BankerInIndia

On-line in the Old Town with a New Blog

BankerInIndia is now Graylightning.com.

Click here to be re-directed to the new site.

I am back in San Francisco, and after a 3 month hiatus, on-line again.
I have moved home to work for a technology venture capital firm.

I am excited to be back and happy to be closer to my family. It's nice to taste good wine and to ski and surf again.

My return to the U.S. is not an abandonment of the beliefs or interests that caused me to go overseas. I remain deeply interested in India, in economic development and emerging markets, in social enterprise and microfinance. However, I came home because I had an opportunity to learn new things at a place that was too good to pass up.

My work involves a mixture of the disciplines I've been involved with for the last three years, but on a very different playing field. I'm still in the business of financing companies, still working with entrepreneurs, but now it's with entrepreneurs who are global thought leaders in technology, and who aim to change the world on a massive commercial, not necessarily social, scale.

With my move came the need for a new blog. I am no longer a banker, nor in India. My posts from the Bay Area will differ from those on the Sub-continent.

The new site name, graylightning, is a metaphor for the biology behind the act of thinking - The electrical impulses that pass through synapses in our cerebral cortex, the gray matter that forms the largest part of our brains. Chemical synapses in this gray fiber allow neurons in our central nervous systems to form interconnected circuits. On these circuits run the biological computations that underlie perception and thought.*

As I try to capture the ideas and experiences that flash through my synapses and find their way on to this virtual page, the topics may range wildly, but will reflect my long standing interests: Curiosity for new places, companies, ideas and technologies, and a passion to continue exploring our increasingly interconnected, but immensely diverse planet.

I no longer have India as a canvas, and there are few places that can inspire as much story-telling as a developing country, but San Francisco is a nice landing pad from which to re-launch. There is no shortage of creativity, intelligence or change here.

I will try to post as often as I can, daily, if possible. I will write to keep you, and me, entertained.

Thanks for reading.

-Mark

* Adapted from Wikipedia.

A New Year's Good Memory

It's been a year since I launched bankerinindia on typepad, and it's been a life changing one for me.

In the way that a new job or a new home or a new group of friends can influence your life, every aspect of mine was renewed and reformed during my year overseas.

I am finally getting used to being back in San Francisco, remembering how to wait patiently in lines, fighting the urge to bargain when I buy something, and putting the last pieces of my personal logistics in order, from transportation, to housing, to finding a good place to eat bagels again, one of my most-missed foods.

And as I've been unpacking boxes, starting my job, meeting new people, buying a car - I've grown optimistic about the year ahead, but there are some things from last year that I know nothing in San Francisco can ever compare to.

The New Year's Eve party I attended this year was complete with beautiful people, bubbly champagne and breathtaking views of Twin Peaks, but it was a world away from the homemade pot of spicy vindaloo and boombox full of Bollywood tunes that were the hallmarks of my night last year.

One year ago I spent the evening celebrating with several young Indian friends on the rooftop of a Delhi slum - a housing project run by one of the local bosses of India's BJP (Bharatiya Janata Party) to cradle new arrivals to the city and encourage BJP party allegiance. Most of the people living there had come from villages in the last several years, looking for work and a taste of the fabled economic expansion that has thickened wallets in India's cities. And while the place had dire living conditions, conditions which most Americans could never tolerate (open sewers, packs of wild dogs running rampant, no running water and spotty electricity) it was also home to a tight-knit, hard-scrabble community of some of the friendliest, funniest and most honest people I have ever met in my life.

In a bit of patchwork engineering that only MacGyver could dream up, my friends there were able to siphon off energy from an inverter-run light bulb to power a tape-deck and speaker set that filled the cool night air with pulsating Bhangra rock and American '80s hits. And as a special treat for my presence, the group had procured several cases of Kingfisher beer and a full-size cake with icing that read "Happy New Year 2007." This may have seemed trivial in America, but I know they came at great expense to the young guys I shared them with.

The party was great, and between the bouts of laughter and shaving cream fights, as my friends alternately danced to Huey Lewis and Ravi Shankar with equal enthusiasm, my view of life and what makes it good came just a little more into focus.

So I'll end my first post of 2008 with an e-toast to those friends - Ravi and Ajai and their band of cricket-obsessed jokers out on the edges of Rohini West - I hope you guys have a great year, and wherever you end up in India - I look forward to the day we meet up again, and another round of Kingfishers.

