Mumbai: Spread over 1.75 sq km, and home to a million people, this is Asia’s largest slum. It is home to a $2billion (Rs 8,800 crore) leather industry that employs 2 million and, on 19 February, it will get its first commercial bank branch. To some, that’s a sign that Dharavi has arrived.
Chennai-based Indian Bank has had a pilot branch in Dharavi since 2005, an experiment that seeks to include the slum’s population in the banking (and consequently, the economic) mainstream of India. Now, the bank has decided to convert the pilot, which has 6317 accounts, into a full-fledged branch complete with an automatic teller machine.
Dharavi already has a bank, and has had one for the past 21 years, the Abhyudaya Co-operative Bank, which has 40,000 accounts and deposits of Rs 36 crore, but a cooperative bank isn’t the real thing. To people who live in middle-class boroughs, a bank opening a branch isn’t a big thing, especially not in an environment where several banks are doing just that to tap a growing market for retail banking.
In some ways, it seems only apt that Dharavi get its own bank branch, or even branches from several banks. The slum stands right next to the Bandra Kurla complex, Mumbai’s new financial district, a celebration of money in glass and chrome.
Dharavi will also soon be ‘redeveloped’ by the state government, a project that is estimated to cost around Rs 10,000 crore.
Until now, the financial and banking infrastructure in the slum, apart from Abhyudaya Co-operative Bank, has been fairly rudimentary: moneylenders, pawn shops, and a small micro-credit initiative.
“People have to take loans (from moneylenders) for education, healthcare or business purposes at as much as 4% interest per month, because regular banks will not entertain them,” says Jockin Arputham, founder of the Society for Promotion of Area Resource Centres (SPARC), which runs 70 microcredit groups in Dharavi that seek to offer small loans at much lower rates.
The rate charged by moneylenders works out to 48% a year, and residents of Dharavi pay that much because they often simply do not have a choice, according to Prema Salgaonkar who runs a microcredit group for 1,700 families in the slum. “People do not get loans if they give their postal address as Dharavi,” she says, “so they give their office address or a relative’s address.”
And Dharavi’s residents cannot open accounts in banks in adjacent boroughs for a variety of reasons: the inability to provide proof of identity or address or both, maintain a minimum balance of Rs 1000, or provide a letter of guarantee from existing account holders at the branch. Even businessmen based in Dharavi, running flourishing leather businesses, are cut off from the mainstream.
That could explain why Rajan Pote is excited about Indian Bank’s entry. The leather belt maker whose business earns revenue of Rs 5 crore a year has been considering branching out into exports. “A letter of guarantee from a public sector bank would go a long way in establishing my credibility in the export business,” he says.
Not everyone feels that way. Gaja Ghosh owns a leather tannery and does business worth Rs 20 lakh a year, but says that most banks do not give him a hearing when he walks through their door “just because I am from Dharavi.” He is happy with Abhyudaya Cooperative Bank, and plans to continue doing business with it.
That doesn’t come as a surprise to Devendra Mewada, manager, Abhyudaya, who says that his bank spotted Dharavi’s potential early. Demand for housing and vehicle loans have zoomed in the past five years he adds. “Any bank that comes into Dharavi will take time to connect with the population; most of our customers are illiterate and we are as good as financial planners to them.”