Scheme for Nano Entrepreneurs

In the first tranche of the massive stimulus package of Rs.20 lakh crore rolled out on May 13 by the prime minister Narendra Modi, the finance minister Nirmala Sitharaman on the following day  (May 14) announced Rs.5,000 crore special credit facility for 50 lakh street vendors. Remarkably,  as per the package, the beneficiaries include migrant workers, street vendors, small traders, self-employed people, small farmers etc.

Street vendors, as we know them as small enterprises or micro enterprises, usually work with a small capital base and most of the times, these micro entrepreneurs, also called Nano entrepreneurs, don’t have a capital base of their own and borrow money from informal sources on very high interest rates. With the onset of pandemic and subsequent lockdown derailed them as most of them might have consumed their savings and high cost capital during the lockdown, leaving them burdened with debt. To bring this unorganized economic segment back on track and pull them out of financial miseries, the government realized that there was an urgent need to provide affordable credit for working capital through formal banking system to help them resume their businesses.

Even as street vending plays a vital role in assuring livelihood to a large underprivileged and marginalized section of the society, its contribution is seldom recognized in the socio-economic sphere. Economic experts admit that in informal sector street vending helps to generate employment and income and sustain the economy. It is growing because it not only provides employment, but it also provides services to the populations in urban, peri-urban and surrounding rural areas and that too at their doorsteps.

But the outbreak of coronavirus and consequent lockdowns left the street vendors, reported to be 10 million (one crore) in number, struggling on earning front. They immediately lost their source of income, and to meet the domestic requirement they might have even consumed their capital base. So in order to help them to restart their business, the government tailored a loan scheme for them and launched it as “PM Street Vendor Atma Nirbhar Nidhi (PM SVANIDHI)”. In simpler terms it’s a Street Vendor Loan Scheme. Even as the scheme is a welcome step, the low quantum of finance is not sufficient to pull them out of financial miseries.

Let’s understand scenario of this huge informal sector acting as a main source of the livelihood of 50 lakh vendors and also the scheme launched for these nano entrepreneurs called street vendors and hawkers in urban, peri-urban and surrounding rural areas. Notably, J&K Bank rolled out the scheme last week.

What is street vending and who is a street vendor?

Street vending, a profession in existence since time immemorial, is one of the most visible self-employment avenues in informal sector in India. It is considered one of the marginalized sections of the urban poor as it is widely seen in urban public spaces. Here vendors offer their labour to sell goods and services without having any permanent structure of their own.

Remarkably, there is an Act of Parliament, Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014, enacted to regulate street vendors in public areas and protect their rights. The Act envisages social security and livelihood rights to these Nano entrepreneurs.

According to the Ministry of Housing and Urban Poverty Alleviation, there are more than 10 million street vendors in India and the number is growing as people in rural areas owing to poverty continue to migrate to urban areas. Since they usually lack skills and education, they have no job options in formal sector jobs. In order to survive in the city, most of them become Nano entrepreneurs (street vendors).

Over the years the street vendors have organized themselves into trade unions and associations, and numerous NGO‘s have started working for them. The National Hawker Federation (NHF), based all over India, is a federation of 1400 street vendor organizations, trade unions in 28 states.

So, in succinct, a street vendor refers to a person engaged in vending of articles, goods, wares, food items or merchandise of everyday use, or someone who offers services to the general people from a temporary built-up structure or by shifting and moving from one place to another. Notably, barbers, cobblers, pan shops, laundry services etc. also fall under this category.

What is the nature of facility under the Street Vendors Scheme?

It’s a working capital term loan facility. The vendor can initially obtain loan up to Rs.10,000. The loan is to be repaid in 12 installments  and on timely or early repayment, the vendor  is eligible for interest subsidy @ 7%. The interest subsidy amount will be credited directly in the vendor’s account on quarterly basis. In case of early payment, the admissible amount of subsidy will be credited in one go.

In addition to this, the vendor will be get monthly cash-back incentive on digital transactions. If the vendor ensures timely repayment of the loan in the given tenure without any default, he/she will be eligible for higher loan.

How is identification of beneficiaries (vendors) done?

The eligible vendors engaged in vending as on or before March 24, 2020, will be identified as per following criteria:

  1. Street vendors in possession of Certificate of Vending/Identity Card issued by Urban Local Bodies (ULBs).
  2. The vendors, who have been identified in the survey but have not been issued Certificate of Vending/Identity Card. Provisional Certificate of Vending would be generated for such vendors through an IT based platform.
  3. Street Vendors, left out of the ULB led identification survey or who have started vending after completion of the survey and have been issued Letter of Recommendation (LoR) to that effect by the ULB / Town Vending Committee (TVC) and
  4. The vendors of surrounding development/peri-urban / rural areas vending in the geographical limits of the ULBs and have been issued Letter of Recommendation (LoR) to that effect by the ULB / TVC. Identification of Beneficiaries left out of the Survey or belonging to the surrounding Rural Areas.

Notably, one can access the surveyed list of vendors on the website of Ministry of Housing and Urban Affairs to find his/her name. However, banks would be guiding the vendor in this regard.

The scheme carries incentive on digital transactions. What is the mechanism of earning this incentive?

The on-boarded vendors would be provided with a monthly cash-back in the range of Rs.50 – Rs.100 as per the following criteria:

  • On executing 50 eligible transactions: Rs.50;
  • On executing the next 50 eligible transactions: Additional Rs.25; and
  • On executing the next 100 eligible transactions: Additional Rs.25. Each transaction > Rs.25 will be counted.

Notably, eligible transactions mean a digital payout or receipt with minimum value of Rs. 25 & maximum Cash Back incentive shall be available only up to Rs. 1200. The vendors will also be eligible for benefit of interest subsidy on the enhanced limit (If enhanced after 01 year) which will be available maximum upto March 31, 2022.

It is worth mentioning that vendors not familiar with digital transactions will get guidance from the concerned and they will also be provided with debit card and QR Code.

Is vendor supposed to present third party guarantee as security for the loan?

No. As far as security aspect is concerned, there is verbal hypothecation of stocks created out of Bank finance to be confirmed by vendor by submitting an affidavit. There is no collateral security, which means no third party guarantee s required. The Scheme has a provision of Graded Guarantee Cover for the loans sanctioned.