible. And that, I realized, really is Conard’s world. “God didn’t create the universe so that talented people would be happy,” he said. “It’s not beautiful. It’s hard work. It’s responsibility and deadlines, working till 11 o’clock at night when you want to watch your baby and be with your wife. It’s not serenity and beauty.”

50

individuals involved in social businesses understand their work as being particularly

morally inflected.

Social Businesses and the Development of the Bottom Billion

In December 2010—in the midst of the Indian microfinance crisis—an opinion piece published in London’s Financial Times argued, “Microfinance is not the enemy.”

The authors of the piece were leading economists Abhijit Banerjee (MIT), Pranab

Bardhan (Berkeley), Esther Duflo (MIT), Erica Field (Harvard), Dean Karlan (Yale),

Asim Khwaja (Harvard), Dilip Mookherjee (Boston University), Rohini Pande (Harvard),

Raghuram Rajan (Chicago Booth School of Business). The last author, Raghuram Rajan, the former IMF economist, was one of the few voices warning of the possibility of a subprime crisis as early as 2005. Similarly, in his book The Subprime Solution, Robert

Shiller, the Yale economist who had also voiced early concerns over the subprime sector, writes:

Ultimately the solution to the economic problems revealed by the subprime crisis requires our doing a much better job of extending the innovations of modern financial technology, together with effective safeguards, throughout society, and of being unafraid to think and act on the scale of the New Deal-era reformers. Democratizing finance is crucial in this process: by spreading risk, it places economic life on a firmer foundation. Financial democracy is thus not only an end in itself, but a means to another equally worthy end: the propagation of greater economic stability and prosperity by financial means.

The democratization of finance has in a limited sense already been embodied in the so-called microfinance revolution. [Emphasis added. 2008: 25]

Rajan has been more cautious in his approach to microfinance, noting parallels to the

51

subprime crisis in his award-winning book Fault Lines (2010).28 Nevertheless, in an

interview with the Indian channel NDTV at the World Economic Forum in 2011, Rajan,

echoing the earlier editorial, insisted that microfinance must be saved. Given the serious

implications of a financial crisis created by lending to the poor, why are even the critics

of the subprime market in United States so sold on microfinance? The reason, I suggest,

is not that these supporters of microfinance are unaware of its problems or limitations;

indeed, many have accepted that microfinance is not the silver bullet solution,

particularly in relation to actually improving economic growth or wellbeing of

individuals participating in microfinance (Sanyal 2009). Nevertheless, many continue to

support the role of microfinance in the “democratization of finance” (Shiller 2012) as an

inherent good. It is the dual moral and economic underpinning of microfinance that

marks its resilience in development economics and policy. It is the spirit of ethical

capitalism that gives microfinance and other such social businesses such potency in the

midst of crisis.

In 2004, Michigan management professor C.K. Prahalad published The Fortune

at the Bottom of the Pyramid: Eradicating Poverty through Profits. The book is a critique

of “the paternalism toward the poor” not only by government agencies, but also NGOs

and MNCs (2010: xiv). The bottom of the pyramid is not a call for corporate social

responsibility (CSR). Rather, it is an argument for what Prahalad calls “inclusive

capitalism” (ibid: xiii). Thus, Prahalad advocates:

If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a

28 For example, Rajan writes, of microfinance: “Although it [microfinance] has promise on a small scale, history suggests that when scaled up, and especially when used as an instrument of government policy, it will likely create significant problems” (2010: 45).

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whole new world of opportunity can open up. [Emphasis added. ibid: 25]

Note here the transformation of the poor as proletariat with nothing but her labor to sell into both entrepreneurs and consumers. The making of the poor into consumers is “more than access to products and services. They acquire the dignity of attention and choices from the private sector that were previously reserved for the middle-class and rich” (ibid:

44) [Emphasis in original]. The bottom line, writes Prahalad, “is simple: It is possible to

‘do well by doing good’” (ibid: 26).

A report from the Boston Consulting Group identifies the “next billion consumers” as follows:

The next billion consumers can be found largely in Brazil, China, and India, but the group also spreads across Africa and other parts of Asia. If they were a nation, the next billion would be the tenth-largest economy in terms of GDP, ranking after Spain, but ahead of Brazil, Russia, India, South Korea, and Mexico. In its development, the next billion “nation” is today where India was in the 1990s and China in the 1980s. It is on the cusp of high growth and voracious consumption. Yet these consumers cannot or will not participate in formal financial-services— at least not at present (Sinha and Subramaniam 2007).

For corporations, the bottom billion offers an immense, untapped (or unsaturated) market of possible consumers. This concept of the bottom billion has been widely picked up in mainstream business and investment practices. From tailoring fast-moving consumer goods (FMCG), such as sachets of shampoo or detergent, to the poor, to investment in banking services such as microfinance, the poor have become increasingly embraced by corporations looking to expand their markets.

Like Prahalad, Muhammad Yunus has also advocated the role of for-profit businesses in alleviating poverty. In his book Creating a World Without Poverty: Social

Business and the Future of Capitalism (2007), Yunus critiques the role of government, non-profit organizations, multilateral development institutions (e.g., the World Bank,

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IMF), as well as corporate social responsibility (CSR) for failing to mitigate poverty. He goes on to criticize mainstream free market theory for envisioning people as “one- dimensional” profit-maximizers (ibid: 18). In contrast to Prahalad, Yunus sees the social business as a “non-loss, non-dividend business” (ibid: 24). While investors can recoup their investment, the profit is supposed to be reinvested in the business, rather then shared with investors. This is a key difference with Vikram Akula (2011), the founder of SKS

Microfinance, who describes investor returns as key to scaling up the business, and an issue that I will come back to later in this chapter. Nevertheless, for Yunus, profit is a necessity; the business itself must be profitable in the long-term.

As corporations have increased their influence, the growing focus on “business ethics” in management studies reflects a larger shift toward considering the role of the corporation and society at large (Das Gupta 2010). The popularization of social businesses, whether following Prahalad’s envisioning of the bottom of the pyramid as entrepreneurs and consumers, or Yunus’ reconfiguring of the multidimensional interests of social business emerges a new conceptualization of capitalism. For Prahalad, the bottom of the pyramid approach restores the dignity of the poor, while for Yunus businesses and their leaders are not driven by the singular pursuit of amassing wealth.

Yet both operate within the framework of capitalism. It is, as Ananya Roy suggests, the

“ethicalization of market rule” or the “struggle to retool practices of calculation and rationalities of risk that take account of, and even mitigate, the exploitative character of bottom billion capitalism” (2012a: 106) [emphasis in original]. Or, as Zizek writes:

The ideological version of capitalism which is emerging as hegemonic out of the present crises that of ‘socially responsible’ eco-capitalism. While admitting that, in the past and in the present, the free market system has often been over- exploitative with catastrophic consequences, the claim is now made that one can

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discern the signs of a new orientation which is aware that the capitalist mobilization of a society’s productive capacity can also be made to serve ecological goals, the struggle against poverty, and other worthy ends. [Emphasis in original. 2009: 34]

This is not trickle-down economics, where benefits of the free market will eventually get

to the poor; rather, the poor are central to the economic and ethical dimensions of

businesses and the future of capitalism.

There are a growing number of scholars looking at the socio-economic impact of

CSR programs (Benson 2012; Rajak 2011; Shever 2010; Welker 2009). Rather than

providing corporations with ethics, Dinah Rajak argues in her ethnography of a mining

company in South Africa, that CSR provides corporations “with a moral mechanism

through which their authority is extended over the social order” (2011: 13). Through the

language of corporate responsibility, “social problems are re-framed in such a way as to

align with the agendas of corporations and make them amenable to the interests of big

business” (ibid). Meanwhile, fair trade movements have also moved producers, sellers

and consumers to imbue products with ethical meanings as they circulate (Dolan 2007;

Goodman 2004; Lyon & Moberg 2010).29 Rather than a simple and crude adherence to

free market logics, both CSR and fair trade thus offer the possibility of a more ethical

capitalism. Social businesses, like CSR and fair trade attempt to explicitly link the ethical

29 Fair trade consumers are engaged in a form of consumer politics. As observed by Martin Hilton and Matthew Daunton, there are two types of consumer politics: first, “the politics of material culture, the general movements and abstract ideologies which have tried to shape the meaning of consumption” (2001: 12). This is the consumer understood as a rational, utility-maximizing individual in the classical liberal sense or collective consumption under state socialism. There is also what Hilton and Daunton identify as “the material culture of politics,” relating “to specific acts of purchasing, the political meanings attached to a particular commodity and the political struggles involved” (ibid). This latter form of consumer politics, the authors argue, “is never stable and it demonstrates the near impossibility of constructing a unifying or universal politics of consumption” (ibid: 13).

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and economic in their business model. Unlike CSR and fair trade, however, social

businesses are directed at both providing services to and profiting from the poor or

underserved populations. Thus, the poor are seen as a potential market for businesses, not

as objects of charity or beneficiaries in a supply chain.

Such moralization of the market is, however, a complicated process that intersects

with existing ideas of development, the role of the state, as well as corporations. On the

one hand, as anthropologists have long argued, economic relations are not themselves

driven purely by rational choice calculations of individuals. Local ideologies and

cosmologies, social obligations, forms of reciprocity, and hierarchies have always already

shaped economic relations (Graeber 2001, 2011a; Malinowski 2002 [1922]; Mauss 2000

[1954]; Sahlins 1972). On the other, the rise of neoliberal economics since the 1970s has

given rise to a conception of the market as a calculative logic that gets applied to social

spheres beyond the economy (Brown 2005; Harvey 2005; Ong 2006). While grand

narratives of free markets have relied on the concept of the invisible hand of the market,

movements toward an ethical capitalism demonstrate “the rise of a new visible hand, which conjures morality at the heart of corporate capitalism” (Rajak 2011: 16). Here, not only is the failure of free markets to address poverty acknowledged, but private corporations are endowed with new meaning: to incorporate development goals into their missions as a profitable practice.

Ethical capitalism, particularly through social entrepreneurship, also marks a shift in the ideologies and practices of development. Anthropologists have variously critiqued development discourses and interventions in the global South (Escobar 1995; Ferguson

1994; Gupta 1998; Li 2007; Sharma 2008). Many of the critiques have focused on the

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discursive production of development as a technique of intervention. Yet, as Julia

Elyachar (2012) argues, the problem of development is reconstituted with the bottom of

the pyramid. The discovery of the wealth at the bottom of the pyramid and of the ability

to do well while doing good has meant “there is need to try to change poor people. Nor is

there a need to change the institutions in which poor people are educated and work. There

is no need, as such, for development” (2012: 113). Development policy, including the

provision of social welfare, is no longer conceptualized as a means of development (Sen

1999), but more aptly is expected as a positive externality of corporate enterprise. From

the increasing privatization of everything from education to healthcare, it is purchasing

power that increasingly determines access and availability of welfare services for the

“bottom billion.”

Ironically, the critique of development—including perhaps from

anthropologists—has “had an implicit position on knowledge that is much closer to

[Friedrich von] Hayek’s than to socialists’. Like Hayek, critics of development rejected

the assumption that the state or development agencies could know the poor and their

needs” (Elyachar 2012: 119). James Smith (2008) has similarly pointed out that the

deconstructionist critiques of development aimed at centralized planning emerged at the

very moment that neoliberal policies (e.g., structural adjustment and economic

deregulation) were changing the terrain of development, and the role of the state. In place

of the state and development agencies providing services or developing infrastructure,

corporations can now imagine the poor as a new or underserved market. In effect, it is the

bottom line—not the state’s obligation—that provides poor people with affordable access to education, housing, or healthcare.

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Consider, for example, the description in a report by J.P. Morgan on “impact

investing”:

In a world where government resources and charitable donations are insufficient to address the world’s social problems, impact investing offers a new alternative for channeling large-scale private capital for social benefit. [O’Donohoe et al. 2010: 5]

Impact investing, following the bottom of the pyramid model, is expected to create a

positive impact beyond the financial return. Moreover, the authors of the report explain that this “emerging asset class” offers a vast market opportunity for investment, estimating “a potential over the next ten years of profit ranging from $ 183bn to $667bn and invested capital ranging from $400bn to nearly $1 trillion” (ibid: 11). Potential areas for impact investing include agriculture, health, water, energy, housing, education and financial services.

Microfinance too falls into this category, for access to credit is formulated not

only as part of inclusive growth, but also as a profitable business. From the perspective of

the critiques of development, there is something of the uncanny in the conceptualization

of the poor as now free from the paternalistic and disciplinary powers of NGOs or state- run development programs. In its avatar as the poor who can pull themselves up by the bootstraps with access to credit and a little bit of entrepreneurial ambition, even critiques of the development discourse can fail to acknowledge the structural inequalities of

everyday life at the margins in the absence of the state’s services.

Of Charismatic Founders

In considering the entanglements of the ethical and economic in social businesses,

I do not argue that there is anything inherently insincere about the former in service of the

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latter. Rather, individuals involved in social businesses are deeply committed not only to

a service to the poor, but also in a form of self-transformation through work. Yet, the

insistence on the double bottom line of profitability and social good can create

complicated outcomes as businesses transition from their founding by charismatic leaders

to a more bureaucratized management. In the process, founders, executives, investors and

employees of microfinance institutions have to constantly negotiate and weigh their

varying commitment to the double-bottom line of social good and profits. I examine the

ways that people narrate events about the founding and development of MFIs in order to

explore this complex wedding of the ethical and economic.

I was meeting with Mr. Ray, the chief operating officer (COO) of the Eastern region of one of the major microfinance institutions in India. During the interview, Mr.

Ray explained his own journey from commercial banking to microfinance. He had spent

35 years, working at numerous multinational commercial banks. Here, he had met his

“guru,” Mr. Bose, who was the founder of the MFI, and had chosen to follow him into this industry. Mr. Ray then went on to narrate Mr. Bose’s journey to microfinance:

Mr. Bose was a very successful international banker, but he is more of a professor or philosopher than a banker. He was in retail banking for [and American bank] for a long time and has a MBA from [the United States]. Corporate life is very different and he became tired of the rat race. One day, he had a dream of his father who passed away when he was very young and in the dream he told his father of everything he had accomplished, and to this his father had asked “So what?” That was the formative question of this [microfinance] project. He met with Mohammad Yunus of Grameen Bank and decided to do something for the downtrodden.

On a different occasion, Dinesh, a loan officer at DENA, was recounting how Mr. Basu, the founder at the MFI he previously worked had scaled up his operations. Mr. Basu, explained Dinesh, had started with about Rs. 18,000 to start doing business in Howrah.

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There was such demand for money from the public, and pressure to provide loans that he

did not know what to do. At the eleventh hour, his wife gave her wedding jewelry to him

to get money to give loans. When he hesitated to take her jewelry, his wife said: “if you

can make people smile with this, than that is an ornament enough for me.” In the two

narratives, Mr. Bose and Mr. Basu have significantly different origins both personal and

institutional: the former comes from an elite multinational bank, and the other is of a

more middle class background and with a grassroots background in microfinance.

However, both narratives have similar structural elements. Significantly, they are pushed

by close kin (father for Mr. Bose, and wife for Mr. Basu) to further pursue their work in

order to do good for others. These are key turning points for both men in the development

of their companies. Yet ultimate mark of real success for both of these men is the

“scaling up” of their respective institutions and their success in terms of profitability.

However, these narratives of what I identify as “foundational moments” in order to

address a key element of social businesses.

The narratives of social businesses are not simply stories that blatantly celebrate

the free market, but do so in ways that can be harder to disentangle from other discourses.

Corporations are “deeply invested in their stories in telling their histories” (Bose & Lyons

2010: 8) as part of their social identities, these stories often invoke tropes that “obfuscate the actual relations of production and division of labor that they must organize and regulate” (ibid: 9). The investment in this narrative is particularly important for social businesses such as microfinance that must sustain the social identity of doing well and

doing good. Like the two narratives recounted by employees of MFIS, two

autobiographical works, Yunus’ Banker to the Poor (2003) and Akula’s A Fistful of Life

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(2011) describe moments of revelation and transformation that lead to the founding of the

Grameen Bank and SKS Microfinance, respectively from the perspective of the founders

themselves. I analyze these narratives to explore the social identities of the entrepreneur and the social business as they are represented in the retelling of their origins.

In Banker to the Poor, published several years before being awarded the Nobel

Peace Prize, Muhammad Yunus retraces his journey in founding the Grameen Bank. The book follows Yunus’s transformation from an academic economist to the founder of the bank to the poor in Bangladesh and its eventual growth worldwide. Starting from his childhood in post-partition East Pakistan (now Bangladesh), Yunus goes on to describe his time in the US pursing a PhD in economics at Vanderbilt. In the United Sates, Yunus became involved in Bangladesh’s independence movement in the 1971, leading to the decision to return to independent Bangladesh upon completion of his degree in 1972.

After a brief stint at the Planning Commission, Yunus accepted a position as head of the

Economics department at Chittagong University. Following this move, Yunus began working with the villagers of Jobra, and with the landless poor. This research eventually led to his founding the Grameen Bank.

For Yunus, the transformatory moment was his meeting with Sufiya Begum, a 29- year-old woman during research. He describes her as “in her early twenties, thin, with dark skin and black eyes. She wore a red sari and had the tired eyes of a woman who labored everyday from morning to night” (Yunus 2003: 46). Sufiya made bamboo stools for a living, on which she worked on as she talked to Yunus. Explaining that she made just 50 poysha—about 2 cents—profit because she had to buy her materials from middlemen. She would need a loan to buy her own raw materials in bulk, but interest

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rates for moneylenders were too high at 10 percent per month, or even 10 percent per week. Yunus continues:

I had never heard of anyone suffering for the lack of twenty-two cents [amount needed to buy in bulk]. Should I reach into my pocket and hand Sufiya the pittance she needed for capital? That would be so simple, so easy. I resisted the urge to give Sufiya the money she needed. She was not asking for charity. And giving one person two cents was not addressing the problem on a permanent basis.” [2003: 48. Emphasis in original.]

After a sleepless night, Yunus decided to lend approximately US$27 of his own money

out to villagers in the district. This is the beginning of his experiments with lending to the

poor, leading to the eventual founding of the Grameen Bank and its model.

Born to Indian immigrants in the United States, Vikram Akula traces another path

to microfinance. After graduating from Tufts University, Akula moved to India to work

at an NGO that provided microcredit. After returning to the United States, Akula

embarked on a PhD in Political Science at the University of Chicago, writing his

dissertation on microfinance. During his time as a graduate student Akula founded SKS

Microfinance as a profit-driven microfinance venture. Like Yunus, Akula’s vision of

microfinance takes off from a fateful meeting that occurs while working at the NGO:

“Then, one day, a woman walked into our regional office. Barefoot, emaciated, and

wearing a faded purple sari, she was obviously poor and from a lower caste” (2011: 3).

Although she wanted to get a loan, the NGO had no more funds. Going to tell her the

following day, Akula recounts her response:

The woman looked me in the eye, and with great dignity, she spoke the words that would change my life. “Am I not poor too?” She asked me. I stared at her, jarred by the question, and she went on. “Do I not deserve a chance to get my family out of poverty?” [ibid: 4]

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This question caused Akula to consider to the need for scaling up microfinance—a

project that would eventually lead to the listing of SKS on the Bombay Stock Exchange.

I highlight these two moments because they are emblematic of what I suggest are

foundational stories that are central to social businesses that purport to “doing well by

doing good.” Without going into a deeper textual analysis of these texts, I suggest that

these stories have a fabulistic quality to them, and are essentially stories of morality: Why

should a poor, and perhaps more importantly, hardworking, woman not have access to

credit? While both Yunus and Akula are already involved in development work, these

meetings seem to shake the men out of what they see as simple solutions for addressing

poverty. Of course, there is a strange confusion between the savior and saved, as well as

gender in these stories: the poor women strike the conscience of the men, although

ultimately it is the men who seemingly provide the way out of poverty to these women.

These are highly personal moments, when emotional connection to the poor woman is central to the transformation. In her analysis of the person-to-person microlending website Kiva, Shameem Black examines the role of sentiment in its popularization. For Black, the “microsentiments” of the lenders—more than the borrowers—inform and create a new form of sociality. Sentimentality is “the emotionally suffused experience of sympathy for others” (2009: 270). Black argues that the predominantly First World lenders use the online platform to sympathize with the hardship of the poor in the Third World, such forms of lending does not account for how lifestyles in the First World might be contributing to the very problems they seek to ameliorate. With the sentimental narrative depending on the successful repayment of loans, Black observes how “e-mails noting receipt of a scheduled payment do not

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necessarily assess the well-being of the business or the quality of life of the owner”

(2009: 286). Black is ultimately troubled by “sentimentality” that detaches itself from the

structural inequalities of such global flows of capital. Rather, Black wonders whether

“truly unsentimental cosmopolitanism may be truly utopian” (ibid: 288). In other words,

would we be able to address these questions of justice and inequality without the

discursively powerful trope of sentimentality?

While I do not intend to question the sincerity of these sentimental reactions of

the founders or employees of the MFIs, it is the subtler ideological move in the morality

tale that I would like to consider. Yunus does not simply give money to the poor woman.

He explains that she does not want charity. Similarly, Akula wants to find a way to end

poverty through profitability. He writes that in order to help poor women like the one he

encountered, he needed to bring more money into microfinance. His solution is: “Why

not bring the circle around, making it possible for donors—or investors, as the case

would be—to make money from supporting microfinance?” (Akula 2011: 53). In effect,

what emerges from each of these encounters is a reinforcement of capitalist market logics

that implicitly critique welfare. Emotionally suffused narratives, such as the ones about

Mr. Bose, Mr. Basu, Yunus, and Akula require greater disentangling in terms of their ideological work in sustaining a culture of entrepreneurship and the celebration of self- sufficiency over state support.

On the Culture of Entrepreneurship

During fieldwork, I was often struck by the prominence and popularity of the business section in many bookstores: the shelves lined with books and magazines

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hawking knowledge about succeeding in India’s new economy. Similarly, a growing

number of television channels are dedicated to 24-hour news coverage on business and

finance, from the English-language NDTV Money, CNBC-TV18, ET Now, to the Hindi- language Zee Business, CNBC-Awaaaz. Additionally, there is a growing popularity of business degrees and programs and valorization of business figures. All of these examples mark a palpable transformation of the Indian middle class into what Appadurai, in the US context, has called “business junkies,” with the “growing hegemony of business news and knowledge in the popular media over the past few decades” (2012).

Everything from home ownership (mortgages, financing) to sports (franchising, trading players, team ownership) has become increasingly subject to business analysis, while start-up entrepreneurs have become heroes. Citizenship is increasingly defined by business observes Appadurai: whereas the business of America was once business, “now we are gradually moving toward a society in which the business of American life is also business” (ibid) [emphasis in original]. The dissemination of business knowledge in

Indian everyday life happens in its own social and cultural context.

A form of entrepreneurial personhood has always existed within the South Asia, where existing notions of mercantile ethnic groups and castes often structure the identity of the individual engaged in business (Fox 1967; Damodaran 2008). For example, writing of the role of caste in contemporary capitalism in India, Damodaran observes the “head start” experienced by members of mercantile castes who could “leverage their existing connections to obtain credit and mobilize capital” (2008: 2). These “thick networks” also serve as “sources of information and markets” (ibid). Though professions can no longer legally be pre-determined by caste, caste-based as well as ethnic networks continue to

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influence everyday economic life in India. For example, a commercial banker explained his perspective on microfinance in West Bengal as follows:

Among the Bengalis, the spirit of enterprise is not that strong. If you look outside, who is running the businesses? Patels [Gujaratis] and all that, not many Bengalis. Bengalis don’t think big. In Andhra Pradesh or Madhya Pradesh, loans are in the amount of 50,000; here it might be about 15,000. So they have much larger loans. I went to a male group and asked what is the amount of loan and the man said 15,000. I thought that was too small, but he said that he couldn’t handle any more than that. That is the typical psyche of Bengali. There is a good side of it too, because you know that they won’t waste it.

The comments reflected how specific ethnic and cultural groups are identified as being more or less business-like, particularly as it relates to the degree of financial risk that person is willing to take (See Chapter 5).

However, in South Asia, where notions of the person embedded in social relations, the “business ‘person’ is constituted by his or her social relations and transactions” (Weeratunge 2010: 329; c.f. Ostor et al. 1983). Moreover, indigenous notions of “just” business inform this local entrepreneurial spirit. Prior to independence,

Mohandes K. Gandhi envisioned an alternative economic development of India based on village life (Chatterjee 1993). Responding to Gandhi’s criticism, Jawaharlal Nehru wrote

“quite firmly on the universal principles of historical progress: ‘We are trying to catch up, as far as we can, with the Industrial Revolution that occurred long ago in Western countries’” (ibid: 202). By the 1940s, Gandhi’s alternative formulation of an independent

India functioning through self-regulating, harmonious villages had been had more or less been rejected by the National Planning Commission in favor of large-scale industrialization. Yet 70 years after this debate, Gandhi has been revived in Indian business circles, in particular his role as a leader, strategist and innovator. Beyond the use of Gandhi’s leadership style to corporate strategy however, there remains the question of

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how to incorporate Gandhi’s socialism with capitalist logics.

Arun Maira, the former chairman of Boston Consulting Group in India and

currently a member of the Indian Planning Commission, turns to Gandhi in his argument

for a more local business management model:

We keep feeling that models of people in the West are the ones we should follow. In a way, we remain subservient to the leadership values and models of the West. But since the last two to three years these models are being doubted even in the West, and so it is time for India to look within itself for leadership examples...

In business, empowerment is all about making sure everyone is connected to the organization's goals. Gandhi has a way of doing that: making sure that everyone in the cause is connected to the goal…

In the last few years, there is a thinking that capitalism is not just about creating wealth, but you have to take care of the shareholders and stakeholders, too. Many years ago, this emphasis on the interests of the stakeholders was labeled socialism. So, Gandhi's ideas and the lessons learnt from him are not totally different from what corporate India would like to do. [Ganapati 2003]

Maira—much like Gandhi’s critique of Western civilization—is insistent that Western

corporate models cannot be used in the Indian case. Moreover, wealth creation of the

corporation cannot occur apart from wider social concerns. In identifying the populace as

shareholders and stakeholders rather than citizens, Maira reformulates the way in which

people can claim rights from the states. In other words, businesses have to be concerned—as part of management strategy—with doing good. As with Zizek’s argument that utopia is now enfolded into capitalism, socialism too is taken to be absorbed into capitalism.

A book by journalist Rashmi Bansal (2011) entitled I Have a Dream: The

Inspiring Stories of 20 Social Entrepreneurs Who Found New Ways to Solve Old

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Problems has been a Indian bestseller in business books.30 The book documents the cases

of a number of successful social entrepreneurs in sections entitled “Rainmakers,”

“Changemakers,” and “Spiritual Capitalist.” In an introduction to the cases, Bansal writes

in short paragraphs, in almost poetic form:

I see now, a new breed of people. Thinking-feeling individuals who look a problem in the eye and declare war.

These people think like entrepreneurs but feel and work for the cause of society.

And hence, they are ‘social entrepreneurs.’

These are people like you and me, not Mother Teresa. They are using the principles of business, to create a better world.

A world where profit does not equal greed. Where people come together for a common cause. A world where “I” does not mean crushing “them.”

Because the bank balance you have here on earth will remain, when you depart.

Your karma, you carry forward. [2011: Author’s Note. Emphasis in original.]

Bansal distinguishes two kinds of people, “thinkers” who do not do anything about

poverty or inequality because they “believe the world is a neat place, with boundaries,”

and “feelers” who will give something, “if not a coin, at least a moment of compassion.”

Social entrepreneurs, however, are “thinking-feeling individuals” are able to transcend

this divide to help bring about change by applying the principles of business. Moreover,

Bansal uses the idea of karma, describing it as “the bank balance you have on earth” to

promote social entrepreneurship. Using the somewhat ironic analogy of a bank balance,

Bansal draws on the popular understanding of the Hindu and Buddhist concept of karmic

30 In September 2011, I Have a Dream was the number one bestseller for non-fiction books according to the list published by the news magazine India Today.

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reincarnation to make a case for social enterprise.31 In making this argument, however,

Bansal assumes the legitimacy of making profit. Thus, she writes of a world where

“profit does not equal greed” or “where ‘I’ does not mean crushing ‘them.’” The argument stands that profit can be good, as long as it does not crush “them.” Forget class struggle—the message suggests—accumulation can exist without exploitation. Tellingly,

Bansals forthcoming book is Poor Little Rich Slum, about the spirit of enterprise in

Dharavi, Mumbai, India’s largest slum.

Anthropologists have examined the capitalist encounter with non-capitalist

societies, and the process of enfolding greater parts of the world into the capitalist system

(e.g., Taussig 1980; Nash 1994). However, other scholars have subsequently argued for

the need to study the hybrid forms of capitalism that emerge in these encounters, rather

than privileging the “Eurocentric assumption that the Midas touch of capitalism

immediately destroys local indigenous economies and cultures” (Yang 2000: 481; Ong

2006; Tsing 2005). Historical analyses of economies in the colonial encounter challenge

universal models of capitalist transformation, demonstrating the role of indigenous

capitalists in the process of transformation (Ray 1995; Birla 2009). Rather than

(re)producing a singular grand narrative of global capital, attention to the local

particularities, and historical contingencies, reveals the dialectical processes through

which global capital interacts and intersects with vernacular capitalisms, competing

elites, and local politics.

31 Karma serves to explain “certain dimensions of one’s present existential circumstances in terms of a predetermined destiny and also serve to define the nature of the responsibility that one should assume for one’s actions in order to attain positive (including post-death) ends” (Keyes 1983: 13). Through karmic reincarnation, action in the current life shapes the future of the spirit and one can assure a better future by performing caste duty.

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Ethical Limits

Numerous scholars have pointed to the free market as the premise of

microfinance; that credit as a human right should be seen as a way to create millions of

entrepreneurs who will raise themselves out of poverty (Karim 2011; Rankin 2001; Roy

2010). Microfinance did indeed emerge and grow in a period that aligned with the rise of the neoliberal doctrine of market hegemony and the dismantling of state-led development

projects since the 1970s (see also Chapter 4). In India, it is notable that microfinance has

picked up pace particularly since the liberalization of the economy in 1991 (See also

Chapter 3). However, the ethical dimensions of social business make for a more

complicated story. In other words, ethical capitalism is not neoliberalism by another

name. Rather, it is something that proponents of free markets must constantly contend

with as a possible limit to expansion. The “ethical” is undoubtedly shot through with

power; it reproduces structures of inequality by normalizing and naturalizing them as

desirable. However, the ethical is not simply part of the superstructure in the Marxist

sense, confounding the exploitative relations of production. What is deemed ethical is

also a way to understand how people make sense and meaning of their lives. To this

extent, it is not a predetermined and foregone conclusion, as people seek to justify their

beliefs in everyday life. Just as social businesses can claim to be ethical, other social

actors can challenge these claims, as demonstrated in the case of SKS Microfinance.

Following the successful listing on the Bombay Stock Exchange in July 2010 (see

Chapter 3 for further discussion of this event), one of the first signs that all was not well with SKS Microfinance was the rumor that Akula had fallen out with his management,

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namely Managing Director and CEO Suresh Gurumani.32 While Akula has been the public face of SKS Microfinance, he has been periodically absent in the running of the company he founded in order to finish his PhD, to work at the consulting firm McKinsey, and then to deal with a messy transnational divorce and child custody case based in the

United States. Meanwhile, as described in an Economic Times piece, Gurumani “was

SKS' face for investors… Mr. Gurumani could speak the language of private equity funds and global investors—return on equity, return on capital, client acquisition—thanks to his two decades of banking with the financial world at Standard Chartered Bank and

Barclays” (Udgirkar 2010). If Akula was the publicly acceptable charismatic leader,

Gurumani represented the leader who would appeal to investors. The public sparring perhaps revealed more than differences in personality, but a more fundamental tension between the contradictory demands of social and financial bottom lines.

On October 4th 2010, newspapers reported that Gurumani had been fired and

replaced by M.R. Rao, the deputy-CEO at the time, a move that precipitated a 9% drop in

SKS’s share price. Further, Akula had been appointed Executive Chairman with a greater

role in running the company. While there has been speculation over the exact reason of

Gurumani’s dismissal, including personality and strategic differences with Akula, what

the IPO and management scuffle ultimately revealed through subsequent debates in the

media was the profitability of microfinance. For example, appointed in 2008, Gurumani

was paid Rs. 15 million per annum (approximately US$275,000), in addition to a

performance bonus of Rs. 1.5 million (approximately US$27,500) and was entitled to

675,000 shares under a stock option plan to be vested until 2014 (worth about US$16

32 Based on reports from The Telegraph (Calcutta), The Economic Times, and Business World.

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million at the height of SKS’s share prices) 33 In fact, in October 2010, the Economic

Times (2010) reported that more than 60 employees of SKS had each made more than Rs.

1 million by selling shares following the IPO. They had received these shares through an

Employee Stock Purchase Scheme (ESPS) in 2007, making a return 29 times their initial investment. Even before the listing, Akula and other senior management, including

Gurumani, sold part of their stakes in the company, making significant profits. This very profitability would come to haunt SKS in the crisis, not only as their stock prices crashed but also the reputation of the company. How, after all, were people making millions off of an industry that was purported to helping the poor?

Akula and SKS are not alone in facing critics over the profitability of microfinance. In Bangladesh, Yunus had come under scrutiny of the government. In

April 2011, he was removed from his post as Managing Director of Grameen on the technicality that he was 70 years of age, while regulations stipulated retirement at 60.

Although some have argued that this was politically motivated, the move demonstrated the real and imagined power of the microfinance institution as it has grown and expanded its reach.

Max Weber has written of charismatic authority as requiring natural leaders who

“in times of psychic, physical, economic, ethical, religious, political distress… have been holders of specific gifts of the body and spirit” (1946: 245). Similarly, as observed by

33 Compared to this, the annual compensation in 2010 for the chairman of the publicly owned State Bank of India, a Fortune 500 company, is about Rs. 2.7 million (about US$500,000) (Economic Times 2010: http://articles.economictimes.indiatimes.com/2010- 08-28/news/27589626_1_state-bank-sbi-chairman-banking-sector), while for the CEO and MD of the privately owned ICICI Bank, annual compensation in 2009 was about Rs. 16 million with stock options (Forbes Asia: http://people.forbes.com/profile/chanda-d- kochar/42493).

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sociologist Rakesh Khurana (2002), there has been a shift in corporate leadership from

one of “managerial capitalism” to charismatic authority of CEOs. Since the 1980s, new

members of the American business elite were “no longer defined as professional

managers but instead as leaders, whose ability to lead consisted in their personal

characteristics, or more simply, their charisma” (Khurana 2002: 69). CEOs, argues

Khurana, have transcended the profane task of making money, and have been portrayed

in various ways from visionary to role model (ibid: 71). In India too, CEOs and their

paychecks have increasingly been revered as role models of success.

However, for Weber charismatic authority is inherently unstable, and the leader

can maintain authority only insofar he can prove his strength, whether it is performing

miracles or heroic deeds. The bureaucratization of authority becomes a part of the process

of rationalization. As microfinance institutions have scaled-up to financialized entities,

with professional management, they have moved toward increasingly bureaucratized

forms of management. Yet, this transition is particularly fraught for social businesses that

depend on charismatic leaders and their transformatory stories.

These stories also have reverberations as they work their way into the lives of the

borrowers of microfinance. During a group meeting, one of the borrowers told Anand

(BM) that she had been reading about the controversy with Yunus and the Grameen

Bank, and how he had allegedly moved money from the bank. Anand responded:

Of course Yunus has done something wrong. He made a lot of money, and he was not able to resist. But that does not mean the work he did for microfinance was bad. He was tempted by money.

Mana repeated this idea of Yunus in a conversation we later had, during which he observed, that while Yunus had done something wrong, what he had done for the poor

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was still commendable. In this new manifestation, the story of the charismatic founder had become that of a tragic hero, whose downfall is precipitated through a fatal flaw.

Ironically, the revelation of profitability becomes a limiting condition to the social business.

Even as individual figures involved in microfinance, such as Akula and

Gurumani, are subject significant questioning in the public sphere, microfinance has remained surprisingly intact, celebrating a culture of entrepreneurship. Although faced with the ethical limits of profitability then, the premise of microfinance itself being a social good remains. Writing of critique and capitalism, Boltanski and Chiapello note the capacity for capitalism to absorb “part of the critique that has helped to disarm anti- capitalist forces” (2005: 27). Critique, in other words, is “a motor in changes in the spirit of capitalism” (ibid). Social entrepreneurship in the service of development has taken hold with the waning of the hegemony of pure free market principles, including trickle- down or supply-side economics. “Doing well by doing good” marks the ways in which capitalism absorbs the critiques of its failures to mitigate poverty. Nevertheless, as

Boltanski and Chiapello observe, while capitalism absorbs and transforms itself through critique, it often “does not challenge the principle of accumulation itself, or the need for profits” (ibid: 29). Excessive profitability may be problematic, as with the backlash against SKS, yet the culture of entrepreneurship continues to celebrate the market logics.

Yet the ideology and culture of entrepreneurship does not map easily to the precarious everyday lives of the urban poor in Kolkata.

The Real Work of Business

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Founded in 1999 through joint collaboration between the Bengal National

Chamber of Commerce and Industry (BNCCI) and the Government of West Bengal, the

Enterprise Development Institute (EDI) offers training and support to develop

entrepreneurship in the state. Among its activities, EDI works to create awareness about

entrepreneurial activities, and runs workshops and courses on entrepreneurship for small

business owners, unemployed youth, retired military servicemen, women, and minorities.

Wanting to understand the way in which the entrepreneur was understood in this

entrepreneurship promotion organization, I spoke with Mr. Maity, the Deputy Director of

EDI:

Mr. Maity: Our target is to create entrepreneurs, not managers.

SK: How do you distinguish between entrepreneur and manager?

Mr. Maity: Entrepreneurs he is the owner of his enterprise. He started his venture. It is his venture, and he is the owner. Now, a new term has come up, intrapreneur. It means if a person has similar traits of an entrepreneur, but is working in an organization as an employee, then we are calling that person intrapreneur. He is working, drawing a salary, but he has similar traits as an entrepreneur. He has innovative ideas, he solves problems in different ways. Sometimes he is taking some risks. So he has entrepreneurial traits. So that is an intrapreneur. But he is not the owner. Basic difference, he is not the owner. Since he is not the owner, he is not entrepreneur. Entrepreneur is the proprietor of the organization. Sometimes it is difficult how you call someone, he is entrepreneur or he is manager, executive. It is very difficult.

SK: What would you say are the traits of an entrepreneur?

Mr. Maity: The main traits as we think: independence, risk-taking ability—should be moderate risk-taking not high-risk, not low-risk—perseverance, problem- solving attitude, flexibility, communication and interpersonal skill, hardworking.

As this conversation revealed, there are two formulations of the entrepreneur: first, the one with the entrepreneurial habitus with the necessary personality traits; and second,

proprietorship. The entrepreneurial habitus is marked by the ability or willingness to take

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appropriate risk, as well as skills such as communication and problem solving.

Proprietorship reflects the need for ownership of capital or the material dimension of the

business. Of course, both the entrepreneurial habitus and proprietorship are shaped by

structural conditions: the poor are less likely to have received business-related education

or cultural capital that shapes this specific entrepreneurial habitus. Similarly, without

economic capital, proprietorship of a business is often tenuous. Significantly, the

identification of both the entrepreneurial habitus and proprietorship flag disjunctures

between the ideology of ethical capitalism and the material basis. For Mr. Maity,

managers are not real entrepreneurs, though they may have the entrepreneurial

disposition. However, his final insistence on ownership as the primary identifier of an

entrepreneur shows the centrality of economic capital. Microfinance purports to create

entrepreneurs by providing poor women access to credit. However, while the discursive

emphasis on creating millions of micro-entrepreneurs—as suggested by the Deputy

Governor of the central bank in the opening quote—may cultivate a culture of entrepreneurship (i.e. a social and cultural context in which the traits of the entrepreneur are celebrated and embraced), can it actually create entrepreneurs?

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Figure 2.1: A couple in their grocery store [mudi dokan] (Photo taken by author)

Figure 2.2: A couple running a bookbinding business (Photo taken by author)

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RETAIL SERVICES Clothes/Sari 143 Car/Taxi 30 Grocery Store 35 Tailoring 23 Food stall 33 Rickshaw 22 Tea stall 21 Autorickshaw 15 Fruit/Vegetable 18 Electrician 12 Fish 13 Beautician 8 Cosmetics 11 Cycle Repair 6 Meat 10 Laundry 3 Medicine shops 10 Photo studio 3 Bidi/Paan Stall 9 Photocopy 3 Jewelry 9 Plumbing 3 Coal/Cooking gas/Kerosene 8 Rental property 3 Electronics 8 Travel Agency 2 Miscellaneous 8 133 Direct seller 6 Flowers 4 PRODUCTION Milk 4 Leatherwork 45 Newspaper 4 Plastics 18 Shoes 4 Clothing workshop 5 Stationary 4 Embroidery 3 Spices 3 Bookbinding 2 Mobile Phone 3 Printing 2 Poultry 3 75 Tableware 3 Chemicals 2 CONSTRUCTION Eye glasses 2 Construction 22 378 Furniture/Carpentry 12 Marblework 3 Painters 2 Total Respondents: 625 39 Table 2.1: Businesses of Borrowers from DENA

As a couple filled out a loan application, Mukesh, the loan officer glanced over the business listed. “You have a tea stall?” asked Mukesh. “Grocery store,” responded the husband. “I have a tea stall as well—they’re adjoined. I have many businesses; you can put any one of them down,” he answered, indicating the constant hustle of business in the informal economy. During another house verification, Putul, the branch manager asked the husband of a borrower what he did. “I drive a bus,” he replied. “But I also run a

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business delivering Bisleri [filtered water].” Asked what he did, he explained that he had

to pick up the 20-liter jars of water from the Bisleri dealer, for which he put down a deposit. From the deliveries—often to apartment buildings without elevators—he

received a delivery charge. Looking at his papers, Putul noted that for the last loan, he

had a business selling fish. “Yes, but that didn’t work, and now I’m working in water,” he

replied. Both of these examples point to the constant flux of people who do run

businesses based in the informal economy of Kolkata.

Quite in contrast to what is recommended in the management books and courses

that have become so popular in India, success in the informal economy often requires

constant movement to new projects. As a professor of marketing at the Indian Institute of

Management, Calcutta, explained to me in a meeting, “there is no business plan.” Yet, as

people constantly try to make ends meet through these business ventures, capital is more

often circulated to corporations and larger businesses, or the financial system through

loans. Most new “entrepreneurs” in the slums hardly ever accumulate capital.

We were at a group meeting and I was going around asking all the members for

what kind of businesses they had taken loans (See Table 2.1). As several of the women

responded, Mukul, the branch manager, who was familiar with my research ritual, said

jokingly: “I’ve always wondered, you all take loans to sell saris. Who is buying and who

is selling?” Certainly, the striking number of respondents (23 percent) who said they had a “sari business” raises questions about the use of loans to start or expand businesses. On a number of occasions, loan officers explained the prevalence of the sari business amongst borrowers because it was relatively easy to prove. In other words, women would often keep a few new saris at home, and when the loan officer asked to see evidence of

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their business through inventory, the women could bring out these saris. This is not to say

that there are no legitimate sari business owners among the borrowers. In contrast to the

rhetoric of women’s empowerment through entrepreneurship, borrowers most often

described the businesses as belonging to a husband or son.

Scholars estimate that almost 90 percent of the Indian population works in what is categorized as the informal economy (Breman 1996; De Neve 2005; Harriss-White

2002). Liberalization of the Indian economy has led to the further informalization of the economy, with privatization leading to fewer available public sector jobs and the increasing efforts on the part of private firms to reduce costs of production through labor cuts (Harriss-White 2002: 210). The ongoing industrial decline in West Bengal (Bagchi

1998; Pedersen 2001) and the “flexibilisation of production” (Raychaudhuri & Chatterjee

1998: 3062) have also contributed to this process of informalization of labor, particularly in the urban center of Kolkata (Gooptu 2007; Mukhopadhyay 1998). Most of my informants worked to some extent within the informal economy. Of course, the informal and formal economies are not disconnected entities: borrowers and their families often had jobs in the formal sector (e.g., service sector workers, etc.), while also participating in the informal sector (e.g., small businesses, domestic work, etc.).

Yet the official designation of the informal economy under neoliberal regimes, as

Julia Elyachar argues, essentially changes the way in which the relation between citizen

and state is perceived:

Conventionally, the people were linked to the state or nation. In programs to empower the poor by incorporating them into the market, the concept of the people was associated no longer with the state but with the economy. This new association was characteristic of an era in which the rhetoric of the economy had come to prevail. Translated into the language of the economy, the people became the informal economy—those who, without any help from the state, made their

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own way, depending on themselves or their communities to survive. [Emphasis added. 2005: 172]

Informal labor is no longer seen as an issue for the government to address, but is simply

assumed to be part of a functioning economy. This is not to deny the centrality of the

informal sector in the economy as a whole. Indeed, as Carolyn Nordstrom argues, these

non-formal economies “link with worldwide economic and political concerns”

(Nordstrom 2001: 237) and sustain forms of production and circulation in the formal sector. Informalization of the economy can then be seen as the process by which people are increasingly seen as responsible for their own well-being; a process the resounds with

the microfinance goal to create millions of entrepreneurs who are responsible for their

own fate.

