None of the above earn more than $400 a month on average (~ Rs. 20,000). The owners of the dress store, those grocery stores located on the side of the main road, the salon, and the small roadside food stall ('Hotel Lingaraj') recognised that a major limitation was the external appearance of their store fronts. They wanted to improve their stores' look, make it more attractive to passers-by.
Of course this could be done by helping them get a loan and helping them design their store fronts for maximum appeal to their local customers (given the specific nature of their service). But this means a substantial investment into a physical structure that is sitting illegally on government land and which therefore can be legally demolished at any time.
This is a risky investment. Demolition of the (illegal) slum itself would be politically risky for the local government, but demolition of (illegal) roadside is done quite regularly in more central parts of the city. No reason to expect this location to be safer. Yet selling one's services from a dreary, impoverished looking store tends to attract few customers.
Exploring the alternate location possibility
Since renting a space on government approved land at another location would be costly for these micro businessmen, one option could be to pool money, rent a medium sized store and partition it off to create multiple little stores within it, a mini super-market if you will. That would be quite a big investment though; our enterprise owners did not favour it.
One problem with this "alternate location" solution is that for the grocery store owners, the biggest chunk of their customer base came from the 1200 households of the slum community itself. They would miss out on this elsewhere.
Another problem is that these 10 enterprise owners wouldn't want to enter a joint agreement with respect to property or business. They are not from the same neighbourhood within the community, they are not business collaborators, at least 4 of them are selling exactly the same goods to the same community customers so they are competitors, and they didn't seem to be that socially close to each other.
Our meeting didn't exactly end on the desired positive note of the businessmen saying that they wanted our services. This is hardly surprising given that our program manager told them they that since they lived in an untenable slum, they would have trouble getting loans from banks.
Of course this was after we had had a discussion about micro-investments into different aspects of their business, and after we had spent an hour discussing their business problems. So naturally they asked well, what's the solution?
We should have repeated to them that a solution lay in their applying for government loans to start with, loans that were not conditional upon slum tenability and which were specifically meant for urban poor entrepreneurs. Instead we all got a bit nonplussed by the bank financing problem and by the tenure insecurity problem, and stared blankly at them.
Instead of offering business solutions to our potential clients, we wasted their afternoon by articulating their problems, offering a couple of solutions, and then spending the last 20 minutes discussing the biggest problem with actually implementing any of our solutions - funding.
Small wonder then that they got irritated and left.
- This clearly showcased me as a greenhorn, unable to command a business meeting, unsure of the institutional rules governing a micro business (finances, funding sources), ignorant of their specific problems, and unable to achieve the exact goals of a business meeting with people for whom time is money and who mistrust NGOs.
- Next time round I'll need to write down clear goals for each meeting: is this meant to be an informational session (of benefit to our targets), Q&A about existing problems (of benefit to my team), consulting sessions (of benefit to our targets), or a work session where we're actually working with our clients on business plans and paperwork?
Benefits of working in the field - Immediate access to primary information
But let's go back to the problem of getting loans or grants. Our program manager presumed that our slum enterprise owners wouldn't get bank financing because the tenure insecurity would make bankers nervous. He also briefly noted that the government could provide loans but for some reason best known to himself, de-emphasized such loans.
After our meeting, my team of Centurion MBA** students sat down and discussed the debacle. Then I went to my favourite refuge - the internet.
I went to the Bhubaneswar Municipal Corporation (BMC) website to look up loans administered by them to urban poor micro-entrepreneurs. I found a 20 page list of 318 Urban Self Employment (USEP) loan recipients (where USEP is one of the Urban Poverty Alleviation programs currently being focused upon by local and state government agencies).
I printed out this list and highlighted all the recipients that appeared to live in slums, especially noting slums with a high number of loan recipients and slums with fewer recipients but with each individual receiving a large (Rs 1-2 lakh) amount. Then my program coordinator (also the community secretary as I talked about in an earlier post) and I took off to track down the loan recipients in our area - Wards 30 & 31 (our current target - Kargil Basti - is in ward number 30).
- We wanted to know what the micro enterprise owners in these nearby slums were doing differently to be eligible for government loans
- We wanted to know what these slums were doing differently to enable so many of their residents to be entrepreneurial enough to run businesses and be finance savvy
** plug for the parent institution that's created this platform on which I'm working, hence not entirely a shameless plug.
The first slum we went to is shown in the photo above (on the left; the first line of small houses in the background). This was a cluster of just 10-15 households, all living in a small compound that they jointly rented from a city resident. Within this one compound they had each constructed 1-2 room brick dwellings with tin sheets for roofs. Each dwelling housed at least 3-4 members from what I could tell, although there probably were an additional 1-2 small children in most of the dwellings I saw. So these weren't exactly squatters.
The "let's register a group" NGO/Government syndrome
- This little cluster was so neatly nested within a confusing corner of the city that it took us a lot of time to track it down. The loan recipient(s) themselves (the women in the photograph above) completely denied having taken a loan for the first few minutes. We showed them the name and address on the list and also showed them where it said that a woman named X had taken a loan of Rs. 25,000 for running a grocery store.
- The women finally found this woman X but the latter denied having taken Rs. 25,000 as loan from the government. She said she'd taken Rs. 5000 only, that it must be a mistake in government records.
- Finally she remembered. It turns out that she and some of the other women in this cluster had registered as a Self-Help Group (SHGs) by an NGO that had realised (like all NGOs in India) that the Indian government loved registering and funding groups.
- Each member in this "group" ran their own little business (tea stalls, variety stores etc). They registered as a group, opened an account for this 'group business', and took out a Rs. 25,000 loan. Each took Rs. 5000 and applied it to their own business.
