Savings Behaviour of the Urban Poor
A Case Study of Rickshaw Pullers in Delhi
Microfinance Researchers Alliance Programme
Centre for Microfinance, Chennai
6th August 2010
Mani Arul Nandhi
Associate Professor, Jesus and Mary College,
University of Delhi, India.
(This presentation is drawn from a wider study sponsored by the Institute of Money, Financial Inclusion
and Technology, University of California, Irvine, whose funding and support in every way is gratefully
acknowledged by the researcher)
Outline of Presentation
Motivation
 Objective
 Research Question
 Data and Methods
 Main Findings
 Way Forward
Concluding Observations
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
Motivation
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8.1 million are urban poor in India (India Urban
Poverty Report, UNDP,2009 )
Large segment of the urban poor employed in
informal sector
High Level of financial exclusion of disadvantaged
and marginalized population in India (40 %)
shunned by mainstream financial sector
Urban poor are heavily dependent on informal
financial services
Understanding the financial and money management
behaviour of urban poor – critical to facilitate their
inclusion.
Research Question



Focus of wider study: Financial behaviour of
disadvantaged and marginalized migrant group
A case study of cycle rickshaw pullers in Delhi
Focus of this paper: Savings behaviour of
rickshaw pullers in terms of mechanisms used,
reasons thereof, and the constraints faced as
well as level of awareness about formal/semiformal financial services.
Data and Methods
Sample
- 176 Rickshaw pullers randomly drawn from 4 districts
in Delhi (Central, North, West, South)
- 10 Key informants (rickshaw owners, mechanics and
users of rickshaws)
- 10 FGDs with a cluster of 4-6 rickshaw pullers.
 Data
Primary data based on 4 methods
Structured In- Depth Questionnaires
Focus Group Discussions
Key Informant Interviews
Case Studies


1.
2.
3.
4.
Background Profile of Rickshaw pullers
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Majority illiterates (48% )
High proportion from socially
and economically backward
groups (59 %)
Equal
percentage
from
landless
and
landed
households but < 2.31 acres.
Only 9 % owned some asset
(wristwatch,
radio/transistor,
clock, second hand small TV).
21 % had a mobile phone.
Mostly from wage labour and
landless households.
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Average Household size -6.
Average number of years in
rickshaw pulling – 14 years.
Homeless, or living in illegal
settlements & in unhygienic
conditions, with little or no
facilities for sanitation..
Majority had no personal
identification proof (no voter’s
ID or a Ration Card) or
Address Proof in Delhi. In a
nutshell,
rickshaw
pullers
belong to the poorest and
marginalized groups
Economics of Rickshaw pulling



Average number of rides on a normal day – 14
Rates for short, medium and long distance ridesRs.10, Rs.15 and Rs.20 –Rs.30 respectively.
Income from rickshaw pulling:
Gross Earnings = Earnings on a normal day
Net Earnings = Gross Earnings Minus Rent
charges paid for hiring rickshaw and daily
expenses.
Daily Earnings

Average Gross Earnings on a normal day (not
every day’s earnings)
Rs.179 (Entire sample)

