Borrowing to stay poor

Do you own this auto-rickshaw?"

It was an innocent question, posed as a conversation starter. My family runs a school in the southern suburbs of Chennai, and Mari has the daily charge of picking up some of the students from their homes and transporting them to the school. Needing to head into town to attend to a few tasks of my own, I asked him if he could drive me around; I promised we would return to the school in time for the other half of his routine -- taking the children home. It promised to be a long drive with three different stops planned, and I thought a little exchange would make the time pass more memorably.

"Who, me? I could never afford this rickshaw, Sir. Do you know how much a rickshaw costs?"

I hadn't recently bought one, or even remotely considered that possibility, and his counter took me a little by surprise. How was I to have that information? I imagined a rickshaw would cost more than a motorcycle but less than an automobile, but there are an awful lot of numbers in between. With no further clues by which to narrow my estimate even a little, I guessed anyway. "1.5 lakhs?" I said, a little wary that I should not suggest by the number or the tone of my voice that he was either too poor to afford one or too incompetent to muster the necessary amount. He sensed my cluelessness right away, naturally.

"For that kind of money, you can buy two auto-rickshaws!" I didn't tell him what my next guess would have been if he had merely said I was wrong, that would only have further underscored what he must already regard as white-collar ignorance. In any event, my purpose in raising the question was quite specific, so I stayed with the script.

No, he didn't own the auto-rickshaw, he rented it. The daily rent was Rs.100, and in a typical month he could make enough money from his savaris to afford the rental, pay for petrol and minimum maintenance -- all major breakdowns would be handled by the owner, mercifully -- and take home a few thousand rupees. In a good month, perhaps Rs 5,000, but more typically Rs 3,000. Occasionally in a lean month his earnings might be as little as Rs 2,000, and those times were especially tough. Taking days off was an unaffordable luxury; the best he could hope for was that his brother would fill in for him should he take ill or be unable to run the vehicle for any reason.

I obtained most of that information by a series of quite direct questions. In hindsight, I am struck that he did not take these to be intrusive; I would certainly not have received similar questions about my finances and life with similar matter-of-fact-ness. Mari, though, didn't seem to attach very much importance to them. He simply provided replies to my questions, and once or twice he anticipated what I would ask next, and went on with his answer to include my follow-up poser as well.

We arrived at the first of my stops, outside the offices of the Adyar Times. The editor, Vincent D'Souza, has helped me understand the opportunities and perils of neighborhood publishing over the last few years, and I tried to anticipate how long I might spend in conversation with him this time. It was agreed that Mari would wait in the relative shade of a tree some distance from the building, rather than right outside it, and that I would keep myself conscious of his deadline. He might be gone a few minutes to get his tea, he said, and if I should return during that time, I should wait. I told him I would return in 30 minutes, perhaps 45, but when I did emerge from my conversation with Vincent, it was past an hour since he had dropped me. He didn't complain, and we were on our way again.

"Have you ever thought about buying your own auto-rickshaw?"

This question, I knew myself to be foolish; the man pays as much in rent each month as he earns, and the likelihood of the thought bypassing him completely must be zero. People don't rent their means of livelihood if they can afford to purchase them. Still, it seemed a quick way to rejoin the conversation, and we had some distance to cover to the next stop, moreover. If two years' rent is nearly enough to purchase a vehicle that would last six to seven years, what kept him from making the transition to ownership? To fork over enough money to purchase a product three times over during its lifetime and yet not own it - that must be frustrating.

Yes, he had thought many times of buying an auto-rickshaw, but there was the little problem of money. I imagined a faint note of sarcasm in his voice, and felt he wanted no further part of this conversation but he continued. The banks were unwilling to lend to him because he had very little collateral. They were quite aware that owning an auto-rickshaw is highly profitable, a few bank officers even purchased and rented rickshaws themselves. There were also plenty of schemes various governments had allegedly set up to help small borrowers to make an independent living, but the bottom line was always the same -- the banks would not lend to him.

I've read enough of Mohammed Younus and micro-lending enterprises to know this. Banks can be terribly stupid, sometimes. The indigent villager often repays his loan at a far more reliable rate than the big borrowers in the cities, but this truth is somehow lost on the financial institutions. They would love to lend you $300 million to buy an unknown enterprise because 'growth by acquisition' is thought to demonstrate great entrepreneurship, even if the entity being bought will eventually become a millstone to a currently profitable business. They will also gladly lend to the hapless bloke who brings home a regular salary, from which he will make endless monthly payments to buy some cheap imitation of a refrigerator or washing machine. But banking for the poor - heavens, no!

"Couldn't ten of you get together and buy an auto?" Yes, Rs 75000 is a lot of money and on his own Mari would need to find two years' worth of rental payments to afford a purchase, but wouldn't a carefully planned micro-enterprise scheme spread the risk and let him be on his way quicker? From savings of less than a thousand rupees a month, a group of ten drivers can save enough to afford one rickshaw. Savings on the rent of that rickshaw would halve the time to the next purchase. Even gradually reducing their contributions to the kitty after the first year, in about five years each of the drivers could own his vehicle outright, and from there the gravy train would kick in.

Right?

Wrong. First, I do not understand the financial dynamics of poverty adequately to suggest this scheme. A rickshaw-driver's family does not live on Rs.3000 a month because that's all it takes to stay alive and healthy and happy. Instead, they live with the level of alive and healthy and happy that Rs.3000 can buy. Illnesses and injuries are neglected, the even deeper poverty of relatives in need is ignored, education is sacrificed. Meager shelter and manageable rations of food pass for 'life'. The temptation -- even pressure -- to use any additional money for the neglected things in immense. If Mari's mother takes ill, the Rs.600 he has saved up over weeks together must be raided, and saving for his own vehicle must begin afresh.

