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A Digital Loan helps a Street Vendor to get Back on his Feet

Technology Today

Dr Archana Verma

Twenty years ago, Sadashiva Das started cooking and selling panipuri, a popular street food made of fried flatbread and flavorful fillings. It took several years for him to build his reputation in the bustling market area of Khurda, located in the Odisha province of eastern India. As his panipuri business took off, Sadashiva was able to feed and provide for his family. The income he earned from his business also allowed him to send his son and daughter to college.

Like other street vendors across India, Sadashiva had to close his panipuri business — the only source of income for his family — when the lockdown began. Because Corona virus is highly contagious, he was unsure when he would be able to restart his business, if at all. Without the income from his food stall, the lack of cash became a major problem for him, and he recalled that he nearly slipped into a depression. He didn’t have enough savings to last for another few months, so he picked up a job as a daily wage worker to make ends meet.

After six very challenging months, Sadashiva learned that he could apply online for a loan to give his business some relief during this crisis. Although the online registration process is fairly easy, Sadashiva struggled because he doesn’t have much experience using technology. As a client of  Annapurna Finance, a micro-finance institution and Accion partner in India, he received support through the loan process and Annapurna’s staff walked him through the online registration process.


Annapurna states in its official release that it recognises that technology can help their team to reach more clients, provide better customer support, improve the efficiency of their operations and launch digital products that help micro-entrepreneurs stay in business. The pandemic has accelerated their focus on digitisation. But many of their clients — especially those living in rural areas — need extra support to learn how to use digital tools. 

One month after he applied for the street vendor loan, Sadashiva received the disbursement he needed to restart his business. He reopened his panipuri stall while following the government’s pandemic safety measures and his sales slowly returned. But while vaccines have rolled out and infections have dropped in countries like the United States, India is still facing devastating Corona outbreaks. Skyrocketing cases have overloaded India’s health system and new lockdowns have left small business owners out of work again. Digital financial tools can help small business owners to weather this crisis, find a way to reopen their businesses safely and help us to create a more inclusive recovery for all.

What is Micro-Financing?

Micro-financing organisations are financing companies that provide small loans to low-end entrepreneurs and self-employed people who do not have any access to banking facilities. The definition of “small loans” varies between countries. 

In India, all loans that are below Rs 1 lakh are regarded as micro-loans.

Some government banks also offer micro-finance to the eligible categories of borrowers.

Some Benefits of Micro-Finance

It provides easy access to credit – Micro-finance organsations provide people with a small loan in their times of need. Banks do not usually offer small loans to customers; micro-financing institutions providing micro-loans bridge this gap.

It serves the low income groups of the society – majority of the micro-finance loans are given to women and people in the lower economic strata. Unemployed people and those with disabilities are also beneficiaries of micro-finance. 

3 Micro-Financing Institutions with Low Interest Rates

I Fusion Microfinance
Fusion Microfinance is an RBI registered institution. It offers loans to women in the rural and semi-urban areas. In addition to offering financial support and insurance protection, the company also imparts financial literacy to its customers.

Loan Details - 

Loan Amount - Rs 3,000 – Rs 60,000
Loan Tenure - 8 months – 2 years
Interest Rate - 21% - 21.50% pa on reducing balance method
Processing Fee - 0 – 1% of loan amount + GST

II Annapurna Microfinance
Annapurna Microfinance provides loans to the low-income groups. Technical and financial education is also imparted to the borrowers to strengthen their entrepreneurial skills. 

Loan Details -

Loan Amount - Rs 1,500 – Rs 25 lakh
Loan Tenure - 12 months – 240 months
Interest Rate - 18% - 26% pa (reducing)
Processing Fee - 1% - 2% + GST

III Arohan Financial Services
Arohan Financial Services states that it has offered micro-loans to 1.9 million borrowers throughout India. The local partners of the company help it to reach remote areas. It also engages in MSME lending activities.

Loan Details -

Loan Amount - Rs 1,100 - Rs 50,000
Loan Tenure - 3 months - 24 months
Interest Rate - 20.70% - 21.25% pa

Some Precautions

Borrowers of micro-loans should keep certain points in mind while going for micro-finance - 

1 - The micro-financing company should be registered with a positive review in the market. Don't get involved with scamsters who may be engaged in illegal activities.
2 - Micro-finance loans have a higher rate of interest than many kinds of loans from banks. Hence, survey the market and find out which micro-financing company offers lowest rate of loans and is registered with a trusted name in the market. 
3 - Loaning procedure should be easy and free of complications, which may take your time unnecessarily. 
4 - Interest rate should be on a reducing model. Top up payout facility should be there.

In case of doubt, don't hesitate to consult someone who knows about loans or who has taken a micro-finance loan earlier. If you take care of the pros and cons, you can avail of micro-finance in your time of need. 

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