Dharavi: In Search of Due Credit

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India’s largest slum is built on the creative zeal of entrepreneurs who had no access to finance from banks. But things are changing now

Officials of Indian Bank were nervous in February 2007. Their first branch was opening in Dharavi, and they were uncertain of the reception awaiting them. This was before Slumdog, and Mumbai’s largest slum was considered avoidable at best and downright dangerous by banks. Police protection had been arranged for. 

It soon became clear something had gone wrong, but it had nothing to do with security or law and order. Staff at the branch were flooded with demands to open accounts or remit money to far-flung families. Clients and potential clients would materialise even if it was 10:30 pm, when the lights were on because staff had stayed late to close the books. “Whenever the bank was open, people were willing to come,” says one bank official, “Before this bank opened in Dharavi, people used to keep money in their pockets or in a suitcase.”


Dharavi takes some getting used to. There are beds on rent for migrant workers too poor to afford a room. There are also narrow alleyways that are fully air-conditioned. In this mystifying maze, what unites the newly arrived migrant and the made-it-rich businessman is that for both time truly is money. Unlike most of India, where there always seems enough time for another cup of tea, Dharavi is a hot-bed of entrepreneurship. The system is efficient, if informal—workers often live above their ‘factories’—and it supplies Mumbai with everything from biscuits to pots.

Consider this: in 2005, the last year for which such an estimate is available, Dharavi is thought to have exported between Rs 300 crore and Rs 800 crore in leather goods, with little or no support from India’s formal financial system.

Banks have usually ignored migrants, small businessmen and the poor. A vast swathe of India—41 per cent of the population—does not have a bank account. Credit is even scarcer—only 14 per cent of Indians have a loan account. Of greater concern, though, are signs that things may have become worse  after liberalisation. Moneylenders, whose importance had waned steadily since Independence, are again thriving across the country.

Efforts by the Government and central bank to extend the reach of banks and other financial institutions have not only given Dharavi an assortment of bank branches, but also non-bank institutions such as Financial Inclusion Network and Operations Ltd (Fino).

Fino is not a bank, but it has a technology interface with partner banks. The result is shorter lines, friendlier service and lower costs, even for small transactions that customers operate through biometric smart cards. I watched a woman in a nine-yard sari handing over a Rs 100 note along with her card. She was out of the office in the time it took for her to get her change. Later, Fino officials told me that she was a bhajiwali who stopped by every day to deposit Rs 50 in her account.


When it comes to the issue at the heart of any business, credit, there is still a long way to go. “We’re not interested in bank loans. Our capital is from our munaafa (profit),” says a leather commissioning agent on 90 Mile Road, barely looking up from his books. Loans, he says, require too much documentation. And, he adds, as though speaking to the naive, credit for Dharavi is a big red cross for banks.

That complaint predates Dharavi’s bank branches. Part of the problem is that businesses here are very different from the formal companies that banks are designed to cater to. Few give or ask for bills. A legitimate concern bankers have is that clients could vanish overnight, which is why they insist on documentation. But, even well-established firms have difficulty proving ownership of factories they have owned for years.

The groan is echoed across Dharavi. “They don’t give loans for businesses,” says Sunil Kamble, who owns a shop that sells leather items on Dharavi-Sion Road. “I tried once or twice to apply for a loan, but then gave up. They say, ‘Bring these papers and those papers’, and in the end it does not happen.”

Dharavi’s informal businesses are emblematic of a transition the Indian economy is undergoing. The small business sector is also where most jobs happen to be. Think of all 13 million small enterprises in India, and you see why policymakers want to help the small-scale sector— in the hope that its jobs will sustain numerous households, which in turn should partly fulfil the ‘inclusive’ promise of India’s economic growth.

For the moment, though, there aren’t too many alternatives in Dharavi. Roshan Kalim says business hasn’t been this bad in his nine years in the leather trade. Profit, Kalim adds, has dropped from some Rs 8,000 to Rs 1,500 a month. He scoffs at my question about bank credit, saying that he plans to sell land in his Uttar Pradesh village and invest it in his Mumbai shop. When I wonder aloud whether that would be a wise decision, Kalim shrugs and says there is little else he can think of doing. He is sure, he adds, that an investment here would see better returns than in his village. I wonder what his family would do if he ends up regretting the sale of ancestral land.

No village boy hoping against hope to make it in the big city, Kamble has a Rs 5 lakh home loan from a state-owned bank. He estimates the turnover from his shop to be around Rs 12 lakh a year, and knows interest rates in the informal market off the top of his head. Still, when the time came to buy the shop he had been running for ten years, Kamble found himself turning to friends to raise the Rs 18.5 lakh needed.


When banks do manage to understand their clients’ needs, however, the results are stunning. “I started with Rs 16 in 1993,” says Parvati Fatnani, whose Balaji Industries makes leather and rexine goods such as CD covers. Within two years of starting the business, she got a loan of Rs 3 lakh. Now the company has a loan of Rs 2.5 crore from Indian Bank to support land and building requirements, working capital and machinery needs. Their turnover has reached Rs 6 crore. In 2005, Fatnani’s small-scale export oriented unit was even felicitated by President APJ Abdul Kalam. 

“Dharavi is a golden land,” says Parvati, “It’s very easy to start and grow, but after one stage you have to be organised.” Ask her about her bank, and she beams: her company’s operations are thrice the size since she shifted her account to Indian Bank.

Parvati’s success is the bank’s success. By April 2010, the Dharavi branch of Indian Bank had opened 27,000 savings accounts, met all its internal business targets, and done Rs 45 crore of business, almost all of it in remittances of migrant workers to their families. Officials are planning to shift to bigger premises.

But there are many who don’t have the good fortune of working with an understanding bank. Most banks are fairly inaccessible; bank employees look through you; clients are herded into lines; many are told to come back again and again, which daily wage workers can’t afford and businessmen have no time for.

One leather garment exporter, whose family has owned factories in Dharavi for three generations, once tried getting a loan against the family apartment in Bandra as collateral. With no documentation to prove ownership of his factories and the family unwilling to extend the mortgage on their flat, the exporter is now thinking of selling his property to raise capital.

“Nobody wants to give their house as collateral,” he says, asking his name not to be disclosed. His turnover in 2008-09—mostly from exports—amounted to some Rs 7 crore. But with big markets in Europe and the US stagnant, and the rupee rising again, he would like to focus on the domestic market. But, “How do you do business without finance?” he asks, his frustration evident.