Limits of Mumbai Slum Development as a Science

Limits of Mumbai Slum Development as a Science
Tanmay Misra
August 2014

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This paper would not have been possible without the support of Studio-X Mumbai and Columbia
University’s South Asia Global Center. It is largely inspired by and an adaptation of several
papers by Professor David Kennedy at Harvard Law School, in particular “Some Caution about
Property Rights as a Recipe for Economic Development.” I am also thankful to interviews with,
in order of occurrence, Dr. Nirupam Bajpai at Columbia University’s Global Center in South
Asia, Mr. Gaurav Gudhka and Mr. Amit Nanda at Tata Affordable Housing, Mr. Madhu Menon
at Micro Housing Finance Corporation, Ms. Sukanya Purkayastha at Columbia University’s
Global Center in South Asia, Prof. Ramesh Kumar Misra, Dr. Krishnan S. Raghavan at the Asian
and Pacific Centre for Transfer of Technology of the United Nations Economic and Social
Commission for Asia and the Pacific, Mr. Dibyendu Sengupta, Mr. Monish Verma, and Mr.
Vittal Dhage at the Delhi headquarters of the European Business and Technology Centre, Ms.
Radhika Kaul Batra and Ms. Diya Nanda at the Office of the United Nations Resident
Coordinator in India, Ms. Spandana Battula formerly at the Housing and Land Rights Network,
Mr. Milind Borikar and Mr. Nitin Deshmukh at the Slum Rehabilitation Authority, Ms.
Vaijayanti Mahabale at the Mumbai office of the Housing and Urban Development Corporation,
and Mr. Rahul Srivastava at URBZ Mumbai. Any errors in fact and in interpretation are mine
alone.

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Executive Summary
When it comes to Mumbai slum development, one is confronted with a theory or model at every
turn. This paper focuses on two prominent interventions and their aspiration to become a science
of development: first, titling and two property rights analytics (‘market efficiency’ and ‘pro-poor
empowerment’) and second, microfinance. It unfolds three assumptions that gird development
expertise’s claim to science: the legibility of the slum as baseline evidence, decision-making as
derivative of a model, and institutional harmony between financial sustainability and poverty
alleviation. Finally, the paper concludes by examining the relationship between architectural
theory and typology and slum development to understand the stakes of development as a science.

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Chapter One: Introduction
From its emergence as a category to describe the spatialisation of poverty, a ‘slum,’ by its very
definition, is a problem. It is something to be addressed, something that requires an intervention,
something that requires a solution which would transform it out of its existence. It is both an
antagonist and an impetus to various development programmes for whom it serves as a raison
d’etre. If there were no slum, there might be no need to call for a humanitarian urban
development. If there were no slum, there might be no need for any professional institution
whose mission would be to eradicate poverty for this target population, to eradicate this target
population as a ‘target population,’ as a distinct group to profess to serve. In short, if there were
no poverty, there would be no underdevelopment.
If poverty is in fact intermeshed in a web of other problems which co-constitute it—disease,
illiteracy, discrimination, etc.—intermeshed to the point of dissolving in the heterogeneity of
social life as a discrete problem for ‘development,’ then a world without poverty could mean a
world without conflict and therefore a world without difference. Gone would be the intricate
international apparatus whose proclaimed directive is to solve this conflict of difference which
results from the interdependence of the global economy. Gone would be the literature on how to
develop, on the true meaning of development, on its most accurate measurement, and gone
would be the practitioners, their salaries, their ways of living, and their identities of themselves
as humanitarians, once there is no need for their intervention. In a world without difference, there
is no other into whose life one could intervene.
If the work of development is one step towards this vision of a world, or towards a ‘second-best’
ideal whose specifics we could haggle in the meanwhile, then though practitioners might differ
in their recommendations, they do seem to largely agree, on the basis of a faith in that aspect of
their work which they deem is technical, that models and analytics—which ones and how to use
them are up for debate—will provide solutions to poverty and will do so with the reliability of a
scientific assurance.
Where the slum is concerned, an international apparatus of expertise links economists, policy
academics, legal scholars, and other social scientists to multilateral organisations that provide
conditional financial assistance, to consulting firms commissioned to provide insight on
interventions, and to academics, policymakers, and others within India who cite and reproduce
this expertise. The prominent role of this circuitry in shaping any given intervention in a Mumbai
slum, producing both the understanding of the problem and the intervention’s justification,
cannot go understated. Among other recommendations, development experts have hailed titling,
property rights analytics, and microcredit as critical for slum development. These interventions
have been endorsed both by prominent international organisations working within India as well
as by the Indian government itself. They bring to bear varying notions about legal formalisation
and informal customs to compose a strategy for slum development that aspires to become a
science. This paper is a detailed explication of some of the assumptions, acknowledged and
otherwise, of these expert proposals.
*

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Chapter Two: Titling & Property Rights
1. Introduction: Formalisation of Property Rights
Titling often proceeds from certain premises about the relationship between law and economic
development in which the legal concept of property serves as a sort of wedge or pivot. Property
is said to provide the tangible form necessary to produce value from an asset beyond its
immediate and physical use. Because it describes, organises, standardises, and preserves an asset
in law, property is said to make possible the asset’s comparative evaluation, security, and
fungibility for transactions.1
This relationship between law and development vis-à-vis property
also involves an idea about the relationship between the informal (customs) and formal (laws)
that shape an economy. Property is on the side of the formal. Increasing formalisation of
property rights is therefore said to be positively correlated with tenure security. In the continuum
of formalisation-as-security, a slum-dweller is often said to be on the end of the informal, and
therefore the insecure, lacking the registered leasehold or the freehold which comprises the gold
standard of tenure security on the opposite, formal and secure, end of the spectrum.2
This logic
of titling was central to the 1985 World-Bank-funded Slum Upgrading Project.3
As an in-situ
titling of where he was already squatting, formalisation was expected to incentivise the slum-
dweller’s own desire to upgrade the property which upon titling he now confidently knows is his.
This same wisdom is reflected in the proposed draft model of the Property Rights to Slum-
Dwellers Act, the Jawaharlal Nehru National Urban Renewal Mission, and the Rajiv Awas
Yojana scheme whose vision is that of a ‘slum-free India.’4
The investment said to take place once the slum-dweller feels secure in his tenure is not the only
benefit that apparently follows from formalisation of his property right. Upgrading his home
would increase the value of the property. The formal home can also now be reached by the
infrastructure provision of the city. It is now taxable and can raise the money needed to provide
this infrastructure. Proof of home ownership can fulfil a prerequisite for a loan application at a
bank to provide the slum-dweller with access to credit. Now integrated in the city’s formal
economy, the slum-dweller is part of the circuitry whose quantitatively-measured economic
growth he could increase. The call to formalise property rights is therefore a strategy for a mixed
set of not necessarily coterminous development goals. These goals might be imagined in a
sequence: first the improvement of slums, then their eventual reduction in number, followed by
the alleviation of the poverty that apparently they both cause and out of which they are caused,
and finally the increase in GDP and HDI that represents overall development of the territory.
Titling has been subject to a variety of criticisms. A private developer could persuade the slum-
dweller to sell to him the title so that he may then develop a commercial complex on that plot. A
slum-dweller could initiate and approach a private developer to sell his own title once he
speculates a profit from the increasing land value and goes to squat elsewhere. Perhaps the slum-
1
Hernando de Soto, The Mystery of Capital: Why Capitalism Succeeds in the West and Fails Everywhere Else,
(New York: Basic Books, 2000): 46-47, 56-57, and 61.
2
Paramita Datta Dey, Anisha Sharma, Shayak Barman. “Land Tenure Security: Is Titling Enough?” National
Institute of Urban Affairs, WP 06-03 (December 2006): 1-3.
3
Deepika Andavarapu and David J. Edelman, “Evolution of Slum Redevelopment Policy,” Current Urban Studies
1, no. 5 (2013): 189-190.
4
Om Prakash Mathur, “Slum Clearance to Property Titling: A Legislative Framework for Slum-Free Cities?”
National Institute of Urban Affairs, (December 2006): 1-3.

