CASI Student Blog
The audience is as much a part of the Indian movie-going experience as the film itself. Singing anthems, whooping and hollering, rooting for favorites, calling out fouls and simulations, and getting a halftime snack fix – few differences aside, it’s possible to forget you’re in a dark room with 3D glasses and imagine yourself in a soccer stadium. Regardless of which side wins the denouement, audience participation is all part of the picture show.
A few words first on Indian movie theater protocol. Going to the cinema is still an affordable and regular Sunday afternoon outing, and for popular films and timings, it’s recommended to book seats in advance. Not just tickets, but assigned seats. Seat prices don’t change based on the viewer’s age or professional status, but, like many public spaces in India, based on the class your seat is in, which in some theaters ranges from VIP, Premium, and Executive, to Normal. Unlike in the United States, the seats farthest from the screen are the most coveted, so much so that the rows are numbered starting from the back, and seats from the upper half of the theater are more expensive than the empty front, so that the VIP sit in the last row, like an inverted stadium.
Anthems and intermission are also in the mix. Following a 2016 Supreme Court ruling, which has since seen some back and forth, it is mandatory for cinemas to play the national anthem to the image of the tricolored flag, and for citizens to stand and sing, in order to “feel this is my country and this is my motherland.” A practice some have dubbed popcorn nationalism, and which has recently been questioned by the same court that instituted it. The intermission, or interval as it’s known in India, is an older institution, and one that is more difficult to uproot, not because it maintains the Bollywood three-act structure as some claim, but because audiences buy snacks at that time rather than before the start of the film.
Intermission sales are such a large source of revenue that theaters halt all films halfway. This is fine for Indian movies with natural fade outs, but might leave you startled in the middle of a battle scene of a Western film like Dunkirk. Snacks include the usual popcorn-soda combo, with the additional chaat masala layer between salty and caramel popcorn, as well as samosas and Thums Up. Last time I ordered a soda it came without a lid or a straw because of a new no plastic policy, a whimsical Corporate Social Responsibility move that made drinking the soda turned draft beer tricky in the dark.
Now to the audience. It isn’t made up of hooligans, but definitely rowdy and demanding spectators. Despite the fairytale-like nature of some Bollywood films, audiences don’t feel alienated from the plot, and don’t shy away from expressing approval or discontent for what’s on the screen. This comes in the form of whooping during action scenes and near-kisses, or booing evil-doers and power cuts, Bangalore’s personal nemesis. It’s also shouting out “Don’t do it” to that character opening doors in horror films and “Are you done?” during overly dramatic scenes of reunion, as well as laughing at jokes said on screen or in someone’s text message, except that one time during Black Panther when a punchline with a Coachella reference went over everyone’s head. Repeat viewing is not uncommon here, perhaps because of people’s experience with traditional performances of epics known from childhood, meaning that sometimes you’ll sit next to someone singing along to all twenty songs of the film, or asking you to make space for them to walk in a quarter into the screening, which is always the sign of a good story about to unfold.
Diwali, the Hindu festival of lights celebrating the triumph of good over evil, might be considered a less than fortuitous date to pilot a survey instrument for business owners in Mumbai. The crowds doing last minute shopping to puja-fy their homes, the local student body from which I pluck research assistants gone home, as have business owners with employees to run the shop in their absence – all can plunder this trial, but the Indian calendar leaving little space between Hindu, Muslim, or Christian festivals and historical figures’ birthdays, this week is as a good as any.
So it is that on Choti Diwali, or little Diwali, what feels like Christmas Eve, my research assistant, a real life Velma Dinkley, picks up the puddle I am on a train platform under the 32 degrees of midday, and guides me through the overground maze onto the ladies’ compartment of a train headed to Borivali, a northwestern suburb of Mumbai. The compartment’s contents of embroidered and printed layers of crepe, silk, and cotton look especially vibrant, for which Velma, always quick to provide context to my wonderment, explains the tradition of purchasing and wearing new clothes on Diwali. As the only ladies in drab shirts and slacks, we stand out among the rainbow flash of the urban landscape, but all the more to blend into the paan and watch repair stalls on our list of visits.
On our way to our first business owner, Velma catches a whiff of nostalgia and we find ourselves stopping by street vendors to do our own last minute Diwali shopping. Velma picks at the baskets of sparkles and brightly colored powders to make rangolis on the doorstep, while reminiscing about “bursting crackers” as a child that turned into flaming smokey snakes. Despite their roller derby champion names like Ruby Whip and Sparkling Thunder, their light to noise ratio is apparently quite low and results in a neighborhood-sweeping Armageddon, softened only by the yellow and orange marigolds crowning doorways and awnings.
