Initial Discussion (E-mail)

SM: The need for banking services is very much a part of the progression and I also understand the challenge of directing the effort in a way that it does not go the same way as the rest of the world has gone. After all, even in that world, the need for various services, including banking has emerged in the same fashion.

Stan told me that many people have told him earlier that a bank is a very complex entity. I must begin by saying that I completely agree and we must accept this fact. There is no sense in denying it. But the
good news is that what we're talking about is not necessarily the same entity as exists in the mainstream. Therefore we need to pick and choose only those aspects, which are relevant to our needs. When we
put them together, if it turns out to be a bank, so be it. If it can be an NBFC, which progresses to be a bank, so be it. If it can be something else, which serves the purpose, so be it. Simplifying, however, is a challenge, which cannot be underestimated.

Stan: I am ALL for simplification. And fully agree it is a challenge. Much of our work has been centred around de-mystifying and simplifying in a manner that makes it possible for the community to take over and manage.

SM: A bank primarily addresses the need of saving, transaction, credit creation. I have a tendency to simplify and often overdo it. I'm very open to being pointed out when I do so. This tendency of mine says
that an NBFC addresses the first and third need. Offering transaction services i.e. moving from an NBFC to a bank has definite advantages, but it is becomes a completely different ballgame. The regulatory
framework is much tighter, risk assumes a much greater magnitude, technology outflows are massive, manpower related complexities are far larger. A bank is significantly more challenging than an NBFC. My
first question is, have we understood the needs of the community deeply enough to make a choice in light of the above?

Stan: Our idea is of a cooperative bank which I have understood is much simpler than a purely commercial bank. 

On this question of needs: a very good question. This has been discussed for many years. But let me give you some background. With the exception of the Mullukurumba community, for all the other tribes this is the first generation that has become an active part of the cash economy. They started at the bottom as daily wage labourers and through our intervention graduated to being land owners and farmers (without giving up their wage labour). However this transformation has not been necessarily matched by an understanding of the cash economy. By planting tea they were plunged into a capital economy - without any understanding of how a capital economy works. Hence there is no concept of keeping aside money for later investment - for example when leaf production and income are at its highest all of it is spent and later when there has to be an investment in terms of fertiliser, pruning etc - they cannot afford it. Its cash in and cash out much like wages.  

So the need for savings and to introduce a concept of savings was seen as the first step - a step we have initiated a few years ago. This was coupled with the fact that people had NO SECURE PLACE to keep their physical cash. Hence saving with us was more a way of keeping cash safe than anything else. Hence a primary need already identified is the option of safely putting some cash away when there is surplus. This is something we are currently addressing  through our savings programme. there are issues with it which are directly linked to your next question.

SM: My second question pertains to manpower and competency. I assume that this entity, like others will also be managed by the Adivasis (sooner than later). Have we identified people, who are 'initiated' enough and can be trained to manage this entity on a full time basis?

Stan: The flaw in the savings programme was that the young adivasi women entrusted with the savings programme and the area accountants (also adivasis) were not given the training needed to fulfill the responsibility handed over to them. This was primarly due to the fact that the task of training them fell on one or two people who themselves had more than full time commitments. On hindsight we made the mistake of seeing this as a "programme" within ACCORD rather than as an institution like the hospital or school and hence other than the grass root staff tasked with collection of savings we had no dedicated staff either as managers or trainers. This has led to messy accounting, difficulty in reconciliation etc and worse there was no focused and strategic growth of the programme.  Hence the failure was more from our side. The capacity and potential within the community is definitely there. I am fully confident that we can definitely train a team to completely manage this entity. There has therefore been a realisation that we have to change our approach and strategy and institutionalise this entire area of work. Whether it is bank, NBFC, Cooperative bank, Cooperative credit society etc is to be seen.

Coming back to the issue of needs, savings and transactions is definitely one that is already identified at the community level. Credit is another need that has been articulated but in more specific and individual contexts rather than at the general community level. At our team level (all adivasis) however, the need for credit has clearly been articulated. The credit needs that have been identified are as follows (not in any order): a) schooling b) festivals c) crop investment d) illness - especially long term illness resulting in loss of income. Two potential areas for credit that have been identified are a) housing - currently we have no evidence that there is any appetite from the community for housing credit but our internal discussions have thrown this up as a possible solution to meet the housing problem and b) a little more complicated is consumer credit which we know the community is already accessing. In the past this used to be for daily consumables like rice betel leaf etc. But now this appears to be minimal - thanks perhaps to free rations - and consumables credit has changed to things like clothes, furniture, vessels etc. All of which are provided on credit by mobile suppliers. Anecdotal evidence and some prelimanary research by a group of TISS students indicate that people pay almost double the cost because cost is projected as EMI (or rather equated weekly installments) and people do not total up and realise that it so much more expensive, even allowing for interest. While we know there is an appetite to access credit for such needs we have no idea whether we can intervene in any meaningful and effective way in this arena. If we can, it can result in huge savings for the community as the outflow of cash through this avenue is huge. We have some figures based on the study by the students. 

Yet another "need" identified by the team was the fact that now the adivasis HAVE to open bank accounts in order to access any of the government subsidies and benefits. This is an uphill task. Though many have done so, for the majority this is still not a very feasible option. Distance of the branch, attitude issues of bank staff, unfamiliarity with the system, dependence on intermediaries at the bank to fill out forms etc are all reason cited. Hence the "need" for our own bank, which can reach the person at their village! And is perhaps the single biggest argument from their perspective for a formal bank rather than just a savings and credit society.     

SM: Thirdly, do we envisage this entity to serve people outside of the Adivasi community? A related question, is the credit need likely to be met by savings within the community plus capital created thusfar?

Stan: At present we have no intention of serving people outside the community in terms of loans. However, we would like to explore the possibility of outside entities (our own organisations for example) and other "friendly" individuals depositing money in this entity thus allowing for a larger pool of capital for lending. And also allowing for the profits of the lending to go to the community rather than to mainstream banks. 

I believe that whatever ideological positions one has on the economy, we have to admit that the capital economy is here to stay. Our people our part of it whether we like it or not and we cannot turn the clock back and separate them from it. But capital - primarily but not just through the banking sector - works completely in favour of the people with capital and hence everything else is subordinated to ROI etc. So for many years I have been obsessed by how to deal with this - especially since we played quite a major role in catapulting the adivasis into the capital market economy by introducing them into the tea industry. How to make capital work for the poor and not for the rich alone? I am very sceptical of the newly emerging social entrepreneurship model which is put forward as a solution. My wife Mari and I have a written a paper for the on Social Justice and Social Entrepreneurship which might interest you.

 ( http://www.sbs.ox.ac.uk/sites/default/files/Skoll_Centre/Docs/Social%20Justice%20-%20Contradictory%20or%20complimentary.pdf)

 I feel more radical thinking and out of the box solutions are required. Solutions that do not work within and strengthen the status quo but rather solutions that challenge and change the status quo! Our work with Just Change in part has been to try and change the relationship between labour and capital.

 On a final note let me say that the political rationale behind the bank lies in the fact that the ACCORD approach has been based on changing power equations. Community owned institutions, like the Hospital, School, Tea Leaf marketing society etc are proven examples of how community institutions can change power relationships. However, their powerlessness in the cash economy undermines much of the achievements in the other sectors. And hence developing some kind of financial institution that they control becomes a vital step forward.