Mark Hannam
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Hinduism and Microfinance

Printable version

Learning from Gandhi:
addressing the current
dilemmas in microfinance


Hinduism and Microfinance

The Financial Crisis
of 2007-2009:
A Sketch of a Credible Explanation


Money Market Funds, Bank Runs and the First-Mover Advantage

The Morality of Money Lending

The Case for Central Bank Liquidity Facilities for Institutional Money Market Funds in the Offshore Market

Creating Sustainable Micro-lending in London

Darwin and Philosophy

Financial Inclusion
and Equality


David Hume's "Of Suicide"

Is God a democrat?

The Risk Premium
for Commodities


INTRODUCTION

The most celebrated attempt to explain the relationship between religious belief and economic practice remains Max Weber's The Protestant Ethic and the Spirit of Capitalism (Weber, 1904, 1930). Weber suggested that capitalism developed first in predominantly Protestant nations of Western Europe and North America because the ideals and beliefs of Protestant Christianity provided cultural support to particular forms of work, savings, investment and worldly endeavour. He did not argue for a correlation between the most religiously devout and the most economically successful individuals; rather he argued that religious beliefs were influential across society and helped to create a culture in which economic success was respected and rewarded.

Weber saw the specific case of Protestantism and the rise of capitalism as an illustration of a more general thesis concerning the relationship between the religious beliefs of a society and its openness to a more rational approach to social and political organisation (Weber, 1956, 1968). Weber provides a typology of world religions, based on his assessment of their metaphysical content, their teaching with regard to the path to salvation, their attitudes towards life in this world and their potential support for processes of social rationalisation (Habermas, 1984). Using this typology, social theorists might be able to make general predictions about the likelihood of success of certain economic and business practices in societies in which particular religious beliefs are, or remain, the dominant cultural influence.

One such prediction might be the extent to which religious beliefs and cultural attitudes derived from Hinduism have supported the development of microfinance in India. Although there is some literature on religion and microfinance (Ashta and De Selva, 2011) very little work has been done on Hinduism and microcredit. In this paper we introduce the basic idea of microcredit (1), briefly summarise the central beliefs of Hinduism (2), and identify ancient Hindu texts that are relevant microcredit (3). A short discussion of the Hindu tradition of practical wisdom, suggesting why this tradition is relevant to the contemporary MFIs (4), leads to a case study of a microfinance institution (MFI) with Hindu religious roots (5). In conclusion we draw some lessons for management education, adding some notes of caution.



(1) MICROFINANCE

Microfinance is the provision of financial services to the poor and the financially excluded. Although poverty and financial exclusion are highly correlated the latter may also arise from restrictive cultural practices, geographical unavailability, financial illiteracy or other blockages to access to financial services. It is estimated that in 2005, 1.4 billion people lived in abject poverty earning below $1.25 a day in purchasing power parity terms and that another 1.2 billion people earned between $1.25 and $2 a day (Chen and Ravallion, 2008). Furthermore, a significant proportion of the world's population does not have access to a bank account and basic transaction banking services. Microfinance tries to fill this gap by the provision of small loans, savings accounts, insurance and remittances.

It is worthy of note that the business ideas from which the modern microfinance movement drew inspiration, emerged initially in Christian societies, such as Ireland and Germany (Roodman, 2012). By contrast, the contemporary microfinance has flourished in a diverse range of societies, including Latin America (primarily Christian), North Africa (predominantly Islamic) and South East Asia (where we find a mix of Hinduism, Islam and Buddhism). There does not appear to be close relationship between modern microfinance and any one religious tradition, comparable to the relationship between early capitalism and Protestant Christianity that Weber described.

Despite considerable success in delivering financial services to millions of people who previously were excluded from access to useful financial products, and in some cases success in improving the economic and social well-being of the borrowers (Banerjee and Duflo, 2011), the modern microfinance has recently been subjected to a number of serious criticisms (Bateman, 2010). The common theme of many of the criticisms is either that microfinance is undergoing mission drift or that its impact is not proved. The mission drift critiques maintain that it targets clients who are better off than the poor (Copestake et al., 2001); MFIs grant larger loans at higher interest rates, to those who have more assets, higher valued collaterals, minimal equity, effective loans, and more experience. (Dutta and Magableh, 2006); and that high interest rates reflect profit-seeking rather than doing good (Ashta and Hudon, 2012, Lewis, 2008, Smith and Epstein, 2007).