Jeevika is a community-based NGO oriented towards women’s rights and

empowerment, and located in the southern edge of Kolkata.34 While they provide

microfinance through the self-help group model, the Access to Livelihood program works

to train women in various skills. Yet more than just offering training, Jeevika helps

groups of women to form units through which they can run a cooperative business. For

example, one group had received training from Jeevika to make soft toys, and had since

become independent from the NGO. They received orders and samples from a fair-trade

organization, which sent patterns and designs that the women would fulfill. At the time

that I visited Jeevika, they were training women in-house to sew clothing and fabric-

based decorations for fair-trade export.

There were seven or eight women in the room sitting at sewing machines working

and chatting. At the moment, they were fulfilling orders for 150 pieces of decorative

34 I have not changed the name of this organization.

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buntings, as well as 220 pieces of long skirts and tops for export. Most of these were made from old or used saris. The skirts and tops were mostly for export to the UK and

Japan. One of the women oversaw the whole group. She explained that when they received an order, she would first check the delivery date. She would then ask what people could do. Some people would say they could finish five pieces a day and some three. So depending on the capacity of each person, she would see if they could make the delivery date on that schedule. If not, they would only take an order for what they could complete. She explained that she depended on a kind of competitive spirit among the women that emerged as they tried to complete as many as possible

Another woman was the buyer for the group, going to the wholesale district of

Burra Bazar twice a month—or more as needed—to buy all the materials necessary. She had started out about two years ago, when she did not know anything. When she started, one of the men working at Jeevika had taught her where to go, and what to buy, though she was now able to do this on her own. Not only was the bus journey long and bumpy

[dhakka khete khete jete hoi], men in Burra Bazar would also push [dhakka mere ditto] her, she explained, after seeing women doing this kind of work. Another small business that Jeevika had helped to establish was run by three women who had received computer training. The business did photography, with a small studio for portrait photos in the back, and also printed leaflets, and business cards. In addition to a loan from Jeevika, they had received support from another information technology oriented NGO. When I visited, they had paid off the loan, and had no other loans. They had also hired two other women. When they had started, people had doubted that three young and unmarried women would be successful, and even had trouble finding a place to rent for the business.

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These experiences highlight the way that women’s empowerment did not occur easily.

Even with assistance in starting the business, women faced significant pressures in being in predominantly masculine public spaces such as the wholesale market.

I raise the examples from the livelihood training program for two reasons: first,

the cases show how the culture of entrepreneurship has been normalized in the

development discourse, particularly of women’s empowerment. Thus, similar to the

discourse of MFIs, women are encouraged to become active in businesses as a way to

achieve empowerment. Second, I raise them in contradistinction to microfinance

programs that rely almost solely on access to credit as the primary means of establishing

a business. The above stories point to the complicated process of actually starting a small business, and the various social, cultural and economic capitals needed to navigate the process of establishing a business. For example, learning how to buy materials in the wholesale market, establishing contacts with fair trade organizations to sell handicraft products, raising enough capital to buy equipment, and having the right contacts to lease space have all been problems faced by women, and assisted through the networks of

Jeevika. There are, of course, problems and limits to enterprises that focus solely on “fair trade” markets (e.g., Goodman 2004; Lyon & Moberg 2010). Not all poor women in

Kolkata can become part of groups that sell fair-trade goods.

In February 2011, the Supreme Court of India ordered the Centre and States to provide schemes for rehabilitating physically and sexually abused women. The order was part of a ruling upholding the High Court ruling of the life imprisonment relating to the murder of a sex worker in Kolkata (Budhadev Karmaskar v. State of West Bengal), the

Supreme Court noted the following:

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Hence, we direct the Central and the State to Governments prepare schemes for giving technical/vocational training to sex workers and sexually abused women in all cities in India. The schemes should mention in detail who will give the technical/vocational training and in what manner they can be rehabilitated and settled by offering them employment. For instance, if a technical training is for some craft like sewing garments, etc. then some arrangements should also be made for providing a market for such garments, otherwise they will remain unsold and unused, and consequently the women will not be able to feed herself. [Emphasis added]

What this ruling points to is the disjuncture between the discourse of empowerment and actual practices. Or, as Aneel Karnani, a colleague of the late Prahalad at the Ross

Business School at the University of Michigan and critic of the bottom of the pyramid strategy argues, rather than romanticize the idea of entrepreneurs, the creation of

“opportunities for steady employment at reasonable wages is the best way to take people out of poverty” (2007). Arguing that most informal sector small business-owners are not necessarily so by choice, given higher and regular wages in the formal sector, Karnani suggests the International Labour Organization’s (ILO) term “own-account worker” is more appropriate than the romanticized notion of “poor entrepreneur.” In other words, while “entrepreneur” comes to mark the ideological valuation of self-sufficiency and market efficiency, “own-account worker” refers to the basic definitional category of people who are self-employed without having employees. Thus, while the culture of entrepreneurship encourages the poor to escape poverty through small businesses, it tends to ignore or erase the structural inequalities that largely bar them from entry and participation in the overall formal waged labor market.

Precarious Waiting

Paromita stood by the bed answering the stream of questions from Mukul (BM)

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and Tania (LO) regarding the loan she was applying for. She was taking the loan for her

husband who drove a taxi. “Do you own it?” demanded Mukul. “No, we don’t own it, but

we have it on lease,” Paromita replied. The taxi would be theirs when they paid of three

lakhs (Rs. 300,000) for it. “But why do you need a loan if you do not own it?” queried

Mukul. “We have to do the repairs. If something goes wrong, we have to fix it,” she

explained. Further, having the car on lease, they had to pay the owner Rs. 400 every day

that her husband took the taxi out. Needing her husband’s signature on the form as a

guarantor, she slipped into the other room to call him. He came out, wearing the grey

trousers—part of taxi drivers’ uniform. “You’re not going out [to work] today?” asked

Mukul, not only seemingly oblivious to the uniform, but seeming to imply that he was

not working enough. “I go out every day,” replied the man curtly, signing the form, and

heading out for the day.

***

The tiny windowless hut was the bookbinder’s workshop. On our way, Saurav

(BM), who was introducing me to them, explained that Purnima and her husband Arijul had gone to six other microfinance institutions before finally getting a loan from DENA.

Grateful for the loan, they had recently gifted him volumes of Tagore’s works. We came to the door, where the middle-aged couple sat in the dark room, squatting on the floor with a bucket of glue, surrounded by piles of books completed and incomplete books.

During the interview, Arijul answered most of the questions, even though it was Purnima who was the official borrower.

When they had decided to set up the bookbinding workshop, Arijul and Purnima had rented the room, but could not afford the equipment they needed. They first had

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taken a loan of Rs. 8,000 from DENA two years ago, using it to buy special equipment

for binding. He indicated a heavy green metal contraption. Since then, the loan amounts

had increased, and they were now on their fourth loan of Rs. 17,000. But business often

depended on the season. Usually, they managed the work between husband and wife. But

during busy seasons, he had to hire additional labor, needing at least two more people to

complete the work. Even then, they made about Rs. 10,000 per month, give or take. The

weekly repayment of loans could sometimes be hard, and at times they do not have the

money to repay the loan. On those occasions, they have to get the money from elsewhere

[e.g., moneylenders]. Sometimes they did not get paid by their customers, and would

have to wait for payment to get the money. They now needed another loan in order to get

equipment to make the binding process faster.

***

The two vignettes above represent the reality of work for the urban poor borrowers. In both cases, the borrowers and their husbands are self-employed. The stories

mark the precarity of work in the informal economy, and the ebbs and flows of money

over time as people work to sustain their lives and livelihoods: the taxi driver who must

go out to drive everyday to make ends meet, must also constantly pay off the debt of the

car itself, financed by other loans; the bookbinder whose income fluctuated with the

seasonal demand for particular books. It is a condition of always waiting, of marking time

in ways that are both regular and uncertain: daily income, weekly debts, monthly fees,

and annual festivities (See also Chapter 7 on temporal disjunctures). In a situation of

constant lack, making ends meet is a structuring condition of life.

A growing body of anthropological literature has looked at the emergence and

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growth of precarity as a condition in contemporary capitalism (Muelebach 2011;

Muelebach & Shoshan 2012; Allison 2012; Molé 2012). Many draw on the post-Fordist condition and experience of the industrialized parts of the world, particularly North

America, Europe and Japan, as well as the global South where Fordism coexists as “both an achieved and aspirational form” (Muelebach & Shoshan 2012: 337; Weston 2012;

White 2012). In the case of emerging economies, where the process of industrialization is still ongoing, the term “post-Fordism” is more complicated. However, as Kath Weston writes, both the industrialized global North and the industrializing South, are subject to nostalgia: “one case may enlist future-directed nostalgia, the other memory-driven nostalgia, but it is nostalgia all the same. Nostalgia, in each case, for a less precarious existence” (2012: 432). Fordism elsewhere has provided “powerful images for a social order of mass inclusion and citizenship through labor” (White 2012: 400). While post-

Fordism may represent the present’s relation “to a particular past” (ibid: 399) of the industrialized world, it nevertheless marks a moment in the global imaginary of secure lives.

In India, the transition from the developmentalist to liberalized state reflects this duality, with the dismantling of state-owned industry. Thus, whereas the Nehruivan model of large-scale industrialization was once the perceived way forward for development, liberalization has led to not only to privatization of these industries, but also a growth in service sector jobs (e.g., call centers) that have helped a growing new

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middle class, rather than the working class (Gooptu 2007; Fernandes 2006).35 Further, with the rapid process of urbanization, there is a steadily expanding population of precarious labor in the cities of the global South (Davis 2006), and a pressing need to address mass under- and un-employment in these metropolises.

Despite the alienation of industrial labor and related Fordist disciplinary regimes

(Fraser 2003), its passing has engendered nostalgia for a past that guaranteed employment and security, or what Lauren Berlant (2006) calls “cruel optimism.” Cruel optimism is “the condition of maintaining an attachment to a problematic object in advance of its loss” (ibid: 21). Thus, Berlant argues that in moments change, the

“emotional flooding” of a new object produces “a similar grasping toward stabilizing form, a reanchoring in the symptom’s predictability” (ibid: 31). While Fordism provided

“a set of institutions, practices, and feelings,” it is also “frustrated promises—promises that nevertheless maintain a strong hold over the present” (Muelebach & Shoshan 2012:

324). Under changing economic conditions, including the flexibilization of labor and the privatization of services, the Fordist promise becomes of nostalgic attachment.

However, as Jamie Cross (2010), writing of the precarious labor in special economic zones in India has observed, these spaces are not necessarily zones of neoliberal exception. Rather, for the “always already precarious lives” (Muelebach &

Shoshan 2012: 338), the condition of job and income insecurity has forever marked existence in the informal economy of the Third World. Indeed, despite the desire for the

Fordist past, precarity may be norm and Fordism the exception in the historical

35 The Indian state has nevertheless been heavily interventionist the economy, despite the rhetoric of liberalization. Thus, the policy trend has been of “a rightward drift in which the embrace of business continues to grow warmer, leaving many others out in the cold” (Kohli 2004: 285).

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development of capitalism (Neilson & Rossiter 2008).

The monsoon rains had flooded the streets of north Kolkata, as Tania (LO),

Mukul (BM) and I waded our way to the group meeting. As we arrived at the meeting center—a house adjoined to the local Sitala temple—the place was bustling with people preparing for the puja that was to take place in the evening. As we sat waiting for the other members of the group to show up, one of the borrowers, Kalpana, spoke of her son.

“He’s finished college, but he doesn’t have a job,” she sighed. “He’s taken all the exams, but nothing came of them. Do you know where he can get a job?” she asked the DENA staff. If the new spirit of capitalism was meant to address development through entrepreneurship, Kalpana’s plea for DENA to help her son find a job marked its limits, where millions wait for jobs. As India celebrates its newly minted millionaires and billionaires in the new economy of enterprise, many still wait for jobs that will offer stability in their everyday lives.

While waiting is part of the human condition, the conditions of what Craig Jeffrey calls “long-term waiting” raise questions about “situations in which people have been compelled to wait for years, generations or whole lifetimes, not as a result of their voluntary movement through modern spaces but because they are durably unable to realize their goals” (2010: 3). In his ethnography of educated under- and un-employed youth in India, Jeffrey argues that this patient waiting is a strategy that enables middle class to maintain power, but also one that can fail with the changing employment structure away from agriculture, as an increasing number of youth engage in “unplanned, comparatively aimless waiting” (ibid: 33). While these times of waiting can offer possibilities of political action (Jeffrey 2010; Neilson & Rossiter 2008), they are also

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moments of social suffering.

Waiting for security at the global margins is therefore doubly marked by its

absence in the past and present. In places, as James Ferguson observes in the Zambian

Copperbelt, this exclusion is felt as abjection, “a sense that promises of modernization

had been betrayed, and that they were being thrown out of the circle of full humanity,

thrown back into the ranks of the ‘second class,” (1999: 236). In the postcolonial world,

consigned to the “waiting room of history” (Chakrabarty 2000: 8), the desire to become

modern is simultaneously marked by “the recognition of modernity’s absence” (Abraham

1998: 19). Moreover, “postcolonial time is always a time-in-waiting, of being able to see

the future in the present through knowledge of conditions prevalent in advanced states,

yet of always being behind them in terms of one’s own development” (ibid). While for

the postcolonial state, anxiety over modernization has become an overwhelming concern,

it is the experience of waiting that marks life at the margins. Yet, even as precarious labor has transformed the global North, many at the margins are still waiting for jobs, waiting for access to healthcare, waiting for education, waiting for the promises of Fordist past that were never actualized. Moreover, with the embrace of the culture of entrepreneurship, people are increasingly encouraged to make it on their own.

Jane Guyer has argued that there has been of the contemporary “double move, toward both very short and very long sightedness, with a symmetrical evacuation of the near past and the near future” (2007: 410) under the influence of macroeconomic theory.

The emptying of this near future has meant an increasing disciplining of the world through “a punctuated time that fills the gap between an instantaneous present and an altogether different distant future” (ibid: 417). Contending with the near future in

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anthropological analysis requires attending to both how “events that intervene decisively in one life are represented as mundanely repetitive from another’s standpoint” (ibid). As narratives of ethical capitalism reconfigure our understanding of present actions and future rewards—whether profits or karma—the near future looms large for urban poor borrowers who struggle with everyday precarity.

Chapter Conclusion

May 2011 marked the opening of the Mumbai chapter of the Dalit Indian

Chamber of Commerce and Industry (DICCI). Held at the exclusive Taj Mahal Hotel, the organization was feted by Dalit entrepreneurs, as well as members of Mumbai’s business world, and officials of the Bombay Stock Exchange. While some heralded this as “Dalit capitalism” or “capitalism with a social face,” others wondered if a few elite, successful entrepreneurs could really make a difference for the millions of Dalits who continue to face caste discrimination in India (Economic Times 2011c; Karunakaran 2011). In April

2012, the DICCI floated the for-profit Dalit Venture Capital Fund to financially support

Dalit entrepreneurs (Mukherji 2012). Entrepreneurship, it would seem, would address one of the harshest forms of social exclusion in South Asia, if only those who are oppressed are entrepreneurial enough to escape their exclusion.

This chapter began with a discussion of the notion of ethical capitalism and related social businesses. Both contradict classical liberal economic theories of free markets, while still holding to the tenets of capitalism as a social good. The ideological power of ethical capitalism reveals what Boltanski and Chiapello (2005) observe is the ability of capitalism to absorb critique. However, while demonstrating the ideological

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foundations of ethical capitalism in narratives of social businesses and management

literature, there remain real and tangible effects of this form of capitalism in the lives of

the urban poor. Microfinance has become popular as entrepreneurship is embraced as a real solution to problems of under- and un-employment. While there are undoubtedly

some rags to riches stories that support the narrative of enterprise, others are left to fend

for themselves amidst conditions of increasing global precarity.

Jane Guyer has observed that compared to anthropological work on the state and

politics, there has been limited work on economic theory and rhetoric:

But relatively less attempt has been made than in the anthropological literatures on power, law, and the state to address economic experience and reasoning in relation to the rhetorics and programs that directly shape that experience and to the theory (or doctrine) that justifies it. (2007: 411).

Following Guyer, I have shown how theory and policy around ethical capitalism and the

culture of entrepreneurship have come to shape people’s economic experience under

always already precarious conditions in the global margins. I show how the theoretical

and ideological formulations are experienced as gaps in the actual practices of running businesses in the informal economy. In the next chapter, I examine more specifically on the policy of financial inclusion, its relation to microfinance, and repercussions.

92 CHAPTER THREE

Risky Ventures: Financial Inclusion, Banking and the Politics of Credit in India

It is not that the banks were not functioning well. They were functioning well. But they saw things in a particular light which was a little bit removed from the needs of the country. -Indira Gandhi in a 1969 address to the Banker’s Club in New Delhi (1975)

Flows, who doesn’t desire flows, and relationships between flows, and breaks in flows? -Deleuze and Guattari (1983: 229)

In the summer of 2009, I was conducting preliminary fieldwork on microfinance

in Kolkata. In the wake of the 2008 financial crisis, the collapse of Lehman Brothers, and

significant turmoil in the global banking sector, I asked the management at various

microfinance institutions (MFIs) whether they were affected by this global upheaval. The

response was uniformly no. With stricter regulatory norms, the Indian banking sector had

largely escaped the effects of the US-led financial crisis. More to the point, however, they

explained that the poor borrowers and their local economies were not integrated at a

global scale, and so were largely untouched by the global crisis. This meant that demand for loans remained high, as did the recovery rates of the MFIs. In 2009, the prediction among analysts and management of MFIs was that the profitable Indian microfinance sector would continue to grow. It would be another year before the Indian banking sector would encounter its own “subprime” crisis in the microfinance sector.

The parallels between the subprime mortgage crisis and the Indian microfinance crisis, though incommensurable in scale, are striking: the overextension of credit, investment hype over a new financial product, poor regulatory systems, and the inevitable

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collapse of a bubble. Yet the Indian microfinance crisis was not simply the “micro” form of a larger, more complicated financial crisis. Rather, the Indian microfinance crisis emerged from its own set of factors relating to a longer history of the politics of credit, banking regulation, and expanding financial systems.

In examining empowerment in debt in Cairo, Julia Elyachar writes of the need to first answer a set of “technical questions”:

Who gave money for empowerment debt? To whom did they give that money? How was that money transferred, how was it distributed, and how was it used? (2005: 197)

Importantly, Elyachar points to the intermediary role of local banks between international organizations and microfinance institutions. It therefore becomes necessary to understand the role of both microfinance institutions and of the banking industry that mediates the financial flows. Systems of microfinance have to be understood not simply in the final transaction between the borrower and the MFI, but by tracing what Arjun Appadurai terms “financescape” (1996: 34) or the full set of linkages and disjunctures that connect the global economy. This chapter is about these “technical questions” about banking and regulation. It is about the particular trajectory of microfinance in India, and its emergence in relation to the government’s policy of “financial inclusion.” The crisis reveals the ways in which multiple interests intersect over the politics of providing credit to the poor, from local government to global financial institutions.

Gilles Deleuze and Felix Guattari have observed how banking has been central to the process of deterritorializing capital under contemporary capitalism. The authors identify the two forms of money: that which goes into a worker’s pocket and that which is entered on balance sheets of commercial enterprises (1983: 228). While the former

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relates to flows in payments for consumer goods and use value, the latter serves the

abstracted flows of financing. At a “pivotal point,” (ibid: 229) banks participate in the

circulation of both financing and payment as the “formation of a means of payment and

the structure of financing” (ibid). In managing the multiplicity of monetary and financial

flows, the bank comes to control “the whole system and the investment of desire” (ibid:

230) under the current regime of capitalism.

Moreover, banks facilitate the creation and circulation of “finite” and “infinite” credit. Finite credit represents commercial monetary credit in simple circulation; that is, credit that falls due on specific dates (ibid: 229). The latter marks the demonetization or dematerialization of money as bank credit with the circulation of drafts rather than money (i.e., financialization). In particular, banks are uniquely capable of creating

“infinite debt: an instantaneous creative flow that banks create spontaneously as a debt owing to themselves” (ibid: 237), or a flow “that does not enter into income and is not assigned to purchases, a pure availability, nonpoessession and nonwealth” (ibid)

[Emphasis in original]. For Deleuze and Guattari, this necessitates a modification in the definition of surplus value, which is increasingly extracted from the two flows of money.

In an economy that relies increasingly on the flow of finance capital, banks and their practices have been central in the production and circulation of debt products. The authors press for greater emphasis on banking practice, financial operations, and the specific circulation of credit money in the study of money (ibid: 230). Understanding the role of banking—even in its technicalities—offers an understanding of how these flows operate in contemporary capitalism.

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Recent global crises have also signified growing scalar integration through

financial networks. A financial crisis in one country has repercussions in others with

share- and bond-holders existing across borders. Crises can trigger economic “contagion”

leading to capital flight from countries and regions (Desai 2003; Rajan 2010). However,

where “financial activities are a defining characteristic not only of the corporate

economy, but also of politics, the welfare and social security system, and general

culture,” (Knorr Cetina & Preda 2005: 1) crisis within the financial system can have systemic or wide-reaching effects on the everyday lives of people. This chapter examines

how the global financial networks have become tethered to the lives of Kolkata’s urban

poor through banking practices, political and regulatory measures, and their

consequences.

The State and the Banks

The last century has marked the transformation of the economy into a site of

power and governance (Birla 2009; Foucault 1991; Mitchell 2002). Scholars have

demonstrated both the historical and contemporary role of money in shaping the

relationship between the state and its citizens. For example, tracing the historical

emergence of national currencies in the 19th and 20th centuries, Gustav Peebles argues

that what emerges is an “inverted panopticon” wherein “citizens must be constantly

gazing back into the nation’s center, for their own economic self-interest has now become

attached to the management of the national currency” (2008: 234). The alienation of the

citizens’ ability to individually safeguard economic value makes them dependent on the

state to do so. In her ethnography of fiscal disobedience in Cameroon, Janet Roitman

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(2005) similarly demonstrates the role and importance of the economic relationship

between citizens and the state, and the normalization of certain forms of wealth extraction

by the latter. Taxes and prices are therefore “not simply instrumental methods for

obtaining or assuring power; they are, rather, the very material form of power itself”

(ibid: 3). That is, debates over fiscal regulation get to the heart of the problem of power by “questioning the modes of classification and standards of evaluation that give order to hierarchies of value and establish the logics of practice” (ibid: 8). Fiscal regulation becomes a way not just to constitute (tax-paying) citizens, but also to delimit the spaces of legitimate state power.

However, the ways in which the state can intervene in the economy have shifted with different economic paradigms (Prasad 2006). While 19th century laissez-faire or

purely free market ideologies sought zero state intervention, the Keynesian model

emerging in the early 20th century meant that the state could intervene in the market, for example through fiscal spending in order to increase employment or address social needs

(Polanyi 1957). In contrast to classical free market ideologies, neoliberal economic policies that have emerged since the 1980s require that the state “openly responds to needs of the market” (Brown 2005: 41). For example, the state facilitates free market principles, such as through liberalization and privatization measures. Thus, the state reaffirms the primacy of the market in the distribution of resources and the responsibility of the individual to be competitive and self-interested.

While there have undoubtedly been shifts in the role of the state’s role in the market over the past three decades, the relation is often represented as simply rollback of the state in its provision of welfare and the ascendancy of speculative (private) capital.

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Rather state actors have been central to the expanding process of financialization (Arrighi

2010). Or, as Greta Krippner, writing of financialization in the United States has

observed, “reliance on market mechanisms transformed the resource constraints of the

1970s into a new era of abundant capital” (2011: 22). Policymakers and state officials did

not just allow new flows of capital; they actively “tap[ped] into domestic and global

capital markets to resolve domestic political issues (ibid). Interest rates and credit have

also been central to these political debates. Indeed, the liberalization of capital controls

on cross-border flows have emerged only through political and legal mediation (Abedal

2007).36

Blanket theories of neoliberalism often simplify the complex interrelations of state and market. Thus, the historical particularities and local social and political contexts are subjugated to larger narratives global markets. Or, as James Carrier (1997) argues, the idea of the “free market” is itself rooted in Anglo-American culture and history. The politics of credit in India has its own set of issues that have reverberated over centuries: indigenous bankers, colonial law, postcolonial state-building, and contemporary financial markets have all contributed to the banking industry as it now stands, including its relationship to microfinance. At times global interests have intervened; at other points, domestic politics have directed credit markets. With closer attention to these particular conjunctures, I attempt to understand the conditions that shaped the popularization and

36 Rawi Abedal credits the rise of global finance capital in the 1980s not to the demands of Wall Street or US Treasury, but paradoxically to Leftist European governments, particularly France. These European policymakers wanted a “managed globaliztion” to strengthen the power of international organizations that could supersede the authority of more powerful states such as the United States and Germany, as well as a belief that capital controls were detrimental to the middle classes that could not subvert them as could the rich (2007: 14-16).

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critiques of Indian microfinance.

Banking on the Credit: A History

Throughout the course of fieldwork, I was repeatedly told—particularly by people

not affiliated with the sector—I should really go to Bangladesh in order to study

microfinance. These comments reflected the popularly perceived centrality of the

Bangladesh and the Grameen Bank in the history of microfinance, and something that is

mirrored in the expansive body of academic literature on microfinance. While the

Grameen Bank and the Bangladesh case has certainly been an important player in the

institutional background of microfinance, the analytical emphasis on the two has tended

to obscure the ways in which microfinance has emerged within a wider range of contexts

and varying institutional frameworks. In India, the legacy of the Grameen Bank and the

global spread of microfinance since the 1970s is only part of the story of the national

politics of credit and financial inclusion. Rather, Indian microfinance both shapes and is

shaped by the state and bank relations in their ongoing negotiations.

In 1947, independent India inherited a formal financial system that had been

largely shaped by nearly two centuries of British colonial rule. During the colonial era

between the mid-19th Century through the early 20th century, India served as the “vast social laboratory where juridical and economic changes and reforms could be implemented and observed with minimal political constraints” (Chandavarkar 1983: 762).

That is, the colonial government could implement economic policies with limited concern for political backlash from Indians. During this period, the formal financial sector consisted of 1) the three Presidency Banks of Bombay, Bengal, and Madras

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(amalgamated into the Imperial Bank of India in 1921 and transformed into the State

Bank of India following independence); 2) foreign-owned exchange banks; and 3) Indian joint-stock banks. Meanwhile, the informal sector included moneylenders and indigenous bankers.

The origins of commercial banking in India are in the early 19th century with the

European agency houses, which were primarily trading houses that offered banking services including accepting deposits and giving loans and mortgages as a side business.

The Presidency banks were initially more closely related to the state, with local governments providing part of the capital. However, with the Presidency Banks Act of

1876, the government largely withdrew its capital from the banks and its rights of appointing officers, while retaining the right to regulate banks. The Imperial Bank of

India Act of 1920 amalgamated the Presidency Banks as a joint stock company (the

Imperial Bank), but with the stipulation of opening 100 branches in five years. In effect, it was an early policy of financial inclusion. With the establishment of the Reserve Bank of India in 1934, the Imperial Bank stopped being the government’s banker, except in places with no branches of the Reserve Bank. The Imperial Bank, however, accounted for over a third of all commercial deposits in India, and with its close relationship with the government and leading role in setting lending rates, “functioned as the price leader in the oligopolistic structure of Indian commercial banking” (ibid: 779). Although there were a number of Indian joint stock companies, they were often plagued by crises and failures through the early 20th century. Even as the number and market share of these joint stock ventures increased, they continued to reproduce lending practices of the

Imperial Bank and foreign exchange banks, “instead of filling the gaps in credit

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structure” (ibid: 782). Thus, the indigenous formal sector did little to offer alternative

sources of credit to the poor.

In the absence of formal institutional credit, it was the informal sector that

financed the bulk of Indian credit for domestic agriculture, trade, and industry. The

distinction between indigenous bankers and moneylenders is not clearly defined, though

the former tends to accept deposits and deal in indigenous bills of exchange, while the

latter only makes loans. While there is some religious stigma attached to usury in

Hinduism, the moneylender has always occupied a position within the caste system, close

to the merchants and traders, and integral to village life (e.g. Chettiars, see Rudner 1994;

see also Gregory 1997; Sharma & Chamala 2003).37 Of course, not all moneylenders belong to a specific caste, but they are not outside of the existing social world.

Historically, indigenous banking flourished during the Mughal period in India, providing credit not only to peasants, but also the state, despite the Islamic prohibition of riba

(interest) (Schrader 1994).

British colonialism produced the paradoxical consolidation of the negative image of the moneylender along with the strengthening of his power. By the second half of the

19th century, lending to peasants expanded with growing exports of grain and cotton to

Europe, while industrialization required larger amounts of capital investment (T. Roy

2010: 115). Prior to colonial rule, the power of the moneylender to lay claim to the debtor’s property had been constrained because land could not be alienated from the community. However, with the implementation of new laws and a judiciary that gave land titles to individuals, land could then be used as collateral for the debt—a system that

37 Charging rates over those stipulated in Vedic scriptures is considered usury and a sin in Hinduism. (Gregory 1997: 216-217).

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empowered the moneylender through the force of law in rural India (Metcalf 1962; Birla

2009). The initial laissez faire principle of the colonial government toward moneylenders under this new legal framework led to rising rural indebtedness and growing resentment of the newly powerful moneylenders.

Agricultural failure in 1875 led to the violent Deccan Riots, as moneylenders

refused to extend credit to peasants (Fukuzawa 1983). Afraid that large amounts of land

moving into the hands of moneylenders would destabilize the colonial government, the

state moved to prevent a larger peasant uprising in rural India by introducing new legal

measures to restrict moneylending practices. The 1879 Deccan Agriculturalists Relief Act gave power to courts to reduce interest rates and restructure repayments (ibid). Created for the Deccan region, the Act became a model for the rest of India. While curbing the power of moneylenders over land and addressing indebtedness, the Act simultaneously created the problem of restricting available rural credit. As Tirthankar Roy argues:

Lenders lent money not because they hoped to take possession of the property of the poor, but because they had a reasonable chance of making money from the interest income. In a normal season, the interests of the debtor and the creditor were aligned rather than being in contradiction. The debtor expected to make money after paying back the loan, and the creditor hoped the debtor would repay rather than fail to repay the loan. [2010: 205]

The clampdown on the informal sector failed to increase alternative sources of credit for

the poor; an issue that remained unresolved by post-independence. Indeed, the Reserve

Bank’s 1951-1952 stratified sample survey of indebtedness of rural households found

borrowing from the informal sector to be 90 percent of total rural credit (Chandavarkar

1983: 798).

The implementation of Nehruvian socialism post-independence brought the

financial system under the ambit of the developmental state. While the First Five Year

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Plan unveiled in 1951 had an interventionist framework, it was the Second Plan from

1956, and authored by statistician P.C. Mahalanobis and emphasizing heavy industry, import substitution, and an expansive public sector that “provided the analytical foundation for the development strategy that was pursued for the next 35 years” (Joshi

2006: 6). By the 1960s, the Indian state faced crises in food self-sufficiency, following wars with China in 1962 and Pakistan in 1965, as well as harvest failures and droughts in

1965 and 1967. By the Fourth Plan in 1969, there was increasing focus on the role of agriculture and related access to credit.

In 1967, the Congress Party faced one of the worst electoral defeats, losing many of its coalition partners and greatly reducing its majority (Torri 1975). The debacle convinced then-Prime Minister Indira Gandhi of the need for her party to take a more leftist turn. One of these policy measures was social control of banking. Though initially floated by her rival, Moraji Desai, nationalization of Indian banks was ultimately a political maneuver by Gandhi to consolidate left support. The initial move toward social control of banking was to address the structural feature of Indian banking, whereby bank ownership by industrialists meant that credit was not available for agriculture or small businesses.

Between 1967 and 1968, Moraji Desai sought to implement a policy of

“effective” social control over banks through the Banking Law (Amendment) Bill and the creation of the National Credit Council. The former was to address the ownership structure of banks by industrialists, while the latter was to assist the credit needs of agriculture and small-scale industry. Gandhi, however, shifted policy from the social control of banks to the nationalization of banks by 1969 in order take a more leftist

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position. Politically, Gandhi divested Desai of the Finance Portfolio, resulting in his resignation as Deputy Prime Minister. On July19, 1969, the Cabinet unanimously promulgated the Banking Companies (Acquisition and Transfer of Undertakings)

Ordinance, nationalizing 14 banks, and bringing 83 percent of the total banking system

under state control.

This “new policy was characterized by a radically changed concept of credit-

worthiness” (Torri 1975: 1090). Indira Gandhi assured members of the upper house on

August 7, 1969, that nationalization of banks would shift “credit worthiness of person to

credit worthiness of purpose” (ibid). And in a letter to chief ministers, Gandhi asserted:

“the one major shift which we visualize in the lending policies is that credit should be

provided not purely on the basis of security offered but on the basis of the projects posed

for credit” (ibid: 1090-1091). The new credit policies were also aimed at developing

banking facilities in previously un-served areas in order to shore up savings for public

expenses. In 1980, a further six banks were nationalized, with public sector banks

controlling 92 percent of the market for banking services.

This new form of “social banking” sought to make financial services part of the

planned economy, whereby “banks were not there to cater to the needs of the few, but to

enable the realization of the entrepreneurial needs of all, and to generate economic

growth with sustainable development” (Joshi 2006: 8-9). Data shows financial growth

during this period of bank nationalization, with the extension of banking and financial

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services to a larger segment of the population (Arun & Turner 2002).38 Critics have

argued that banks became an arm of the government’s fiscal policy, financing

government spending (Hanson 2003). Financial deepening, in other words, did not mean

that the social banking was highly profitable. Banks were directed to lend to state-

mandated priority sectors, including agriculture and small businesses. In the 1980s, banks

were required to make 40 percent of loans to the priority sector. By 1991, the banking

system had become increasingly unstable with a growing number of non-performing

loans on their books.

Though there had been a number of moves toward liberalization in India through

the 1980s, in 1991, the Indian government faced a balance of payments crisis. The crisis

was the result of both the state’s high level of borrowing to finance the state-led

development policies, as well as a number of external shocks including the Gulf War and

domestic political unrest leading to capital flight. On the brink of default, the World Bank

stepped in with a $500 million structural adjustment operation (SAL). The World Bank

SAL was complemented by an International Monetary Fund (IMF)-funded stabilization

program, both stipulating that the government institute liberalization measures.

Liberalization thus implemented by then Finance Minister and current Prime Minister

Manmohan Singh began to remove many of the import substitution policies and opened

up the Indian economy to foreign products and investment (Zanini 2001). However, in

contrast to the Asian economies hit by the 1997 Asian Financial Crisis, financial reforms

38 Between 1969 and 1990, the number of bank branches increased rapidly, from 8,262 to 59,752, with the average population served per bank declining from 64,000 to 14,000. In particular, rural branches increased from 1,833 to 34,791. Total credit as a percentage of GDP increased from 9.8 percent to 19.7 percent (Arun & Turner 2002: 432).

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in India were relatively gradual, and also strengthened regulation and supervision

(Hanson 2003). Moreover, financial liberalization remains an ongoing process.

In 1991, the Narasimham Committee, appointed by then-Finance Minister

Manmohan Singh under the leadership of former Reserve Bank Governor M.

Narasimham to examine India’s banking sector, recommended reforms to the financial

system. These included the gradual freeing of interest rates, and reducing the burden of

directed credit. The government encouraged competition in the financial sector by

granting new banking licenses to private and foreign banks. Additionally, non-banking

financial corporations (NBFCs) were supported as a way to provide further funding to

various un- and under-banked sectors. NBFCs can provide various financial services,

including loans. Unlike banks, NBFCs cannot accept demand deposits, or issue checks.39

Despite recommendations to reduce directed lending to 10 percent, priority sector lending requirements remained at 40 percent for public sector and domestic private banks, but 32 percent for foreign banks. In 1998, the second Narasimham Committee recommended further reforms to strengthen the banking sector, including correcting the high level of bad debt in directed credit (Reserve Bank 2001). The second report included

39 The Reserve Bank of India defines NBFCs as follows: A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire- purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company). [Non-Banking Financial Companies, FAQ. http://www.rbi.org.in/scripts/FAQView.aspx?Id=71. Accessed June 14, 2012].

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recommendations for improving priority sector lending by enhancing lending practices, including checking creditworthiness to small borrowers, a task that became particularly suited to microfinance institutions.

Microfinance Models: SHG Bank Linkage and MFI

Despite the government’s promotion of directed credit to the unbanked, commercial banks remain wary of priority sector lending due to high transaction costs and high risk of default. Not only did commercial banks lack the financial methodology and human resources for lending to the poor, “the institutional mission of banks precludes such forays” (Joshi 2006: 78). Thus, while commercial banks have some degree of direct lending to the poor, lending to microfinance institutions have become a better alternative for banks’ costs and risks (See Figure 3.1).

In extending credit to the unbanked, the government of India has experimented with support for various models of microfinance (See Figure 3.2). Indigenous forms of informal rotating credit associations known as chit funds have long existed in India, circulating loans to community groups (Anderson 1966; Sethi 1995). However, since independence, a number of models of more formalized community-based credit systems have emerged. One of the early experiments with microfinance was the Mahila SEWA

Cooperative Bank established in 1973. Part of the Self Employed Women’s Association

(SEWA), founded by activist Ela Bhatt, the bank was established by around 6,000 members of SEWA buying shares of Rs. 10 each. In its original mission, the SEWA Bank aimed to provide loans not only for productive purposes, but also to help “redeem women’s pawned jewelry, mortgaged house or land, redeem old debts from brokers,

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moneylenders or landholders” (Bhatt 2005: 102-103). As a cooperative bank, the SEWA

Bank does not use group lending; rather, there are Bank Sathis or bank workers from the local communities who assess creditworthiness and collect repayment. As a cooperative bank, SEWA Bank faces greater regulatory scrutiny than microfinance institutions that have emerged since.

Direct Lending by Banks to Poor Borrowers

In lending directly to poor borrowers, commercial banks face high transaction costs as well as high risk of defaults. High transaction costs include labor- intensive operations, multiple transactions of small amounts, and related processing costs. The bank is responsible for recovering loans from what is perceived to be a high-risk population, and therefore assume the possibility of having a large number of non-performing loans on their books.

Lending through Microfinance Institutions

By lending to microfinance institutions (MFIs) and self-help groups (SHGs), commercial banks can make loans to multiple organizations, thereby diversifying their risk. Banks are also able to offset the transaction costs of lending to the poor by making fewer, larger loans to microfinance organizations. The MFIs and SHGs therefore take on the risk of lending to the poor, while being responsible for repaying the loan to the commercial bank.

Figure 3.1: Commercial Lending and Microfinance

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Figure 3.2: Microfinance models in India

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In 1990, the National Bank for Agriculture and Rural Development (NABARD), a public sector bank, began a bank linkage pilot project with 500 self-help groups

(SHGs).40 In 1996 financing of SHGs was designated as priority sector lending (Joshi

2006). NABARD defines an SHG as “a group of about 20 people from a homogeneous

class, who come together for addressing their common problems” (Puhazhendi &

Badatya 2002: vii, n2). The groups are encouraged to initially voluntarily pool resources

to make small loans to their members and start a savings accounts, with the expectation

that these practices build financial discipline and credit history for the members. Once the

groups show “mature financial behaviour” (ibid), banks can make loans to the group

without collateral and at market interest rates. The initial voluntary savings are described

as “warm money,” through which “members begin to appreciate that resources are

limited and have a cost” (ibid). This “warm money”—representing money that comes

enmeshed in social relations—comes to structure the unattached “cold money” coming

from banks, enforcing credit discipline among borrowers. While formal credit flows

40 NABARD describes a SHG as “a group of about 20 people from a homogeneous class, who come together for addressing their common problems” (Puhazendi & Badatya 2002: vii, n2).

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occur only when borrowers are deemed sufficiently aware of systems of formal financial

transactions, the banks also rely on existing social and cultural norms of reciprocity and

obligation that they are created and strengthened in the groups in order to maintain high

rates of repayment.

As a ‘bank linkage’ program, the SHG model enables a connection between

mainly rural borrowers and commercial banks, primarily through the savings and loans.

However, in both cases the savings account and the loans disbursed from the bank are in

the name of the SHG and not any individual group member (NABARD n.d.). The bank

linkage program has three models: 1) banks directly organize SHGs; 2) SHGs that are

mediated by agencies other than banks (e.g., NGOs, farmer clubs, individual rural

volunteers); and 3) NGOs and SHG federations act as credit intermediaries, assuming the

risk of lending (Ghate 2008). Between 2002 and 2010, the number of SHGs provided

with bank loans increased almost tenfold from 461,478 to 4,587,178. Despite its growth,

there are a number of factors that have been problematic for SHGs. These include the

relatively short lifespan of many SHGs, and the poor “quality” of the groups (e.g., poor

governance, high dropout rates) (Ghate 2008). From the borrowers’ perspective, the size

of loans from SHGs has been relatively small, and the time taken to get a loan is often

long.

Since the late 1990s, another model of microfinance has rapidly grown rapidly:

the non-banking financial company microfinance institution (NBFC-MFI, hereafter MFI)

model.41 As for-profit commercial ventures, MFIs—the main focus of this dissertation—

encourage borrowers to form joint liability groups (JLG) but give loans to individual

41 Many of the large MFIs in India were founded in the late 1990s early 2000s, including BASIX, SKS, Spandhana Spoorthy, etc.

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members of the group (Malegam 2011). These individual loans are guaranteed by other

group members, and the group meetings principally enable loan recovery. The duration of

loans is typically shorter for MFIs (approximately one year) than for SHGs

(approximately two years). While many MFIs started out as non-profit organizations,

they converted to MFIs in order to raise additional capital and expand operations. Still

other organizations were established as MFIs, seeing lending to the poor as a profitable

business opportunity. Unlike SHGs, MFIs have attracted large amounts of private equity

and investment.

From Social Banking to Financial Inclusion

While the notion of social banking shaped earlier policies of finance and

economic development, including bank nationalization, there has been a marked shift to

“financial inclusion” policy in the early 2000s.42 Financial inclusion was, of course, part of a larger shift toward inclusive growth in development policy (Sen 1999; World Bank

2006). The argument for financial inclusion stemmed from the fact that despite increasing consumer finance options for the high and upper middle classes, a large section of the population remains excluded from access to these services (Rangarajan 2008). Financial inclusion as a policy strategy in India was emphasized in the Khan Committee report to the Reserve Bank on rural credit and microfinance (Khan 2005). The report noted that despite previous efforts of banking outreach, there remained large gaps in the availability of banking, particularly in rural areas. In fact, the commercial banks had only reached 18

42 As defined by NABARD, financial inclusion is defined as: “the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost” (Rangarajan 2008: 1).

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percent of the rural population in terms of savings and 17 percent in terms of loans. The report was commissioned in the wake of a number of high-profile statements on financial inclusion, including the 2005-2006 Budget Speech by then-Finance Minister P.

Chidambaram. In the speech, the Finance Minister affirmed the emerging importance of

MFIs:

Government intends to promote MFIs in a big way. The way forward, I believe, is to identify MFIs, classify and rate such institutions, and empower them to intermediate between the lending banks and the beneficiaries. [Khan 2005: 8]

Similarly, the then-Governor of the Reserve Bank Y.V. Reddy noted in his 2005-2006

Annual Policy Statement that “banks are urged to review their existing practices to align them with the objective of financial inclusion” (ibid: 10). In its conclusions, the report suggests that its recommendations will “likely to lead to a financial inclusion oriented growth model that aims at achieving socio- economic empowerment of the less advantaged sections. This will also provide an ideal platform for the microfinance institutions to grow at a faster pace” (ibid: 60). Additionally, financial inclusion has been incorporated into the work of the Planning Commission—the country’s development planning agency—in its 11th Five Year Plan (2008). Thus, the major bodies determining economic and banking policy in India have all prominently embraced financial inclusion as an important policy directive in the last decade, with microfinance at the forefront.

We can then ask how specifically does social banking differ from financial inclusion? While both policies aim to increase access to credit and banking facilities, financial inclusion aims to integrate the poor into a wider network of finance. In its report to the Planning Commission, the Committee of Financial Sector Reforms offers the following:

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[The Committee] proposes a paradigm shift in the way we see inclusion. Instead of seeing the issue primarily as expanding credit, which puts the cart before the horse, we urge a refocus to seeing it as expanding access to financial services, such as payments services, savings products, insurance products, and inflation- protected pensions. [Planning Commission 2009: 6] While credit remains an integral factor, it is not the only area for consideration in financial inclusion. Financial inclusion aims to integrate the poor into the system of formal finance, not simply as consumers of credit but as a market for an entire range of financial products and services. Additionally, while recognizing the importance of agricultural credit, the report pushes for greater attention to the urban areas due to increasing migration. Finally, among its recommendations for the financial sector are more reforms in the banking, including further liberalization through new licenses for private banks. Thus, while social banking sought to make the government and state- owned banks the primary means of providing financial services to the poor, financial inclusion seeks to use the private sector to a greater extent in order to reach the same goals.

