By Vineet Rai
What Rich Indians consider the economy, is largely discretionary spending by the middle, upper middle and the Rich. Infrastructure and Industries is what they assume constitutes the rest of the economy. Rising tide lifts all boats and hence it is easy to ignore the tireless efforts of the millions who have slowly fought exceptional odds to push themselves out of poverty by those who sit at the top of the pyramid and when going is good.
As India went into the lockdown 45 days back all those who count themselves the Economy of India are flat on the ground claiming they have no will and desire to fight the challenge. Airline, Hospitality and Real Estate are knocked out while Banks flush with funds cannot see, imagine or think about how to move forward from here. There is however an interesting catch – a slew of volleys being played between RBI and Banks with liquidity exchanging hands between the two while the rest of India, cash starved and seeking liquidity, looks on wondering when they would join this ball game.
Meanwhile we at Aavishkaar Capital made our first post lock-down investment in a company that is building a Grain Bank in Bihar. This investment happens right in the midst of the biggest calamity humanity has ever seen. We are investors like others and we are accountable for our decisions and surely Bihar is not the center of Indian economy and hence everyone looked at our move inquiringly.
We did what we did simply because we believe post Covid19 the bounce back of Indian economy is going to be from its Heartland and would be led by the Agrarian economy, the farmers, the marginalized and the Microfinance borrower. The figures are telling for Ergos Grain Bank in Bihar. In the month of April, right in the midst of the Lock-down. Month to Month comparison shows an 8X ( From 191 Farmers in April 2019 to 1510 farmers using Ergos in April 2020) increase in the farmers coming to digitize the grains in the same number of warehouses while the volume has gone up from 1428 MT to 3480 MT indicating a larger number of small farmers are using ERGOS Grain Bank facility. While everyone in Urban India is talking about 70-90% decline, here is a story that warms your heart and explains why the bounce back would come from rural agrarian India.
Another part of the marginalized sector that has been amazing news for India has been the Microfinance sector. The sector has done yeoman service to India by bringing 100 Million women into financial inclusion while impacting the lives of almost 500 Million Indian (almost 40% of most economically marginalized Indians). Most stirring has been the resilience of these proud women who have taken the onus on their slender shoulders to deal with the expectation of Banking sector, the equity investors, the petty politicians and the rest of those who have trying to derail the sector in guise of protecting the same women. Without receiving any fiscal support, the women have built a US $ 45 Billion sector whose on time payment performance is almost as good as any AAA rated company without having any collateral or security over three decades.
Despite this incredible achievement, the analysts, the bankers and the Scions of Banking Industry at large, almost always rubbish the credibility of these amazing women leaders whose track record remain unblemished and resilient despite the Andhra Microfinance Crisis, The impact of Demonitisation, the liquidity crisis post ILFS debacle etc.
It is amazing how the mainstream tries to marginalize the most emphatic performance simply because it cannot respect those who do not wear suits. Covid19 would prove to the world that Microfinance would be the most resilient financial asset in the post Covid world and India would need to rebuild its future from the bottom and strengthen its foundation. I am hopeful that Bankers in India and Credit Rating agencies all over the world would realize that it is not the security but the cash flow and commitment of the borrower that build sustainable business and track record for the borrower.
As I say proudly, the next decade would be defined by Impact Investing as the new Mainstream, with capital across the globe acknowledging the need of sustainability and equity over mindless greed. India as the global leader and powerhouse of Impact Investing and Social Entrepreneurship has the opportunity to demonstrate that you can rebuild your economy with the marginal and I am very confident the global pool of capital would follow the lead.
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