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Development Crossing recently had the opportunity to ask Dr. Pradip Kumar Sarmah a few questions about the Rickshaw Bank initiative, a flagship program of the Centre for Rural Development in India. Thanks again to Pradip for taking the time to share some of his thoughts with us… Development Crossing: Could you provide a brief overview of the Rickshaw Bank initiative and how it came about? Pradip: Rickshaw Bank1 is flagship program of Centre for Rural development (CRD) that provides a means of self-employment for poor and underprivileged Rickshaw community. Objective of the concept is to issue an asset based loan to rickshaw puller repayable through a minimum installment rate on daily basis. Rickshaws are a significant means of transport and conveyance in India. Rickshaw pullers generally hire rickshaw on daily basis and can rarely dream of owning rickshaw in lifetime. As per CRD’s survey 95% rickshaw pullers hire rickshaw on a daily basis. Due to their migrant status, unable to arrange the capital and identity, rickshaw pullers hiring cycle rickshaw for life long. Their migrant status and inability to produce proof of residence constraint them from opening bank account and keep them away from accessing saving and credit from formal banking system. There are estimated 8 million rickshaw pullers in India. Similar to other rental services, they have to bear the cost of any accidental damage to vehicle on which there is no insurance option. Unable to bear the cost of a large damage, puller is subject to harassment and this leads the pullers with no choice but to flee the locality. Underlying cause behind this vulnerability is that -- Rickshaw Pullers are constrained by lack of access to basic formal banking services such as loans, savings, insurances, lack of disposable income to access basic utilities or provide adequately for families. The product “rickshaws” are manufactured locally, either in an in-house manufacturing unit or by local suppliers. Designed by India Institute of Technology and assembled by CRD’s production center, the rickshaw is more aerodynamic, lighter than the traditional vehicle and has safer seating arrangements. This makes it easier on puller and more comfortable for passenger, thus creating heightened consumer demand for Rickshaw Bank vehicles. This asset is then accessible by a fivemember common liability group that acts as social collateral towards ‘loan’. The concept of garage is introduced as meeting point for 25 pullers and also works as a collection centre for daily repayment. The garage owner is creation of another point of entrepreneurship initiated by loan from Rickshaw Bank. The product available to the target community is the Rickshaw; the insurance facility for the puller, the passengers and the vehicle, the license for puller and vehicle, uniform and identity card. Additional benefits tied in on fee basis are cooking gas connectivity, emergency loan or need based purchase items. Finance is raised on a Loan cum Advertisement based model. Formal financial institutions provide loan on commercial rates; grant money is targeted to leverage greater financial access to bank loans and for internal capacity building; advertisement space behind rickshaws is sold to local businesses or interested corporate houses and is an additional source of revenue. The advertisement revenue also helps to reduce risk in case of delayed repayments from pullers. Additional loans are given to Rickshaw Pullers community to address their needs. Pullers own Rickshaws in a maximum of 15-18 months—with most owning within 10-12 months. 1

Rickshaw is a modified tricycle, which is used extensively as a mode of transport for carrying passengers and luggage. All over India, more than 8 million persons earn their livelihood by pulling cycle rickshaw.

How it came about: The Wall Street Journal November 14 , 2007 By JEREMY WAGSTAFF Rickshaws Drive Entrepreneurship Pradip Kumar Sarmah was nudged into action late one night, when he recalled a conversation earlier that day with a rickshaw driver. Like many Indians, Mr. Sarmah, a former veterinarian who in 2001 won an Ashoka fellowship for his work promoting small-scale animal husbandry in northeast India, routinely traveled in a rickshaw. There are an estimated eight million rickshaw pullers in the country, and Mr. Sarmah had used an occasion that day to learn what he could about these people's livelihoods. "Who owns your rickshaw?" Mr. Sarmah had asked. The driver gave a name -- clearly not his own. He said he had been working 16 years as a puller. "How much rent do you pay?" Mr. Sarmah asked. Twentyfive rupees a day -- about 65 U.S. cents -- came the answer. "By the moment I got down [out of the rickshaw], I forgot about it, but when I got home and had dinner and went to go to sleep, his words came back to me," he says. "So I got up and went to my calculator." A few sums indicated that the driver paid nearly half his earnings in rent -- and many times over had covered the approximate 6,500-rupee cost of a rickshaw. Mr. Sarmah decided to learn more, and the next day he prepared a questionnaire. He quickly learned that few rickshaw pullers intended to be one; they came to the city looking for work, and, without proper papers, this was all they could find. For the same reason, none was insured, or had a bank account. "It's a huge community," he says. "But there is no support system." Mr. Sarmah's answer -this year's Asian Innovation Awards bronze winner -- was in part inspired by Muhammad Yunus, whose Grameen Bank had brought credit to rural Bangladesh: a Rickshaw Bank that gives pullers a good chance to own their own vehicles on decent terms. Under the program run by Assam-based Centre for Rural Development, pullers buy the rickshaw on credit, payable in daily installments. To do so, they must group together with at least four others who act as "social collateral." Defaulters are discouraged and repayment problems discussed within the group. They gather at a meeting point, usually a pharmacy or small shop, the owner of which is supported by a small loan himself and who is responsible for collecting the daily repayments. A coordinator collects these sums in the evening. Should one puller fall behind in his payments because of illness or other problem, the others must apply on his behalf for a "leave application," and the daily installments are suspended without penalty. "Each member has an undertaking for each other so they can create peer pressure for each other," says Mr. Sarmah, who is executive director of the development group. Mr. Sarmah's idea of a Rickshaw Bank was complemented by another key innovation: a new kind of rickshaw. Collaborating with the India Institute of Technology, he came up with a rickshaw with more room for passengers, a more comfortable seat, a better center of gravity to make it easier to pedal, and enough space on the back for businesses to advertise prominently. Rickshaw drivers can expect to pay off the loan within 18 months. In Assam, where the project was launched in 2004, 350 of the 1,350 pullers who have taken out loans have paid off their loans.

