Where every minute is a risk!!!

When we talk of microfinancial services it is always credit and savings. There is no doubt that strong demand for micro finance services in our country exist among the poor. There are around 150 million poor households present in our country whose average credit requirement is around Rs 20000. So we can see that a potential demand of Rs 300,000 crores ($ 60 billion) exist, out of which only 10% i.e. $6 billion have been covered by micro-credit agencies. While we can clearly observe the potential for microfinancial services across our country, reality on ground is that MFIs instead of venturing into unexplored market of actual poor and needy in the remote corners of the country, they are busy oversaturating an already saturated marketspace leading to a phenomena called the MF bubble (more or less similar to the housing bubble of US) due to overlending and multiple lending to the not so poor and needful. AP has become hub of Microfinance with every second MFI present there. Customers have taken 8-9 loans and they use one loan to repay the other .While the tension in this bubble is at its threshold here, it has already started bursting at places like Kolar mines in MP, where on issue of a fatua that paying interest is against Islam, many MFIs failed to recover their lendings and broke down financially. Talking of solutions talks are on to get a central agency to monitor the MFIs but why none of the financial institutions have even bothered to look beyond products in savings and credit remains a question.

Remittances are not a phenomenon of today. Ganjam forms a major district in Southern Orissa where over 50-60% of the population is migrant in nature.

Rural Orissa moves to various places in India. They go to Surat & Bhavnagar in Gujarat, Mumbai in Maharashtra, Chennai in Tamil Nadu, Places in UP and MP etc. and make money by doing a lot of hard work in places like dockyards, railways stations, rolling mills, cloth mills, glass factories and many such dangerous and difficult places. By doing this work they make anywhere around Rs. 5000- Rs. 10000 on a monthly basis. Most of them being illiterate handling bank accounts is a big problem for them. Moreover when there are cases where the post-master has been caught mishandling their money so Indian postal service just doesn’t seem to be a very good option to them. And also a day of loss of work means a day’s loss of wages. In such a scenario a person who is a bit more educated, reliable, can come to some very accessible place near to their place of work, collect their money and disburse it to their families back at home in the shortest time will be a great relief.

Necessity is the mother of invention. Micro remittances service has been existing in southern Orissa since long through an in formal and not so legal medium. They call him courier wala and government calls him tappawalla.

Vichitra Swain was 26 years old, working with his fellow migrant workers in the Bombay dockyard when he was struck with this wonderful business idea. Today he is about 35 years old, a respectable gentleman, with a 10+2 education who is working very hard to make a living of any where around 50000-100000 per month, He is also an LIC agent(which is an ambush for his illegal service) and has uses the same set of customers for his LIC work too. He has three policies for his own children(one is two years and other is six months in age).

What does he do? Simple. He collects money from a client base of around 5000 migrant workers in the two states of Maharashtra and Gujarat and remits them to their homes back here at Orissa on a monthly basis. Every client remits an amount of Rs.3000 to Rs.4000 and he ends up transacting an amount of about 2- 2.5 crore on a monthly basis.

His first client in March 2002 was Mr. Bulu Sethi who remitted an amount of Rs. 400 to his home. During his first month of business he did transactions worth about Rs. 40000. He charged an amount of Rs. 50/Rs. 1000 at that time. At that time Abhimanyu Wayu Seva(AWS) which was owned by Mr. Abhimanyu Jena was the dominant player and his biggest competitor. AWS charged Rs. 40/Rs.1000 at that time. But with emergence such courier walas with lesser rates and core banking solutions AWS ceases to exist anymore. Today Vichitra Swain with his brother-in-law to help,is one of the large players with 7-8 more players cover the entire market space of Ganjam.

With increasing competition, his rates have come down. The charges decline with increase in the lump being sent. He takes Rs. 40/Rs. 1000 remitted for an amount upto Rs.3000, Rs. 30/ Rs. 1000 for an amount between Rs. 3000- Rs.8000 and an amount of Rs.20 for an amount more than Rs. 8000.

The way in which he operates also generates a lot of interest. Everything is thoroughy planned. He gets his reservations done a month in advance( He never uses tatkal or an AC). He does it in 2^nd class sleeper.It is interesting to note how he has formed a network with his friends relatives and acquaintances. Once thay are informed week ahead of time, his customers wait for him with their money in clusters. He just has to reach those scheduled places at a scheduled time and collect money. His stay and food costs are being borne by his friends, relatives etc. Such is the amount of respect that he has .

Collection and disbursement is not an easy job. He travels about 200 kms daily by bikes, local trains and other modes of local transport. He never delays his appointments and his clients never have to skip work for him. Disbursement also follows the same pattern. A vehicle whose number plate changes every month and a witness to his deliveries of hard earned money of migrants to their family members are the other major requirements for a Tappa walla.

Previously collection and disbursement took about a month but now he does it in an interval of 1 min to 24 hours. He has grown tech-savvy and is using core-banking solutions for this purpose nowadays. He has more than 25- 30 accounts all over the country to carry out these transactions. How does he manage residential and ID proofs for them is worth finding out? And so is the methodology behind formation and maintainance of the database as to which client’s transactions are done through which account.He is respected by the goons, political leaders , his society ,children , youth and old alike, though loot of a tappawalla while he is on road is also not a rarity. He makes big money and lives a riskful life. His life has all thrill , respect and money which a rural youth can dream of. So he remains a man in demand, the most eligible bachelor…. But whether he will like hand over his baton to his son. Answer is a big No-No. On asked he gives two reasons-travel and security. With the support of his friends and relatives, respect in society, investments such as FD, land , houses, social capital, a tappawala surely is an inspiration for the financial institutions of our country.

This phenomena called the Tappawalla not only shows the way forward for the MFIs but also leaves us with a lot of questions to ponder upon.

Is Micro-remittances a way forward for Indian MF? If yes then how should be the modus operandi, mobile like the Tappawalla or non-mobile like the ubiquity model? What would be the break-even both in monetary terms and also the time required to achieve it? Should MFIs partner with some other financial institution? What will happen to the Tappawala? Will the MFIs be able to replicate his model and build the same amount of social capital in terms of network and trust like him? What are the pros and cons of incorporating him into this system?

Whatever be the future but today undoubtedly, he remains an entrepreneur worth our admiration and awe…