The price of information

Dear private bankers of Nepal, please pay for research to generate data needed to improve your business

Aug 24, 2015- Executives leading private commercial banks in Nepal have long complained about the fact that the growth of their business has been hampered by the absence of reliable data and analysis. In 2009, the Chief Executive Officer of one of Nepal’s leading commercial banks, Sashin Joshi, was reported to have said, “We just look out of the window and do some arm chair analysis. We have this tendency to leave things to Pashupatinath.”

It is common sense to say that reliable and timely data should be available on the economy and the society at large so that banks and other related financial institutions can make robust business decisions. If such data and analyses do not exist or exist in a shoddy manner, then who should try to generate them and who should cover the associated costs?

Taking responsibilityThe first answer, quite obviously, should be the Nepal Government. Its Rastra Bank does have a research cell which produces several periodic publications that provide us some useful data on the national economy. But whatever comes out from this channel has been deemed inadequate by the executives of the private banks for many years now.

Second, and this is also quite obvious, the private banks themselves. If the kind of information and analysis needed for the growth of a particular sector is not available, those who feel the need for it the most should create the institutional research platforms to fill that lacuna. Creating such an entity and giving it the task to generate information and analysis that would be publicly accessible should be quite easy.

An association of Nepali banks, Nepal Bankers’ Association (NBA) already exists and it has more than 30 members now. A genuine and productive research cell could be easily encompassed within it since two of its announced objectives are: “to collect as a clearinghouse and distribute among the members various materials of research oriented, analytical and other articles, information, statistics, reports, etc. relating to banking activities and business” and “to make an arrangement for the collection, classification, and distribution of banking statistics among the members.”

Has the NBA established a research cell? An officer in its secretariat confirmed that while the association has done some research to assist its members to deal with staff salary and some other issues, it does not have a functional research cell. I think it should to meet its own publicly-declared objectives cited above.

Not so complicatedHow might the NBA fund such a research cell? Well that is easy: from ear-marked contributions from their own members. According to a report published in Nagaraik daily on August 16, nine members of the NBA have each earned after-tax profits of more than a billion rupees during the last fiscal year which ended in mid-July. The total profit of these nine banks alone is about Rs 16.5 billion. Although the figures for all the other member banks have not yet been published (they will be in the next few weeks), I suspect that the total profits for all the members of the NBA for the last fiscal year will easily exceed Rs 20 billion. Each member bank could be asked to donate a fixed percentage (say 0.3) of their after-tax profits to the NBA to support its activities, including its research cell. If the profit figure is in fact 20 billion for the last fiscal year, at 0.3 percent, the total contributions would be Rs 60 million this year alone!

As a research director at the Kathmandu-based academic NGO Martin Chautari, I know that you can do quite a bit of good research and publications with less than Rs 60 million per year. With non-guaranteed money of much smaller magnitude per year, we at the Chautari have executed research on a number of different themes with about 20 full-time and part-time researchers and support staff. With the same money, we have also run a research library, published books, edited two of the leading Nepal Studies journals, trained new and young researchers through mentoring programmes and held one academic and one general interest seminar a week during the last fiscal year. Because we do not have an endowment, we support these activities by raising project-specific funds and by responding (sometimes in collaboration with colleagues in universities in Nepal and abroad) to specific national and international calls for applications on themes in which we work.

In others words, an institution like Martin Chautari has to rely on donor generosity to do its research while protecting its editorial freedom. The NBA would have no such constraints since money would come assuredly from its members.

What about the institutional set-up of such a research platform within the NBA?It would have to be led by an academic with a published research track record in economics, finance, sociology, economic history or some related subject. S/he would act as the research director and would have to coordinate the work of several thematic research groups, each of which would be led by research coordinators with proper academic credentials and research experiences. Each such group, ideally, should have both senior and rookie researchers and an element of mentoring would be built into its research plans.

Rise to the challengeThe general assembly or the executive committee of the NBA could determine the terms of reference (TOR) for the research cell. Such TOR will have to be revised periodically. Thematically speaking, the NBA could ask its researchers to focus on themes such as macroeconomic data generation and analysis to supplement what the Rastra Bank does. It could commission research on what kinds of new financial services are in demand in rural Nepal. The NBA could also ask its researchers to do studies that would improve the substance and the image of the banking industry in the country. For instance, what does the industry need to do to increase the participation of women at the managerial ranks and the number of Dalits in all positions, both who are greatly under-represented in the industry currently? The topics can be varied and can be pursued sequentially to build up the knowledge base and analysis gradually.

Robust collaborations could be done with researchers located inside Nepali universities and in independent academic NGOs to execute research that will enhance our historical and current knowledge of how the economy is embedded in the larger Nepali society and polity. Such relatively more complex research will engender writings that will contribute to better formulations of effective policies in the long run.

So here it is. Dear leading private bankers of Nepal: please rise to this challenge to create a research platform within your own NBA to generate accurate and timely data and analysis that you say is needed to improve your business and profits? I hope the new NBA executive committee led by Upendra Poudyal that includes such a star as Anil Shah as one of the two vice-presidents will do something. Not too long ago, addressing a different theme, Shah wrote in his Facebook page: “There comes a time in everyone’s life when they need to step up and be heard for what they believe in!”

Yes, here is a chance to put that dictum in practice for the banking profession itself. We will be watching.

Onta is a research director at Martin Chautari

Source: The Kathmandu Post, 24 August, p. 6.

http://kathmandupost.ekantipur.com/news/2015-08-24/the-price-of-information.html