Diwali seems to be as good a reason to welcome us in as to shoo us out, independent of customer flow or progress made in today’s newspaper. Our best reception comes from a man sipping chai at the empty counter of his 2 by 2-meter store, carefully looking through us as we near his perimeter of interaction, before putting up an index in the air, and slowly saying “No time,” chai sipping and people watching uninterrupted. Others like the man selling knock off track suits a couple stalls down calls us in to ask what we are snooping for, promptly inviting us in for chai delivered spill-proof in ziplocs. The “heureux elus”, or lucky winners as my grandmother calls my survey respondents, who sit through the ten to forty minutes of questioning depending on our need for clarification and their need for an ear, are compensated with Velma’s homemade coconut laddoos.
My linguistic capacities in Hindi and Marathi being nil, Velma is free to direct the conversation and discuss Bihar’s Dowry Free India Movement, or the gender distribution of cattle on a Rajasthani farm, while I decipher interactions in the rambunctious silent film playing out before my eyes. Standing in the entrance of a frame repair workshop owned by an old man with an even older assistant, I watch as a corpulent lady appears, flower garlands in a bag, on the hunt for puja elements. She asks for images of Lakshmi, the goddess of wealth honored on the night of Diwali so that she pays a visit to worshippers’ homes. The hunched assistant proceeds to fan out Lakshmis sitting in her lotus flower. The images having a landscape orientation however, the goddess bores a more portly stature than in the client’s imagination. Tapping the goddess’s stomach, the woman asks for portraits, after which the assistant produces a stack of images and flips through Hanuman, Ganesh, Lord Ram, Sai Baba, and the multitude of Hindu deities and gurus I have yet to catalogue. Lean Lakshmi is not of the party.
The sun setting on the noble citizenry of the pedestrian alley, the lady settles on landscape Lakshmi and saunters off with her marigolds and newspaper-wrapped frame under the arm. A “Happy Diwali” and a gifted image usher us out. On the way back to the train station, we stop again by sidewalk vendors seemingly birthed by the retail shops behind them over the course of the day, and I get my first taste of charred water chestnuts – a humble delight. Small earthen pots flickering with ghee light our way to the neon vada pav joint marking the entrance to the station and dishing out its slider-sized concoction of yellow bread and fried potato stuffing to commuters. I ask Velma about her Diwali plans. She tells me traditionally people stay home to drink and gamble with their friends. There is another tradition though, which her family opts for, entailing a full spring cleaning to welcome the new year before the relatives arrive. “So you’re celebrating New Year ?” I ask. “Well, one of them. This is my third in 2017.” Diwali, as good a time as any to amble the streets of Borivali.
As mainstream household microfinance has matured in India over the past thirty years, focus has turned to the country’s underserved Micro, Small, and Medium Enterprises (MSMEs). The MSME sector is a pinnacle of the Indian economy, made up of 48.8 million units that contribute 11% of India’s GDP (IFC, 2010). With India’s young working-age population to peak by 2020, the government has taken measures to give impetus to MSMEs’ potential to scale and generate further job creation.
MSMEs operate in an environment that makes it difficult for them to formalize and scale however. Challenges that have chronically constrained the growth of the sector include poor infrastructure and insufficient market linkages, but the most cited challenge to growth is a lack of adequate and timely access to finance. As microfinance prioritized the financial inclusion of households over that of enterprises, credit has become more accessible to self-help groups than to entrepreneurs with a larger need for it (Joshi, 2017). Financial inclusion advocates have adopted the term “missing middle” to categorize MSMEs that fall into a debt gap, being too small to access bank loans, yet too large for microfinance loans (CGAP, 2015). According to an IFC estimate, the sector suffers from a debt gap of over INR 2.9 trillion ($ billion), which, despite the advances made in the last decade to expand financial services to MSMEs, cannot bridged by the current composite of government schemes, financial institutions, and individual enterprises.
The MSME sector in India is classified into Micro, Small and Medium based on the size of the initial investment made to start the enterprise. This classification however provides limited visibility into the sector’s finance needs, more so a function of an enterprise’s size and area of operation, type of industry, customer segment, and stage of development. Honing in on the distinctions between manufacturing and service-oriented enterprises provides an example of the sector’s heterogeneity in terms of credit needs and the challenges in accessing formal credit channels.
The service sector accounts for 71% of MSMEs and is dominated by retail trade, eateries, and small transport operators. The addressable debt gap in this sector amounts to INR 0.9 trillion ($ 18 billion). The primary reason for this shortfall is a lack of understanding of the business models and financing benchmarks at play in a sector that almost entirely operates in the informal economy. A second reason is that service sector operations are intangible and entrepreneurs do not have the primary security or immovable collateral banks require to hedge the risk of default.
