My first post on Nextbillion.net
Anecdotes and Analysis: The Microfinance BubbleIt went up on Monday, just got around to posting it here, so please do check it out if you're passing through here. It may not all make sense to people who aren't familiar with social entrepreneurship and the Base of the Pyramid... well, all I can suggest is... Google it! :-)
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Anecdotes and Analysis: The Microfinance “Bubble”
An article in the Economist, 'Froth at the bottom of the pyramid' brought to my attention an interesting ongoing debate about the possibility of an emerging 'bubble' in microfinance. While news of a bubble is in itself extremely interesting, the argument also highlights a fundamental weakness we currenty face in analyzing the BoP space. The lack of large scale quantitative data and analysis to back our arguments.
The debate is as follows: Based on the findings of a research study in the silk making town of Ramanagaram, in the south of India, a reporter from the Wall Street Journal wrote about a groundswell of discontent among microfinance borrowers in the town and warned of an emerging 'bubble', as lenders chased potential borrowers who would not have the ability to repay their loans. Based on interviews with residents of the town, academics and investment funds, she finds evidence of a 'credit crisis' brewing, as over-indebted borrowers find it difficult to pay back their loans. She talks about poor neighborhoods in India being 'carpet-bombed' with loans, which are mostly being used to pay for weddings, purchase goods and pay off other lenders, rather than for any income enhancing purposes.
Vikram Akula, founder of SKS Microfinance, one of India's largest microfinance lenders, strongly refutes the WSJ article in a letter to the editors. According to Akula, the anecdotal findings from a particular town in India about the over-indebtedness of some of its residents can hardly be generalized to the entire microfinance industry. He goes on to point out that the data suggest a very different story, and microfinance institutions in India, which now serve over 22 million clients, have consistent repayment rates of 95% and above. He goes on to argue that the research study cited in the WSJ article used a small sample of 20 clients in a 3 month period. He also highlights the fact that the authors of the study qualified their findings by stating that it was difficult for them to answer the question whether it was excessive supply or surging demand that was driving the rise in credit.
Akula's rebuttal is compelling, and he backs it up with data and findings from statistical studies of the microfinance sector. While the question of a microfinance 'bubble' is an important one, and certainly merits further analysis, this debate really underscores the importance of having valid data and the use of appropriate analytical methods to back your arguments.
The BoP space has so far relied largely on anecdotal evidence and case studies for analysis. It would be extremely wrong to say that case studies and qualitative research are not valuable tools in BoP evaluation, but it is important to understand their strengths and limitations. Case studies are useful for answering 'how' and 'why' questions about a particular situation, but their findings cannot be used to draw generalized conclusions about a larger population. A case study can help you understand how a particular process achieves a particular outcome, and why it works in a particular way, but it cannot tell you if the process will work in other situations, under different conditions. Without reliable, accurate quantitative data collected from a reasonably large sample of respondents, it is impossible to draw generalizations of the sort made in the article.
As the BoP movement matures, there will be increasing scrutiny from businesses, funders, the academic community and traditional development practitioners for credible data and analysis. As it grows to scale and opens itself up to outside inspection, BoP practitioners and theorists must start collecting quantitative data and measure their impacts in objective ways.
As for the bubble? It may still happen, but the doomsday predictors will need to make a more convincing argument.
Search for the Black Swan*
* Note on the title: The 'Black Swan' is based on the concept of 'falsifiability' - which means that a particular statement can be proven false by experiment or observation. This does not mean that the statement is false, just that it can be proven false.
This was based on the idea that if you see a white swan, you can say 'There is a white swan'. If all the swans you see in your life are white, you might make a universal statement like 'All swans are white'. This is a statement that you believe to be true, but can never prove to be true because it is impossible for you to see every single swan in existence. There may always be a non-white swan in existence that you haven't seen. However, it can easily be proven false by the observance of a single black swan. If you see a black swan, then that statement is immediately proven false (And in fact, the discovery of the Australian Black Swan disproved the validity of that particular statement).