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dweller will refuse the title to begin with on the basis of the associated administrative charges
and/or subsequent tax for provisions he was already receiving or making do without. Perhaps a
slum mafia gets in the way of everything, violently taking the rights to land, razing the homes,
and realising the financial gains, all with full knowledge of a government that is too weak to
respond or paid off by this same mafia. The slum-dweller could be very pleased about the new
title, but once his neighbour has decided to invade his plot, the slum-dweller cannot contest the
invasion in an ill-equipped and overburdened court system. Perhaps titling does work as intended
but only when done in conjunction with a variety of other poverty alleviation strategies. Or with
general awareness about the pricing system, a strong judiciary, access to credit, an incorrupt and
functioning government, antitrust laws that promote a competitive real estate industry, a slum
community organised to defend itself, an education through which the slum-dweller can realise
himself, and so on. Perhaps titling does not work because none of these things exist. Or because
these other things are in fact more crucial for what titling seeks to accomplish (for example, a
tenure security that leads to poverty alleviation and/or economic growth). Titling is sometimes
part of a looser package of legal prescriptions for developing countries referred to as ‘rule of
law,’ where formalisation of property rights for tenure security is accompanied by calls for
contractual simplicity, clear rules over vague standards, minimal judicial discretion, zero
tolerance for corruption, strong enforcement, and an independent court system.5
Unconcerned with titling’s scientificity, these criticisms keep intact the notion that titling could
be something coherent, even if only ideal and never realised in the hustle and bustle of
implementation. Furthermore, they imagine that the relationship between property rights and
development sometimes could be a scientific model when proposing that the outcomes of
formalisation could be predicted and guaranteed, inducted upwards into a theory that, now
generalisable, could be scaled horizontally and implemented downwards elsewhere, with an ease
and a flexibility that manages both to adapt to a foreign context and to keep unmodified its core
principles. It seems there are at least two ways to probe this aspiration to become a science where
property is concerned. The first is to focus on titling, and the second to examine two major
analytics about legal entitlements as they relate to proposed outcomes of slum development.
2. Titling and Ideas about the Informal Slum
In titling, we could try to understand exactly what such a programme means when it evokes the
informal as something property rights could subsequently formalise to create development. We
could ask whether formalisation of the property right of a slum-dweller to his home through a
titling scheme involves more than just the mere grafting of a title onto what is imagined to be
already clear, even if informal, delineations of property.
On the one hand, nearly everyone might agree that, yes, formalisation of a property right means
more than the issuance of a piece of paper called a deed. That deed is somewhere catalogued, it
is returned to for research, for tax, for surveying, for surveillance, it is shown to a bank which
acts differently in its presence than it would have in its absence. Without all of this, formalisation
would not produce the effects that it claims result from it.
On the other hand, the difference at stake is not in whether or not titling performs something
5
David Kennedy, “Laws and Developments” in Law and Development: Facing Complexity in the 21st
Century, eds.
John Hatchard and Amanda Perry-Kessaris (London: Cavendish Publishing, 2003): 17-26.

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more than itself. The difference at stake is whether titling affects an existing set of social
relationships in that it changes them or (instead) whether titling can, at once, formalise these
relations as if crystallising them as is but without actually or meaningfully altering them. An idea
lodged in this latter contradiction of formalisation is the idea of the informal as not just ‘without
law’ but without any coherence altogether. If only formalisation provides security, the home is
not shelter for the slum-dweller but a transitory event. If only formalisation provides a basis for
evaluation, it must mean the slum-dweller is without solid understanding of value because true
value is only the value that results from bringing a legal asset into a formal economy. If only
formalisation converts the asset into property, the slum-dweller knows nothing of belonging—
the space he lives in is a haphazard and arbitrary phenomenon, there is no real distinction
between himself and his neighbour without the borders of the law, and therein the slum as an
informal space is something like chaos embodied, where maybe the only law is the law of the
jungle.
There are development practitioners who likely have no such image of ‘the slum’ in their heads,
even without being hard-pressed to describe what vague and awkward conglomerate of
sentiments they do have strung together when they imagine the word. Indeed, there are
development practitioners who proceed with the image of the slum as a rich place, of dreamers,
of a community solidarity untouched by a possibly bleak modernity but full of the
entrepreneurial activity that comes before and within modernity nonetheless. Market forces are
indeed already at work in the slum. The market precedes the law even if the law strengthens it,
bringing the bargain into the legal price system. If only this informal economy could be validated
somehow—apparently, the slum’s own self-validation is not enough—because once recognised
in the legal ambit, all sorts of growth, economic and otherwise, is possible. Here exists the slum
as an informal space that has an internal logic, that of the market, which the law would only, but
significantly, amplify.
Both these visions of the slum are united in their belief of formalisation as a transformative
contact only to the extent that it is a covering-over. It is a formalisation that is an intervention in
an object which is only seen to be benefitting and by a subject who is never seen to be
interfering. The practitioner exacts his target with precision, affecting only it and nothing else.
For this to be possible, he must be able to conceive of ownership in the slum as something
legible, something that he need only to trace as a technical activity.
This imagined clarity may not in fact be so clear and instead involves a whole host of questions
to be re-constructed, and in this reconstruction, altered, to create a formal property regime.
Formalisation must alter whatever is said to be already at work in the slum because the informal
is neither already the logic of the formal waiting to be realised nor without any notion of order
itself. In other words, informal customs are not so vague as to lose coherence altogether, and it
may very well be possible to make sense of them—certainly those inside the slum do for their
lives to operate to begin with. But at the same time, these customs do not already take on the
form of the systematicity which only formalisation is said to codify effectively. Instead they
must be rendered legible through questions the titling scheme necessarily involves. Who really
does squat in that sector? The owner? A tenant? Should the tenant be considered de facto owner?
If so, when? Should titles be uniformly given to the head of households? Is the head of the
household the father, if there is one, and what would it mean to put the mother’s name on the
title?, or another relative, perhaps the eldest, and if that varies in this neighbourhood block, does

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it make more sense to approach titling through rules or through standards?
So far, these questions relate solely to ownership. But if property means more than just a right to
own and instead involves a whole bundle of rights (to use, alienate, exclude, rent) and legal
duties (to cultivate, allow tenancy, prevent dangerous conditions), the set of questions and
implications involved in formalising property rights go beyond titling as only assigning or
reflecting ownership.6
We might have to decide if and how we want owners to be able to lease or
sell the property, whether they can or should operate their businesses from their homes, how they
should take care of it, and so on. This involves reference both to a regime of private rights in
which police intervention or civil lawsuits can be brought to bear if need be as well as a system
of regulatory overlay which defines the relevant role of administrative agencies.7
Any given property law regime is too intertwined with other legal regimes to extract from it the
always-same and consistent set of entitlements to then deploy as a best practice whenever
questions of design become too overwhelming.8
For example, even if only consider property as a
home, the nature of the property owner—a corporation, the state, a family, themselves all
varying legal demarcations—will bring into our ambit corporate, public, or family law.9
In any
country, these legal regimes will overlap in diverse and inconsistent ways.10
A titling scheme
faces these questions while it also attempts to resolve a similarly dizzying array of informal
property customs already at work in the slum which formalisation is premised to attempt to
grasp. That titling could bypass all of these questions that strike at the heart of its proclaimed
mission to formalise property relations and instead copy-and-paste a model property regime onto
its target, either because it sees there its own logic waiting to be discovered or a blank slate onto
which only it could provide structure, is one of the ways the dream of titling is a dream of a
science.
3. Interlude: Law and Markets
Perhaps, as seems to be the case in Mumbai, titling openly embraces itself both as an
intervention that does indeed interfere in a slum’s social arrangements and as intermeshed, and
irrresolvably so, with other legal regimes. The Slum Rehabilitation Authority’s slum-
development scheme is in-situ in that slum-dwellers remain on the parcel of land they were
already occupying, but they are now rehoused in a multi-story apartment building, the feature of
the scheme that also makes it a rehabilitation programme. A land plot in a slum is divided in two.
Private developers build the complex on one portion and provide the flats for free to the slum-
dwellers, who are housed in transit accommodation. In turn, the government authority will allow
the developers to clear the land where the slum-dweller formerly squatted (the other portion of
the plot) and develop, at a concessional floor space index greater the law typically allows,
buildings to sell on the open market. This feature, and that often times the squatted land has great
6
David Kennedy, “Some Caution about Property Rights as a Recipe for Economic Development,” Accounting,
Economics, and Law 1, no. 1 (2011): 31.
7
Duncan Kennedy, “Legal Economics of U.S. Low Income Housing Markets in Light of ‘Informality’ Analysis,”
The Journal of Law in Society 4, no.71 (2002): 78.
8
Duncan Kennedy, “Property as Fetish and Tool: Duncan Kennedy on Property, the Commons, and the Law,”
Grassroots Economic Organizing, accessed 24 June 2014, http://www.geo.coop/story/property-fetish-and-tool.
9
David Kennedy, “Some Caution about Property Rights as a Recipe for Economic Development,” 31
10
Duncan Kennedy, “Property as Fetish and Tool: Duncan Kennedy on Property, the Commons, and the Law.”

