Street vendors are one of the most marginalised, poor as well as vulnerable sectors of the urban informal labour market. While street vending is seen as a thriving business given its capacity to adapt to the changing demands of urban society, this category of self-employed persons is yet to receive legal legitimacy. Several factors contribute to this situation, the prime among them being access to formal credit. While it can be argued that financial inclusion and inclusive growth can together generate self-employment opportunities and alleviate poverty and unemployment, easy access to formal credit institutions is the stumbling block. This study was conducted by the Tata Institute of Social Sciences (TISS) in collaboration with the United Nations Development Programme (UNDP). Its objective was to highlight some of the problems faced by street vendors in conducting their daily business and examine how financial institutions, especially those in the banking sector, can include street vendors in their credit policies.
PROTECTION OF LIVELIHOOD AND REGULATION OF STREET VENDING ACT
According to the Ministry of Housing and Urban Poverty Alleviation, there are 10 million street vendors in India, with Mumbai accounting for 250,000, Delhi having 450,000, Kolkata, more than 150,000, and Ahmedabad, 100,000. Most of them are immigrants or laid-off workers, work for an average of 10–12 hours a day, and remain impoverished. In India, street vending makes up 14% of total (non-agricultural) urban informal employment. Though the prevalent license-permit raj in Indian bureaucracy ended for most retailing in the 1990s, it continues in this trade. Inappropriate license ceiling in most cities, like Mumbai which has a ceiling of 14,000 licenses, means more vendors hawk their goods illegally, which also makes them prone to the bribery and extortion culture under local police and municipal authorities, besides harassment, heavy fines, and sudden evictions. In Kolkata, the profession was a cognisable and non-bailable offense.
Over the years street vendors have organised themselves into trade unions and associations, and numerous NGOs have started working for them. The National Hawker Federation (NHF), based all over India, is a federation of 1400 street vendor organisations, and trade unions in 28 states.
Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014 is an Act of the Parliament of India enacted to regulate street vendors in public areas and protect their rights. It was introduced in the Lok Sabha (Lower House of the Parliament of India) on 6 September 2012 by the then Union Minister of Housing and Urban Poverty Alleviation, Kumari Selja. The Bill was passed in the Lok Sabha on 6 September 2013 and by the Rajya Sabha (upper house) on 19 February 2014. The bill received the assent of the President of India on 4 March 2014. The Act came into force on 1 May 2014.
Street vending was illegal in urban India for almost six decades until the passage of Act in 2014. Despite the law having legalised the activity, however, the default policy in most cities across India is to clamp down on street hawkers. Yet street vending remains a viable source of employment for many. As the pace of urbanisation increases across India, it is only likely that a greater number of street traders will contest for space. This brief examines the spatial and legislative dimensions of street vending. It recommends that street vending be made into a planned activity, purposefully written into a city’s urban plans.
THE REJUVENATION OF STREET VENDORS IN INDIA
Empowering street vendors in India is a critical task as they form a significant part of the informal economy, often facing economic challenges and limited legal protections. Here are several ways to support and uplift this community:
- Legal Recognition and Protection: One of the most fundamental steps is to provide legal recognition and protection to street vendors. India has passed the Street Vendors (Protection of Livelihood and Regulation of Street Vending) Act, 2014, which aims to protect the rights of street vendors. Ensure that local authorities are implementing this act effectively.
- Identification and Registration: Create a simplified and accessible registration process for street vendors to formalize their businesses. This will enable them to access various benefits, including loans and subsidies.
- Financial Inclusion: Promote financial inclusion by encouraging street vendors to open bank accounts. Link these accounts to government schemes and promote savings habits.
- Access to Credit: Facilitate access to affordable credit for street vendors, possibly through microfinance institutions, self-help groups, or government-backed schemes. Low-interest loans can help them expand their businesses.
- Skill Development and Training: Provide training and skill development programs to enhance the entrepreneurial and business skills of street vendors. This can include financial literacy, hygiene, customer service, and basic accounting.
- Infrastructure Improvement: Work on improving the infrastructure in street vending areas. Clean, well-maintained, and safe vending zones can attract more customers and improve the working conditions for vendors.
- Market Linkages: Create platforms that connect street vendors with broader markets, both online and offline. This can expand their customer base and boost their sales.
- Healthcare and Social Security: Explore options for providing health insurance and social security benefits to street vendors, including accident coverage and pension schemes.
- Access to Technology: Promote the use of digital technology to help street vendors manage their businesses more efficiently, whether it’s for inventory management, payment processing, or marketing.
- Community Organizations: Encourage Street vendors to form cooperatives or associations that can advocate for their rights collectively and negotiate with local authorities or suppliers for better terms.
- Awareness and Sensitisation: Raise awareness among the general public about the contribution of street vendors to the local economy. This can help reduce the harassment and discrimination they often face.
- Regulatory Reforms: Continuously evaluate and update existing regulations to ensure that they are business-friendly and supportive of street vending.
