Image 1: Beneficiary Meenakshi
Penned By Board Member Alo Pal
So then, why don’t you put this money into safe investments and live off the interest?
– That is not the way to generate wealth.
– Why not? Your children will be productive too, they will add to this capital and will have an even better life with the cumulative returns from the safe investments no?
– No, that is not how you generate wealth. Let me explain. This creates some security but does not generate wealth especially when interest rates are lower than or hovering around inflation.
– Why? The bank will use your money to lend-out to businesses and give you the interest you seek. From whatever form of FDs etc, you make?
– No, Alo, savings isn’t what generates wealth. It only creates a sense of security around the money you have. It is borrowings and leverage that create wealth.
– How!
– You take loans against your assets and reinvest. To reinvest the right amount while minimizing risks, you need a calm and practical mindset, as well as the ability to wisely choose a viable business plan.
This is the point where a Bengali, conditioned by generations of the cultural baggage of high thinking and simple living fails to see reason. How can a continuous co-existence with debt be a good way to live?
***********
Sitting in the shade of the verandah at our Angalakuppam social centre, I listen to Meenakshi. She had received a loan from Sharana under our Social Entrepreneurship program for the part payment of a pregnant cow in December 2022. The rest of the money she self-financed. This was the first cow in her herd. The second cow, in September 2023 was sponsored by a French organization, in December 2023 she bought her third cow, self-financed and partly from a loan from a self-help group. Even as we spoke, she informed me that she had added a fourth cow to the herd by pawning her Jewellery in February. In January 2024, she received another loan from Sharana, this time, to build a proper cow shed. By this time, I was in a state of panic. Why was she accumulating so much debt? But Meenakshi was a picture of quiet confidence. She seemed to have a good grip on her business plan. The male calves were sold off, but she reared the female calves with much love, nutrition, and care. The milk from the cows was a steady source of income, and she was able to pay off her debts steadily month after month. While it is true the loans were either interest-free or low, she was managing to put aside that money every month and pay off her debts, and when the time was right was borrowing to acquire a cow our build infrastructure for better health and maintenance of her herd. The dry cows are inseminated by AI, and I am really curious to see how she maintains a steady calving calendar now to ensure continuous milk production. But then I could not stop worrying about what I perceived as the pressure and stress of debt.
Image 2: Meenakshi in her cow shed
And then, of course, the penny dropped! Meenakshi was the model wealth-generating entrepreneur my friend was talking to me about! “Borrowing” didn’t intimidate her at all. And sure enough, she was slowly increasing her assets.