Pakistan Explodes

Bhutto's dead. And the sun seems to be setting on Pakistan's hopes for democracy as well.

I was shocked out of my Christmas hiatus enough today to write again.

Pakistan -- a state borne out of the hubris of one man (Mohammad Ali Jinnah) and the collective Muslim fear of religious persecution from Hindus -- this blood brother and subsequent bloody rival of India seems to have no logical path for a transition to democracy.

Pervez Musharraf, a nine-year military dictator, and beleaguered ally of the U.S. and the Bush administration, is politically weakened, with little national or international legitimacy left. He is beset on all sides by enemies, both democratic reformists and extremist jihadists. And now the best possible alternative to him, and for a democratic country, the first female prime minister ever in the Islamic world, is dead, and possibly, at his own hand.

I just saw Charlie Wilson's war. It is entertaining, funny, and painfully ominous.

There's a quote at the end of the movie from Wilson himself, the former U.S. Congressman, and though it was made in regard to the U.S. efforts in Afghanistan in the 1980's and not specifically Pakistan, one could be forgiven for using the same quote to describe the situation that remained across the border in Pakistan after Britain's prolonged colonial adventure in South Asia ended in 1947 after two centuries, or even, the U.S.'s more recent misadventure in Iraq.

"These things happened. They were glorious and they changed the world. Then we fucked up the endgame."

Pakistan remains an ally of the United States, and yet, it is also the current stronghold of the West's most bitter enemies, potentially including its most wanted man, Osama Bin Ladin.  As the world's only remaining superpower, we can hope that the United States is beginning to learn from its historical mistakes and the mistakes of its forebarers. Our country's collective political memory can at times be as frighteningly short as our 30-second-ad-attention-span culture. While the seeds of conflict in South Asia were planted by local warring tribal and religious factions, not colonial powers, the fires that burn today were stoked in different involvements of the U.S. and the U.K. over the last century. Those conflicts were left to grow, and in some cases fueled, in Pakistan, over the last fifty years, and in Afghanistan over the last twenty, without a careful eye on the long-term lasting impacts of our diplomatic and military efforts.

During the next 11 months our country will again choose a new President, who will inherit a set of international challenges as difficult as anything from the last 70 years (and I'm looking back to September 1939 when the Nazis invaded Poland as a high water mark).

Whether or not Pakistan holds an election in January seems at this point almost irrelevant. Will a new leader for the PPP emerge? Those of us who are just observers of Pakistan and hope for a better future for that country can only wait and see. Can Nawaz Sharif pick up the reformist banner?  Does it matter? The worst case scenario, chaos, followed by national disintegration and the proliferation of Pakistan's 70 nuclear weapons, will make it tough for the U.S. and others to support any immediate deposing of Musharraf. But can we afford much more short-term thinking? What is the end game for Pakistan?

I missed my opportunity to see Pakistan from the inside during my year in South Asia. One glimpse over the border in Waga was as close as I got, and after today, probably as close as I'll get for a long, long time.

"I am sure that democracy is in our blood. It is in our marrow."
  -- MUHAMMAD ALI JINNAH

Microfinance: Charity or Usury? Why I Still Like It

While in the midst of some one AM soul-searching in my investment banking cubical - a common occurrence during the fall of 2005 - I began thinking about what I wanted to do next.

My brother, a venture capitalist who had recently been through a job search of his own, suggested I pick up Mohammad Yunus' book, Banker to the Poor.

I read it over Thanksgiving and was soon looking for jobs in the microfinance space.

India was at the top of the list of places where microfinance was growing rapidly, and I also happened to like curry. It just made sense.

But once in Delhi my idealistic vision of how microfinance really worked was tested, and I began to change my mindset from viewing it as social work to viewing it as a business with social (mostly positive) implications.

The stigma tarnishing money-lending in much of India and elsewhere, has been cases of lenders creating loan terms that discourage, or make impossible, the re-payment of loan principal. When this happens it leaves poor borrowers working perpetually to pay off an ever-spiraling amount of interest without ever clearing the balance of their original debt.

This is the stuff that Bollywood films are made of. Farmer takes loan, but can't ever pay it back (he never has enough cash at any one time, or a good place to save). With no way to pay back the principal the Farmer works himself deeper and deeper into poverty, losing his land, his house, his job, and in some cases, his children to child labor or betrothals. As he contemplates suicide, Amitabh or Abhishek Bachchan (father-and-son Indian acting heart-throbs) comes to his rescue, promising him a dowry for his daughter that will pay off the debt. A song and dance number is performed, the Farmer is spared his life and everyone leaves the theater happy.