Second, he does not know nine people he can trust! Mari is mildly fortunate; he has a brother, and that means he only needs to find eight others! Still, there is not the faintest chance of this happening. Like millions of the urban poor, he finds himself chasing an economic dream unsupported by the ties of community and family he would find in the villages. Here in Chennai, there is opportunity to make money, but the sort of mutually trust-reinforcing micro-credit scheme that works in the villages isn't easily reproduced in the urban jungle. People move and become untraceable, people die and become intestate, and far more often that he can accept, people cheat. Eight others? No, he couldn't find two others to begin this hare-brained scheme!

I resigned myself to a little silence, feeling suitably admonished and mildly useless, too. Mercifully, we arrived at the Tamil Nadu Science Foundation. The TNSF is a wonderful organization, and I will write of that another time, but will stay with the story line here. A half hour must have passed while I was away, and I returned eager to resume the conversation but a little concerned that Mari may have already had enough of my inquisition. Even as I sought a tactful resumption, however, he picked up the thread himself. Clearly, he had used some of his waiting time to recalibrate his understanding of his aspirations and opportunities.

"I have to say, Sir, no one has asked me the kinds of questions you are asking now."

I kept quiet, unsure what he meant by that, and he went on. "There is a routine to every day, and sometimes just being in the routine doesn't allow me to think of anything else. It is only when you ask these questions that I wonder if there is still something I could be doing. In one way I am poor, and I cannot really escape this poverty unless there is some really unanticipated good fortune. But in other ways, I think maybe I can save a few paise each day, and even if it is little it may add up to something. At the same time, I can also see that even a few rupees isn't much use these days, and that discourages me." I let him speak for a while, as he remembered the small opportunities he had let pass and the hopes that had stayed with him for years. He seemed forlorn, torn between believing himself unlucky and un-enterprising.

"What would you do if I were to give you enough money to buy an auto-rickshaw?" I asked. Not that I particularly had that much money to give away, but wanting to understand something of the world he might gain from it.

"I guess if I had my own vehicle, I would rent that one out, and continue driving a rented vehicle myself. I wouldn't stop driving this rented auto."

I was dumbfounded, and disappointed. We had only just then finished discussing in some detail how unfair the lending practices that kept him in poverty were, and yet at the first sign that he might escape it, he sought only to perpetuate it! Why? I reminded him that my main interest was in helping him free himself from the clutches of the usurious system that kept him poor, and that I wasn't about to see him impose that horror on another person. Indeed, by his stance he lessened the probability that I would support him at all. By my tone I left him little doubt of my dissatisfaction with his plans.

"Yes," he said, "but you don't have to live in my world. You want social change, and you want that to happen in ways that you approve. But the changes you seek are slow, and my needs are much greater than those changes can support. More than that, you imagine that there is middle ground between the rich and the poor, and that we can all inhabit that space decently and proudly. These are good thoughts, but they aren't real. People like me already have loans to repay that charge 10% a month, we have postponed surgeries for near and dear ones. We must compete among ourselves for the few scraps the markets allow us. The cooperative enterprise you are suggesting is a luxury I cannot afford."

"Perhaps, but no one from your dog-eat-dog world is offering you a helping hand, is he?" I retorted. We arrived at the posh home that would be our third stop, and I disembarked quickly. If he must embrace his insular world, then he must bear its burden, I told myself as I stomped off. I shall limit myself to the cheer of visiting a favorite aunt and reminiscing of times past, and then we can both return to our universes. He can rent his auto and pay 46% interest on every third purchase, and hock his wife's small jewelry for school uniforms. I'll find someone who'll take my money with a little more grace and a lot more responsibility towards others who are similarly poor.

He had little chance to respond as I strode away but the conversation wasn't finished. I returned 40 minutes later, determined that I would leave Mari to his ways but he had one further lesson to offer.

"It is true, as you said, that no one in the dog-eat-dog world is offering me a helping hand. But it is not my world. I didn't create it. Somebody else, living comfortably in well-laid neighborhoods with electricity and running water and private cars, created it. I was merely put in it, and I expect that I will have to live in it, but that doesn't mean it is the world I would create. I have listened to you all morning, and I take your counsel well, for you truly appear to care about my livelihood. But my life is not the sum of its financial parts, and the complexities that force me into certain financial decisions are huge. Your money is a kind gesture of our meeting, but it has no understanding of my life." He turned away definitively, his back daring me to contradict him.

The words stung, and we drove in silence to the school, each unwilling to risk destroying the comfortable silence. As I paid him for his services, he offered a parting graceful word. "I hope you will not take my words unkindly," he said, "and if I spoke in anger, please forgive me." I smiled wanly, told him that I would try to understand, and walked away.

The passage of time has allowed me to consider Mari's direct words in ways that I was simply not prepared to then. Perhaps I don't see things his way, but who am I that I should forgive the depravity he must live with? The financial terms of his world are burdensome, yes, but most definitely they are not ones he has himself set, and that I cannot deny. Some weeks later, at the screening of a film based on Grameen Bank's 16 Decisions, I met representatives of several micro-lending enterprises, and recounted my morning with Mari, noting especially his lack of community support as a migrant. In conversations with Rangasamy Elango, of whom I wrote earlier on these pages I've begun to understand other aspects of financing for small enterprise. These efforts are coalescing into a micro-lending model, which I hope will be instructive.

Above all, the poor must have access to credit, Younus said. Much of the grinding destitution of the nation is sustained by a cycle of usurious lending and subsequent bonded labor that is simply illegal, and this must change. Without access to credit in regulated markets, and forced to fend for themselves in unfamiliar and hostile environments, the urban poor must borrow even to cling to the poverty that marks their lives.

Ashwin Mahesh