Tag: India

Riots that resulted in anywhere from 10 to 1,000-plus deaths in their hometowns ultimately influenced lending decisions among hundreds of loan managers in India — and the effect endured for decades, a new study reveals. The research shows a country’s ethnic fissures can create crevasses in its road to economic progress.

Those are the findings by WashU Olin’s Janis Skrastins and three other researchers, who analyzed the lending decisions of about 1,800 Hindu loan managers at a large, public sector Indian bank.

Janis Skrastins

More than 250 of those loan managers had experienced fatal Hindu-Muslim riots in their hometowns when they were children. Later, as grown men, those loan managers favored lending to Hindu borrowers over Muslim borrowers.

“The most important takeaway is that your early childhood experiences of ethnic conflict can have long-lasting effects,” said Skrastins, assistant professor of finance. And the experiences “can actually lead to misallocation of resources even in the longer term.”

The researchers’ paper, “Experience of Communal Conflicts and Inter-group Lending,”  provides microeconomic evidence on the link between inter-group frictions and economic transactions. It is forthcoming in the Journal of Political Economy.

Muslim borrowers less likely to default

The loan managers’ favoritism persisted even as the loans they made to Muslims were less likely to default, the research revealed.

“What’s very, very important is the money or the profit that the officers expect to make on one Muslim borrower is going to be higher than on a Hindu,” Skrastins said.

“So that means they’re just giving money as a favor to some of their own group,” and creating disadvantages for another.

The researchers also discovered that loan managers’ bias persisted throughout their careers, suggesting “the economic costs of ethnic conflict are long-lasting, potentially spanning across generations,” Skrastins said.

The paper documents the lifelong consequences of racially divisive personal experiences in childhood, rather than shorter-term increases in in-group favoritism as a result of current events. The authors say that, to their knowledge, this is the first research on the topic.

Lending decisions over seven years

Skrastins, Raymond Fisman of Boston University, and Arkodipta Sarkar and Vikrant Vig, both of the London Business School, analyzed loan managers’ lending decisions from 1999 to 2006.

In tandem, they used a database of Hindu-Muslim riots from 1950 to 1995, along with each loan manager’s year and city of birth. With that information, they could infer whether ethnic riots erupted in a loan officer’s hometown during his childhood.

All men in the sample were born after 1950 and joined the bank no later than 1995.

The researchers measured riot exposure based on riot deaths in the loan managers’ hometowns from the year they were born to when they joined the bank. Generally, new loan managers at the bank are in their early 20s. Since the bank forbids any loan manager from working in his hometown, they necessarily leave their birthplace when they join the bank.

Because the bank requires loan managers and borrowers to list their religion, the researchers also had access to that information.

‘Riot-exposure’ defined

In their main results — which used local riot deaths of 10 or more people to define “riot exposure” — they found this: The presence of a riot-exposed loan manager was associated with 4 percentage points higher lending to Hindu borrowers relative to all other borrowers.

They also found that the presence of a riot-exposed loan manager was associated with a 2.5 percentage point increase in defaults by Hindu borrowers relative to Muslim borrowers.

The researchers also examined lending decisions as a function of when the loan manager was first exposed to Hindu-Muslim violence. Riot exposure before he was 10 years old was “the most important determinant of later lending decisions,” they found.

In their final analysis, the researchers examined loan managers’ decisions tied to the 2002 Gujarat riots, which left more than 1,000 people dead.

They found that lending to Muslims declined by 8 percentage points with the arrival of a branch manager who had been stationed in Gujarat at the time of the riots.

At cross-purposes with themselves

In some ways, the loan managers shoot themselves in the foot by shunning Muslim borrowers.

Loan managers in Indian state banks have incentives to perform well, the researchers note. Some rewards are promotions to higher grades with higher compensation — or better postings. Loan managers may be dispatched to places with better perks such as better schools, larger houses, the use of a car, or control over a larger portfolio.

If a loan manager is performing poorly, he risks being sent to places with weak infrastructures and lousy schools. Basically, when a loan officer plays favorites in lending that worsens his repayment rates, he hurts himself, the researchers point out.

Photo illustration by Olin Creative Director Katie Wools.

Radhika Ghai Aggarwal, MBA 2002, Chief Business Officer and Co-founder of online marketplace Shopclues, a highly successful startup based in India, talks about the importance of mentors in her career in an interview with the Economic Times.

“I have had several mentors who have greatly influenced different aspects of my growth and learning in the past 20 years or so. My dean at Washington University, Dr Mahendra Gupta, former dean, Olin Business School, had a great influence on me during my early professional career.

“I have known my current mentor for almost 10 years now. …The most important professional advice I got from my mentor was to always hire someone better than yourself.’ She said, ‘If you find that you are generally the smartest person on the table then there is something wrong.'”

Link to Economic Times article.

Related blog post.

Radhika Ghai Aggarwal, MBA 2002, Chief Business Officer and Co-founder, Shopclues, is featured as one of five “women-led startups smashing the glass ceiling in India,” in a column by Suparna Dutt D’Cunha, a contributor to Forbes.

