Community Leadership at a Hindu Non-Profit Organization Leads to Outperforming in Indian Microfinance Market

Abstract

There are isolated streams of research in spiritual capital, spiritual leadership, and community leadership. We put together these three notions and indicate that taken together, a spiritual leader with a community leadership style can use his spiritual capital to boost both the social and financial performance of the organization and reduce risk. We document a case where a Hindu non-profit organization is more resilient compared to the other top Indian firms which are for-profit organisations. This challenges the popular belief that creating sustainable organizations with social impact requires a purely business logic. This case study reports the results of interviews with the top management of the organization explaining how religion is related to management inputs, the social business model, and financial performance outcomes. We add to the meager literature on Hinduism in social business leadership. We generate five propositions that expand the extant theoretical conceptualization of community leadership with a case example from a non-profit Hindu spiritual leadership domain. They serve as lessons that managers can reflect on while working with their community and building trust.

1. Introduction

Management development scholars are looking at spiritual capital and its use in business (Malloch 2014). Spiritual capital is defined as the fund of values, beliefs, knowledge and information that comes from the virtuous thinking and leadership in an organization (Seaman 2011). The interest in spiritual capital is because it has the potential to help organizations be more productive, perform better, generate more profits and help people self-actualize. At the same time, leaders using spiritual capital may be rigid and may lose empathy from over-work (Cregård 2017). Perhaps spiritual leaders may overcome some of the limitations of their position by engaging in a community leadership style. While significant work has been done on community leadership (Wu 2021), there is no previous study on spiritual leaders adopting a community leadership style.

Curiously, one sector which has attracted researchers of spiritual management is microfinance, which is concerned with material needs and community development of the poor. Microfinance sector has both non-profit or for-profit organizations serving community needs. Microfinance researchers consider that development requires a focus on incorporating spiritual values and inclusive thinking in society and the need for financial resources (Rodey 2001). Thus, this sector is an interesting context to explore how spiritual capital can be leveraged for organizational success and community development. According to a recent scientometric literature review, Islamic finance is one of the key emerging trends in microfinance research along with financial inclusion and social entrepreneurship during the last decade (Gutiérrez-Nieto and Serrano-Cinca 2018).

Some work is focused on Christian faith-based microfinance organizations (Bidzogo 2012; Lybbert 2008; Mersland et al. 2013; Wydick et al. 2011). However, very little work has been done on Hinduism and microfinance (Ashta and Hannam 2014; Harper et al. 2008).

This is strange because a substantial part of the world’s poverty is in India and the country has the highest number of non-profit organizations serving social causes1. In addition, according to the Microcredit Summit, there are more microfinance borrowers in India than any other part of the world (Reed et al. 2014). We know that 79.85 percent of the Indian population is Hindu (Census 2011). Therefore, we would expect that a lot of work would be forthcoming on Hindu faith-based microfinance, but this has not happened. This is especially surprising when we considered that among the major religions, Hinduism is one that permits venerating money, and the Goddess of Fortune (Lakshmi) has an important place.

Some Hinduism spiritual texts may have some bearing on microfinance (Ashta and Hannam 2014; Sharma 2011; Sihag 2008). Thus, the legal codes set up by Manu (Bhattacharyya 1996; Bühler 1886) or by Kautaliya (Rangarajan 1992) specify maximum interest rates in different situations as well as the role of rulers who have to protect the creditors. Similarly, the laws of inheritance of debts may also have a bearing on the role of the son to reimburse the microcredit taken by his father (Seibel 2009).

Our research objective is therefore to understand how spiritual capital is mobilized by Hindu spiritual leaders to improve organizational performance and develop their communities and what lessons managers can learn from them. For this, we explore whether a Hindu faith-based microfinance can successfully deliver financial services, and if so, what makes them succeed. Our exploration was in a Hindu non-profit context, and by examining the above questions, we document whether spiritual leaders can use spiritual capital to achieve organizational success and attain community development.

2. Relevant Literature Review

In this section, we explore the notions of spiritual capital, spiritual leadership and community leadership which have largely been treated by researchers as independent concepts without looking at their possible interrelationships. Thereafter, we look at previous work on microfinance and religion as it serves as a context to explore whether spiritual leaders have used spiritual capital to improve organizational performance and sustainably address community needs.

The notion of spiritual capital has been defined as the “fund of beliefs, examples, and commitments that are transmitted from generation to generation through a religious tradition, and which attach people to the transcendental source of human happiness” (Malloch 2014, p. 19). Examples of beliefs, values and attitudes include striving towards better life, positive learning on one’s own mistakes, preparedness to learn new things, asking of the basic question of ‘why’, empathy and awareness of a higher mission (Šarotar Žižek et al. 2011; Zohar 2006). Integrity, truthfulness and trust, interacting with the wider community and going the extra mile are also discussed by Stokes et al. (2016). The fruits of this spiritual capital are hard virtues such as leadership, faith, courage, patience, perseverance and discipline. There are also soft virtues such as justice, compassion, forgiveness, gratitude and humility that emanate from spiritual capital. These virtues are linked to organizational performance (Malloch 2014).

Spiritual capital also creates a sense of belonging and well-being within the organization (Stokes et al. 2016). Along these lines, there is a definition that “spiritual capital is the use of inner assets such as imagination, intuition and persistence, all directed by intention and intensified by focus and an inner certainty of success” Chu (2007) and that it leads to creativity including organizational creation and innovation even by microentrepreneurs in developing countries (Neubert et al. 2017).

Lybbert (2008) distinguishes human capital and social capital from spiritual capital. Human capital is focused on the self, social capital on others, while spiritual capital is focused on the divine. His study on microfinance indicates that the high repayment rates of this fund are leveraged more by spiritual capital rather than social capital.

