A street shot of a boy looking straight into the camera.
Far from the controversies caused by complex corporate micro finance groups in Andhra Pradesh and farmers suicides in Maharashtra due to non-repayment of loans given by powerful political money-lenders, Delhiites from the sub-prime classes are taking small loans to boost their earning capacities.
Women living in slums and families from the lower socio-economic sections in the Indian capital are taking loans as little as 5,000 at interest rates of around 25 per cent per annum. Even these tiny amounts help them buy a coffee-vending machine; start a business of selling chappals; open a kitchen to supply tiffins to people working in the neighbourhood; make small plastic caps for lipstick covers or manufacture lamp shades from home.
In east Delhi’s resettlement colony of Seelampur, a group of five Muslim women took loans between Rs 5,000 to Rs 15,000 all for various businesses. Shaheen from the east Delhi area of Seelampur has opened up a small embroidery unit where she has been able to employ three other women who work alongside her to help her grow her business. “I pay these women according to the number of hours they work, which can be upto Rs 100 for eight hours,” she says brimming with confidence. There was a time just one year back when she used to work alone but the loans she took from Shikhar Finance enabled her to grow her business.
This group of five women - Shaheen, Mumtaz, Nazma, Ishrat Jahan and Shahan at a meeting to pay back an instalment to a representative of Shikhar Finance company.
So how did she spend her money? “I spent the loan money on cloth and material so that I could make my own cushions and sell them to high-end shops. Instead of just doing embroidery for shops, I started selling them my own stuff.” Her husband, who drives an autorickshaw, did not interfere when she decided to take the loan but did make it clear that she has to take responsibility for clearing the loan amount. Shaheen’s family uses a heater, refrigerator, cooler and her small home has a steel cupboard. Shaheen has actually become the voice of the Delhi-based Shikhar Finance in her neighbourhood.
Inspired by Shaheen’s story, Mumtaz, a distant neighbour, whose son was a chappal salesman and earned a paltry commission that was hopelessly insufficient to meet their meagre ends took courage. She took a loan, bought the footwear herself and set out with her son to sell it at various weekly markets. Now the two of them sell their own product, which is both satisfying and getting them more money, and the thought of repaying the loan with an interest does not scare Mumtaz.
Mahesh Babbar stitches the fabric in his kitchen while the other assembling is done in his bedroom
The harsh truth is that micro loans have not turned around people’s lives dramatically. Most still remain poor and the bigger things in life – marrying a daughter, buying property, adding the barest of comforts – elude them. On the other hand, tiny doses of money have helped them grow their current business and given them hope for a better future. For example, Mahesh and Beena Babbar have been able to expand their lamp shades-making business and now employ a full-time staffer. He has been able to expand his business with the Rs 10,000 loan that he availed.
Less than six months back Babbar, who lives in Trilokpuri, used to get a meagre salary of Rs 4,000 for making lamp shades. Dissatisfied with life, he quit his job and remained unemployed for a while. “A friend’s wife who had taken a loan urged me to start my own business in the same line of work. I took a loan and bought materials to assemble lamp shades. Within a couple of months, I have been able to achieve a turnover of Rs 20,000,” says a satisfied Babbar. He says that he may again take advantage of a similar loan to increase his business. He offers nearly 400-500 lamp shade designs between Rs 85 to Rs 150, which might sell for as much as Rs 1,500 in the plush markets of central Delhi.
The confidence that the lamp shade maker shows is not reflected in Ramji and Seema’s business. The two live in slums in east Delhi and manufacture lipstick caps which are sold to wholesalers. Ramji’s wife took the loan so that her husband could buy another machine – both of which lie on a hard bed in the bedroom of his one-room house. His biggest problem is that he gets to operate his machines only when there is no power cut. With massive power cuts in Ramji’s slum, his work remains badly affected.
Ramji at work in his bedroom factory.
The positive thing in Ramji’s life is that his loans have facilitated him in being able to buy two machines which have increased his manufacturing and selling capacity. But for the father of five school-going children, life continues to remain a struggle as he battles power cuts and saves money for his daughter’s marriage.
The irony is that these impoverished and illiterate families are barely aware of the changes taking place in the legislative sphere that governs micro-finance. For them banks do not exist and most of these people will not be given a loan even by government banks. Alternatively, life in the global economy is such that big businesses access cyclopean loans with bribes and rural money lenders take lives along with interest rates of over 100 per cent in return for the loans they give.
For the poor Indian family, the current financial system is about getting the worst of both - the modern and the traditional economy.