The State government launched ‘Badavara Bandhu’, an ambitious scheme to disburse interest-free loans to street vendors and small traders, with much fanfare. However, about a month later, the scheme has managed to help only a few.
The scheme was announced in the budget last year with an aim to free the poor business community from the clutches of private financiers, who disburse loans at exorbitant interest rates. The government had announced that 5,000 people would be given interest-free loans.
Since its launch on November 22, 2018, only 497 street vendors have availed loans amounting to ₹30.72 lakh from various cooperative banks in the city.
ID card an impediment
A major impediment is the requirement of an identity card issued by the Bruhat Bengaluru Mahanagara Palike (BBMP). A majority of street vendors don't have one.
According to a survey conduced under the National Urban Livelihood Mission, the city has approximately 25,000 street vendors. Soon after the survey, the BBMP had printed 15,000 identity cards to be distributed among street vendors across its eight zones. However, many are yet to get the cards.
BBMP officials admitted that the civic body had stopped issuing identity cards to street vendors after the Labour Department objected saying the civic body had no jurisdiction to do so. “The Labour Department claimed a State board had to be constituted, and only the board can issue identity cards. We decided to stop issuing the cards until these issues are sorted out,” an official said.
‘Relaxing rules’
Admitting that there were certain teething troubles, Registrar of Cooperative Societies M.K. Aiyappa said the department had been holding talks with various banks to ensure that the scheme reaches more beneficiaries. “One of the requirements for the loan was a BPL card. The unions explained that many street vendors do not have ration cards or other documentation. So, we have asked the government to relax that requirement. A notification in this regard will be issued shortly,” he said.
Other issues
S. Babu from the Bengaluru Jilla Beedi Vyapari Sanghatengala Okkoota pointed out several other issues. The government had directed coorperative banks to disburse loans ranging from ₹2,000 to ₹10,000 after opening a zero balance account. However, some banks are charging ₹300 from vendors to open bank accounts in violation of regulations.
“The banks also claim that to repay the loans, the applicants (street vendors) have to go to the branches themselves. They claim they don't have the manpower for a collection system,” he said, adding that this was counter-productive as vendors would have to lose time going to the bank instead of vending.
A street vendor said instead of ‘wasting time going to the bank’, she would rather borrow from private financiers, who come to her to collect interest.
Another complaint is the lack of clarity on which bank and branch to approach. “When we approached one branch, they direct us to another. This running around makes the scheme cumbersome,” said a vendor from Vijayanagar.
Vinay Sreenivasa from the Okkoota said a public notice on banks chosen for the scheme, the criteria for application, and payment procedure needs to be issued. “Right now, the payment procedure is not clear. There should be some safeguards in place,” he said.
How private financing works
Thippeswamy (name changed) sells vegetables on a push cart in residential localities near Seshadripuram. Every day, he takes a loan to buy vegetables. By the end of the day, he has to pay nearly 15% interest. This means nearly all his profit goes towards repayment of the loan.
Like Thippeswamy, thousands of street vendors depend on private financiers, who lend loans at exorbitant interest rates on a daily, weekly and monthly basis. Colloquially, these loans are called ‘meter baddi’.
Manjunath, a street vendor from Jayanagar 9th Block, said many vendors are often exploited by private financiers. The interest rate ranges from 10% to nearly 40%. While the interest rates are low for daily loans, they seem to be the highest for weekly loans.
Explaining how private financing works, Mr. Manjunath said if a street vendor needs ₹1,000, he/she gets ₹900 with the financier retaining the interest component. The vendor has to return ₹1,000 by the end of the day.
Repayment options are fixed by the private financier. If a loan is to be repaid in 100 days, the private financier will collect the interest either every day or once every week until the loan is repaid.
“If a vendor is unable to meet his/her obligation, the private financiers and their men insult him/her in public, and sometimes take them away. This means loss of business, making repayment all the more difficult,” he said.
S. Babu from the Bengaluru Jilla Beedi Vyapari Sanghatengala Okkoota said the terms are the same for men and women street vendors.
The rate of interest varies across areas and markets.
Vinay Sreenivasa from the Okkoota said that with poor access to formal credit mechanisms, street vendors often have to turn to informal credit mechanisms and borrow at high interest rates. “This is where schemes like Badavara Bandhu can make a difference. While it is a good scheme, there seem to be certain teething issues. The government could have discussed the modalities with street vendor unions to make it more effective,” he said.