- Public-Private Partnerships: Collaborate with private businesses and non-governmental organizations to support street vendors with resources, training, and marketing opportunities.
- Data Collection and Research: Conduct regular surveys and research to understand the specific needs and challenges of street vendors in different regions. This data can help tailor policies and programs more effectively.
- Government Incentives: Introduce subsidies or incentives for street vendors, such as reduced taxes or access to raw materials at lower costs.
Empowering street vendors is not just about helping a vast informal sector; it’s also about fostering economic growth, reducing poverty, and creating a more inclusive economy. Sustainable and comprehensive support from government, civil society, and the private sector is crucial for achieving this goal.
MICROFINANCE FOR STREET VENDORS
Microcredit, also known as microfinance, plays a significant role in India’s financial landscape, especially in providing financial services to underserved and economically vulnerable populations. Microcredit institutions in India offer small loans and financial products to low-income individuals and micro-entrepreneurs who may not have access to traditional banking services.
Here’s an overview of the microcredit business in India:
- Microcredit Institutions: Microcredit in India is provided by various institutions, including microfinance institutions (MFIs), self-help groups (SHGs), and non-governmental organizations (NGOs). Some of the well-known MFIs in India include SKS Microfinance (now known as Bharat Financial Inclusion Limited), Bandhan Bank, and Ujjivan Small Finance Bank.
- Microcredit Products: Microcredit institutions typically offer small loans, often referred to as microloans, to clients who use them for various purposes, such as starting or expanding small businesses, meeting urgent financial needs, or improving their livelihoods. These loans are generally unsecured and have short repayment terms.
- Target Demographics: The primary target demographic for microcredit in India includes low-income individuals, particularly women, and marginalized communities. Women often make up a significant portion of microcredit borrowers, as it is believed that empowering women economically can have a positive impact on their families and communities.
- Group Lending Model: The group lending model is a prominent feature of microcredit in India. In this model, borrowers are organized into self-help groups, which are responsible for guaranteeing each other’s loans. This approach promotes social cohesion and mutual support while reducing the risk for the lending institution.
- Interest Rates: Microcredit interest rates in India can vary widely depending on the institution, the type of loan, and the region. Interest rates are generally higher compared to traditional bank loans due to the higher operational costs and risks associated with lending to low-income and unbanked individuals.
- Regulation: The microcredit sector in India is regulated by the Reserve Bank of India (RBI) and the National Bank for Agriculture and Rural Development (NABARD). Regulatory frameworks have evolved to ensure responsible lending practices, transparency, and consumer protection. The Microfinance Institutions (Development and Regulation) Bill, 2012, aimed to regulate the microfinance sector.
- Challenges: The microcredit sector in India has faced challenges, including issues related to over-indebtedness, aggressive collection practices, and occasional instances of client exploitation. These challenges have prompted regulatory interventions and calls for responsible lending practices.
- Impact: Microcredit has had a significant impact on poverty reduction and financial inclusion in India. It has empowered individuals, especially women, by providing them with access to credit and financial services, which can help them improve their income, living standards, and overall economic well-being.
- Digital Transformation: With the rise of digital financial services and mobile banking, many microcredit institutions in India are incorporating technology to enhance efficiency, reduce costs, and improve outreach to clients in remote areas.
- Government Initiatives: The Indian government has launched several initiatives to support microcredit, such as the National Rural Livelihood Mission (NRLM), which promotes the formation of SHGs and provides financial support for livelihood activities.
Microcredit continues to be an essential tool for financial inclusion and poverty alleviation in India. When implemented responsibly and ethically, it can be a powerful instrument for improving the lives of millions of underserved individuals and communities. However, it requires continuous oversight and regulation to prevent abuses and ensure that borrowers are not burdened by excessive debt.
PM SVANidhi SCHEME
According to the report by SBI, PM SVANidhi has smoothly integrated marginalized urban micro-entrepreneurs while also breaking down communal barriers. According to the research, “Almost 75% of loan beneficiaries come from the non-general category, a testament to the innate power of well-intended policy schemes to seed transformative changes.” OBCs account for 44% of total disbursements, while SCs/STs account for 22%. 43% of the total beneficiaries are women. The report says, “The female share indicates the empowerment of the entrepreneurial capabilities of urban females, giving SVANidhi a gender equalizer tag.”
The report also mentioned that the ratio of people repaying the first loan of Rs 10,000 and taking the second loan of Rs 20,000 is 68 percent, while the ratio of people repaying the second loan of Rs 20,000 and taking the third loan of Rs 50,000 is 75 percent.
About 65% of PM SVANidhi borrowers are between the ages of 26 and 45. On average, 63% of individuals under the age of 25 and 63% of those over the age of 60 spend more after loan issuance.
The future of street vendors in India is subject to a variety of factors and challenges, but it also holds potential for growth and improvement. The future will depend on a combination of government policies, social trends, economic factors, and the adaptability of vendors themselves. It’s a sector that has shown resilience and innovation, and with the right support, it can continue to thrive while preserving a significant part of India’s cultural and culinary heritage.