Let me begin today’s column with a short story. The story belongs to the nineties era and is about a street vendor who was selling fruit near a bank branch on the pavement. His business was brisk and would exhaust all his stocks just before evening hours. However, I noticed a unique situation everyday confronting him.
A man would come on his motorcycle and collect money from him. One day I took a chance to ask him about the motorcyclist collecting money from him. He said he was his financier. The motorcyclist was a salesman of a locally reputed business house who was also into lending business to small businesses like street vendors.
It was an interesting disclosure and prompted me to unearth further details. The businessman lending to street vendors was actually a borrower of a bank and was enjoying a cash credit facility with a substantial limit.
He would utilize the cash credit facility to extend loan facility to the tune of Rs. 5000 to Rs.10000 to a group of street vendors for procuring the stock. The street vendors were happily paying extra bucks on the loan facility, as they were garnering handsome returns out of the loan amount.
Basically in the early nineties era, it was an uphill task to obtain a loan from banks. There were limited loan schemes available and that too for a limited segment of customers.
Even government employees were forbidden to access bank loans except housing loans etc. There was no concept of a cash loan. It was impossible for a street vendor to look at bank loan facilities.
To be precise, the concept of tailor-made schemes was lacking in the banking system. In fact lending to poor segments of customers such as the street vendors was not considered profitable by the banks.
Today, the scenario is totally different. Bank loans serve as good as oxygen to almost all segments of population – be it poor or rich.
In other words, EMI (equated monthly installment) culture has invaded every household. Banks are proactive in tailoring loan products and services for every section of customers.
It is worth mentioning that Jan Dhan Yojana played a yeoman’s role to get even the poorest of the poor into the banking fold and paved the way for them to avail bank loans.
Discussing specifically about the loan facility for street vendors, it was on June 01, 2020 when the PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) was launched by the government for providing affordable Working Capital loans to them.
This scheme was the outcome of Covid-19 pandemic and launched to help the street vendors to resume their livelihoods that were adversely affected due to pandemic-induced lockdown. Even as the duration of the scheme was until March 2022, the government has extended it till December 2024.
The scheme is expected to benefit nearly 1.2 crore people in urban India, with focus on enhanced collateral free affordable loan corpus, increased adoption of digital transactions and holistic socio-economic development of the Street Vendors and their families.
It merits a mention that the outbreak of coronavirus and consequent lockdowns had left the street vendors struggling on earnings 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 the “PM Street Vendor Atma Nirbhar Nidhi (PM SVANIDHI)”.
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.
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 unorganised economic segment back on track and pull them out of financial miseries, the government realised that there was an urgent need to provide affordable credit for working capital through a 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 marginalised section of the society, its contribution is seldom recognised in the socio-economic sphere.
Economic experts admit that in the 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.
Historically speaking, street vending, a profession in existence since time immemorial, is one of the most visible self-employment avenues in the informal sector in India.
It is considered one of the marginalised 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.
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 short, 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 the facility under the Street Vendors Scheme? It’s a working capital term loan facility. The vendor can initially obtain a loan up to Rs.10,000.
The loan is to be repaid in 12 mostly 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 a 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 get a 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.
As far as the 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 is required.
Meanwhile, J&K Bank has street vendor finance scheme in place which provides working capital term loan to small traders/vendors, including small manufacturing units, service sector units, shopkeepers, fruits / vegetable vendors, food-service units, repair shops, small industries, artisans, food processors, horticulture activities and others, in rural as well as urban areas.
The street vendors can avail loan up to Rs. 3 lakh under the scheme, known as Saral Finance to Small Businessmen scheme. The loan facility is revolving in nature, wherein full admissible loan limit can be restored/enhanced (on merits) after two years from date of disbursement of original facility.
(The views are of the author & not the Institution he works for)
Disclaimer: The views and opinions expressed in this article are the personal opinions of the author.
The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.