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Savings Behaviour of the Urban PoorA Case Study of Rickshaw Pullers in Delhi
Microfinance Researchers Alliance ProgrammeCentre for Microfinance, Chennai
6th August 2010
Mani Arul NandhiAssociate Professor, Jesus and Mary College,
University of Delhi, India.
(This presentation is drawn from a wider study sponsored by the Institute of Money, Financial Inclusion and Technology, University of California, Irvine, whose funding and support in every way is gratefully acknowledged by the researcher)
Outline of Presentation
Motivation Objective
Research Question Data and Methods
Main Findings Way Forward
Concluding Observations
Motivation
8.1 million are urban poor in India (India Urban Poverty Report, UNDP,2009 )
Large segment of the urban poor employed in informal sector
High Level of financial exclusion of disadvantaged and marginalized population in India (40 %)
shunned by mainstream financial sector Urban poor are heavily dependent on informal
financial services Understanding the financial and money
management behaviour of urban poor – critical to facilitate their inclusion.
Research Question
Focus of wider study: Financial behaviour of disadvantaged and marginalized migrant group
A case study of cycle rickshaw pullers in Delhi
Focus of this paper: Savings behaviour of rickshaw pullers in terms of mechanisms used, reasons thereof, and the constraints faced as well as level of awareness about formal/semi-formal financial services.
Data and Methods Sample
- 176 Rickshaw pullers randomly drawn from 4 districts in Delhi (Central, North, West, South)
- 10 Key informants (rickshaw owners, mechanics and users of rickshaws)
- 10 FGDs with a cluster of 4-6 rickshaw pullers. Data
Primary data based on 4 methods1. Structured In- Depth Questionnaires2. Focus Group Discussions3. Key Informant Interviews4. Case Studies
Background Profile of Rickshaw pullers Majority illiterates (48% )
High proportion from socially and economically backward groups (59 %)
Equal percentage from landless and landed households but < 2.31 acres.
Only 9 % owned some asset (wristwatch, radio/transistor, clock, second hand small TV).
21 % had a mobile phone.
Mostly from wage labour and landless households.
Average Household size -6.
Average number of years in rickshaw pulling – 14 years.
Homeless, or living in illegal settlements & in unhygienic conditions, with little or no facilities for sanitation..
Majority had no personal identification proof (no voter’s ID or a Ration Card) or Address Proof in Delhi. In a nutshell, rickshaw pullers belong to the poorest and marginalized groups
Economics of Rickshaw pulling
Average number of rides on a normal day – 14
Rates for short, medium and long distance rides-
Rs.10, Rs.15 and Rs.20 –Rs.30 respectively.
Income from rickshaw pulling:
Gross Earnings = Earnings on a normal day
Net Earnings = Gross Earnings Minus Rent
charges paid for hiring rickshaw and daily
expenses.
Daily Earnings Average Gross Earnings on a normal day
(not every day’s earnings) Rs.179 (Entire sample)
Average Net Earnings on a normal day Rs.91 ($1.94) (90 % of sample) Nil Net Earnings - 9 % of sample
Average Monthly Earnings
Monthly Earnings
N=176
%AverageMonthlyEarnings
Gross Earnings 50 28.41 Rs.3442
Net Earnings 120 68.18 Rs.2321
No Response 6 3.41 -
Savings N Percent*
Do you put away some portion of your daily earnings as savings? Yes No
1679
94.895.11
If Yes, how often? Daily Weekly Monthly As and when surplus available
8196
81
46.025.113.4146.02
Where do you keep your savings?1.Keep savings on person/self2.Keep savings with shopkeeper /friend3.Keep savings wife4.Keep savings with rickshaw owner5.Keep savings with relative6.Keep savings at place of stay7.Keep money buried 8.Remit home regularly9.Deposit in my bank account10.No response11.No surplus, no savings12.Give interest free loan to fellow puller
975410755443341
55.1130.685.683.982.842.842.272.271.71.72.270.57
* Some responses total > 100% due to multiple responses.
Savings Practices/ Measures usedSavings measures N Percent
Keep savings on person/place 97 55
Keep savings with shopkeeper 54 31
Keep savings with relative/wife 15 9
Keep savings with rick-owner 7 4
Keep savings in shack/room 5 3
Savings buried under soil 4 2
Remit home regularly 4 2
Deposit in a bank account 3 1.7
No response/No savings 7 4
Ingenious Saving Practices to Minimize Risk of Loss
Living on streets and safeguarding savings – by dividing saved amount to 4 different people – Rs.150 per day divided and given to Chaiwala, Paanwala, Thelawala and 2 friends living in a rented room (Case of Parichan Paswan)
2nd case of Gaya Prasad – Saves with paanwala (but does not give every day), saves by carrying money inside his person and remaining buries under soil (not in the same place) Sometimes
buried amount > amount from other methods; Remits home quickly once saved amount is built up to a lump sum.
Cautious about remittance mechanism – through M.O or a villager (one of the rare respondents who use this formal channel).
