Open Source

This isn’t about foreign banks (though some people would argue that ICICI is practically a foreign owned bank now), but it’s an interesting enough story to share anyway.

ICICI Bank is expanding so fast that its IT costs are ballooning. In a desperate cost cutting measure, the head office announced an open source initiative: from now on, all new PCs and laptops would use OpenOffice instead of Microsoft Office.

Which is nice, except that the Windows version of Open Office is pretty slow. Oh, it does everything that MS Office does, just a whole lot slower. Spreadsheets in particular are resource hogs. For anyone in the bank who has to work with huge amounts of data, this is a problem.

A friend tells me of this conversation he had with his boss.

Friend: I’ve finished the calculations. Here’s the spreadsheet.
Boss: Hmmm, do you think the calculations are okay?
Friend: Yeah, I think I’ve got everything right.
Boss: Fine, I’ll take your word for it. If I open it up here to check it’ll take too long.

Heh. Unintended consequences are funny things.

Collections and the Telecom Revolution

Two things about Indian telecom have made life difficult for banks’ collections departments.

The first is that fifty years of state telecom ensured that it was almost impossible for anybody to get a landline.
The second is that competition in mobile phones is so fierce that people can switch their mobile phones practically instantly. Unlike the USA, there are no long-term contracts, no numbers mated to handsets, or so forth. And on the consumer behaviour side, people aren’t all that worried about losing the number which everyone has- which is also influenced by competition to some degree- SMSing all your contacts your new number isn’t grossly expensive.

Which means that all too often, a collections officer will be trying to track down someone who’s been delinquent on his credit card or personal loan or mortgage payments, only to find that he has no landline, and that the mobile phone number he’s provided no longer works.
There are two aspects to this- the people who genuinely don’t intend to pay and change their numbers to make life difficult for the bank. And people who intend to or can be persuaded to pay and have changed their numbers anyway. If number portability does get implemented eventually, the second group will be easier to trace down. Banks are probably going to love number portability far more than consumers.

Islamic Banking and REITs

In my first two weeks on the job, I had to go on an outbound call. A client had deposited a huge sum of money into a current account that hadn’t seen any activity at all for a few years. We went to investigate both the source of funds (to see if it was a possible money laundering attempt), as well as to see if we could persuade them to bring the money under wealth management (if it was legitimate).

When we got there, we discovered that the client was an agent for a society of Muslims. The client expained that Muslim investors had joined together, pooled money, and bought real estate. The property had been deveoped and resold and the proceeds were now sitting in the current account, prior to being paid out to investors.

In effect, the client had been running a mini-REIT. REITs might have been permitted as REITs only in the past two years, but this client had gone and built a synthetic REIT on his own. Amazing.

What I learnt from this is what an awesome investment avenue a properly managed REIT can be for Muslim investors. Very orthodox Muslims don’t invest in debt because of the Koranic prohibition on interest. When they do keep money in bank accounts, they donate the interest they earn to charity. An investment vehicle based purely on real estate is ideal for them (so is equity for that matter, but the stock market has left too many people in India spooked- more on that later, maybe).

Of course, for REITs to have an impact among individua Muslim investors, entry sizes have to come down from the levels they are at today: five million rupees. I don’t think that’s a huge problem; REITs are in their infancy and the ticket size will definitely drop. Accessibility will come in with REIT focused mutual funds.

Respecting the Community

At the financial institution where I work, there is a charter of values which says that we should be international not only in our operations, but also in our values. To this end, we need to respect the communities in which we operate.

This disturbs me. It sounds nice at face value, but the real communities we operate in are often bigoted, narrow-minded, superstitious, or outright hostile to individual rights. They are communities which preach holy war against other communities, or refuse to allow basic surgery for fear of offending the gods, or communities which don’t allow their women even marry to their own desire. Respecting the community isn’t good enough to have international values. We need to spread the values we aspire to.

Three hundred years ago, my industry heped to create the middle class in Europe. It financed them- and thus financed the spread of liberal values. If we are as courageous as out charter tells us to be, we should damn well live up to our responsibility and create a liberal middle class in Asia.