In his 2010 budget speech, then-Finance Minister Pranab Mukherjee indicated that the Finance Ministry and the Reserve Bank were looking into issuing additional banking licenses. In 2011, the Reserve Bank of India released guidelines for new banking licenses for the private sector (Reserve Bank 2010; 2011b). One of the main dimensions of the debates over new banking licenses has been financial inclusion: to what extent and how could the state push for services to the unbanked through new licenses? With many large corporate houses said to be seeking the new licenses (e.g. Reliance, Birla,

Mahindra, Tata), existing banks criticized the measures for new banking licenses on the grounds that it would recreate the past conditions of corporations monopolizing credit

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(Economic Times 2012b; 2010b).43 Speaking at a bankers’ conference in New Delhi in

March 2011, the Reserve Bank Governor Duvvuri Subbarao explained that plans for financial inclusion would be a significant factor in the consideration of new licenses

(Economic Times 2011a). Thus, the Reserve Bank would require foreign banks that set up subsidiaries in India to be subject to regulations for domestic banks, including maintaining priority sector lending.

In February 2011, major newspapers in India carried an advertisement, while television channels aired a commercial from the ruling UPA chairperson Sonia Gandhi, as well as the Ministry of Finance and the Indian Banks’ Association, announcing the

Swabhimaan [self-respect] campaign for “a brighter tomorrow” (See Figure 3.3).

Showing people from across India in indigenous clothing with bank account passbooks, the advertisement has the tagline “Our account, our self-respect” [hamara khaata, hamara swabhimaan]. The campaign is a financial inclusion drive to bring basic banking services to 73,000 unbanked villages with populations of more than 2,000. Among the benefits of the program, the government seeks to increase the presence of business correspondents and new mobile banking technologies in rural areas, as well as improve urban-rural banking linkages.

43 If corporate houses are given bank licenses, the assumption is that credit would be largely circulated within corporate circles, rather than going to agriculture or small- and micro- businesses.

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Figure 3.3: Swabhimaan Campaign (Source: Economic Times, Feb 2, 2011)

While the Swabhimaan campaign is part of the larger financial inclusion

movement, it is significant in its departures from simply promoting microfinance as the

means for increasing access to credit. Announced in the midst of the microfinance crisis

in India, there is no mention of microfinance, although micro-pension and micro- insurance are noted as benefits of the campaign. Even as the SHG and MFI models have

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grown as part of the financial inclusion drive, the recent introduction and promotion of

the Business Correspondents model demonstrates the shifting terrain of financial

inclusion and its consequences for both the existing MFIs and borrowers.

The Reserve Bank introduced the Business Correspondent (BC) Model in 2006.

Under the BC model, banks can conduct business through intermediaries such as

cooperative societies, NGOs and MFIs in exchange for a fee. These services include

disbursal of small value credit, loan recovery and interest payment, collection of small

value deposits, sale of micro-insurance, mutual fund products, pension products and other third party products, and receipt and delivery of small value remittances or other payment instruments (Reserve Bank 2006a). Unlike the MFI model where the MFI gets a loan from the bank, which it then disburses, the MFI or NGO simply provides the service for a fee under the BC model, and channels the services to the poor (See Box 3.4). Recently, individuals have also been authorized by the RBI to serve as correspondents. The Reserve

Bank (2011a) now lists retired bank employees, retired teachers, retired government employees and ex-servicemen, individual owners of kirana, medical and fair price shops, public phone operators and gas stations, as well as larger organizations to serve as BCs.

Central to the BC model is the use of information and communication technologies

(ICT). Handheld and mobile devices enable higher levels of monitoring of transactions by banks. Given the turmoil in the MFI model, the BC model has been increasingly popularized by the government as the way forward in financial inclusion. Such changing perceptions of microfinance have had significant effects in the regulatory landscape of

MFIs.

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Figure 3.4: Business Correspondents Model

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Regulating Microfinance

In February 2011, I interviewed the manager in charge of microfinance at a public sector bank. In response to my question about the current situation, he replied:

The RBI has not yet given any clear policy... RBI has not given any additional circulars on regulations since the Malegam Committee report. Unless the RBI gives any further directives, banks don’t want to get involved any further. The banks are apprehensive about lending to bad MFIs.

The banker’s comments reflected the situation in the MFI sector since October 2010, and the crisis originating in Andhra Pradesh. As the least regulated of the formal sector lending institutions, MFIs suddenly faced increased scrutiny not only by government regulators, but also commercial banks that made bulk loans to the MFIs. The freeze in available funds created a liquidity crunch and MFIs were increasingly unable to extend new loans to their borrowers. Meanwhile, banks wanted a clearer signal from regulators regarding the future of the sector.

With the rapid growth of microfinance since the late 1990s, the first major regulatory move came in 2007 with the Ministry of Finance unveiling a bill to regulate

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the microfinance sector. The Micro Financial Sector (Development and Regulation Bill

was meant to promote and develop the “orderly growth of the micro finance sector” (Lok

Sabha 2007: 4). Among its directives, the bill sought to make NABARD the regulator for

the microfinance sector. Additionally, it would have restricted lending to Rs. 50,000 for

individual loans and to Rs. 150,000 for housing projects, and would have required

requiring registered MFIs to have net owned funds of at least Rs 500,000. However, the bill lapsed with the end of the Lok Sabha (lower house) session, and was never passed.

While there was discussion of reintroducing the bill in 2009, it was not until the 2010 crisis that serious attempts were again made to regulate the sector.

In October 2010, the state government of Andhra Pradesh promulgated the

Andhra Pradesh Micro Finance Institutions (Regulation of Money Lending) Ordinance.

The ordinance—later approved as an Act by the Andhra Pradesh state assembly in

December 2010—clamped down on private MFIs, namely NBFCs, while providing relief to SHGs. The Ordinance required all MFIs operating in the state to register with the district-level authority within 30 days of its introduction, requiring information on purpose, interest rate charged, system of due diligence, recovery practices, and list of individuals authorized for lending and recovering of loans. Without registering, MFIs would be barred from both granting and recovering loans, and the registering authority was granted power to cancel registration at any time, given sufficient reason including the use of coercive recovery methods. In place of loan officers visiting borrowers, the

Ordinance designated the offices of the Gram Panchayats (local self-government) as the only place for loan recovery. The Ordinance also prohibited membership at more than one SHG. MFIs were also barred from recovering loans whose interest exceeds the

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principal, and allowed borrowers to receive a refund of the amount in excess. Further, the

Ordinance introduced fast-track courts for settling microfinance-related disputes. While

creating more stringent regulations for MFIs, the Andhra Pradesh state government

provided additional relief to SHGs through soft loans from banks, which enabled SHGs

to clear MFI loans.

As mentioned in Chapter 2, the crisis was prompted in part due to the problems in

management at SKS, as well as public outcry over the spiraling number of microfinance-

related suicides (See Chapter 7). However, other commentators have offered the

emergent competition between the state and the private MFIs in Andhra Pradesh as a key

component to the unfolding crisis. For example, in an opinion piece in the Economic

Times, prominent journalist and supporter of microfinance Swaminath Aiyar (2010) argued that “the government is supposed to be a referee. But in AP [Andhra Pradesh], the referee is also a big player and it wins by disqualifying rivals.” Aiyar goes on to argue that despite the need for regulatory regimes in microfinance, “local politicians don’t want to empower people through independent access to finance: they prefer patronage networks that can be used as vote banks. Government-driven SHGs can serve that purpose, but not MFIs” (ibid). In other words, the state government found a scapegoat in the private microfinance sector in order to promote the more politically strategic SHGs.44

From the perspective of MFIs, political involvement can create a “culture of non-

44 SHGs have increasingly been developed and mobilized by political parties in India to further particular interests (Khape 2009; Kumar 2010; Times of India 2012). This is because the groups that have been formed for loan purposes can be more easily accessed by politicians. Moreover, support of particular parties can ensure further funding, while specific SHGs have taken on particular political hues, such that members of another party cannot join the SHG. MFI groups tend to be less politically driven because funding is not tied to political interests. However, since groups often overlap between MFIs and SHGs, there may be some effects on the MFI groups.

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repayment” whereby politicians are encouraging borrowers not to pay back loans and thereby disrupting the financial system.45 Thus, political interests have come to shadow debates about regulation of the microfinance sector in India.

However, it is not simply the political mobilization of SHG groups that has affected regulation of microfinance. At a microfinance workshop in January 2011, one of the speakers, Brij Mohan, a former banker at the public sector Small Industries

Development Bank (SIDB) and founder of the SIDBI Foundation for Micro Credit observed that MFIs had come to see banks and investors as the only stakeholders, rather than government or civil society. However, given that microfinance is a “sensitive sector,” he argued that there was greater need for MFIs to pay attention to both government and civil society. The rapid growth in pursuit of profits have deterred from the social objectives of microfinance. Mohan went on observe how MFIs have touted the near 100 percent recovery rates as a symbol of their success. However, he added that rather than celebrating this high recovery rate, media and civil society have seen it as a negative thing because it means there is no allowance for default or tolerance for difficulty. There is therefore a need to recognize that there are situations where people have difficulty in repaying a loan, and there has to be sufficient mechanisms of redressing this.

While the Andhra Pradesh Ordinance applied only to the state, it had significant indirect effects on microfinance operations across the country, including West Bengal.

First, it affected the operations of MFIs that were headquartered in Andhra Pradesh,

45 The term “culture of non-repayment” was used by Richard Weingarten, Managing Director, Norwegian Microfinance Initiative (NMI) at the National Microfiance Conference 2011.

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including SKS. Second, the Ordinance signaled the possibility of state governments

intervening in microfinance operations. Third, the effects of the crisis quickly spread to

other states, leading to a liquidity crunch in the microfinance sector as a whole, as banks

became increasingly reluctant to give fresh or renew loans to MFIs, given the uncertain

regulatory environment. Given the renewed interest in and pressing need for regulation in

the microfinance sector, the Reserve Bank of India established the Malegam Committee

on October 15, 2010 under the leadership of Y.H. Malegam to report on the microfinance

sector and to offer policy recommendations of its regulation. The much-awaited report was released in January 2011 proposing a number of measures for the RBI to consider.

One of the main recommendations of the Malegam Committee included the

designation of the category of NBFC-MFI in order to address the specific regulatory

needs of the microfinance sector and different from other NBFCs.46 NBFC-MFIs were

required to meet a set of new conditions. First, the Malegam report called for no less than

90 percent of the MFI’s total assets (excluding cash and bank balances and money market

instruments) to be in the nature of “qualifying assets;” or in microfinance loans. This

means that only companies that are focused largely on microfinance can continue to

operate, while larger financial companies with small microfinance operations will be

excluded. The report goes on to outline restrictions on such “qualifying assets” or the

actual microfinance loans:

i. the loan is given to a borrower who is a member of a household whose annual income does not exceed Rs. 50,000;

46 The definition of NBFC-MFI is a company that “provides financial services pre- dominantly to low-income borrowers with loans of small amounts, for short-terms, on unsecured basis, mainly for income-generating activities, with repayment schedules which are more frequent than those normally stipulated by commercial banks and which further conforms to the regulations specificied on that behalf” (Malegam 2011: Sec. 4.2).

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ii. the amount of the loan does not exceed Rs. 25,000 and the total outstanding indebtedness of the borrower including this loan also does not exceed Rs. 25,000;[47] iii. the tenure of the loan is not less than 12 months where the loan amount does not exceed Rs. 15,000 and 24 months in other cases with a right to the borrower of prepayment without penalty in all cases; iv. the loan is without collateral; v. the aggregate amount of loans given for income generation purposes is not less than 75% of the total loans given by the MFIs;[48] vi. the loan is repayable by weekly, fortnightly or monthly installments at the choice of the borrower. [Malegam 2011: Sec. 5.9]

Further, the Malegam Committee found based on the financials of nine of the large MFIs

(accounting for 70 percent of clients and 63 percent of the total microfinance loan

portfolio) that interest rates ranged from 31-50 percent with an average of 36 percent.

Interest rate at smaller MFIs averaged about 28 percent (2011: Sec. 7.5). Taking into

account the overall costs of running an MFI (e.g., staff, other overhead, etc.), the

Malegam Committee recommended that effective interest rates for individual loans

should be capped at 24 percent. Additionally, the Committee recommended transparency

in the fee structure, with no more than three components to the loan 1) a processing fee

not exceeding 1 percent of the gross loan amount; 2) the interest rate charge; and 3) the

insurance premium (2011: Sec. 8.7).49 In addition to restricting borrowers from taking

loans from more than two MFIs, the Committee recommended the establishment of a

credit information bureau. In terms of consumer protection mechanisms, the Malegam

Committee suggested that field staff should not be allowed to make recoveries at the

47 This means that a borrower can have a single loan of Rs. 25,000 from one MFI or a combined amount of Rs. 25,000 from all MFIs (e.g., Rs. 10,000 from MFI-A, Rs. 15,000 from MFI-B). 48 Non-income generating loan purposes include repayment of old debts, health, home improvement, and education. 49 This means that MFIs cannot charge a security deposit, and any existing security deposits should be returned.

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residence or workplace of the borrower as a way to mitigate the use of coercive methods.

Additionally, it recommended the introduction of a code of conduct for all employees to

follow.

Regarding corporate size, the Malegam Committee recommended that NBFC-

MFIs should have a minimum net worth of Rs. 150 million in order to reduce transaction

costs and improve efficiency with larger MFIs (2011: Sec. 15.3). This is up from Rs. 20

million for MFIs that were registered as just NBFCs. While arguing for the continuance

of priority sector designation for microfinance, the Committee noted that such lending

should be denied to MFIs that fail to meet regulations. Moreover, recognizing the

growing practice of securitization as well as the entry of private equity, the committee

outlined a number of regulations for these areas. Finally, the committee recommended the

Reserve Bank as the regulator for microfinance, and that with the implementation of a single regulatory framework, the Andhra Pradesh Act would no longer be required.

As expected, the Malegam Committee report faced a number of criticisms from

the MFIs. In a response piece in the Financial Express, Vijay Mahajan (2011), Chairman

of the MFI BASIX and President of the associational body MFIN proclaimed “Operation

Successful, Patient Dead;” or that while tackling regulatory concerns, the report did not

address the issue of non-repayment in Andhra Pradesh as a result of the Ordinance.

Others wondered if the Malegam was instituting a “slow death” for the microfinance

sector. However, a number of more specific concerns regarding the regulatory

recommendations came up. These concerns were voiced, for example, during the Sa-

Dhan organized workshop that I attended at the end of January 2011. First, as one

participant argued, in designating the annual income level of microfinance borrowers as

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no more than Rs. 50,000, the Reserve Bank was trying to create a uniform cut-off for

poverty. However, people living in urban areas may be making more than Rs. 50,000, but

would be considered poor by other measures given the higher costs of living in the city.

Further, he contended that Rs. 50,000 meant very different things for a family of three

and a family of six. Thus, the Rs. 50,000 cut-off was arbitrary cut-off for determining

poverty levels and neediness of borrowers.

Second, with the introduction of options for monthly, fortnightly or weekly

repayments, other MFI representatives at the workshop argued that the Committee did

not consider the cash flow of households. Thus, offering options for monthly or

fortnightly repayments did not take into account the fact that many borrowers relied on

daily incomes, for which larger monthly repayments would be difficult.50 Moreover, in

requiring higher levels of capital adequacy, participants at the workshop wondered

whether the Malegam Report was strengthening the position of investors at the expense

of the MFIs, as many small MFIs would not be able to meet these regulations. As an

observer at the National Microfinance Conference later in April argued, the Malegam

Committee was fostering a system where “big is beautiful” rather than helping smaller

organizations.

After the draft bill that was proposed in April 2011, the Micro Finance Institutions

(Development and Regulation) Bill, 2012 was finally introduced at the Lok Sabha in May

2012. However, last minute changes raised the credit limit from Rs. 50,000 as proposed

in the draft bill to Rs. 500,000 in the final Bill, with provisions to make loans up to Rs. 1

50 On the flip-side, one participant pointed out that while the Malegam Committee only recommened that borrowers have a right to ask for monthly or weekly options, the MFI still retains the right to refuse the chosen option if it deems the borrower unable to repay the monthly amount.

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million for purposes to be outlined by the Reserve Bank. This is up from the

recommended Rs. 25,000 by the Malegam Committee, making microfinance a financing

option not just for the poor, but also the middle class.51 Further, the RBI can designate the

minimum net worth for an MFI, depending on its size of operations. As of July 2012, the

bill is still pending in Parliament.

Chapter Conclusion

One of the exclusions of the 2012 bill that appeared in the 2011 draft bill was the

question of systemic importance. In the 2011 draft bill, any microfinance institution that

becomes “systemically important” is required to follow directives issued by the Reserve

Bank from time to time. The categorization of MFIs that are of systemic importance was

to be decided by the Reserve Bank. In recognizing MFIs as being of systemic importance,

the 2011 bill aimed at highlighting the systemic risk that microfinance posed. In other

words, there exists possibility that problems in the microfinance sector could threaten the

financial system as a whole. On the one hand, it can be argued that the microfinance

sector is not significant enough in the financial landscape of India to merit identification

as systemically important. On the other, the continued emphasis on financial inclusion

and the impact of the microfinance crisis suggest the more extensive systemic influence

of microfinance. For example, as the rupee weakened against the dollar in late 2011, the

Reserve Bank announced the raising of external borrowing limits for MFIs to US $10

51 Reportedly, while the finance ministry wanted to include the lower cap, the law minsitry did not. In order to not further delay the bill, the credit limit was raised significantly higher than the original recommendation (Rajshekhar 2012).

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million. Thus, the microfinance sector has been absorbed into the strategies of the central

bank to manage the overall financial structure of the economy.

Moreover, as Rawi Abedal argues, “capital regulations and liberalizations are

signals interpreted by financial markets. Market participants, in this way of thinking,

infer meaning from policies” (2007:17). Thus, with increasing financial flows into the

microfinance sector, regulatory moves have become signs for whether or not to invest in

microfinance.52 While such structural conditions shape the working environment of microfinance, regulatory measures can often miss the everyday experiences and interactions both of borrowers and loan officers. The vagaries of the market as well as the new trajectories of government policy are often at odds with the lived realities of borrowers who, in the absence of other options, have come to rely on microfinance loans to make ends meet. When financial crises stemming from intersecting financial and regulatory interests occur, there is little attention paid to the lives that have been shaken with sudden changes in monetary flows.

This does not mean that there should be no efforts at regulating microfinance; rather, it raises the question of what happens when the poor are directly connected to global finance. As Kellee Tsai has argued in her work on China, attempts to replace informal finance through regulation and financial inclusion policies can fail without attention to local level political and economic dynamics (2004: 1503). The following chapters examine microfinance practices, including the interactions between borrowers and lenders from an ethnographic perspective. In doing so, I show not only the political

52 This effect is observable in the share prices of SKS, the only listed MFI.

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and economic dynamics of microfinance, but also the influence of local social and cultural values as they are interpreted in everyday practices.

127 CHAPTER FOUR

The Reluctant Moneylender: The Work of Microfinance Loan Officers at the Peripheries of Finance

Anand, a branch manager at DENA, and I stood in the elusive shade of a scraggly tree from the harsh noon sun. We were waiting for Mithun, the loan officer, to finish his round of house verifications before heading back to the branch office for the afternoon.

As we stood by the littered stream that had narrowed to a trickle, Anand reflected on his previous experience in loan collections: “Sometimes, you go and there is little you can do. Once, when I was working in the rural area, I went to this person’s house because she had not paid back the loan [at the meeting]. Seeing the place, I could not even ask them to pay back the loan; they had nothing. But, there was a little boy and he looked like he had not eaten. When I saw him, I took out my wallet and gave him Rs. 10 and told him to go eat his tiffin [lunch]. It was really the fault of the branch manager who had made the mistake in allowing the loan. They should never have given that loan knowing their situation.”

In his recounting of this experience, I was struck by Anand’s intertwining concerns for an impoverished family and the possibility of a loan default for the MFI.

Poor financial risk analysis had landed Anand in an ethically tenuous position: to have demanded repayment in this situation was impossible. Yet, the adherence to this decision meant that the loan would become overdue in the company’s books as a non-performing asset, for which he would be accountable. Anand’s story was poignant because it indexed a position of real struggle to reconcile the abstract demands of a creditor assessing financial risk (and profitability) and the ethical position of an individual enmeshed in a particular social relationship. As argued in chapters 2, as social businesses, the management at commercially driven MFIs see their role as providing a social good while

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pursuing profits, or of “doing well by doing good” (Prahalad 2010). Yet instances such as

the one Anand described reveal moments where these two aspects are irreconcilable, and

the financial enfolding of the poor does not automatically lead to improved social

welfare. Like extreme levels of profitability (Chapter 2), the relational concerns that loan

officers voice in their everyday encounters with borrowers demonstrates the very limits to

this “ethicalization of market rule” (Roy 2012a:106). This chapter is about the work of

finance at the peripheries, and the related tensions and ambiguities of expanding financial

networks in India. Moreover, it explores how individuals, acting as creditors, find

themselves having to navigate between and make sense of intersecting moral and

financial economies.53

As banks integrate the poor into financial relationships, they create new kinds of socialities, obligations, and expectations for both borrowers and lenders, though always in an existing cultural framework (c.f., Fisher & Downey 2006). Banking relationships are always constituted through physical and emotional labor of intermediaries or

“proxies” such as loan officers who do not own the capital they extend as credit, and alienate the debt relationships they produce. As microfinance loan officers in India alienate the debts they produce, they must also negotiate existing social imaginaries such as moneylending and reworking the framework for ethical action that makes loan recovery a morally acceptable profession. As arbiters of both formal finance and socially embedded relationships in the communities where they work, the MFI staff are

53 Here, I draw on E.P. Thompson’s (1991) definition of the moral economy whereby customs and traditions determine a form of distribution that is deemed socially acceptable. This is not to say that it is therefore equitable, but that it is a different norm of distribution than the logics of market forces (See Chapter 5 for furter discussion of the moral economy).

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emblematic of the experiences of mediators in various contexts. This chapter examines

how microfinance loan officers in India embody, negotiate, and question the complex

intertwining of institutional directives and local relational demands in the process of

alienating debts.

A number of recent studies of microfinance have examined its consequences in

particular for debtors (Karim 2011; Moodie 2008; Rahman 1999; Rankin 2001; Sanyal

2009). While providing critical insight into the ways in which borrowers experience

microfinance debt, there is little scholarship on the loan officers, who play a key role in

the functioning of microfinance. Moreover, there tends to be little ethnographic analysis

of how formal financial norms and interests have increasingly shaped microfinance

practices. Studies that do focus primarily on the global financial networks of

microfinance (Roy 2010; Weber 2004) often occlude the ways in which debt is mediated

by people, and productive of more complicated outcomes than the smooth dissemination

of capital, and importantly the possibilities for change in these gaps. This chapter focuses on loan officers as necessary intermediaries in doing the everyday work of enfolding the poor into networks of global finance.

The microfinance crisis described in chapter 3 also offered a specific context to

understand the experiences of MFI staff, particularly those involved in loan recovery.

One of the key objects of critique by the politicians, regulators, and the media was the

loan officer who was characterized as no better than a moneylender. Many of my

informants were keenly aware of their negative representation, and expressed ambiguity

about their own position and responsibility in the process of financialization.

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Financial Labor at the Periphery

Emerging scholarship in the social studies of finance has explored the social

construction of financial markets and networks created through financial technologies

(Beunza & Stark 2004; Callon 1998; Knorr-Cetina & Preda 2005; Knorr-Cetina 2005;

Mackenzie et al. 2007).54 Anthropologists have also begun to ethnographically document

how investment bankers, traders, lawyers, and regulators actively engage with financial

forms and make markets at elite centers (Ho 2009; Miyazaki 2003, 2013; Riles 2010,

2011; Zaloom 2006). While the expansion of finance capital is a global phenomenon,

with notable exceptions (e.g., Caliskan 2010; Elyachar 2005a), there little scholarship on

how marginalized populations in the global South experience the encounters with and

incorporation into these new global financial regimes.

Recent ethnographies have demonstrated the importance of work by investment

bankers and traders in both creating and sustaining the hegemonic ideology of

54 Drawing on Bruno Latour’s work on the science laboratory, Beunza and Stark (2004) write of the links, not only between traders, but also between traders and their tools. Market calculations are “not simply embedded in social relations. Calculative practices are distributed across persons and instruments” (2004: 370). New tools of trading enabled, in other words, the shift to quantitative finance by revealing new kinds of opportunities, not otherwise visible. Similarly, Karin Knorr-Cetina (2005) describes the shift from markets based on “network architecture” in which local social relationships heavily shape market behavior and outcomes, to “flow architecture,” which “acts as a centering and mediating device through which things pass and from which they flow forward” (2005: 40). With the introduction of computerized screen quotes in 1981, “the market” is no longer situated as a network of many places, but identically and simultaneously represented on the screen in all places. The modern financial market is therefore non-identical to itself: “markets are always in the process of being materially defined, they continually acquire new properties and change the ones they have” (2005, 52). Financial indices such as the Dow or S&P 500 are only momentary representations of the market that is constantly in a process of becoming. Financial technologies, therefore, work to reshape the ways that space and time are experienced in everyday life.

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contemporary financial markets (Ho 2009; Zaloom 2006). For example, in her

ethnography of Wall Street, Karen Ho contends that the cultivation of a culture of

smartness among the recruits to elite investment banks “begets global spread, justifies

global financial influence, naturalizes imperialist practices, and produces financial

dominance” (2009: 72). The creation of an elite financial labor force (e.g. investment

bankers and traders) has been central to the ideological underpinning of the current form

of financialization. Similarly, through her ethnography of traders in Chicago and London,

Caitlin Zaloom has shown the “labor of creating a market” (2006:165), revealing the

embodied practices of financial markets. Along with the social studies of finance, these

ethnographies have been important in demystifying the abstractions of financial markets

by focusing on the labor of producing, legitimizing, and moralizing finance.

At the same time, Annelise Riles (2010) has rightly critiqued much of the

scholarship in social studies of finance for focusing primarily on elites (e.g., traders)

rather than those who work at the peripheries of financial assemblages (e.g., back office workers). Even these peripheries often remain in the metropolitan centers, while finance is seen as irrelevant to the lives of the poor, except indirectly. Yet the work of financialization extends beyond Wall Street or the Bombay Stock Exchange to the everyday lives of people at the margins (Elyachar 2005b). While subject to the forces of global capital, there is little examination of how people at the peripheries themselves produce and participate in financial markets. The “frontiers of capitalism” (Tsing 2005) include not just the landscapes that are speculated upon and exploited, but also the populations that remain outside of the mainstream of finance, or the financially excluded.

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In his theory of accumulation by dispossession, David Harvey asserts, “capitalism must perpetually have something ‘outside of itself’ in order to stabilize itself” (2003:

140). New markets and populations, such as the financially excluded, are constantly needed to perpetuate capitalism. Central to this hegemonic form of global imperialism are the credit system and finance capital, which have become “major levers of predation, fraud, and thievery,” while the speculative raiding by major financial institutions has become “the cutting edge of accumulation by dispossession in recent times” (Harvey

2003:147). Yet the “singular thingness” in such broad theorizations fails to capture “the many fissures, contradictions, historical particularities, and shifts in imperial processes”

(Lutz 2006:593) or the “friction” of global connections (Tsing 2005). Critiquing global forces such as finance capital requires writing about theory “without reproducing the theory’s own ‘totalizing’ propensity” (Miyazaki 2005:176). While recognizing the power of finance capital, to actually reify it as a homogenous “thing,” inadvertently reproduces the very object of critique (e.g., the “market” or “finance”).

Although financialization at the peripheries and the problematic incorporation of the poor into financial networks is indeed part of “speculative raiding,” it is very much peopled, creating contexts in which individuals encounter, debate and negotiate the complex web of multiple demands of economic life. Financial inclusion requires the use of and innovation in abstract financial technologies (e.g., corporate debt, equity, etc.).

Nonetheless, financial capitalism “is not all smoke and mirrors. There has to be something there to begin with” (Leyshon & Thrift 2007:109). For microfinance, that

“something” is the debt relationship constituted between the loan officer and the

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borrower. In addition to the tools of abstraction, financializing the peripheries depends on labor of loan officers to actively produce and sustain these debt relationships.

The Work of the Creditor

At DENA, the work of loan officers is both mundane and eventful. A typical workday begins early: the first group meeting of the day starts at eight in the morning.

Many of the MFIs require their staff to live dormitory-style in the branch offices for six days a week. This is in part because of the early morning meetings, but also, as will be discussed later, because loan officers cannot belong to the neighborhoods where they work. On busy days, loan officers cover four to five group meetings by noon: one hour for a meeting and any related work, such as house verifications or loan applications, leaving just enough time to get to the next meeting. They navigate Kolkata’s unpaved alleys and the potholed roads teeming with the morning rush hour traffic to get to the group meetings held in the homes of the borrowers. Bicycles are the only allowed means of transportation, although there are rumors that some firms have given their staff motorbikes. During the summer months when the sun beats a deadly heat, or during the monsoons season when staying dry is a challenge as Kolkata streets become waterlogged, the journey is tiring and even dangerous. Loan collections happen even during Kolkata’s notorious “bandhs” [strikes], when most other businesses in the city shut down for the day.

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Figure 4.1: A loan officer updates all the passbooks and ledgers at a meeting (Photo taken by author) There are a number of institutionally codified practices for the meetings: the

group leader, cashier, and secretary (chosen from among the group members) make sure

that all the women have assembled by the time the loan officer arrives, and have collected

all the passbooks and money. The loan officer refers to all the women borrowers,

regardless of age, as “Didi” [Bengali honorific, elder sister], while the women refer to the

officer as “Madam” or “Sir.”55 There is supposed to be a group floor mat for the meeting,

but in many one-room homes in the urban slum settlements, there is barely room to sit. In

such cases, the loan officer and the group cashier sit on the bed, which may still be

occupied by a sleeping or ill family member, while the other borrowers huddle on the

55 Aminur Rahman (1999: 5) argues that this referential system reinforces the hierarchical structure of the Grameen Bank model of microcredit lending in which the power of the male bank workers over the women borrowers is reinforced.

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floor or stand outside. At the meeting the loan officer has to write the amounts received

in the women’s passbooks and in her own collection ledger, quickly count the money,

follow-up on any loan applications, and then head out to the next meeting. On most days

someone is late, and on occasion a borrower does not turn up at all. On such days, staff must convince the other borrowers to remain until they have solved the problem, namely pooling the missing amount from among the members present. There are also house verifications to be conducted for loan applicants, which must be squeezed in within the hour for the group meeting.

Back at the branch office around noon, the loan officers have to double-check the collected amounts before lunch. In recent years, they have become targets of robbery, given that they are known to travel with large amounts of cash. There is also fear that any missing cash will be taken out of their salary. Once the cash is accounted for, there is time for a short break before the afternoon’s work of loan disbursements, when borrowers with new loans come collect them at the branch office. Finally, the staff has to complete the various forms of accounting (daily, weekly, monthly). The day’s work ends around four or five in the evening. Sometimes, there is an outstanding loan that requires visitations later in the day, though MFI staff are technically not allowed to visit borrowers’ homes at night. The loan officers have Saturday nights and Sundays off to go home, but have to be back by Sunday night for the Monday morning shift. There is, perhaps unsurprisingly, a high turnover rate in the staff at MFIs. The work is exhausting, and the pay is not adequate compensation.

Consider the employment trajectory of Samit, who had joined DENA just two months before we met. He was from a small town near the India-Bangladesh border, and

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had recently graduated from college, majoring in literature. He learned about this job in

microfinance through a friend who was applying. While his friend failed the interview,

Samit landed the job. Even while feeling bad for his friend, he had accepted the position

at the insistence of his elder brother who thought he would learn new things. Samit

expressed dismay at what he termed the “money situation.” Pay at the office was low at

about Rs. 5,000 a month and after deductions for living costs at the branch office (e.g.,

meals), he was left with just about Rs. 3,000 in hand.56 When he had started, a regional manager had praised Samit saying he was sure to be promoted quickly. But Samit found that this kind of lifestyle was not sustainable in the long-term: “One of the women [loan officers] is married and has a child. But she has to leave her child with her parents and stay here. Men will also be expected spend more time at home once they are married.”

Now, even his brother told him: “Bhai [brother], you have to find a job that pays better.

You won’t be able to get by on that salary.” Samit’s experience highlights the difficulties of working in microfinance in terms of hours and pay. Yet he, like other MFI staff, was tasked with enfolding the poor into financial networks.

Producing Debt

Interest-bearing credit can be considered “capital as a commodity,” where the lender alienates the use-value of the money, so that it can be put to use by the borrower as capital, and returned with interest (Marx 1993b). Marx’s original analysis of credit

56 Rs. 5,000 is approximately US$100. In comparative terms, it is approximately the salary level for full-time drivers.

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limited “capital as a commodity” to exchange between capitalists (Harris 1976:160).57

However, credit to workers (or non-capitalists) is no longer a traditional form of usury and distinct from the capitalist mode of production, but is central to the smooth flows of capital (Harris 1976:158). Thus, even though poor borrowers do not convert borrowed capital into commodities (as would industrial capitalists), the growth of credit markets and the related development of new financial products and their circulations have meant that the range of capital as commodity has expanded. For example, under contemporary financial regimes, debt instruments circulate as commodities without ever being converted into productive use value, and surplus value is created not just through labor, but also in circulation and speculation (LiPuma & Lee 2002; Sunder Rajan 2005).

Interrogating these new forms of capital as commodity then requires tracing the social life of credit from production to exchange (Appadurai 1988).

With investment firms seeing credit markets of the poor as an “opportunity rather than obligation,” (Sinha & Subramanian 2007) microfinance loans have become new sources of capital for financial products, such as securitized debt. These financial instruments fuel the process of “accumulation by dispossession” (Harvey 2003) by enfolding the poor into the wider financial networks. However, as noted earlier, this is not a process that happens easily or without ambivalence and fissures, because the transformation of capital into “capital as commodity” requires the labor of microfinance employees. It is only once the loan is established between the borrower and the lender— the cash handed over to the former and entered into the books of the latter as an asset that

57 For Marx, capital as commodity occurs when the money capitalist lends to the industrial capitalist, who converts money to its use value, to be used in production (Marx 1993b; Harris 1976).

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will be realized in the near future with interest—that the loan is taken to be part of the

MFI’s net worth and can enter capital circulation. Thus, both commercial banks and

MFIs use what I will call a “proxy-creditor” to mediate the creditor-debtor relationship.

In other words, loan officers exist in microfinance debt relationships as people who produce the debt relationships (i.e., the loan product) but are not themselves the owners of capital.

While scholars have examined the shift towards flexible labor and disciplinary regimes of labor under contemporary capitalism (e.g. Freeman 2000; Ong 2006), in identifying the work of loan officers as labor here, I primarily aim to defetishize the financial product as a pure abstraction and to show how financialization at the peripheries depends on the labor of MFI staff. Of course, this is not just the case in the peripheries of finance: Gillian Tett’s (2009) account of the development of collateralized debt obligations in the 2008 subprime crisis traces how these products were conceptualized, developed and put into circulation by particular individuals and networks at investment banks. Like other commodities, debt instruments do not magically enter the lives of poor borrowers in India or homeowners in the United States, and capital does not appear in the books without the work of intermediaries. However, once fetishized, the loan is no longer seen as a product of labor, and tied to relations of production, but as a mysterious, powerful and almost natural thing that circulates freely (Marx 1978: 320; Taussig 1980;

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1987).58 In its commodity form, the debt can be alienated from its producer, and finally moved to the balance sheets of the company.

Yet loan products are unique commodities precisely because they are debts.

Unlike other commodities, credit returns to the lender with interest, and with the use value of the lent capital intact (Harris 1976). While economic debt entails this particular financial arrangement, the monetary aspect is only part of what constitutes the debt relation. Even with its increasing abstraction through processes of financialization, debt remains inherently relational. From Marcel Mauss’s (2000 [1954]) theorization of the gift as a form of debt, to Pierre Bourdieu’s (1977) analysis of credit and debt in maintaining hierarchical dominance, anthropological work has long identified the social productivity of debt in creating networks of obligation. Others have destabilized the economic hegemony of credit by demonstrating the intrinsically cosmological meaning of financial relationships (Chu 2010; Langford 2009; Maurer 2002). Fundamentally relational, debt is not just the financial transaction of owing and being owed money, but ties together the creditor and debtor in extensive relationships and obligations of exchange (Graeber

2011a). Microfinance provides critical insight because it relies on close and informal interactions between loan officers and borrowers, while transforming the loans into financial products.

In the Shadows of the Moneylender and the Bank

58 Michael Taussig (1987) has written of “debt fetishism” in reference to the system of debt-peonage, whereby it is the debt that is fetishized and not the commodity. While Taussig emphasizes the difference between the debt and commodity, I am interested in looking at how the debt operates as commodity under financialization.

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The Indian government has promoted microfinance as a formal sector alternative

to informal moneylending. Yet speaking to the Economic Times, Dr. Y.V. Reddy, former

Governor of the Reserve Bank of India, critiqued MFIs, saying: “If it is profit and if there

is lending, aggressively, then its just moneylending” (Nayak 2010). It was an ironic

description of a sector that had purported to be the formal alternative to the moneylender

who offers loans at exorbitant rates of interest. There has been the persistent negative

stereotype of the moneylender as essentially exploitative in the Indian cultural

imagination: “coldly preying upon their cultivator clients, luring them further and further

into debt, and finally sucking them dry of surplus, savings, property and liberty” (Rudner

1994: 36). For example, a classic representation of this stereotype is Sukhilala, the moneylender in Mehboob Khan’s epic Mother India (1957) who exploits the peasant

debtors in newly independent India.59 It is this image of the moneylender that continues

to shadow the microfinance loan officer.

The invocation of the moneylender by government regulators in reference to

MFIs indexes a complicated history of banking, credit, and development. As argued in

the previous chapter, the figure of the moneylender came to mark the “backward”

informal financial sector, while banking came to represent integration into modernity.

Yet even as the formal financial sector remains out of the reach of most Indians, many

59 In the film, Radha’s mother-in-law takes a loan from Sukhilala to pay for her son’s wedding. When Radha’s husband is crippled in an accident and unable to work, he abandons the family. Burdened with the loan, the film traces Radha’s struggles as a peasant woman with two young sons in newly independent India. In the end, the younger of Radha’s sons, Birju realizes that they have been exploited by Sukhilala because they are not literate and therefore do not understand how the interest has been compounded. Bent on revenge, Birju kills the moneylender, recovers his mother’s wedding bangles, and kidnaps Sukhilala’s daughter. In a final act of sacrifice, Radha, symbolically embodying Mother India, kills her own son to protect the chastity of the young woman.

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still rely on the moneylender for access to credit. Moreover, the negative image of the

moneylender has received increased attention in recent years in India because of the crisis

of farmer suicides due to over-indebtedness (Shiva et al. 2000; See also Chapter 7).60

Despite tendencies to collapse all moneylenders into one category, there are both

formal (licensed) and informal (unlicensed) moneylenders. Most states, including West

Bengal where I conducted fieldwork, have laws curbing moneylending and require

moneylenders to be licensed (Reserve Bank 2007). According to a survey by the Reserve

Bank, many people continue to rely on the informal moneylenders due to limited

outreach from the formal sector, confidentiality and the provision of “doorstep service”

by moneylenders, ready lending for consumption purposes, and the speed of getting the

loan (RBI 2007). For most of my urban poor informants who lacked landholdings, low-

interest loans from commercial banks were deemed impossible without adequate

collateral and documentation, while interest on loans from moneylenders was

exponentially higher. Though attempts at bridging these inadequacies have been made,

for example, through the introduction of cooperative banks and financial inclusion drives

by public sector banks, MFIs in recent years have filled this gap between the local

moneylender and the inaccessible commercial bank.

Posited to exist between the moneylender and the commercial banks, the lending

methods of the MFIs also rest somewhere in the middle: they have fixed, scheduled

collections, but with a modified door-step service (i.e., loan officers visit groups, rather

60 Farmer suicides, particularly in the southern states of India, have received widespread attention. Since 1997, an estimated 200,000 farmers have killed themselves, and in December 2011 the National Human Rights Commission of India demanded reports from three of the key states on the issue. The privatization of seed production has led to increasing levels of indebtedness for farmers who have to buy hybrid seeds and chemical fertilizer.

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than borrowers having to come to the office); they offer interest rates that are higher than

commercial banks, but lower than moneylenders; and they use formal loan application procedures, but rely on regularized social interactions to monitor and assess risk.

Borrowers also distinguished MFIs from informal moneylenders, by referring to borrowing from the latter as taking “money on interest,” despite the fact that MFIs also

take interest on their loans. Borrowers tended to refer to the MFI as “bank,” while

commercial banks would be referred to in their proper names (e.g., State Bank or Axis

Bank). Yet such an existence between the formal commercial banks and the informal

moneylender creates complicated creditor-debtor positions, particularly for the loan

officers who administer the microfinance loans.

Samit, for example, was extremely uncomfortable with the coercive elements of

working at the MFI. “I don’t like going to people’s houses and sitting around and waiting

for the other women to come up with the money [for repayment],” he said, indicating his

dislike of a crucial part of the job. His discomfort stemmed from the fact that the loan

collections took him into the borrowers’ homes where he felt intrusive. This feeling was

amplified when his role shifted from passive to active loan collector, whose job was

“making people pay” (Rock 1973). Shortly after, Samit told me he was leaving the job;

he was going back to school to get a teaching certificate Loan officers like Samit may

express class distinction in their dislike of doorstep loan collections, especially in

comparison to office work (Bourdieu 1984). However, there was something particularly

unsettling for the MFI staff in the very act of collecting loans. These anxieties were

sharpened when debtors became defaulters, and loan officers had to become debt

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collectors—a shift that brought loan officers into uncomfortable proximity to the negatively marked moneylender.

Challenging the popularly circulating critiques of MFIs as moneylenders, Anand offered an alternative perspective of microfinance, contrasting it to the central bank. We were at a meeting held in a small bamboo hut built on stilts atop a polluted pond in the city’s eastern periphery. Anand explained that it was a “BPL” (below poverty line) area, using the state’s categorization of extreme poverty. There were few furnishings, except for a bed and a television balanced on a makeshift shelf. While the MFI staff, including myself, sat on the bed, most of the borrowers clustered at the door and sat on what little space there was on the floor.

The meeting started normally, with borrowers handing over their passbooks and weekly installment. However, as borrowers demanded to know when they would get new loans, Anand sought to calm the angry protestations. With the ongoing liquidity crunch in the microfinance sector, there were not enough funds to go around. “It’s the Reserve

Bank’s decision,” Anand tried to explain, only to be met with grumbling from the group that he could sanction more loans if he wanted to. Anand’s explanation was only partially correct, but more importantly, he could not explain to the borrowers what the Indian central bank had to do with their microfinance loans. After all, the RBI was an institution that most borrowers had little idea existed, let alone encountered in their daily lives.

Anand tried to clarify: “You want to borrow, and we,” he emphasized, “want to give you more [loans]. But we can’t because of the RBI.” The two big losers in this whole crisis, he explained, were the borrowers and the MFIs: the former who wanted to borrow and the latter who wanted to lend, but could not. “Don’t you think we want to

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give loans? You would be better off with larger loans, and we would profit too. My hands

are tied. But who knows better what you need?” he demanded. “Tell me, who is next to

[stands with] the poor: us or the RBI?” This contrast between MFIs and the Indian apex

bank points to real presences and absences in the everyday lives of the urban poor. In

describing both Anand’s misunderstanding and the borrowers’ lack of knowledge about

the central bank, I do not imply that they were incapable of comprehending it. Rather, at

that at margins of the state where most people exist in the informal economy, the

regulatory body of the central bank simply did not figure into everyday economic

practices (Das & Poole 2004; Roitman 2005). Yet, as part of the formal financial sector,

MFIs are under greater regulatory scrutiny by the RBI and the Finance Ministry than

informal lenders. At the same time, it was their very proximity to the borrowers that

subjected MFIs to the association with moneylending. Against the general “financial

dualism” (Schrader 1994: 186) of formal and informal lenders, microfinance chafes at

both.

Nonviolent Claims

The loan officer’s social position is tenuous because of the ambiguity in her role

as creditor caught between formal and informal lending practices. In defining the

creditor-debtor relationship as the basis of justice, Nietzsche states that the right of the

creditor to inflict pain upon the body of the debtor is meant to inspire trust to pay back

the debt (1967: 64). This form of compensation through the debtor’s suffering, Nietzsche writes, is “a recompense in the form of pleasure” (ibid), or the pleasure derived from

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being in a position of power. The position of the creditor in a dyadic relationship is

therefore one of power.

Ethnographic work has consistently documented the conception of the powerful

position of the creditor as opposed to the weakness of the debtor (Peebles 2010). The

position of the creditor in a dyadic relationship is one of power over the debtor. However,

as proxy-creditors, staff at MFIs must enter these unequal creditor-debtor relationships,

without actually owning the capital. Loan officers attempted to clarify their own position

within the existing norms of power in debt relations. This was illuminated during one

group meeting. It was January and the early morning cold seeped through cracks in the

walls and the thin mat on the concrete floor, as the women huddled together. The women

wanted to know why they could not get new loans, and Anand, as branch manager, had

come along to explain. In his retelling of the crisis, Anand attempted to distance

microfinance from accusations of wrongdoing in recovery practices.

Anand began by telling the women of the problem in the state of Andhra Pradesh

where a number of people had committed suicide, partly it was said due to over- indebtedness to MFIs. However, he noted that this had happened at a time of elections, and politicians who needed to get votes blamed the MFIs for their failures. He continued:

But what is really happening? MFIs aren’t forcing people to take loans; borrowers want loans and that’s why they take loans. You often say that you want larger loans. Do we give that to you? No, we give less. And what are the other options people have to borrow? There are the banks that offer loans through cooperatives or the local mahajan [moneylender] who takes high interest rates. If you don’t return these loans, then the banks can bring in the police and the moneylenders can bring in local mastans [thugs]. But MFIs don’t use any such means to recover loans; they don’t call in the police or hire other people to make you return the loans. They can only rely on your goodwill to continue to repay the debt.