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profit potential as prime real estate, attracts the developer to be involved in slum rehabilitation to
begin with and ensures a given rehabilitation project’s financial viability. The ownership of the
new building will be in the name of the housing co-operative society which slum-dwellers must
form to qualify for rehabilitation to begin with, and it will include the names of both the owner
and the owner’s spouse in a 30-year renewable lease at nominal rent to the government. Other
conditions of eligibility apply both for slum-dwellers (among them: proof of residence prior to
the year 2000 in an officially certified slum through select documentation such as name on
electoral roll) as well as for the developer (among them: bearing all the costs that transit housing
and rehabilitation will entail as well as a discounted premium if constructing on government land
and ensuring 70% of the slum-dwellers in a plot agree to a proposed project). The slum-dweller
may not transfer the new flat in any manner for 10 years. Where the state deems a site to be
hazardous or difficult to develop, or where it deems it must use it for public purpose, the state
may rehabilitate slum-dwellers ex-situ. The state may evict those slum-dwellers who are not
eligible for rehabilitation or those who form the 30% non-willing to live in the new
accommodation.
This is only one way to paint the crude brushstrokes for a summary of the most recent slum
intervention in a city with a longstanding record of crafting and deploying schemes. Each
rehearsal of the history of Mumbai’s slum interventions poises this latest iteration as part of a
trajectory in which certain actors are made discrete and their importance to the historical
outcome is made to ebb and flow depending on the particular expert’s narrative in question.
Actors often include the government—typically the state of Maharashtra, itself divided into the
elected officials who devise the slum intervention and the appointed civil servants who interpret
and implement it through a web of agencies—the private sector: an unidentified mass of
developers who all run, as if robotically prey to, the same logic, and finally the slum-dwellers
themselves which represent possibly the very poor or the working class, class affiliations which
the expert sometimes fleshes out in the historical narrative, sometimes avoids, or sometimes
describes as aspiring- or lower-middle class. Where history is a site for the expert to mine to
design a slum development model, these actors are variables in that their actions vary and in this
variance, affect an end result. But apparently as a variable, their variability has a limit or else, by
virtue of what the expert deems their particular and constitutive interest, the line between them
and another actor would begin to blur. This means the private sector is after profit, the slum-
dwellers are out to improve their own lives, and the government pushes its legislative capacity,
designing and making into policy the model which embroils itself and the others into a dance of
implementation. Put another way, the expert’s policy model will often assume each actor
behaves in a way unique to them and that defines them as a distinct actor to begin with. The
work of modelling is to tease out the behaviour (which the expert himself has defined) by
dangling incentives or disincentives that guide the actor along in a way attuned to the expert’s
operative goal in hand. The social terrain is the laboratory for the policy scientist who is in the
difficult position of orchestrating through institutional design the scope for variables to vary only
predictably so that by their own accord (as the expert sees it) they end up producing the policy’s
intended outcome.
Among other things, one relevant policy instrument at hand for slum development is law. Its
utilisation’s ideal outcome is a certain sort of economic development, ideally a poverty
alleviation that goes hand-in-hand with economic growth, both perhaps produced alongside one
another until they merge into the same. Law seems to have an integral role when it comes to

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constructing the value of an asset; certainly the wisdom about formalising property rights is
girded on this belief. From the delineation of the asset as a discrete entity, to the ways in which
one might assess and measure its perceived value, to the management of this value’s distribution,
law is there at each step building what we otherwise call the modern economy. One relevant
relationship in which law is implicated in the construction of economic value for slum
development is the relationship between land and property insofar as property defines
entitlements to own, to cultivate, to reap, to sell, etc. Yet law has not always been integral in
generating value from land. Prior to or in the absence of law, people did indeed make
economically productive use of land, and assets in general, from which they derived value. There
are several familiar narratives about why and how: among them is the story of the development
of human society premised on scarcity. Scarcity could be inherent to a group – a society could
somehow know of what it has never thought it could have and want it still. Or perhaps, scarcity
could be constructed after the fact. For example, where a population came into contact with
another and encountered the relative difference in resource allocation between the two and where
this encounter inculcated in each a desire for what it came to see as lacking within itself that the
other could fulfil, trade took place. A given asset could be conceptually evaluated in terms of
another asset, like one’s lack in terms of the other’s surplus, and so, a relationship of value could
be constructed.
Value therefore does not inhere in the asset prior to some sort of assessment of a relative lack
and surplus. Even for a society that has no contact with another, its own allocation and
distribution of a given asset will determine its value relative to the lack and surplus as seen from
the people who believe they stand to benefit from having that asset. In this scenario, the
distribution and allocation of an asset are responsible for its value construction, but more
crucially, its distribution and allocation are themselves the result of contestation borne out of
competing desires, themselves shaped by a previous state of distribution and allocation. This idea
is distinct from a theory of economic value as the result of forces of supply and demand. Here,
supply and demand would each constitute the other. There would be no supply without an idea of
what one demands and therefore ought to lay claim over. Both supply and demand would be the
tentative and still dynamic outcome over a conflict over desired assets whereby some have
managed over others to hold onto and enforce their entitlements over the desired assets,
themselves only deemed valuable because of a prior outcome of contestation. There is nothing
‘natural’ about desire or about entitlements. They might have an internal logic once codified, but
because they constitute and are constituted by one another, they are always up for grabs.
Contestation could be described as the mediation of desire into an entitlement over something.
Land in particular seems to exemplify the need for contestation to make and enforce a claim of
entitlement because it requires great effort to seize and to occupy.
Even if law as we know it is absent, it seems challenging to conceive of value construction from
land outside of any system altogether that organises a distribution of entitlements. Where land is
concerned, those who have already laid claim to some land must be entitled to inherit the
agricultural training to produce, through their own labour or their claim over others’ labour, what
the land can cultivate, and they must devise how the potential revenue of the yield should be
allocated between them, their workers, and possibly others. Therefore, whether created
piecemeal or self-consciously at once, law will reflect, in both the professional process of its
codification and as a legislated or official outcome, a particular moment of distribution and

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allocation emerging from contestation.11
If this is the case, a market, formal or otherwise, is
indeed always and already about entitlements, legal or otherwise, about who can claim access to
which resource, the scope of what they can do with it, and how successfully they can have that
claim enforced. What will matter for development is how these entitlements are contested to be
formally arranged and what contestation and informal re-distribution happens as a result, not a
theory of whether law in general should be clear and formal, fast or slow. Where a science of
development is concerned, an expert might try to imagine the exact, necessary configuration of
entitlements in a model to produce the intended outcome.
4. Two Analytics for Property Rights and Development
What could then be said to be operative in the latest theory of development for Mumbai slum
intervention insofar as formal and informal entitlements regarding property are concerned?
Unlike the slum-dweller, the private developer, by virtue of already having the capital through
previous sales he was entitled to transact, is in a position to be able first to finance construction
and then to repay the loan through the profits he will be entitled to reap from the commercial
division of the land parcel. The land parcel itself is largely the property of either the state of
Maharashtra, a territory whose history is the lineage of empires who seized it through battle, or
of Mumbai’s municipal corporation whose ownership, and establishment of itself as an owner,
dates back to British colonial authority. The slum-dwellers’ claim to the land is not a legal one,
and the political infeasibility of the government’s evicting and relocating them outside of the city
strengthens this claim. Financially, the government is unwilling to itself finance the construction
of enough housing to accommodate the sheer number of slum-dwellers. Even in cross-
subsidising this construction through the private sector, property values outside the city—where
there might be more available space to house a greater number of the slum-dwellers—might be
too low, itself the function of a history of claims that determined this value as an outcome, to
attract developer interest. Politically, a nexus of politicians and activists vying for constituencies
within the slum further validates the squatters’ entitlement to the land which they occupy. The
slum rehabilitation policy recognises these informal claims, whether grudgingly, realistically, or
respectfully, and it realises the possibility of creating economic value through housing
development on the high-value squatted land.
a. Efficiency
Why does the government not itself perform the developer’s role in its proposal? Why involve
the private sector at all? Is it something inherent to the way private claims to property generate
value from land that a government’s sovereign claim cannot? Where one sees the rhythm of
Mumbai slum interventions’ history as an increasing withdrawal on the part of the government in
acquiescence to the private sector, it could very well seem plausible to imagine the government
as hesitating to finance interventions.12
Where this plausibility becomes the basis for the nature
of government in relationship to development requires some more scrutiny. After all, if making
and wielding the law is the purview of the government, and if development is a function of the
interaction between formal and informal entitlements, does not the government have an upper
hand or at least a leading role in affecting the economic result by rearranging and allocating legal
11
David Kennedy, “Some Caution about Property Rights as a Recipe for Economic Development,” 11.
12
See Jan Nijman, “Against the odds: Slum rehabilitation in neoliberal Mumbai,” Cities 25 (2008): 73-85
for one characterisation of this history.

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entitlements? Some suggest it is this very role, described in the catch-all category of ‘regulation,’
from which government should refrain because markets are more efficient in producing an
outcome that maximises economic performance, a maximisation for the efficiency proponent
which characterises the best sort of development.13
Does property in the hands of the private sector produce more development than it could in the
hands of the state? From the start to say that markets produce efficient outcomes is to define
development in a particular way. It is to say that buyers and sellers already know what is best for
them. What they need is the right signal to transact. This signal is the price of the good or service
in question. Once the government’s subsidies, tariffs, limits on foreign investment, other
import/export controls—in fact, almost everything set up to define the industrialising state
apparatus in India prior to liberalisation—are dismantled, this price could finally be undistorted
and reflect the actual willingness of the buyers and sellers to transact. If it were any higher or any
lower, resources would be distorted and therefore their value underutilised: less would be
available when there was more willingness to buy or vice versa. Undistorted, the market would
produce the most value possible from transactions in a given scenario of supply and demand. It is
the maximisation of this value that defines efficient development.
Within this rubric, where does one know to draw the line for efficiency? Do taxes on polluting
industry or laws stipulating a minimum age for labour, or a minimum wage, make markets
inefficient? Where critiques of efficiency posit that markets will not by themselves arrive to
outcomes that are friendly to labour or the environment, or other goals deemed socially desirable,
these critiques still maintain the role of the state through the law as a limit, stepping in only when
it said to be needed. Of course, market efficiency still requires the state to act through the law, so
law is not always just the regulatory hurdle for markets. Where the Slum Rehabilitation
Authority is concerned, the statutory amendments that make its own existence possible, the
change of existing development control regulations relating to floor space index, the leasing of
the land to the developer for the sale component during construction, the provision to allow
transfer development rights, etc. are some of the major legal manoeuvres that facilitate the real
estate market to function in the Mumbai slum rehabilitation intervention. To this end, it might
appear that the Slum Rehabilitation Authority’s intervention meets some key features of the
efficiency paradigm. That buyer and seller will know the best way to maximise their resources
could appear as a premise, if only implicit, in letting developers approach slum-dwellers or vice
versa to implement a rehabilitation project.
If in fact this efficiency paradigm describes this intervention, is the land’s value realised to its
most productive potential? If measured financially, that land has long since seen commercial
business operate and generate revenue for slum-dwellers as both owners and employees. It is not
clear if rehabilitation will be a lasting disturbance for the businesses or a temporary halt on the
way to greater productivity. Will increased proximity to their new upper-middle class neighbours
mean an expanded consumer base for the business or will it phase out once it appears the new
tenants prefer luxury goods and services provided elsewhere? There is also the possibility that
13
See Alain Bertaud, “Converting Land into Affordable Housing Floor Space,” The World Bank, Policy Research
Working Paper 6870 (May 2014) for an efficiency proposal regarding land and affordable housing; See Vinit
Mukhija, “Enabling Slum Redevelopment in Mumbai: Policy Paradox in Practice,” Housing Studies 16, no. 6
(2001): 791-806 for a brief genealogical description of market-enabling and the role of government versus market in
slum development.