The impact criticisms include the difficult to prove impact statistically (Duvendack et al., 2011); that while it may be positive on some criteria in some areas it may be negative on others (van Rooyen et al., 2012); and that microfinance alone is not sufficient and needs complementary social capital (Gomez and Santor, 2001) or micro-franchises (Burand, 2012). In extreme cases, the argument is made that the actions of microcredit companies have led to negative impact and even increases in the rates of suicide amongst the rural poor of India. However, some correlation but no causal relationship is found between microcredit and suicides (Ashta et al., 2011).



(2) HINDUISM

The belief system of Hinduism is pantheistic, the belief that God is everything and everything is God. Hinduism is also polytheistic, that is, it supports belief in many Gods. Very briefly, there is a Central God (Brahman) who is then divided into a trinity of creation, preservation and destruction, played respectively by Brahma, Vishnu and Shiva. These last two came down to Earth in reincarnations to defeat evil. In addition, for each quality there is one God; everyone can turn to a god that suits him or her. In simple terms, we could say that God has infinite qualities each of which is infinite in quantity. If we take any quality and follow through, we arrive at the infinity that is God. To understand the abstract God is not easy even for the most advanced intellectual. Most of us rely on symbols and this role is provided by the multitude of Gods.

The scriptures of Hinduism consist of what God said (the Shrutis, namely the Vedas and the Puranas) and what Manu remembered (the Smritis). The Vedas are considered to be the divine truth that has always been there but revealed to some seers who chose to remain anonymous and passed down their vision of the truth in an oral form to their disciples. The exact date when these truths were first written down is unknown. One of the major texts of Hinduism is the Bhagavad Gita, which is found in one of the two great epics of Hinduism, the Mahabharata (the other one being the Ramayana). It is generally considered that the Gita summarizes the essence of Hindu philosophy found in the Vedas.

The Vedas are distinct from what Manu remembered, and which is called the Manusmriti, that was transcribed later. Although there are other codes by other law-givers, that of Manu is the most well-know. In Ancient India, there is also an important work on Political Economy called the Arthasastra, written by Chanakya Kautilya, sometime between 350 BC and 150 AD (Rangarajan, 1992, p 18-21).

In Hinduism all important acts are sanctified through religious practice (samskara in Sanskrit). Although there are ten samskaras pertaining to marriage, its consummation, pregnancy, birth, naming, feeding, hair-cut, studies, sacred thread ceremony and the completion of education, there are other practices which are followed (e.g. the funeral) which are also part of this way of life (Bhaskarananda, 1994). According to Nirvedananda (1944), the Hindu word dharma goes beyond religion and contains all the practices that a man needs to do to become divine in all his bearings. In this paper, unless otherwise stated, when we refer to the Manusmriti, we are referring to the translation by Bühler (translated 1886)[ ]; when we refer to the Arthasastra, we are referring to Rangarajan (1992).



(3) HINDU TEXTS AND MICROFINANCE

Money and wealth in Hinduism

According to the Arthasastra there are four ends to a productive and moral life. These are Moksh (Salvation), Dharma (Ethics), Artha (Money) and Kama (Pleasure). These four qualities are also enshrined in Vedic tradition (Sharma, 2005). So money is one of the four most important qualities. The importance of money in Hinduism is reinforced by the place assigned to Lakshmi, the Goddess of Wealth, who is the wife of Vishnu, the God of Preservation. Divali, one of the greatest festivals of Hinduism, reveres Ram, an incarnation of Vishnu. But on this day prayers are also offered to Lakshmi. Hindu traders begin their new year at Divali after offering prayers to Lakshmi. Hinduism also recognises the mercurial nature of money and the need for Lakshmi to move: she should therefore not be hoarded but passed on.

