Rickshaw Bank spells financial security

Rents out rickshaws and transfers their ownership to the drivers after the latter have paid a daily rental of Rs 25 for 18 months.

A casual question that he asked a cycle rickshaw driver in Assam made Pradip Kumar Sarmah, a vet by training, ponder on why many rickshaw pullers do not own a rickshaw even after years of toil.

Thus began the journey of Rickshaw Bank (RB), a flagship venture of the Centre for Rural Development (CRD), a non-government organisation in Guwahati, which rents out rickshaws and transfers their ownership to the drivers after the latter have paid a daily rental of Rs 25 for 18 months.

RB provides an insurance cover for Rs 9,000 for the rickshaw, Rs 50,000 for the driver against injury or death, and a third party insurance of Rs 10,000 each for the passengers. It also gives them a uniform, shoes, licences, a photo identity card and related training.

The demand for these rickshaws, referred to as dip bahan (“dip” means light and “bahan” means vehicle), is higher due to the insurance cover.

“Rickshaw pullers have no access to banks. So, they take recourse to rentals and, in the process, pay the cost of the rickshaw many times over,” says Sarmah, who was in Hyderabad to participate in the Tech4Society, a platform for about 100 innovators from several countries.

“Income producing assets are critical to come out of poverty,” says Sarmah, a fellow of Ashoka-Lemelson, which nurtures social innovations by providing a fellowship to innovators.

Limited savings leave rickshaw drivers vulnerable even to minor setbacks. The problem is compounded by lack of insurance cover. They lose the earnings of an entire day if they fall sick.

In 2003, Sarmah saw the strength of the community model in carrying out microfinance activities, and developed the rickshaw garage system. Each garage has five groups, and each group five drivers, who take a loan for the rickshaw. The garage manages their savings, repairs the rickshaws and collects the rent on a daily basis.

Over 4,500 rickshaw drivers have accessed loans from RB. CRD has plans to replicate the franchise model for promoting new entrepreneurs. “The driver market is underserved,” he says. But he recalls that the journey for RB was not a smooth one.

He first approached the Indian Institute of Technology (IIT) in Guwahati for a better design for rickshaws and for including adequate space for advertisements to recover some of the project’s costs. A prototype was manufactured and 80 rickshaws were assembled according to the given dimensions.

But there was a flurry of complaints from rickshaw pullers that the chain fell off constantly, despite repairs. He again contacted IIT-Guwahati, but the chain problem persisted. One member of the rickshaw community told him that the chain fell because the rickshaw’s chassis was made of hollow pipe (this was done to reduce the weight of the vehicle).

The pipe bent on bumpy roads and led to the chain falling frequently. The hollow pipe chassis was immediately replaced with one made of iron bars, to resolve the chain problem.

Sarmah says banks were unwilling to give credit for the manufacture of rickshaws. He then tapped the corporate social responsibility funding of Oil and Natural Gas Corporation, Indian Oil Corporation, Hindustan Unilever Limited and Punjab National Bank. They agreed to support a 100- rickshaw pilot each in return for an exclusive three-year agreement to advertise on the back of the rickshaws at a discount of 86 per cent.

After the rickshaw garage pilot succeeded, banks offered financial backing at commercial rates, with the company providing the guarantee, he recalls.

RB uses a combination of loans and advertisements on the rickshaws to raise funds. Once the ownership of the rickshaw changes, the bank gives 65 per cent of the advertising revenue to the driver and retains 35 per cent for arranging and producing the advertisements.

However, the drivers continue their links with RB for loans at two per cent interest per month, better advertisement revenues and access to insurance services.