13
the usual clientele of the slum-dweller is priced out—displacing the old consumers instead of the
old business. This sort of gentrification might mean displacing the slum-dwellers altogether.
Another scenario could involve slum-dwellers’ illegally renting out their apartment, either by
themselves squatting elsewhere or within vacant space in the new building. Or these new tenants
might settle in or near the building without the explicit consent of the rehabilitated slum-
dwellers. Or perhaps everything goes according to the plan. The debt-ridden government earns a
significant premium when the developer constructs on its land. The slum-dwellers get a free
apartment, and the developer still makes a substantial profit because the location is prime real
estate. Upper class citizens get luxury housing where it is locationally desirable.
If it is efficiency which is the guidepost for how to design policy, just letting buyers and sellers
do their work tells us nothing about how to make choices regarding design or choose among
possible outcomes the most desirable one for an end vision. For example, if it had so desired, the
SRA could have designed the total policy implementation process (from registration, to transit,
to construction, to the eventual rehabilitation and commercial sale) to happen more quickly.
Introducing regulation instead, the policymakers may have wanted to ensure concern for the
slum-dwellers’ consent and participation does not get swept up in a drastic transformation of
their social life. Describing the design intent this way means describing the regulation as a hurdle
for the market in the name of the social. Yet we cannot yet say whether this will be an obstacle
preventing the delay of the inevitable financial gains of commercial sale, or whether it will make
the scheme’s overall implementation, in this slum and in another one, more socially
sustainable.14
In other words, from the onset, it is undecidable within an efficiency rubric as to
whether regulating consent will produce a more or less productive outcome when it comes to
slum development, just as it is not clear in the first scenario above whether gentrification will
increase or decrease slum-dwellers’ business productivity.
Among the scenarios outlined above, it could very well be that there are multiple efficient
outcomes. Or it could be that efficiency would run counter to our idea of development. If it is
economic growth we desire as development, the most efficient outcome could be only a one-time
spurt.15
Or if it is reducing the number of or improving the quality of life within slums,
gentrification could mean just relocating the problem elsewhere. Among these scenarios, and
there are many other plausible ones, it is impossible to know which is the most efficient outcome
of the design—in which actors have utilised or rearranged entitlements to maximise the use of
the resources—without recourse to something exogenous to the efficiency analytic. Perhaps it is
a theory which could tell us in whose hands resources’ financial value would most accumulate to
benefit all over time. Or a theory that ex-situ rehabilitation would be a disaster in terms of its
political optics and/or infeasible altogether. Or a theory that prioritises the budgetary constraints
of the government to argue against its financial involvement in rehabilitation. One could
endogenise all of these concerns to then develop a more robust model to predict a greater variety
of outcomes and then design a policy to lead to the most efficient one. It is possible to do this,
but the moment of decision will necessarily involve something exogenous and would not be
produced by the model itself. It will be the function of an argument. If one has mapped plausible
outcomes of a slum rehabilitation policy, including the possible effects of gentrification, of poor
14
On this point, Prof. Kennedy cites Karl Polanyi’s study on Western industrialisation, Karl Polanyi, The Great
Transformation: The Political and Economic Origins of our Time (1944) (Boston: Beacon Press, 2001) in David
Kennedy, “Some Caution about Property Rights as a Recipe for Economic Development,” 19.
15

14
media coverage, of litigation, and of multiple other consequences, then the decision would pivot
in large part about how to prioritise the relative weight—perhaps a function of its likelihood, its
capacity to benefit or harm, to be mitigated or enhanced, methodologies themselves up for
debate—among these competing factors. Perhaps one can surrender all these factors to a
common measure through quantification and ask the model to tell us what to do, but how to
perform this quantification, and the prior decision for which variables one should make discrete
so as to then turn them into the correct number, would be subject to the same questions about
how best to evaluate their comparative importance.
Furthermore, the set-up of the efficiency analytic will require holding static some set of
resources. The examination of some likely outcomes of the current efficiency-inducing
rehabilitation policy only could have been possibly by exogenising and holding still assumptions
about how the land’s property regime was set up, who had how much capital to invest or spend,
where labour can work, etc. To the extent that these resources are themselves functions of
distributed entitlements, it is possible that these very entitlements could be arranged another way.
Indeed, it is difficult to think of what resource—land, capital, labour—is not a function of a
plastic and fungible legal regime which defines formal entitlements about how the resource may
be utilised.16
If to say markets are more efficient than governments seems is instead to say that
we want to rearrange legal entitlements to speed up the ways in which private companies can
transact, with whom they can transact, across more borders, etc., then the difficulty in
establishing whether this rearrangement in fact produces efficiency arises from whatever
baseline this efficiency analytic must necessarily assume in drafting a model: perhaps factor
endowments regarding land, a pricing system, capital ownership, etc. These baseline
assumptions will always involve a distribution of legal entitlements, about what it means to own,
extract, sell, purchase, who can do so, and under what conditions. This distribution is not a given.
It might appear congealed in law, but it is always up for contestation and subsequent re-
distribution.
b. Empowerment
Maybe we could try to make our job a lot easier by throwing efficiency to the wayside and
adopting a pro-slum framework to design the scheme so as to maximise the gains of the slum-
dwellers, even if inefficiently. Among the words we could use to describe this approach, we
might choose ‘empowerment.’17
To ensure the slum-dwellers’ apartments were both free and
high-quality, we could either keep the cross-subsidy with the private developers or develop an
elaborate state apparatus of in-house architectural/construction expertise or floating tenders for it,
coupled with intense subsidies. In either case, some further modifications might seem obvious:
100% consent of slum-dwellers to pursue rehabilitation and no limit on the size, shape, setting,
or style of their individual flats or of the building as a whole. Let us surrender the development
of slum rehabilitation to the best and brightest minds of architects and builders in the world. If
we have chosen to involve the private sector, and if the costs of the rehabilitation apartment run
counter to the private developers’ freedom to exercise profit maximisation, the government could
leverage a variety of tax breaks, further loosen regulations around floor space index, and grant
more transfer development rights to the developer. Or—if we think these gains for the private
16
17
For an example of an empowerment framework, see Sundar Burra, “Towards a pro-poor framework for slum
upgrading in Mumbai, India,” Environment and Urbanization 17, no. 1 (2005): 67-88.

15
sector ought to be tempered lest commercial sale on the same plot hamper aesthetically,
environmentally, or economically the value of the slum-dwellers new apartment—the
government could forego cross-subsidising by instituting in its place a target quota akin to the
central government’s affordable housing requirements for private developers but a much more
intensified version of it, demanding what the developers must do and how they must do it.
With law’s capacity to distribute at the forefront here, we should not be surprised to hear any
outcries from elite citizens and the real estate industry about what might be perceived as a drastic
hand-out to the slum-dwellers at the expense of projects targeted towards higher income
demographics (whose property might be taxed heavily to finance the project), of the real estate
industry’s growth and its contribution to Mumbai’s overall economic growth, or the
government’s own credit rating if it has financed the rehabilitation through debt. We could avoid
these scenarios and focus through simplification on minor modifications of the rehabilitation
policy, keeping intact cross-subsidy with the private developers but ensuring they get the consent
of each and every slum-dweller and not limiting the size of each flat within the building. But
questions about distribution are not outside of the picture. Instead, they are re-represented in a
host of challenges that would follow from even the most utopian of proposals that attempt to
maximise the gains for the slum-dwellers.
The organisation of the slum-dwellers’ consent, at the moment of the project’s approval and
throughout its implementation, could be the crucial site to examine to determine the extent to
which the policy is ‘participatory,’ that is, distributing in a manner we deem equitable or, rather,
prioritising the beneficiary. As we start to try to listen to this beneficiary deeply, what we hear is
that any given slum community is likely not a monolith. It is rife with all sorts of its own
differences which we typically associate with ‘diversity.’ Where the existing policy requires the
land parcel on which the development will occur and where the housing co-operative society be
one and the same parcel, it might be that this diversity even breaches self-segregation. Where it
does not, diversity will not stop at the level of either caste or religious based self-segregation.
Within the given caste or religion, divisions regarding gender/sex, age, income, and the
community’s own power hierarchy also cut across the group. Of course there is also the desire to
participate or not to participate in a rehabilitation scheme, or how to participate, or ambivalence
towards it, not readily associated with the aforementioned categories which we usually
demarcate in the category of ‘identity.’
To this end, there are divisions laterally across communities in the slum, vertically within even
the most homogeneous community, and all the way down to the individual divided within
herself. The more you recognise the heterogeneity of the community’s desire, the more attractive
coercion becomes as an option to unify the diversity at a particular juncture to move the process
along. We can call this a classic political problem of collective representation. If the co-operative
adopts a one-person/one-vote principle, who will frame the topic on which to vote? The SRA
requires each housing co-operative to elect a chief promoter. How will she frame the topic
recognising her responsibility to the group as an entity whose collective interest she must help
forge out of competing desires including which are her own sensibilities about the direction of
their future? It is of course possible to do this well and to do this poorly. It will depend on the
dynamics of the group in question, all the different factors we project onto the term ‘leadership,’
and surrendering these factors and dynamics to the actions and reactions of whatever and