If only it was so simple in real life.

As I explained in my post "My Friend the Money Lender," there are indeed informal money-lenders all over the rural and urban communities of India. And they can charge very high rates, in Delhi as high as 73% on an annual, declining basis.

But the practice of making loans available to people who have no other recourse for borrowing fills a development need, an economic need and a social need. And the view of whether or not it is an honorable profession is a subjective one. Is a one year loan at a 10% declining annual interest rate honorable? What about 25%? 50%? Where do you draw the line? What if the cost to the microfinance institution (MFI) of providing that loan is 30%? Then is a 29% rate of interest usurious or charitable? What if a financing business or an MFI figures out a way to make microfinance loans to women cheaper (through volume) than a women's empowerment NGO? Is the NGO still charitable or just inefficient? What about the MFI? Are they racking up good karma or just profits?

These are the questions I struggled with as I attempted to define my view of the commercial microfinance space. Yes, some of these MFIs are real finance businesses. Yes, some of these businesses have a real social impact on the lives of the clients, whether on-purpose or not (but usually on purpose), allowing them to pay school tuition fees for their kids, or dowries for their daughters or have working capital for their shops. Yes, the rates charged by these MFIs can be very high by Western standards, but they are usually not higher than the informal local lending markets, and in most cases, are lower.

Nevertheless, I still see microfinance as a development tool. It alone doesn't get people out of poverty, but it can help them stabilize or smooth their cash flows and safeguard their financial security against fluctuations in income.

But the stereotypical view of informal money-lenders as antagonists fleecing the poor is an out-dated and naive one. Many money-lenders are leaders in their communities. They provide advice or money or references when someone in the village is sick or in need of help or, as is often the case, in need of money.

That does not mean that MFIs don't have a clear role to play. They do - and that role has been and will likely continue to be several fold:

1. Increasing competition in the personal loan market for the bottom of the pyramid, and thus reducing prices

2. Linking banks, insurance companies, health organizations and other mainstream institutions along with their products and services to people not typically reached by the formal economy

3. Educating borrowers about the importance of financial discipline (and savings)

These are things MFIs do well - and they are reason enough to support microfinance, even if it's not the panacea for poverty that Mohammad Yunus dreams of.

Why I Left Investment Banking

"The most fun you'll never want to have again."

Or something like that... It's the pitch that was used to lure me into the first two life trials I'd been through: pledging a fraternity in the South and completing a successful stint in investment banking, though these must seem trivial to people who've been in conflict zones or faced life-threatening illnesses.

But while both these experiences were influential, and tested the amount of shear physical and mental stress I could endure, the second became the more educational and life altering.

Setting my collegiate ideals on the shelf for a time, I took a job in investment banking directly out of school, and I began to grasp 'how the world truly worked': who controlled capital, how it moved, and the myriad decisions that rippled through societies and economies based on these factors. I also had my first real exposure to the world of high technology: the entrepreneurs, successful executives, programmers and engineers with mind-boggling capabilities to create (out of 1's and 0's) whole systems, applications and tools to ease, accelerate and expand everyday life, work and play.

But irrespective of all I was learning, I always knew that the world I was living was a decidedly small and elite one.

I was meeting the guys who built the ruggedized PCs, digital cable modems, email systems, online photo applications, and optical networks that allow you and I to live a plugged-in, supercharged, light-speed lifestyle here in America. And everyday I worked for the high-flying i-bankers who helped these companies go from public to private, independent to acquired, and big to biggest.

It was a fast-paced, feast or famine environment; every detail mattered, every pitch seemed like a life and death struggle to win the deal, and every piece of paper we sent out the door was critically important. I rarely slept.

After my second annual banking "bonus" I was feeling as though I'd conquered the challenges of M&A modeling, software comps, and powerpoint pitchbooks but still didn't feel much personal satisfaction.

I was making a six figure salary as a 23-year old. I had an expensive car, an apartment in one of San Francisco's nicest neighborhoods, and enough money to dine out at the Bay Area's finest restaurants on a whim. I was making enough to live the good life, but, working 80-100 hours a week, I had no time to actually live it.  And, though it sounds a bit stereotypical, I didn't feel in control, but rather controlled.

