Credit line for street vendors may’ve few takers; half of 10 mn not covered

Finance Minister Nirmala Sitharaman’s announcement of a credit line of ~10,000 to 5 million street vendors as part of her stimulus package may find few takers.

The reason: A majority of street vendors, due to closure of their business, do not have the liquidity to pay back a loan. The package, according to estimates by street vendors’ associations, in any case will cover only half of the 10 million vendors across the country.

Says Sangeeta Singh of the National Association of Street Vendors of India (NASVI), which has over 300,000 street vendors as its members: “What we had suggested to the government was a three-pronged approach — first, direct cash transfers to street vendors, so that they have some money to start their business; second, permit them to resume their businesses (only 3 per cent of vendors are operating); and, third, offer them credit lines in the last phase. Our estimate is that hardly anyone currently has the ability to pay back the loan with interest. So the money might go to the wrong hands.”

Many point out that states are doing better by making direct cash transfers. The Odisha government, for instance, has announced that it will provide ~3,000 to registered street vendors. The Uttar Pradesh government has transferred ~1,000 to 480,000 daily wagers, including street vendors.

Many say that there is no clarity on what the credit is being given for. Says Yatish Rajawat, chief executive officer of Centre for Civil Society, which is working closely with street vendors: “The question is whether this money is sufficient and will make a difference to their business or not, whether this loan will be used to tide over their liquidity due to the lockdown or to revive business. Of course, the bigger problem is identification and the process of

disbursement that the government will follow.” NASVI, which had undertaken a survey in 2014, had estimated that the total number of street vendors in urban India was around 10 million. Various estimates made before the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act was passed in 2014 say that street vendors comprise about 2.5 per cent of the population of cities. It assumes the population of cities at 430 million.

Based on data from state-level associations, Delhi has around 300,000 street vendors, Odisha around 65,000 registered vendors, Tamil Nadu around 800,000. However many of them would require updating.

The Street Vendors Act was the central model regulation on the basis of which states enacted their own laws. Then local committees in cities had to work out the bylaws to ensure that vendors were registered and given earmarked area and a place to operate. Vendors not only had to be given an ID, bringing them into the formal sector, but also vending certificates that would give them legal rights to run their business in an earmarked area and locality from where they cannot be ousted. However, NASVI says only a few states — Karnataka, Madhya Pradesh, Odisha and Bihar — have provided certificates while most others are currently issuing IDS to vendors, which of course can be used for disbursing the loans. However, the exception has been Delhi, which has not even done that.

A majority of street vendors, according to a study undertaken by NASVI, depend on their own resources to finance their business as money lenders charge heavy interest. Only 2 per cent of vendors get access to money from cooperatives or self-help groups.

Public sector banks have also raised questions on disbursing loans of such small denominations and say they do not have the expertise to do so and fear this could lead to a rise in nonperforming assets.