16
whomever is deemed constitutively outside the collective.18
If it seems right that ensuring by law that the co-operative is present in some form and taken
seriously at meetings with other stakeholders throughout the development and implementation of
the new property regime would encourage the possibility their gains are maximised as the
process evolves, then still the host of other political questions about collective representation are
not answered merely by virtue of the collective represented at ‘The Decision Table.’ There are
many decision tables internal to the collective itself, and they present serious choices that will
determine whether the possibility of maximising gains is realised or not, to what extent, how
these gains are shared, and how their future is sustained.19
These other questions are relevant
both for the co-operative as well as for the ‘empowerment’-minded policymaker. They include
how to react in the face of gentrification (to preserve the gains in the co-operative as a sort of
enclave of the co-operative or to prevent the displacement of other non-organised slum
communities). Where the size of the individual family flat is a site for contestation between the
developer and co-operative, an analogous dilemma is repeated. The capacity to realise these
preferences would depend on a given individual in the co-operative or the whole co-operative’s
ability to coerce and convince the developer to meet their demands for flat size. Is it more
important that the preferences of a co-operative or someone within the collective take precedence
over a principle of fairness to provide the same housing to slums across multiple co-ops? Does
maximisation mean each co-operative should grab as much as it can even if it means flat size is
erratic across the slums or would such a free-for-all mean rehabilitation reproduces the power
asymmetry across the slums, with those at the top able to get the best apartments while those at
the bottom are left with only the most basic flats?
Furthermore, if we do not want to let the private developer’s interest in where the most profit
would be reaped guide which slums they approach, we would have to decide whether to
prioritise the most upwardly mobile slum communities (perhaps those at the cusp of LIG and
above) who can be more quickly integrated into the middle class and lower the total number of
poor or to target those at the very bottom (EWS) who might be seen as most in need of
rehabilitation.20
By now it should be no surprise that the costs of gentrification, of slum targeting,
of unifying the collective are questions about allocation. Each choice in these binarised knots
might be supported by one economic theory or another, but they remain up for debate.
No theory whether poised for or against the catch-all category of either efficiency or
empowerment will be able to decide as a general rule of thumb or ‘best practice’ in whose hands
property rights would most realise the gains we associate with ‘development,’ whether as
poverty alleviation or profit generation, without rehearsing through intimately political questions
about allocation and distribution (including those arising when poverty alleviation is at odds with
profit generation), a rehearsal that whittles away at the capacity for this theory to emerge as a
rule, as something generalisable, predictive, universal, and indeed, scientific. Questions about
18
For an explication of the problems of political representation vis-à-vis NGOs, see Sapana Doshi, “The Right to the
Slum? Redevelopment, Rule and the Politics of Difference in Mumbai,” (PhD diss., University of California at
Berkeley, 2011).
19
That even a particular institution, the limited equity co-operative in the case of the following, designed with the
empowerment of the poor in mind would re-play within itself historical questions about political organisation, see
Duncan Kennedy, “The Limited Equity Coop as a Vehicle for Affordable Housing in a Race and Class Divided
Society,” Harvard Law Journal 46, no. 1 (2002): 85-125
20
ibid

17
how to manage entitlements are not settled once and for all at the moment of design so that their
resolved answers can then be put to implementation. The thought exercise is built into the
practice, and implementation drives theory to the local until it is less of a formulaic model and
more of a record of the contestations it faced along the way.
*
Chapter Three: Microcredit
1. Microcredit in the Formal and Informal
Like a title, microcredit is said to provide a stable framework which by its nature facilitates
economic growth. The borrower in the slum community who desires to start/expand his business
or buy a home could go to a microfinance institution to apply for a loan for which he would
likely not qualify at a typical, commercial bank. Whereas these commercial banks would need,
by law, a salary slip and/or proof of ownership of the current home as requirements to lend,
microfinance institutions often require neither. Slum-dwellers in the informal sector who might
want to access credit if they desire to finance the purchase of a home might also be the least
likely to qualify for this credit. The collateral which the traditional bank requires is the very thing
which a slum-dweller might want to finance through a loan: a home (for which a deed is legal
proof of ownership) or a formal business (for which a salary slip is legal recognition of income).
Between the commercial bank which refuses to lend to them and local moneylenders whose
interest rates could be exorbitant, the slum-dweller apparently has nowhere to turn. Microcredit
aims to fill this gap. Credit access is here a stand-in for development, premised on the belief that
getting poor people access to money in a way that makes it possible for them to repay it later,
even if with interest charged, will facilitate economic productivity or social gain either by
starting a business that employs labour and generates capital or by financing a home that will not
only provide shelter for the slum-dweller but also accrue market value over time.
On the one hand, what was seen as the strength of a titling scheme—its formal nature, the
security this formality provides, and the investment opportunities it enables or incentivises—is
reversed for the microfinance proponent. The formal nature of commercial lending (its
contractual terms, the requirement of collateral) is exactly the problem that compels microcredit
which claims informality in that it does not use legal recourse to perform the loan transaction or
ensure its repayment. This does not mean institutions responsible for providing or facilitating
microcredit loans operate outside the law. The central government must authorise them.
Microcredit is rather said to be an informal practice to the extent that some of the major legal
obstacles preventing access to a formal loan are displaced.21
In other words, while the
relationship between the state and the microfinance institution may well be a function of formal
law, the relationship between the borrower and the lender is where the claim to informality is
situated. Away from the mediation or interference of the state, which the contract or collateral
can here symbolise, this informal relationship between the lender and borrower is therefore
supposedly closer to the population whom the lender professes to serve. Because contracts are
laden with rigid and universalising terms, and because standard collateral represents the lack for
21
Antara Haldar and Joseph E. Stiglitz, “Analyzing Legal Formality and Informality: Lessons from Land-Titling
and Microfinance Programs,” in Law and Economics with Chinese Characteristics: Institutions for Promoting
Development in the 21st
Century, eds. David Kennedy and Joseph E. Stiglitz, (Oxford: Oxford University Press,
2013): 113-114.

18
which the slum-dweller desires a loan to begin with (proof of home ownership), both legal
formalities apparently misunderstand the nature of the client. To design the microcredit scheme
without reference to the state in the form of contract or collateral is purportedly to put aside the
foreign jargon and arbitrary even meaningless regulation of formal law and in its place embrace
the language of the slum-dweller himself.
The policy trajectory of Indian banking as it relates to microfinance seems to suggest this sort of
idea: of proximity as authenticity. Banks were dispersed across the country especially in its rural
heart and linked to self-help groups. Formed prior to or after the entry of an intermediary
microfinance institution or NGO to which it will then be linked, a self-help group is an initiative
whereby members will pool together some of their savings and decide the terms of their lending
practices themselves. The self-help group may well be in charge of all of the decision-making
regarding lending criteria including amortisation schedules, compulsory savings amounts,
interest rates, distribution of surpluses, and any or all other aspects of microcredit deemed
meaningful or relevant. A role of a microfinance institution can be decidedly separate from the
decisions of the self-run self-help groups as well as from the funding chain that brings capital
from the bank to the borrower. It might train, monitor, and support the financial services which
only the self-help group itself will provide to its community members. Sometimes, the bank is
altogether absent, and the microfinance institution is no longer an intermediary but instead
functions as the capital supplement for the self-help group; as such, it may set lending terms for
its clients or it may still yet leave that work to the group. In this given scenario, the role of the
microfinance institution may very well only be to provide more capital once the self-help group
is seen to be successful so as to increase either the amount of an individual loan or the number of
loans. Indeed, the relationship between the self-help group and the microfinance institution can
take on many forms of which the aforementioned is just one, representing in principle the
formality supposedly least intrusive and only there to facilitate what remarkable entrepreneurship
the self-help group already demonstrates.22
Where the group decides the terms of lending and where it does not, and where they may be no
group at all but instead a microfinance institution and its clients, the absence of the formal
contract characteristic of a loan transaction signifies for some experts that the further you get
away from law and the closer you get to people developing their own terms for lending, the
closer you are to what those same people believe and desire. For slum-dwellers to band together
to decide collectively how to lend their resources, or, in the absence of such a group, for a
microfinance institution to develop loan products that maximise flexibility without recourse to
the possibly confusing details of contract is seen as representative of democratic principles like
inclusion and self-representation. For this same institution to put aside title or salary slip as
collateral requirements is to widen the pool of those who can access credit and in this widening
reflect its developmental, as opposed to merely commercial, aims. Microcredit apparently
derives its power for ‘financial inclusion’ through its distance from formal law and its proximity
to informal self-help groups.23
22
For a portrayal of details of microfinance in India, see Jennifer Isern et al, “Sustainability of Self-Help Groups in
India: Two Analyses,” Occasional Paper 12 (August 2007): 1-48.
23
For construction of the ‘financially excluded’ as a target for development, see Marcus Taylor, “The Antinomies of
‘Financial Inclusion’: Debt, Distress and the Workings of Indian Microfinance,” Journal of Agrarian Change 12, no.
4 (2012): 601-610.