Interest rates

The three great monotheistic religions (Judaism, Islam and Christianity) all had at some point in their history, a prohibition of interest rates (Mews and Abraham, 2007). By comparison, Hinduism allows interest rates, even rates considered excessive today. The level of rates seems to depend on the context:

Chapter VIII of Manusmriti says:

140. A money-lender may stipulate as an increase of his capital, for the interest, allowed by Vasishtha, and take monthly the eightieth part of a hundred.
141. Or, remembering the duty of good men, he may take two in the hundred (by the month), for he who takes two in the hundred becomes not a sinner for gain.
142. Just two in the hundred, three, four, and five (and not more), he may take as monthly interest according to the order of the castes.

Article 140 would indicate that an interest rate of 1.25% per month is allowed (15% per year without compounding). However, Article 141 seems to allow even 2% per month (24% per year), and Article 142 permits monthly interest on debt at the rate of two, three, four or five per cent "according to the order of the castes" (24, 36, 48 or 60% a year). It may reasonably be construed that the Brahmins reserved the lower interest rates for themselves, believing in their integrity, and that higher interest rates were for the lower castes, in view of the high risk and efforts required to get money back. Thus a risk-return relationship was already considered.

Some centuries later, Kautilya's Arthashastra considers "the lawful rates of interest for different purposes shall be: normal transaction 1.25% per month (15% per year); normal commercial transaction 5% per month (60% per year); commercial travel with risky travel through forests 10% per month (120% p.a.); commercial transactions with risky travel by sea 20% per month (240% p.a.). Even higher rates were possible in regions where the King could not afford protection: "No one shall charge or cause to be charged a rate higher than the above, except in regions where the King is unable to guarantee security; in such a case, the judges shall take into account the customary practices among debtors and creditors" (Rangarajan, 1992, p. 426).

The notion of risk and return were thus developed in India as early as Kautilya, at the latest by 150 A.D. What was tolerated at that time is not necessarily what is tolerated today because religion has evolved, the economy has been transformed and the nature of risk has changed. However, the nature of the transaction and its inherent risk led to a risk premium, legal and regulatory enforcement risk was recognized and usury ceilings were applied to make finance affordable (Sihag, 2008). In the absence of a State enforcement capacity, Kautilya considered that the wisdom of the market should not be subjected to State control and credit rationing should not be applied by imposing a usury ceiling, even of 240% per annum.

Chapter VIII of Manusmriti continues:

151. In money transactions interest paid at one time (not by installments) shall never exceed the double (of the principal); on grain, fruit, wool or hair, (and) beasts of burden it must not be more than five times (the original amount).

Thus if interest is paid in one instalment, 200% seems to be allowed; 500% is also allowed for advances on certain items. Consumer credit companies all over the world can take heart from this. The rates allowed in the Arthasastra seem to be much lower: For grains and for commodity stocks the interest is limited to 50% (Rangarajan, 1992, p. 426).

However, the usury ceiling in Manusmriti seems to remain at 60% per year because it is asserted that anything higher is not recoverable.

152. Stipulated interest beyond the legal rate, being against (the law), cannot be recovered; they call that a usurious way (of lending); (the lender) is (in no case) entitled to (more than) five in the hundred.

In addition, interest on interest was not allowed: this is indicated in both Manusmriti and in the Arthasastra. Chapter VIII of Manusmriti says:

153. Let him not take interest beyond the year, nor such as is unapproved, nor compound interest, periodical interest, stipulated interest, and corporal interest.
154. He who, unable to pay a debt (at the fixed time), wishes to make a new contract, may renew the agreement, after paying the interest which is due.
155. If he cannot pay the money (due as interest), he may insert it in the renewed (agreement); he must pay as much interest as may be due.

In the Arthasastra too, interest on unpaid interest was not recoverable: "no one shall claim as principal the original loan with the accumulated interest added to it". Moreover, the interest rate has to be determined at the time of making a loan. Once interest rate is fixed for a loan, it cannot be changed (Rangarajan, 1992, p. 425).