“She’s the first Indian woman to break into the unicorn club. Valued at over $1 billion, Shopclues is one of India’s home-grown e-commerce stars. Started in 2011, along with Sanjay Sethi (CEO), ShopClues becomes the ninth startup to join India’s unicorn club by raising about $150 million from Singapore government’s GIC and its existing investors Tiger Global and Nexus Venture Partners last year. What started with a team of 10 is now a 1,000-strong organisation.

“Prior to starting Shopclues, Aggarwal, a management graduate from Washington University, worked for diverse sectors including retail, e-commerce, fashion and lifestyle with companies such as Nordstrom and Goldman Sachs in the U.S. She looks after branding, marketing, acquisitions, sales, hiring and product mix at ShopClues.

“There has never has been a better time than now to do any kind of business in India,” said Aggarwal. The e-tailer has about 350,000 small and medium sellers on the platform, and 14 million registered users.

“But, do people still stereotype the woman entrepreneur? ‘It’s not as much about stereotyping. The challenges are the same in entrepreneurship, man or woman. The only challenge is that because there are so few of us, people end up asking questions like, ‘How do you ensure work-life balance?’ You need a support system at home and work as your responsibilities grow.'”

Link to Forbes article.

In April 2015, IIT-Bombay and Washington University launched the first US-India joint Executive MBA program in Mumbai. Today, Oct. 14, 2016, the first batch, or cohort, graduated in St. Louis after a three week residency stateside. Congratulations to these trailblazing executives who are now alumni of two leading universities and equipped with new leadership skills to manage business challenges in the 21st century.

Olin’s Interim Dean Kurt Dirks was master of ceremonies for the graduation event held in Knight Hall’s Emerson Auditorium. David Farr, Chairman and Chief Executive Officer of Emerson was the keynote speaker. Washington University Chancellor Mark Wrighton also addressed the students, faculty, staff, and family members present. The entire ceremony was live-streamed online; the recorded version will be available for viewing beginning Oct. 18, link here.

Shivganesh Bhargava, Head of the Shailesh J. Mehta School of Management at IIT Bombay was also a featured speaker at the graduation ceremony as well as IIT Bombay Professor Prasanna Mujumdar. Sunil Punjab, Managing Director for Sigma-Aldrich in India, and a member of the graduating class, was chosen by his peers to be the student speaker. Ashly Thomas Jacob received the Student Recognition Award.

Inaugural class at a glance:

  • Approximately 16 average years of professional experience, with 11 years of management experience
  • 11 industries represented — both India and multinational companies
  • Over 40 percent of the class are executives at the senior vice president level and higher
  • Over 50 percent of the class is traveling from outside of the Mumbai area

2016 EMBA Mumbai graduation ceremony:

Click on thumbnail to expand image. Photos by Sid Hastings, WUSTL Photo Services.


I’m not sure what happened, but time has a way of sneaking up and then speeding by you. In May, I was looking forward to spending time back home in Denver. I came back to Mumbai in July, and the next thing I know, it’s September. During that time, I finished my last graduate class in India, started my new term as the board president of an international school (volunteer), traveled to Vietnam to attend a governance conference, and am now preparing to travel to Washington University’s St Louis campus to complete the joint WashU-Indian Institute of Technology Bombay (IITB) Executive MBA program in October.

Hari Sankaran, Vice Chairman and Managing Director of Infrastructure Leasing and Financial Services (IL&FS), spoke to our batch in August about leadership and “thinking big.” (Note: In India, business schools use the term batch vs cohorts in the U.S.) He succinctly stated three points that leaders must act upon for professional (and personal) success:

  • People don’t know what they want – It is up to you to decipher what they want and need.
  • Congruence of leadership – The leadership team must all be aligned or face barriers and impediments along the way
  • Time is of the essence – You must act and take advantage of the opportunities given to you.

When I first started my journey in India, I was focused on traveling and applying what I learned from graduate school. Little did I know was that was not really what I wanted. During my time as an executive MBA student, I’ve learned the following lessons:

1. Making a difference mattered to me

What I realized I wanted was the ability to make a positive impact through strategic thinking, collaboration, and implementation in a multi-national environment. I have been fortunate to be able to give back through volunteerism.

2. Emotional and moral support is crucial

Without the support of my family, the international school community, and WashU and IITB, I would not have been able to shape concepts and lead the decision-making process effectively. Without this unified team, I would have struggled significantly.

Brian AiChang with Lobsang Pendha

Talk about “luck”—I was able to meet Lobsang Pendha, one of the Dalai Lama’s senior leaders in Vietnam.

3. Avoid “analysis paralysis”

You have to act and put yourself out there. To me, luck is not a result, but rather preparing yourself to take advantage of an opportunity that presents itself. I did not intend to become the board president, but going back to school helped me prepare for this honor when it presented itself.

So simple yet so hard to execute. Sometimes it’s trial and error. Other times, it is “luck.” By knowing what questions to ask, how to build consensus, and when to act is the difference between struggle or success. So far, so good–I cannot complain of my results.

This post was republished from Brian’s personal blog, with permission from the author.