19
On the other hand, microfinance will sometimes claim formality. This is typically in comparison
to informal lending, that is, transactions done outside of the law altogether. A moneylender in the
slum loans money and gets the principal back with interest and with no legal record of the whole
process. The same goes for family members who lend to one another and may not even charge
interest. The proclaimed advantage of the microfinance institution is that, because it is integrated
within the formal economy, it can charge competitive interest rates less than that of the informal
moneylender and of greater amount or frequency than the family member and can provide,
alongside credit, other financial services through a team of staff. Connected to a bank or itself the
fundraiser of capital, formal microcredit loans can expand in geographic scope and density in
ways that are more difficult for informal moneylenders. Furthermore, informal moneylending is
by no means necessarily a practice with economic or social development in mind. As an informal
practice, it is conceived as something too varied, maybe too erratic or selective, inconsistent or
disorganised, to cohere as a consistent strategy that would promote any sort of sustainable
development. Microcredit, however, is by its nature a practice born out of the distinction from
mere moneylending. Its practice can be held together through institutionalisation in a way that
informal finance, by virtue of being informal, cannot: quotas in India for banks to lend in
government-deemed ‘priority sectors,’ of which microfinance is a part, is one such example.24
It seems then that where microcredit is informal and where it is formal, it can only be said to
benefit from both. Where informal finance is to be mimicked in the institutional design of the
microfinance scheme, it is entrepreneurial and savvy. Where the formal features of microcredit
loans are no match against informal finance, the latter is exploitative and its interest rates are
usurious. Microcredit seems to abandon and embrace formal law at the very moments most
relevant for development. Contract represents one such point of contact between the informal
and formal.
2. Introduction: Contract and Collateral
Among other things, a formal contract is said to provide clarity. A clear contract is one which
makes its terms known to both signatories and to the state which can ensure that enforcement, in
the case of breach, is accurate to these terms. If the contract is clear, then everyone knows what
they are getting themselves into. If it is clear, it is easy to be accurate, and if it is accurate, it is
fair. Of course, it is not only out of ignorance that contract is breached – a party simply may
know that it can get away with the violation. In such cases, the authority of the state to seize
assets, arrest, etc. makes enforcement of the contract effective. Formalisation then means not
only that the legal terminology of the contract is foreign and inorganic to the community life of
the borrower. Because of this enforcement mechanism, the contract also errs on the side of the
formal in requiring the state to intervene.25
Even in the case of compliance, the intervention of
the state looms as a possibility, and as such, its authority is upheld even without breach of the
contract. The power of formalisation is present throughout contract design and implementation.
Opposed to the role of the state in a formal contract are the informal norms of the borrower
24
For an informal/formal lending comparison, see Sarah Pearlman, “Flexibility Matters: Do More Rigid Loan
Contracts Reduce Demand for Microfinance,” CAF Working Papers, September 2010 and Mark Schreiner,
“Informal Design and the Design of Microfinance,” Development in Practice 11, no. 5 (2001): 637–640.
25
Haldar and Stiglitz, “Analyzing Legal Formality and Informality: Lessons from Land-Titling and Microfinance
Programs,” 113-114.

20
community which apparently serve as the means of making contract enforcement realisable: fear
of shame in the community, genuine affection towards one another, returning a previous favour
and thereby reproducing behaviour, etc.26
These norms do not necessarily require the state. As
such, these norms are said to be informal, proximal and thereby more authentic to the terms of
the borrower’s community. Of course, for state authority to be effective, one must believe the
threat to be credible; this belief is also the function of a norm as is the desire or capacity to obey.
Like the borrowing community, the formal contract is also not without a very crucial dependency
on norms to be made effective.27
Perhaps the difference between state authority and informal compliance might then be the
difference between types of norms as oppose to their presence versus their absence altogether.
Perhaps one such difference is the ostensibly organic norms of the community against which the
norms of the contract might be foreign, standardised, universalising and therefore incongruous
with the local specificity of the community. If universalising, then formal contract norms might
also be rigid, and if rigid, they must also be explicit. Informal norms of a community agreement,
however, might be understated, even vague, and therefore possibly adaptable and flexible.28
Informality’s flexibility is not the only alleged virtue which makes the microcredit scheme
effective. Pre-existing norms are also said to make the scheme’s enforcement cost-effective.
Whereas community norms alone may be sufficient for informal enforcement, like a desire to
maintain social standing that keeps one from breaching an agreement, the state must come in as a
third party to enforce a formal contract between two strangers with no prior relationship between
them to derive status or respect from one another. For a borrower and lender who live next door
to one another, their proximity and their subsequent history make it uncomfortable for one to
break a promise to the other. Legitimacy is apparently internal to the informal agreement
whereas for a formal contract, it comes from without.29
The security that formal private law is
said to provide by cushioning a transaction which two strangers make with one another with the
credibility of state authority is here apparently not as deft as the ease of grafting a scheme
directly on top of a community of neighbours. Deft not only because state intervention is costly
but also because informal enforcement could be more effective. Shame, for example, is at least
cheaper if not also stronger than imprisonment. Indeed, it itself is a type of social isolation. It
need not be brought in and explained—the social relationships that would make shame work are
already at work, and the borrower already understands shame.
For these norms to function as the microfinance practitioner would imagine, they are crystallised
in the self-help group which does peer-based lending that operates on group liability. The group
will determine whether to lend within itself or outside, under what conditions to lend, and the
group will jointly cover losses in the case of default. A group may also receive credit from a
bank or microfinance institution jointly with each member pursuing separate investments from
his allotment from a divided pool of credit. The group is a key premise for the microcredit
26
ibid
27
Programs,” 113-114.
28
For the praise of contractual flexibility, see Haldar and Stiglitz, “Analyzing Legal Formality and Informality:
Lessons from Land-Titling and Microfinance Programs,” 116, 119.
29
Programs,” 116-117, 120.

21
enterprise. Beget from a community’s own entrepreneurial desires, it symbolises a democratic
aspiration for self-representation that development expertise might claim as its own inspiration
and vision but not a product of its own interference. (After all, the group may well have formed
and decided lending terms before the microfinance institution has entered the picture, and in any
case, the group leads itself.) Moreover, the group will deeply know its borrowers in ways a
formal lender does not and maybe cannot because they will be the group’s own neighbours and
relatives. Where housing finance loans are given to individuals as opposed to groups, that one
must have previously qualified for or received a group loan, or that the lender still remains a
community member, keeps this feature intact. Intimate contact and the consequent knowledge
from it harness norms like admiration to transform it into a willingness to lend, guilt into
effective enforcement, or solidarity into flexible repayment. Put another way, shame works best
and perhaps only because we know each other intimately.30
Intimate knowledge is said to be responsible for more than just efficient and effective
enforcement. Serving as a type of security that discourages loan default, this knowledge is also a
gauge for credit-worthiness where and when one cannot require collateral of a slum borrower.
And when one cannot seize the asset if the lender does in fact default, then the lender has put his
social worth up for grabs, willing to be shamed if he cannot pay back the principal and/or
interest.31
Intimate knowledge apparently does more than just incentivise repayment and parse
out risky clients. It also is said to ensure that credit is in fact invested in a home rather than
something unproductive. It will even encourage, by making it easier for, safe clients to band
together to form the self-help group. Where housing microcredit does not work through a self-
help group to utilise the knowledge the group would bear, where instead it has employed a team
of staff to transact microcredit loans, the institution has sometimes nonetheless tried to adapt this
knowledge through proximity to the community, premised again on the idea that the closer one is
to the slum, the more authentic one is to their wishes and the more one can therefore claim one’s
support of rather than interference in the slum’s democratic self-representation. One such
strategy is for the institution to hire loan officers from the community itself.32
Where this is not
possible or desirable, the institution will then send its own loan officers directly to the homes and
businesses of the clients to engage in a sort of richly anthropological collection of what will be
termed ‘data.’33
The loan officer, whether local or foreign, participates in a circuitry between the
client community and the microcredit institution which operates on and through the knowledge
this circuitry fosters.
One such example of a Mumbai microfinance institution dedicated exclusively to housing
finance follows. Clients must want work in the informal sector and want to live in an urban home
to qualify for a loan. A loan officer would go to a prospective borrower, say a vada pav
salesman, and take pictures of his work, simultaneously uploading these pictures via smartphone
onto the database of the microfinance institution, asking him about his customer traffic, the latest
30
For the “informational advantages,” and “credibility of enforcement” that norms avail see Haldar and Stiglitz,
“Analyzing Legal Formality and Informality: Lessons from Land-Titling and Microfinance Programs,” 120.
31
See Rashmi Dyal-Chand, “Human Worth as Collateral,” Rutgers Law Journal 38, no. 3 (2007): 793-845.
32
For an example of local hiring, see Sohini Paul, “Creditworthiness of a Borrower and the Selection Process in
Micro-finance: A Case Study from the Urban Slums of India,” Margin: The Journal of Applied Economic Research
8, no.1 (2014): 59-75.
33
For an example of credit data in microfinance, see Mark Schreiner, “Benefits and Pitfalls of Statistical Credit
Scoring for Microfinance,” Savings and Development 28, no. 1 (2004): 63–86.