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In his positioning between the moneylender and the bank, Anand purposefully distances

MFIs from the ability to inflict violence on the body of the borrower. Unlike banks that have established a legal right to property in the form of collateral or to call upon state violence, and the moneylender who assumes informal authority to compensate for delayed payment through physical intimidation, MFIs are deemed passive. This does not mean that there are not other forms of violence inflicted on the borrowers by MFI staff

(e.g., social and mental pressure); rather I am interested in the ways that loan officers narrate their relationship as creditor to the debtors.

“We have to be Gandhian in our work,” said Amit. We were sitting in the branch office one afternoon as he finished his day’s accounting. “You know what Gandhi said— that if someone strikes you on one cheek, you should give the other? That’s what we have to do; no matter what they [borrowers] say, we just have to listen and wait. I heard this story from my friend who works at a different bank [MFI]. He and the branch manager had gone to this woman’s house, and she dumped water on them, and they could not do anything. They just had to sit there until she paid,” he added with dramatic flourish. It was a strange reworking of the constitution of violence in the debt relationship, for in this narration, it was the proxy-creditor who was under threat of verbal and physical abuse.

Amit was not alone in describing his position of vulnerability; throughout my conversations with MFI staff, I often heard stories of such encounters. In another case, an officer had been locked in a borrower’s house, though in this case it was because the MFI had not sanctioned a new loan. He had called his office from his mobile, and had to be rescued by colleagues. Anand had also explained that they “worked with lowered heads,” suggesting a position of deference rather than authority toward the borrowers. These

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claims to the reversal of the power relations in the loan officer’s narration signifies a more complicated relationship with their borrowers than is typically described both in popular and academic writing about coercive microfinance recovery practices.

Against the growing criticism of microfinance institutions in India and, particularly the coercive tactics used to recover outstanding loans, Amit’s invocation of

Gandhi articulated a much deeper ethical struggle working in for-profit microfinance. Of course, Gandhian non-violence should be read as an active political strategy by acting as moral agents rather than passive victims (Devji 2011). MFI staff would aim to ultimately accomplish loan recovery through non-violence rather than see it as failure. Moreover, the system of borrower groups have enabled MFIs to turn over the violence inherent to loan recovery to the other group members. Thus, violence on the part of loan officers is no longer required, as extreme levels of community and peer pressure come to substitute the threats of police or thugs. In practice then, borrowers have little power to challenge the MFI when defaulting on a loan.

Circulations of an Alienated Debt

Mithun had been working in microfinance for a few years when we spoke. He had put himself through college, studying hardware networking. He had decided that there was no future in this area, because technologies were changing so fast that nobody would pay for repairing equipment that had broken down. Mithun entered microfinance when an uncle, who ran a rural microcredit Self-Help Group (SHG), offered him a job after he had finished college. He had switched to DENA a few months before we spoke. Asked if he liked working in microfinance, he replied with a laugh that of course he did not like it at

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first, “but then nobody likes work.” But as he worked, he had to start “thinking of it [the money] as my own.” Against the rote work of collecting weekly installments, Mithun found ways to perform his duties with greater attention and skill. For example, he explained how he would come up with ways to make sure the loans were recovered.

When they had switched groups earlier, he had taken on four over-due [OD] loans. “But I recently just managed to recover one OD,” he said proudly, demonstrating his skill at his job and in managing a difficult debt recovery. For Mithun, loan collections were not inherently enjoyable as work, but thinking of the loans as his own made it at the very least more interesting. As stated earlier, while the labor of the debt is primarily that of the loan officer, the capital belongs to the company. However, by imagining a kind of ownership of capital, Mithun attempted to reappropriate his personal investment in the debt.

Mithun’s attempt to recover the debt in his own terms marked the limits to the alienation of the debt in its commodity form and undermined the MFI’s efforts at signaling the difference between microfinance and moneylending. Attention to the debt relationships between borrowers and loan officers reveals the constant possibilities of the commodity form of the loan to rupture and expose something more than just the financial transaction. Although the microfinance loan circulates over time as a commodity, the weekly meetings ensure that relationships embedded in the debt are constantly worked upon beyond its point of origin by both the staff and the borrower.

The senior management of DENA contends with this possible reappropriation of the debt relationship by loan officers as a danger. There is always the chance that the relationship between the loan officer and the borrowers will devolve into a patron-client

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relationship. This concern became explicit in the wake of the microfinance crisis as MFIs sought to manage their reputation as extractive moneylenders. These measures included setting up a complaint box at the headquarters and telephone hotline to address borrower grievances if they were not handled sufficiently by the branch office staff. Yet concerns about the relationship between the loan officer and borrowers were quite often not about complaints from customers. The head office was committed to managing relationships between loan officers and borrowers because of the social productivity of debt (Roitman

2005). The everyday interactions did not just create grievances on the part of the borrowers, but also relationships that had to be monitored by the head office for reasons I now explore.

I had frequently heard the MFI staff refer to their jobs as “transfer jobs,” while borrowers complained that the “sir” or “madam” changed too often. During an interview,

I asked the deputy general manager of DENA, Mr. Guha, about the loan officer (LO) transfer system:

Mr. Guha: We have a policy that loan officers have to be transferred after one year. This is because we may be satisfied with a LO, but he or she might not fit well with the area or with other people at the branch office. Then he or she can be transferred…

SK: So the LO stays in the same branch office, but goes to a different field?

Mr. Guha: Yes, exactly. Also, if there are problems, the LO could hide it if he or she thought they were going to be there for a long time. But if officers change, then the problems are exposed.

SK: Sometimes the borrowers in the field would say the loan officer changes too often…

Mr. Guha: Borrowers are told when they join that a new person will come after one year, so the borrowers know this when they join that this is a rule. The borrowers are comfortable. Normally, they take it sportingly.

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With the transfer system, loan officers are never in charge of a given group for more than

three to six months. While MFI staff members are occasionally transferred to a

completely different branch office, usually they are circulated within different groups at

the same branch office. Transfers mean that that new loan officer will uncover any

unofficial transactions of the previous officer. As stated earlier, in establishing the

formalized loan agreement, the loan officer is alienated from the product of her wage labor and the debt becomes a commodity. Without ownership of capital, the loan is supposed to be free of all ties with the person who established the loan while the transfer system is meant to reinforce this abstraction by systematically cutting ties between the loan officers and the borrowers. However, despite the attempts by the head office to control ties between loan officers and borrowers, these relationships often extended beyond financial exchanges.

The Emotional Labor of Debt Recovery

Microfinance practices wed together more tightly the futures of both loan officers

and borrowers as both sought to know and call upon personal commitments. Women

would ask often a new loan officer about previous staff; and in particular, explain that the

previous “madam” had made particular promises (e.g., larger loans). For borrowers, this

was a strategy to ensure future loans. Similarly, loan officers’ attention to the intimate

details of borrowers’ everyday life in order to ensure smooth loan recovery. Despite the

alienation of capital, for both loan officers and borrowers, these concerns were persistent

reminders of the original debt relationship.

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Loan officers, in particular, relied on the relationality of debt to ensure loan

recovery. MFI staff used powerful affective ties created through everyday interactions to

pressure women into payment by calling upon the obligations of the debt relationship. In

one case, the loan officer and branch manger both attended the group meeting to

convince an over-due borrower to repay her loan. As we arrived at the group meeting,

most of the group members were already present. Once we sat down, some of the women

whispered to the branch manager. The borrower in question, Ruma, an older woman, sat

mutely in a corner, the end of her faded sari draped over her bowed head. She avoided

looking at anyone, staring at the floor. She had stopped repaying her loan since the

previous week, explaining that her husband had just retired, and only one of her sons

worked, making barely 500 rupees a week for the family of four. In trying to convince

her to repay the loan, the branch manager told her that the loan officer had paid the

amount due the week before on her behalf to make up the difference (although she had

not done so in reality). “But,” he said, “now that madam [LO] had paid that amount on

her [the borrower’s] behalf, what would she [the LO] tell her husband when she went

home without her full income?”61 Tania, the loan officer, further pushed the borrower to

consider her [Tania’s] position: “I can’t lose my job because of this. I’ve been up for

promotion, and I don’t want to be held back because of this situation.” Following these

exchanges, the woman eventually agreed to start repaying, though with smaller weekly

installment than the original contract. Tania’s concern that she may be held back from a

promotion is a real one, as the MFI management does look at the number of over-due

loans under a given loan officer in considering promotions. However, Tania also invokes

61 Ironically this kind of logic contradicts how MFIs position themselves in terms of women’s rights and empowerment by reinforcing patriarchal gender norms.

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a form of loyalty from the borrowers to redress this situation, as well as empathy with a woman whose domestic life is represented as under stress. Such affective pressure on the borrowers obliges them to recognize their personal responsibility to the loan officer rather than an impersonal legal obligation to the MFI.

In their study of doorstep moneylending in England, Andrew Leyshon and his colleagues have found that “friendship” is often used as “a technique to retain the most profitable customers” (2006:181). However, I suggest that this kind of care-work can be identified as emotional labor: “to induce or suppress feeling in order to sustain the outward countenance that produces the proper state of mind in others” (Hochschild

1983:7). Through marks of deference and caring, the loan officers produce feelings of obligation in the borrowers. As Anne Allison (1994) demonstrates in her ethnography of

“hostess clubs” in Japan, while women’s affective labor creates a pleasant environment for men, it also helps male white-collar workers feel a strong attachment to their work.

The hostesses’ emotional labor extends beyond the interpersonal relationship with the customer to help structure social life more broadly. By being attuned to the everyday needs and concerns of the women borrowers, the MFI staff assemble knowledge not only about the emotional worlds of borrowers, but also their riskiness.

In order to mobilize affective pressure during recovery, loan officers had to maintain emotional bonds with borrowers throughout loan period by demonstrating care in their everyday encounters. Officers would remember details about the women’s lives and attempt to address the particularities of their situations through expressions of care and concern. Amit, for instance, needed to check all the passbooks for any errors, a task done every month or two. Usually, this would be done during the hour-long meeting and

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the women would have to wait until the work was complete. At the end of this meeting— only 20 minutes into the allotted one-hour—Amit said that he would take all the books back to the office with him to check and bring them back later. Afterwards, Amit explained that he had left because the group met in the room that also served as the kitchen. Until everyone departed, the borrower whose house the meeting was in would not be able to cook for the day. So, he explained, he tried not to take too long with the meetings.

Such practices are not just utilitarian in their ends; rather, such expressions of care become central to the ways in which loan officers understand and value their own social role or position. For instance, loan officers navigated the negative association to the moneylender by emphasizing their care-work. Further, emotional labor can counter the alienating effects of wage labor itself. Against the objectification of workers, Elizabeth

Dunn demonstrates how women in a Polish baby food factory “[revalue] themselves and their labor by bringing ideologies of motherhood” (2004:143), such as care for children’s safety. This practice of resisting commodification simultaneously contributes to workers’ disciplining of themselves and reinforces gendered norms of mothering. MFI staff repeatedly expressed to me their desire for respect [samman] as a fundamental part of their work. For loan officers, respect meant having borrowers respond politely without arguing, and trusting and attending to the advice given by loan officers. To lose respect was a dangerous possibility, not because it undermined the formal code of conduct, but for the loan officer’s valuation of her work and sense of self.

For instance, Putul had joined DENA a year ago. She had been working in microfinance for four years when we spoke. Asked whether there were any differences in

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all the various neighborhoods she had worked in, Putul replied said: “When you give

advice to people in the rural areas, they listen to you and analyze that information. In the

urban areas, people don’t have respect for us. They will call the head office or regional

manager directly to say that they’re not getting a loan or they want more. Of course there

is more need in the city, but they don’t analyze or think about what we say; they just want

more.” The foregrounding of respect marked the ways in which Putul wanted to be seen

as more than an intermediary for getting loans. She valued her own knowledge and

expertise in helping the poor. Like other loan officers who mentioned respect in response

to my question of what they enjoyed most about working in microfinance, Putul felt there

was more to her role than sanctioning and distributing loans. The perceived differences of

respect, however, were not without their own repercussions for borrowers. MFI staff

could respond to what they felt was a lack of respect from a potential borrower into the

designation of that person as “high-risk” and hence deny the loan.

In an effort to address criticisms, MFIs formalized rules for loan recovery

practices. At DENA, Mithun showed me the newly mounted “Code of Conduct” on the

wall of the branch office. It was a list based on suggestions from Sa-Dhan, MFIN (two

Indian MFI associations) and CGAP, the World Bank-based microfinance think-tank.

Mithun started listing the code of conduct as they remembered it—integrity, quality of service, fair practice, and social work—as if reciting answers to an examination, “Since the code of conduct is laminated and posted on the wall now, if we don’t follow the rules then human resources can fire us at any time,” Mithun added, almost as an afterthought.

Given the negative side of loan recovery practices, there is certainly a need for regulatory oversight. However, with the budding cottage industry of consultancies and

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ratings agencies that offer evaluation services to MFIs, worker’s care-work have become

subject to new forms of scrutiny. These consulting firms conduct evaluations and ratings,

including whether and to what extent MFIs adhere to their mission statements. Branch

offices can now be evaluated in terms of how well they are adhering to the code of

conduct and loan officers are made to adhere to company standards of emotional labor.

Emotional labor, once an unregulated part of the job, is undergoing increasing

standardization and formalization.62 Mithun’s observation that one could now be fired for not adhering to the code of conduct marks a heightened monitoring of workers, and the precarious position of loan officers.

Care in Banking

Ambivalences about the alienability of debt remain unresolved in more formal financial relationships as well. In a television commercial for ICICI, a private Indian bank, an elderly woman comes into deposit a check. As the bank officer processes the check, she proceeds to talk about her son who is now in America. The bank officer continues to work throughout the conversation, processing files. Soon the lights are being turned off in the office, and the officer indicates to leave a light on, and encourages the woman to continue her story. When she apologizes for delaying him, he responds, “no problem ma’am, please,” allowing her to continue. The commercial ends with a narration that “there is nothing too small.” The commercial is part of a series showing interactions between bank officers and customers. IDBI, a public sector bank, also has a well-received campaign depicting the relationship between a young boy and a baby elephant. The

62 As Hochschild (1983) suggests, this reflects the “commercialization of feeling” as the company initiates, directs, and monitors workers’ emotional life through their work.

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commercial ends with the statement that “some relationships grow deeper over time.”

Despite emerging technologies in internet and mobile banking that decrease the number of actual interactions between banks and customers, the message in these advertisements is the same: the relationship between the banker and customer is more than the financial transaction.

In analyzing these commercials, I do not mean to take at face value what is being represented; namely, an equal relationship between bank and customer. The commercials mark the emergence of “emotional capitalism” where the “economic sphere, far from being devoid of emotions, has been on the contrary saturated with affect” (Illouz

2007:23). Yet, these representations do suggest a particular ambivalence or vulnerability even in formal finance toward debt relationships. What is especially tenuous in the banking relationship is its appearance as a starkly financial one. As Jonathan Parry, challenging the distinction between gift exchange as good and commodity exchange as bad, has argued, commercial exchange can also become the focus of “symbolic elaboration” (1989: 65-66). Like the loan officers working at MFIs, there is a desire for the relationship to be “something more” than the mere financial transaction; however, that “something more” demands emotional labor from the proxy-creditor, whether a MFI staff or a commercial bank employee. Such work is meant to extend the peripheries of finance, by enfolding new populations into global financial networks. However, corporations that actually own the capital must constantly monitor this relationship between its staff and customers for what it sees as an “excess” of sociality that is embedded in the debt. These forms of excess can be both negative and coercive, but also forms of friendship and care that complicate the alienability of the loan. As in the case of

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microfinance, the everyday enmeshment of loan officers’ and borrowers’ lives means that there is more to the debt relationship than the basic transactional necessity. Loan products, constructed through debt relationships of the borrower and the proxy-creditor, have elements of inalienability or “something” that remains in exchange relationships

(Weiner 1985). Even while the capital in the debt relationship is technically handed over to the MFI, traces of the original debt relationship remain with the proxy-creditor, which cannot be retrieved by the financial institution.

Chapter Conclusion

As the crisis unfolded, commercial banks became increasingly unwilling to lend to

MFIs, unsure of regulatory environment and the future of the industry. Faced with a liquidity crunch, MFIs sought new funding opportunities. One such avenue was the securitization of loans. While MFIs had begun securitization even before the crisis, partly as a source of capital and as a way to reduce debt in the MFI’s books, the lack of ready loans from commercial banks made them turn increasingly toward securitization as a way of infusing cash to sustain lending: The Kolkata-based Bandhan Microfinance had inked deals to securitize Rs. 4 billion (approximately US$80 million) in April 2011, while

Hyderabad-based SKS Microfinance had Rs. 6 billion (approximately $120 million) in securitized deals.

Securitization means that banks or non-banking financial institutions combine and buy loans from the issuer (e.g. MFI). The issuer in turn pays the interest and principal of

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the loan back to the buyer.63 Typically, MFIs pool together anywhere from 5,000 to

10,000 individual loans from different branch offices and from different states into these

structured debt products. Before the crisis MFIs already boasted of loan recovery rates

above 90%, making them relatively low-risk. Bundling loans further reduced the overall

risk of the debt products because it is statistically unlikely that a significant number of

individual loans from such varied branches will all default, whereas there may be knock-

on effects of defaults within a given branch. In the case of SKS, no one branch office

accounted for more than 1 percent of the pool. Moreover, because payments had largely

stopped in Andhra Pradesh, none of SKS’s securitized tranches included loans from the

state. The structured debt products are all then analyzed by credit ratings agencies, based

on which MFIs can sell the debt product. Ironically, securitization of home mortgages

fueled the US subprime crisis, while it took a subprime crisis of sorts to further promote

securitization in India. In response to the sudden securitization spree, the Reserve Bank

released regulatory guidelines in September 2011 for the securitization of microfinance

loans. As securitization practices gain popularity, it leaves open questions about the

alienability of debt and its repercussions. With securitization, a debt that is established

between the poor borrower and the MFI can now be owned by a distant financial

institution, and can be traded as a regular bond.

As microfinance scales up, it has turned to increasingly financialized instruments

through private and public equity, extending the “social distance” (Shipton 2010:6)

between borrowers and creditors. A debt that is established between the poor borrower

63 Speaking to the Economic Times (Menon 2010), Sucharita Mukherjee, CEO of IFMR Capital, a Chennai-based firm specializing in microfinance securitization explained that investors can get better returns than top rated non-convertible debentures (NCDs) and securitized auto loans.

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and the MFI can now be owned by a distant financial institution through securitization practices, and traded in financial markets. These loans are now tied to the systemic risk of finance, while the ties between the borrowers and the financial product are increasingly obscured.

Still, the labor of financialization at the peripheries is not primarily that of abstraction and knowledge production, as often discussed in the social studies of finance.

As I have described in this article, it is the emotional and physical labor of loan officers who enfold the poor into the expanding networks of finance. This work demands that loan officers produce debt relationships, and alienate them as formalized loan products.

However, even as the capital of microfinance is alienated and increasingly financialized, practices of care continue to enmesh the lives and livelihoods of borrowers and loan officers. Care-work serves not just a utilitarian end, but becomes the way by which loan officers attempt to attend to the ethical dimensions of debt recovery practices as they are shaped by local social imaginaries. From narrating the vulnerability of their position as proxy-creditor to explaining the desire for respect in their work, they try to distinguish the blurring of their role with that of moneylenders, who they have supposedly replaced for the better.

On our return to the branch office, Anand and Mithun were discussing the accusations they faced earlier. Turning to Anand, Mithun said: “It was a good thing you were there. If I were there alone, they would have stopped taking loans from us, because, really, I have no reason to give [as to why they couldn’t get new loans]. Other times I can find a reason, but they do return their loans on time and without problems.” The microfinance crisis highlighted the increasing financialization of the lives of urban poor

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borrowers, where consideration of systemic risk compels commercial banks and the central bank to curb microfinance lending. The logic of these financial maneuvers is never fully communicated in the interactions between loan officers and borrowers. Both of these parties remain at a loss to explain and understand why their lives are being reshaped by banks and bankers they never encountered. The alienated debt circulates as capital; yet, it also haunts the proxy-creditors and the debtors, for whom the original inalienable debt relationship remains. These moments reveal the ethical consequences for

MFI staff who create and alienate debt relationships as loan products, namely the impossibility of giving a reason for why credit cannot be offered to one who has so faithfully maintained the debt relationship.

161 CHAPTER FIVE

The Domestication of Microfinance: Women, Empowerment and the Middle Class Modernity

We sat in the small room, waiting. The money that had been collected and

counted lay in neat piles according to denomination under the weight of a book, so as not

to be blown away by the fan spinning overhead. Shanti fidgeted anxiously, clutching her

purse. “I have to go shopping. By the time I get there now, all the fish will be gone,” she

sighed. “I was going to go shopping too” chimed in Bina. “There will be nothing left by

the time we get there.” The meeting had started at 10AM, it was nearing 11:00AM, well

past the time collections were usually finished, but two of the group members had not

repaid and the women present would have to wait until the two women came up with the

money.

It was the fourth meeting of the day, and I was accompanying Mukul (BM), who

was substituting for Radha (LO) who had been ill with the flu.64 The meeting had started normally enough, but 20 minutes into the meeting, there remained three loans outstanding. One of the three borrowers was ill, but the others said that she usually sent the money. Eventually, her young son turned up with the money in hand. However, there were still two unpaid loans. As it turned out, the two women had not been paying on time for the last two weeks, but Radha had not reported problems to the office, preferring not to create problems for the group, as she always eventually managed to recover the money. Impatient with having to wait, Mukul went to their houses to look for them, but came back saying that neither were at home.

The two women had come by briefly at around 10:30AM, to say that they did not have the money now, but that they could get it by the next day. Under heavy protestation

64 For MFI staff, I will indicate whether they were a branch manager with (BM) and loan officer with (LO) throughout the text.

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from the remaining women in the group who were worried about the creditability of their own group, and the added burden of having to pay off the women’s loan for the week, the two women said they would get it by 11:30AM that day. As the minutes crept by, some of the women stealthily slipped out of the room. The few who remained in the room— just six of around 20—had been unable to escape Mukul’s gaze. Arati, a slight young woman in her early twenties, wondered about her two boys, a toddler and a baby a few months old. “I left my sons at home. My sister-in-law is going to give me an earful [kotha sonabe]. I told her I would be home quickly.” With so much work left to do throughout the day, the women in the group were itching to leave; yet they had to ensure payment for the two remaining loans before they could be dismissed.

As the clock ticked, the women got increasingly annoyed and agitated; but no one seemed willing to take on the burden for paying the amount for the women. The other women in the group explained that the two women’s husbands were in a failing business venture together. Between the two, the outstanding repayment amount for the week added up to a substantial amount of Rs. 750. Most of the women paid anywhere between Rs.

150-Rs. 400 per week. As Rima, the woman whose house the meeting was being held in, observed, “nobody has that kind of money just lying around,” especially to be given to women they did not fully trust. Shanti clutched Rs. 100 in her hand said, “this is all I have, and I have to go shopping. I can’t spend it on them—and I don’t know when I’ll get it back if I do.” Conversation revealed that Arati had been sick a few weeks earlier and had sent her weekly payment by one of the now absent women. However, the money had never been received in the group, and everyone assumed that the woman had circulated

Arati’s money as her own. But there were other concerns too: “They don’t think about

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anyone else,” said Bina. “We’re meeting in this house, and there are expenses [for electricity] with the fan running and the lights turned on. We used to meet at one of their

[the absent women] houses before, and she would always say, ‘We have to be done in 15 minutes’ and see now you see, they keep us waiting.”

At around 12:30PM, Mukul finally convinced the women to pool together the outstanding amount of Rs. 750. In return, he would send a loan officer later in the day to collect the amount from the two absent women in order to assuage the group’s concern that they would not pay it back. It was an ironic reversal of the way in which typical microfinance story of social capital as collateral is narrated in the popular imagination.

Here, the women required formal intervention from the microfinance institution (MFI) in order to recuperate the loan. Moreover, the experience of waiting during this group meeting highlighted the limitations to social capital, while revealing the multiple demands on women’s time.

The global success of microfinance, particularly within development policy, has been attributed to first, its creation and use of social capital between group members as collateral in the absence of material collateral. Second, in addition to economic benefits, microfinance is expected to lead to women’s empowerment. I show in this chapter that social capital did not simply exist in situ: most women borrowers labored to produce these relations, while also balancing borrower meetings with domestic and wage labor, collecting documentation and proof of housing and identity from local politicians, and working to maintain neighborly relations with other borrowers. Critics of microfinance have emphasized the negative effects of social capital in terms of the production of new kinds of obligations and discipline (e.g. new forms of patron-client relationships,

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neoliberal discipline; see Ito 2003; Karim 2011; Rahman 1999). However, I consider the

domestication of microfinance as it is incorporated into the everyday lives of urban poor women, and the ways in which microfinance is absorbed into existing forms of

relationality and gendered hierarchy. I argue that this domestication has to be understood

within the context of local class ideologies, resulting in the reinforcement of class

difference rather than social change.

An Intellectual History of Social Capital and Empowerment in Development

You are an idealist, Professor. You live with books and theories. (Yunus 2003: 54)

In his autobiography, Muhammad Yunus, founder of the Grameen Bank, recounts

meeting with a commercial banker to try to get loans for poor women. Asked why the

bank cannot make such loans, the branch manager responds: “They simply don't have any

collateral… That is our guarantee” (2003: 54). When Yunus persists in asking why they

need collateral, when they should be primarily interested in getting their money back, the

banker retorts with the above quote about Yunus’ idealism and reliance on theory. The

lack of material collateral has been described as one of the primary reasons the poor do

not get access to credit. Yunus’ solution to this problem of collateral is to form what is

known as a joint liability group (JLG). Developed as one way to counter the lack of

collateral, joint liability groups utilize social networks as a means of ensuring recovery.

Yunus describes how group membership both creates support and protection, and also

“smoothes out the erratic behavior patterns of individual members, making each borrower

more reliable in the process. Subtle and at times not-so-subtle peer pressure keeps each

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group member in line with the broader objectives of the credit program” (2003: 62).65

While the use of groups in microfinance emerged somewhat independently from the

theoretical configuration of social capital, the popularization of the latter bolstered the

enthusiastic reception of microfinance within the field of development.

The contemporary theory of social capital largely emerged in the 1970s and

1980s.66 Alejandro Portes (1998) defines social capital as “the ability of actors to secure benefits by virtue of membership in social networks or other socials structures” (1998: 6).

In the sociological context, social capital theory has its roots in Bourdieu’s notion of the benefits individuals get from being in particular social networks (Bourdieu 1986; Portes

1998). For Bourdieu, social capital is one of several forms of capital, including economic and cultural, that individuals can accumulate. There are real material benefits to social capital as people are able to access networks that provide economic benefits (Portes

1998: 4). A second origin of social capital theory is sociologist James Coleman’s assessments of the social context of persistent inequality and the relationship between social and human capital. However, in contrast to Bourdieu’s location of social capital within the context of class, Coleman’s analysis social capital was tied to rational choice theory. That is, while social capital can contribute to explaining inequality, it is not necessarily seen as a more entrenched part of the structures of power (Fine 2010: 39).

Sociologist Mark Granovetter’s (1985) work on how economic action is embedded in

65 Many MFIs have moved away from the classic Grameen JLG structure, but have retained the group meetings as an efficient way of recovering individual loans (c.f. Armendáriz & Morduch 2010). Individual problematic loans may be excluded or renegotiated, but the group as a whole is not affected. 66 A longer genealogy of social capital can be traced to the 18th century Scottish Enlightenment with David Hume, Adam Smith, and Edmund Burke, among others on the role of society and social norms in regulating the market (Woolcock 1998).

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social relations has also been influential in the development of social capital theory.

Political scientist Robert Putnam’s (1993) work on the role of social capital in enhancing

civic life has also served to translate social capital theory to public policy.

Compared to the previously dominant development paradigms (e.g.

modernization theory) that “construed social relations as singularly burdensome,

exploitative, liberating, or irrelevant” (Woolcock & Narayan 2000: 228), social capital

theorists of development reinstated social networks both as positive and central to

effectuating development.67 Social capital theory dovetailed with the shift in development policy away from the singular focus on economic growth and top-down policies to human capabilities and empowerment (e.g. Sen 1999).68 By the 1990s, social capital had entered mainstream development policy, absorbed into the programs of international institutions such as the World Bank and the United Nations Development Programme

(UNDP), as well as national development agencies (e.g. the Planning Commission of

India). Appealing to both the free marketers on the right, skeptical of the role of the state, and the left, with its emphasis on grassroots level participation, social capital was widely

67 Woolcock and Narayan (2000) identify four perspectives of social capital in economic development: 1) the communitarian perspective holds social capital as inherently good; 2) the network perspective acknowledges the tension between the positive and negative aspects (i.e. differences in power between vertical and horizontal relationships); 3) the institutional view (following Theda Skocpol) argues that community networks depend on the institutional environment; and 4) the synergy view (following Peter Evans) argues for the need of both institutional support and popular participation in effectively mobilizing social capital. 68 Amartya Sen’s (1999) critique of the narrow focus of development as economic growth was a break from the dominant paradigm. In contrast to earlier formulations of the objects of development as inert and passive recipients, Sen advocates the need to consider human agency. Sen advises looking beyond development as measured by aggregate economic growth and revaluing the ends and means of development. Development as freedom is therefore understood as the removal of deprivations, whether they are economic, political or social.

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accepted as the anathema to development failures (Harriss & De Renzio 1997: 920;

Fukuyama 2001). Within the discipline of economics, social capital became seen as a

way to address market failure through non-market mechanisms (Fine 2010: 114). For

example, trustworthiness could be considered a “cultural variable” (Francois 2002: 5) to

explain differences in cooperative environments and hence, in levels of economic

development.

Social capital has also been used to account for differences in institutional

development. It has been employed to address the question of “when and under what

conditions do destructive or moribund institutions emerge rather than constructive,

responsive ones?” (Woolcock 1998: 170). However, accounting for social capital as a

variable requires measuring it, whether qualitatively or quantitatively. As a

fundamentally relational category, development scholars had to find a way to measure

something that “exists only when it is shared” (Narayan & Cassidy 2001: 60). To do this,

scholars have to use objectify dimensions of social capital (e.g. membership in informal

groups, community participation, family ties, political engagement) to find correlation

with various outcomes (e.g. governance, security, empowerment) (ibid: 65). However,

some categories remain difficult to tease apart: for example, does empowerment lead to

more social capital or does it produce social capital?

Yet as the scholars in the social studies of finance have argued, social scientists

“contribute toward enacting the realities they describe” (Callon 2007: 315). In other words, social scientific knowledge is performative in the sense that Austin (1975) formulated, whereby certain phrases have illocutionary force. For example, certain phrases, such as “I now pronounce you,” not only describes the act, it also “performs” the

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act in its statement. In a parallel manner, while economic theory describes the market, in

its articulation, it also actively shapes it. As Donald Mackenzie (2007) shows in his

analysis of the Black-Scholes-Merton model for options pricing—for which the modelers

was awarded the 1997 Nobel Prize in economics—the model “did more than simply express price patterns that were already there… there is reason to think that the use of the model altered price patterns” (2007: 65). The model was not purely descriptive; prices followed the model in part because of its very existence.69

In the context of social capital, Julia Elyachar (2005b) has observed how

developments in the social sciences including social capital theory facilitated the

theorization of the informal economy. More specifically, Elyachar argues that social

practices that “had often been viewed as an obstacle to economic development, were now

seen, in the guise of social capital, as a resource for reproducing global markets,

maintaining global stability, and achieving economic growth” (2005b: 9). The

popularization of social capital theory in effect enables the “conceptual transformation of

social networks among the poor into an economic resource for capital” entailing a

process of dispossession (ibid: 10). The problems of poverty could in effect be side

69 These works on the performativity of economics have been highly influential in the social studies of finance, showing the ways that abstract theories come to shape the very object it is supposed to describe. However, as critics of economic performativity such as Miller (2002) argue, this perspective ends up producing “a defence of the economists’ view of the world and a rejection of the evidence of how actual economies operate as available to anthropologists and sociologists” (219). Callon effectively brackets out power and the ideological foundations of the economic theories he studies, and accepts the easy translation of theory into reality. However, other works take direction both from the performative dimensions of economics, with attention to the social and political spheres as well. Drawing on Bourdieu’s critique of Austin, MacKenzie (2007) cautions that it is the social, political and political factors that determine the felicity conditions of a performative—that the statement succeed in doing what it is supposed to do. Thus, the Black-Scholes model performative in and of itself, but because of its historical linkages to the Chicago derivatives market where it was taken up and applied.

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stepped by assuming that social capital would substitute for other forms of state

intervention. Social scientific paradigms in this sense do not just describe, but reshape the

very object of its analysis in unexpected ways.

In the turn away from economic growth alone, the popularization of social capital

coincided with the emergence of two other factors in development policy: focus on

gender and on empowerment. While the then dominant paradigm of modernization theory

had generally ignored the role of women, second wave feminism of the 1960s and 70s

began to influence development theory as well.70 By the 1980s, the women in

development (WID) paradigm absorbed feminist critiques of structural inequalities in

gender relations (Razavi & Miller 1995). Economist Ester Boserup’s work helped to

bring women back into mainstream economic development. Boserup’s analysis of

agriculture in Sub-Saharan Africa critiqued development policies that instituted “Western

notions about what constituted ‘appropriate’ female tasks’” (ibid: 4), leading to male

monopoly of new farming technologies and displacing women from the traditionally

more equal positions in agricultural economies. Microcredit and other such income-

generating programs were introduced under WID as a way to incorporate women more

fully into the market economy (Sharma 2008: 5). While bringing women back into

mainstream development however, WID did not fundamentally challenge the premise of

70 Modernization theory posits that societies move from tradition to modernity and “assumes that the values, institutions, and patterns of action of traditional society are both an expression and a cause of underdevelopment and constitute the main obstacles” (Valenzuela and Valenzuela 1978: 538). Under this model, development could result from exogenous stimuli—the “diffusion of modern values and institutions from early modernizers” (ibid) and guided by Third World elites. Development, as accepted and envisioned by the postcolonial state was thus of “a linear path, directed toward a goal, or a series of goals separated by stages” (Chatterjee 1993: 204); though the goals, and hence the means, were determined by the historical process of development in the West.

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modernization theory, leaving in place Western ethnocentrism about gender (e.g. the role

of women in the domestic and public spheres), and the value of market efficiency

(Sharma 2008: 5). In particular, the “bureaucratic resistance to gender redistributive

policies” (Razavi & Miller 1995: 7) necessitated WID advocates to continue to produce

efficiency-based arguments.

Critiques of WID led to an eventual shift to the gender and development (GAD)

paradigm. In particular, GAD emphasized the social construction and reinforcement of

gender roles (Razavi & Miller 1995: 12). In its implementation as policy, GAD advocates

emphasized empowerment as a way to challenge existing inequalities (Sharma 2008).71

Thus, in 1995, the United Nations Fourth World Conference on Women, also known as the Beijing Platform, solidified the GAD paradigm with its emphasis on empowerment.72

However, the turn to GAD was also a way to dispose “of both ‘women’ and ‘equity,’ two

issues presumably most likely to meet a wall of resistance from policymakers primarily

interested in ‘talking economics.’ The framework thereby translates some important

components of the gender division of labour into a language that is unthreatening and

71 Sharma argues that empowerment was conceived of as “overcoming disempowerment and the related inability to make strategic life choices, and challenging unequal power relations” (Sharma 2008: 6). This move toward empowerment parallels the institution of a neoliberal ideology in which “the market is the ideal arbiter of resources and the harbinger of social good and dictates that the state must minimize its interventionist role” (ibid: 16). Moreover, following Foucault (1991) and Ferguson and Gupta (2002), Sharma argues that women’s empowerment organizations reflect neoliberal governmentality or the “diffusion of self-regulatory modes of governance… throughout society and the imbrication of varied social actors, including individuals and NGOs, in the project of rule” (2008: xvii). 72 The first point on its mission statement was empowerment: “The Platform for Action is an agenda for women's empowerment. It aims at accelerating the implementation of the Nairobi Forward-looking Strategies for the Advancement of Women and at removing all the obstacles to women's active participation in all spheres of public and private life through a full and equal share in economic, social, cultural and political decision- making.” (UN Women 1995)

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accessible” (Razavi & Miller 1995: 15). This emphasis on gender equality as economic

efficiency remains in more recent incarnations of global development policy, including

the 2012 World Bank World Development Report on gender and development. In other

words, the radical elements of gender analysis were neutralized with its incorporation

into policy framework as empowerment.

Microfinance programs emerged at this intersection of social capital theory and

programs for women’s empowerment in development. The Grameen model of group

lending became a “prime example of the effective mobilisation of social capital for

poverty reduction where both the market and the state have failed” (Ito 2003: 323). The

Grameen model was not created as development policy with direct reference to social capital theory, but was absorbed by the theory as an exemplary case. Moreover, often— particularly in the South Asian case—with its emphasis on gender and empowerment, microfinance was easily incorporated into discourses of women in development and empowerment. Participation in microfinance groups was supposed to yield “not only an economic payoff in increased access to financial services, but also an empowerment payoff in new forms of bridging and linking social capital” (Rankin 2002: 12). Yet both microfinance promoters and their critics have often underemphasized the meaning that the borrowers themselves ascribed to the loans and their use.

Take, for instance, the case of Minoti Didi. She had just moved into her new house, where we were sitting, in the northern edge of the city. “It’s so much more convenient to live here than in a rented house. You don’t have to rush to get everything done. It used to be such a bother with trying to use the [common] bathroom before the other tenants.” Though she spoke dismissively about this—suggesting that these new

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conveniences had made her lazier—there was a clear note of pride in her voice. One of her daughters made periodic appearances, getting ready for school while listening to music on her mobile phone. She had a small business selling seasonal things: in the winter, she sold woolens—sweaters and blankets—and during the monsoons, she sold umbrellas. Most of her clientele was in the neighborhood. It was September, and she was nearing the end of her current loan, but wanted to wait a little before getting her next one, in time for the winter when she could buy a large stock. But she had another major expense on the way: she had just arranged a daughter’s wedding for January. When asked whether the loan would help with the wedding, she laughed, saying, “you couldn’t even boil water for a wedding with these loans. No, I’ve saved up separately for the wedding.”

There was also the neighborhood deity, for which her turn was coming up to sponsor a puja [rituals]. Minoti Didi was thinking of February when the hassles and expenses of the wedding would be over.

Minoti Didi’s narration indicates the limits to both the celebratory framework of microfinance having liberatory potential for women oppressed by patriarchal traditions and critiques that focus primarily on neoliberal governance (e.g. removal of state welfare, emphasis on market efficiency, etc.) as an explanatory framework; both of which foreclose the ways in which the women see their social position within their community.

For Minoti Didi, the microfinance loans were mundane: they had not significantly transformed her life either for the better or worse and she did not expect them to either.

Nevertheless, she hosted a group meeting in her house, and continued to make plans for subsequent loans. She was well aware that the size of the loans were not large enough to substantially change her life, but her small business could assist her family in paying for

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various obligations, including the wedding and puja. The loans enabled her to comply with existing social demands.

Without diminishing the inequalities and social suffering wrought by capitalism and gendered violence, I trace in this chapter a more complicated understanding of the

social lives of urban poor women that microfinance is supposed to transform. In doing so,

I adopt first, the “slum’s eye view” (Nandy 1998) for my analysis. Writing about the

cultural politics of popular film, Ashis Nandy poses the following question:

Are the inhabitants of the unintended city [slum settlements] the passive objects or tools of history they are often made out to be? Are they only an urban proletariat waiting to be organized into a new political formation? Or are they the makers of their own destiny…? (ibid: 3)

Nandy suggests that Indian slums are “not so much the enforced abode of the industrial

proletariat or the urban poor atomized and massified. It is an entity that territorializes the

transition from the village to the city, from the East to the West… The slum is where the

margins of lower-middle-class consciousness are finally defined” (ibid: 5-6). Rather than

take the urban poor simply as objects of intervention, the “slum’s eye view” approach

calls for a deeper analysis of the textures and productivity of life at the margins. In

particular, the “slum’s eye view” allows for a better understanding of the ways and

moments at which ideologies are crystallized, not from the top-down, but through

everyday practices.

Second, taking cue from Michel de Certeau’s theorization of everyday practice, I

analyze the “poetic ways of ‘making do’ (bricolage)” (1984: xv). For de Certeau, the

tactics of the poor—as opposed to the strategies of the wealthy—are conditioned by the

lack of power; nevertheless, these tactics offer spaces of negotiation against the backdrop

of an overbearing panoptic modernity (Napolitano & Pratten 2007: 9). I trace the

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trajectories of women borrowers, the “poets of their own acts, silent discoverers of their own paths in the jungle of functionalist rationality,” (ibid: xviii) as a way to understand and take seriously the multiple values that people give not just to debt, but its ultimate use and circulation.

Women and Credit-work

Eight-year old Rimi sat perched on the edge of the bed. Her mother had a loan and the group meeting was being held in her house. With short hair and a serious countenance she clutched her mother’s passbook and observed the meeting. Seeing her, the women borrowers joked whether she too had her money ready to return or if she was going to ask “sir” for a loan. Teasing young girls about her future wifely duties is a relatively common practice in India. Along with rituals, such everyday language expresses gender ideologies and conveys the expected role of women as wives and mothers (c.f. Dube 1988; Fruzzetti 1982). Just as they might have teased Rimi about cooking for a husband, getting a loan was constructed as another job for a married woman to do. This moment marked how microfinance had become absorbed into the everyday domestic labor of women, rather than serve as a radical or transformatory tool of emancipation. This domestication of microfinance represents something quite apart from the dominant message promoted by microfinance institutions and supporting international organizations.

One of the operational practices of MFIs is that the group meetings take place in the home of one of the members. Group members, particularly in the urban context, are required to live within five minutes of walking distance from the meeting place. This

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system ensures higher loan recovery rates than the typical bank practice of having

customers come to a branch office. Two primary reasons are: first, borrowers are more

closely monitored; and second, there is a lower cost on the part of borrowers to return the

loan. If a woman had to go to the branch office, she would have to take time, and

possibly pay for transportation to get to the branch office, making the cost of payment too

high. I suggest that the domestic spaces of interaction for microfinance meetings are an

important aspect of understanding how women borrowers experience microfinance, and

in analyzing its effectiveness in addressing women’s empowerment.

From early works in feminist anthropology, the domestic/public dichotomy has

been a dominant mode of analysis of gender. In the now seminal work on gender in

anthropology, Woman, Culture and Society, Michelle Rosaldo identifies the “domestic”

and “public” as “the basis of a structural framework necessary to identify and explore the

place of male and female in psychological, cultural, social, and economic aspects of

human life” (1974: 23). Though not entirely or universally, Rosaldo argues that women

“become absorbed in domestic activities because of their role as mothers” (1974: 24). It

is only when women “transcend domestic limits” (ibid: 41) that they are able to “gain

power and a sense of value” (ibid). It is only by “entering the men’s world” (ibid) of the

public sphere that women can challenge unequal power structures of gender relations.73

Numerous cross-disciplinary studies have shown that microfinance programs directed at women often change domestic relations in addition to income or economic gains, though interpretations have been mixed as to whether these changes are primarily

73 Other anthropologists have pointed to the analytical limits of this dichotomy, including the problematic universalization of gender roles and domestic activities (c.f. Collier & Yanagisako 1990).

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negative or positive. One key argument for microfinance as a tool of women’s

empowerment is that it can give women an improved position in household decision-

making by being the source of access to credit (Kelkar et al. 2004; Holvoet 2005).

However, others have been more cautious about the overall impact of microfinance in

changing women’s domestic power, suggesting that credit overwhelmingly remains

within male control, and can even increase violence towards women (Goetz & Sen Gupta

1996) or reinforce and intensify existing gendered codes of shame and honor (Karim

2011; Rahman 1999).

Despite these ambiguities, MFIs and related agencies and funders consistently

represent microfinance as assisting women to gain power both within and out of the

domestic sphere by becoming a successful entrepreneur. MFIs in India use these tropes

when presenting successful case studies of women entrepreneurs. Take the story of Rubi

Chand that is posted as a case study on the website of Bandhan Microfinance.74 Rubi is described as a “self-starter.” Her husband worked as a driver, but his income alone was not sufficient to support the family, including two young sons. She was, however,

“valiant enough to take the chances to pursue her dreams for a better future for her family.” After she took a loan from Bandhan, Rubi started a fried snacks store, and is now “a confident multi-tasker. She is not only a responsible mother and wife but also a renowned business woman.” In addition to describing Rubi as a successful businesswoman, the case study presents her need to also always be a good wife and mother. While the main readership of the MFI website is not the borrower, but institutional lenders and affiliates, and local and international media, the case study offers

74 Bandhan Microfinance. Rubi Chand. http://www.bandhanmf.com/case_studies_suchana.aspx [accessed October 28, 2011]

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insight into the gender ideologies that underpin Indian microfinance and development rhetoric related to the public and private role of women. This stands in marked contrast to the ideological premise that Suzanne Brenner outlines for modernization and domesticity in Indonesia:

The ‘ideal’ New Order woman is portrayed as a dedicated wife and mother who devotes her energies to serving her husband and bolstering his career… and to raising the next generation of good Indonesian citizens” (1998: 240).

