Blog Competition on Suitable Finance for Agricultural Households
An article in The Hindu a few months back by P. Sainath stated that migrants from Ganjam staying in Surat send home Rs.400 crore a year. A fourth of that is sent through ‘tappawalas’, an informal courier system. On our recent trip to Orissa we had a two-hour long interview with a tappawala to understand his remittance business.
Aakash Swain (name changed) was 26 when he landed in the Bombay docks to work as a wage labourer with dreams of making it big in the city. But he soon became frustrated with the meager wages and in spite of opposition from his family, started this business in 2002. The first sum of money he collected was Rs. 4000 which was sent through a demand draft and which he personally encashed and disbursed in Ganjam. It took him a month to do this.
Today, he has 5000 customers spread across Mumbai, Surat and Bhavnagar. They are engaged in occupations as diverse as ship breaking, textile weaving, construction and iron ore loading. On an average, each sends Rs. 5000 per month for which he charges Rs 30-35 and the money is delivered within 24 hours. Two of his own relatives in Ganjam withdraw cash and disburse it to the recipients, so trust is not an issue. They verify details such as the sender’s and recipient’s name and address and hand over the money in the presence of two witnesses who sign the receipt along with the recipient.
Swain is also an LIC agent and has sold life insurance policies to all his customers. He makes around Rs. 20000-30000 from courier charges in a month and around Rs. 10000 from his job as an LIC agent. He spends 15 days in Surat and Bombay and 15 days in Berhampur. His customers are informed about his travel plans and tickets are booked well in advance. They let him stay with them and take good care of him, providing him with a comfortable place to stay and also arranging for his food. When he disburses money, families are happy to welcome him and sometimes offer him cold drinks and snacks.
He claims to have more than 25 accounts in various banks in Mumbai, Surat and Bhavnagar, all in his name. When questioned on how he managed to do that, he says that he just needed to produce a ration card or an address proof to open these accounts. He deposits money collected from customers in them and usually maintains enough balance to withdraw cash for disbursement. He said that he did not maintain any record of his accounts or transactions and remembered each one by memory.
Focus group discussion with migrant labourers and their families in Jakarapalli village of Ganjam district.
Most workers he served belonged to either backward castes or scheduled castes while most tappawalas belong to Other Backward Castes (OBC’s) such as Jena, Swain and Gouda. According to him, the reason why people find it convenient to send money through him is because they work in shifts and find it difficult to deposit money during bank working hours. Also, many of them are illiterate and are afraid of going to the banks to open an account and to deposit money. They can barely sign their names. The family members back in the village are worse off as they are illiterate as well and are afraid to go to the banks to withdraw cash. Bank branches are also located far away from their villages.
Another one of his USP’s is that he extends a special facility to clients who need money urgently. He gives a maximum of Rs 10,000 as advance payment to a customer and no interest is charged for this. The money is collected from the sender during the next cycle. The only charges are his courier charges. He admits that it is a risky business due to the large amounts of cash he has to handle and he faces the risk of losing money due to theft or dacoity. But so far he does not seem to have faced any such incident.
For a villager who just studied till the 12th grade, he has come a long way. He owns a house, is married and a father of 2 sons. He is happy that today he is wealthy, respected and better off than his brothers. He wants his sons to be educated and not follow him in his business as the competition now is too intense. Also, more and more people have bank accounts today and prefer to send money through banks. He knows that his business is shrinking and soon he will have to think of other opportunities to make money. But for the time being he is not worried and enjoys the risk he faces every day and every minute.
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Vijayalakshmi C and Shilpa Sathe of InnerWorlds contributed to this post.
This is a very interesting story. Well told. What is not entirely clear to me though is that exact process of remittance. What does he do with the bank accounts? How does he collect money from his customers? How does he get the money to his relatives in Ganjam? Details of this would be very useful.
He informs his customers the days he will be available in a city (ususally between 7-13th / 23rd-30th in Surat)when his customers hand over money to him. He deposits them the same day into several of his accounts while simultaneously informing his relatives back home at Berhampur about details of payments to be made: name/address and amount. These helpers withdraw money from other accounts and make personal delivery to the recepient in presence of 2 witnesses after verifying details of name of the recepient and address. He actually mentioned how earlier he had to take DDs and physically carry money and now how core banking solution has ensured money can be transferred the same day. He charges Rs35/1000 Rs transferred while customers mentioned declining rate as amount sent increased. In a week's time, the sender receives signed receipt from his hometown taht the money has been delivered.
We should check with commercial banks what charges they levy for the use of these services and therefore what the Tappawala's p hrofit margin is. Is the service he provides legal? Is he not running a banking operation by collecting money and sending it out through his personal bank account? Wha if people like him applied to become business correspondents?
He mentioned SBI, ICICI Bank, Andhra bank among the banks where he has accounts . Is it legal? His operations can be proved to be illegal in court of law to the extent that he probably uses fictitious proofs to open accounts across states – but we could not probe further as he was becoming very defensive. He was not worried about police and naxals.He said people welcome him where ever he goes . We got the same impression from his customers. We in fact mentioned that he is running a one man bank , he was quite thrilled. By letter of law, what he does may be illegal but to his customers, he is doing a great service. It makes sense to bring such grey services under legally sanctioned roles. But , its moral impact – I have no answers.