22
cost of potatoes, his salary, etc. Precision is not necessarily a consistent priority: for example, a
range in salary, as some sort of ratio between income and instalment, rather than a specific
number, knowing well that the salary is seasonal and/or volatile, will suffice. The officer will
then go to another vada pav salesman in the same area, asking the same questions to him to
corroborate the answers of the first. The same work would be done at the prospective client’s
home. The data would be parcelled off into separate categories: work, family, etc., with five
credit officers responsible for and only able to view the data (text and pictures) of their particular
category from anywhere in the world through a smart-device. The principle behind this approach
of credit approval is the desirability of tension between information. If two out of five credit
officers approve, the loan is approved. As the database grows, there is more historical
information to corroborate each new customer. To date, not a single one of the 5000 borrowers
has defaulted.
It is possible at this point to heed the lesson from titling and appreciate the difficulty it would
take to separate the role of the microfinance institution from what is said to be underway in the
community prior to the institution’s entry. Specifically, we could ask: does microfinance simply
insert itself onto a bed of existing norms and social relationships, extracting from them the
knowledge that is supposedly already there, without in fact transforming the social life and
inculcating norms and knowledge of its own in the slum? This is not necessarily the most
relevant question to gauge the dream of microfinance as a science. Though its conceived use of
group liability appears only to harness solidarity but, in leveraging the relationship between
shame and dignity, never tamper with it, microfinance unlike titling makes no pretence of
pursuing an intervention without interference. After all, installing what it sees as lacking in or
foreign to the community—financial discipline apparently only microfinance can adequately
herald—is one of the institution’s explicit goals. For some practitioners, cultivating the habits,
institutional and otherwise, to make the community receptive to financial discipline falls under a
self-avowed specialised banner of ‘capacity-building.’ But from the vantage point of its
practitioners, microcredit could be said to always have been about capacity building from the
start. The loan itself is only part of the goal. Along the way, performing the actions of qualifying
for it, meeting deadlines, presenting oneself properly to the lender, etc. are all part of the process
of learning how to behave and therefore realise oneself as an upstanding creditworthy client.
Is microcredit’s claim to operate as a sort of science of lending then just a harmless even if
incorrect assumption? In titling, close scrutiny of this pretension can destabilise not only the idea
that formalisation of entitlements is ever clear or neutral (rather, it involves political decision-
making regarding allocation and distribution) but also that it does not have one necessary
outcome which one could scientifically predict. Along these lines, what could be said for
microcredit if anything? Microcredit’s belief in its predictive power is a function of the two
institutional levers it claims to forego, contract and collateral, and the flexible, vague norms and
intimate knowledge it adopts in their place.
3. Flexibility and Intimate Knowledge
When it comes to the presumed role of contract, or its lack thereof, it seems that microcredit has
a dual and complementary notion regarding the formal and informal relationship: 1. that formal
contractual clarity is a rigidity which forecloses credit access in the case of exception while, 2.
self-help groups would be more accommodating to borrowers, thereby expanding credit access,
because of the less precise, and therefore flexible, norms of informality.

23
A flexible norm may, in a way, seem like an oxymoron. A norm from the moment it is
understood as such means a trend has cohered, it is consistent, it is recognisable as the same in
multiple places, it is reproduced and thereby must also be reproducible. How can something be
identical across space and time and still be said to be flexible? There must be some flexibility for
it to stretch but not so much that it loses its similarity to be called a norm across these iterations.
Some degree of flexibility, and some degree of rigidity, must be part of every norm to appear as
a norm.
What about an informal norm then makes it more flexible than a formal one in a contract while
still being a distinct norm and that too an informal one? Is the community more accommodating
of exception or the occasional mishap than the state enforcing a contract would be? Without its
lending terms elaborated in rich detail, a self-help group may very well have more room to
manoeuvre and course-correct when a loan goes awry. Perhaps then the clarity of the formal
contract is antagonistic towards the flexibility deemed necessary for providing access to credit to
slum borrowers. But it’s not necessarily true that clarity, if by that word we mean either a
lengthy or a pithy explication of terms, ever finally precludes multiple interpretations of a
contract – that a contract which is said to be clear is in fact correctly read only one way as
opposed to others. If this is the case, the state can also read into the ‘clear’ contract an exception,
an accommodation, or a course to be corrected. If clarity is not always so clear, one can always
read flexibly.
Clarity then is less an aspect of the contract itself than a function of the interaction between the
text and the acts and customs of its interpretation. As such, it is much more dynamic and
interactive than the image of a contract as a static and free-floating paper might suggest.34
Even
an apparent lack of specificity in an informal loan transaction can be both liberating, if it means
one party is free to act how they like with no recourse to an exact condition, or, as a custom of
reading the agreement, a strict even if unspoken norm operates by binding a party to a specific
course of action.
Clarity is therefore also a relative matter: for an informal community to adopt international legal
standards with non-discretionary rules of credit transactions might make its functioning
transparent to a foreign investor but incomprehensible to the lenders and borrowers currently in
it. These same lenders and borrowers might find technically imprecise, broadly discretionary and
vague standards much more illuminating and easily understood while those outside the
community may remain baffled.35
Neither is formalisation as a type of clarity necessarily in fact so clear nor is the relationship
between clarity and flexibility a deterministic one. Greater credit access and financial inclusion
writ large is not a logically guaranteed outcome of either a clear and rigid formal contract or a
vague and flexible informal agreement. Both are functions of norms which are themselves both
rigid and flexible at once. In other words, neither clarity nor flexibility is a necessary precursor to
increasing credit access for a slum borrower. It is undecidable as a general rule whether only an
exact target whets the willpower to land it or whether only a vague standard provides the easiest
space for landing. Replacing a formal contract with informal norms does not ensure, by virtue of
an accommodating flexibility of normative vagueness in informal life, that a greater number of
34
35

24
slumdwellers receive access to credit because they are given a break when they do not or cannot
pay back the loan on time. Herein lies microcredit’s claim to science through foregoing contract:
that because of the way particular divisions between the formal and the informal appear certain
to the practitioner, aspects of either will necessarily produce a given distinct and coherent
outcome. Where microcredit’s other institutional lever is concerned, the lack of collateral and the
intimate knowledge that replaces its security, it is an outstanding issue that requires scrutiny to
further probe microcredit’s aspiration to the status of a science. After all, if its notions about
contract are misguided, collateral could still keep together microcredit’s capacity to yield
financial inclusion as a definitive result of foregoing it.
Offered to the lender as a deposit whose value to the borrower is meant to be a safeguard against
default, collateral as defined by a commercial bank is a requirement a slum borrower often
cannot meet without a title or a market-valued asset to pledge. That microfinance foregoes
collateral and has not met high default is only laudable if it has also meant greater financial
inclusion for those deemed most in need for credit for housing investment. In other words, low or
no default is not exactly the best indicator for the sort of financial inclusion most desired by the
microcredit practitioner. What sort of lending outcome most represents financial inclusion is
itself up for debate. Does it take on the form of a number? If so, is it the most number of loans
transacted? Or only those to the poorest of the poor? If our interest is in housing finance, do we
exclude loans transacted for the consumption desires of the borrower? Perhaps we can focus only
on housing finance loans transacted without default to borrowers of the lowest income-based
categories that are acknowledged as industry and government standards. Even if these loans
represented only a minimal share of transactions of any given microfinance institution, it might
be argued that the practice of extracting intimate knowledge to gauge creditworthiness in the
place of collateral remains untarnished in principle.
There are two practices we can separate. The first is represented by group lending, and, in its
absence, by the hiring of the loan officer from the community. The other is exemplified by the
data collection approach of the housing microfinance institution outlined in the previous section.
The local loan officer is a sort of mediation between these two practices – ostensibly
representing the best of both worlds. He is from the informal community itself, so he supposedly
has a privileged access to information, unmediated in its authenticity, requiring no translation,
that only a native could have, a whole history of it from even prior to his employment as a loan
officer that he can draw upon. At the same time, he also works like an anthropologist from the
outside coming to the field to collect data whose worth he will later test by inserting the data into
a process said to screen out his own and others’ subjectivities and produce as an end result a
creditworthiness objective enough to replace the security collateral would provide. Of course it
should be said that a given microfinance institution’s data screening process, for example the
aforementioned one, consciously and explicitly maintains the moment of human decision
through the role of the credit committee responsible for interpreting the data and then choosing
approval or rejection. Where a microfinance institution relies on a credit scoring process that
quantifies all the data and produces a number whose range alone will determine rejection, the
moment of human decision is still intact, though congealed in the institution’s choice of credit
scoring process, and the decisions of the expert which went into constructing this process to
begin with. As in the case of titling, questions about institutional design form an integral part of
the loan screening process even if it appears data screening is meant to shoulder the burden of
responsibility one inevitably confronts in design. The attempt to develop a science of lending