- When I asked what happened to these business into which Rs. 5000 (which even in a tier 2 city in India is absolute peanuts by the way, comes to less than $100) had been invested, they said that each of those businesses had collapsed but that they had been able to repay the loan completely.
- In all of this, the NGO seems to have seen its role as the loan facilitator, not appearing to have given even one tired damn about whether the loan was invested into the business to actually make it grow, one tired damn about figuring out how the loan would be repaid, or one tired damn about how this "group" was starting upon an insane downward spiral of continuous loans.
- So what did they do now? my project coordinator asked.
- They basically said: "We took more loans".
- We were astonished.
- Q: "More loans? From whom?"
- A : "From Indian Bank, State Bank of India, and SKS Micro Finance"
- Q: "And you repaid those loans? How?"
- A**: "We engage in some business activity all the time. We borrow to run this business and run our households, use our business (or borrow from neighbours) to pay off the installment, then get another loan. But we've been stuck with SKS Micro Finance for 5 years now and are looking to go to other banks for loans".
- Q: "You use your bank loans to run your household?"
- A: "Yes. Where else would we get money from?"
- Then they pulled out their registers where they had meticulously kept account of every loan installment for years, and showed it us.... forcing us to uncomfortably go through every private account entry. They said "Look! We always pay our installments. No matter what. But we're stuck with SKS Micro Finance .... can you help us get a loan from Indian Bank? We love Indian Bank".
- Q: "No sorry, we ourselves came to find out how you've been getting yourselves loans, not bring loans to you. But so did you never try to run a group business and actually invest these loans into developing the business? Taking a more substantial amount like Rs. 25,000 and establishing a moderately successful small-enterprise instead of spending Rs. 5000 on some (disastrous) combination of a micro-enterprise and your household expenditures?"
- A: "No. But we paid all our installments".
- Q: "Did you never invest this money into your individual business and actually scale up your business to make a profit rather than just keep taking loans, repaying loans, and keeping your level of welfare exactly where it was?"
- A: "No. But we're a safe loan recipient. We would never default on our repayments".
- Q: "So when your business - for which you took a loan - collapsed, you.....".
- A: "Did something or the other to keep going... then took another loan. As a group we have a great track record, not one missed payment".
- Q: "Okay, well thank you".
- A: "Can you get us another loan? We need a loan."
- Q: "But you just said you were great at taking & repaying loans. You seem excellent at it. We came to get help from you in figuring out sources of loans for our beneficiaries"
- A: "But we don't want the microfinance, we want other loans now".
- Q: "Sorry. But after we form groups in our target community, we'll definitely come to you and help out here too".
Of course it was difficult to come away from this situation without desperately trying to get this group a loan. Like denying an addict a hit. These were some of the most malnourished, destitute women I've seen in a while. The woman under whose name the BMC recorded the loan, was so thin that she looked like a war camp survivor. It was so brutal that I couldn't bring myself to photograph her. She was bent over, her bones jutted out, she looked like she had starved for years, her entire household lived in one dark room. It is ridiculous that my project coordinator and I spent an hour trying to track her down in order to hear what we thought was a "micro enterprise success story".
But she was chirpy and completely confident of her business skills. Except that for her, "business" was tantamount to making ends meet.
** Translated, accurately paraphrased, but dramatised. Our conversation was as circular, but hardly as succinct.
We had our list with us, so we tried to track down the 4-5 people the records said lived here. It seemed an impossible task. Finally we found one. But turns out the gentleman listed had passed away. His son sat in front of us, quite drunk at 6:30 pm. He said he too had worked in a government office, in some accounts department. I said that's wonderful, we must come to him for information about government funds then. We asked him about his father's business. Did he know if his father had taken a USEP loan? He asked if that was a reasonable thing to expect him to know. We said no. He then asked one of the women sitting around, to guide us to the next person on our list, living deep within that colony.
Our final stop was the house of the woman Y shown on the right hand side photo above.
- Records showed she had taken a Rs. 50,000 loan under the USEP scheme.
- Y said yes she had. She and her husband ran this store that was doing really well, and they needed the money for routine repairs. They had repaid the loan quickly enough, and taken another loan of Rs.1 lakh to grow their business.
- The business did well again, but then the husband died in an accident. Most of their savings were spent during the three days that the husband spent in the Intensive Care Unit at the hospital.
- After her husband's death, Y was unable to manage all the aspects of business herself, particularly all those that involved external dealings - finding customers, dealing with vendors, etc.
- So she shut down shop, but rented out the store space to another business.
- The marriage of a daughter (with bridal "gifts" financed by Y's family) and several accidents of a son followed, leaving her with too few savings to think of starting back her business even though now the household comprised only two individuals (one less mouth to feed could have led to more savings had the son's accidents not put her in some debt) and she had the time.
- She wouldn't know where to start with a business now, though she had done some research into how much it would cost to set up even just a small, well-designed snack food or baking goods store. She would have to take a loan to do something like that of course, and she felt capable of running such a business, but she was just too tired to start all over again.
This is a completely different self-employment case from that of the women's group described above. In the case of Y, a series of external economic shocks left her crippled. It would cripple anyone, let alone a small business owner. In the case of the group, a longer term perspective on business development might have saved them from destitution. I'm not sure our business centre is ready to help either category right away. The first would be unwilling to re-enter business and it's not my place to persuade. The second have been sitting and waiting for years for the next NGO to get them a loan so they can keep their households running and perpetuate their current economic practices. Since we are not in that business, I don't want to take the responsibility of chipping away at their dependencies. Our current target is a clean(er) slate, much easier to start with that while we refine our business model and assess our social outcomes.