We see that the moneylenders who demand 30% to 240% per year could be tolerated because they provide special services, for emergencies, lending small amounts, with no formality. So in the Hindu world, there is a place for the usurer, for MFIs and for banks. The recent ordinance passed in October 2010 by the Governor of Andhra Pradesh restricting interest to the amount of the principal draws to some extent from Hindu texts and religious culture.

Recovery of debt

A central problem for microcredit is to ensure that the borrower pays back. If he or she does not do so, enforcement is a problem. Chapter VIII of The Manusmriti indicates:

47. When a creditor sues (before the king) for the recovery of money from a debtor, let him make the debtor pay the sum which the creditor proves (to be due).
48. By whatever means a creditor may be able to obtain possession of his property, even by those means may he force the debtor and make him pay.
49. By moral suasion, by suit of law, by artful management, or by the customary proceeding, a creditor may recover property lent; and fifthly, by force.
. A creditor who himself recovers his property from his debtor, must not be blamed by the king for retaking what is his own.
51. But him who denies a debt which is proved by good evidence, he shall order to pay that debt to the creditor and a small fine according to his circumstances.

Article 47 requires that the king has to ensure that the debtor repays his debt. Article 48 is clearly in favour of creditors: the creditor is allowed to use all means to recover his debt. Article 49 indicates that there are five means of recovery. These are translated slightly differently by Bhattacharya: "dharma (persuasion), vyavahara (legal proceeding), cala or upadhi (trick), carita (sitting down at his door) and bala (compulsion to do the work or confinement)"(Bhattacharyya, 1996, p. 181). Moreover, Article 50 indicates that the king is on the side of the creditor who takes back what was rightfully his due.

In view of the above, the recent Andhra Pradesh ordinance, which does not allow following a person to his house, or any other harassment seems to go against recognised wisdom of the ancient Hindu texts, which allow trickery to get back the money.

The Manusmriti also states that if a debtor is unable to pay his debts, then he should be made to do work suitable for his caste in the house of his creditor, in order gradually to liquidate his debt.

177. Even by (personal) labour shall the debtor make good (what he owes) to his creditor, if he be of the same caste or of a lower one; but a (debtor) of a higher caste shall pay it gradually (when he earns something).

Thus bonded labour was accepted in place of debt repayment as it was in most other early societies (for example, Athens at the time of Solon). Once again, higher castes were privileged in this regard.

The Arthashastra also details the rules permitting a person to sue for recovery of debt (Rangarajan pp 423-424). These rules indicate that debts might be passed on to the next generation.

"In case a debtor dies, the responsibility for repayment, with accrued interest, shall devolve upon: sons; heirs inheriting the property of the deceased; co-signatories; sureties. When there is no limitation as to time or place, the obligation to repay shall devolve upon sons, grandsons and kinsmen who inherit the debtor's property…" (Rangarajan, p.424, 3.11.14,17,18)

If the inheritor gets property and debt, three generations are bound to pay the debt and interest; if the inheritors do not get ancestral property, then only two generations need to pay the debt (Sharma, 2011). Hinduism encourages the settlement of debts prior to death. In Bali, Hindu microcredit borrowers believe that if they die indebted, they will be born indebted and this places spiritual pressure on them to repay (Seibel, 2009).


(4) PRACTICAL WISDOM IN THE HINDU TRADITION

All civilizations have a tradition of wisdom that is passed down through the generations by means of myth, story, song and artwork (Birren and Svensson, 2005). Just as the Greek tradition distinguishes theoretical wisdom from practical wisdom, so too in Eastern thought there is a distinction between abstract thought and the practical wisdom of how to live one's life well. In Hindu thought, dharma describes both the customary law that is accessible to men and women and should structure their lives, and also the eternal law that explains the meaning of the world and the events that come to pass, which is wholly known only to God, but occasionally revealed in small part to men and women, as for example to Arjuna in the Gita (Zaehner, 1962).

