Wealth Management in Punjabi agrarian communities

The Punjabis are largely an agricultural community. Trading was left to their southern neighbours - Jhangis, and finance to the Sindhis. Though Mahajan is a Punjabi surname (Mahajan is one who lends money on interest), it is not preponderant bcs the Punjabi considers debt to be the worst form of affliction. We are actively discouraged from taking even a penny in debt. And the Mahajans are, of course, universally disliked because they squeeze people's blood in the form of interest. There is a story of Guru Nanak based on this popular metaphor - the story of Bhai Lehna.

So, money management of the Punjabis is largely based on this wisdom, and the fact that the Punjabi has had to deal with multiple foreign invasions from the West.

ਤੱਲੀ ਉੱਤੇ ਰੱਖਣੀ ਚਾਹੀਦੀ, ਥੱਲੇ ਨਹੀਂ
Tali utte rakhni Chahidi, Thalle nahi

- Be a giver, not a borrower

Most of our wealth was in gold, because gold could be put in pots and buried in the ground. This appears to be the banking principle applied by the Punjabis. After 1947, my grandmother could only indicate the size of the pateelas in which they buried gold jewelry.

We were ok to eat less, and not have a penny of debt on our heads.

The Padta System of Accounting

This absolute gem was narrated by my father in law.
Once, he was sitting at a lecture being delivered by a senior person at Tata Steel. The lecture spoke a lot about the Padta system of accounting.

After the lecture was over, the floor was open for questions. My father in law raised a hand. He said, "Sir, you have spoken a lot about the Padta system of accounting. But I do not know what it is. Can you please tell us what is the Padta system of accounting?"

The speaker was stunned. "You have heard me speak for so long, but you didnt know what the Padta system of accounting was for all that time?"

"No sir", my father in law confessed.

The speaker looked across the room and asked, "Who else does not know what is the Padta system of accounting?"

Most of the hands in the room went up.

The speaker then asked them to site and explained, "Every morning, when we open the factory, we look at the order book and the production schedule, and decide, 'पड़ता है, के नहीं पड़ता है?" The room burst into loud laughter.

पड़ता है, के नहीं पड़ता है? is trade jargon in West India for "Is it profitable for me to do this, or not?"

But the lesson is deep. A factory, esp of capital goods like steel, can afford to look at cyclical demand and also suffer losses for a while. But if the general manager is asking, on a daily basis, Am I profitable today? That completely flips the perspective. To be profitable, even a little bit, everyday, is the key to being a sustainable, profitable business.

I have used this lesson in all my business advisories - Padta hai, ke nahi paDta hai.

The startup ecosystem now calls it positive unit economics.

The Marwadi Accounting Principle

I don't know whether this is true or not. Heard this from my father.

So, apparently, among the Marwadis, this is one way of accounting.

Suppose the maximum profit that can be made on an enterprise is 100. The actual profit is 80. The Marwadi will log that, not as 80 rs profit, but as 20 rs loss.

Interesting way of looking at things, no? 

The Daily Collection practice of the Sindhis

The Sindhis are largely the bankers of the subcontinent. They provide business loans. I've rarely seen a Sindhi delve into loans for marriages etc.
Obviously, they charge a hefty interest, and the Indian average of 3% per month is not unheard of.
However, for collection, the Sindhis have a very unique method.
They do not do monthly EMIs. They travel to the Asami's (debtor's) place of business every evening, just after the bulk of the day's earnings have come in, and before it is time to do the accounting for the evening, and they take the day's share.

This system has many benefits. Here are a few that I could see:
A. Businessmen make their earning everyday. So a small daily contribution pinches less than a bulk monthly instalment. This is the greatest advantage of this system. It aligns itself to the cash flow cycle of the debtor.

B. Frequent Contact. Usually, these visits also become a time for small talk, perhaps a chai some day, etc. This allows the creditor to remain in touch with the debtor and also, as the confidant, become privy to business fluctuations before they become apparent to the market. The creditworthiness of the debtor is also assessed everyday. The creditor can, when he goes there, see how well the shop is doing, how many visitors appear, how stress free the debtor appears etc.

C. Low loss. Because the EMI is divided into 30 small parts, in the event of non payment, at least some part of the EMI has been recovered.

Has anyone in the corporate sector used this?
I think that Sahara India had this, but for their daily savings scheme, not for their loan collections.
I am not aware of anyone else.

The businessmen NEVER sends an employee to do this daily collection. It is always the seth himself. That is a very improtant point. The Munim can do the paperwork, but the daily collection is always physically done by the seth or his family member.

The First Post - The Historical Perspective, and the current Imperative

Even though the first known treatise on wealth management and public administration - The Arthashastra, was created in India, our track record of documenting our wealth management practices has been marred much by the subsequent actions focused on burning the libraries and then the noble efforts of Macaulay.

I don't think that, as is normally claimed, Indians are inherently bad at documentation and record keeping. Rajatarangini, Ashtadhyaya, Mahabharata, Ramayana, and Arthashastra, among others, prove our ability to document and record both our history and our body of knowledge.

But Indian history has had a long period where such records were meticulously and systematically destroyed. And therefore, we have what is left to us in the form of:
A. Proverbs
B. Folk Songs
C. Folk Tales
D. Whatever is left of our manuscripts.

The Buddhists, on the other hand, have done exceptionally well when it comes to both conservation of wealth and preservation of manuscripts.
A separate chapter on that. Perhaps. Some day.

For now, welcome to this blog. It is just a hobby today. Who knows what it might blossom into.
Wishing us all luck.