Hold on to savings but involve in reciprocal borrowing and lending to manage deficits – reason difficult to build up lump sum- case of Sunil Kumar Pathak from U.P
Ingenious saving practices - continued
Homeless but pragmatic – build up and remit fast – case of Asarfi – keeps money in a bundle with him till it becomes Rs.500 or thereabouts and remits weekly by depositing in his friend’s account.
What if I don’t have a Bank account, I have a friend’s account to deposit – case of Mohd.Islaam from Madhubani district, Bihar.
Health crises (wife/daughter), frugal living, juggling of expenses and money management skills of wife to build up Rs.10,000 with Sahara (Case of Sanjay Singh, Bihar)
Share expenses to minimize cost of living and save to take care of family needs and to repay loans – the case of undergraduate puller – Vijay Paswan
Dispense with avoidable expenses to save and (literally) hold on to it tightly – case of Hukam Singh, M.P. (stays on pavement, use public conveniences and carries a plastic wrapped bundle with him always.
Total savings by different methods (in the last 30 days in INR)
Saving methods N % Average Total Saving
1. Self 76 43 2906 2, 20880
2. Shopkeepers 64 36 2503 1, 60250
3. Wife 10 6 1960 19600
4. Rickshaw owner
7 4 1264 8850
5. Bank 2 1 1650 3300
Total of 1+2+3+4
157 89 2158 4, 09580
No response 19 11 -
Potential savings of migrant rickshaw pullers
Projected Scenario of an aggregated market supply of savings in 30 days (at a conservative estimate)
Number of rickshaw pullers in city 6,00,000 i) only 30 % of sample save with shopkeepers,
Assuming on a lower side, ii) only one half of savings of total savings with
shopkeepers (~ Rupees1250), 30 % of 6,00,000 multiplied by Rs.1250 INR = Rupees 22.5 croresClearly, rickshaw pullers are bankable but excluded by
formal sector.
Reasons for informal savings
Savings with shopkeeper1. No safe place to save due to homelessness (32 %)2. Trust and accessibility (34%)3. Possibility of spending money on temptation goods
(18%)4. Lack of awareness about alternatives available
(10%)5. Convenient to deposit due to physical proximity
with operational areas 6. Helpless circumstances but to depend on known
shopkeepers.
Costs of saving with shopkeepers
Known costs to rickshaw pullers:1. Loss of interest income that could have
accrued if deposited with banks.2. Risks of loss or deception ‘But no other option and compelled to save with
such ‘neighbourhood shopkeeper bankers’Therefore, accepted as ‘hidden price’ paid for
safekeeping by shopkeepers.This system based on ;Mutual Trust’ and a ‘win-
win’ strategy for both pullers and shopkeepers
Savings with self /place of stay
Lack of trust in anyone in the metropolis Weak social links Bad experience in safekeeping with traders Lack of knowledge about safe options in the
banking sector Lack of knowledge about other formal
sources or unhappy experience in other alternatives.
Storage practices – hidden on persons , earthen piggy banks, wrapped in polybags & buried, locked boxes etc.
Formal and Semi Formal Savings
82 % had no formal bank accounts either in village or Delhi
18 % stated that they had bank accounts – but either in spouse/mother’s name or had an account earlier but became non-operational due to no money available for deposit.
Reasons for no account in bank or post office- No identify proof –either at Delhi or Village- No address proof- No money to deposit in bank - No awareness about banks or about benefits of
saving in banks- Cumbersome formalities
Financial Inclusion - Problems
Findings clear pointer about financial exclusion of rickshaw pullers – a disadvantaged and marginalized group in Delhi
Barriers to financially include this group operates from 3 levels
Economic barriers: 1. Low, irregular and unpredictable income stream.2. Landlessness, nil or negligible assets base.3. Low value cash savings4. Lack of awareness about benefits of savings in a
bank (and about “no frill account’)5. Lack of financial literacy
Other Barriers
Personal Barriers Lack of personal
identity or address proof and no banking history
Low Levels of literacy Lack of awareness
about alternatives for safe, secure saving services
Lack of time due to nature of livelihood
Social Barriers1. Mobile habitat2. Lack of
homogeneous culture
3. Weak social links.4. Social isolation5. Feeling of
hopelessness.6. Lack of
confidence.
Key Challenges
Lack of personal identifying documents for opening a bank account to fulfill ‘KYC’ norms.
Lack of awareness. Frequent, low value, and high volume cash
transactions High operational costs of meeting this segment’s
need No banking history and no time for transacting
due to nature of livelihood
Therefore, need for door step and flexible provision of banking services
What is the way out?
Way Forward and Technology as Enabler Financial services for this poor migrant segment
requires a different outlook and suitable flexible products with door step services.
Technology is the key to offer branchless banking services to the urban poor.
Number of technology initiatives underway and role of Mobile Banking holds great promise.
Relaxation of KYC norms for this segment, financial literacy and sensitization of ground level bank staff are prerequisites for banking this unbanked segment.