In regard to spiritual leadership, although there has been a growing literature on workplace spirituality, considerably more than that on spiritual capital, it lacks clarity (Dent et al. 2005) and very few studies have been undertaken on spiritual leadership (Gardner et al. 2020). A large number of leadership articles aim to distinguish spiritual leadership from closely related concepts such as authentic leadership, transformational leadership, servant leadership and charismatic leadership (Anderson and Sun 2017; Avolio and Gardner 2005; Francoise 2016; McKenna et al. 2009; Reed et al. 2011). One theory proposes that spiritual leadership is based on a compelling vision, not necessarily religious, that gives the followers hope to make a difference. The reward is altruistic love, leading to a sense of calling and positive performance (Fry 2003). Some definitions of spiritual leadership are focused on qualities of the leader (Fry 2003), some on the organization and workers (Fairholm and Gronau 2015), while others include the community that the organization is aiming to serve (Duchon and Plowman 2005).

A larger group of papers indicates that spiritual leadership has a positive influence on organizational performance (Duchon and Plowman 2005; Fachrunnisa et al. 2014; Fry and Slocum 2008; Fry et al. 2011, 2017; Yang et al. 2019a, 2019b). This positive relation works through intermediate variables (moderators and mediators) such as nurturing the spirit at work (Duchon and Plowman 2005); employee well-being or life satisfaction, social responsibility, organizational commitment (Fry and Slocum 2008; Fry et al. 2011, 2017); job satisfaction (Fachrunnisa et al. 2014), a meaningful climate, especially in high task uncertainty situations (Yang et al. 2019b), relational energy and employer integrity (Yang et al. 2019a). However, there are concerns that spiritual leadership may lead to over-work, intrusion in people’s lives, rigidities and failure to rotate (Cregård 2017).

The notion of ‘community’ in leadership is considered vague but distinct from existing notions of leadership where it is often seen as about the “‘leaders’ asking, persuading and influencing ‘followers’” to pursue a goal (Sullivan 2007). When a community sense is evoked through leadership, there is a shared emotional connection between people who feel like they belong to a same group and think that they can collectively make a difference for that group (McMillan and Chavis 1986). Community can be place-based and local, but not necessarily so if there is a bond beyond physical space to represent a community of common interest, purpose or practice (Andersen et al. 2002). Community leadership is less hierarchical as there is a shared vision addressing a common need (Onyx and Leonard 2011) and it draws from the social capital in the community (Sander and Putnam 2010).

Leaders with a community leadership style have clarity of purpose with a collective goal (Larson and LaFasto 1989; Pigg 1999). They act as change agents to innovate and challenge systems in a community (Kouzes and Posner 2006; Schein 1995). They have the ability to mobilize others by utilizing tacit knowledge, such as the ability to network, seek resources, spot local talent and establish relationships (Javidan and Dastmalchian 1993; Martiskainen 2017). They create conditions for change (McGrath [1962] 1964), and take the initiative needed for change with active participation and a sense of service (Craig and Gustafson 1998; Van Wart 2003). Community leaders catalyze change to address local problems and drive policy change (Wu 2021).

Lamm et al. (2017) provide a conceptual model on community leadership. They build upon the five primary activities for task accomplishment as proposed by Pigg (1999): initiation and spread of interest, organization of sponsorship, goal setting and strategy formulation, recruitment, and implementation of strategy and plans. They propose that a community leader’s goal is more to solve a problem for the community by being adaptive and resilient to carry forward a shared vision than to impose the pursuit of a fixed performance outcome within a time frame. The strategy associated with resonant goals is to work collaboratively for the shared vision by using mutually agreeable ways that the community is willing to adopt in their own environment. The initiation and spread of interest is emergent from the community when an issue of shared interest is identified and leadership is implicitly attributed to the person who has a set of values, behaves ethically and communicates as change agents to create a motivated community with awareness. The awareness results in an organization of sponsorship where the leader’s reputation and resources help to build trustworthy relationships with the community members and network with other related organizations to act in cooperation as cohesive teams. The recruitment and implementation plans are then about stepping back and empowering the members of the community to use their local knowledge and act as leaders themselves to execute the plan and participate in their inclusive vision. Lamm et al. (2017) frame their community leadership model with the above distinctions to be context specific and hence, need to be expanded upon on with examples from diverse contexts. They observe that the community leadership is more about the influence the leader has among the members in the community and it is not necessarily about authority.

Nel (2018) observes that in community leadership style, the leader can influence the community to feel an ownership of their development by co-investing their own assets and leveraging their assets with resources from external agencies. Community leadership style is found to have application among community foundations (Wu 2021) and businesses which aim to address social needs (Austin et al. 2006; Osborne and Gaebler 1992). However, applications of community leadership for business performance is less explored though it has been studied in fields like education, health, local government and tourism (Martiskainen 2017). The present study will be first of its kind to explore how a spiritual leader with a community leadership style can use his spiritual capital to boost both social performance and financial performance of the organization. It will apply the theoretical model of community leadership to a religious context. The context we use to explore this business performance relationship is that of a Hindu faith-based microfinance institution. One path-breaking work on Hinduism and microfinance studies a Hindu faith-based non-profit organization called Shri Kshetra Dharmasthala Rural Development Project (SKDRDP) and details the processes used by this institution to build microfinance initiatives centered on the needs of each borrower to enable them to get out of poverty (Harper et al. 2008). Since microfinance is having disputed results on impact (Duvendack et al. 2011), criticized for high-interest rates, and may even create stress and suicides (Ashta et al. 2015), we wanted to see how a faith-based Hindu organization would act and address these sectoral challenges compared to its secular peer group. SKDRDP is often contrasted from fast-growth models of microfinance, owing to its community centredness on one State in India (Ashta 2014).