Average Net Earnings on a normal day

Rs.91 ($1.94) (90 % of sample)
Nil Net Earnings 9 % of sample
Average Monthly Earnings
Monthly
Earnings
N=176
%
Average
Monthly
Earnings
Gross Earnings
50
28.41
Rs.3442
Net Earnings
120
68.18
Rs.2321
No Response
6
3.41
-
* Some responses total > 100% due to multiple responses.
Savings
N
Percent
*
Do you put away some portion of your daily earnings as
savings?
Yes
No
If Yes, how often?
Daily
Weekly
Monthly
As and when surplus available
Where do you keep your savings?
1.Keep savings on person/self
2.Keep savings with shopkeeper /friend
3.Keep savings wife
4.Keep savings with rickshaw owner
5.Keep savings with relative
6.Keep savings at place of stay
7.Keep money buried
8.Remit home regularly
9.Deposit in my bank account
10.No response
11.No surplus, no savings
12.Give interest free loan to fellow puller
167
9
81
9
6
81
97
54
10
7
5
5
4
4
3
3
4
1
94.89
5.11
46.02
5.11
3.41
46.02
55.11
30.68
5.68
3.98
2.84
2.84
2.27
2.27
1.7
1.7
2.27
0.57
Savings Practices/ Measures used
Savings measures
N
Percent
Keep savings on person/place
97
55
Keep savings with shopkeeper
54
31
Keep savings with relative/wife
15
9
Keep savings with rick-owner
7
4
Keep savings in shack/room
5
3
Savings buried under soil
4
2
Remit home regularly
4
2
Deposit in a bank account
3
1.7
No response/No savings
7
4
Ingenious Saving Practices to Minimize Risk of Loss
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Living on streets and safeguarding savings – by dividing
saved amount to 4 different people – Rs.150 per day
divided and given to Chaiwala, Paanwala, Thelawala and 2
friends living in a rented room (Case of Parichan Paswan)
2nd case of Gaya Prasad –
Saves with paanwala (but does not give every day),
saves by carrying money inside his person and
remaining buries under soil (not in the same place) Sometimes buried
amount > amount from other methods;
Remits home quickly once saved amount is built up to a lump sum.
Cautious about remittance mechanism – through M.O or a villager (one
of the rare respondents who use this formal channel).
Hold on to savings but involve in reciprocal borrowing and
lending to manage deficits – reason difficult to build up lump
sum- case of Sunil Kumar Pathak from U.P
Ingenious saving practices - continued
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Homeless but pragmatic – build up and remit fast – case of Asarfi – keeps
money in a bundle with him till it becomes Rs.500 or thereabouts and
remits weekly by depositing in his friend’s account.
What if I don’t have a Bank account, I have a friend’s account to deposit
– case of Mohd.Islaam from Madhubani district, Bihar.
Health crises (wife/daughter), frugal living, juggling of expenses and
money management skills of wife to build up Rs.10,000 with Sahara
(Case of Sanjay Singh, Bihar)
Share expenses to minimize cost of living and save to take care of family
needs and to repay loans – the case of undergraduate puller – Vijay
Paswan
Dispense with avoidable expenses to save and (literally) hold on to it
tightly – case of Hukam Singh, M.P. (stays on pavement, use public
conveniences and carries a plastic wrapped bundle with him always.
Total savings by different methods
(in the last 30 days in INR)
Saving methods
N
%
Average
Total Saving
1. Self
76
43
2906
2, 20880
2. Shopkeepers
64
36
2503
1, 60250
3. Wife
10
6
1960
19600
4. Rickshaw owner
7
4
1264
8850
5. Bank
2
1
1650
3300
Total of 1+2+3+4
157
89
2158
4, 09580
No response
19
11
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Potential savings of migrant rickshaw pullers
Projected Scenario of an aggregated market supply of savings
in 30 days (at a conservative estimate)
 Number of rickshaw pullers in city 6,00,000
 i) only 30 % of sample save with shopkeepers, Assuming on
a lower side,
 ii) only one half of savings of total savings with shopkeepers
(~ Rupees1250),
 30 % of 6,00,000 multiplied by Rs.1250 INR
= Rupees 22.5 crores
Clearly, rickshaw pullers are bankable but excluded by formal
sector.
Reasons for informal savings
1.
2.
3.
4.
5.
6.
Savings with shopkeeper
No safe place to save due to homelessness (32 %)
Trust and accessibility (34%)
Possibility of spending money on temptation goods (18%)
Lack of awareness about alternatives available (10%)
Convenient to deposit due to physical proximity with
operational areas
Helpless circumstances but to depend on known
shopkeepers.
Costs of saving with shopkeepers
Known costs to rickshaw pullers:
1.
Loss of interest income that could have accrued if
deposited with banks.
2.
Risks of loss or deception
‘But no other option and compelled to save with such
‘neighbourhood shopkeeper bankers’
Therefore, accepted as ‘hidden price’ paid for
safekeeping by shopkeepers.
This system based on ;Mutual Trust’ and a ‘win-win’
strategy for both pullers and shopkeepers
Savings with self /place of stay
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Lack of trust in anyone in the metropolis
Weak social links
Bad experience in safekeeping with traders
Lack of knowledge about safe options in the
banking sector
Lack of knowledge about other formal
sources or unhappy experience in other
alternatives.
Storage practices – hidden on persons ,
earthen piggy banks, wrapped in polybags &
buried, locked boxes etc.
Formal and Semi Formal Savings
82 % had no formal bank accounts either in village or Delhi
 18 % stated that they had bank accounts – but either in
spouse/mother’s name or had an account earlier but
became non-operational due to no money available for
deposit.
Reasons for no account in bank or post office
- No identify proof –either at Delhi or Village
- No address proof
- No money to deposit in bank
- No awareness about banks or about benefits of saving in
banks
Cumbersome formalities
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Financial Inclusion - Problems
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1.
2.
3.
4.
5.
Findings clear pointer about financial exclusion of rickshaw
pullers – a disadvantaged and marginalized group in Delhi
Barriers to financially include this group operates from 3
levels
Economic barriers:
Low, irregular and unpredictable income stream.
Landlessness, nil or negligible assets base.
Low value cash savings
Lack of awareness about benefits of savings in a bank (and
about “no frill account’)
Lack of financial literacy
Other Barriers
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Personal Barriers
Lack
of
personal
identity or address
proof and no banking
history
Low Levels of literacy
Lack of awareness
about alternatives for
safe, secure saving
services
Lack of time due to
nature of livelihood
1.
2.
3.
4.
5.
6.
Social Barriers
Mobile habitat
Lack of
homogeneous
culture
Weak social links.
Social isolation
Feeling of
hopelessness.
Lack of confidence.
Key Challenges

Lack of personal identifying documents for opening a
bank account to fulfill ‘KYC’ norms.
Lack of awareness.

Frequent, low value, and high volume cash transactions
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High operational costs of meeting this segment’s need
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No banking history and no time for transacting due to
nature of livelihood
Therefore, need for
banking services
door step and flexible provision of
What is the way out?
Way Forward and Technology as Enabler
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Financial services for this poor migrant segment requires a
different outlook and suitable flexible products with door
step services.
Technology is the key to offer branchless banking services
to the urban poor.
Number of technology initiatives underway and role of
Mobile Banking holds great promise.
Relaxation of KYC norms for this segment, financial literacy
and sensitization of ground level bank staff are prerequisites
for banking this unbanked segment.