This model emphasizes the singular domestic role of women in development. With microfinance, women are expected to not just be a good wife, but also a good entrepreneur and aid the family in escaping poverty.

The domestic spaces in which the meetings take place offer insight into the new role of credit in women’s lives. The loan officer and I were a little late in getting to a meeting. As we entered to the nearly empty room, one of the women informed us,

“Everyone left because they have to go get water and [kerosene] oil.” “Does water only come once a day?” I asked. “Twice: once around 11AM and once in the evening. At the tap in our area, we get it regularly; in other places, it sometimes only comes once a day.”

“We just get a trickle at home [from the tap],” said another woman, meaning she had to get water from public sources as well, even if she supposedly had running water in the house. At other meetings, women would often come late because of water collection. One of the borrowers explained, “Our biggest problem is water in the morning. We have to go and collect the water, and it takes time and sometimes people are late or have to leave to get water.” Asked if there were any problems, one woman added that people were sometimes late in getting to the meeting. There was water to be fetched in the morning, and “there was always women’s work” [mēder kaaj to achei]. On another occasion, the

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group was meeting in an apartment hallway. Throughout the meeting women and young girls came through in with buckets of water, filled at the water truck parked on the street.

The cement ground was darkened with spilled water. The loan officer asked why the floors were wet. “There’s no water,” replied one of the women. “We haven’t had any water for the past few days in the building” she added, referring to the government housing where the meeting was being held.

Although many of my informants would mention or complain about the additional work of getting water from public water sources, I never observed or heard of any kind of political mobilization around water, or active forms of “hydraulic citizenship” (Anand

2011). Nonetheless, water collection was mentioned so often and repeatedly that it was impossible to ignore. Its absence and intermittent presence were very much a part of the textures of everyday life in the slum settlements of Kolkata. Yet getting water, like microfinance, had become marked as and absorbed into women’s work. Their intersection is a powerful reminder of hidden labor of domestic work: they both emerge as distinctly gendered work when women have to decide between collecting water and attending a microfinance meeting. Against the expectation that credit would “liberate” women, it added another task to the long list of domestic work, and one that would have to be negotiated with other daily obligations such as collecting water. Moreover, both water-work (O’Reilly 2006) and what I will call credit-work are non-market forms of gendered labor such as “kin-work” (di Leonardo 1987) that mark particular convergences and expectations of womanhood and modernity.

Writing of a water supply project in rural Rajasthan, geographer Kathleen

O’Reilly argues that “a ‘modern’ water project needed ‘modern’ women to sustain it.

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Thus village women imagined as ‘traditional’ were marked for change by [project] staff”

(O’Reilly 2006: 962). These modern women, as opposed to men, are expected to be conscientious and responsible consumers. The modernization of water systems was simultaneously coded with women’s empowerment and participation; that “to be domestic is to be traditional is to be disempowered” (ibid: 965). The objective of the participatory water modernization project became to “entice women out of their houses into women’s groups or onto their village’s water committee as a women’s representative” (ibid). Yet, where “empowered” and “modern” work as synonyms,

O’Reilly argues that the project produces a particular kind of gendered modernity, where

“flowing into villages with the project’s clean water supply is a promise of modernity: modern water for modern women” (ibid: 961). Like water, the steady flow of credit to women is expected to create modern entrepreneurial women, or, to borrow a phrase, modern credit for modern women.

Credit-work is an everyday set of practices that women engage in to access, maintain and repay loans. While there is a long and cross-cultural history of women as arbiters of household credit (Jordan 1993; Lemire et al 2001; Tebbutt 1983), microfinance demands a particular configuration of women’s work on which I will focus.

Returning to Bourdieu’s theory of forms of capital, the production and maintenance of social capital requires:

[An] unceasing effort of sociability, a continuous series of exchanges in which recognition is endlessly affirmed and reaffirmed. This work, which implies expenditure of time and energy and so, directly or indirectly, of economic capital, is not profitable or even conceivable unless one invests in it a specific competence… and an acquired disposition to acquire and maintain this competence, which are themselves integral parts of this capital (1986: 250) [emphasis added].

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The networks on which social capital is based do not simply exist, but there is a constant

expenditure of labor to create and maintain them. Credit-work requires turning the

“contingent relations” (ibid: 249) of the neighborhood into an institutionalized network of

a microfinance group through which borrowers have access to economic capital.75

Initial access to the loan requires women to establish relationships with other

women in the neighborhood. When asked how they first learned of microfinance, most

borrowers told me that they had learned of it through word of mouth. In fact, after setting

up the branch office and initial drive to establish groups, MFIs do very little publicity in

the neighborhoods where they work, relying on other women in the neighborhood to

learn of the MFI from existing borrowers. After learning of the particular MFI, the

potential borrower must establish ties with the existing group members, or in some cases,

establish a new group altogether with at least 10 other women. In joining a group, most of

the other existing group members must approve of the new member. Thus, women with

poor neighborly relations will not get access to loans, particularly as MFIs require

borrowers in one group to live within approximately five minutes walking distance of

each other.

Access also requires having the right set of documents, the right income profile,

and the right answers to questions from the MFI staff. Typically, the set of documents

necessary for a loan are: 1) age proof (e.g. Permanent Account Number (PAN) card,

voter identity card, or ration card); 2) photo proof (PAN card or voter ID); 3) address

75 Here I am less interested in the critique of social capital produces positive or negative forms of sociality (see n2, this chapter), than in the actual labor of producing the networks.

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proof (PAN card, voter ID, or ration card); and 4) a joint photo with the guarantor [See

Figure 5.1].

Figure 5.1: Documents needed for loan

PAN CARD RATION CARD VOTER ID AGE PROOF   

PHOTO PROOF   

RESIDENCE PROOF    (Must correspond to current address)

Borrowers most commonly had Ration Cards, which are issued by the state government and enables cardholders to get subsidized essential commodities (e.g. rice, lentils, kerosene oil) through the Public Distribution System. However, ration cards in

West Bengal do not include a photograph on the card. The next commonly held form of identification was a Voter Identification card. However, often the address on the card often would not match the current address, especially for migrants. The PAN card, which is issued by the Income Tax Department and is required for filing taxes, fulfills all requirements. However, most urban poor borrowers (especially women) do not file income tax papers and so do not have a card. A photo identity with address proof must also be provided for the guarantor, typically the husband of the borrower, but in cases where she has been widowed, it can be a son or son-in-law, or even a father-in-law (see

Chapter 6 for further discussion on male guarantors). Thus, a borrower often only has a voter ID but with her natal rather than marital address; or she has a ration card without a photo proof. In such cases, she has to go to the local councilor and get a signed letter with photo confirming her identity. Moreover, when a borrower lives in a rented house or

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apartment, she must get a letter from her landlord vouching for her as a tenant (See

Chapter 6 for further discussion). Gathering all of these documents require considerable time, work and negotiation, as well as expenses.

Once a woman has established a loan, she must attend the weekly meetings both to repay and to maintain her creditworthiness. Attendance is taken at every meeting, and women who have missed too many meetings may become ineligible for a subsequent loan even though she has paid back her loan on time (e.g. by sending the money through another borrower or family member). The MFIs insist on attendance as a way to keep track of their borrowers and ensure that she does not become overdue. Since most women have two to four microfinance loans from different institutions, many mornings are occupied with group meetings.

As with water-work, credit-work intersects with various other forms of labor that women are expected to conduct including domestic, wage and other income generating forms of labor. It is in the moments at which women who perform multiple forms of labor have to choose or prioritize these seemingly invisible tasks that they become evident. Take the following examples where borrowers had to negotiate between meetings and other forms of work:

(1) Wage Labor

A meeting had gone over time and we were waiting for the last borrower to turn up. One borrower kept pressing the loan officer to let her leave. She explained her hurry: “We don’t even have time to eat, but we still come to the meeting on time. I come home from work [at the hospital] just to pay off the loan, but now it means that I won’t be back in time to get tiffin [lunch, provided at work].”

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(2) Small Business

One of the borrowers at a meeting that started at 11AM ran kochuri stall [fried bread typically sold with curried potatoes]. She asked and was allowed to leave the meeting early because, as the other women explained, this was a peak time for business, and so she had to be back at her stall. Another woman was repeatedly absent from the meetings although she always sent her money. When asked why she missed the meetings, she replied that she had a vegetable stall in the marketplace. If she were to attend the meeting, she would either have to leave her stall or pack everything up, both of which would affect her sales.

(3) Childcare

We were at the branch office one afternoon, when a woman came in to submit documents

for a loan. “Please do it quickly” she said, “my daughter hasn’t come home from school

yet and I have to go look for her.” It turned out that her 8-year-old daughter had gone to

school in the morning and though she should have been home by 11AM, it was now

3PM, and she had still not come home. Other parents had said that she had gone with one

of her classmates to her aunt’s house. But nobody could get a hold of this classmate’s

family. The woman had been working all day, and she had not been able to go out

looking for her daughter herself, and she had not told her husband either, figuring that he

would “go crazy” if he found out that his daughter was not home yet. Despite her obvious

anxiety to get out quickly to go and look for her daughter, the woman stayed around long

enough to fill out the requisite forms and give her thumb print, etc.

These examples show the constant negotiations that women borrowers have to

make to ensure that they fulfill their obligations in various areas of family life from

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income generation to childcare. I rarely encountered women who narrated access to credit

as fundamentally changing their lives; rather, credit was absorbed into the existing

demands on women’s time, becoming another necessary form of women’s work.

But credit-work can also fail. This became apparent during one group meeting that was disrupted by an enraged woman who came in to confront the cashier about her inability to get a loan from a different MFI. “She’s stopped me from taking loans there.

Just because they’ve made her a group leader, she thinks she can do what she wants. She wouldn’t give me a signature for a loan! I sent the money, I gave it to my son to take to her, and she scolded him. Why should she talk to a little boy like that? I sent the money! I gave it to my son to take to her [the cashier], and she scolded him.” While the other

women tried to defuse the situation, telling her to come later to talk, and not in front of

the loan officer and myself. The loan officer asked if it was to do with the DENA group,

and when she replied that it was for a different MFI, he told her to discuss it later since it

was not related to this meeting. However, even as the woman moved outside, she

continued to shout accusations at the women. The woman whose house we were meeting

in wondered out loud: “What will the neighbors think with all this racket?”

As the meeting ended and the room cleared out, the woman who had accused the

cashier came back in. Finding none of the women at the meeting willing to listen to her

story, she turned to me, tears now streaming down her face:

I needed a loan, and she wouldn’t give me a signature. It was before Puja and I really needed the money and I was running around everywhere. I had to take a

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loan from a moneylender in the end [shude taka nite hoiche] just so I could buy my children new clothes.76

She had failed to make the right connections, to find and enter the right networks, for

which she was now unable to get a loan. Such moments of accusation, mistrust and

rejection were not uncommon during the course of my research. Rather, they were a

constant reminder of the power exerted by dominant members of the group and

neighborhood, and the force of exclusion of social capital.

In Domestic Spaces

In her feminist critique of Habermas, political theorist Nancy Fraser observes that

the historically constructed public sphere was “not simply an unrealized utopian ideal; it

was also a masculinist ideological notion that functioned to legitimate an emergent form

of class rule” (1992: 116).77 Further, Fraser is concerned about a strict division between

the public and private (domestic) spheres, noting not only the linkages between the

private and public spheres, but that there are “no naturally given, a priori boundaries”

(ibid: 129) of what constitutes a public or private concern. Like Rosaldo, Fraser identifies

the inherently gendered aspects of the public sphere, but she also highlights permeability

of the public/private dichotomy, and the public influence of the domestic or private

sphere.

76 Durga Puja is the biggest annual festival in West Bengal, which lasts for six days in September or October depending on the lunar calendar. People usually wear new clothes for main days of the festival, and shopping for new clothes is a major event. When asked if there was anything additional they would like from the MFI, women would often tell me that they wanted a special Puja loan to help pay for expenses around this time. 77 Fraser draws upon Habermas’ model of the public sphere as a “theater in modern societies in which political participation is enacted through the medium of talk” (Fraser 1992: 110).

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Michael Warner (2005) similarly argues that despite the ideological and architectural distinctions between private and public spaces, the two often intermingle.

Thus, “a private conversation can take place in a public forum; a kitchen can become a public gathering place” (Warner 2005: 27). Moreover, the very differentiation of gendered private spaces “turns the home and its adjunct spaces into a functional public for women—spaces that can be filled with talk and with the formation of a shared world”

(ibid: 37). Another modification of the public/private divide is to consider

“counterpublics” which, “against the background of the public sphere, enables a horizon of opinion and exchange; its exchanges remain distinct from authority and can have a critical relation to power” (ibid: 56; c.f. Fraser 1992). Counterpublics, existing in multiplicity, recognize the “public” as the hegemonic, but are not fully subsumed to it.

Further, they “are scenes of association and identity that transform the private lives they mediate” (Warner 2005: 57). The counterpublic then serves as an associational space that is neither private, nor public but mediates between two.

Microfinance groups can be considered as counterpublics: they allow for women to associate in largely domestic spaces, but discussions at the meetings are supposed to incorporate public issues, and allow for counterhegemonic discourses of gender. A number of scholars have examined how the meetings create spaces in the women’s lives to discuss and address issues such as domestic violence. For example, Paromita Sanyal’s

(2009) work on microfinance in rural West Bengal shows that while it has a limited economic impact, the group structure enables new forms of collective action. For example, the group structure lets women borrowers meet other women outside and organize against domestic violence. Thus, “economic ties may actually constitute or lead

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to social ties and may have a liberating potential by creating new structures of

relationships” (Sanyal 2009: 548). Megan Moodie similarly argues in her study of

microcredit in rural Rajasthan that despite limited financial benefits, women wanted to

get loans because “because it provides them with another platform to discuss all kinds of

issues that seemingly have nothing to do with microcredit: caste relations and the burdens

of raising daughters” (2008: 455). On the one hand, these studies show the ways in which

meetings can reshape the experience of domestic life in various ways for many women

borrowers by offering spaces of discussion, offering an analytical shift away from the

singular emphasis on economic outcomes (e.g. Robinson 2001; Weber 2004). On the

other, against the expectations of this specific kind of counterpublic, I suggest that the

meetings have multiple social productivities, with outcomes that are not necessarily as

liberatory or counterhegemonic.

“Come in and sit,” loan officers would often tell the women during meetings. But

with meetings held in one-room homes, this simple suggestion was often physically

impossible. With barely enough space for the loan officer and the cashier (one of the

group members) to sit and do their accounting, the remaining members of the group often

stood outside or at the door. Moreover, with meetings taking place in the homes of

borrowers, they often coincided with daily household work. The aroma of spices would

pervade meetings, with lunch simmering on the stove in the same room. Children would

navigate the room, hopping over women to get ready for school. The microfinance

meetings were both absorbed into and disrupted the domestic everyday. While discussion

at the meetings I attended occasionally addressed broader issues, such as politics, particularly around elections, they were still rare. I found few occasions in which the

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group meetings served platforms for considering social issues. Rather, borrowers frequently pressed the loan officer to let them leave early in order to finish up their everyday chores, including shopping, cooking or picking up children from school. In part,

I suggest differences in space shape the ways in which these meetings function that limit opportunities for public discussion. Compared to both Sanyal and Moodie’s analysis of rural microfinance, urban microfinance operates in very different physical spaces.

Figure 5.2: Women waiting outside during a meeting in Kolkata (Photo taken by author)

Take, for instance, the photograph [Figure 5.2] of women standing in the doorway and outside the room from my own fieldwork. This kind of scene was a common sight during the course of my research, where meetings often took place slum settlements with little extra associational space. In contrast to the quintessential image of women sitting around in circles to discuss issues beyond loan, urban microfinance is marked by its lack

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of space. It was a situation that was commented on by loan officers who had worked in

both rural and urban areas. In response to my question about meeting space, Anand, a

branch manager, explained: “Space is a problem in the city. In rural areas, there are

always houses with verandahs, or everyone can sit in front of the house. Sometimes it

was a problem when it rained and it was muddy or waterlogged. But in the city it was

really hard to find places for the meeting.” With space being such a premium, loan

officers were always on the lookout for potential meeting places, particularly during

home verifications.78 I accompanied Putul, a branch manager during one such verification. As we left the potential borrower’s home, Putul commented that this would be a good place to have a meeting because there was space to sit. Space then becomes one possibility of accessing credit: women with larger houses receive loans not because they have larger incomes, but because they provide the space to do so.

Borrowers and even non-borrowers can also be enterprising in this respect by

renting out their homes for group meetings. In one case, a meeting was held in what seemed to be the front room of a relatively spacious house. There was a chalkboard on the wall, and one of the women explained that the woman whose house this was taught poor children for free. However, the homeowner was not herself a borrower; she was charging Rs. 10 per person per month to meet there. Most of the women seemed to agree to it, saying, “It isn’t that much. Nobody will mind.” However, Krishna, one of the borrowers, responded that her husband would not agree to pay an extra Rs. 10 per month for a meeting fee, and that it was Rs. 10 that could be spent on other things. The

78 House verifications take place before sanctioning a loan (See Chapter 6). The residence of a potential borrower must be visited first by the loan officer in charge of the group the borrower is in or will join, and second by the branch manager. The process is meant to ensure the validity of the statements

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microfinance staff did not want the women to be paying a fee either. They spent

considerable amount of time during the meeting trying to decide on another place to meet

within the neighborhood, but everyone had the same answer: they had no space. Finally

one of the three women from the other neighborhood said that they could meet in one of

their houses, though it would be a little further away than the desired radius to have a

group meeting. The ironic entrepreneurship of women, not necessarily borrowers, renting

out space to microfinance groups was an example of a highly original microfinance-

inspired business, though not usually conducted by a borrower.

Yet the transformation of domestic spaces into “centers” (the house where group

meetings are held) intersects not just with other forms of domestic labor as noted in the

earlier section, but also other aspects of domestic life. Women were often hesitant to offer

their homes for meetings because their husband and children would be getting ready for

work and school in morning. Another popular reason was that they had children who

were studying for India’s notoriously competitive school and university exams. One such

moment of conflicting claims to space emerged when I was revisiting one of the groups,

but the meeting had shifted to a different home. It was now held in a small flat in

government quarters. MFIs regularly move meeting spaces—usually once a year—in order to not burden one borrower, but also to ensure relations do not get entrenched in one place (see Chapter 4). I later learned from the branch manager Putul that this had been a sudden move. The group had previously met in the house of Laxmi, a recently widowed woman. Laxmi had just received a larger business loan from DENA for her clothing store, but she had been willing to keep the weekly meetings in her house. The business loan is a larger loan, between Rs. 30,000-50,000, generally given for people

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with more established businesses, and having formal documentation such as business

licenses and tax files, but with monthly repayment at a higher interest rate.79 Putul

explained that this business loan had been perfectly justified as Laxmi had all of her

documentation in order and she had been running the business for many years. But some

of the other women in the group gossiped behind her back that “she had changed” after

her husband’s death and that she really shouldn’t get the business loan. “It hurts their

ego,” explained Putul. “They think, ‘why should she get more than me?’ and they try to prick [khuchiye] her.” She added that Laxmi lived with her son and daughter-in-law who just had a baby. “You see how loud everyone is in this group? You know how they say she’s changed after husband’s death? Well, what happened was that her grandchild had been ill and had just come back from the hospital. She got upset and said if everyone was going to be loud and bicker, then they couldn’t have the meeting there any more. That’s why they moved the meeting.”

When domestic spaces are transformed into the counterpublics of MFI “centers,”

private life is also reshaped. This does not mean that these private spaces were never

accessible to the neighbors who now enter these spaces for group meetings. Unlike rural

areas where distance can play a role in the relative isolation of women in their own

homes, people are constantly present in the lives of their neighbors in the urban slums.

However, the form of this presence is now different: the women are no longer just

neighbors, but responsible to for each others’ creditworthiness by providing space and

time to attend the meetings. Moreover, as I explore in the next section, the dynamics of

these group meetings demands a return to Bourdieu’s analysis of the forms of capital in

79 DENA stopped giving new business loans around December due to the crisis.

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relation to hierarchy. As geographer Katherine Rankin argues, despite the “radical

potential” of microfinance groups, “common moral frameworks generated by social norms and networks can be implicated in cultural ideologies that justify and perpetuate inequality” (2002: 17) [Emphasis in original]. In other words, the assumption of social capital as benign ignores Bourdieu’s initial analysis of its use in maintaining hierarchical class difference.

Middle Class Modernity

Dressed in her usual “maxi” nightgown with a towel thrown over her shoulders as a dupatta, Piyali Didi was explaining her experience with microfinance. She had organized the group she was in, and the meeting was held in her apartment. She lived with her sixteen-year-old son in the third floor of the unfinished concrete building. It was her natal home [baaper bari], and she had moved back when her husband had died some years back. She had taken a loan to help pay for her son’s education, and was trying to get an additional loan through her mother for the same purpose. When asked about microfinance, she responded:

It helps. Women can do something for themselves from home. Most of the people do things like [food] home delivery or sell sari/clothes [kapor]. At least the women are able to get money from somewhere. Most of the time [women’s] husbands’ incomes are enough to keep households going [sansar chalano]. But, it’s the extra income that these loans bring in. After all, belonging to the middle class [using the term in English] means that we need the extra money to send our children to better schools, to try to get them a better life in the future. People want to provide their children a better education because they want the next generation to do better than they had. Our parents didn’t really think that education for their girls was that important. A little bit of schooling would be enough. Then it was time to get them married. Now, people want their girls to succeed.

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Speaking more broadly, she observed that India was not a developed country, particularly the eastern region. Microfinance was important to development. She explained that she read lots of magazines and learned about these issues from these publications.

Hearing that I was visiting from the United States, Piyali Didi said that there was a young woman in the neighborhood who was studying in Barcelona. She spoke with pride that a girl from the neighborhood was studying overseas. The other women in the group also knew of this young woman and praised her for being intelligent. Although the woman in Barcelona was married, her younger sister who was working in an outsourcing company (Business Process Outsourcing or BPO) was not. Some of the women snickered while speaking of the sister as being successful professionally but unable to get married.

Juxtaposed to the earlier conversation of wanting a better life for women, the comment pointed to the easy slippage between ideas of a good life: between the desire for success in the workplace and that in the domestic sphere. Yet what I will argue in this section is that what Piyali Didi and the other women’s conversations index is a specific middle class ideal. The endorsement of such an ideal emerges as a limiting factor to the discourses of women’s empowerment in relation to microfinance.

In recent years, scholars across the social sciences have written about the Indian middle class, with an emphasis on the “new” middle class (Donner 2009; Fernandes

2006; Fernandes & Heller 2006; Mazzarella 2003; Oza 2006; Radhakrishnan 2011). The newness of this middle class is marked by the 1991 liberalization of the Indian economy and related changes in consumption practices. Following Leela Fernandes’s critique, however, I note that the overly culturalist approach “too easily reduces or identifies the

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middle classes with advertising images” (2006: 87).80 While studies of the new middle

class often note the fractured nature of the middle class, they tend to ignore multiple

claims to middle classness, particularly by those who do not necessarily have the markers

of middle class identity that the studies on the new middle class address (e.g. jobs in the

new economy of information technology or BPOs). Moreover, while the new middle

class is often placed within the context of both globalization and a national middle-class

identity, such formulations tend to ignore local and indigenous contexts of understanding

class relations. I argue here that it is this understanding of middle-class identity that

women such as Piyali Didi refer to when they identify as “middle class,” using the

English term rather than Bengali. In order to do so, I turn briefly to the indigenous

category of “middle class,” namely the bhadralok identity and its historical emergence.

The bhadralok, translated literally as “respectable folk,” was a Bengali Hindu

class category that emerged under British colonial rule. It was the new urban middle class

of colonial Calcutta:

The bhadralok designates the social elite that emerged out of the economic transformations—the ruins as well as the opportunities—wrought by East India Company land reform and trade policies. It was an internally differentiated, heterogeneous in its caste composition (though kayasths, vaidyas, and Brahmins predominated) as well as in the routes through which individual members achieved and/or consolidated their economic status (Mani 1998: 43).

While Lata Mani here designates the bhadralok as social elites, they are also defined as a

“middle income group characterized by English education, professional occupations, and

salaried (rather than entrepreneurial) status” (Roy 2005), and held as distinct from the

80 By “culturalist approach,” Fernandes refers to the analysis of media and advertising images that put forth a particular image of the “new” Indian middle class.

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rich baralok [big people] (Sarkar 1992: 1546).81 By the early 19th century, the bhadralok

were the middlemen to the British, the “classic comprador class” (Mani 1998: 44). The

creation of this English educated professional class, however, would have significant

consequences for the Nationalist movement that would take off by the late 19th century.82

For the purposes of this chapter, I focus on the implications of bhadralok ideology in relation to gender, class and the domestic sphere.

Negotiating the tension between the need to “modernize” and the British justification of colonial rule (as a civilizing/modernizing mission of sorts), Partha

Chatterjee argues that while the ‘outer’ domain (i.e. economic and political spheres) could be modernized, the domestic sphere or “the home in its essences must remain unaffected by the profane activities of the material world—and woman is its representation” (1993: 120). The anti-colonial Nationalist movement therefore resignified the domestic sphere. Not only was the domestic sphere inherently gendered, it marked a certain notion of “tradition” and of Indian nationhood as opposed to the colonial West.

Chatterjee thus highlights to the ways that the domestic/public dichotomy gets deployed in the construction of multiple social imaginaries.

The “modern woman” inhabits a particularly tenuous position in this construction: she “was to be modern, but she would also have to display signs of national tradition and

81 While there is some correlation between upper caste and bhadralok, the two are not coterminous. Bhadralok should therefore be taken as primarily a class category. 82 Ranajit Guha (1989) shows how the contradictions between a universalizing liberal ideology and the real conditions of colonialism lead to the breakdown of consent of the ruled. The failure of the hegemonic state in India under British rule occurred because “colonialism could continue as a relation of power in the subcontinent only on the condition that the colonizing bourgeoisie should fail to live up to its own universalist project” (Guha 1989: 276). In short, it is because of the disjuncture between ideology and the material basis—the rights of citizen rather than share of profits in the case of colonial rule—that hegemony is never accomplished by the ruling colonial power.

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therefore would be essentially different from the ‘Western’ woman” (Chatterjee 1993: 8).

The significance of this Nationalist reconstruction of the domestic/public dichotomy for

conceptions of ideal womanhood continues in postcolonial and post-Liberalization India.

As argued by Rupal Oza:

This new woman makes confident, rational choices for herself and her family members. She is fashioned as a modern woman who is aware of the ‘world’ around her while at the same time conscious of her role as mother and wife (2006: 31).

The modern Indian woman, while being “aware” of the public world is nevertheless most

active in the domestic sphere as a responsible mother and wife. Note the similarity with

how MFIs present women borrowers such as Rubi Chand mentioned earlier. The linking

of women to the “inner” domain of tradition creates not only a rather static

conceptualization of women’s roles, agency and subjectivities, but also a particularly

middle class image of respectable womanhood.

In her ethnography of middle-class women in Kolkata, Henrike Donner (2009)

argues for the need to understand how the domestic sphere constitutes the (re)production

of the Bengali bhadralok middle class. Donner argues “the overarching concern in these

[middle-class] women’s lives was the reproduction of class-based, middle-class identities, which favour the role of the housewife and stay-at-home mother in order to produce the perfect family” (ibid: 3). The role of women in the middle-class domestic sphere now is not to protect it from the influx of outside (i.e. global) influences (as in the

Nationalist discourse), but to reproduce class privilege and hierarchy, which may include learning adopting more cosmopolitan practices.

But what then are the implications of this ideology for those who fall outside of the bhadralok construction of modern Bengali middle-class womanhood? Linguistically,

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the urban working-class, often rural migrants to the city, is already marked as an inferior other by the urban middle-class. Consider, for example, the derogatory indigenous terminology for lower-classes: “chotolok” [lowly people]. This term was never self-

ascribed by my urban poor informants; more often, they would describe themselves as

“poor” [garib] or, as with Piyali Didi, used the English “middle class.” The class, rather

than caste-inflected, bhadralok tends to exclude Muslims and non-Bengali migrants in its

formulation (discussed further in Chapter 6). Although madhya britto is another Bengali

term for middle-class, its connotation is often of economic rather than cultural capital.

However, I suggest that the borrowers’ preference for the English term for “middle class”

was an attempt to bridge the exclusions created by indigenous categories of class.

While much of the emerging literature has looked at the self-definition of the new

middle class, some of these scholars have highlighted how the middle-class is defined

against the working class. Thus, while Rupal Oza identifies the growing middle-class and

elite anxiety over questions of “obscenity” and “vulgarity” (2006: 41) through the

popularization of Western media and entertainment, she notes that these discourses

simultaneously mark working-class women as already degenerate. Similarly, Minna

Saavala observes that women, “especially those of the upwardly mobile lower-middle-

class, feel caught between the ideologies of women's work in the public domain and the

value placed on remaining in the domestic sphere” (2010: 37). Smitha Radhakrishnan

writes of “respectable femininity” whereby “women must navigate between the pressure

to work—the promise of independence—and the pressure to work less or not at all,

equated with the norm of staying home” (2011: 83). Thus, Indian middle class morality

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demands that women remain within the domestic sphere as a sign of class distinction. Or,

as Donner suggests:

A lack of respectability and of commitment to domestic roles were attributed to the working class because of their ‘public’ lives. It was, for instance, alleged that they would seek help from the party in marital disputes and take up paid work, which together with a higher number of children and allegedly more sexual freedom marked out those who were not considered bhadralok, that is members of respectable society” (2009: 3).

In an ironic reworking of the public/domestic dichotomy, the intervention of class

imaginaries reformulates the very presence of working class women in the public sphere

as untoward and negative.83 Similarly, Piya Chatterjee argues in her ethnography of women working in tea plantations, “the construction of ‘femininity’ through these aesthetics of taste and domesticity lies at the heart of an emerging global empire” (2001:

43). Moreover, Chatterjee writes of how tribal woman’s body is iconic of “wildness and primitivism. Her essence demands a civilizing and disciplining mission. Her body, marked by the stigmata of a topographical connection—Nature unbound—is the site of excess and constraint” (ibid: 8). Bengali bhadralok ideology marks the laboring body of the working class woman who is present outside of her own domestic sphere, not as an ideal of a “modern” working woman, but as inferior to the ideals of middle class domesticity. If elite or middle class and upper caste women come to embody the ground on which modernity and tradition are framed (Oza 2006: 8), within bhadralok ideology, working class women come to signify an unruly and degenerate other.

In their work on domestic workers in Calcutta, Raka Ray and Seemin Qayum observe the ideological hegemony of what they term “bhadrolok patriarchy” (2009: 122).

83 This is not to say that middle class or elite women do not work outside of the home, as is increasingly the case. However, the necessity and public visibility of working class women does contrast with the labor conditions of middle and elite women.

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Modeled after the ideal middle class family, bhadrolok patriarchy expects that men occupy the “outer domains” and women, the “inner.” Yet, as Ray and Qayum note, working class men who labor within households as domestic workers and working class women who work outside of their own homes, are reconstituted under this framework as

“responsible women and incapable men” (ibid: 127). The bhadralok patriarchy reproduces stereotypes of working class men as unreliable, drunk, and likely to waste money, while working class women are expected to manage the household. Ironically, then, women who work outside of their own home and men who do not earn enough alone to support their families represent not only a “failed patriarchy” in the eyes of the middle class, but force working class men and women to “compensate for the painful gap between their lived experience and the expectations of a dominant ideology that demands that women tend to their homes, husbands, and children. Many seek to create a home life of their own under circumstances that militate against it” (ibid: 129). In other words, the domestic sphere is reconstituted not simply as a gendered space, but tethered to expectations of middle class respectability that locates the presence of men and absence of women not as a positive sign of empowerment but as failure. The notion of “failed patriarchy” signifies the power of an ideology that hierarchizes both gender and class relations within the domestic sphere. In effect, it raises the question of what exactly women’s empowerment entails, when its “success” (i.e. the presence of woman in the public sphere) can be recoded as a socially sanctioned failure.

One example of this experience came not from a borrower, but a loan officer.

Like many of the other loan officers, Nilima, working at DENA, identified herself as middle class (again, using the English). Her father had been active in the Communist

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Party and he had encouraged her to work from an early age. Before coming to DENA,

she had spent time volunteering to teach at a prison in the city. Although she was

married, she lived apart from her husband at the branch office, as required by the MFI.

One day as we were going around to her group meetings, she expressed her frustrations

as a female staff member:

There are some things that you experience as a “lady” [English], and I can say this to you as another lady. It’s difficult sometimes to be a woman going alone to some of the neighborhoods. But what is worse is how you are perceived by middle management at the office. It’s hard to get a promotion. People just assume that if you are a woman and you have to work, then you must be from a bad background. It’s different if you’re very rich [baralok] or very poor [garib]. Then you can work and nobody will say or think anything.

Although Nilima self-identified as middle-class, her very presence in the public sphere

disrupted existing gender and class norms. Nilima struggled with the conservatism of the

management in the very sector that is supposed to be providing women’s empowerment.

Yet it was not simply her presence in the public sphere that brought on such critiques, but

her choice to be absent from the domestic sphere. When I last spoke to her, she in the

process of studying for a teaching certificate, so she could leave the microfinance sector.

Saswati, another female loan officer at a different MFI, faced opposition from her in-laws

in her continuing to work after marriage. Her in-laws insisted that she wear a sari, rather

than a salwar-kameez (loose fitting pants and tunic) as a sign of modesty. This meant she

could not use a bicycle to go to meetings and had to walk.

I take the self-ascription of urban poor women to the English term “middle-class” over Bengali categories of bhadralok and madhya britto as well as markers of poverty as a way to escape the ideological exclusions of bhadralok patriarchy. As in many other contexts, the homogenous term “middle class” masks the internal fractures. As Parimal

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Ghosh, commenting on Sumit Sarkar’s observation that the term bhadralok was “much

too broad, ranging presumably from the maharaja of Mymensingh to the East India

Railway clerk,” writes:

In point of fact there were as many dreams as there were kinds of bhadralok-s, perhaps. Yet, perhaps again, we can talk of shared values, a certain agreement about their self-perception. The maharaja of Mymensingh might not have agreed that the railway clerk was a bhadralok, but they would have both agreed on what constituted a bhadralok (2004: 247-248).

Note the maharaja’s possible exclusion of the railway clerk from the bhadralok category.

Nevertheless, there is a coherent bhadralok ideology, one that is recognizable by the

maharaja and the railway clerk. Middle-class then allows for an inclusive framework that

is distinct from the bhadralok category. This is not to say that the women’s self- identification as middle-class undid the exclusions of the bhadralok; rather, it raises the question of what empowerment as conceptualized in the wider development discourse means within existing normative class categories.

The 2011 electoral defeat of the Communist Party in West Bengal perhaps also marked the failure of the party to actually address class inequality over the course of three decades (See Chapter 1). Moreover, even West Bengal’s Communist Party, led primarily by bhadralok intellectuals, was inflected by elite, not working-class radicalism.84 As an obituary in 2010 of the late and long-serving Communist leader and

West Bengal Chief Minister Jyoti Basu noted “All his life Basu was a gentleman and

84 Atul Kohli attributes the stability of the West Bengal Communist Party (CPM) which is “communist in name only and is essentially social-democratic in its ideology, social program, and policies… The CPM has also consolidated a coalition of the middle and lower strata by implanting some modest redistributive programs… And finally, the CPM has adopted a nonthreatening approach toward property-owning groups, whose roles in production and economic growth remain essential for the long-term welfare of the state” (1990: 267)

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never the perfect Communist” (CNN-IBN 2010).85 Ironically, if the bhadralok class emerged under colonial rule as the promulgators of a liberal ideology, elite radicalism was necessarily limited by unequal power structures. The ascription to greater social and political equality would require the bhadralok class to accede power. As Ghosh notes,

“But to achieve that a price had to be paid, and how far the bhadralok was willing to foot that bill is open to serious doubt” (2004: 251).

The popular representations of women borrowers being liberated from oppressiveness of local traditions—this time through credit and entrepreneurship— parallels what Third World feminists have critiqued as universalizing women’s lives and experiences in vastly different social conditions (Mohanty 1991). The logics of empowerment here assume that increased access to economic capital will automatically lead to social and cultural capital. One of the commonly cited problems by MFI staff was that borrowers “misused” loans for consumption, rather than production purposes. While

MFIs require that women get loans for starting and operating a business, many of my informants wanted loans to pay for increasingly expensive “English-medium” private school education for their children.86 For example, one woman needed to pay a Rs.

10,000 fee every year for her son’s high school education. This desire for credentials in

the form of an English education can be understood as misrecognition of the value of

such cultural capital; what Bourdieu calls allodoxia or the ways in which “relegated

agents collaborate in their own relegation by overestimating the studies on which they

85 Majumdar, Diptos. ‘Jyoti Basu, the Last Bhadralok Communist’ in CNN-IBN. [http://ibnlive.in.com/news/jyoti-basu-the-last-bhadralok-communist/108801-37.html] Accessed November 27, 2011. 86 In the 1980s, the CPM introduced a policy for Bengali-only education in government primary schools, a move that was unpopular with the middle class. The unpopular policy was eventually overturned in 1999 (see Scrase 2002).

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embark, over-valuing their qualifications, and banking on possible futures which do not

really exist for them” (1984: 155). This is seen in the continuing unemployment and

underemployment of educated young people in India (c.f. Jeffrey 2020; See Chapter 2).

During one meeting, a loan officer insistently asked (perhaps more for my benefit

than he otherwise would have done) a young woman who took a loan for her husband’s

vegetable stall: “You don’t do anything yourself? [Nijje kichu koren na?]” She shook her

head. “But you’re supposed to do something for yourself” he persisted.” The young

woman shrugged. “With the child to take care of now and all, I can’t really do anything,”

she responded, rocking the toddler on her knee. For her, as with many other women

borrowers, the microfinance loans did not operate to make women independent from the

expected gendered division of labor. Rather, they were deeply enmeshed in the existing

social norms. Moreover, where stay-at-home motherhood indexes middle class identity, many borrowers did not strive to use the loans to start or maintain a business. As Piyali

Didi, at the start of this section, observed, women predominantly wanted loans so that they could provide for a better future for their children, which is entangled in local ideologies of upward social mobility. The self-directed project of empowerment discourse fails to capture the multiple reasons why poor women access loans, including how local categories of class difference are constructed. In this case, providing childcare and doing domestic work signified greater success than actually working outside of the home or recognition as an entrepreneur.

Chapter Conclusion

We used to be dependent on our husbands. But after the loans, we are able to “compromise” [Eng] on many things. The loans have spread [choriegache]

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everywhere. We use them to buy things for ourselves or schooling our children, so now it will be a real problem if we can’t get loans. Our biggest problem would be if they stopped getting loans, not interest rates or anything. The end of loans would be bad… What would happen? [Ki aar hobe?] All will be as it was before [ja chilo phirejabo]. Mintu

Differences between the intended purpose (productive, e.g. investment in

business) and use (consumptive) of credit has marked a fundamental point of departure in

my analysis from a number of existing critiques of microfinance that focus primarily on

neoliberal discipline and governmentality (e.g. Karim 2011; Roy 2009; Weber 2004). I

have shown how the “cultural articulations” (Rankin 2001: 29) in the gendered domestic

sphere and within indigenous class ideologies condition urban poor women’s experience

of microfinance. Moreover, the competing ideologies of what women should get out of

the microfinance ironically often produce conservative rather than transformative

outcomes for borrowers; a process in which microfinance is domesticated. Yet the ways

in which women act in the domestic sphere and within constraints of bhadralok

patriarchy reflect the agentive capacity in the “ways in which one inhabits norms”

(Mahmood 2005: 15).87 Thus, working class women who self-ascribe as “middle class”

over indigenous terms, while performing middle class gendered identity, challenge the

very exclusions and discriminations of elite and upper class Bengali society. Attention to

the meaning that women themselves give to the loans reveal both the actual use of the

loans as well as the limitations to microfinance as a tool of social change.

87 Saba Mahmood’s contends that “agentival capacity is entailed not only in those acts that resist norms but also in the multiple ways in which one inhabits norms” (2005: 15). Therefore, we have to understand the “discursive and practical conditions within which women come to cultivate various forms of desire and capacities of ethical action” (ibid), which do not necessarily coincide with liberal feminist politics.

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To conclude this chapter, I return to Rankin’s (2002) earlier noted observation

that the radical potential in microfinance is ultimately subjugated to common moral frameworks that often reproduce gendered and classed inequalities. Mintu, in the above quotation, was explaining her experience of microfinance to me. In it, we see the inherent ambiguities of a system that offers the possibility, but never actualizes social transformation: “If the loans stop,” says Mintu in the, “all will be as it was before.” In part, as I will turn to now in Chapter 6, this is because of the risk analysis in the process of determining creditworthiness rewards the “low-risk” person, which is not just a financial but also socio-cultural category.

206 CHAPTER SIX

Credit and Worth: Financial Risk and the Moral Economy of Credit

To the most perfect markets the priesthood of finance attributed powers of calculation and control far exceeding not only the abilities of any human participant in them but the fondest dreams of any Communist commissar pecking away at the next Five Year Plan. -Andrew Redleaf, Founding Partner and CEO of hedge fund Whitebox Advisors (MacLean & Nocera 2011: 307).

It was a routine house verification by a branch manager: the borrower’s single room in a compound for a joint family. The borrower, Arati, wanted the loan for her husband’s construction business. The young family of three lived in a room furnished with a bed, a small bench for sitting, and an almirah [cabinet]. The baby, a few months old, was asleep on the bed when we visited. “How much do you want?” asked Anand, referring to the loan amount. “Rs. 10,000” Arati replied. After some routine questions on what she wanted the loan for, Anand announced that she would get Rs. 9,000, briskly packing up his papers. After we left, Anand explained his decision on the loan amount.

“You know why I gave them less? They have money; they could have gotten a larger loan and it wouldn’t have been a problem. They have money, but they still don’t have class [Eng], don’t you think?” he asked, and continued without waiting for my response.

“Everything was dirty, and not in order [gochano noi]. That’s why they won’t get a larger loan. If everything is in order in the house, you know that their money is in order too.”

Throughout the course of fieldwork with microfinance institutions (MFIs), and particularly during house verifications, I would ask loan officers and branch managers how they decided who got what amount. While there are standard loan application forms, the seemingly idiosyncratic decisions as to whether a borrower would get Rs. 10,000 or

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Rs. 9,000 were based not upon the strictly financial measure of the borrower’s income

and expenditure (required on the loan application), but on the much more culturally

informed aspects of these house verifications. Some of these aspects of risk analysis were

informed by loan officers’ and branch managers’ own interpretations of social

acceptability, while others, such as the system of male guarantors, were institutionally

reinforced.

This chapter is about such entanglements of moral and material economies,

highlighting the ways in which social and cultural valuations underpin financial

decisions. Microfinance loan officers conduct credit risk analysis by evaluating and

interpreting the lives of women borrowers. I demonstrate here that in contrast to the

abstractions of statistical calculability of financial risk through formal measures of

income and expenditure, existing social and cultural categories, including gender, class

and religious differences inform loan officers’ lending decisions. Following from Chapter

5, I argue that despite discourses of empowerment and inclusiveness, the increasing

integration of microfinance into the formal financial sector requires “low-risk”

borrowers, ironically reinforcing gender and socioeconomic inequalities.

The Moral Economy of Credit

Recent work in critical humanitarianism has identified the particular representations of humanitarian appeals, including the portrayal of refugees as pure victims (Malkki 1996), and the medical diagnoses of asylum seekers as legitimate victims

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(Fassin & Rechtman 2009; Ticktin 2006).88 Such representations of other cultures, minorities or those who are socially unequal have often been coded through images (Lutz

& Collins 1993). In contrast to humanitarian appeals on behalf of people rendered as helpless and speechless victims, microfinance institutions and related organizations draw on a different ideological trope, namely, a “do-it-yourself” ethos of entrepreneurship and self-reliance. In his analysis of immigration policies in France, Didier Fassin (2005) notes the historical transformation in the acceptance of the suffering body over the laboring body.89 Despite this turn to the suffering body, particularly in humanitarian contexts, I would argue that it is the laboring body that remains central in the imagined growth of

the political economy of the global South, particularly with the celebration of the

“emergent” economies such as China, India, Brazil, and South Africa that have growing

working age populations that are both producing and consuming in the global economy.

For instance, Goldman Sachs economist Tushar Poddar emphasizes the “demographic

dividend” of India’s large working-age population, nothing that India will add about 110

million workers to its labor force over the next few decades, or more than what the U.S.,

China, Russia and Japan will add combined.90 This working-age population will add not only to production, but also increased consumption in the global economy. In other

88 Malkki idenfies the “visual image of the refugee” (ibid: 384) [emphasis in original] as one terrain on which aid administrators can determine people were refugees or not, depending on how they looked and conducted themselves. 89 Fassin (2005) argues that until the 1970s, healthy laboring bodies were needed for the reconstruction of Europe. However, with the changing economic context, migrants’ bodies have “become superfluous” (Fassin 2005: 372), making suffering (ill) bodies the most legitimate reason for asylum. 90 See A View from India, Feb. 2012. Accessed March 5, 2013.

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words, it is the laboring—producing—and consuming population that is highlighted as

valuable.