To operationalize our study, we first explore how the work of this non-profit Hindu faith-based organization compares to its peers (Research Question 1), and how it was able to use its spiritual capital and leadership to reinforce its success in the community (Research Question 2). We begin by explaining the mixed-methods research design used for responding to these two questions.

3. Research Design

A sequential mixed-methods research design is used to answer the two questions explored in this research. To answer our first question (did a Hindu faith-based organization succeed in the microfinance industry?) a quantitative performance analysis among top players in the industry was conducted (denoted as Study 1). This empirical analysis assesses whether SKDRDP’s performance was a success in the Indian microfinance industry. Post this analysis, the sequence of the research design was to narrow down to our specific case and carry out in-depth interviews and case analysis (denoted as Study 2) to answer our second question (how and why did the organization succeed?). Creswell and Clark (2007) considered that the philosophy of using sequential mixed-methods design in a study is governed by the rigor of ‘pragmatism’ where the researcher’s focus is on combining quantitative and qualitative data analysis as needed to address the specificity of the research questions pursued. Adhering to this philosophy, we use a research design that sequentially uses collection, analysis and mixing of both quantitative and qualitative data to explore answers to our two research questions.

Single case study usages are criticized for inter-related issues of methodological rigor, researcher subjectivity and external validity (Willis 2014). However, this does not demean their strength as an evidence-based method for initiating theories that are grounded on the researcher’s observations. Even a single “black swan” case can refute a theory or help fine-tune existing theory by finding gaps and seeing how they can get filled (Eisenhardt 1989; Siggelkow 2007).

For our research with mixed-methods analytical observations on a single interpretivist case study, the epistemological issue of ‘how it is that we know what we know’ is being addressed. Our mixed-methods approach strengthens the methodological rigor and internal validity of our findings. For example, when the respondents say that their costs are lower than those of others, we can verify this with our quantitative analysis. Regarding external validity, we clearly state that our focus is on particularization and not on generalization. Among the delineations of single case study methods done by Eckstein (1975), Yin (2009) and Levy (2008), such an explicit focus on particularization is justified in the realm of inductive/descriptive cases and can serve as a descriptive representation of a unique happening lacking in an explicit theoretical framework.

4. Research Methodology & Data Collection

Our first research question (can it succeed) lays a rather rich context for the second (how and why). This first contextual part of our research question required comparative empirical data. For this, we obtained data from the Microfinance Information Exchange (MIX), which is a global repository of microfinance data, now reposing on the World Bank website. Indian MFIs in the MIX database constitute about 10 percent of the total number reporting. Indian MFIs charge lower interest rates than the global median. In Microfinance research, interest rates are approximated by yield.

Indian interest rates are lower than global averages because the operating expenses as a percentage of assets are considerably lower in India than those worldwide. Loans provided by Indian MFIs are also less risky, as evidenced by the lower provisions for impairment. Return on assets of Indian MFIs is about the same as the global average. Since Indian MFIs differ from global MFIs, we examined how SKDRDP compares with its peers in India.

This peer group comprises the largest Indian MFIs. Among the ten, we found that there was only one non-governmental (NGO) MFI and the others were all for-profit institutions. This NGO was SKDRDP; therefore, our research intent is to explore SKDRDP as a microfinance player, highlighting this religion-based organization’s performance compared to its secular peers in India.

Secondary data (annual reports, material provided by the MFI) were also used to triangulate how this transition impacted SKDRDP’s performance during this period. The quality of any research is not judged by data being current or old, but by the novel insight the data analysis provides. Therefore, even prestigious journals have papers based on 2014 now being published in 2023 (Korovkin and Makarin 2023). Finally, the quantitative data also helped us verify the statements of the respondents in the second study.

Our second study responds to the question of why a faith-based NGO would outperform its for-profit peers. Since our second research question concerned processes rather than outcomes, we needed a qualitative approach. In any case, there was only one example of a Hindu microfinance institution. We decided to interview the founder and the CEO of SKDRDP. However, since he and his managing director did not respond to emails, we realized that it is not easy to interview elites and that we would have to be introduced (Harvey 2011). We, therefore, sought the help of someone known to them, a CEO of another enterprise in the group, to provide the introduction. Finally, we were able to meet both Dr. Heggade, a priest, who is the founder and chairman of SKDRDP, and Dr. Manjunathan, the managing director. The interviews took place on 25 August 2014 in Daramasthala, Karnataka, India. The interviews lasted 25 min and 37 min, respectively. The transcripts were sent to the two respondents for confirmation and editing. The complete text of these interviews was publicly available on SKDRDP’s website (and is given as Supporting Material). For the present study, the final transcripts of the interviews were coded by the first co-author. This coding was then reviewed by the second co-author. Discrepancies were discussed, codes were modified, and new codes were added or multiple coding was performed during these discussions. We used qualitative analysis using the software program NVivo as a tool to analyze the transcripts of the interview. Since the questions were very specific in view of the CEO time that we were using, the codes that we found to reply to the question used almost all the text (very little was redundant). After the coding, the two co-authors discussed in order to regroup similar codes into themes, till both authors agreed.

In addition to these two interviews, we met three managers of the SKDRDP group, making a total of five. Convenient sampling (with snowballing technique) is commonly used for elite interviews. The three additional interviewees included a director (Mr. Ajit K. Rajannavar), who was a banker on deputation from Syndicate Bank to RUDSET (Rural Development Self Employment Training) for the last eight years, and two relatively young faculty members of RUDSET, Ujire, Mr. James Abraham and Ms. Anusuya. However, these respondents were more interested in entrepreneurship initiatives and did not add substantially to microfinance strategy and management questions which we were studying. In qualitative case studies, interviews end when no new information can be learnt. In view of our scarce time, we therefore stopped further snowballing. Both co-authors were present for all interviews. One co-author did the transcripts and the other edited it (grammar, repetitions, displacing text to more relevant sections), keeping the essential messages. Together, they were able to provide an understanding of their work and their challenges. We selected the comments that were pertinent to our study.