This is a reality of working as an analyst for a major investment bank. You are a resource, and no matter how benevolent your boss is, or how interesting and exciting the transactions are that you are working on, you are a warm body with a bit of grey matter between your ears that understands how to quickly process complex financial information and crystallize it into clean and glossy looking pages of colorful financial and strategic analysis.

I knew it was time for a life change. I needed to get my hands a little dirty, my brow a little sweaty and my heart a little lighter. I had spent two years helping wealthy people generate more wealth. It was time to help very poor people get a better shot at life.

So I left the Marina, and the financial district of San Francisco. I drove my jeep (above) across the country and sold it, along with much of my stuff. And after making a connection through an investment banker in Bombay with a microfinance social investment fund that was getting started in India (Lok Capital), I boarded a plane for New Delhi with a stack of Hindi cd's and a map of the old British Capital.

Riding high off of the Nobel Peace Prize awarded to Mohammad Yunus in October of 2006, I could finally explain to all my finance friends what the hell I was doing. I was bent on changing the world one $100 loan at a time. I saw the small time money-lenders that dominated the financial services sector at the bottom of the pyramid in India as some provincial incarnation of the volatility-seeking hedge fund managers that had terrorized the small public tech firms we had advised during my stint in i-banking. And I was determined to use every excel shortcut I knew, every powerpoint trick I possessed, and every bit of bravado that i-banking and college fraternity life had given me to break these local "money-wallahs," outsmarting them, out-pricing them and figuring out a way to put them out of business.

Thus, I arrived in New Delhi, a metropolis destroyed and rebuilt eight times over, with an ironic history of absorbing and co-opting the foreign invaders who had stormed its gates repeatedly over its 3,000 years of existence.

Thinking Back on A Year in India

I've now reached San Francisco - spent a day wandering around this city that I left a year ago; went for a run along Crissy Field; looked up at the Golden Gate bridge bathed in a purple dawn, standing imposingly over the San Francisco Bay still healing from a massive oil spill several weeks ago; ate lots of yuppy Californian food and tasted the wine again; took a drive looking for housing up and down a few of the city's seven famous hills.

It's coming back pretty easily - the feel of the place - almost so easy that I'm afraid the reasons why I left to go to India, why I traded investment banking for Microfinance, and what I saw and learned while overseas might be melting away from my brain and out of my memory a little too quickly.

The end of my time there seemed to come a bit suddenly. Monday morning I was dodging cows and camels on my way to the Delhi airport. By Wednesday afternoon I was driving my rental convertible down the California 101.

So the next few days I'm going to write a series of posts reflecting on the origins of my trip as well as my feelings on the state of the microfinance industry in India today. I'll try to relate what I liked about my work, and what I didn't. Where I felt I was successful, and where I felt my ideals came up short.  I also want to give my two cents on the current direction of the industry (as I see it) and where my concerns about the future lie.

On the personal side - I can start by saying that when I finished the last chapter in Shantaram two weeks ago, sitting on a Rajasthani train to Pushkar after watching Pakistan defeat India in a bitter eight-hour cricket match in Jaipur, I felt as though I was closing a chapter in my life. The next few weeks were enjoyable, but nothing, not even the last Bollywood movie I saw hours before leaving, seemed to sum up my experience, my feelings about India, my emotions about my time on the sub-continent and the people I met, as that book.

Thankfully, I never spent time in an Indian prison like Gregory David Roberts, but like him I did manage to experience the country's amazing diversity of life, at times inspiring, often wrenching, but always, always engaging.

I was never once "bored" in India.

And as two or three of my very close friends there know, for all the criticisms I laid bare (usually when the temperature had surged to over 100 Fahrenheit, the water and power had stopped simultaneously and my Visa extension had been denied), I also developed a love for the place that will stay with me for the rest of my life.

I'll start the summary of my microfinance thoughts tomorrow - if there are specific topics you think I should address or questions you'd like to ask me about anything related to microfinance or the Indian economic development story, send me an email or add a comment and I will be sure to respond.

Thanks again for continuing to read.

London Calling...

Stopped through London on Tuesday for a brief respite on my way back to San Francisco from Delhi - saw some friends, some sights, took a few pints and a few pictures.