25
through data screening to once and for all resolve decision-making are never dissolved in the
automaticity or objectivity of the process; rather they are reproduced both in every use, which
implicitly reaffirms them, and in in the explicit act of approval.
Where intimate knowledge as a practice of screening is deployed through the group as opposed
through data, it might appear the microfinance institution is turning down scientism in favour of
an authentic and locally native type of knowledge to screen loan candidates. The native is
presumed to already know about features of a local applicant such as trustworthiness, credibility,
and character. Trusting a person is however something different than trusting his capacity to
repay a loan. The latter might require information gathering akin to the loan officer, placing the
native in the same position as anthropologist-scientist, having to decide what information is
worthwhile to collect, which should be weighted more than other, what to do in the instance of
exception, etc. Furthermore, where trust is the function of an interpersonal relationship, it does
not appear to have the features we typically attribute to authenticity’s objectivity. It ebbs and
flows, it varies in intensity, in quality, and it can be broken. It does not take on the form of
something fixed, lasting, and readily accessible as one and the same everywhere it is. Trust is
something one finds oneself already having cultivated for someone, but this does not mean it is
there, waiting and summonable, like an entry in a dictionary. Knowledge about the social web in
which finance is meshed is not something organic or natural either to the local native or to the
outside expert – one has to evaluate the possible consequences in this web of lending, or of not
lending, and of default. So where trust is a relevant criterion for loan approval, it is not retrieved
immediately but constructed in and through the process of its evaluation. All this is to say where
the native is seen as a site of trust-based knowledge waiting to be mined by microfinance, the
alleged local authenticity is underwritten by a process of shifting, time-sensitive, and mutually
constitutive interaction among subjectivities thought to oppose the timeless autonomy of
authenticity. Faith in native authenticity runs parallel and not counter to the faith in data’s
scientificity. Both outsource to a process that appears congealed and self-sufficient—data or
trust—when it is instead dynamically developed in thoughtful encounter and engagement.
These remarks about microcredit’s aspiration to science might only appear meaningful if they
ran against the proclaimed mission of financial inclusion. Yet, it is very difficult to separate out
to what extent the replacement of collateral with intimate knowledge and/or data screening
contributes to providing more people with housing finance, in which it could be said to produce
the sort of development we want, versus the extent to which it helps decrease the risk of default,
in which case it helps keep the microcredit institution running but may not in it of itself produce
a greater as opposed to lesser number of loans. Perhaps it could be said that whether or not either
knowledge-practice is responsible for increasing credit access among the poor, the mere presence
alone of microfinance facilitates credit access since prior to their arrival, commercial banks had
strict collateral requirements that excluded the poor. In India, where commercial banks have
been attracted by the growth of microfinance and seen it as an opportunity for profit-making,
experts argue that microcredit institutions of the non-profit variety will have to increase their
efficiency, minimise their costs, and control default risk if they are to be able to compete with
their for-profit counterparts. As financial sustainability becomes an increasing concern of even
not-for-profit microcredit institutions, it very well may be the case that market will orient them
toward organising their work around the mitigation of default risk as a first priority.
Perhaps if microcredit does not survive as a not-for-profit, its lasting commercial impact might at

26
least mean greater credit access for the poor even if from the private sector where the business
imperative will have to take first priority. In a sense, this is certainly true. More people now have
access to credit because of microfinance. Whether this outcome of financial inclusion is a type of
poverty alleviation is the relevant question for the development practitioner, especially when an
expert presents replacing collateral with intimate knowledge or data as a reproducible formula
for poverty alleviation. Studies that could yield the number of poor persons microfinance has
reached will always favour microfinance in the form of the argument that some is better than
none. Foregoing collateral would extend credit’s reach and in this reach, represent financial
inclusion. But where microfinance enables credit access by foregoing collateral, and where it
replaces collateral with screening to mitigate default risk, it skirts credit access by running
another risk: foregoing the financial inclusion at the heart of its proclaimed mission.
If we were to imagine some of the features that characterise the profile of the risky borrower,
they might include: a volatile income, no fixed or stable place of residence, a weak if any social
network, etc. Money comes to the borrower irregularly and unpredictably making it difficult to
meet even a flexible repayment schedule. Following prospects for quick cash if and when it
arises and/or unable or unwilling to meet the possibly small but inevitable costs associated with
squatting, the risky borrower has no real connection to a locale or to its community whose
members could serve as some sort of guarantors. The more this profile appears identical to the
profile of so-called the poorest of the poor, the more default risk appears associated with (if not a
proxy for) poverty, not trustworthiness or character. Screening out those most risky might mean
screening out those who would also inevitably be deemed, by the industry’s own standards, most
in need of credit.
At the same time, a given lender’s low rejection rate would not necessarily indicate greater
inclusivity. The most poor may not even approach the institution in the anticipation of
rejection—an anticipation either premature or, where screening in the place of collateral binds
risk with poverty, sensible—and would therefore not be included in this figure. Is this simply the
result of inadequate marketing on the part of the lender or a lack of awareness and prevalence of
misinformation on the part of the borrower? Or does it represent something structurally built into
the screening process that replaces collateral? If this is the case, microfinance reproduces in
different form the dilemma for which it chastised commercial lending to begin with. What this
suggests is that one cannot have holistic financial inclusion without a real confrontation with
default risk. Financial inclusion taken to its most inclusive limits could mean also the end of the
capacity to institutionalise microfinance. Scientificity in data screening or analogously in native
authenticity helps uncollateralised lending avoid the risk of default but runs the risk of financial
exclusion alongside it.
This sort of aspiration to science in microcredit is related to but also distinct from that in titling
or in efficiency/empowerment as property models for development. For all three, diving deep
into the premises that gird them, it becomes exceedingly difficult to have the assurance that the
respective institutional design will necessarily yield the desired result with only irrelevant side
effects if any. More specifically, in titling, this faith in formula imagines an intervention whose
formalisation only improved without ever interfering. In property rights analytics, the capacity
for formula grew weaker the more one grew attentive to the increasingly pressing details of
design that provoked crucial questions about allocation. In microcredit, firstly, both titling and
property analytics’ scientific assumptions are in a way combined. The fantasy of deriving a

27
decision from a baseline evidence that need not require interpretation reflects both the idea that
what is at work in the community is already legible rather than constructed as well as the idea
that design settles decision-making once and for all. What is distinct in microcredit is an explicit
evocation of knowledge, native, qualitative, and/or data-driven, that makes possible the
community as a construct and which itself is the scientific practice of that will mitigate default.
Furthermore, through this issue of screening substituting for collateral, microcredit presents an
example of the irresolvable knot at the heart of organisations for whom the absolute fulfilment of
their proclaimed social mission could undo the directive of financial sustainability that marks
and enables their institutionality.
*
Chapter Four: Conclusion
Not without its own history of scientific aspiration, architecture has been valorised or at least
deemed unique among the arts because of its capacity to serve a so-called ‘practical’ function
such as providing shelter and order.36
One theory, or family of theories, held that architecture’s
aesthetic form could be derived from its stated programmatic function.37
In this vein, geometry
would serve as the axiomatic foundation for architecture to perform this one-to-one shuttling
between form and function.38
Where the city is concerned, evoking a geometric foundation
helped architectural theory constitute what we often imagine today as the urban space: the notion
of the city as a unifying grid.39
The typology of the high-rise and of modern architecture was to
symbolize and herald in the future of society.40
Modern architecture held the fantasy of
revolution, of a sweeping social transformation. A science of design was to breach the frontier of
the possible.
The city as the site of production, and architecture as its loyal midwife, imagined space as the
terrain it will conquer.41
The modern city as a unifying grid in which all parts relate to one
another to produce a complex order and chaos also, but only to the extent that it is productive
and somehow vibrant, bears much resemblance to the notion of the modern economy into which
formalisation of property and microcredit would usher in the excluded poor.42
As a social
practice, architecture seems to be all the more so intimately linked to economic development
because of its proclaimed capacity to be subservient to programmatic needs. To that end,
architecture is something to be instrumentalised for development. Visually, the skyscraper, the
commercial complex, and the residential high-rise, among other architectural forms, all indeed
seem to be part of an iconography of successful urban development. The slum might also be
36
de Quincy as qtd. in Manfredo Tafuri, “Toward a Critique of Architectural Ideology,” in Architecture Theory
since 1968, ed. K. Michael Hays, (Cambridge: MIT Press, 1998), 9-10.
37
K. Michael Hays, Introduction to “‘La Dimension Amoureuse’ in Architecture,” by George Baird, 36 and Colin
Rowe, “Introduction to Five Architects” in Architecture Theory since 1968, ed. K. Michael Hays, (Cambridge: MIT
Press, 1998), 74.
38
Alberto Perez-Gomez, “Introduction to Architecture and the Crisis of Modern Science,” in Architecture Theory
since 1968, ed. K. Michael Hays, (Cambridge: MIT Press, 1998) and Hilberseimer as qtd. in Tafuri, “Toward a
Critique of Architectural Ideology,” 22.
39
Tafuri, “Toward a Critique of Architectural Ideology,” 13.
40
Rowe, “Introduction to Five Architects,” 74.
41
Tafuri, “Toward a Critique of Architectural Ideology,” 26.
42
Milizia as qtd. in Tafuri, “Toward a Critique of Architectural Ideology,” 11.

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