Before discussing the results of the two studies, we provide a brief description of SKDRDP.

5. Brief Case Description

SKDRDP is an NGO engaged in microfinance operations. Its primary focus is to serve as an extension of its parent organization which is a Hindu temple called ‘The Shri Kshetra Dharmasthala temple’ and supports a holistic vision that the temple has for community welfare. The temple is located in the small town of Belthangaddy about three hundred kilometres West of Bangalore in the State of Karnataka, India. For twenty generations, the temple was headed by a family called ‘Heggade’. Heggade thus became a hereditary position for the temple, passing on from the father to the eldest son. They hold an important position in the social and spiritual life of the people in the region, giving free food and contributing to the health, education, economic and spiritual needs of the community in an inclusive and secular way. To address the economic welfare of the people in the region, the present Heggade (hereafter called Dr. Heggade) promoted farming and small businesses and entered microfinance to provide loans to people.

Microfinance is a competitive social entrepreneurship industry in India, targeting the world’s largest poor population. In the region of the temple, Dr. Heggade found that the poor were struggling in financing their entrepreneurial dreams. Therefore, the temple ventured into a microfinance institution called SKDRDP. This organization, registered under the Charitable Trust Act, finances people. It focuses on women and community development. The organization is now present in all the districts of Karnataka, a state in Southern India. In the SKDRDP model, a field worker sits with the beneficiary and her family and prepares a five-year plan. Initially, the temple provided some equipment on a charity basis, as well as food to the precarious. Yet, over time, it realized that charity did not work, and the self-help-group (SHG) model was adopted. In our study, we explore whether this Hindu faith-based MFI succeeded and if so, how and why.

6. Empirical Findings

Our findings (from the first study) demonstrate that SKDRDP is a success and then we report the findings on why it may be a success (from the second study).

6.1. Study 1: Is SKDRDP a Success?

From an operational perspective, success for an MFI has two dimensions—its outreach (denoting social impact) and operational efficiency (denoting financial sustainability) (Waller and Woodworth 2001).

Figure 1 presents data on the active number of borrowers that the top ten MFIs had in India in the 2004–2013 period. These are MFIs that reported data to the Microfinance Information Exchange (MIX). The time frame was pertinent to study as it marked the growth of the microfinance sector in India (2004–2010), witnessed a crisis due to the MFIs’ rapid growth plans (2011–2012) and captured the initial phase of recovery thereafter (2012–2013). The figure shows that eight out of the top ten MFIs had over a million clients each in 2010 when the crisis hit the sector. Before that, they had all been increasing their outreach. Since then, they can be divided into two groups: those who have fallen and those who continue to rise. The fragile firms include SKS, Spandana, SHARE, AML and BFSL. However, the others continued their rise and can be termed resilient: Bandhan, SKDRDP, EMFPL, Ujjivan and Janalakshmi. All were Non-Banking Financial Institutions, except one NGO, i.e., SKDRDP. The latter is the largest faith-based microfinance institution in the world, and probably the only large Hindu microfinance institution. Its performance, therefore, merits studying.

To assess SKDRDP’s operational efficiency relative to its peers, we analyzed metrics denoting its profitability, yield and expenditure (

Table A2. Yield of Top Indian MFIs.

Yield on Gross Loan Portfolio	2008	2009	2010	2011	2012	2013
Janalakshmi		28.65%	34.34%	26.16%	26.07%	26.46%
Ujjivan	27.70%	30.36%	29.43%	23.55%	25.69%	25.61%
Bandhan	27.01%	22.16%	21.32%	26.33%	21.75%	23.14%
EMFPL	22.81%	24.44%	29.61%	25.16%	20.50%	22.18%
SKDRDP	13.41%	13.55%	11.97%	14.82%	15.98%	16.29%
SKS	26.33%	25.64%	24.48%	13.41%	13.51%	16.42%
SHARE	25.52%	31.48%	30.33%	8.81%	12.35%	11.64%
AML	25.39%	25.64%	30.49%	8.49%	11.24%	10.02%
Spandana	23.75%	25.71%	20.66%	10.86%	8.66%	12.14%
BSFL	26.11%	28.59%	27.85%	7.63%	8.37%	11.53%

Note: Yield figures approximate interest rates only if the MFI is not making losses. Source: Data downloaded from MIX.

,

Table A3. Provision for Loan Impairment of Top Indian MFIs.

Provision for Loan Impairment/Assets	2008	2009	2010	2011	2012	2013
SKDRDP	0.48%	0.21%	0.19%	0.40%	0.05%	0.43%
EMFPL	1.90%	0.92%	0.38%	0.48%	0.58%	0.36%
Ujjivan	0.07%	0.55%	0.80%	0.83%	0.69%	0.52%
Bandhan	−1.00%	0.03%	0.56%	1.19%	0.46%	0.76%
Janalakshmi		−0.53%	0.00%	1.58%	0.77%	0.87%
AML	−0.34%	0.40%	8.36%	5.16%	49.54%	0.80%
SHARE	−0.21%	0.30%	0.18%	5.34%	46.40%	−0.57%
Spandana	1.23%	1.48%	0.86%	5.37%	52.32%	−4.52%
SKS	0.51%	1.47%	2.71%	39.54%	12.12%	−3.01%
BSFL	0.01%	0.56%	3.26%	43.93%	17.42%	17.15%

Source: Data downloaded from MIX.

and

Table A4. Operating Expenses of Top Indian MFIs.