By comparison with the Western tradition, Hindu thought emphasizes the particular against the universal. To be moral, for Manu, is to particularize; to find the right rule is to find the rule that is context-sensitive (Ramanujam, 1989). What is right or wrong behaviour will depend on one's stage of life, one's station or class, and the circumstances in which one finds oneself. It is the specific context that gives meaning to the problem or challenge that is faced, and to the solution or answer with which a person responds. Practical wisdom is essential for the Hindu because what is dharma in any situation cannot be known aside from the details of the situation.

In the Arthasatra, Kautilya sets out to instruct future kings on the skills required to become successful rulers, which include religious thought, political administration, agriculture and economics, and critical thought. (While Plato thought that philosophers should become kings, Kautilya thought that kings should become philosophers, economists and bureaucrats). As Jonardon Ganeri (2001) explains, the prince's training in religion, politics and economics will equip him to know which goals to choose to pursue; his training in critical thought, that is, the discipline of practical reasoning, will assist the prince in achieving these other goals once they have been chosen.

It can be seen that both for individuals who seek to live ethical lives, to follow and fulfil their dharma, and also for rulers who seek to govern well, to achieve the goals they have chosen for their community, the need for practical wisdom is central to the attainment of success. Learning, through experience, to judge the particular details of the situation, to understand the context in which the decision must be made, to think clearly with discrimination about the means necessary to secure the chosen goal: these are all specific tasks, for which we can only prepare ourselves by the disciplined acquisition of practical wisdom. In the words of Lord Krishna:

Forget experience, you lose discrimination:
Lose discrimination, and you miss life's only purpose.

Paradoxically, the only text-book answer in the Hindu tradition is that there are no text-book answers.

The relevance of this practical wisdom tradition for the microfinance movement can be best understood through two related ideas. First, by comparison with mainstream financial institutions, which emphasise the development of standardised products that can be delivered to the mass market, MFIs tend to develop their products and services with greater variation and flexibility, taking account of the specific circumstances of the local operating environment. Second, this process, of developing products and services appropriate for particular customers in particular places, is not just "good business practice" but also "good moral practice". Ethical finance, in the Hindu tradition , is finance that takes the local context into account, and this has been the business strategy of many of the successful Indian MFIs. The case study that follows illustrates this point.


(5) AN ILLUSTRATIVE EXAMPLE

In this section we look at the case-study of a Hindu MFI - Shree Kshethra Rural Development Project (SKDRDP) (Harper et al., 2008) - and try to place it in a religious context. SKDRDP is a rural development programme started by a Hindu Temple administered by the trustee, Dr. Heggade. The programme offers an integrated rural development programme, including microcredit, to help relieve local poverty. This example offers insights into Hinduism and its role in supporting the development of microcredit in a particular form.

SKDRDP is one of ten MFIs in India with over 200,000 customers. Of these eight are for-profit but SKDRDP is one of the two non-profit MFIs. The normal interest rate for microcredit in India is about 24% to 30% per year, but SKDRDP charges interest of only 12.5% per year. These low interest rates are significant at a time when the fast-growing for-profit MFIs, with higher interest rates, stand accused of usurious lending and unethical collection practices, leading to allegations that some borrowers have committed suicide (Ashta et al., 2011).

The leader of Hindu worship in a certain area of Karnataka State, for the last six centuries, comes from a family of priests. The current leader decided to do more than help his flock through religion and is dedicated to improving their material life. On the hill where the temple is located, he began to provide loans and at the same time advised his people on how to improve the productivity of their land. Because they had faith in him, people took loans, heeded his advice and paid off their loans. Because they pay back, interest rates are reasonable. Gradually, the temple's economic influence has gone to villages further away. So trust and faith might help the growth and sustainability of microcredit.

Figure 1 shows that SKDRDP is both the supplier and the distributor, with the local entrepreneur in between as the central figure. Moreover, SKDRDP also provides financing and technical services to the entrepreneur. A larger background figure to all this could show that the temple creates the trust which obliges the micro-entrepreneur to repay and also which allows him or her to trust the NGO to give the right advice.

From an economic point of view, SKDRDP is both the supplier and the distributor, with the local entrepreneur in between as the central figure. Moreover, SKDRDP also provides financing and technical services to the entrepreneur. In the background the temple creates the trust which obliges the micro-entrepreneur to repay and also which allows him or her to trust the NGO to give the right advice.

