For the past year, as part of my Peak Urban research, I have been researching the emergence of digital money and Uber-like online transport booking services in the auto-rickshaw industry in Bengaluru.
I have witnessed huge gaps in provision to services, particularly for these low-income self-employed drivers who are marginalised from regulated banking institutions and are forced to seek alternative financial arrangements at exorbitant costs.
They provide important transportation services for the public, that are designed to supplement the bus and Metro systems. Yet these drivers are not financially supported in terms of infrastructure investment, salaries, health insurance or retirement pensions.
Their jobs exist almost entirely because of deregulated and unregulated financial institutions. These institutions benefit from the precarity of these drivers who live day-to-day in perpetual cycles of poverty and debt, and it is passengers who must negotiate daily fare rates and journeys.
In my interviews with financial institutions, staff told me that “many drivers default on their payments” and therefore “banks are not willing to loan drivers the finance required to purchase a vehicle”. Not only are drivers high-risk borrowers, the vehicles themselves account for part of the associated risk. On failure to complete a loan repayment, vehicles are traced and seized for auction to recover the loan and interest. However, on re-sale of a vehicle, recovering debt is not certain.
Moneylenders
The price of an auto-rickshaw is Rs 1.8 lakh, and it will depreciate by Rs 60,000 (one third of its original value) within one year. Banks are unwilling to invest in second-hand vehicles because of the risk of engine failure and costly repairs.
A second-hand vehicle’s value reflects not only the vehicle’s condition but also economic markets influenced by the ad hoc introduction of new vehicle permits by the government, as well as a network of financers and brokers. Bank interest rates (8-11 percent per annum), therefore, cannot cover the risk associated with vehicle investment.
These factors leave drivers with little choice but to approach non-banking finance companies, who charge deregulated interest rates of about 16 to 24 percent per annum, or non-registered moneylenders who charge 24 percent and upward annual interest rates.
A driver shows me their loan repayment cards from an informal private lender. He has three; one for Rs 30,000 and two for Rs 25,000 each. Pic: Lucy Baker
The drivers’ dependency is determined by their lack of credit history and at times their legitimacy. Unregistered private financers are willing to lend to drivers without paperwork on reference by a known contact. A tightly-knit network of agents, informants and vehicle seizers constantly work to chase up late payments and to recover vehicles from defaulting drivers.
The police
Traffic police adds another layer of complexity to drivers’ dependency on private moneylenders. The police regularly take small bribes rather than collecting full fines for offences such as operating shared services, failure to produce a driving licence/permit/‘display card’.
In peripheral areas of the city where unemployment is high, and education levels are lower than average, informal services provide an opportunity for income and cheap transportation. However, this encourages drivers to enter the industry without the paperwork required by registered finance institutions.
Moneylenders and police
With a constant supply of customers, limited market competition, and the steady possibility of recovering drivers’ loans by seizing their relatively small and traceable vehicles, moneylenders are profiting from police corruption and loose law enforcement.
The police often justify these actions on the grounds of compassion for those living in poverty, and pressure for young men to be engaged in employment legally or illegally. This leaves urban planners in a dilemma knowing that if police corruption and leniency in enforcing the law is taken seriously, then perhaps these deprived, peripheral communities of the city could be worse off.
However, in the end, the continuing dependency on private unregulated (informal) and deregulated (formal) financial institutions is preventing the upward mobility of the poor. Informal and deregulated finance industries play a role in communities, yet they feed on precarity and poverty. Often the harassment faced by the poor whilst they remain dependent on informal money lending institutions can also lead to cases of violence and even to family suicide pacts as can be traced in court proceedings and newspaper articles over the past year.
Passengers
The public are unaware of the complexity of why drivers are demanding higher fares than those set by the government. This leads to a continuing dispute between desperate drivers and enraged passengers. For many drivers, at least one month’s salary will be lost to interest fees each year. This expenditure is not recognised within the government-stipulated fare rate.
Harried passengers are unaware that loans are not a once in a lifetime entry into the driving industry, but are a regular part of drivers’ livelihoods that – for the majority – do not lead to higher salaried opportunities.
In short, from my research, the lack of regulation in the finance industry, a tight network controlling vehicle markets and the lack of consistent law enforcement contributes to the ongoing reinforcement of socio-economic inequalities and the continued stigmatisation of auto-rickshaw drivers in Bengaluru.
[This article was originally published at PEAK Urban, and has been republished here with permission]
Ola and Uber should be banned for autorickshaw. I wait till a good chap comes who will be courteous and tip them well for being decent. Damn Ola and Uber. They are destroying auto drivers lives
[Editor: This comment has been edited to suit our comments policy]
I get all these, it is sad. But what I don’t get is why don’t they take the ride when and where I want. My experience with getting a ride with an auto is barely 10% even after I am willing to pay more than the govt. fixed rates. They just refused to take the business. Even when they are willing, they demand fare which is like Rs.30/km. It puzzles me to no end why don’t they just work.
You have covered only partial story. Have not explained how much uber, Ola earning they get.
The author of this article has probably never taken an auto-rickshaw. *Most* of the auto rickshaw drivers are some of most dishonest and insincere workers I’ve ever seen – not willing to ply on routes they don’t prefer, not willing to ply at meter rates, scamming tourists / foreigners / outsiders — a good fraction of them are just short of thieves! Their plight would have been far far better had they stuck to the rules and been honest like say taxi drivers in Mumbai. More people would have been taking auto rickshaws.
Appriciate your research and work behind…
However the attitude of these self employed have made them what they are…
Bengaluru auto drivers need to learn from Mumbai counterparts….
Indeed neither I am from Mumbai nor Bengaluru…and that’s where I could get a bit objective…
Rude / Harrass passenger with high tariff quote / with colligues they team up / behaves bad with lady…
Anyways that’s my point of view…
Indeed a real help to these is to train them on humility and professionalism…
Auto industty would survive if they demand slightly more than what’s stipulated by government or just 10-20 rupees above the meter. Koramangala 5th block to BTM, by meter it was 34 rupees and he starts from 150 and comes down till 120. Because of this greediness and their rude behaviour no one wants to board Thier auto. Most of them have real bad road sense. Someone like me never want to get into an auto who don’t put indicator or outs wrong indicator or drives as per his wish , even when yellow light is on.. etc.. I follow these rules and I prefer them only when they follow these. On the whole, they have created lot of issues to common road users, people who walk on road are always in danger of auto rickshaw hitting them. If they get into a disciplined way of working people’s outlook towards them can be changed. Otherwise they deserve to be in the state that they are in,for their behaviour. We prefer Ola Uber, because of the route and fare. We know it’s more than meter,but these drivers don’t argue, they don’t ask more, they also mostly follow the route .. time for them to change. No mercy, no support into their change their attitude.
Most of the auto raja’s have been minting money by exploiting passengers .They had a monopolistic position before the advent of cab aggregators. Now their services are barely required if its that urgent. Aggriators have captured sizeable number of market share and more new users joining every day.
Only way out would be to adopt this technology and earn a decent living.
By the way Karma is real.
Poor people should be provided access to banks, and should be educated about the same. informal lending should be criminalized or regulations similar to formal sector should be imposed on such money lenders.
Autorickshaw’s are a nuisance on bangalore roads. Most of them don’t follow traffic rules. Then there are so many of them making it difficult for other vehicles to move in the roads. Unlike UBER and OLA they are also a safety concern as many of them as there are no records of their trips leaving passengers stranded when their safety is violated.