Operating Expense/Assets	2008	2009	2010	2011	2012	2013
Bandhan	6.68%	4.18%	5.11%	5.35%	3.79%	4.00%
SKDRDP	3.29%	3.94%	3.04%	4.50%	4.62%	5.50%
Spandana	5.97%	6.14%	7.07%	6.99%	4.62%	9.57%
SHARE	8.53%	6.14%	5.54%	5.51%	5.41%	8.92%
AML	7.90%	5.15%	5.84%	5.74%	5.83%	8.64%
EMFPL	11.24%	6.79%	8.45%	10.36%	8.35%	6.75%
Ujjivan	20.24%	17.04%	14.71%	12.88%	9.61%	7.68%
Janalakshmi		15.56%	22.68%	17.66%	11.13%	9.31%
SKS	10.62%	9.80%	10.84%	13.34%	13.71%	13.02%
BSFL	14.53%	10.11%	11.51%	15.24%	26.29%	32.34%

Source: Data downloaded from MIX.

provide further details).

Table 1. ROA of Top Indian MFIs.

ROA	2008	2009	2010	2011	2012	2013
Bandhan	8.66%	3.52%	5.32%	6.44%	4.73%	5.01%
Ujjivan	−0.60%	3.17%	2.01%	0.25%	3.36%	3.50%
EMFPL	1.52%	4.50%	3.63%	2.28%	2.74%	3.66%
SKDRDP	0.15%	1.29%	1.03%	1.56%	2.55%	2.21%
Janalakshmi		−3.05%	−1.38%	0.46%	1.97%	2.94%
SKS	3.68%	4.96%	2.40%	−46.74%	−15.77%	2.88%
BSFL	1.80%	3.12%	0.66%	−63.54%	−35.20%	−40.57%
SHARE	5.53%	5.50%	0.33%	−11.85%	−46.40%	−2.76%
Spandana	6.89%	8.99%	−0.30%	−9.89%	−46.92%	3.27%
AML	5.33%	4.31%	1.30%	−11.91%	−51.09%	−5.63%

Source: Data downloaded from MIX.

shows that the same five resilient firms which have been growing consistently in terms of outreach (including SKDRDP) have also been making profits during the post-2010 period. However, the other five fragile firms have suffered very high negative returns for at least two years. Table 1 presents this profitability trend using the Return on Asset (ROA) metric. Our findings are to some extent consistent with the results of Mersland et al. (2013) who found that Christian organizations had lower ROA than secular MFIs. However, although the Hindu organization had lower results in profitable years, it consistently had a surplus in bad years, while secular MFIs seem to be riskier in terms of variations in profitability.

We looked at portfolio yields (Table A2) that are used as crude proxies for interest rates charged to the poor in the microfinance sector. First, all the yields of the big MFIs, except SKDRDP (our sole NGO), were in the 20 percent to 35 percent range in the years up to 2010. Many of these were higher than the Indian median rates and often higher than the global median rates. Thereafter, yields remained in this same range for the four resilient firms but fell drastically for the five fragile firms. SKDRDP yields were still the lowest among the resilient firms, but they were increasing, perhaps explaining why growth rates in outreach have increased in the last few years. The results are similar to those of Catholic MFIs found by Mersland et al. (2013).

We verified that these yields are related to provisions for the impairment of loans (Table A3). Once again, the same two groups emerge - the resilient firms with low provisions and the fragile firms with high provisions eating up into their yields. Yet, an interesting story also emerges. SKDRDP has about the lowest provision for impairment, year after year. Thus, low interest rates are possible because most people repay. To complete the circle, most people repay, because interest rates are low and affordable. This is different from the results of Mersland et al. (2013) who found that loan performance of Christian and secular MFIs is similar.

To complete the picture, we looked at the operating expenses of the MFIs Table A4). Although there seems to be no clear trend between falling and resilient firms, we noted that expense control is tightest in Bandhan and SKDRDP. In other words, just because an institution is an NGO, it does not have to be lax in operations.

It is difficult to compare the financial ratios and the results of SKDRDP in recent years since it became a banking correspondent and was no longer, strictly speaking, a microfinance institution. For banking correspondents, the loans are on the books of the banks and therefore not included in the assets of the microfinance institution. Nevertheless, the total number of borrowers of SKDRDP in 2019 was reported as 2.9 million (Sa-Dhan 2020). Although it was the third largest Indian MFI in terms of number of borrowers serviced, it was the largest in terms of loan portfolio outstanding and the second largest in terms of loan portfolio distributed during the year. If we consider only banking correspondents, it was by far the largest, having over 50% of the portfolio of all banking correspondents (Sa-Dhan 2020).

This concludes our empirical analysis which depicts how the non-profit model of SKDRDP is placed amidst all the leading NBFIs offering microfinance in India. What we can see is that it is a low operating cost model, a low-risk model and that it is healthily managing growth on a sustainable basis, while charging lower interest. So, while the conventional wisdom indicates that NGOs should convert to for-profits to increase growth and outreach, we have found a case that shows that an NGO can do equally well financially. This black swan justifies a single case study analysis. This led to our second research question: how and why is SKDRDP able to achieve such a good performance?

6.2. Study 2: How and Why Did SKDRDP Succeed?

Having established SKDRDP’s success in the previous section, in this section, we provide the responses to our question by qualitatively exploring the rationale behind SKDRDP’s success.

We were able to regroup the sentences of the interviewees in 12 codes (called nodes by NVivo). Eleven of the 12 codes used information from each of the two transcribed files. Nevertheless, as shown in Figure 2, the comparison of the two transcripts showed that the two respondents provided different coverage on different issues. Dr. Heggade focused on spirituality and philosophy, critical events that brought him to exploit opportunities to do good, the evolution of the MFI, and evidence of success, while Dr. Manjunathan focused more on the business model, opportunities created from social problems, as well as the critical events which influenced the MFI.

Since 12 codes are still a high number, we looked for common themes. We were able to regroup our codes into 3 themes: input, throughput, and output (see Figure 3). However, after discussion, we decided to place religion separately rather than as an input, since it impacted all three themes and is particularly interesting in enhancing understanding of how religion can play a role in social entrepreneurship.