The omnipresent role of SKDRDP in the supply and value chain is suggestive of a few lines from the Gita.

"Brahman is the ritual,
Brahman in the offering,
Brahman is he who offers
To the fire that is Brahman.
If a man sees Brahman
In every action,
He will find Brahman"

This can be compared with:

SKDRDP organizes the entrepreneur
SKDRDP organizes the financing
SKDRDP provides the material
SKDRDP does the marketing
If the entrepreneur needs SKDRDP
In every action
He is dependent on SKDRDP


From another perspective, SKDRDP is a business venture like any other, except structured as a NGO. Instead of using salaried staff to transform the material, it uses outside processing (and hence variable costs) which can then shift the business risk. To its outside processors, it supplies the material as well as financing so that they can buy appropriate tools. It also provides them loans for social and consumption purposes in times of need, rather than giving them a salary raise.

Instead of promoting the independence of the micro-entrepreneur, this alternative perspective suggests that the temple is at the centre, making the micro-entrepreneur wholly dependent on itself: indeed, that the faith-based NGO is "playing God". Of course, if such dependence improves the welfare of the individual, it could be considered to be a rational form of dependence.

According to Harper et al (2008, p.118), it is widely believed that perfection is achieved in Hinduism by passive withdrawal, rather than active intervention (an idea also emphasised by Max Weber). They go on to say that a more active interpretation of Hinduism is possible, based on the notion of karma, whereby each person attains perfection by generosity and sacrifice. The idea that passivity is preferred to activity in Hinduism goes against the views expressed in the Gita which mentions various paths to the ultimate: the Yoga of Knowledge, the Yoga of Action, the Yoga of Devotion, the Yoga of Renunciation, the Yoga of Meditation, the Yoga of Mysticism and the Yoga of Devotion. All of these lead to Brahman.

Within the Yoga of action, Lord Krishna states

"Action rightly performed brings freedom
Action rightly renounced brings freedom
Freedom from action is not brought by merely refraining from action."

The practical wisdom tradition of Hinduism provides reiteration for the claim that the religious life is an active (and not a passive) life. While the eternal law that explains the meaning of the world might be wholly known only by God, for all individuals there is a point and a purpose to the daily activity of their lives. Even those who lack for nothing are enjoined to work, both for themselves and for others. As the Gita says, "I have nothing to obtain, because I have all. And yet I work".

This idea finds an echo in the writings of Kautilya:

"Man, without wealth, does not get it even after a hundred attempts. Just as elephants are needed to catch elephants, so does wealth capture more wealth." (9.4.27, p.637)
Wealth will slip away from that childish man who constantly consults the stars. The only [guiding] star of wealth is itself; what can the stars of the sky do?" (9.4.26, p.637)
"A king who trusts in fate and does not believe in human effort will fail because such a king never begins a work and never achieves anything" (7.11.26-40, p.621).

According to the Gita, the wise have to work to "show by example, how work is holy when the heart of the worker is fixed on the Highest". Then again, the Yoga of Renunciation states that for Seers, "their every action is wed to the welfare of fellow-creatures".

In this context, Dr. Heggade is carrying out the spiritual injunctions of the Gita, which is his duty as the religious head of a Hindu temple., It is necessary for SKDRDP to create the institutions (central purchasing, common marketing, etc.), to ensure that the micro-entrepreneurs get some fruits from their labours, so that they can continue their duty of feeding their own families through their action. This perspective then brings us back to Figure 1, except that the entire chain is being used by Dr. Heggade to encourage poor people to work and gain a living, even at the expense of dependency on SKDRDP.

(6) CONCLUSIONS AND A NOTE OF CAUTION

Hinduism, a pantheist and polytheist religion, reveres money in the same way as it does any other quality. Societies that have been deeply influenced by Hindu religious thought should be fertile territory for the growth of MFIs. Hindu teaching supports the idea of co-operative economic activity to achieve beneficial social goals, including the promotion of economic well-being through the duty of work. However, Hindu teaching is also realistic about the need for high interest rates to compensate for business risks and transaction costs, and emphasizes the importance of the repayment of debts. It is therefore no surprise that the Indian microcredit sector has grown rapidly in recent years. In addition, as the case study suggests, it is possible for a religious interpretation of microcredit business models; in particular it is possible for a religiously motivated MFI to lower interest rates by increasing trust and reinforcing the faith of its borrowers.

