Ajay Sarkar, a driver in the Capital and a migrant worker from 24 Parganas, a district in West Bengal, dreads early morning phone calls from his father. They are rare but they usually mean an urgent request for money. Sending Rs5,000 through a post office isn’t hard, but it costs Rs250, as much as Sarkar spends on commuting in a month, and there’s no saying when it will reach.
After one such call, Sarkar approached his employer. She transferred money to her parents in Kolkata and Ajay’s father made a two-hour trip to their house to collect the money—all within a day of his original phone call.
There may be help at hand— beyond considerate employers —for migrant workers such as Sarkar. Some microfinance companies are using the banking system and mobile phone technology to feel their way through the virtually untapped local private remittances market. They have reason to: the market for such remittances is estimated at Rs26,000-40,000 crore.
The number is smaller than the around Rs1,00,000 crore (Rs1 trillion) India received as overseas remittances in 2006-07, according to the World Bank. Still, for a local market, that’s a bit much, and industry experts and executives in technology firms say the market for local remittances will only grow.
Get connected: AWestern Union counter at New Delhi’s General Post Office. P.K. Gopinath, director, Postal Staff College of India, says deals channelled by Western Union through postal network went up from Rs980 crore in 2004-05 to Rs3,750 crore in fiscal 2007.
That’s because mobile phones and banks can combine to speed up and secure local money transfers that mostly take place through postal money orders.
“India Post handled 96 million money orders (MO) last year,” says P.K. Gopinath, director, Postal Staff College of India, which trains people for a career in the postal department. Money orders are the costliest way to transfer money, at a charge of Rs5 for every Rs100 sent, up to a maximum of Rs250 for Rs5,000. By contrast, sending a bank draft for Rs5,000 would cost about Rs30 plus postal charges.
Nine out of 10 branches of India’s postal network, the largest in the world, are in rural areas.
Yet, on the ground, the delivery of a money order can take days, or weeks in remote areas, with the postman often asking recipients for a commission for his trouble.
“In 2005-06, the latest year for which such data is available, India Post handled money orders worth Rs7,180 crore,” says Gopinath. And transactions channelled by Western Union through the postal network have also gone up from Rs980 crore in 2004-05, to Rs3,750 crore in 2006-07, he adds.
A Western Union executive did not confirm this number, citing company policy.
Untapped potential
The Reserve Bank of India (RBI) says that over 400 million Indians lack access to formal financial services.
According to data from the latest census, which was conducted in 2001, migrants accounted for 30% of the population, or 307 million people.