Table 2. Two examples of text of each of 11 codes (other than religion).

Theme	Code	Text
1. Input	Charity	SKDRDP is very much part of Dharmasthala and Dharmasthala temple is known for charity.
1. Input	Charity	SKDRDP started as a charity programme to ensure the last mile delivery of Dharmasthala charity.
1. Input	Converting social Problems into opportunities	The harassment should not come at a time when the amount is very huge. If it’s a weekly small amount, you can go and question him. The amount required is very small. If it is monthly, it is four times greater and huge. So, if it is after 12 months, it is a mountain. So, the more frequent the recovery, the easier it is.
1. Input	Converting social Problems into opportunities	If the crop fails, he commits suicide if the loan is from a moneylender. … What we do is we tell them to repay every week, Rs 200, irrespective of what happens in the end. So, he will be forced to do other activities, poultry, dairy, or daily labor, and earn 250 to 300 rupees a day. So, at the end of the 18 months, if the crop fails, he has already repaid. If the crop succeeds, all the profit is his. So, instead of suicide, he is laughing.
1. Input	Critical event	In 2006 the BC model came. So, all the banks and government of India decided that they would go by the BC model and they want to pay the BCs a fee.
1. Input	Critical event	The microfinance model developed by SKDRDP in the last fifteen years was based on the ground requirements when the banks were not ready and did not have the delivery mechanism to provide financial assistance to poor people.
1. Input	Leadership	The concept of RUDSET is that anybody with motivation and determination can become a master of his destiny.
1. Input	Leadership	They are not group leaders. They are service representatives.
1. Input	Spirituality or philosophy	In India, we think that God will provide all. But I say, unless you walk the path, you cannot reach the goal. We can help you with securities. But we cannot carry you. People have to participate in their growth.
1. Input	Spirituality or philosophy	Giving has an immediate short-term impact. But at SKDRDP, we talk of self-reliance with a little bit of initial charity. The results of self-reliance are reaped in the long term.
2. Throughput	Business model	We are insisting that we get a 5 percent fee even for the BC model. So, banks give to SHGs at 11 percent but we recover 16 percent and keep 5 percent. For us, the financing problems are over, and we just do our administrative work.
2. Throughput	Business model	Now our interest rates are 18 percent. We borrow at 12 percent. Interest rates have gone up because banks financing rates have gone up.
2. Throughput	Constraints	However, my responsibilities at the temple have restricted my travel and public meetings outside of Dharmasthala.
2. Throughput	Constraints	One reason is manpower. This is in shortage.
2. Throughput	Marketing	We have been very careful to cultivate political and bureaucratic leaders. This includes local village leaders who are solicited for their aid from the beginning.
2. Throughput	Marketing	I have not branded myself with any party. It is not easy to be away from politics and sometimes I have been hurt for not participating. But all politicians of all parties come to me. All our workers in our organization are trained not to talk politics during work.
2. Throughput	Training entrepreneurs	Now, this gives them a goal. So even the poor people who never had a goal, even marginal farmers, have now got goals and it becomes a habit for them.
2. Throughput	Training entrepreneurs	We take 12 weeks to process a loan in which time we teach the people how to plan for their business, learn to account, etc., as opposed to 48 h by some MFIs.
3. Output	Evolution and evidence of success	Over the years SKDRDP has grown out to be a good development model.
3. Output	Evolution and evidence of success	The Trust was giving us donations, but now we do not need donations anymore. Now we are self-sustaining and even able to do some charity from the funds of SKDRDP.
3. Output	Impact	At that time, we thought intervention by SKDRDP in providing financial assistance would help the poor. It has indeed helped the poor.
3. Output	Impact	So, everywhere we have gone, we have started this credit culture which has allowed the farmers to repay. Moreover, these multiple sources of income have reduced risk

provides two examples of text (sentences or paragraphs) for each of the remaining eleven codes in the three themes.

We highlight the areas of learning, change and innovation marking the progress of SKDRDP.

Dr. Heggade remarks that his induction to the chief priest post of the Dharmasthala Temple was a critical event in his personal life as well as that of the organization. According to him, he was 20 years old when his father died and he had to suddenly take charge of the temple. This change in management led to considering how a more positive societal impact could be created.

For Dr. Manjunath, too, joining SKDRDP was a critical turning point in his life. He was a veterinarian by education. Then, he joined a bank that worked with RUDSET (Rural Development Self Employment Training), an organization that trained entrepreneurs. Based on this experience, he was recruited as the CEO of SKDRDP, which was unexpected for him.

This also shows that Dr. Heggade had an inclusive vision for his spiritual organization and had chosen a CEO who had diverse experience and managerial capabilities to execute his vision.

Since spirituality and societal welfare goals were the driving force and microfinance was considered as a means to these ends, SKDRDP’s lending operations were quite distinct from the rest of the players in the industry. Dr. Manjunath provides five philosophical and operational reasons that have resulted in this competitive advantage in inclusive human resource and cost management. Firstly, rather than employing MBAs, they recruit high school graduates who have local knowledge. Second, the repayment is high since the people feel that they are dealing with the representative of God. Third, they provide basic business training for their entreprenuers. Fourth, they train entrepreneurs to work in groups. Finally, the borrowers come to SKDRDP’s office to make their repayment and this lowers operating cost.