So you can either choose to believe that all swans are white, or search for the black swan.----------------------------------------------------------------------------
This blog post is the first of an attempt to document my life as a PhD student. I doubt anyone will really find this interesting enough to read, it exists more for my own reference, to document my path from a naive, misguided graduate student to someone considered somewhat academically proficient by other naive, misguided graduate students (and almost no one else). Something I wish I had done with more frequency as an engineering student to document my descent into madness. This time, while the descent may be slower, less pronounced, but by the evil eye of agomotto, we shall take notes!
I completed my first PhD class this summer. A ten week, intense session on Research Methods. While I've taken research methods classes before, this one, being a doctoral level class, was aimed at teaching me to 'teach' research methods. A once-upon-a-time flunker of statistics, learning to explain t-tests, multivariate regression and how to check for heteroskedasticity.
This class started at 10,000 feet, making me think, for the first time, about the philosophical base of my research and what I believed to be 'true'. For someone whose familiarity to western (or for that matter, any) philosophy has been limited to Monty Python's Drunken Philosophers' song ('Rene Descartes was a drunken fart, I drink therefore I am') and the odd Camus book**, making sense of ontology and epistemology is a tall order. What do you believe to be 'true' in the world, and how can you understand it? What does this have to do with multiple regression, contingency tables and case studies?
Quite a bit, actually.
While I do work at a 'think-tank', and my job title is 'research assistant', research takes on a different tone in a PhD program. While research at work must be practical and 'action-oriented', there are no such restrictions (which are doubtless useful in many cases) in the world of PhD research. Research begins at an abstract, somewhat unfamiliar level here, with a long introspective look at my own opinions, biases and vision of what is real and relevant.
Introspection seems to be the key feature here, and as trite as it may sound, it seems like this PhD may teach me as much about myself as it does about Public Policy. Which is somewhat better than engineering, where the only thing I learned were those immortal words uttered by a wise saint - 'It's not worth it'.
On first appearance, this seems to be worth it.
** Camus's thing was absurdism - nothing in this world makes any sense, so we should stop trying to make any sense of it, something I could easily identify with during the engineering days. Not so useful when you want to do a PhD in Public Policy - try telling your dissertation committee that nothing in this world makes sense so we should stop trying to make sense of it.
Pachacamac I: The Making of the Indian Engineer
It is believed, in the chiropteran enthusiast community, that a colony of bats, when presented with the prospect of leaving the confines of their cave, most often choose to turn left on exiting the cave. Whether this is the result of instinct, centrifugal force, or intense pre-exit deliberation is unclear, but the lack of a well understood reason does not make the phenomenon any less interesting.
A similar phenomenon is exhibited by the mass of indian students that graduate from our schools every year, the bulk of whom almost always veer left and join the nearest (or sometimes farthest) engineering college.
In the year before the millennial, 5 such students of assorted characteristics joined this exodus and entered a world where logic and reason were mere theoretical concepts, never to be applied. As in the case of the bats, their reasons for choosing this direction are unknown. When quizzed about their motivation to become engineers, pollsters were greeted with blank looks and inconclusive answers such as “Dad said so”, “Don't know, couldn't think of anything else, and seemed like a safe option” and “Fuck off man, I have a paper today!”
The decision making capacity of eighteen year olds, newly initiated into the notion of adulthood, is limited to selecting which movie they want to watch when they bunk class. Making life changing choices, like selecting a career, can often lead to extraordinarily bad decisions that are regretted many times over. Pachacamac is the story of some extraordinarily bad decisions.
In subsequent posts, I will try to reveal some of these bad choices, and their consequences. Four (or five) years of sustained mental gymnastics. Stay tuned.
Before the next revolving year is through
On the eve of my 27th birthday, I look around at the collection of papers, text books and piles of photocopied notes and wonder what I've gotten myself into. Wonder how far I've really come from the days of being surrounded by sundry piles of semi-digested information in the dark days beyond the gap of mankhurd.
Then I remember that unlike then, a lot of this stuff (not all of it, let's be honest) actually makes sense to me. More importantly, I actually care! Who would have thought a once-engineer who has failed more subjects than he can (or wants to) remember, would be taking the first daunting steps to a PhD in public policy just a few years later. Who could have imagined that I, who had failed statistics twice, would actually grow to love it so much that I would be able to teach it to others.