In her analysis of the microfinance-lending site Kiva, literary scholar Shameem

Black shows how narratives of borrowers on the website use “familiar sentimental tropes

that stress the borrower’s role as a linchpin of social stability… They emphasize

hardship… They single out ambitions that resonate with middle-class Western ideals,

such as paying for children’s education, expanding a business, and improving the security

of one’s home” (2009: 278).91 Instead of guilt, these micronarratives work to make potential lenders in the global North to feel “neighborliness and partnership” (ibid: 279) with the borrowers in the global South. While borrowers must “maintain the hopeful narrative of upward mobility that inspires so many lenders to invest through Kiva, the sentimental discourse of connection can, at worst, become a mask for a new form of bondage that the poor must endure” (ibid: 286). What inspires lenders is not pity or indignation arising from visions of suffering (Boltanski 1999), but a kind of elision of social inequalities through identification of, and perhaps with, poor borrowers as potential entrepreneurs. As with popular culture representations of celebrities doing mundane tasks, these images seem to suggest that the poor, despite the huge differences in wealth, are “just like us” (Western middle class). As Black argues, such constructions of global connections of intimacy between rich lenders and poor borrowers do little to

91 Kiva is a US-based online microfinance lending platform. It does not lend directly to borrowers, but allows lenders to view profiles of borrowers at Kiva’s partner institutions, and lend money through Kiva. As reported in the New York Times in 2009, the person-to- person lending is somewhat misleading, as Kiva funds the partner institutions, not the individual borrowers at those institutions. (See ‘Confusion on Where Money Lent via Kiva Goes’ in The New York Times . Accessed December 30, 2011.)

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address transnational structural inequalities, and the celebrated regular repayment does not necessarily translate into improvements in quality of life for borrowers.

Moreover, popular images and writing of microfinance tend to reproduce the same image of the borrower: a smiling woman, whether African, Asian or Latin

American. Despite differences among borrowers, not just across continents but also within the same branch office, the poor tend to be represented as a homogenous category.

Writing about indigenous (tribal) politics in the Indian state of Jharkhand, Alpa Shah

(2010) notes how rural elites remain the primary recipients of state benefits. In particular, she observes the similarities in the “aesthetics of poverty” between more and less powerful members of a community:

The sadans [rural elites] also live in mud houses and have neither electricity nor sanitary facilities in their houses. They also fetch their water from the village wells or groundwater pumps, go to the forest to collect firewood for fuel, farm their fields, and sometimes even perform manual labor for pay. These similarities mark what has often struck me as an aesthetics of poverty—that is, the seductive visual imagery of poverty, which makes it easier for NGOs and state development projects to legitimize why these rural elites are the main beneficiaries of resources coming into the village in the name of the poor (2010: 69) [Emphasis added].

Arguing for a deeper analysis that moves beyond these aesthetics, Shah presses for an understanding of poverty “not simply in terms of material resources but also a form of sociopolitical exclusion from the development process” (ibid: 70). Key to the aesthetics of poverty is the similarities in the appearance of poverty that often mask the multiple social, political and economic factors that distinguish between people marked as poor.

The point of noting the aesthetics of poverty is not to participate in reproducing categories of deserving and undeserving poor. Rather, it is to destabilize the representations of homogenous poverty, and following from Chapter 5, to understand

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why microfinance often produce such socially conservative—risk averse—outcomes despites its claims otherwise. In contrast to popular representations and discourses of microfinance purely in terms of inclusion, I argue that categories of risk and creditworthiness mark points of social exclusion.

Unlike international aid agencies or organizations such as Kiva that mediate suffering at a distance (c.f. Boltanski 1999), loan officers and branch managers engage in local mediation. Creditworthiness in the case of microfinance is not an abstract objective measure of a borrower’s ability to pay back a loan; rather, it emerges as much from the social and moral world of the MFI staff (i.e. the “proxy-creditor” as discussed in Chapter

4) as from the economic capacity of the borrower herself. To determine creditworthiness,

MFI staff rely on countless codes of social difference amongst the poor, including class, gender and religion. In addition to financial analysis, such mediations bring into play the moral economy of credit. Take Anand’s (BM) discussion of how to spend money:

You know, here [indicating a particular area], people are very good and they pay back the loans. But their capacity [Eng.] is less, so we give them smaller loans. With better education, people spend money more wisely. Here, they get money and they’ll spend it all on one thing. We’re [talking about himself] not even middle class, we’re poor, but we know how to spend money. We’ll make sure there is enough for what we need. But I was in a village where people didn’t have money, but I saw they were cooking lots of fish in a big karai [pan] with eggplant. We would have had just one small piece of fish and made a second dish with the eggplant. But they don’t really know that.

Knowledge of how to spend money correctly was important for Anand in his conceptualization of poverty. While self-identifying as poor but educated, he distinguished the practices of people he considered frivolous in their use of money. Yet the example of cooking two dishes with fish and eggplant, instead of one suggested concern with both having enough to eat (an economic decision), as well as of eating well

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that is, according to local food customs of having multiple dishes with rice during a meal

(a cultural value). Knowing how to spend money can make one more creditable, and such

knowledge is classed and culturally coded (c.f. Ray 2010). Anand’s explanation

demonstrates how his own conceptions of proper household economy are privileged in

his understanding and analysis of microfinance borrowers. These codes, particularly

apparent in the material manifestation and appearance of poverty have ramifications for

the poor who may spend in ways that seem out of place.

Writing of food riots in 18th Century England, E.P. Thompson defines the moral economy as follows:

A popular consensus as to what were legitimate and what were illegitimate practices in marketing, milling, baking, etc. This in turn was grounded upon a consistent traditional view of social norms and obligations, of the proper economic functions of several parties within the community, which, taken together, can be said to constitute the moral economy of the poor. [1971: 79]

For Thompson, popular consensus informed by tradition and a sense of what “ought” to be demarcates the moral economy (ibid: 112). In a later review essay, Thompson elaborates on the moral economy, which has its own “ideal models or ideology (just as political economy does), which assigns economic roles and which endorses customary practices (an alternative ‘economics’), in a particular balance of class or social forces”

(1991: 340). In other words, rather than market forces (e.g. supply and demand), existing cultural and social forces form a basis of economic distribution. As observed by James

Scott (1976), such traditional arrangements of distribution in the moral economy are not necessarily radically egalitarian. However, for both Thompson and Scott, markets are

“political constructions and outcomes of social struggles,” (Edelman 2005: 332) wherein the poor can demand that prices be “just” in a moral sense of the local social world and

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not simply at market equilibrium. In referring to the moral economy of credit, I am interested in the ways in which creditworthiness depends on local social and cultural conceptions of who “ought” to get loans, not simply about crunching the numbers on a family’s financials. In other words, I investigate the distributional logics of credit along the multiple social and cultural axes, and not just the economic one. Thus, credit risk is the organizing concept by which various forms of judgment come together to mark particular people as worthy, not only of monetary credit, but also of greater social recognition than others.

Meditations on Risk

In June 2009, I attended the annual meeting of a Kolkata-based microfinance institution. The audience consisted of branch managers and loan officers from branch offices of the MFI from across the states in which it operated. One of the speakers, a senior banker from a public commercial bank, was explaining risk management to the audience. He stated that everything has risks, even crossing the road: “You might get hit by a car and run over. So, you take the necessary precautions by looking both ways.” He clarified that similarly, in banking there are three kinds of risk to manage: market, operational, and credit. Most of the audience did not have to deal with market risk, he continued. Market risk, like market fluctations, was something that the MFI management and the commercial banks that fund the organization have to deal with. Operational risks, like equipment failure or branch office security, could be dealt with through the implementation of insurance. Credit risk, he noted, has to be managed through a close relationship with the borrower. In a subsequent interview, anticipating the 2010 crisis, the

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same banker raised concerns about the lack of the regulation in the microfinance sector despite its rapid growth. Just as MFIs had to worry about the “quality” of their borrowers, he observed that commercial banks needed to distinguish between good and bad MFIs through credit ratings systems. Both these concerns highlighted the underlying systemic risk that microfinance presented. Risk and its management then threads throughout the network of financial flows of microfinance, from the borrower to the banking institutions and regulators.

Microfinance was popularized through the discovery that despite risks posed by low and fluctuating incomes, the poor could also be profitable; that is, “the poor always pay back” (Dowla & Barua 2006; See also Chapter 3). This transformation of the poor

into a “bankable” population through microfinance begs significant questions about

conceptualizations of risk and poverty. Microfinance institutions rely on social capital

among borrowers (Chapter 5) and the relational monitoring of borrowers by branch office

staff (Chapter 4) to hedge against poor borrowers’ lack of capital and collateral, and to

ensure high recovery rates. Further, the creditworthiness (and hence riskiness) of

borrowers has to be mediated in a two-step process by loan officers and branch managers

who fill out the loan applications and conduct house verifications to determine who gets

what amount. These practices of risk are often taken for granted, leaving unanswered

what it is that is being adjudged, and why these particular aspects become central points

of valuation and indeed of risk.

In recent years the analysis of risk has centered on the sociological concept of risk

society. Anthony Giddens identifies risk society with modernity: “a society which is

taking leave of the past, of traditional ways of doing things, and which is opening itself

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up to a problematic future” (1991: 111). Similarly, Ulrich Beck defines risk society as

“increasingly occupied with debating, preventing and managing risks that it itself has produced” (Beck 2006: 332). As a constant process of anticipation, “risk does not mean catastrophe. Risk means the anticipation of catastrophe.” (ibid). Risk society is preoccupied with preventing disastrous events in an unknown but possibly predictable future, including areas such as disaster management and biosecurity (e.g. Collier et al.

2004; Petryna 2002).

These concepts of risk have also transformed the economic sphere. As an

“institutionally structured risk environment,” the economy now links individual and collective risks in ways such that “individual life chances, for instance, are now directly tied to the global capitalisitic economy” (Giddens 1991: 117). Risks in the wider economy today transcend global, national and local boundaries. Michel Foucault identifies this as part of the historically emergent process of governmentality, “which isolates the economy as a specific sector of reality, and political economy as the science and the technique of intervention of the government in that field of reality” (1991: 102).

The economy and economic risk thus emerged as areas that the state could isolate and manage through analysis of statistics and numerical data. Timothy Mitchell has similarly argued that the economy, rather than an objectively and always existing entity, “was made” (2002: 82) in the 20th century. The historical shift in the connotation of the economy from attitudes and relations to a “realm of social science, and government policy” (ibid: 81) occurred with the growing importance of calculability. Encompassing both the material sphere and that of numerical calculation, the economy was “easily represented in statistical and algebraic forms” (ibid: 82). In this way, the “most abstract

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and mathematical of social sciences, economics, claimed the task of representing what

seemed the most real aspect of the social world” (ibid). Mathematical and statistical

modeling allowed the economy to emerge as calculable, manageable and ultimately a site

of intervention.

Beyond the state’s management of economic risk, its measurement, analysis and

circulation have become central to the contemporary financial regimes. On the one hand,

developments in information technologies have enabled faster expansion of global equity markets (Knorr Cetina 2005; Zaloom 2006).92 Further, there is an increasing lack of

materiality in the contemporary conceptualization of the market (LiPuma & Lee 2002).

Under these conditions, the “leading edge of capitalism is no longer the mediation of

production by labor, but rather the expansion of finance capital. Capitalist social relations

are no longer only mediated by labor, but also by risk” (ibid: 208). Thus, “if productive

labor once constituted the ‘reality’ of the economy, in the age of finance and speculative

capital it seems that instead of the economy driving the markets, the markets are driving

the economy” (ibid: 209). There is thus an increasing gap between the material aspects of

the economy and the driving forces of speculative capital finance.

92 For example, Caitlin Zaloom’s (2006) ethnography of the commodity exchange market in Chicago shows the transformation of trading from the physical pits to computer-based trading, through which the focus turns increasingly on numbers on the screen rather than person-to-person communication. Similarly, writing of currency exchange, Karin Knorr Cetina observes the shift from markets based on “network architecture, where social relationships carry much of the burden of specifying market behavior and of explaining some market outcomes, and markets that have come disembedded and decoupled from networks” (2005: 39) or flow architecture. Technical systems, such as computer screens on trading floors gather up information, but also project them forward into the future. Computerized screens have meant that “‘the market’ no longer resided in a network of many places, but only in one, the screen, which could be represented identically in all places” (Knorr Cetina 2005: 52). These technologies therefore transform the ways in which space and scale are imagined as well as forms of social interactions.

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Similarly, adopting Marx’s theory of merchant capitalism (in contrast to industrial

capital), Kausik Sunder Rajan observes that commercial capital “does not create surplus

value in and of itself but does so indirectly by constantly perpetuating the circulation of

capital and providing it with its own self-perpetuating logic that does not need to originate from the moment of production of commodity” (2005: 21). In the context of a speculative marketplace, Sunder Rajan posits that this surplus is created not so much as

Marx theorized from the difference between labor and wage, but in relation to risk. For example, in his analysis of genomics, Sunder Rajan argues that healthy patients are transformed into “patients-in-waiting” such that “every person, no matter how healthy, is possibly someone who might fall ill, the potential market for a drug is enlarged” (Sunder

Rajan 2005: 24) [emphasis added]. In other words, speculation about the future allows for interventions in the present and ensures the creation of a market of not just “patients-in- waiting” but “consumers-in-waiting” (ibid). Calculation of these future risks both in terms of disease and profits and losses determines market decisions.

While credit risk analysis in some form has always existed, whether as an understanding of the debtor’s character or her income, contemporary systems of credit are intimately linked to newer practices of risk management. Since the 1980s, the financial sector has grown “based on the idea that the behaviour of financial markets can be interpreted and outsmarted by mathematical models” (Shirreff 2004: 2). As traders embraced new information technologies that modeled risk through complex mathematical models, risk management transformed into a practice that valued, parceled out and created new financial products. In other words, financial risk management “would move towards a finer analysis of credit risk and the increasing tradability of financial

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exposures” (ibid: 35). Securities and collateralized debt obligations (CDOs) enabled

financial institutions to expunge risk from their books, while simultaneously creating a

market for trading risk itself. The consequences of these practices have been well

documented by numerous authors on the 2008 US subprime crisis (e.g Tett 2009;

McLean & Nocera 2011; Rajan 2010). Despite their central role in the disastrous

financial crisis in 2008, in 2009 major financial institutions such as Deutsche Bank were

producing CDOs for microfinance institutions.93

I suggest here that the popularization of microfinance as a commercial venture is

linked to this changing value of risk. As mentioned earlier, commercial banks had largely

been unwilling to lend to the poor because of their lack of capital and collateral. The risk

of default in lending to the poor was simply too high to be desirable for banks. Till

recently, lending to such un- or under-banked segments of the population was promoted

through government initiatives such as priority lending because of the lack of interest on

the part of commercial banks. Why, then, have commercial banks increasingly and

willingly lent to the poor through microfinance? Despite the existing challenges, the

segment of the unbanked remains a possible pool of banking customers. As

intermediaries between the banks and the poor, microfinance institutions have become

the means by which banks can both cut costs and manage some of its risk in lending to

the poor while still profiting from the sector. Microfinance institutions have been central

to reconstituting the risk of lending to the poor. The Boston Consulting Group report on

financial inclusion observes that because the “grass-roots connections give them [MFIs] a

93 The Financial Times reported that Deutsche Bank aided the US-based Finca International (with international operations) in creating a US$21.2 million CDO (O’Connor & Grene 2009). Prior to the financial meltdown, Citibank, Credit Suisse, among others, had been involved in microfinance CDOs.

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clearer view of individuals’ credit histories,” they will enable greater risk management

(Sinha & Subramanian 2007: 26). As earlier described in Chapter 3, by lending to MFIs

and not to the poor directly, banks can manage risk more effectively.

In addition to commercial banks, there are microfinance investment vehicles

(MIVs) or specialized entities that mediate between private investors and MFIs.94 One of the consequences of the Indian microfinance crisis has been that it has further encouraged

MFIs to look for capital from foreign private investors as funds from domestic commercial banks dried up. In fact, in December 2011, the Reserve Bank of India changed regulations to allow cash-starved microfinance institutions to borrow up to

US$10 million (up from $5 million) from overseas.95 Beyond the aspect of “doing good”

(i.e. that supporting microfinance supports social businesses) why would investors consider microfinance an appealing option to also “do well?” Studies in finance suggest that a number of factors make microfinance an opportunity for global investors looking to diversify risk in their investment portfolios (Bystrom 2007; Dieckmann 2007; Galema et al. 2011; Krauss & Walter 2009). First, government subsidies to the sector create the impression that they are like financial institutions that are “too big too fail,” and that the state will dilute market risks (Krauss & Walter 2009: 94). Second, MFIs are seen as relatively less sensitive to global market fluctuations being more detached from international capital, making it an option for diversifying investment risk (ibid: 101).

Finally, within emerging market economies, microfinance institutions are considered to

94 According to a CGAP report (Gahwiler & Negre 2011) over half of cross-border funding to MFIs come from MIVs. 95 MFIs that are regulated as non-banking finance companies (NBFC-MFI) will be able to use external commercial borrowing (ECB) to get funds from multilateral institutions (e.g. Asian Development Bank), regional financial institutions, international banks, and foreign equity holders (Business Standard 2011).

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be less affected by domestic macroeconomic shocks than commercial banks (ibid: 100).

One reason for such differences is that the poor are less integrated into the larger formal

economy. This kind of risk analysis considers how the particular risks of microfinance

can be used to hedge against other kinds of risk in the global and domestic economy. In other words, MFIs—and the related lending to the poor—are perceived not additional risk, but as a way to lessen the risk of an investment portfolio. Ironically, as MFIs expand and increase their customer base from the poorest borrowers, the poor become increasingly exposed to the effects of systemic risk (e.g. global or domestic crises).

Yet the emergence of “casino capitalism” has necessitated the changing “moral valence” of speculation and gambling (Comaroff & Comaroff 2001: 5). The shifts in the acceptability of speculation raise the question of how the “pariah practice” (ibid) of gambling becomes both central to the global economy. However, given these parallels between gambling and speculative market practices, it is important to note that the latter derives its social acceptability from, at the very least, mark or appearance of calculability.

That is, investment decisions must be seen and understood as based on rational, calculative logic and assessment of acceptable risk, and not random or arbitrary choices.96 The spectacular collapse of Lehman Brothers in 2008, the ensuing financial

crisis, and critiques of the financial system, including the Occupy Wall Street movement

might signify the limits to this generalized social acceptability of such forms of financial

risk.

Faced with multiple crises, risk management has become a central practice in

96 Writing of the use of mathematical modeling in complex derivatives, MacLean and Nocera write that traders on Wall Street “came to believe the formulas were not approximation of reality but reality itself” (2011: 280).

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microfinance (See Figure 6.1). In February 2011, I attended a workshop conducted by Sa-

Dhan, the microfinance industry association, entitled ‘Governance and Systems Against

Reputation Risk.’ The workshop had been organized to address the ongoing microfinance crisis, and in particular how to deal with various forms of risk. One of the presentations at this workshop was by a consulting firm called M2i Consulting, which advises microfinance institutions on management and investment. M2i had developed a mixed qualitative and quantitative method for assessing microenterprise (borrower) risk.97 The

parameters and the weights given to each were as follows: character (35%), capacity

(35%), collateral (10%), loan officer (10%) and evaluator (10%).98 M2i conducts this evaluation in order to assist MFIs in their risk management strategies. The presenters insisted on the need for financially quantifiable data to assess credit risk. Meanwhile,

Grameen Capital, set up as a joint venture between the Grameen Foundation, Citi, and

IFMR Trust, also provides a risk solution. This firm offers investment-banking services to companies with a social mandate, including microfinance institutions.99 Grameen

Capital provides equity and debt solutions, including credit guarantees to MFIs to enable

97 While borrowers are supposed to have a microenterprise, often this is not the case. The term microenterprise, based on my observations, refers to the borrower regardless of ownership of microenterprise for the majority of microfinance in India. 98 The character of the borrower is based on her reputation amongst other borrowers in the group, as well as her interaction with branch office staff. Capacity refers to the borrower’s income and hence ability to repay. Collateral (which is officially not required by MFIs) indicates the material possessions that reflect the net worth of a borrower. The weightings of the loan officer and the evaluator (i.e. the branch officer) are meant to address any biases or problems on the institutional side. 99 Grameen Foundation is a non-profit organization headquarted in the US that helps promote the “Grameen philosophy” worldwide. IFMR Trust invests in companies that work on financial inclusion.

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them to get access to loans from local commercial banks and address liquidity risks.100 A

consulting firm called EDA Rural Systems put forth yet another segment of risk

management. Reputational risk, the speaker suggested, was shaping and being shaped by

numerous other risk factors: external, operational, financial management, and mission

drift. EDA offered services to help mitigate these risks. This burgeoning industry of

microfinance consultancies all offered various forms of risk management strategies to

MFIs. At the heart of these services was the notion that increasingly complex forms of

risks faced by MFIs, all of which could be analyzed, calculated and managed through the

right set of tools.

Risks As Faced by MFIs 1. Credit Risk Possibility that borrower will default on contractual obligations (e.g. fail to repay the principal and interest). Reasons include: lack of income, absconding borrower

2. Market Risk Possibility that fluctuations in the financial market will affect operations (e.g. interest rates will change, currency fluctuations will affect foreign private equity)

3. Operational Risk Possibility that internal processes will fail or that operations will be affected by external factors (e.g. political & regulatory environment) 4. Reputational Risk Possibility of negative social performance (e.g. mission drift, unsympathetic civil society & media) Table 6.1: MFI Risks

Yet the greatest risk exposure faced by MFIs was credit risk, or the risk of the borrower failing to repay the principal and interest on the loan. This credit risk has to be mediated by the loan officers and branch managers at MFIs through analysis of each potential borrower’s capacity to repay the loan. At DENA, this credit risk analysis is done in a two-step process: first by the loan officer, and second by the branch manager. When

100 For a fee, the Grameen “growth guarantee” covers the principal loaned by local commercial banks to MFIs through a Citibank Standby Letter of Credit.

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a borrower asks for a new loan, or newly joins a group to get a first loan, the loan officer

makes preliminary inquiries with the existing group members whether or not to make a loan to the applicant. Often, particularly with members who are getting subsequent loans, this is a very cursory and open process at the end of the meeting. However, if the loan officer has had or suspects there to be any problems with a borrower, she will corner one or two of her more trusted members to decide whether to go forward with the loan application.

Once the loan officer deems it possible to go ahead with the application, she will go the borrower’s residence to fill out the loan application. During this review, the loan officer double-checks that what the borrower is saying can be corroborated (though not necessarily with concrete documentation). For instance, if a borrower has a sari business, the loan officer will ask to see her stock. The loan officer also asks how much the borrower is asking for, and will write down that amount. Once the form has been filled out, the branch manager has to visit the house of the borrower and again verify the details on the form and decide, often in consultation with the loan officer, the amount of the loan to be sanctioned. While the process is simple enough, the decisions are mediated by social and cultural norms of risky borrowers.

In his formulation of risk society, Beck contends that risk is “particularly open to social definition and construction” (1992: 23) [emphasis in original]. Similarly, Douglas observes that while risk analysis tries to “exclude moral ideas and politics from its calculations,” there is always the political question of “acceptable risk” (1992: 44).

Douglas further posits that “our modern industrial society has undergone changes which result in the old moral questions about the allocation of wealth being transformed into

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new moral questions about the allocation of risk” (1992: 45). Regardless of its technical and apolitical appearance, risk is not simply a scientific calculation of statistical probabilities, but something that requires a fuller cultural understanding of the social, cultural and political dimensions that constitute the meaning of risk. I turn now to these practices of due diligence as an intersection between perceived abstract calculability and socio-cultural construction of risk.

Risk and the Categories of Exclusion

Mukul (BM), Tania, (LO), and I were heading to a group meeting in an old neighborhood in North Kolkata. Alongside the road that stretched along the riverside were piles of plastic bottles. Many people in the area collected such recyclables—mostly plastics such as PET bottles—or had small businesses processing them. There was an acrid smell of burning plastic that pervaded the area. To get to the meeting, we had to cross a small bridge, and as we neared it, Mukul warned me that there would be a bad smell. Already struck by the chemical smell, I wondered if it would be an intensification of the same. Turning to Tania, she already had the end of her dupatta [scarf] covering her nose and mouth in anticipation. As we crossed, I braced for this new smell, but nothing changed. As we passed by a row of butchers, Mukul turned to me, and said apologetically: “Lots of beef here.” We were in a Muslim neighborhood, and both Mukul and Tania, as Hindus who did not eat beef, were visibly disgusted by the rows of hanging

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meat. While this kind of open butcher is common enough throughout the city, most sell

goat meat and do not elicit the same response as those selling beef.101

On a different occasion, a borrower was asking how I liked Kolkata, and whether

I found the neighborhood we were in dirty. Mukul interjected that “this was nothing,” since we had gone to the earlier mentioned Muslim neighborhood. “There’s ‘meat’ [beef] hanging on either side of the road. It makes me feel sick and I can’t eat on days we come back from there—I feel nauseous [ga guloi].” Compared to other staff that went to the same neighborhood, Mukul was particularly vocal about the presence of beef, though others expressed their consciousness of this difference more subtly. These reactions exemplified the ways in which dominant groups constantly evaluate religious minorities.102

In his discussion of taste or “manifested preferences,” Bourdieu argues that tastes

are “perhaps first and foremost distastes, disgust provoked by horror or visceral

intolerance (‘sick-making’) of the tastes of others” (1984: 56).103 As habitus, taste leads

to “rejecting others as unnatural and therefore vicious” (ibid). What then are the

101 As Robert Desjarlais (1992) suggests, our subjective, phenomenological experiences are themselves shaped by our social worlds. Critiquing the “ease with which anthropologists have assessed foreign realities” (1992: 16-17), Desjarlais argues for the need to “bear in mind that subjective experiences of this sort [e.g. trances] are deeply patterned by long-standing cultural context forming and informing one’s identity” (ibid). My inability to “smell” was marked by my own distance from the social world and context that drew the negative response to beef. 102 The politics of beef are present in other aspects of Indian social life. A recent article in Outlook magazine notes the campaign by Dalit and OBC groups for including beef on university canteen menus to reclaim Brahmin dominated spaces (Raman 2012). 103 Taste, as defined by Bourdieu is “the propensity and capacity to appropriate (materially or symbolically) a given class of classified, classifying objects or practices, is the generative formula of life-style, a unitary set of distinctive preferences which express the same expressive intention in the specific logic of each other symbolic sub-spaces, furniture, clothing, language or body hexis” (1984: 173).

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consequences of such embodied understanding of social difference for assessing

creditworthiness? Bourdieu further argues:

Choosing according to one’s taste is a matter of identifying goods that are objectively attuned to one’s position and which ‘go together’ because they are situated in roughly equivalent positions in their respective spaces (ibid: 232).

While Bourdieu emphasizes the influence of taste in terms of consumption, he also notes

that taste as matchmaker “marries colours and also people, who make ‘well-matched

couples’” (ibid: 241). When determining creditworthiness of borrowers, essentially a

practice of judgment, the MFI staff brings into play their own taste; that is, they find

people who are similar to them as being less risky than those who offend their sense of

taste. Further, a recent study on loans made by Western donors through the Kiva website found that “more attractive,” thinner, and lighter-skinned borrowers were more likely to be funded (Jenq et al. 2012). Mukul’s physical repulsion to Mulsim neighborhoods, as exemplified by his beef-induced nausea, trickles into his perspective of Muslim borrowers, whom he simultaneously discriminates against as less reliable borrowers.

The consequences of these differences emerged on another occasion when I was accompanying Anand (BM) and Sandeep (LO). With the looming microfinance crisis and limited funds, Anand and Sandeep joked that they should just stop the loans in the

Muslim neighborhood, because there were so many overdue loans there. Anand said that if they stopped operating there, they work would be much easier. When I asked why,

Sandeep explained:

They [Muslim borrowers] all have big families and they live in these crowded [ghimji] places. Someone will show a room somewhere as belonging to her, and the person living there will agree to that for a while. Then, they [the borrower] will run away after getting the loan.

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Sandeep’s description of the Muslim borrowers and area reproduced many of existing stereotypes of the religious minority, including lack of reliability, too large family size, and social backwardness, and are popular tropes of Hindu nationalists (Bacchetta 2004;

Hansen 1999; Sen 2007).

The Hindu MFI staff’s response to Muslim borrowers is informed by the history of Hindu-Muslim relations in India. Religion is one of the primary markers of social identity and difference in India. South Asian modernity has been marked by the presence of religious movements in the public sphere, rather than its absence (Van der Veer 2002:

180). Thus religion is central not just to private sphere, but to the region’s political life more broadly.

This aspect of religion in Indian public life is seen in a telling anecdote by philosopher Akeel Bilgrami anecdote in his article on Muslim identity:

I recall that some years ago in India, almost to my surprise, I heard the words “I am a Muslim” on my lips... A landlord who was interviewing me asked me what my religion was. It seemed hardly to matter that I found Islamic theological doctrine wholly noncredible, that I had grown up in a home dominated by the views of an irreligious father, and that I had for some years adopted the customary aggressive secular stance of those with communist leanings. It still seemed the only self-respecting thing to say in that context. It was clear to me that I was, without strain or artificiality, a Muslim for about five minutes. [1992: 822]

Bilgrami’s experience is illustrative of the experience of religion in everyday life in India, where one must be Muslim (or Hindu, Christian, Sikh, etc.) even if it is for that moment of identification. Asish Nandy (1990) describes this as one of “religion as ideology” rather than “religion as faith” or religion as a way of life. For Nandy, religion as ideology refers to “religion as a sub-national, national or cross-national identifier of populations contesting for or protecting non-religious, usually political or socio-economic interests”

(1990: 70). Religion as ideology does not mean that religion as faith is lost, but it

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signifies the multiple ways that individuals and communities position themselves, or are

positioned, within political discourse with regard to religious identity.

Religious identity in public life has also marked continued questioning of Muslim

Indians as hyphenated citizens, particularly given the history of Partition.104 The creation

of Pakistan for a Muslim majority called into question the loyalties of Muslims who

remained in India:

They were the minority that had fought for, or wanted, Pakistan, and they now had not only to choose where they belonged, but also to demonstrate the sincerity of their choice: they had to prove that they were loyal to India, and hence, worthy of Indian citizenship (Pandey 1999: 610-611).

The unmarked citizen, even in a secular state, is now the Hindu, while the Muslim

minority— more than any other religious minority—must be constantly tested and

monitored. Such suspicions seep into everyday life and the assessment of Muslim

borrowers and considerations of their creditworthiness. With the loan officers, there were

no overt or political expressions of antagonism against Muslim borrowers (e.g.,

identification with the Hindu nationalist BJP party). However, more mundane forms of

discrimination against Muslim borrowers were constantly present.

The Hindu MFI staff’s reaction to Muslim borrowers existed in marked contrast

to other religious or caste groups. Unlike the heterogeneous caste make-up of borrower

groups, and the inclusion of Christian and Sikh borrowers in predominantly Hindu

104 Historically, the partition of India and Pakistan, which coincided with the independence of the two nation-states reinscribed religion with new meaning in South Asia. Though founded as a secular state, Partition and the related pre-Independence movements continue to influence religious identities in contemporary India. Indians of all religions had participated in independence movements. However, by the early 20th century, influential nationalists such as Bal Gangadhar Tilak had “eras[ed] the space between ‘Indian’ and ‘Hindu.’ Hindu dharma was the historical, spiritual, philosophical and social basis for Indian nationality” (Tejani 2008: 96).

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groups, groups with Muslim borrowers were most often “100% Muslim,” as one loan officer described them. In part, this reflects the segregation of Kolkata’s Muslim population in particular neighborhoods. However, most borrower groups I encountered were mixed caste, reflecting caste relations in West Bengal. Compared to the more contentious caste politics of other Indian states, particularly in north India, caste relations have been deemphasized in social and political terms in West Bengal, particularly under the Communist government (Kohli 1989; Basu 1992).105 It should be noted that the

Communist Party is nevertheless dominated by the upper-castes. Further, the

Communists also deemphasized caste because of their ideological focus on class, which at times could itself obscure the problem of caste (Jaffrelot 2003). Moreover, urban slums tend to be less segregated by caste than in rural areas (Sen 2007).

This does not mean that caste does not exist in urban West Bengal, but it does so in a particular convergence with class (Fernandes 1997). The local category of bhadralok indexes a complex set of interweaving caste and class relations (See Chapter 5).

Examination of social inclusion/exclusion in West Bengal has had to contend less with

Brahmanical caste ideology or lower caste political mobilization, and more with the bhadralok ideological hegemony. These distinctions are marked, as with the opening

105 Identified as a distinctly South Asian form of social stratification, scholars have extensively examined and debated the caste system of (predominantly though not exclusively) Hindu India. The Portuguese-derived term “caste” refers to “two distinct concepts of corporate affiliation: the jati (birth group) and the varna (order, class or kind)” (Bayly 1999: 8). While there is a profusion of birth groups, they are largely limited by geographical area. Drawing on Hindu scriptures, varna refers to the division of Hindu society into four units: Brahmans, Kshatriyas, Vaishyas, and Shudras. The so- called untouchables (Dalits) “occupy an ambivalent place below, outside or parallel to this varna scheme” (ibid: 9). The intersections and different meanings of caste broadly, as well as the intersections of jati and varna in everyday life in South Asia have been subject to vigorous anthropological debate.

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vignette of Anand’s comment that the borrower had “no class.” Similarly, on the way to a

different group meeting, a loan officer told me: “It’s so dirty here. The people here are a

little low class, I feel disgusted [ghenna korche]. They don’t keep things clean.” The MFI

staff repeatedly designated particular areas as less desirable than other neighborhoods for

doing work because of physical repulsion to the conditions.

Many of the Muslim neighborhoods in Kolkata are doubly marked as other, being both Muslim and non-Bengali—largely migrants from the Hindi heartland, particularly

Uttar Pradesh and Bihar. Most migrants from other states do not speak the “linguistic norm” of standard Bengali (c.f. Bourdieu 1991).106 Language differences often make

communication between borrowers and the loan officers difficult, resulting in

misunderstandings. On numerous occasions, one borrower who was more fluent in

Bengali would translate for other borrowers, or the loan officer would use her basic

knowledge of Hindi to communicate with borrowers. Despite these efforts on the part of

both borrowers and lenders, there remained spaces of silence.

The case of pamphlets handed out by DENA exemplified such gaps in

communication. In early February, DENA printed pamphlets with details about interest

rates and regulations for all borrowers. It was actually the first time that the borrowers

were given these details in printed form. The pamphlets were all in Bengali. We were at a

106 There are also political consequence of linguistic differences between Bengali and non-Bengali speakers. Kohli, writing of the differing influence of the Congress party and the CPM in West Bengal, observes: The migrant Hindi speakers probably already had a favorable disposition toward Congress when they migrated. More important, communism is quite an alien ideology for most Hindi speakers, especially coming from Uttar Pradesh… The recent tendency of the CPM to mobilize along anti-Delhi and pro-Bengali regional themes must have reinforced those existing divisions, creating an ethnic political divide beneath what looked like a class-oriented political issue.” [1990: 140]

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group meeting in a Muslim neighborhood, and the DENA staff handed out the pamphlets.

When Anand asked if anyone could read Bengali, most of the women shook their heads.

One woman mentioned that her children could read it. Anand finally decided that he

would read the pamphlet out loud and try to explain it in Hindi. He read over the first two

pages, and interpreted it into cursory Hindi. The final two pages consisted of short poems

and a fictionalized letter from a borrower to her mother, intended to convey information about the problems of over-indebtedness and syndicate borrowing.107 Getting to these

pages, Anand said he was not going to read them, because the borrowers would not really

understand them. When some of the borrowers asked if there were any Hindi pamphlets,

Anand explained that DENA had published the pamphlets in the language that the

majority of borrowers understood, or Bengali. He said that since about 70% of DENA’s

borrowers in the area were Bengali-speaking, they had only published in the one

language. Thus, linguistic difference becomes another category of difference by which

migrant, particularly Muslim, populations are marked as higher risk based on

assumptions that they will fail to understand regulations in a language that is chosen

without regard to its exclusion of them, as well as the more cultural meanings implied in

the narrative section of the pamphlet.

This condition of being a minority is reflected in a comment Tania (LO) made

after one Muslim group meeting. There had been a problem at the meeting where two of

the borrowers—sisters—were having trouble repaying. “They’re very good groups.

There’s just been this problem…” said Tania. “The two sisters?” I asked. “Yes,” she

107 Syndicate borrowing refers to when a borrower gets other people to take out loans on her behalf. In other words, one person bears the cost of all the loans, but the loans are in the name of other people.

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replied with a slight laugh. “It’s really just one of them. But what can you do, if it’s your

sister… These groups—they’re mostly non-Bengali and Muslim, but they’re very good.

Everyone is very open and they’ll sit and talk to you very openly. But if there is a problem with one person then everyone…” she trailed off. Tania was not the only one to make this observation. In an earlier conversation with Amit (LO), I had asked him about non-Bengali members. He replied:

With non-Bengali and Muslims [he added to my question] you don’t know that much about them. But, you know, probably 90 percent are good. Like in other [Bengali Hindu] cases, probably 10 percent have problems and they give a bad reputation for everyone else.

As both Tania’s and Amit’s comments highlight, problems of one or two group members have significantly different consequences when they are minorities. Although I saw problems with borrowers in many of the groups I visited, when these borrowers were

Muslim or non-Bengali, their delinquency came to represent the community as a whole.

By identifying migrant Muslim borrowers as high risk, MFI staff could attribute blame for failures in microfinance practices and larger social inequalities to the borrowers themselves. In other words, the default rates among migrant Muslim borrowers may be higher. However, as with the larger development discourse in India regarding the Muslim minority, rather than recognizing the structural inequalities by which this group is marginalized as part of the problem, the MFI staff ascribes these failures to something inherent in Muslim borrowers.108 As Douglas, following Beck, has argued, even as

108 The Draft Twelfth Five-Year Plan (2012) by the Planning Commission of India notes that the Muslim minority lags in most major human development indices. This includes education where literacy rates for the Muslim minority is 67 percent (compared to the national 75 percent, and 76 percent for Hindus), and health, with Muslim mothers least likely to have access to a health facility for births (33 percent) or to have post-natal check-ups.

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financial abstraction, risk is “is a socially constructed phenomenon, in which some people have a greater capacity to define risks than others” (1992: 333) [Emphasis added]. Thus, powerful and pre-existing social codes and forms of prejudice inform the designation of creditworthiness. The local moral economy of credit designates non-Bengali Muslim borrowers in Kolkata as high risk by incorporating existing, often discriminatory notions about the minority population.

Ironically, while there was a line on the loan application forms to note if borrowers belonged to any officially recognized “Scheduled Caste, Scheduled Tribe, or

Other Backward Class” (SC/ST/OBC), loan officers never asked borrowers about their background. When I asked about this, Joy (LO) explained that this was unnecessary as he

“already knew” if a borrower should be designated as such. While states have different recognition of SC/ST/OBC, Joy’s claim to knowledge reflected his own perceptions of whether or not borrowers should belong to any given category, than its formal determination.

There was one case in which the moral economy of credit countered the actual practices of credit distribution. This emerged in discussions comparing urban and rural borrowers. Explaining the differences between urban and rural microfinance Anand (BM) said:

It is totally different work. In the rural areas, people are very poor; they fish or farm. In the village, some people make handloom [taat] saris. But in the city, people mostly have small business such as groceries, selling fish and other goods. The urban recovery rates are better because many people have these small businesses. In agriculture and fisheries, the “feedback” [repayment] is not good. For example, people will buy fish to harvest, but then the fish die and they can no longer pay back the loan. So it is a benefit in the urban areas in terms of [loan] recovery. However, there is the rental problem in urban areas, as there is the danger of people absconding. In the urban and semi-urban areas however, people were more “chalak” [clever/cunning]. So there is a greater occurrence of

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syndicate loans and overlapping loans—the two biggest problems. This happens more in urban areas than in rural areas where people are more afraid.

Other loan officers and branch officers repeatedly categorized rural borrowers as “nicer” and more satisfied with the loans than urban borrowers. I was repeatedly told that in order to see “real” poverty, I would have to go to the rural areas. City dwellers, in comparison, were marked as chalak, disrespectful, greedy, and demanding of larger loans. Problems such as absconding borrowers were more common in urban areas due to the fact that many were migrants, with greater anonymity and therefore ability to escape undetected and DENA had precautionary measures in this regard.109 Most of the loan officers and branch mangers that I encountered were not themselves from Kolkata, but from small towns or villages in neighboring districts. In part this reflected the MFIs’ desire to not have loan officers from the vicinity in which they worked (See Chapter 4). For many of the loan officers, their encounters with urban borrowers were marked with their own expectations about city life, often speaking nostalgically about their own homes. Thus, despite the higher recovery loans in urban areas, loan officers found it more difficult to trust urban borrowers.

Writing of the relation between the city and the village, Ashis Nandy argues that the journey from the village to the city and vice versa—the “travel through space and time, the known and unknown and ultimately, the self and the not-self” (2001: 7)—comes to reflect certain core concerns and anxieties of Indian civilization. Over the process of urbanization, the city became seen as a place of freedom from caste-specific vocation and

109 They required the address of a borrower’s natal home [baaper bari] when taking a loan. They would first go to the woman’s parents, as this was the most common destination. If it were far from the branch office, they would send the relevant information to the branch office closest the woman’s natal home. Someone from that branch office would then make inquiries to locate the missing family to recover the loan.

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ascribed status. Meanwhile, the fantasy village was rendered both as a place of both

unjust social relations and a romanticized space in the diasporic imagination. With the

“growing confidence of the city in its capacity to interpret the village in its own terms,”

the shared imagination of the village, writes Nandy, “has been radically remodeled to

serve the city’s own needs” (ibid: 74). For loan officers, the perceived appreciation of

microfinance in rural areas has come to serve as a counterpoint to the lack of gratitude on

the part of urban borrowers.

Guaranteed Hierarchy

Alongside these forms of exclusion, microfinance credit practices also reinforced

existing hierarchies through the system of guarantors. As noted in Chapter 5, women

borrowers at DENA, as with most commercial MFIs, are required to have a male

guarantor. The guarantor is usually the husband, but can also be an adult son, son-in-law,

brother, father or father-in-law. During an interview, I asked Mr. Guha, the Deputy

General Manager at DENA about the policy of male guarantors.

SK: You have the system for guarantors as the husband or son—what about if it’s someone who doesn’t have any male relatives?

Mr. Guha: Yes, if they borrow, they have to have a male guarantor.

SK: Why?

Mr. Guha: [To neighboring staff] We don’t have a lady guarantors right?

Staff: No.

Mr. Guha: We are giving loans to ladies, and almost every male is working. If it is a lady guarantor, then pressure will have to go to the lady. It is better to have a male, e.g. a nephew or someone.

For Mr. Guha, there were two reasons for having male guarantors. First, he assumed that

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men were more likely to be employed and to have a regular income. Thus, despite the discourse of women’s empowerment, there was a financial imperative to have male guarantors who would actually finance the repayment of the loan. In a different conversation, a loan officer explained that the reason for having male guarantors, particularly husbands, was that he could not later say that he did not know his wife was taking a loan, and forbid her from repaying the loan. The guarantor system ensured that patriarchic social structure where women’s loans remained within the purview of male heads of household. During my research, I came across only one case of a female guarantor, where the borrower’s daughter had civil service job, seen as a particularly stable form of employment. But special permission from the head office was required for the daughter to serve as the guarantor.

In the absence of a male guarantor, women will often resort to creating fictive male kin. Anand (BM) had to conduct a house verification for Panchali, who was widowed and ran a small hotel [food stall]. She was a tenant of Deepa, another borrower in the group. After coming back from the verification, Anand regaled his encounter to the

Suresh (LO) and myself. “Did you see who her [Panchali’s] guarantor was?” Anand asked. When Suresh seemed a little confused with the question, Anand explained: “It says it’s her brother—I think she’s widowed—but when I went to her house and looked carefully at the form, it was the other woman’s [Deepa’s] brother who they were showing as her brother. What do you think? Should we give her the loan?” “She doesn’t have any problems. I’m sure we’d get the money back. Her son is still 16 so he can’t be her guarantor,” replied Suresh. “But she has no direct relation to be her guarantor…” trailed

Anand. In the end, they decided that Panchali would still get a loan, based on her history

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of repayment and existing business.

I asked Nilima (LO) about what women who had no male kin did to access loans.

Her reasons reflected the frequency and way in which women would create fictive kin in

order to present someone as brother:

She can get a brother to be a guarantor. But you know, when a woman gets married, then her name is going to be different from her brother’s. So, she could have anyone say that he was her brother, and we wouldn’t necessarily know the difference. Of course, we try to tell them that they have the responsibility to pay back the loan if his name is on as the guarantor.

On the one hand, Panchali’s case and the MFI staff’s response reflect a degree of flexibility with regulations on male guarantors. On the other, the acceptance of such fictive-kin guarantors maintains the emphasis on patriarchal norms, while contradicting much of the language of women’s empowerment. Moreover, it can ironically insert women into patron-client relationships with men who act as guarantors.

Despite this emphasis on male guarantors, MFIs and banks had another implicit risk-related decision in lending primarily to women rather than men. This is the belief that women are more responsible, leading to sustained high loan recovery rates. Take for instance the observations from an interview I conducted with the deputy general manager overseeing the Rural Business Unit (which conducts microfinance operations) of a commercial bank, and one of his staff members (the newly-hired microfinance marketing officer):

Ms. Bhowmik (officer): Most of the groups are women’s groups. Men’s groups are not sustainable.110

Mr. Ray (DGM): There is a mental blockage to provide loans to men’s groups. Officially, there is no policy against men’s groups as with MFIs that only give

110 The commercial bank provides funds for Self-Help Groups. There is no categorical rule against lending to men, but there are more women’s groups than men’s groups.