This low-cost grassroots model had operational advantages for the organization. At the same time, the change that emanated from an inclusive managerial vision and learning made people believe that spirituality is about people helping people without tainting it with discriminatory rituals. This human-centered management approach was empowering to the society and resulted in an outstanding edge in performance for SKDRDP when the microfinance industry in India was hit by a crisis. The crisis was the outcome of the microfinance lending spree that prevailed at that time. Due to the massive growth plans of MFIs, the poor ended up with multiple borrowings from different MFIs who did not understand their cash flow patterns. This resulted in over-indebtedness, making the poor unable to repay their loans. Allegedly some MFIs resorted to coercive recovery practices which ended up with borrower stress, suicides and an imminent crisis. However, at this critical time, the spiritual orientation of SKDRDP proved its philosophy of “Depth being more than Breadth”. According to Dr. Manjunath since the employees of SKDRDP know the cash flow patterns of their clients and since they know the customer’s needs and repayment capacity, portfolio quality is high. Moreover, since SKDRDP stays local within the zone of Dr. Heggade’s influence, reimbursements are high. SKDRDP’s strategy is to grow and stabilize in alternate years, thus reducing risk of unsustainable growth.

Instead of competing with mainstream local institutions, SKDRDP has always used a collaborative approach, partnering with local institutions. This partnership is evident from the fact that SKDRDP shares training opportunities and expenses with the local banks. According to the manager of RUDSET, the local banks consider this as a strategic corporate social responsibility since developing the entreprenuers improves the quality of their loan portfolio.

This partnership with stakeholders is reflected in Table 2, lines 15 and 16. According to Dr. Manjunath, the apolitical ideology of the religious leader allows the continuity of community engagement even when the government changes.

In addition, Dr. Manjunath adds that the spirit of operation is to serve the community and facilitate inclusive growth. For example, recently the government’s policy changed, indicating that microfinance is no longer the key focus of the State and that it prefers to give the advantage back to banks, with erstwhile MFIs becoming banking correspondents (BC). Adhering to its philosophy of co-operation, SKDRDP is planning to withdraw from active microfinance and act more like a BC or agent to the banks. In this BC model, banks will lend directly, but SKDRDP will manage the groups and recover the repayments. The loans will be on the bank’s book. Dr. Heggade states that the reason behind this institutional transformation is to follow the government guidelines rather than go their own way. His philosophy is that organizations exist to fill an institutional void and need to transform and adapt when the needs change. It is a clear example of how organizations must be ready to co-operate rather than compete to facilitate maximum benefits to the community. This reaching out to the community is also reflected by one of the teachers we interviewed who said that Entrepreneurship Awareness Programmes (EAPs) are conducted in camps where the students are rather than at a central place.

In the same spirit, Dr. Heggade feels that organizations should innovatively adapt to the needs of the community rather than blindly replicate business models from elsewhere. He learned that, although microfinance is needed, what is a far more critical need is support in entrepreneurship and market orientation. To create an organizational model that innovatively integrates all these aspects was the real need of the community. Lending money alone cannot address the issue of socio-economic exclusion in the community and the organization had to develop parallel initiatives. SKDRDP has developed subsidiaries to procure raw materials and market the finished goods. SKDRDP also started a self-employment training program that was replicated by the government of India.

According to the director of RUDSET, unemployed people would come to Dr. Heggade seeking his influence to get jobs. Instead, he offered them training to create their own jobs. The success of their self-employment led to the creation of a training institute.

The narratives show that SKDRDP believes in human entrepreneurial power. The institutional design was built on the belief that people are responsible for their welfare, and institutions should exist to facilitate this empowerment among people. With collective efforts rooted in local community leadership and entrepreneurship, people can help themselves (see Table 2, row 9). The microfinance model was innovatively weaved around this people-centric premise.

7. Discussion

This study enabled us to revisit the Community Leadership conceptual model proposed by Lamm et al. (2017) and provide a real-world example from the Hindu spiritual leadership field. We have seen that SKDRDP is a non-profit institution where the head priest is a hereditary position and that the beliefs, examples and commitments are transferred from generation to generation (Malloch 2014). The priest’s inclusive vision to solve the community’s problems led to his venture into business, and his value expressions in management of a social business assumed a community leadership style. For him, being the best microfinance institution is by itself not interesting but solving the community’s problem was.

We offer the following reflections based on our case study. These propositions are summarized in Figure 4 and discussed below, interlinking spiritual leadership, spiritual capital and community leadership concepts. The figure was derived through joint discussion between the co-authors to show all the paths possible without their crossing each other.

First, we noted that SKDRDP had a consistent positive return on assets before and after the financial crisis. This means they have greater resilience to external shocks. This may again be linked to the fact that they have low credit risk compared to secular competitors. The case showed that lower credit risk and more resilience had to do with the conscious commitment of the organization to a slow-growth strategy. Fry et al. (2017) observed that when spiritual leadership integrates faith and human operations to an organizational commitment that is based on altruistic love, then the hope and reward is to make a difference more for the people than for themselves. In the process, though, organizational performance excels, too. The reflexive moral differentiation of the founder may be contributing to outstanding organizational performance in terms of lower interest rates, lower risk and profits equally high as the best of their peers. In our case study, the difference envisioned for the community came from an inclusion vision that transcended the leadership focus and organization work from ‘I to We’ (Barney et al. 2015). This has reflected not just positive organizational performance but also enacted how leaders with a community focus can withstand organizational fragility due to external shocks with the inner focus on their organizational commitment (Fry et al. 2017). While previous studies have covered the organizational commitment of spiritual leaders to generate business performance (Fry and Slocum 2008; Fry et al. 2011, 2017), our research shows that the spiritual leaders with a community leadership style may also do good for their community.

This leads to the following proposition.

Proposition 1.

Spiritual leaders with a community leadership style can improve financial performance through an inclusive vision that their organization is committed to and which enables them to focus on sustainable growth.