It has been a pretty long journey since the days of Pachacamac. And while I haven't achieved a lot of things I thought I wanted to, I've done a lot of different, perhaps better things. I remember listening to this song ten years ago (feels a bit scary saying that, 'ten years ago'), and wondering how things would turn out.
'So the years spin by and now the boy is twenty, though his dreams have lost some grandeur coming true.
There'll be new dreams, maybe better dreams and plenty, before the last revolving year is through' Though well past the twenty year mark, in retrospect, the years and dreams have turned out pretty well.
And the eyes in his head see the world spinning round...
Ever so often, you think about pausing your life to consider the direction you're taking. Think about what you do, and why you do it. Contemplate change, and potential paths you may take to an imagined future. At such times, a break, a lull in the routine of life can be helpful to help you organise your thoughts and think about where you want to take your life.
Of course, I had no such luxury.
After my
first epiphany almost four years ago , which helped me decide that I wanted to quit engineering and venture into the relatively unknown (to me at the time) field of development (a word I have since struggled hard to define), earlier this year I came to another decision making point in my life.
For the past year and a half, I have been working as a research assistant at the
World Resources Institute. Since most of you have never heard of the World Resources Institute, I should start off by saying we are one of the many 'think-tanks' that dot the DC landscape, though we differentiate ourselves by referring to our institute as a 'think-and-do' tank, placing our work somewhere in between The Urban Institute and Greenpeace.
If none of that made any sense, don't worry about it. I probably don't understand anything about your job either.
I had always planned to pursue my PhD after working for a while, and I sent in my applications last winter, hoping to get into a decent public policy program starting Fall 2009. I was accepted at two universities, and was faced with the decision to either pursue my PhD as a full time student at a new university, or to do it part time at George Washington University, where I got my Masters degree, while continuing to work at WRI. On the one hand was a new school, new advisors and all the uncertainty of going back to being a full time student. On the other hand was the thought of returning to a familiar environment while continuing to work at a job I enjoyed, but perhaps being completely overwhelmed by the combination of a full time job with a PhD program.
But instead of taking some time to slow down and think about it, I was planning a three week trip to Bangladesh, India and Cambodia to study companies that provide clean energy solutions for people in rural areas. So after some deliberation, mainly on my daily commute, I decided to return to GWU and pursue my PhD part time, while keeping my job. I sent in the form confirming my acceptance, and proceeded to apply for visas, look up hotels and figure out my travel arrangements. It was only as I sat at Dulles airport, waiting to board my flight to Dhaka, that I began to wonder if I had made the right decision, and ask myself why I had made the decision I did.
The weeks that followed both allayed and heightened my concerns, but I returned to DC believing I had made the right choice.
The next few years should be interesting. Intense, but hopefully, interesting too.
Anyway, I plan to update this blog a bit (let's not over commit now) more regularly... starting off with some reflections from my trip.
More updates eventually.
What it means to be a child
To play outdoors when everyone else is inside. To embrace the weather rather than try to escape it. To play cricket in the burning sun, football in the pouring rain, to dive into a bank of snow.
Blogarithm 2.Ohh?
Trying again
From the dust and the detritus. From the scattered remnants of a once almost blogger. Along the uncertain, infrequent path again.
Why did you stop, you might ask. Was there nothing to write about? The adoring public has long left, only the mechanized spam-bots named Alex that leave comments like this
"Tutt and the driver flonase of the stage.. The Colonel was approached--until his statementnexium that he should consider any attempt to overcome his professional secrecy a personal reflection withheld further advances.." remain.I cannot quite put my finger on the reasons for the more than two year hiatus except to point out that I'm inherently and inordinately lazy. The kind of laziness that the two-toed sloth (not the three-toed variety, which are generally faster moving) aspires to on a Sunday afternoon. That, and a commitment to procrastination that could probably lead me to great heights in government.
It's not that I didn't want to write, or didn't have things to write about. I just... didn't. That's all.
But that changes today!
Or perhaps tomorrow. We'll see. (yawn)