This was my first trip to the former Imperial capitol, and it did not fail to impress; beautiful museums and parks, the infusion of technology into daily life (in Tube stations, cabs, offices, and street signs) as well as extreme diversity in the city's population reflected by the range of clothing, cultures, languages, food, and skin color observable throughout the city.  London clearly felt like the most international place I had ever been, and yet, still distinctly British - dozens of castles, parks, pubs and black, bulbous taxis ensured that.

Overall a great visit, worth another soon hopefully, though the 2-to-1 fx ratio keeps it pricey for Americans. But get this - I start chatting with my taxi driver about the exchange rates, and he starts quoting hedge fund managers from London with the latest speculation on the direction of the Pound.

"Down its going," he says, "time for me to re-order my portfolio, need to take some risk out, as well as reduce my exposure to British Pounds."

When was the last time I heard a rickshaw wallah discuss his investment strategies?
Diwali I guess, and then, it was two words: "Buy Gold."

Though to be fair, I have seen Indian taxi drivers trading commodities at computers before - most recently in Pushkar during this year's camel fair.

Once I even heard of a group of Rajasthani spice traders who cornered the market for a particular kind of rare mustard seed simply because they were closer to the source then the traders in London and Mumbai. Therefore they knew what the actual quantities of supply available in the field were, even before the stuff was harvested and priced in the markets...Reminds me of Eddie Murphys' and Dan Akroyd's orange futures from "Trading Places."

ACCION Backs Lok Capital, Wades into Indian Equity Waters

Some news of note for my former employer,

Accion just issued a press release stating that its new investment arm has now invested in Lok Capital, bringing the Lok Fund's total capital commitments up from US $12 mm to US $14.5 mm. Congrats to the team at Lok.

It looks like Accion is continuing to explore the global microfinance equity space outside of just Latin America as they are also moving ahead with an investment in Africap, the first private equity fund dedicated in African microfinance.

Getting in the Game: JPMorgan Joins the Double Bottom Line I-banking Bunch

The Financial Times reported today that JPMorgan is setting up a social sector finance unit, following the lead that Morgan Stanley took when it set up a Microfinance-dedicated team of investment bankers in September of this year.

In India, the local start-up Intellecap will surely be competing with these teams for the right to be "investment-banker-to-the-poor," in India, as all of these groups are seeking to advise on transactions related to "double-bottom line" organizations and companies. I think the double-bottom line investment space is an interesting one, and I believe we will continue to see a lot more of these type of capital commitments over the next decade (just look at the growing number of funds/institutions like Lok, Omidyar, Legatum Global Development, Microvest, Kiva, Microplace etc.).

So I do believe there is a business in building teams to structure and advise on the deployments of that partially-social capital, along with the creation of metrics to help measure investors success in achieving desired results - However, I think Intellecap and any other small or startup advisory house will have a long way to go in competing with the giants like JP and Morgan Stanley in the field of investment banking when it comes to the larger deals. In addition, they will have to compete with a range of local investment advisory houses on mid-size and smaller deals as well. Though not traditionally involved in social investments, both the global giants and the regional or national-level advisory houses will have unparalleled experience and depth of talent in the world of diversified global finance, and I'm sure they will bring a professionalism and brand that MFI entrepreneurs will look for when considering IPOs, loan securitizations or mergers and acquisitions (M&A) for the first time.

By the way, my prediction on MF M&A remains that we will see the first one or two big deals in Indian microfinance within a year.

The Next Challenge

It's been over two weeks since I last blogged and I've started getting a few questions as to where I went...

I apologize for the gap in posts, but I've been in the midst of geographic and professional transition.

For the last year I've worked for Lok Capital, a microfinance venture capital fund based out of New Delhi and focused on the Indian market. I've had a great experience at Lok working with entrepreneurs and professionals in the microfinance industry here, but the time has come for me to return to the U.S.

At the end of this month I'll be leaving India and joining a global technology venture capital fund based out of the San Francisco Bay Area.

I plan to continue blogging, but my topics will likely range beyond the scope of India and microfinance. The subject matter will probably evolve into a combination of my interests in emerging markets, economic development and the social venture space. I will also be changing the name of the site. I will let you know more as I focus my thoughts.  I encourage you to share your suggestions.

Thanks so much for making bankerinindia part of your day. Its been a (sleep-depriving) challenge keeping the site up to date and interesting  over the last twelve months but the increasing feedback in the form of letters, emails, comments and simply readership has made it really rewarding and led me to write more than I ever thought I would. I look forward to building on this experience in the future.

Please stay tuned and keep checking back - I will post more details soon.