Bank loans for slum dwellers in Delhi

Tear partner Asha in Delhi has succeeded in organising loans for impoverished slum dwellers. Many residents from the severely deprived slum area of Zakhira were granted loans for the very first time. In the past, banks were reluctant to give loans to slum dwellers, and exorbitant interest rates and complicated application procedures meant it was rare for slum dwellers to approach banks for financial help.

Asha invited Punjab National Bank (the second largest public sector bank in the country) to collaborate in providing loans to slum dwellers. Together they came up with a scheme that is extremely favourable to slum dwellers.

Most of the loan recipients are daily wage earners who had no capital to start their own businesses, but now that loans have been granted, they have a chance to set one up. The businesses could include tea stalls, vegetable carts, electrical shops and so on. Some people are choosing to get loans to pay for further education for their children, buy scooters or make repairs to their houses.

Asha staff and volunteers had taken the initiative to identify people who would most benefit from loans and who could be expected to commit to the repayments. The rate of interest agreed is just 4% pa, lower than any that the slum dwellers could have anticipated.

One man was beaming with pleasure and excitement when he received his loan cheque for Rs5000, and explained that he had previously been unable to buy a cycle rickshaw at a cost of Rs3000 (around $70), and been paying a large percentage of his earnings to rent one.

Those people who repay the loans according to the agreement will then be able to borrow a larger amount if desired. Asha staff and Mahila Mandal members will be involved in motivating the community members and ensuring that they make the repayments whenever they are due.