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loans to women. Men’s groups are not as good as the women’s groups, and women’s groups contribute more toward improving the status of women…

The repayment rates in male groups are lower... Also, the formation of groups becomes more difficult with male groups. You hear that women have difficulty getting along from things like TV serials and all, but women form better groups. You have a real coming together of minds with women. However, male groups are more comfortable with larger loans.

Similarly, in an interview at a different MFI, the representative at the regional head office explained their focus on women as follows:

The behavior and personality of poor Indian women is first the responsibility toward the family. She cannot think about herself solely, but thinks about her children. She wants her children to go to school and get an education and that while she may be in this situation of poverty, her children should rise above that level. Men on the other hand, particularly of the “lower strata” of the population tend to drink and gamble. We need to have proper utilization of funds.

What all of these comments signify is the complex and intertwined expectations of gendered behavior (See also Chapter 5). Thus, women are expected to be more responsible not only towards their family, but also in loan repayment and therefore constitute lower risk. Men, particularly poor men, in contrast, are perceived as wasteful and therefore high-risk borrowers. Of course, the representation of drunk and unreliable poor men is as much a stereotype as the self-sacrificing and dutiful poor woman.111 Yet, the irony is that, as Mr. Bhowmik pointed out, men are expected to be better with handling larger loans.

Of course, such gendered perceptions of money and responsibility can extend beyond the urban poor borrowers of microfinance: an article in the Economic Times featured women bankers’ role in minimizing India’s exposure to “a testosterone-fuelled

111 As Matthew Gutmann (1996) demonstrates in his ethnography of working-class men in Mexico, the dominant ideologies of masculinity often belie the kinds of familial care that men provide.

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meltdown caused by men with high-risk appetite” (Dhall & Sharma 2010).112 As Renu

Sud Karnad, the CEO of HDFC, India’s largest housing finance group tells the newspaper:

“Women are not driven by wanting to just show numbers,” says Karnad, who feels the recession was a result of excesses, of wanting to achieve goals at whatever cost. “Women are more practical and moderate in risk taking” [ibid].

As with the gendered discourse of microfinance lending, women bankers are described as more responsible and more cautious risk-takers. The latter dimension of perceived lower

risk-taking can have both positive and negative consequences.

Even at MFIs such as DENA that typically lend on only to women, men can get

business loans. These are larger loans collected on a monthly basis, but requiring more

formal documentation such as tax filings and business certifications. The ambiguities of

this arrangement emerged when DENA, as a result of the microfinance crisis, halted all

business loans for a period of time. Consequently, Abdul, a young Muslim migrant from

the neighboring state of Bihar, needed to switch from a business loan to a regular loan.

Abdul ran a small mobile phone and grocery store, and while the business loan had been

in his name, he needed a female family member to be the borrower for the regular loan.

His mother had agreed to get the loan, but she lacked a document showing her age.

Having lost her voter card, she had no photo identification; they could produce the police

report documenting its loss, but they had not received a replacement card yet. Abdul was

112 According to the Economic Times report, the Indian financial sector has had a greater representation of women executives and leaders than other sectors. Thus, while 11% of the companies across sectors in India have women CEOs, 54% of these CEOs are from the financial services sector. Karnad of HDFC goes on to explain that one of the reasons for women’s success in retail banking has been the “nurturing and adjusting attitude” that emerges from women’s handling of both work and home, “as a wife or a mother” (Dhall & Sharma 2010).

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married, but his wife was back in Bihar, and so she could not attend the weekly group

meetings to repay the loans. There were no outstanding problems with his loan or

repayment and the DENA staff were hesitant to lose him as a customer. “Can my younger

sister get the loan?” asked Abdul finally. “Is she married?” asked Mukul (BM). Abdul

shook his head. “Don’t you have any other sisters who are married?” Abdul replied that

he did. “If you can get her, it will be best if she [the married sister] can take the loan.

Come by the office tomorrow afternoon,” instructed Mukul. Reversing the practice of

finding brothers to be guarantors, Abdul had to find a sister who could access the loan.

These gendered practices of microfinance lending create complicated debt relationships between parents, in-laws and children, as well as between siblings.

Microfinance programs, despite their emphasis on women, reinforce a dichotomy

in access to credit: small loans for poor women, large loans for wealthy men. A recent

study on access to credit in India has found that women-headed households “do not

receive equal treatment when it comes to individual access to regular (non-scheme based)

credit” (Rajeev et al. 2011: 76). This was seen to hold true across rural and urban

contexts, and across occupations, even when they are involved in similar economic

activities. Further, because of this unequal access to formal loans, women-headed

households tend to pay higher rates of interest for informal sector loans. Despite access to credit through microfinance, the authors note that this credit “is limited in size and may not be adequate or frequent enough” (ibid: 79). Thus, microfinance programs do not cover the gap in unequal access to formal credit by poor women-headed households (i.e.

households without an adult male income-earner).

A related exclusion is that of young unmarried women. While women who are

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widowed are eligible for loans, young women (younger than 35 years) who have never been married are not, even if she were to get a brother or father to serve as guarantor.

Coded in the language of risk, MFI staff explained this practice in terms of the fact that young Bengali women will likely leave the neighborhood upon getting married, making them higher “flight” risk. In contrast to young unmarried women, widowed women are given loans. The assumption here is that widowed women will not remarry and will either remain in her marital home or with her children, or return and stay in her natal home. (c.f.

Fruzzetti 1982: 103-107). Meanwhile, the age cut-off alludes to the expectation that unmarried women over the age of 35 will likely never marry. Such expectations mark the ways in which women’s life choices are conscribed by marriage. The stakes of this debate were reflected in the decision of Jeevika, a women’s rights-based non- governmental organization with a microfinance arm to not require male guarantors. They had explicitly decided, after much debate, against having male guarantors, agreeing that the group’s guarantee was sufficient for accessing a loan. In addition to giving loans to both married and unmarried women above 18, the organization also provided livelihood training (See Chapter 2).

Guarantees came in another implicit form through the requirement of “address proof” and the related risk of tenancy. Borrowers who rented their homes were required to get a signature from their landlord vouching for their creditability. However, this requirement was constantly subject to critiques from borrowers. Consider the case of a borrower who had finished paying off her loan and did not want another one. Inquiring why she chose to stop taking loans, the woman replied that it was because they had moved to a new house. She found it embarrassing [lajja kore] to ask the landlord for a

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signature, particularly since it was a new place and they didn’t really know him very

well. To get another loan, there would be house verification and she repeatedly expressed

embarrassment at having to ask the landlord for this. “Not all landlords are the same,” she continued. “Some people have no problems, but others don’t want to sign. What are you to do then? It hurts your prestige [Eng] to have to ask. I don’t have any problems with things like going to the councilor [for a signature], but I really don’t like going to the landlord.” Having to ask landlords for signatures was repeatedly expressed by borrowers as being embarrassing or shameful by making public the private state of one’s financial affairs.

However, with the microfinance crisis, MFIs such as DENA became increasingly reluctant to lend to borrowers who rented homes rather than owned them. Although Putul

(BM) suggested that this was only for relatively new tenants, and that people who had resided at the same address for a long period of time would not be subject to the same rules, it placed added pressure on women who were seeking loans. Around 30% of the

Kolkata’s population lives in slums, with around 6,000 bustees (Sengupta 2010). Bustee

is the indigenous term for slum, but also designates legal urban entities with a three-tiered

tenancy system: 1) the landowner; 2) the hut-owner (thika); and 3) the bustee dweller

(bharatia). The 1949 Calcutta Thika Tenancy Act and subsequent revisions have

transferred greater rights to the bharatias against eviction, and provisions against the

alienation of land (i.e. land can be inherited but not sold) (Banerjee 2002). For many of

the borrowers who were bharatias, their eligibility for loans required signatures from

their landlords. Although the increasing popularization of microfinance in India has, to

some extent, lessened the stigma of debt, borrowers nevertheless expressed a sense of

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embarrassment or shame in having outsiders know of their indebtedness.

While in the above example the borrower expressed anxiety in approaching the landlord, another woman did not want to get a signature from the local councilor for documentation. Her son, who was to be her guarantor, did not have sufficient documents proving he was over 18 years of age. Rahul, the loan officer asked if he had taken the

Madhyamik [class 10] exams, because his date of birth would be on those records. She replied that he had never taken the exams. Finally, Rahul suggested that she go to the ward councilor to get a document verifying his age. The woman, however, was greatly agitated by the thought of having to go to the councilor. “Everyone knows everyone,” she said, hesitatingly. “I don’t want to ask him for something like this.” “You don’t have to tell him what it’s for,” replied the loan officer. “Just ask him to verify your son’s age.

That’s all we need.” Though still hesitant, she agreed. Even as we walked out of the apartment, she continued to repeat how she didn’t want to go and ask the councilor for

“these things.”

The role of the guarantor or local politician, either as the formal male guarantor or the implicit guarantee of the landlord, is one of both obligation and power. The guarantor is expected to be financially responsible in the case of the former, or provide a personalized form of credit history in the case of the latter. Yet, at the heart of these requirements for guarantees are inherently risk-averse practices not just financially, but also socially. The guarantee of the male kin becomes a kind of patriarchal permission for women borrowers, while excluding unmarried women from accessing loans. Meanwhile, the tenancy requirements make it more difficult for recent migrants or individuals lacking

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landholdings to get credit. Both of these cases in relation to guarantees result in relatively conservative outcomes that perpetuate rather than challenge existing hierarchies.

Chapter Conclusion

When attending to credit risk analysis of borrowers, loan officers engage in

practices of due diligence. Head office staff explained to me that like retail banks, DENA follows KYC (Know Your Customer) norms to determine the liability of potential borrowers. KYC regulations as mandated by the Reserve Bank of India (2004) are

primarily meant to prevent money laundering. However, as a practice of due diligence that ensures banks know the risks of their customers, these regulations are also part of the

risk management system of the financial institution.113

Analyzing the practice of due diligence in offshore banking regulations, Bill

Maurer raises the question of “the way ethics interfaces with social knowledge” (2005b:

476). Challenging the reductionism of scholarship on capitalism and finance to quantification and mathematical modeling, Maurer notes “a new form of managing financial risk offshore that relies not on calculation but on judgment and ethical self- fashioning” (ibid). Maurer draws attention to “the nonquantifiable and ethical that lie

‘inside’” (ibid: 477) contemporary capitalisms. The practice of due diligence calls forth the “reasonable man” over the “economic man” through its invocation of “whether or not

113 The Reserve Bank outlines KYC norms for preparing customer profiles as following: Banks may prepare a profile for each new customer based on risk categorisation. The customer profile may contain information relating to customer’s identity, social/financial status, nature of business activity, information about his clients’ business and their location etc. The nature and extent of due diligence will depend on the risk perceived by the bank. However, while preparing customer profile banks should take care to seek only such information from the customer which is relevant to the risk category and is not intrusive (2004: 5).

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‘reasonable care’ has been taken to ascertain the identities of offshore entities” (ibid:

483). Tied to the emergence of the “reasonable man” and the practice of “due diligence” is the monitoring of “reputational risk” or “a form of risk that cannot be managed through quantitative calculation; instead, it is managed through evaluative procedures of due diligence” (ibid: 487). The management of reputational risk is evaluative and not quantitative. Quantitative methods, from mathematical modeling to statistical analysis cannot determine levels of reputational risk, which beg the question of identity and qualitative analysis.

For the MFI staff due diligence in the form of credit risk analysis is colored by everyday social norms and knowledge. Yet, as Maurer argues, this kind of knowledge

“does not seek coherence but care” (ibid: 491). In effect, due diligence and

“reasonableness” is a form of art, rather than a scientific concept. Reasonableness is “not about probability or statistics… but about foreseeability” (ibid: 492) which depends on knowledge and experience of the person in question. Thus, reasonableness is “a continuous effort” (ibid) in the constitution of the self as an ethical subject that “always begs more words” (ibid: 493). In other words, what is reasonable can seem like an endless process of description. Maurer argues that the “reasonable man” is, in effect, the

“‘Dissipative Man’—he tires out after a while, ‘reasonably faithful’ to the truth, but that is all one can reasonably expect” (ibid: 496). Maurer’s analysis of the shift from

“Economic Man” to “Reasonable Man” and finally “Dissipative Man” shows the limits to the calculative logics of mathematical and statistical analysis. While loan officers and branch officers make judgments on the creditability of borrowers, we have to simultaneously ask what happens to borrowers who are adjudged.

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Writing of the state apparatus, Louis Althusser argues that individuals are “always already” subjects that “constantly practice the rituals of ideological recognition, which guarantee for us that we are indeed concrete, individual, distinguishable and (naturally) irreplaceable subjects” (1971: 172-173). For Althusser, ideological state apparatuses such as education, religion and media contribute to the ways that individuals come to submit freely to their subjection. As creditworthiness comes to mark social identity as well, one may ask what the effects of such constant measurement by lending institutions have on borrowers who interpellate themselves by these assessments of worth. For example, the requirement of male guarantors has normalized male kin as a requirement in creditworthiness. Such practices not only stabilize existing forms of gendered hierarchy, but also come to give value to male kin in new ways, while always already enmeshing a women’s identity with that of her male guarantor.

In response to the microfinance crisis, Microfinance Institutions Network

(MFIN), the self-regulatory organization consisting of 46 of the largest MFIs in India

(excluding SHGs), launched a credit bureau in partnership with High Mark Credit

Information Services Ltd. High Mark, a Mumbai-based credit information company will set up a dedicated microfinance credit bureau, with the data of around 30 million loan accounts. According to a release statement from MFIN (2011), the credit bureau will provide, among other things:

1. Readily available client data will allow MFIs to determine repayment behavior and make more informed credit decisions. 2. It will also help borrowers establish repayment history, enabling them to borrow at lower rates based on strong repayment history. 3. Having authentic borrowing data for clients will help banks and MFIs avoid multiple lending to the same borrowers. This in turn will go a long way in addressing concerns of over-indebtedness of clients and consequent client distress.

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As noted above, at DENA, the introduction of the credit bureau meant that they would now have access not only to the repayment history of the a potential borrower, but also how many and which other MFIs a borrower had existing loans. Based on this information and the directives in the Malegam Committee Report (2011), DENA would now only lend to borrowers whose total indebtedness (including the loan from DENA) was no more than Rs. 25,000, or three different MFIs.114 For example, if a borrower had an existing loan of Rs. 10,000 from one MFI, then she could get a maximum of Rs.

15,000 loan from DENA; or, if she already had loans from three other MFIs, even if the total amounted to less than Rs. 25,000, she would no longer be eligible for a loan from

DENA. Prior to the introduction of the credit bureau, loan officers would simply ask the borrower what outstanding loans she had. Most often, the MFI staff told me, the women would tell the truth; though on occasion the real figures would come out only with repeated questioning or some sleuthing through neighbors.

Keeping in mind the fact that the new credit bureau can only account for the large

MFIs belonging to MFIN (i.e., borrowers can still access loans from smaller organizations that are outside of the regulatory ambit of the Reserve Bank), it nevertheless reshapes the credit market for the poor. On the one hand, the introduction of the credit bureau is meant to protect borrowers by regulating the level of possible indebtedness. The credit reporting is seen as a way of providing “reputation collateral” for poor borrowers without physical collateral (Miller 2003: 2). On the other, credit data

114 The Reserve Bank of India released the Malegam Committee report in 2011 in response to the microfinance crisis. Based on its findings, the committee offered directives for regulating the microfinance sector. See Chapter 2 for further analysis of the report.

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serves the purpose of “improving the efficiency of financial institutions by reducing loan

processing costs as well as the time required to process loan applications” (ibid). While

regulations to protect consumers of credit are certainly necessary, the standard credit histories mark the increasing formalization and integration of microfinance in the financial markets. The credit bureau can provide seemingly objective measures of borrowers’ credit histories to financial institutions. Brett Williams, writing of the US where the documentation of credit histories has been normalized since the 1970s, observes, “bad credit appears such a marker of citizenship that poor people even find it hard to rent an apartment in many cities” (2004: 99). There is not the same history in collecting consumer credit data in India as in the United States. In fact, CIBIL, India’s first consumer and commercial credit bureau was established in 2000. Like CIBIL, the microfinance credit bureau provides a new marker of good citizenship: creditworthiness.

Yet the assessment of creditworthiness, as I have argued in this chapter, absorbs

existing forms of social exclusion. In contrast the discourse of inclusiveness, the fact that

certain women get loans is subject not just to their financial viability to repay, but

because they are understood by loan officers to be less risky. These decisions include longstanding prejudices against minority communities or migrant. The decision makers also perceive women as more responsible, but only insofar as she does not challenge existing forms of gendered inequalities. What the credit bureau normalizes is not an objective measure of creditability—the simple accounting of one’s financial position— but the social markings of more or less deserving borrowers. It is the distributive logics of the moral economy of credit as much as market forces that determines who gets credit and who does not. In this chapter I have shown the ways in which practices determining

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creditworthiness are inherently risk-averse. In the Chapter 7, I examine how new

financial technologies such as micro-life insurance comes to further the risk aversion of microfinance and its consequences for the lives of urban poor borrowers.

250 CHAPTER SEVEN

Death Insured, Life Precarious: Insurance, Suicide and the Valuation of Life

They will owe those debts until they die. Death will be the only form of debt discharge that they will ever see. Elizabeth Warren in Maxed Out (Dir. Scurlock 2006)

It was almost a year since Amina had stopped repaying her loan when I learned about her. Joy (LO) and I had arrived at the group meeting in North Kolkata, where having climbed a series of unlit stairs of an old apartment building, we arrived at the roof where, instead of open space, we found a series of rooms had been added, seemingly ad hoc. Some of the women were late arriving at the meeting, as there had been a disturbance the night before—“a husband-wife issue,” as it was explained. The police had been called and they had been making inquiries late into the night.

“There is one OD [over-due] in this group,” said Joy, the loan officer with the ledger on his lap, as we waited for all the women to arrive. Hearing him mention the outstanding loan, one of the women, Farah spoke up: “We used to have problems with her [Amina]. She was always late with payments, so we put a lock [tala] on her door, so she couldn’t go in [to her home] until she paid her loan. After that she ran away. We managed to contact her natal home [baaper bari], and got news that she had gone to

Bombay. We heard she did this and that she was over there, but then we got the news that she had taken poison [bish khe] and died. I still see her two boys around sometimes… I feel bad for them.”

“We can’t do anything about it,” added Joy. “We don’t have a death certificate or anything for her. Without the documents [necessary to claim insurance], her loan is still

OD.” Amina had died indebted; the loan in her name remained in the books as unpaid. A

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few weeks later, Farah told me that Amina had taken Rs. 3,000 from her as a personal loan, which she had also not paid back. Added to the tragedy of Amina’s death was the fact that she had not escaped her debts even in death, despite the life insurance on her loan. The precariousness of Amina’s life meant that there was no record of her death, no documentation to claim insurance, her final means of paying off her debt.

In recent years, microfinance institutions (MFIs) have increasingly embraced mandatory life insurance as a way to recover loans in case of the borrower’s death. This chapter is about the linkages between life, death and debt through the lens of insurance.

Following from the previous chapter, it shows how the practice of financial risk management on the part of MFIs through insurance falls short of addressing the uncertainty of life for many urban poor borrowers. On the one hand, farmer suicides relating to indebtedness have received widespread media and political attention.

Similarly, in the Andhra Pradesh case, the microfinance-related suicides were emphasized over other factors. Yet, as I will argue in this chapter, the emphasis on death, whether as a financial issue in terms of insurance or as a political concern over suicide can often occlude precariousness of life at the margins. Suicidal death becomes the primary means of talking about the problems of indebtedness in both policy and popular discourse, while the conditions that lead to initial indebtedness, from illness to social obligations remain underemphasized.

Insuring Risk

In 2009, I interviewed the then-chief operating officer (COO) of an MFI that operated in but was not headquartered in Kolkata. I had asked Mr. Ray, who had come to

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microfinance from 35 years of experience in commercial banking, how this background made a difference. He replied with the following example:

We provide need-based products, such as insurance. The insurance is a two-way protection. Insurance covers risk both for the individual as well as for the bank. The death rate is very high for the people who take these loans. When we started, in one month, six people who had loans died. At first we thought that they were cheating the system; that this many people [borrowers] could not have died in one month. However, we realized that there are reasons for such high death rates amongst our borrowers. There is the case of suicide, where the husband is a drunkard or is having an affair. Basically there is a lack of peace or a lack of food and women commit suicide by setting themselves on fire, or something. There is also malnutrition, which leads to death. Insurance provides a security.

As argued in previous chapters, the development of microfinance has had to contend with the riskiness of lending to poor borrowers. One such risk category is the higher mortality rate of poor borrowers, including high rates of malnutrition. Insurance, Mr. Ray suggests, provides security for a price, but the question remains, “for whom?” The normalization of life insurance as part of microfinance requires more than the financial rationality, but reworking of ideas of life and death (c.f. Zelizer 1978). Yet, in addition to mortality rates caused by illness, lack of hygienic living conditions, or sufficient nutrition, Mr. Ray emphasizes the prevalence of suicide. Why does suicide figure so significantly in the discourse of debt? Mr. Ray’s comments reveals the need for MFIs to account for the risk of death in their lending practices. While raising health-related mortality as well as suicide, he does not address the role of debt in producing unbearable living conditions for borrowers.

MFIs have various structures of life insurance. One is the case where they outsource the life insurance to a specific life insurance company, e.g. Bajaj Allianz, or

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ICICI Prudential. The second, as was the case with DENA when I conducted research, the insurance policy is internal.115

While some microinsurance providers offer non-life insurance (e.g., livestock, health), most are for life (Ghate 2007). Whether the insurance provider is in-house or external, the general practices are the same.116 First, at the time of getting a loan, borrowers are required to purchase life insurance. Although borrowers essentially buy a separate life insurance policy for the loan, it is usually presented as an additional fee, rather than a separate product. The cost may vary, depending on the type of insurance, but in general these insurance products are similar to term life insurance that is payable only on the condition of death within the given period of time (i.e., the loan period).117

For example, DENA took one percent on every loan as an insurance premium for the duration of the loan. Thus, someone getting a loan of Rs. 10,000 would pay Rs. 100 for insurance. The insurance covers the repayment of the loan in case of the borrower or her guarantor’s death. While DENA’s internal insurance only covered the repayment of the loan, other insurance policies offered additional benefits to the family of the deceased. A different MFI had a tie-up with ICICI Prudential, which would pay a sum of Rs. 30,000 to the nominee of the policyholder.118

115 In July 2011, DENA was in the process of transitioning to an external insurance provider. 116 Of course, in the case of in-house insurance, profits from the insurance segment remain with the MFI, whereas with the contracted service, profits and losses are channeled to the insurance company. 117 This is in contrast to whole life insurance which insurance the entirety of a person’s life. 118 According to ICICI Prudential’s website, the Suraksha Kavach micro-insurance policy offered through MFIs costs Rs. 244 per Rs. 10,000, or 2.44% of the loan amount.

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In order to claim the insurance the surviving borrower or guarantor has to produce the death certificate, as well as a letter from the group acknowledging the death. As with

Amina’s case, this was not always straightforward. For example, family members often have difficulty getting the death certificate, having to bribe officials to get the documents processed. In one case, the family was still waiting for a death certificate following a borrower’s accidental death. DENA staff had accepted the cremation receipt in its place in order to go ahead with closing out the loan, and returning the margin money to the borrower’s family. Loan officers were often uncomfortable talking about life insurance, with its emphasis on death, usually preferring to say, “if something happens [kichu hole]” rather than “in case of death” when explaining life insurance. Yet life insurance had also been normalized among borrowers. For instance, while discussing microfinance in an auto-rickshaw with staff from a self-help group (SHG) model microfinance organization

(i.e. not a commercial MFI), the driver turned around to ask about what kind of loans they offered. “I have Rs. 80,000 already in loans from Bandhan and others,” he said proudly. After inquiring about the amount the SHG offered in loans, he proceeded to ask,

“do you have bima? You know, if something happens to the borrower?” This SHG did not offer any such insurance; however, it was telling to see how life insurance had been absorbed into standard microfinance loans. Yet as documented by scholars on the history of life insurance, such acceptance requires more than an acknowledgement of the financial role of insurance.

Historically, life insurance emerged in Europe around the 15th century, but was relegated to the commercial sphere, particularly in relation to merchants and overseas travel. Nevertheless, due to its association with gambling on life, life insurance was

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widely banned in much of Europe, although French and English merchants would use life insurance for their slave cargoes (Clark 1999: 14-15). The proliferation of insurance services in the early 18th century—to protect against everything from highway robbery to cuckolding—signaled the effects of calculability and “a profound movement in English society and culture whereby danger began to be domesticated through the conversion of the various hazards of life into calculable, manageable risks” (ibid: 1). Insurance was about both speculation and prudence; it was about conquering chance and betting on it.

Insurance more broadly became popular—and indeed possible—with the growing calculability through documentation of statistics. As argued in the Chapter 5, risk analysis required calculability, and risk analysis is also at the heart of life insurance. On the one hand, risk entails a new blaming system by which we “treat every death as chargeable to someone’s account, every accident as caused by someone’s criminal negligence, every sickness a threatened prosecution. Whose fault? is the first question” (Douglas 1992: 15-

16). On the other, risk is not just about blame; more than “something to be avoided, spread, or otherwise managed,” risk is now “something to be encouraged or embraced,”

(Baker & Simon 2002: 20) as demonstrated by the increasing encouragement of risk- seeking behavior (e.g., stock market, extreme sports). The contradictory ideologies of risk as both something to be avoided and taken mark modernity.

However, as Francois Ewald has argued, there is also an increasing move toward precaution, in which, “in principle, compensation no longer has meaning, because the only rational attitude is to avoid the occurrence of a threat with irreversible consequence”

(2002: 298). More than risk-taking, Ewald suggests that the age of precaution is about

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finding the “zero-risk” option.119 In other words, it is better to avoid the risk altogether through precautionary measures, than to try to find adequate forms of compensation.

Similarly, Karen Ho (2010) has argued that risk has been misrepresented in the analysis of Wall Street. Thus, rather than believing they had taken on more risk, bankers believed they had “mastered risk” by offsetting risky assets through hedges. In effect, the “value at risk” was thought—wrongly—to be zero. Yet this turn toward precaution—of “zero risk”—indicates perhaps a certain paralysis in action; or, as Ewald writes, “an exhaustion in innovation and therefore to a revolutionary change in society with even more unfortunate consequences” (2002: 299). In a move toward precaution over risk, there is a greater desire to preserve the possible negative outcome of taking a risk. Precaution then, including the use of insurance, is then less about “taking” risk than attempting to preempt it, or to “master” it.

With insurance as a precautionary tool, the risks of life can be brought under control, quantified and financialized through calculative techniques. Insurance objectivizes events as risks, making “what was previously an obstacle into a possibility.

Insurance assigns a new mode of existence to previously dreaded events” (Ewald 1991:

200). Insurance has grown in both public areas of life (e.g., Social Security, universal medical care) and the private domain (e.g., health, life, property, tort liability). The former has meant both the spreading of risk among the population in order to address social problems (e.g. unemployment, poverty), while the latter attempts to make individuals more accountable for themselves (Baker & Simon 2002). The popularization

119 Ewald gives the example of the shift towards “zero-risk” in military strategy, comparing current risk analysis of lowering the risk of losing soldiers, versus the situation in the First and Second World Wars where men were sent en masse to battle in the fields (2002: 297).

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of life insurance emerges from this tension between the social and individual accountability for various risks.

While there are various forms of insurance that protect against “unpleasant contingencies,” (Ranade & Ahuja 1999: 203) I will focus on life insurance in this chapter because of its prevalence in microfinance practices. Primarily, life insurance “provides protection to a household against the risk of premature death of its income earning member” (ibid). While providing this kind of financial cover, the growth of life insurance has marked “a new and unregulated form of property: property in the very fabric of human life” (Clark 1992: 60). As argued by William Pietz (1997), the abolishing of deodands120 in England in 1846—non-human objects that cause human death—marked a transition to capitalist society, whereby human life could be given and understood by monetary value. Significantly, it was modern life insurance that was best able to articulate monetary compensation for human life from a capitalist perspective and the normalization of the wage-earner:

Using acturial tables of average life expectancy and the likely career trajectory and wage income of a person in a given occupation, one can calculate the amount of lifetime wage earnings lost by an individual killed in an accident before his natural time. In a capitalist society, this is obviously the correct logic for compensating a life, and we may note the class specificity it involves; people with different levels of income have differently valued lives. [Pietz 1997: 107]

Thus, insurance became a particularly capitalist form of mediating and valuing death, under changing ideas about property and responsibility.

120 Deodands, as objects that caused human death, were considered accursed and considered sovereign property. However, with the advent of the Industrial Revolution, property laws pertaining to the deodand became problematic insofar as the state claimed monopoly of property. This was demonstrated in the case of the death of a person by railways. Under the existing laws of the deodand, the (privately owned) train responsible for the death would become state property, which cannot be sustained under capitalism.

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Further, the expansion of life insurance to popular classes was central to the expansion of capitalism, even as there were differences in the classed valuation of life.

Daniel Defert (1991) argues that “popular” life insurance originates in mutual societies that provided support for workers. However, under political suspicion, both employers and insurance companies attacked this form of mutualism as precursor to socialism.

Contemporary insurance emerges from the “demutualization of [the] workers’ movement” (ibid: 227) and the success of “employers’ philanthropic paternalism” and

“financiers’ insurance companies” (ibid: 228). Thus, the growth of popular life insurance marks not only the expansion of capitalism, and moves away from mutual societies providing greater social support, but also the early stages of financialization of everyday life.

In the context of economic development, insurance is often offered as a tool for the poor who are seen as particularly vulnerable or “least able to cope with risk and shocks” (Dercon 2005: 2). In the language of economists, these shocks must be dealt with through “income smoothing” or “consumption smoothing” mechanisms. Insurance policies—as well as credit—are seen as ways, or “risk-coping strategies” to address gaps in income and consequent effects on consumption (ibid: 12). In his ethnographic work on

South Africa, Erik Bähre (2011) finds that insurance can serve as a form of redistribution.

Bähre argues that under such circumstances, commercial insurance can work as a form of redistribution that is part of the market. While traditionally, social and kin networks, as well as mutual associations and government programs have provided this kind of support, as with credit, commercial financial institutions increasingly provide such services to the poor.

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Viviana Zelizer (1978; 1979) has written of the emergence and acceptance of life insurance in the United States in the 19th century. These new institutions were “were primarily concerned with death as major financial episode. Their business was to make people plan and discuss death in monetary terms” (1978: 594). Yet such commercialization of human life was not readily accepted. The growth of life insurance required what Zelizer explains is the ritualization of life insurance. Life did not become profane; rather, insurance became sacred—part and parcel with a “good death” (ibid:

603). With increasing urbanization in the 19th century, women and children became increasingly dependant on the husband/father’s role as wage earner, who was now also responsible for providing for his family in case of his death. Thus, life insurance “referred to new standards of dying in the United States” (ibid: 603). Providing for one’s family through financial investment in insurance became a measure of a “good death” in an increasingly nuclearized family, and where “a man was judged posthumously by his financial foresight as much as by his spiritual qualities” (ibid: 603). Significantly, moving away from risk analysis alone, the acceptance of life insurance then requires changes in the understanding of death.

However, given the importance of local cultural understanding of life and death in insurance, and the origins of life insurance in the West, how, as Cheris Sun-ching Chan asks, “can this business be globalized and expanded to places with different cultural traditions?” (2009: 276). Chan’s own work in China documents how life insurance emerged as “money management” rather than “risk management,” as a way of evading the taboo subject of sudden death by formulating life insurance as an investment. Or, as

Bill Maurer, argues in the context of Islamic insurance in Indonesia:

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Islamic insurance merely makes explicit what was implicit in the acturial technique of insurance, and what critical analysis of insurance needed to bring out into the open to fulfill its own critical desires—that it is a form of moral or ethical evaluation, that its facts are always-already values. [2005a: 151-152]

Beyond the statistical and mathematical modeling of actuarial sciences then, what is being assessed in, and what is being protected through life insurance are subject to social and cultural understandings of life and value. In short, while insurance marks a heightening form of financial rationality in an era of risk and precaution through actuarial abstraction, it is simultaneously always already marked by existing social and cultural norms.

Life Insurance in India

The history of insurance in India marks similar tensions between the expansion of finance capital and paternalistic protectionism; of risk aversion and the embrace of risk.

The modern system of insurance in India originated in the nineteenth century under

British colonial rule, with the Oriental Life Insurance Company set up in 1818, the

Bombay Assurance Company in 1823, and the Madras Equitable Life Insurance Society in 1829. While operating in India, these companies insured European lives. Once they did start insuring Indians, they were usually charged extra premiums of 20% or more (Sinha

2002). It was only in 1871 that the Bombay Mutual Life Assurance Society began offering “fair value” policies to Indians. By 1938, there were 176 insurance companies operating in India. The Indian Life Assurance Companies Act was the first statutory measure to regulate the life insurance sector in 1912, followed by a series of acts through to independence in 1947 (IRDA 2007). In 1956, the insurance sector in India was nationalized by then-Finance Minister S.D. Deshmukh under the Life Insurance

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Corporation (LIC) Act of India, bringing together 200 or so individual insurance companies. Nationalization of life insurance was legitimated on three accounts:

(1) It was perceived that private companies would not promote insurance in rural areas. (2) The Government would be in a better position to channel resources for saving and investment by taking over the business of life insurance. (3) Bankruptcies of life insurance companies had become a big problem. [Sinha 2002: 4]

Similar to bank nationalization (which came later; See Chapter 2), life insurance was brought under government control under the premise that private insurance could not extend sufficient benefits to the poor, particularly in rural areas. Insurance premiums to the state-owned insurance behemoth were also supposed to provide the government greater access to private savings and investment funds for state-led development projects.121 Insurance was not immediately liberalized in 1991. It was only in 1999, following a series of reports from government commissions, that the Insurance

Regulatory Act opened the insurance sector to private sector, including foreign partnerships. Changing social and demographic norms in India, such as the decrease in joint families, which traditionally provided financial support upon the death of a family member, as well as an increasingly aging population have shaped the growth of life insurance in India (Ranade & Ahuja 1999).

121 This fits with the Nehruvian model of development in post-Independence India. In contrast to Gandhi’s vision of an alternate economic system in independent India that emphasized village life, Nehru, as the first Prime Minister of India, saw large-scale industrialization as the way forward. In the 1950s through the 1970s, development economists and policymakers implemented strategies and tools that had functioned in the modernization process of the West with hopes that there would be the same results in the postcolonial state (Bose 1997; Chatterjee 1993).

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Figure 7.1: Manual for LIC Premiums (Photo taken by author)

Figure 7.2: Billboard for LIC Advertisement in Kolkata (Photo taken by author)

In trying to situate the local understandings of insurance, take, for instance, the two above images. I came across the first [Figure 7.1] in 2009, when an LIC representative had stopped by my house. He had with him the above edition of the “ready reckoner” manual with actuarial tables meant for LIC agents (though not published by

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LIC). This ready reckoner, advertised on the publisher’s website as the “Bhagavad Gita”

[Hindu scriptural text] of insurance agents and consists of tables of LIC premiums. It is published by Wings Publications in nine Indian languages. What was particularly arresting about this edition was the imagery on the cover: a magician’s hat and wand conjuring up money. As the visuals and the wording indicate there is an element of the magical in creating wealth through insurance. Interestingly, this book is meant for the sellers of insurance, not the buyers. In effect, the tables within are the “tricks of the trade” through which money can be conjured up. The tagline is: “Wings… Magical Companion for Creating Wealth & Surakshsa [protection].”122 Note that even here, it is about creating wealth and protection, though how this happens exactly is subject to magic and mystery. Although life insurance in India has a relatively long history, there remains something mystical about the creation of wealth, especially through death. Indeed, as

Zelizer (1978) has argued, rather than make death profane, life insurance has become sacred.

The second image [Figure 7.2] is a billboard for LIC promoting life insurance plans specifically for women, with the message: “You are a new age woman. Prepared for life.” The woman skipping in the background suggests an element of freedom that having insurance can offer. The woman in the foreground, while not wearing a sari (too traditional) is still wearing an “ethnic” top, marking her as both modern and Indian—

“appropriately Indian” (Radhakrishnan 2011). An accompanying television commercial to this advertising campaign depicted various middle class women, including a

122 In insurance policies, the term most commonly used is “suraksha” from the Hindi and Sanskrit word meaning “protection.”

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housewife, executive, teacher, and doctor, stating that they are insured.123 The tagline at the end is: “We are responsible, we are insured.” Like credit in Chapter 4, this message is for “modern women” who are able to prepare for life through new financial technologies such as insurance. Women are encouraged to ensure financial stability for their families through insurance. Moreover, with insurance, individuals are increasingly responsible for ensuring their own financial security in the future, rather than depend on forms of social welfare. Insurance is both subject to contemporary forms of risk analysis, and to the social and cultural norms of understanding responsibilities in life and death. How are these particular configurations of insurance practices understood when they intersect with credit?

Collateralizing Life

Credit and insurance have long been associated with each other: As credit networks became crucial to English commercial society in the eighteenth century, life insurance became a collateralizing device that “helped to lessen the costs of credit by reducing the risks of lending, thereby attracting more capital into the financial marketplace” (Clark 1999: 9). Thus, from its early uses, insurance became a way to collateralize loans. This intertwining of credit and insurance is not unusual in

123 The specific reasons given in this LIC women’s campaign TV commercial for being insured include: “I’m not worried about the future”; “I take my own decisions;” “I contribute towards our home loan EMI [Equated Monthly Installments];” “I won’t compromise on my child’s future;” “I contribute to my family’s financial health as well;” and “I can retire whenever I want to.”

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contemporary everyday credit practices, including insurance sold for credit cards and mortgages.124

The lack of material collateral in providing credit to the poor has been one of the primary reasons for microfinance. In place of material capital, social capital through the use of Joint Liability Groups (JLGs) is supposed to provide adequate assurance to lenders that they would be able to recuperate their capital in the case of a default (See Chapter 4).

Nevertheless, a growing number of MFIs, including DENA, have moved from the JLGs to the Individual Liability Method (ILM). The ILM means that while the individual is liable for repaying the loan, the group structure is retained as a way of reducing the transaction costs of lending to the poor (Giné & Karlan 2011). Under ILM, the group is no longer responsible for paying back the loan of the individual. Although the default of one borrower can have negative consequences for the perceived creditability of the group for subsequent loans, the group is not contractually obliged to pay back the loan of the defaulting borrower. Moreover, there is increasing evidence from studies of microfinance that it is not always social capital from the group (whether pressure or support) that induces people to pay back, but that it is the incentive of future loans that ensures people continue to maintain a good credit history (Bond & Rai 2009; Sadoulet 2005). The argument is that it is the “non-refinancing threats” (Armendariz & Morduch 2000: 203) on the part of MFIs that induce borrowers, expecting future loans, to repay.

124 In March 2012, UK’s Financial Services Authority ordered banks and insurance brokers to inform customers that they may have been mis-sold payment protection insurance (PPI) for credit cards, personal loans or mortgages. According to a Financial Times report (Moore 2012), many of these policies were tacked onto the loans without the customer knowing or needing them. The letters from the bank are meant to inform customers that they can reclaim the premium if they were mis-sold insurance.

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In my own fieldwork, loan officers repeatedly pointed to this aspect, particularly as the crisis tightened their ability to offer larger subsequent loans. For example, one morning as I arrived at the branch office, Anand (BM) was explaining to his staff that he had just received a message from the head office that they would have to stop disbursals of all new loans due to the lack of liquidity. This meant that not only would they not be able to take on new borrowers, but also existing borrowers would not be able to get new loans.125 Throughout the rest of the day, as we made the rounds to the group meetings, whenever the borrowers would ask about new loans, Anand would tell them it was a new policy. On occasion, when the women challenged him, saying he was just saying that without sufficient reason, or that he was misleading them, he would pull out his mobile phone, reading aloud the English text message from the head office: “Stop all disbursals until further notice.” Exhausted from this repeated conversation, on our way back to the office, Anand said: This is the problem with no new loans; there will be no motivation

[for the women to repay]. This is going to ruin [noshto kore debe] the groups.” High rates of loan recovery required that women believe they would get future loans rather than social pressure. If they no longer believed that the MFI would provide loans in the future, they would not be motivated to repay their current loan. In other words, with the shift to the ILM, social capital is no longer the substitute for material capital in lending to the poor. Yet the MFI cannot lend without some kind of risk management strategy. If social capital is no longer the basis of collateral in microfinance, what then is being collateralized that enables MFIs to continue to take the risk of lending to poor borrowers?

125 The day before, on February 14, 2011, the Times of India reported that banks had refused to extend lending to MFIs beyond what they had committed to by December 30, 2010 at a meeting between MFIs and the Indian Bankers’ Association (Singh 2011).

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Life insurance, as demonstrated in the previous section, enables people to both reduce and embrace risk. The life insurance policies that microfinance borrowers take out

(often without an option to do otherwise) likewise enables MFIs to continue to lend to individuals—to take the added risk of lending to the poor—while simultaneously offsetting this risk through insurance. Yet insurance is also about a certain understanding of temporality; of relations between the past and present to the future. Intertwined with risk analysis, insurance practices also lead to a what Anthony Giddens terms the

“colonization of the future:”

The ‘openness’ of things to come express the malleability of the social world and the capability of human beings to shape the physical settings of our existence. While the future is recognised to be intrinsically unknowable, and as it is increasingly severed from the past, that future becomes a new terrain—a territory of counterfactual possibility. Once thus established, that terrain lends itself to colonial invasion through counterfactual thought and risk calculation. [1991: 111]

Insurance comes to give new meaning to people’s lived present, as death looms in the near future—the one year period of the loan.

The consequences of this colonization of the future are often troubling, as experienced by borrowers who are denied loans on the seeming overdeterminedness of the future. Take, for instance, the case of pregnant borrowers that arose during one of my visits. We were at a meeting where a young woman spoke to Samit (LO) about closing her account. As she did, she expressed her frustration with not being allowed to take a loan:

I need the money right now, and I would take a loan. What is the point of waiting? Why should you not get loans because you are pregnant? You [speaking to me] have to tell them [the head office] that this is a bad rule. Do you think that my husband would not take responsibility if something happened? Of course he would continue to pay back! This is the time that you need money the most.

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The other borrowers nodded in agreement, and Samit made no real attempt at responding to her argument. Note that incorporated in her statement is the knowledge of “something happening.” The possibility of death as a risk is acknowledged in her statement, as is her insistence that her husband would continue paying in such a case. The point of life insurance would be to cover this risk, but DENA is careful not to overextend credit (and insurance) to people they deem already high risk. The problematic formulation of pregnant women as high risk is not necessarily unique to Indian microfinance, given the controversy in the US in 2009 over health insurance companies deeming pregnancy to be a “pre-existing condition” for women, and effectively charging higher premiums based on gender.126

In another case, I asked a different loan officer what he looked for when giving a loan. He listed the usual: age proof, address proof, documents. I asked him about the age proof and why they needed it. He replied: “We only give loans to women from the ages of 20-50.” “Why?” I inquired. “Well, there’s the usual, you know, people get sick or can’t attend meetings, and…” he trailed off. The unsaid here was that older women would have higher mortality rates. In fact, death was often left unsaid in discussions about life insurance. As Anand, going over the details of life insurance to a group stated:

“If you or your guarantor—the person in your joint photo—dies—and we don’t like to think of these things—then you don’t have to pay off the loan.” Without being spoken of, or by referring to it as “something,” life insurance constantly signals the possibility of death, suffering and loss in the near future. Geeta Patel describes the purchase of

126 A 2009 report from the National Women’s Law Center in the US found that insurers in the individual market reject women based on what they deem “pre-existing conditions” which can include pregnancy, previous C-section, being a survivor of domestic violence or receiving treatment for sexual assault.

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insurance as the “desire for care, hope for change and intimacy through loss” (2007: 110).

In other words, it is only through loss—whether of a person, of health, of property—that one can access insurance and gain benefits. Similarly, for Ewald, “what is insured is not the injury that is actually lived, suffered and resented by the person, but a capital against whose loss the insurer offers a guarantee” (1991: 204). In this formulation, the loss cannot be compensated; it cannot be transformed into a financial value. However, following Ewald, insurance can be understood as being about managing the risk of something else to start with: capital itself. What matters is not the loss of life (or health) here, but the capital that is inherent to the healthy, laboring body.

To return to an earlier question then, what is it that is being collateralized when life insurance is taken as part of credit? It is the capital possibilities of the living, laboring borrower. For poor borrowers who do not have material collateral, it is the possibility that one can always work to pay off a loan as long as one is alive that enables MFIs and banks to take the risk of lending without material collateral. However, I would like to take one step back. In positing life insurance as collateral for microfinance borrowers, I examine the idea of collateral.

The basic definition of collateral is property or assets that that a debtor puts up in order to secure a loan. In the case of default, the creditor can seize the collateral in its place. Collateral addresses the risk of a market exchange that occurs over a period of time. As Annelise Riles points out, in the duration of this exchange the fate of the two parties—the creditor and debtor— “are intermingled. Their fortunes influence one another, and their actions have consequences for one another” (2011: 163). Thus, a lender is concerned about the well being of the borrower insofar as she can repay the loan—the

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risk that the lender has taken in order to make a return on interest. Collateral becomes a tool for “foreclosing those uncertainties, those risks. Collateral is a tool for placing limits on those mutual entanglements” (ibid: 164) [emphasis in original]. In other words, posting collateral becomes a way of ensuring a return of some sort to the lender even if the borrower defaults on the loan. Yet given the temporal dimensions, ownership of the collateral is not clearly defined: “collateral is a kind of temporally delineated commons…

In the near future—that is, for a set period of time in the future delineated by the time when the debt is to be repaid—there are two hands on the baton” (ibid: 165).

