Put your trust where your money is

The COVID-19 pandemic has severely affected small-scale entrepreneurs and street vendors. Countless of them have lost their livelihoods. During the lockdown in Kolkata, while working with children who live on the streets and in slums, we at Calcutta Social Project (CSP) realised that the best way to help them would be to help their parents, many of whom were struggling to procure food.

As a nonprofit with limited funds of our own, we wanted to see what the impact of offering small, interest-free loans to these entrepreneurs could be. A lot of the people we were talking to either already had a roadside food stall, or were keen to set one up as they had lost their regular employment or livelihoods. To get them started, CSP offered interest-free loans between INR 5,000 and INR 10,000. 

While the amount may seem small, we found that people were able to effectively use it to get their businesses off the ground. Additionally, they were able to repay the sum to us when their businesses became profitable. In fact, contrary to popular belief, 56 percent of people we gave grants to are in a stage of repayment with us, and some have even reached out to us for capital to expand. 

One such case is that of Kakoli Mondal*, a 60-year-old-woman, who initially came to us asking for INR 2,000 as a loan. Her husband, the sole-earner, had suffered a paralytic stroke and to make ends meet, she wanted to open a pavement food stall. Despite us offering her more money, she insisted on taking a loan of only INR 2,000 as she feared she wouldn’t be able to pay back the additional amount. She repaid the loan in time and has recently approached us again as she wishes to expand her business now.

People often assume that small-scale, often marginalised entrepreneurs like Kakoli Mondal cannot be trusted. However, our experience has shown us that this is far from the truth. Even after two successive COVID-19 waves and lockdowns, we have only had 13 percent of people default on their repayments. It is important to note here, that this number was half before the second wave of the pandemic hit.

*Name changed to maintain confidentiality.

Arjun Dutta has been heading the Calcutta Social Project since 1997.

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Know more: Read more about how informal workers can be supported during COVID-19.