Although the manufacturing sector accounts for a smaller share of enterprises, its contribution to GDP is greater and its debt gap twice that of the service sector at INR 2 trillion ($40 billion). Manufacturing is more capital-intensive and has longer working capital cycles, especially as payments from buyers are realized with the significant delay of 100 days on average. Since suppliers’ credit remains limited, the working capital demand of enterprises tends to exceed the short-term credit limits offered by financial institutions, resulting in a large financing gap.
To mitigate these challenges and address the financial requisites of service-oriented and manufacturing MSMEs, boiled down respectively to start-up capital working capital, the Government of India has accelerated reforms to facilitate banking the underserved. The first wave of reforms ensured that every registered MSME has a bank account linked to the Udyog Aadhar. This was followed by the operationalization of an equity fund for the MSME sector and the inauguration of development banks and “small finance banks” to cater specifically to the missing middle. In parallel, India’s central bank expanded coverage of credit guarantee schemes that require banks to allocate 40 percent of their credit portfolio to “priority sectors” including MSMEs, and also reassure banks that, in the event of default, the government will make good the loss incurred by the lender up to 85 per cent of the credit facility (RBI, 2016).
Supported by these initiatives, it was expected to see more players and capital flow into the debt gap, resulting in greater volume of credit to MSMEs. The government’s impetus however did not glaze over the banking sector’s perception of small businesses as a high-risk and commercially unviable proposition to lend to, mainly due to the high transaction cost and high risk associated with these businesses. As a result, Indian banks are not inclined to ﬁnance MSMEs, especially micro and small enterprises, which predominantly translate to subsistence enterprises in the service sector.
First, the transaction costs associated with sourcing and evaluating MSMEs are high. Banks have limited manpower to scope out small businesses, and the transaction costs of sourcing being constant regardless of loan size, there is a natural incentive for bank agents to fish for sizeable producers in need of larger loans as opposed to corner stores with smaller ticket sizes. Assessing credit worthiness is also more expensive due to the informational opacity of MSMEs. Enterprise promoters are for the most part not financially literate and do not maintain formal accounts or differentiate between business and household finances. In the absence of standard capital benchmarks and credit scores, bank agents are left to base loan needs on cash flows, a time consuming and approximate process.
In addition, promoters lack collateral to secure their loans. Or rather, they lack the right collateral. This may seem paradoxical, given the recent finding that 95% Indian households’ wealth is held in physical assets, but these assets primarily consist of gold and land that are difficult to mortgage in the event of default. While the trend of collateral-free debt is growing gradually, in part thanks to the aforementioned schemes, financial institutions insist 95%-98% of bank loans be secured with immovable collateral, especially in light of the sector’s historically high levels of non-performing assets (RBI, 2017).
So it is that of the overall finance demand of INR 32.5 trillion ($650 billion), 78 percent is either self-financed or comes from informal sources. The banking industry’s reluctance to work with this sector is far from being the singular cause for the debt gap, as MSMEs are almost equally reluctant to avail formal financing. Starting with the human perspective, promoters’ fear of seeing their costly bank applications rejected and the belief that their projects are not worthy of formal investment keeps them from approaching banks. One might wonder how this is given the plethora of credit schemes tailored to them, but according to a recent survey of 85 MSMEs in India, over 50% of promoters were not aware of a single financial scheme, and only 12% had ever resorted to one to obtain financial support (Singh, 2016).
Were MSMEs aware of these schemes, there might also be an economic reason for not availing them. Informal finance currently fuels the sector, and while institutional channels, comprising trade credit, chit funds, and moneylenders, tend to be expensive, non-institutional sources such as family, friends, employers, and joint family businesses represent 95% of informal credit, and float it at minimal or no interest. Granted, these loans come with other strings attached and are limited in capacity, but overhauling quick, cheap money in favour of security and interest-laden loans will require more than preferential policies. When considering the registration, tax, and compliance requirements necessary for MSMEs to be eligible for credit schemes, the benefits of formal financing hardly seem to outweigh the costs of formalization.
In 1992, Dr. Prabhu Ghate, an independent researcher interested in the interaction of formal and informal credit markets, noted that “The expansion of formal credit at the expense of informal is often mistakenly assumed to be an end in itself, and the success of such policies is often discussed in terms of changing relative shares. Their true rationale, however, should be to ‘compete’ the terms of informal credit down by providing an alternative.” Although written over two decades ago, his words hold true, as the priority remains to study MSMEs’ current pathways to growth, and their sources and uses of informal credit, in order for the formal financial sector to put forth better adapted financial products, and for the government to more easily accessible credit facilitation.