Nevertheless, it is the creditor, not the debtor, who is in a more powerful situation in this relationship, for the debtor cannot escape the debt obligation without paying at least the collateral (ibid). Given this analytic framework for understanding collateral, what are the consequences for using life insurance as de facto collateral?

Following Ewald and Patel, I have argued that what life insurance is not the injury or loss, but the circulating capital value of the loan. When microfinance borrowers buy life insurance as part of the loan, there is no compensation of the experience of loss itself.

What then is it that it insures? Primarily, it is the recovery of the loan by the creditor. Life insurance comes to stand in as the capital that the borrower has “posted” in the absence of material collateral. Thus, following Riles, for the duration of the loan, both the MFI and the borrower are invested in the collateralizing device: the life insurance.

The group met in Jaya’s modest one-bedroom apartment. The meeting was in the bedroom, though by the time everyone arrived, the group spilled into the hallway. Spread out on the bed were numerous notebooks with the name of a private school. “My son’s just been admitted,” said Jaya, indicating the pile of books. As we waited for the other

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women to arrive, she asked Anand (BM) if DENA offered any educational loans. “We’ve just enrolled our son to school, and its been an expense,” she explaining her need for a loan. As we were waiting, Jaya brought out her passbook as well as that of her sister, who also belonged to the group. “Why isn’t she here?” demanded Anand. “Her husband is very sick. He has cancer,” replied the woman. “There isn’t anyone else and she has to look after him. He hasn’t been able to eat anything recently…” she trailed off. “Have they known for long?” asked Anand, picking up the passbook and opening it to the photo.

“This is him, right?” The woman nodded, “They’ve known for about two years and he’s been getting worse. It’s been very expensive.” Anand held the book up for me to see the joint photo of the woman and her cancer-stricken husband, before making a quick note in his book.

The moment marked the reality that loans from microfinance are not typically for building or expanding business. Both sisters needed their loans for other everyday necessities: education and healthcare. While sympathetic, Anand’s quick movement from learning about Jaya’s brother-in-law’s condition to picking up the passbook marked the way in which re immediately recognized the connection between the illness and its effect on the borrower’s loan. As the loan’s guarantor, he was covered by life insurance.

Nevertheless, as the primary income earner, his illness could affect the loan recovery. For collateralized life, the implications of an unhealthy body are highly problematic. In making this observation, I do not suggest that the MFI staff with whom I worked ever preferred the death of borrowers or their guarantors. However, the financial preemption of risk through life insurance can complicate the relationship between a costly life and an insured death.

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On Suicide

In October 2010, the Society for the Elimination of Poverty (SERP), a service- delivery organization under the Department of Rural Development, Government of

Andhra Pradesh, prepared a report on alleged harassment of microfinance borrowers. A list of victims of harassment, compiled by SERP, was obtained by Microfinance Focus

(2010), a website dedicated to microfinance related news. Of the 123 documented cases, there were 54 microfinance-related suicides. Suicide and attempted suicide cases from this report included the following:

Rs. 18,000 was taken as loan, because of the harassment of the company Mr. Venkanna committed suicide. [sic] Company [MFI] has taken away the TVS scooter of Venkanna and the house was locked by the company workers. Task Force committee verified the case. Banoth Bujji wife of Venkanna filed FIR [police report].

Rs. 15,000 was taken as loan. Company workers asked her to do prostitution for repayment of their loan. MFIs abetted to commit suicide. She was treated in MGM hospital in Warangal.

Rs. 16,000 was given as loan and created fued [sic] in the family, between wife and husband about the repayment, with the unbearable harassment Manjula committed suicide, but the case was treated as domestic violence.

Erika Kinetz (2012), reporting for the Associated Press stated that over 200 people committed suicide in Andhra Pradesh in late 2010. I have not been able to find a primary source verifying this number, which was obtained through internal documents from reports commissioned by MFIs. In February 2012, the Andhra Pradesh government reopened investigations into suicides related to SKS following the Associated Press report. Yet, as the critiques emerged—and continue to emerge—there is a striking factor: microfinance-related suicide seemed to become an Andhra Pradesh-specific situation.

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There are perhaps three dominant reasons for this regional focus: First, Andhra

Pradesh, and South India more generally have one of the highest suicide rates in India and globally (Aaron et al 2004).127 Second, Andhra Pradesh at this point had the highest levels of microfinance penetration in India, including a large number of the major microfinance players headquartered in Hyderabad, the state capital. Third, there was the state government’s involvement in pursuing the case against MFIs. As described in

Chapter 3, the Andhra Pradesh government—as exemplified in the SERP report—took a proactive step in attacking MFI practices. MFIs and their supporters in turn critiqued the

Andhra Pradesh government for politicizing commercial microfinance, while promoting the government-sponsored microfinance initiatives. Though the media, politicians and regulators focused on the Andhra Pradesh crisis, I found over the course of fieldwork that microfinance-related suicide was prevalent, if less visible, in Kolkata. As one borrower, interrupting an MFI staff member’s recounting of the Andhra Pradesh case observed:

“there are suicides here as well,” going on to recount the case where the husband of a borrower had recently drunk poison.

We were headed to a group meeting in the north of the city, near Clive House, once the residence of Lord Clive, the British officer who defeated Siraj ud-Daulah, the last Nawab [prince/governor] of Bengal in the Battle of Plassey in 1757. Like Clive

House, which had become a makeshift shelter for Bangladeshi refugees, many of the houses in the area were old and crumbling. It was early and the first meeting of the day, though there were a large number of absences from the group. Displeased with the

127 See also Joceylyn Chua’s (2009; 2012) and Murphy Halliburton’s (1998) work on suicide in the Southern state of Kerala, which paradoxically has the highest suicide rate in India, despite being a model for development with high rates of education, and life expectancy.

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turnout, Putul, the branch manager, demanded where everyone was. “It’s the older members who don’t come,” said one woman. “You know, mostly people that Shilpa-Di had brought in,” she added. I noted some tension in the group at the mention of Shilpa, but I thought it was a not an uncommon situation where members did not get along. Later that day, as Putul and I were walking back from a house verification, I asked her why there were so many problems with the earlier group. Putul responded:

You know they mentioned Shilpa-Didi? Well, the meeting used to be at her place and she had started the group. But she always had problems paying back the loan—her husband didn’t work, and she had a number of loans. She had brought people in, but a lot of times, money would go missing, and it was usually attributed to Shilpa-Didi. She committed suicide [suicide koreche] recently. Of course, her loan was covered by the insurance, so they didn’t have to pay the rest of it off, but there are the others that she brought into the group who sometimes don’t turn up or pay. So we’re waiting for them to finish this loan cycle—they probably won’t get another loan. We’re going to try to move the center away from here—maybe to the house where the woman we just visited lives. She’s said she has some more women in her neighborhood who want to borrow, so they can start another group and we’ll disband the older one.

I asked why Shilpa had committed suicide, and whether it because she was under pressure from all the loans. “Her husband didn’t work, and they had problems,” answered

Putul.

The MFI staff suspected that Shilpa had taken what was termed a “syndicate loan,” where one borrower has other people take loans on her behalf, sometimes for a fee, or sometimes on the understanding that she will reciprocate when necessary. However, the syndicate borrower would still be servicing all of the loans simultaneously. Thus, one borrower could end up with Rs. 40,000 loan if she and three other borrowers got even Rs.

10,000 (on the low end) each. This means that at a 12.5 percent flat interest rate, the syndicate borrower must pay Rs. 1,000 every week to service four loans (i.e. Rs. 250 per loan) or Rs. 4,000 every month—a significant debt burden for borrowers whose monthly

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income may be about Rs. 10-15,000.

Yet when I asked about whether the debt was the reason for the suicide, Dolly attributed it to other reasons: Shilpa’s husband’s unemployment, and marital arguments.

On a methodological note, I did not follow-up directly with Shilpa’s family on her suicide. Given my affiliation with the MFI, I did not want cause any added stress to the surviving family. Nevertheless, there is a certain impossibility in understanding the reason for Shilpa’s suicide, because it is understood ex post. That is, Shilpa’s suicide, like many of the other microfinance-related suicides, is read into the existing social and cultural narratives of death and suicide.

In her seminal piece critiquing Subaltern Studies, Can the Subaltern Speak?

Gayatri Chakravarty Spivak (1988) analyzes the case of Bhuvaneswari Bhaduri, who committed suicide when she was unable to go through with a political assassination in the armed struggle for Indian independence. Spivak observes:

In this reading, Bhuvaneswari Bhaduri’s suicide is an unemphatic, ad hoc, subaltern rewriting of social text of sati-suicide as much as much as the hegemonic account of the blazing, fighting, familial Durga. The emergent dissenting possibilities of that hegemonic account of the fighting mother are well documented and popularly well remembered through the discourse of the male leaders and participants in the independence movement. The subaltern as female cannot be heard or read. [1988: 308]

For Spivak, while the female suicidal figure is read in the masculine construction of the warrior goddess Durga, her choice to commit suicide while menstruating and its implicit meanings remain obscured. As Spivak explains, this timing puzzled people until the discovery of her membership in the militant group, for it symbolized the fact that it was not the case of an illicit pregnancy. Yet, where the suicidal woman in India always- already exists in the narrative of sati (widow immolation), her death is a “displacing

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gesture” (ibid) that reverses the interdict of menstruating (and thereby ritually impure) widows from immolating themselves.128 Nevertheless, the hegemonic, masculine narrative forecloses the multiple meanings of Bhuvaneswari’s death. Recovering the subaltern voice of this suicidal figure always remains partial.

Recognizing the impossibility of retrieving the subaltern voice of women who have taken their own lives, I do not attempt to disentangle why particular individuals committed suicide in my analysis. Each case is tragic and without sufficient information on each of the women, such explications would not do justice to the individual lives. I am nonetheless interested in is the circulation of narratives of suicide in India and its social consequences. That is, against the grain of suicide as life-negating, I am interested in the

“social and political productivity of suicidal practices” (Chua 2009: 17) [emphasis in original].129 In other words, I am interested in understanding what James Staples argues are the “cultural contexts in which suicide becomes an meaningful act” (2012b: 20). In the South Asian context, suicide is incorporated into local understandings of sacrifice, honor and shame. The focus on social productivity is not to glorify suicidal practices; rather, it is to observe that they can “engender or re-animate forms of social life” (ibid:

197). Or, as Angela Garcia, following Wittgenstein argues that suicide is “a form of life;” that “life on the verge of death, or life ended by suicide, is similarly not alone but

128 Lata Mani (1998) and Rajeswari Sunder Rajan (1993) on the colonial and postcolonial discourses of sati, particularly the civilizing mission in banning the practice. 129 In his classic study of suicide, Emile Durkheim (2006 [1897]) argued that there are social causes for suicide. He identified four types of suicide, 1) egoistic, 2) altruistic, 3) anomic, and 4) fatalistic. While egotistic suicide occurs due to excessive individualism, altruistic suicide is a result of excessive integration into society. Anomic suicide occurs at times of social change, when there is a flux in social regulation, while fatalistic suicide is the result of oppressive social conditions. While Durkheim’s analysis shows why individuals commit suicide given social conditions (e.g., the cause), I am interested in how the discourse of suicide circulates and its social productivity.

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embedded in a set of intimacies” (2010: 152). Moving beyond the analysis of how social conditions shape individual decisions to end life, these authors argue for an understanding of how suicidal events are deeply intertwined in the everyday lived realities and socialities.

Lisa Stevenson, writing of conducting fieldwork about suicide among the Inuit in

Nunavut, Canada has observed astutely:

But for anyone who lives with it, including the anthropologist, suicide is no longer just a problem about which something must be done, but a wound… I soon became less concerned with improving the techniques of suicide prevention and more interested in understanding the affective and normative fields in which suicide, and the ‘lifesaving’ interventions it inspires, occurs. I hope, ultimately, that such an approach clears the ground for an alternative conceptualization of what it might mean to attend to the pain of others. [2009: 58-59].

As narratives of suicide circulate, they apportion blame, and often onto the suicidal figure. The conceptualization of suicide as a wound calls for a closer attention to the conditions that frame the suicidal event. Stevenson argues that suicide among the

Canadian Inuit is “a response to the pain of living in the future’s wreckage—a now that becomes unlivable” (ibid: 65). At such moments, the act of listening— “when life is radically in question—means taking uncertainty about life very seriously” (ibid: 65).

Such attention calls for a shift in the analysis of suicide from the event of the death itself to the conditions—past, present and future—that cause intense social suffering.

Writing of the anthropology of pain, Veena Das (1995; 2007) observes the limits of language in communicating pain. However, pain does not destroy communication; rather, “it makes a claim on the other—asking for acknowledgement that may be given or denied” (Das 2007: 40). Acknowledgement of pain, for Das, is a moral act; it demands intersubjective communication that can transcend the limitations of language. Similarly,

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writing of medical symptoms, Joao Biehl and Amy Moran-Thomas argue that symptoms can be more than markers of a disease, but can also be the “means of articulating a relationship to the world” (2009: 282). Even for conditions that are unspeakable, the symptom marks a way for the individual to communicate with another—a means of

“establishing oneself as part of a matrix in which there is someone else to hear it [one’s voice]” (ibid). To express pain is, therefore, to demand recognition. The western tradition of “the incommunicability of pain” occludes the significance of “how acknowledgment of pain, as a cultural process, is given or withheld” (Kleinman et al. 1997: xiii). The authors suggest that the incapacity to acknowledge another’s pain signals a kind of political abuse and blindness to moral sensibility. The analysis of suicide then rests between the impossibility of retrieving the subaltern voice of the suicidal figure, and the need to acknowledge pain, to listen and attend to the suffering of others, even when it is not voiced. Where dominant narratives about death can foreclose the acknowledgement of certain experiences of living, the analysis of suicide must address both the voiced, hegemonic narrative about what it means, before arriving at the unvoiced—the subaltern—which perhaps cannot be recovered in its entirety, but can be attended to in pieces, always fractured and incomplete.

There had been a suicide in the idyllically named Picnic Garden neighborhood of

Kolkata. News of the death had traveled to the group meeting I was attending at the eastern edge of the city. One of the group members had heard of the news through another MFI. After the meeting, I asked Anand (BM) if he knew of this case. Anand nodded, “Yes, she had a loan from DENA as well.” In addition to having loans from multiple MFIs, she had a syndicate loan, with five people taking loans on her behalf. A

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few weeks later, her story reappeared at another meeting. One of the group members had loaned her Rs. 3,000. “She said she was going to buy an ambulance. But just the next day she went and put a rope around her neck [Golaye dori badlo].” Her blunt manner of recounting the story surprised me; yet, as with Farah who had loaned money to Amina in the opening vignette of this chapter, her sympathy was tempered by the fact that she would not recover the personal loan she had made. The Picnic Garden suicide did not make the news, a fact unsurprising for a poor woman from the slums. But what I was struck by was the matter-of-fact way that her death—and the microfinance suicide cases in general—was discussed among other borrowers and MFI staff.

When I asked Dinesh, a loan officer, about the suicide cases, he responded with the following:

The AP [Andhra Pradesh] crisis and suicides happened because people took loans larger than their capacity. The fault is with those who take and not those who give. The situation now is that if we don’t give loans, people will commit suicide instead. The motivation for suicide is that people took loans for two lakhs [200,000]. They don’t have the capacity to repay, and so they commit suicide. If you can’t utilize the money, then you have to commit suicide. It is the fault of the taker.

The reason for borrowers committing suicide is recast as one of individual responsibility.

The morality tale is that one should only take what one can pay back. His matter-of-fact statement: “they don’t have the capacity to repay, and so they commit suicide,” was jarring. What is striking about Dinesh’s commentary is that the reasoning is also turned back on itself: people will commit suicide for not getting a loan. Yet if there is little questioning of why borrowers were given these loans in the first place, there is even less concern as to why the women needed loans beyond their “capacity.” To borrow beyond

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what you can repay is the fault of the borrower, just as the obligation to return is an absolute.

The response to failure in microfinance practices is one that is often glossed over in the representation of successful entrepreneurs. In India, the neoliberal promise of a consumerist future is repeatedly made unattainable to millions of people living in enduring conditions of poverty. Failure in such conditions has made suicide thinkable: “a possible and appropriate response to being shamed, a means of communication when other means had failed, and a release from an otherwise intractable status quo” (Staples

2012a: 141-142). As Julie Livingston writes of Botswana, what is at stake in that economy with new forms of investment, risk and self-determination is the “loneliness and rage… when such strategies fail” (2009: 654). Or, as Julia Elyachar observes in Cairo, every failure of empowerment debt reinforces the legitimacy of the market while placing the blame squarely on individuals:

Even when enraged at others (or perhaps especially when enraged at others), these subjects [the poor “entrepreneurs”] recognized that their failures on the market were their failures—to be good entrepreneurs, to understand marketing, or to force the bank to release their second installments. If they were failures, then others must be better than they, and more deserving of the privileges they themselves had failed to accrue. [Emphasis in original. Elyachar 2005b: 211]

In this celebration of the market and condemnation of failed entrepreneurs emerges a new form of loneliness and marginality. It is a marginality that turns inwards to the individual rather than locating problems in the wider social structures.

As David Graeber (2011a) argues, insistence on debt repayment is constructed as a moral rather than economic argument. Monetary debt, unlike other forms of obligation, can be precisely quantified:

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This allows debts to become simple, cold, and impersonal—which, in turn allows them to be transferable. If one owes a favor, or one’s life, to another human being—it is owed to that person specifically. But if one owes forty thousand dollars at 12-percent interest, it doesn’t really matter who the creditor is; neither does either of the two parties have to think much about what the other party needs, wants, is capable of doing—as they certainly would if what was owed was a favor, or respect, or gratitude. One does not need to calculate the human effects; one need only calculate principal, balances, penalties, and rates of interest. If you end up having to abandon your home and wander in other provinces, if your daughter ends up in a mining camp working as a prostitute, well, that’s unfortunate, but incidental to the creditor. Money is money, and a deal’s a deal. [Graeber 2011a: 13-14]

The morality of monetary debt repayment is absolute; the burden of failure is transferred to the debtor, who must repay regardless of its costs on her quality of life, regardless of whether the loan may cost the borrower her life.

At the 2011 annual conference convened by Sa-Dhan, the industry association of microfinance in India, one of the speakers, the head of a large MFI, noted the “tsunami” the sector was facing in the wake of the Andhra Pradesh crisis. During the question and answer session, a participant angrily demanded: “When my own existence is at stake, then there is a tsunami [of concern]. Why was there not a tsunami when people were committing suicide?” The commenter had highlighted a key factor in the response to suicides in microfinance: Why had they became and issue only when it affected the industry’s image?

A Death is Announced: Peepli Live and the Case of Farmer Suicides

In 2011, Mamata Banerjee came to power as Chief Minister of West Bengal. The slogan for her Trinamool Party was Maa, Mati, Manush (mother, soil, people), as she championed the cause of poor farmers in the state. In January 2012, India Today reported that 29 farmers, particularly in the fertile Burdwan district, had killed themselves over

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debt worries in the past few months (Bhabani 2012). Of the cases reported, 30 year old

Ghulam Mustafa, had Rs. 40,000 from a microfinance institution, but his yield was of poor quality and he was unable to sell his harvest. Despite its prevalence in other states, the issue of farmer suicides had not been significant in West Bengal. Banerjee dismissed the cases as not significant, stating: “They had personal problems, family issues, they had huge personal loans, running into even a crore [ten million]. And some of those being mentioned have died of diseases, and have not committed suicide” (Economic Times

2012a). The ensuing back and forth between Trinamool and the Communist Party reflected the ways in which farmer suicide in India has been politicized. This is not to say that farmer suicides are not an important problem; rather, I want to explore why farmer suicides in particular get politicized.

Farmer suicides, particularly in the states of Andhra Pradesh, Karnataka, Kerala, and Maharashtra have received widespread attention. Since 1997, an estimated 200,000 farmers have killed themselves, and in December 2011 the National Human Rights

Commission of India demanded reports from three of the states on the issue.130 The privatization of seed production has led to increasing levels of indebtedness for farmers who have to buy hybrid seeds as well as chemical fertilizer (Shiva et al 2000). While these trends have emerged since the 1970s and the Green Revolution, they have intensified since the 1990s with the liberalization of the Indian economy. Moreover, while technological innovations have led to a rise in the production of cash crops such as

130 The National Human Rights Commission (2011) sent notices to the state governments of Maharashtra, Andhra Pradesh, and Kerala, following media reports on farmer suicides in the state. Media reports suggest that 680 farmers committed suicide in six districts of Maharashtra in 2011, 90 farmers in six districts of Andhra Pradesh between October and November, and 8 cases in Kerala’s Wayanad district in November.

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cotton, these yields have fluctuated annually, depending on variations in rainfall, often leading to farmers unable to pay off their debts (Mohanty & Shroff 2004). Small farmers have also become particularly vulnerable to price shifts with the agrarian integration into global markets since the 1990s (Mohanakumar & Sharma 2006).131 While the problem of farmer suicides has been politicized and publicized in the media, the discourse itself have been shaped by state-defined categories and policies (Munster 2012).

In 2008, the UPA government announced the Rs. 600 billion Agricultural Debt

Waiver and Debt Relief Scheme through then Finance Minister P. Chidambaram’s

Budget Speech (Ministry of Finance 2008; Reserve Bank 2008). The scheme would waive all loans overdue as of December 31, 2007 and remained unpaid for marginal farmers (holding up to 1 hectare of land), and provide a one-time settlement through a rebate for other farmers. By signing the debt waiver or debt relief, farmers would be eligible for fresh agricultural loans. Conservative critics of the scheme argued that this populist measure would ruin the “credit culture” of farmers by forgiving loans (Anup

Roy 2012). Although the program has not been renewed in subsequent budgets, these critics argue that the expectation of future waivers reduce the incentive for loan repayment among small farmers. Other critics have noted that the scheme fails to address the indebtedness of poor farmers who had borrowed from moneylenders and not from the formal banking sector, which is overseeing the waiver.

The extent to which farmer suicides have become a hot button political issue was reflected in the 2010 release of Peepli Live. Directed by first-time director Anusha Rizvi and produced by Bollywood superstar Aamir Khan, Peepli Live is a dark comedy about

131 Ronald Herring (2005) has argued for a more nuanced understanding of the use of GMO crops by examining the ways that they are used and understood by farmers.

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farmer suicides, and government and media response to it. The film opened over

Independence Day weekend in August to critical acclaim, and box office success, grossing around Rs. 402 million—a significant feat for a small-budget movie with a largely unknown cast. Moreover, there was a special screening for Prime Minister

Manmohan Singh and other members of Parliament. Although successful with urban audiences, farmers from the Vidharbha region of Maharashtra protested the satirical film as insensitive to families of farmers who had committed suicide (Tehelka 2010).

Yet one of the ironies is that while it was hailed as a film about farmer suicides, there is no suicide in Peepli Live, although there are two deaths. The film is set in the fictional village of Peepli in a fictional northern state. Two brothers, who are facing the loss of their farmland to the bank, come up with the plan for one—the younger and easily manipulated Natha—to commit suicide in order to access government support for families of farmers who have killed themselves. However, when word of this plan gets out via a local reporter, Natha becomes the center of a political and media firestorm.

Throughout the film, however, there is a silent figure that constantly appears in the background: a landless farmer, laboring away on backbreaking work. As the elite, urban media reporters focus on whether or not Natha will commit suicide, Rakesh

Kapoor, the young local reporter who first broke the news about Natha, starts to notice the wordless farmer. He wants to find out more about this farmer, but is dismissed by his idol, the urbane reporter Nandita, who uses him to try to interview Natha and his family.

Eventually, Rakesh learns that the silent farmer has died of starvation and overwork. The second death is that of Rakesh, who disillusioned, but still in pursuit of the suicide story, ends up in the barn where Natha is hiding from politicians and the media. Rakesh is

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killed in an accidental fire in the barn, but confusion over the body leads to the assumption that it is Natha who is killed. Natha escapes to the city, believing that his family can now claim compensation for his supposed death. This too falls apart, as the accidental nature of the fire means that it was not suicide, and therefore his family is not eligible for relief. In the end, we see Natha working in a major city as a construction worker; another dispossessed farmer who must labor silently.

In my reading of Peepli Live, what is key is not the satirical story about the planned suicide, but the silent tragedy that goes by unnoticed. The film gestures at this issue through the deaths of the already landless farmer, and the reporter who tries to tell this story. Nevertheless, what is remarkable is perhaps that life imitates art. In its reception, the story of the landless farmer is almost erased, despite his presence throughout the film. In its reviews, Peepli Live is a story about Natha and farmer suicides.

The structural parallels between the dispossessed landless farmer, and Natha’s final transformation into a dispossessed landless farmer is an extremely powerful critique of contemporary India. Moreover, the political focus on farmer suicides has tended to underestimate its prevalence in urban areas, which have encountered liberalization with the downsizing of public sector workforce (Parry 2012). Yet, the “horror” (Asad 2007) that the suicidal event evokes renders invisible the much more mundane forms of

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existence that can make life unlivable.132 To say this, I do not mean to say that suicide is not tragic, but political and media attention on suicide alone transforms the everyday deaths at the margins matter of fact, not something that must also be attended to.

On the one hand, financial technologies, such as insurance, work to mitigate future risks. On the other, this emphasis on hedging future risks can render the future more certain than the present. Debt-related suicide leading to financial reprieve may be the final, most tragic end to the impossibility of making ends meet in a condition of constant uncertainty. Yet, given this “colonization of the future,” (Giddens 1991) through risk assessment, how do we contend with the precarity of the present?

Temporal Disjunctures of Precarious Labor

Mukul (BM), Tania (LO), and I passed a Sitala temple on the way to the meeting.

The goddess of smallpox is popular in the slums of Kolkata, where she is worshipped— with the eradication of smallpox—to secure health of its inhabitants (Chatterjee 2004;

Kaviraj 1997).133 It was a telling sign of the uncertainties of everyday life that confront

132 Writing of suicide bombing, Asad argues that horror is “a state of being,” rather than a “matter of interpretation” (2007: 81). Horror, argues Asad, “requires no discursive effort” (ibid). However, there is not the equivalent horror liberal democracies of the West toward state-sanctioned killing of civilians in war, as there is towards suicide bombers. What horrifies, “is not just dying and killing (or killing by dying) but the violence appearance of something that is normally disregarded in secular modernity: the limitless pursuit of freedom, the illusion of an uncoerced interiority that can withstand the force of institutional disciplines” (ibid: 91). 133 As Kaviraj argues, “Even gods in modern Calcutta are divided in strictly intelligible class terms” (1997: 103). While the educated Bengali middle class worship Durga, “the highly aestheticised goddess of all power, a redemptive, avenging form of Shakti… the lower-class dwellers of Calcutta’s endless slums worship appropriately lower forms of divine life like Shitala, the goddess of smallpox, or Manasa, goddess of snakes. These deities are treated with appropriate contempt by members of the middle-class elite” (ibid).

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the slum neighborhoods. When we arrived at the meeting center, Panchali, another of the loan officers, was already present. As we sat down, some of the members started whispering to Mukul that one of the members had received a loan from another MFI. As the meeting commenced, it became apparent why this was a problem: the same member,

Ruma, had refused to repay her loan to DENA.

Ruma, introduced in Chapter 4, had been a borrower for three years. She had never had a problem before, but had recently become become unable to repay her Rs.

22,000. Her financial situation had changed when her husband had to retire from his job.

With only one of her two sons employed, making just Rs. 500 per week, she maintained that she could only afford to repay Rs. 1,000 per month, or less than half of what she was supposed to pay. The DENA staff wanted the other members of the group to cover

Ruma’s weekly payment, and she would owe the members the monthly payment. In effect, they wanted the group to refinance Ruma’s loan. However, not only would this mean that Ruma would become heavily indebted to other borrowers, the other members were also unwilling to take the risk. They pointed to the rumors of Ruma’s new loan to argue that she had enough money to pay off her existing loan. Other than explaining what she could pay, Ruma remained largely silent.

With the meeting having run well over its set time, and still there was no resolution to the issue. But the DENA staff had come prepared for this very situation.

Mukul instructed Panchali to stay with the group until they resolved the issue, and that nobody would be let off until then. Many of the women complained about this situation, with children needing to be picked up from school, or food to be cooked or taken off the stove. On our way back from the next meeting, which was just nearby, Mukul checked

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back in on the meeting. The women had been let go. “We just needed to put some pressure on her,” explained Mukul about the whole event. “We got news that she got a loan from Bandhan and that she’s paying back at other places. The others told us to put some pressure on her. She can pay; she’s just trying not to.”

The loss of her husband’s income, one son’s uncertain income, and another’s unemployment marked the realities of Ruma’s life. Trying to disentangle the “real” story of whether Ruma was trying to not pay her loan to DENA or not is not my goal in recounting this event. Rather, it is to point to the set of choices individuals have to make when there is a constant lack of money. The loan from the other MFI was seen as a possible source of repaying the DENA loan; yet, to use that loan to pay off the one from

DENA would only mark the way in which borrowers became trapped in debt cycles: borrowing from one place to pay off another. Yet Ruma’s silence as she encountered the anger of the group members and the MFI staff pointed to a dilemma: How do you pay off debts when you have no money? Moreover, her position pointed to the temporal disjunctures between the regularized repayment of loans and the everyday realities of existence in the informal economy where income is often irregular, with little to put aside for sudden fluctuations in consumption.

In my questions about monthly and weekly repayments, one of the repeated complaints of borrowers was that it did not reflect the income flows. In particular, borrowers distinguished between those who depended on monthly salaries and those who had businesses, with income that was more spread out, but also at times more uncertain.

For borrowers with monthly incomes, ensuring weekly payment meant putting aside enough money in order to ensure repayment every week, even when money became tight

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at the end of the month. For borrowers with small businesses, while income flows were more regular throughout the month, periods of bad business could severely affect the ability to repay the weekly loans. As one borrower explained the condition of repaying weekly loans, if she invested the loan in something, it would take a while to recover her investment, making it difficult to pay back the loan every week. With the current situation, she explained, the next week’s payment comes up as soon as one week is paid up. “It is like we are just taking and giving [nichi ar dichi].” The experience of the loans is less of stability and one of constant circulation.

When I asked another borrower, Payal, about her experience with microfinance loans, she explained:

We are able to increase business. We are poor people, and nobody else will give us the money. So we are able to get loans from here. We aren’t wasting [khachina] the money; we are using it to increase business. If we had larger loans, we would be able to increase business more. Weekly payments are good because there’s no money at the end of the month.

Payal’s comments mark the many ambiguities and ironies of microfinance and its form of regularized repayment among poor borrowers. On the one hand, the loan offers the opportunity to increase business, yet they do not seem to fundamentally change the problem of the shortage of money at the end of the month. Yet these loan repayments also change people’s engagement with temporality.

In his classic study of industrialization in England, E.P. Thompson traces how the development of the clock, the “small instrument which regulated the new rhythms of industrial life was at the same time one of the more urgent needs which industrial capitalism called forth to energize its advance” (1967: 69). Timekeeping technologies, therefore, not only regulated and discipline wage labor, but also helped to shape the

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moral and cultural sensibilities surrounding time. Recent anthropological and sociological work on finance and contemporary economic practices has similarly shown how conceptions of temporality are shaped by financial technologies and conceptions of the market (Knorr Cetina 2005; Miyazaki 2003; Zaloom 2009). For borrowers who must now constantly negotiate weekly payments, there is a heightened experience of the relation between time and money. Yet new forms of temporal regulation are often at odds with the realities of working in the informal economy. With regularized repayment of microfinance loans, I suggest that timely repayment constantly meets untimely expenses.

Yet Payal’s comments also emphasize the fact that they did not “waste”

[khachina] the money, but put it to use in the form of business. The term Payal used was

“taka ta khachina,” which translates literally as “we don’t eat the money” Other borrowers also commented on the fact that the loans did not go to their stomachs [pete porena]; in other words, that they did not consume the loans. The need to repay can also has physical manifestations: borrowers often described the weekly repayments as

“headaches” [matha batha]. Others said that they experience “tension” in making sure that they had enough money to repay the loans.134 Again, while this can mean an inconvenience, often there are real physical consequences for such forms of stress—what

Clara Han (2012) in her ethnography of debt in Chile explains is “neoliberal depression.”

Such language highlights the ways in which microfinance required the circulation of money; the ways in which exchange rather than use value of money is deemed central to its success. By and large, microfinance loans are meant to be “production” rather than

134 Murphy Halliburton (2005) has noted the emergence and proliferation of mental health categories such as “tension” in India as a more universal and portable term of allopathic medicine, as well as a way to describe emerging experiences of subjective illness.

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“consumption” loans, despite the overwhelming need often to make ends meet through loans (c.f. Brett 2006). As production loans, they are meant to enable borrowers to start or enhance a business. Consumption loans, on the other hand, are meant to be used, without the expectation that they will create returns in the form of profits. The productive and consumptive uses of loans align with Marx’s (1978) definition of use value and exchange value: while the consumption loan is meant to be used up, the productive loan is meant to be used only insofar as it creates more capital: it is capital that must produce more capital.

Good borrowers are those who do not simply use up their loans—even in times of need—but invest them to create more wealth in the future. It is the possibilities of a future that matters, not the present hunger, illness, or obligations. In an era of finance capital, the quest to constantly circulate money means that borrowers are expected to

“invest” and not “use” money, even if it means going hungry or being unable to pay a doctor’s bill. Yet there is always the promise that invested wealth will return with profits to the borrower. As one of his informants tells Joao Biehl in his ethnography of AIDS in

Brazil: “For now you can have the sign of Roche in your body but you don’t have the trace of rice and beans” (2007: 165). AIDS therapy without addressing the larger structural issues can fail to address the precarity of life on the margins. In the case of microfinance, for now the poor have loans, but maybe not food, medicine, school fees, or clothes for the annual festivals; that would be a frivolous use of a good loan.

The Cost of Living

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Parul wanted the meeting to end quickly. She had to rush out right after the meeting to pick up her children from school. We were in her apartment talking about microfinance—what she liked, didn’t like. “Do you like the weekly repayments?” I asked. I had repeatedly come across debates over whether monthly or weekly repayments would be better for borrowers. “Weekly is better,” replied Parul. “With monthly, you would have to put money aside to make a large payment at the end of the month. But what would happen if the children get sick? Of course I would use that money to pay to see the doctor. So it’s better to pay every week.”

Parul’s comments reflected the multiple claims on money that has been stored at home. They highlight the choices that borrowers have to make everyday when money is scarce: Do you pay for a doctor’s bill? Or do you repay the loan so you can maintain access to credit in the future for other necessary expenses? The answers to these questions are rarely about economically deterministic rational choice, but about confronting “ordinary ethics” in everyday life. Ethics, argues Michael Lambek, is an integral part of the human condition:

Human beings cannot avoid being subject to ethics, speaking and acting with ethical consequences, evaluating our actions and those of others, acknowledging and refusing acknowledgment, caring and taking care, but also being aware of our failure to do so consistently. [Emphasis added. 2010: 1]

For many of the borrowers I interviewed, the microfinance loans helped to structure the practices of care and providing for family members. Yet, moments when they were unable to do so created painful experiences of helplessness and paralysis.

At the end of a meeting, one woman hung back to ask Anand (BM) a question regarding loan repayments:

What happens if the borrower and guarantor are both sick? How can they pay

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back? Or what about if the income earner is sick, then the other person has to take care of him? In [another MFI], they let you off four weeks if that happens. But you have to make it up the rest in the next month.

Her question reflected the fact that there are few contingency plans for when illness strikes a family, particularly an income earner. Yet, as the borrower asks, illness is not just about the individual, but about the family members—particularly in the absence of affordable healthcare facilities—who must attend to the patient. Anand replied that that was a great question, but they did not have anything like that at DENA. After the meeting, however, he and the loan officer laughingly discussed the impossibility of letting people off for illness, saying that once they allowed it, people would be coming with ailments all the time. And even if they required a letter from a doctor, it would be easy enough to get one forged in Kolkata, that it would not be a hindrance.

Yet the borrower’s question points to a critical issue of managing the costs of living, where the seemingly the only certainty is that there are constant expenses. In her work on maternal love in Brazil, Nancy Schepher-Hughes shows how evolutionary theories of mothering fail to account for material scarcities in which women in the shantytown confront the death of their children. Mother love, argues Scheper-Hughes, is

“anything other than natural” (1992: 342); rather, it is shaped by the “pragmatics of motherhood” (ibid). The political economy is part of the social and cultural forces that come to shape the emotional lives of individuals. Illness was present throughout my fieldwork: many borrowers or their family members were often sick, creating difficulties in repayment. The constant negotiations between paying for healthcare and trying to make ends meet could seem highly detached from emotional care. Nevertheless, these

“choiceless decisions” (Arextaga 1997: 60) were often being shaped by the larger

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political economy and structural inequalities.

Take, for instance, the case of Aruna, her arm wrapped in a blue cast when I encountered her at a group meeting. She had broken her arm recently after falling down.

“In two hours they took Rs. 3,000!” she exclaimed. It cost about Rs. 300 just to see the doctor at the private Ruby Hospital. But her son had recently been injured as well when he had fallen into the public toilet. But with his school exams, she had to take him to school and back in a hired car. As she bemoaned her hard times, Mithun (LO) tried to console her by explaining how he liked hard times: “It just means that things can’t get worse, and good days are ahead!” he said encouragingly. Aruna raised her eyebrows and looked unconvinced.

Healthcare has been one of the main areas of privatization since the liberalization of the Indian economy in 1991. There have been massive cuts to the public sector for healthcare, along with privatization of medical care (Berman 1998; Qadeer 2000). While the Supreme Court of India has ruled that private hospitals (in Delhi) built on concessional land have to reserve 10 percent of beds and 25 percent of outpatient services for free treatment to the poor, most private hospitals have continuously failed to do so

(Times of India 2011).135 Yet, like credit to the poor, healthcare in India has been identified as an investment opportunity (O’Donohoe et al 2010). A report on emerging markets from PricewaterhouseCoopers (2007) notes:

Healthcare is one of India’s largest sectors, in terms of revenue and employment, and the sector is expanding rapidly. During the 1990s, Indian healthcare grew at a compound annual rate of 16%. Today the total value of the sector is more than $34 billion. This translates to $34 per capita, or roughly 6% of GDP. By 2012, India’s healthcare sector is projected to grow to nearly $40 billion.

135 The Kolkata Municipal Corporation has offered similar incentives to private hospitals (Ganguly 2009).

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The private sector accounts for more than 80% of total healthcare spending in India. Unless there is a decline in the combined federal and state government deficit, which currently stands at roughly 9%, the opportunity for significantly higher public health spending will be limited.

In the absence of good public facilities, private hospitals have increasingly emerged, especially in the urban areas, as the only option for the poor to get access to healthcare.

Loans, including from MFIs become ways of managing these privatized expenses for those who are often least able to afford it. Yet, the regularity of repayment required for such loans conflict with the very precarity of life at the margins.

With the popularization of the bottom of the pyramid model, as argued in Chapter

2, services for the poor, including health, education and housing, are increasingly shaped by investment interests. Such financialization of the peripheries taps into the productive and consumptive capabilities of the poor. On the one hand, private firms can extract wealth from the poor through new financial products such health or life insurance, or new educational and housing loans. On the other, the poor increasingly spend the loans and insurance to get service from private sector health providers or schools. In both cases, the everyday precarity of life for much of India’s poor remains unchanged with these new financial flows.

Chapter Conclusion

In this chapter, I have tried to show how the dilemma of collateral manifests itself with the increasing financialization of microfinance lending. Recent work on risk has shown how excessive risk-taking is simultaneously mediated by attempts to hedge or offset this risk. In the case of microfinance, the question of collateral—of managing the

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risk of lending—has always been an issue. Not only has the concept of social capital standing in for material capital been problematic, as argued in Chapter Four, MFIs have increasingly moved away from the group lending model, toward individual lending as they have “scaled up” their services. In the absence of both material and social capital, life insurance has become the new solution to the problem of collateral.

However, when considering what it is that this insurance collateralizes, we increasingly see the laboring body of the poor as central to this formulation. Yet when poor borrowers face the precarity of the present, where wages and indeed health can be subject to sudden changes, the regularity of debt repayments can cause painful disjunctures with lived reality. While the tragic cases of suicide mark moments when this pain becomes unbearable, emphasis on these deaths alone can foreclose the ways of seeing and addressing the conditions that make debt both necessary and unbearable in the informal economy.

297 EPILOGUE

Rethinking Financial Inclusion

It was toward the end of my year of fieldwork in Kolkata, when Kaveri came to me with her bank forms. She mostly did domestic work, cooking for families in the neighborhood. She wanted to make a fixed deposit at the local public bank, and needed help with the English language forms. I duly filled in the information to the best of my ability: the fine print of various interest rates and term periods was confusing even to me, and indicated to Kaveri where to sign. That afternoon, Kaveri returned with the form in hand looking despondent. The bank official had told her that they could not process her forms for the deposit. He had told her something about the interest rates, but she was not sure what was required and had left. Rather than trying to fill in the form again, I decided to accompany her to the bank.

We arrived at the bank just half an hour before closing. It was still busy, as people waited in various lines. While parts of the operation were computerized, stacks of papers and forms—reminiscent of many Indian bureaucracies—still overflowed from the desks of bank officials. Kaveri and I made our way to the back of the bank where one bank officer managed the deposits. There was no real line, as people gathered around the desk, waiting to capture the officer’s attention. As I joined this crowd, Kaveri stood back from the crowd. I managed to get the officer’s attention, and showed him the papers, asking what the problem was. It was a simple matter: the special high interest rate required writing in 366 days, rather than ticking one year. With the changes made, the officer quickly processed the forms and told Kaveri that she could pick up the deposit certificate in two days. “You’re not from here?” the officer asked me—or stated—as we were about

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to leave. “No,” I explained that I was in India for a year. “Well, let me know if you need anything else,” he offered before we left.

After a year of observing the abundantly circulating language of financial inclusion, I was struck the differences in Kaveri’s initial experience and my own privileged treatment. The quick dismissal of Kaveri on her visit alone marked the ways in which the poor experience services. It was particularly poignant because Kaveri wanted to make a deposit to the bank—she was not asking for a loan, demanding assessment of her riskiness, yet she was systematically sidelined. Moreover, as a public sector institution, the bank was an arm of the state, and one of the primary means for the government to implement financial inclusion policies. Neither did they have forms that would be accessible in the local language, nor did they make any particular effort to make them legible to people who could not read English, or understand the specificities of financial language.

This experience marks what Akhil Gupta has observed is that despite the rhetoric of inclusion, the ability of the state “to change the life chances of the poor are small unless there is a fundamental shift in the commitments of the state to the poorest and most disempowered segments of the population” (2012: 39). This fundamental shift must encompass policy implementation in ways that account for the specific forms of discrimination that the poor face in everyday life. This dissertation has examined how microfinance fits into the wider policy of financial inclusion in India. I have highlighted the ways in which microfinance intersects with the popularization of social businesses, and the idea of “doing well while doing good.” This form of what I call “ethical capitalism” marks the new ways in which the poor are incorporated into formal financial

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networks. Yet the inclusion of the poor into formal finance requires the constant monitoring of systemic risk, and of ensuring the stability of existing forms of discrimination.

Despite the problematic aspects of microfinance, I am also left with Sean

O’Connell’s observation that despite the frustration of outside observers regarding exploitative practices of doorstop moneylenders, customers often demonstrate appreciation of them. On the one hand, Kaveri’s experience of the formal sector bank is markedly different from the relationship between loan officers and borrowers, as I have traced in the dissertation. Not only do MFIs provide credit to the poor (despite higher interest rates), they do not treat the borrowers as second-class customers, as do many commercial banks. On the other, this perpetuates a system in which the poor are offered the least favorable and often highly exploitative terms and conditions.

Ultimately, by accounting for the “sense of lived poverty and the everyday survival strategies of the economically marginalized” (Fernandes 2010: 266), we can come closer to understanding the ways in which structural inequality is reproduced, often by the very measures meant to counter them. In observing how poor borrowers of

Kolkata utilize microfinance loans, I have shown that it is often to make ends meet, to pay for regular and untimely expenses. Microfinance loans then fulfill a purpose, though it is not the purpose that is so widely circulated in the popular imagination and policy circles of producing entrepreneurial housewives. Rather, it is to address not only the lack in income, but also the lack of affordable and adequate social services such as education, housing, and health. The proliferation of “micro” financial products, from credit

(including the emergence of health or education specific loans) to insurance marks the

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ways in which the poor must increasingly financially invest in a precarious future. In this dissertation, I have aimed to highlight what microfinance does and does not do— including pay for privatized education and healthcare—as an argument not for the end of microfinance, but rather as a signifier of spaces where inclusion fails.

301 BIBLIOGRAPHY

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Abedal, Rawi 2007. Capital Rules: The Construction of Global Finance. Cambridge, MA: Harvard University Press.

Abraham, Itty 1998. The Making of the Indian Atomic Bomb. London: Zed Books.

Aiyar, Swaminathan S. A. 2010. Killing Microfinance Will Help Moneylenders. Economic Times, October 24: 18.

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