Second, this case highlights the role of spiritual capital in organizational sustainability and inclusive institutional building. We can see that the leaders used an inclusive human-centered community leadership approach. Although using an NGO, there seems to be a substantial difference from the volunteer community leaders studied by Bono et al. (2010), who all participated in a community leadership program. In our case, the founder already had a positional leadership role as the head priest and spiritual leader, and he did not have any motivation to build up personal management skills. His motivation seems primarily to be value-based: to do good for the community. He considers that microfinancing is at its best when envisioned as part of a broader moral initiative to help people help themselves, with due emphasis on entrepreneurship training and market support. This vision is then translated into a better social performance which then attracts more borrowers and increases outreach.

Proposition 2.

Spiritual leaders with a community leadership style can improve social performance through an inclusive vision that their organization is committed to.

Third, SKDRDP, like hybrid social enterprises, does not believe that finance is the only goal. The SKDRDP website as well as the leaders of the group highlight all their initiatives to bring home the message that money is just a small part of the material solution. Once a material minimum is attained, spiritual welfare can be sought. We note also that Dr. Heggade is not focusing on the transformation of his employees but rather that of his beneficiaries or community. While there are social and cultural activities around churches (Clarke 2013), the role of the spiritual leaders in organizing material development of their communities is under-researched. At the same time, Dr. Heggade’s particular leadership style may be suitable to a very specific organizational context, in line with the findings of Palrecha et al. (2012) who compared three leadership models in India. In our case, the context gives Dr. Heggade access to utilize the tacit knowledge of the community for organizational success, such as the ability to hire people who have grassroots knowledge about the entrepreneurial endeavors of the poor, and the networks to partner them with entrepreneurial training and marketing channels. Martiskainen (2017) characterized this tacit knowledge as an operational advantage of community leadership as grassroots initiatives. It was observed that spiritual capital and community leadership are interlinked when it comes to a faith-based organization’s performance, unlike in voluntary initiatives, where community engagement is a planned program.

Proposition 3.

Spiritual leaders with a community leadership style are interested in the community welfare and they use their tacit knowledge of the community to lower downside risk and increase profits.

Fourth, this case study shows that the SKDRDP leadership focused on depth of operations in its immediate community rather than aiming for breath across states. Its presence remained local even now covering almost all the districts of Karnataka and just one district of the neighboring State of Kerala (Sa-Dhan 2020). This conscious tradeoff between geographical expansion and depth of outreach does not mean that there is no growth. This demonstrated that the organizational maturity deepens social impact (Waller and Woodworth 2001). The reason for SKDRDP staying local has been that Dr. Heggade’s influence is largely in his home State. Although the religiosity of SKDRDP may not be the only factor for its success, in this case, it seems to have created links between people that, in turn, increases trust, lowers risk and sustains community leadership.

Proposition 4.

Spiritual Leaders with a community leadership style have lower risk and better social performance if they capitalize on the fruits of spiritual capital (the faith and trust of their followers) by focusing on their zone of influence.

Fifth, our case also demonstrates a spiritual leader who is open to cooperating with the State. When the spirit of operations is to cooperate with the State rather than to compete on being an alternative to the State, then growth in outreach happens with depth and breadth, and organizational success is seen to be an incidental outcome. The case study has implications for community leadership and for social entrepreneurship. Wu (2021) had defined community leadership as catalyzing change with the intention to address local problems and drive policy change, but had found that not all community leaders provide all the dimensions of leadership. In our case, we found that the spiritual leaders do not change policy but adapt to it. Social entrepreneurs understand that they are filling institutional voids and need to transform their organizations as one void is filled and public priorities change. This conforms to the openness to transformation that successful social entrepreneurs demonstrate: their enthusiasm to change the world can lead them to be changed by the world (Barney et al. 2015).

Proposition 5.

Spiritual Leaders with a community leadership style achieve better social performance when they cooperate with the government rather than confront it.

8. Concluding Remarks

The objective of this study was to understand how spiritual capital is mobilized by Hindu spiritual leaders to improve organizational performance and develop their communities and what lessons we can learn from them. For this, we used the Indian microfinance sector as the context and examined MIX data and compared the top ten MFIs in India (Study 1). We found that a non-profit Hindu faith-based MFI called SKDRDP was outperforming its peer group: charging lower interest rates, having lower operational costs and stable profitability. This success was unexpected since it was the only NGO in the sample of ten MFIs. This led to Study 2, where we examined the reasons for the success. We interviewed the CEOs: the founder and the MD, and a few officers. Our study showed that spiritual management was lowering the costs. The founder CEO was a spiritual leader who was using his spiritual capital to solve a community problem through a social business. This led to trust in the community and resulted in high repayment rates from borrowers of all religions in the community. While engaging with the literature, we found that this inclusive and human-focused leadership style of the spiritual leader aligned with the community leadership style, and this was yielding stellar business performance while working with the poor. Therefore, we linked the three concepts of spiritual leadership, spiritual capital and community leadership with an example from the Hindu spiritual leadership domain. We provide five propositions where we show that a spiritual leader with a community leadership approach aligns with all of the characteristics of the basic community leadership model but can differ in the authority and influence dimensions. By virtue of being a spiritual leader, in our case, the leader possesses both authority and influence, though the basic model does not conceptualize positional authority for a community leader. The spiritual leader enjoys both authority and influence as he capitalizes on the fruits of spiritual capital in the form of trust and faith in its non-profit model that legitimizes its commitment to cause. This adds to the theory of community leadership.

However, since none of the other top ten firms was an NGO, we did not compare SKDRDP with other NGOs. It is possible that other NGOs may also have community leadership styles. Future research should therefore focus on whether the themes that we brought out can be solely or uniquely attributable to the Hindu leadership of the MFI.

Future researchers need to validate this case study and its propositions, especially if they find other Hindu faith-based organizations in this space. They could also see if Hindu and non-Hindu borrowers perceive SKDRDP differently. Our current findings serve as lessons that managers can reflect on while working with the poor at the base of the pyramid, where building trust among the community would need thinking beyond business skills.