Halls of Shame: The unholy business model of community halls in Mangaluru

News Karnataka

Halls of Shame: The unholy business model of community halls in Mangaluru

Halls of Shame: The unholy business model of community halls in Mangaluru

CA Valerian Dalmaida   ¦    Oct 15, 2019 03:04:03 PM (IST)

Halls of Shame: The unholy business model of community halls in Mangaluru-1

Recently my friend fell on hard times; the economic slowdown had caught up fast with him. Once upon a time, the financial pillar of his extended family and community, he contributed his mite to various causes that cut across religious and community lines, believing always in the adage – to help others is to help yourself! He said yes (when approached for help), even when he wanted to say no! Perhaps then he had not read the book “Don’t say YES when you want to say NO!” by Fensterheim and Baer. He has certainly read it now.

One of those causes was the building of a community hall; he contributed liberally when he was approached by the religious heads wanting to build it – for the community. After all, it would help the community he thought; and then he fell on hard times.

It was at this crucial juncture, his daughter received a marriage proposal; it was like a match made in heaven. She was excited about the proposal and accepted it with her parents’ full support. He wanted to do well by his daughter, his only one; and so despite the hard times, he decided to dip into his precious savings to provide her with as grand a wedding as possible with his limited funds.

The first decision he had to make was a date and a venue for the reception. His first thought – The community hall I helped build! He approached the hall authority hoping to receive a massive discount on the rental and other costs associated with the use of the hall. Nothing doing said the hall authority – You pay the same rate as everyone, even if you are hard up - No exceptions he was informed rudely. “But I contributed so much for this hall and I wouldn’t mind if I could afford the whole rental, but given my changed circumstances’ can you not relax the rule”, he pleaded. Nothing doing came the reply.

The cost of the rental he thought, will mean he would have to cut corners elsewhere. In the end, he decided against renting the hall and held the wedding reception at his home, altering his original plans completely. At the reception, he heard the whispers, “he was a benefactor of the community hall, why didn’t he hold it there?. The questions hurt and hurt deeply. But he didn’t show it, but I could see it in his eyes when I spoke to him the other day….

Community assets - of the community, by the community, NOT for the community!

I narrate this story because today, those who contribute to the creation of community assets are being fooled; they get the privilege of using it only if they pay for its use like anyone else. What then is the use of contributing? To my mind, it’s a rather strange way of functioning. Mostly these halls are built by religious leaders on the pretext of serving the community. In reality, the community is not served, it suffers; neither the underprivileged nor the contributors get any concession on its rental for family functions, and there’s a reason given out! The rental funds are... for the community!

I pondered over the justification they gave my friend for discounting the rental for him – “the funds are for the community”. I thought to myself - they had already built a hall for the community, but the community had to pay to use it. Ok, so the funds are collected for the community, will the community have to beg for a part of them? Or will they be distributed as dividend among the families of the community registered with the religious heads of the community? Neither. The religious heads use the funds for the greater symbolic glorification of God rather than the alleviation of suffering of his brethren as prescribed by the very God they are attempting to glorify.

The whole concept seems like a cruel joke, and I choke on my laughter…

The Halls of Shame Business Model

The reason I choked on my laughter? I recognize that the whole concept makes good business sense in these hard times, and any Business School could easily grab its essence for the sake of its students! Perhaps some of our religious heads involved in setting up and running this business model can be invited as visiting faculty.

Here’s how it works; you gather, not borrow, money to create an asset for the very people from whom you collect the money - so no interest or collateral involved; It’s easy to get money from them for two reasons – their love of the God in whose name the money is collected, and the fact that the asset is for them and their brethren – at least that’s what they think; create an asset (who benefits in the creation of that asset is anybody’s guess) and then rent the asset out to the very same people with whose help it was created! The business model does not stop there. You then use the money to further other similar projects in house or elsewhere. When asked for a return on investment in the form of a dividend or a discount – give them the stock answer – All for One (not one for all). This Business Model is also viral in its spread - First there was one, now there are many!

But let’s say a person of the community has sufficient land for the purpose of building a reasonably sized community hall. He approaches local families and their members abroad (like the Religious heads do) for contributions on the assurance that they and the local community members will get to use the hall free / at a nominal rental to cover electricity and other variable expenses, and the rental collected from other communities will be distributed to them in proportion to their contribution – Will they provide interest free capital? My experience says no; in spite of the good returns.

Being a Chartered Accountant and a businessman myself, having invested in a Media Company in Mangalore along with likeminded people, I find this business model fascinating up to the point of creation of assets; but as a businessman, I realize that those who contribute would also like to see an adequate Return on Investment. The beneficiaries of this return are not only the investor but also the employees, suppliers for services, the Government through GST, ESI, Profession Tax, ROC fees, consultants for audit, company compliance matters, marketing and business development, and brand building. In the end, the City, the District, the state and the nation benefit.

In order to continue contributing to the economy, – which is vital for community development - business needs working capital; this can come from investors in the form of fixed deposits, who want a slice of the business and are willing to park their spare funds with the business as it can offer better returns as compared to Banks where the returns are falling. This is a good proposition (vis-à-vis halls of shame) for people especially when the business backs it up with an unblemished repayment record; After all, should the bank fail, your deposits are insured only up to Rs: 1 lakh individually.

Choices are individual and according to circumstance, but don’t let yourself be fooled anymore. Much like my friend.

About the Author
CA Valerian Dalmaida is a Fellow Member of the Institute of Chartered Accountants of India, residing in the UAE and practicing as a consultant for an accounting and advisory firm in Abu Dhabi. He has more than 38 years of experience in accounting, finance, banking, investment, and advisory services.