graylightning

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.