However, in a polytheist religion, everything is acceptable. The problem is that it is possible to select certain aspects of Hinduism to support specific arguments, since there is no universally accepted set of beliefs which actually constitute Hinduism. This makes it difficult to draw firm conclusions with respect to the causal relationships between religious beliefs and economic practices. Further, like most other religions, Hinduism suffers from the growth of secular values and attitudes (Sen, 2005). It would be interesting to know whether the secular legacy of Hindu beliefs differed from the secular legacy of Christian, Jewish or Islamic beliefs. It would also be interesting to understand whether microcredit companies behave differently in those parts of India where secularism is most advanced, as compared with places where Hindu beliefs maintain a strong hold on social, cultural and economic life. These are questions for future research.

We have limited our comments to microcredit. Manusmriti and Kautilya also talk extensively of deposits, which is relevant to micro-savings, as well as pledges which could be used as collateral or guarantees for loans. It appears that the Hindu religious tradition would support and endorse a wider range of microfinance activities than pure credit provision. It would also be interesting, in the wake of the media focus on suicides in India, to study the social relations between moneylenders and their clients in India, to see if religious organizations have been able to nurture a different kind of relationship than those exerted by profit-seeking MFIs in this area.

It would be foolish to assume that Hindu teaching could simply be taken from its original source texts and applied - immediately and literally - to the modern business world. Kautilya's writing are two thousand years old and cannot be read as direct advice for us today. The practical wisdom tradition must be translated into the modern idiom and the contemporary context to be of value. We have drawn attention to the pragmatism of Hindu religious texts that deal with the setting of interest rates and the collection of debts. The lesson for today's managers is not to copy the letter of the old laws, but to capture their pragmatic spirit and apply it to the modern world. This is consistent with Kautilya's assertion that young princes should acquire practical economic management skills during their preparation for leadership, as well as learning eternal religious values.

While we are confident in our general conclusion - that the social idealism and economic realism of Hinduism - provide a welcoming environment for microfinance - we are fully cognizant that there is much that we do not yet know about the details of the relationship between Hindu beliefs and practices and the success (or otherwise) of MFIs. With these cautions duly noted, we conclude by drawing attention to a clear confluence of interest between Hindu practical wisdom and recent research findings into best practice in microfinance. This in turn suggests some practical lessons for MFI practitioners and management educators.

The practical wisdom of Hindu thought is particular, context-dependent and addresses the specifics of the situation. A K Ramanujan recalls his father saying, "The Gita is part of one's hygiene" (Ramanujam, 1989, p.43). His point being, first, that religious observance and practice must become part of one's daily routine; but also, second, that one's religious observance will be determined by circumstance. What makes for good hygiene at one time and place depends upon the time and the place. There is plasticity in the practical wisdom of Hindu thought.

The best recent research into the success of MFIs focuses on listening to the borrowers and learning from their experience. By listening, the MFIs can learn what products are needed, how these products should be delivered and at what price. The oft-used but routinely ignored banking slogan, "know your customer" turns out to be the best policy for success. Of course, what customers want will be context dependent so the most successful MFIs will be those that can be flexible - can embrace plasticity - in their approach to service design and delivery. What lessons might the management education community learn from these reflections? First, that to be successful, the standard management disciplines must be embedded into the specific context of the customers' lived experience. Top down approaches to business management, especially the application of universal principles to all cases, irrespective of local context, are likely to fail. Second, that the trust that can be established between lender and borrower - as illustrated by our case study, SKRDP - can be crucial for the survival and flourishing of an MFI. Managers need to learn to listen to their customers; then they need to learn to trust them.





1 The translated work is available online at http://www.sacred-texts.com/hin/manu.htm

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