Development Crossing: Since the launch of the initiative, what types of obstacles or challenges did you face and how successful has its uptake been? Pradip: In the beginning there is no one to support the concept. Neither any donor agency nor a bank comes forward to support the Rickshaw Drivers as most of them are the migrant labour. There is no any address proof of the Rickshaw Drivers in the city. Therefore, the initial venture capital was raised from the corporate as the advertisement cost which was offered at 96% cheaper than the commercial rate. Once we have established the model with this sponsorship than banks are coming forward to support the program. Even everyday R&D is required in this sector. The feedback received from the Rickshaw Drivers is considered and modified in the Rickshaw model. The other challenges are the manpower requirement in a scalable model. Gradually we are able to handle these problems. Development Crossing: What is the best way for individuals and organizations to get involved in ensuring the success and growth of the initiative? Pradip: • Sponsor a Rickshaw means a livelihood asset to a poor family with 225 USD • Support with Human resources for --- documentation / visual, MIS, fund raising, design improvement Development Crossing: What do you see as the future for the Rickshaw Bank initiative? Pradip: Rickshaws are a significant means of transport and conveyance in India. There are currently estimated to be 8 million rickshaw pullers in India. 95 percent of these rickshaw pullers are victims of high daily rental fees making it nearly impossible to earn enough income to ever own a rickshaw in their lifetime. In addition, similar to other rental services, they have to bear the cost of any accidental damage to the vehicle on which there is no insurance option. Unable to bear the cost of a large damage, the puller is subject to harassment and this leaves the pullers with no choice but to flee the locality. The underlying cause behind this vulnerability is that Rickshaw Pullers are constrained by lack of access to basic formal banking services such as loans, savings, insurances, lack of disposable income to access basic utilities or provide adequately for families. In fact Rickshaw Bank is not only a microfinance institution; it is an institution that works with a holistic approach to address the problems of the rickshaw pullers community. It is also observed that Rickshaw Bank has able to form a platform where multiple stakeholders like Corporate, Bank, Municipal Corporation, Police, Insurance Company, Hospitals can participate with winwin situation. Rickshaw Bank always innovate new ideas and tries to solve the issues emerged from the rickshaw pullers. As a results of that the initiatives, like providing LPG(liquid petroleum gas) connection, eye care support, health support, emergency cash loa n, education loans for the children of the pullers, AIDS awareness, introducing family planning norms, creation of new garage, distribution of old cloths took place. •

We will differentiate us through continuous innovation that will positively impact the entire lifecycle of the rickshaw puller.

Benefits have been in the nature of both fee based and awareness programs ( cloth, health clinic, LPG, AIDs awareness, education loans, housing loan, other information and benefits such as advertisement, insurance, license, liasioning with police, government, donors)

Development Crossing: Are there other projects of the Centre for Rural Development (CRD) that you would like to highlight? Pradip: CRD’s mission is “to ensure sustainable livelihood for the poor families by using local resources and skill up gradation with community participation.” Here we are involved with a lot of social mobilization process in the livelihood sectors like Animal Husbandry & Veterinary, Agriculture, Fishery, Dairy & Forestry. Since 2000 onwards CRD is working as a District nodal agency for a World Bank funded project in the state of Assam, India for the above sectors.

Interview with Dr. Pradip Kumar Sarmah