The man who could have been a contender for ICICI Bank’s corner office is happier taking a crack at getting low-cost credit to the rural masses.
He has worked for a hedge fund while doing a PhD, been on the board of India’s top private sector bank, worked as a corporate banker and done treasury operations, so what’s he doing heading the bank’s social sector foundation? And living in, of all the places, Tanjore, at a time when the succession battle for ICICI Bank’s corner office is hotting up? In any case, why would an IIM-A graduate join an NGO after he’d finished his MBA, see the light as it were and go on to become a banker, and then go back to the NGO world, asks Sunil Jain.
Lunch is a good place to find out. We meet at the India International Centre annexe dining room — Mor, who heads ICICI Foundation, doesn’t like 5-stars, and the IIC sort of fits the profile of what he’s trying to do, given how burdened its middle-class-to-well-heeled quasi-intellectual membership is with the need to make the world a better place (disclosure: I’m a spouse-member). Between Mor’s vegetarianism and IIC’s fixed menu since, almost, its inception, ordering takes all of five minutes — yellow dal, pindi chana, raita, rotis … And, yes, mushrooms. Hardly an inspired choice, you’d think, but it gets Mor reminiscing his first job — a freshly-minted MBA joined an NGO called Pradan and began working with mushroom farmers; he was, he says, a ‘development enthusiast’, but soon realised Pradan wasn’t his calling as he couldn’t ‘communicate’ with his client, the farmer. Ironic, given his new choice of career, and the rest of his life, depends on his ability to communicate, even proselytise — Mor’s mission is to find new ways to crack India’s financial inclusion challenge and, along the way, figure out ways to improve the health and education system as well, and then sell that to various politicians.
Given its development bank status back at the time Mor was with Pradan (Pradan was founded by Vijay Mahajan, an iconic IIM-A gold medallist who’s today working with smart cards for financial inclusion), joining ICICI as it was then known, was in continuation with his development agenda, Mor says. His talk of how derivatives can help further a development agenda goes over my head, but the explanation of how financial services help ‘complete’ a market makes sense — “Why do farmers grow so many crops?”, he asks, and proceeds to answer without waiting for my reply, “Because they’re looking for security … the rain may fail and so one crop may get hit … if there’s a market for it, why not just buy rainfall insurance?”
Mor’s all charged up, so lunch doesn’t interfere with his ability to talk, and the pindi chana and tandoori roti are dealt with while explaining how the government’s rural finance model is bust, how the likes of Vikram Akula and his SKS Micro Finance are trying to plug the gap, and how the ICICI Foundation is trying to come up with what Mor hopes is a lasting solution. For the record, Mor insists he was not sidelined by ICICI Bank chief KV Kamath because rural/inclusive banking was making losses, that he asked for the job since he found that while ICICI Bank’s rural book had grown well (Mor does admit to some problems but maintains they could be handled), he realised the only way to really crack the business was to spend more time in it, not through supervising a portfolio at the level of the board. “We had a growth challenge, not a loss challenge.”
The Regional Rural Bank model, he explains, broke down since these banks were both collecting deposits as well as lending — essentially the idea was to be self-contained. But if there’s a rainfall failure, the deposits stop coming in, and the loans given turn bad at the same time. The co-operative bank structure was an alternative where the main source of funds would be Nabard refinancing, but the problem here was that the cooperative banks had no capital at risk — so they didn’t bother to see if the loans would get repaid. The Grameen Bank model (Akula is essentially trying to replicate this model), he says, is welcome since it is trying to plug the gap in finance availability — it works on lending to groups, instead of individuals, and then using peer pressure to ensure the loans get repaid. The problem with this, he says, is that the ‘bank’ sells typically just one product, is able to get a penetration of just 5-10 per cent per village, and so keeps finding new villages to lend to, there’s hardly any technology being used and the model is people-intensive. All of which ensures its costs remain high.
The Tanjore partners he’s working with, on the other hand, have 15 branches already and are offering multiple products to clients. As per RBI rules, they don’t take deposits but raise equity to be able to lend. The bank operates through Fino — a tie-up between ICICI Bank/LIC/IFC/Union Bank which allows subscribers to use the sophisticated back-end computing that top banks use but at a fraction of the cost — and this allows it to offer its customers several different types of products, and so increases its customer penetration. So, the Tanjore company is able to offer rainfall insurance (the Fino platform ensures the insurance firm has all the details of the insured person) and even money market mutual funds — while it can’t take deposits under RBI rules as this requires it to have a minimum net worth running into a few hundred crore rupees, money market mutual funds are a good substitute for customers as they give a return of around 8 per cent as opposed to 2 per cent in a regular savings account and are quite liquid (“you don’t have a chequebook or ATM facility, but if you give the bank some notice, the money’s available”). “Without Fino, this bank could never be able to do the rainfall insurance or money market mutual funds.” If Tanjore works, Mor is convinced it will be the new face of low-cost inclusive banking.
“The idea”, Mor says while ordering a coffee (too early for dessert, one supposes since the Foundation’s work is far from complete), “was to see what the missing pieces were … and fit them, so India can reach where it needs to in the next 20 years”. Twenty is a big thing with Mor, for while explaining why he opted for the Foundation, he spoke of how he was evaluating what he wanted to be doing in the next 20 years …
The Foundation is also working with the Bara district education board in Rajasthan (1,700 schools and 450,000 kids) through two NGOs; 78 pace-setter schools have been selected and trainer-teachers sit with the teachers trying to see how to raise their levels — one teacher, Mor says with pride, says he knew it was possible to teach addition and subtraction with pebbles, but now he knows he can do LCM and HCF as well. “Maths through objects, language through words (not alphabets), and science through experiment is our goal”, says Mor who, at one time, wanted to be a physicist.
The Foundation, in fact, is working with a clutch of NGO trying to find solutions which are workable/scalable. So, there’s giveindia.org which is like a stock exchange where NGOs apply for a listing (120 NGOs are listed currently) … giveindia does a regular audit of these firms, so those looking to donate know that these NGOs are kosher. Thehub is an NGO that rents space in bulk and then gives it out for a few hours a day to NGOs, Mitra helps NGOs find staffers.
We could go on, but Mor’s got a meeting, so he ends with one last example of how his Foundation is looking at things differently. While doing the maths for a school project, they realised it would only work if the land for the school was free. So, Mor went to four real estate funds and made the following proposition — if you give us X acres of land free, we will build a school for so many children in your locality; this will raise the price of your overall landholding and we’ll both benefit. “Four funds have already said it’s a great idea.” Mor then expands on it … “Why don’t cities use this model? Go to builders and say you’ll build a hospital/school in their area if you get the land free.” If you hear of Sheila Dikshit or some other politician using this idea, remember you read it here first. Mor gives the name of a US city doing precisely this — he’s promised he’ll write about it for Business Standard, or give me enough details I can write a column on it!