Three Wheels United: helping Bangalore's auto drivers go green and earn extra money
40-year old G Malliga is one of the few lady auto drivers in Bangalore and has been driving an auto for the past 16 years. She bought her own auto in 2000, as she was eligible for a bank loan, given to individuals belonging to the scheduled caste or scheduled tribe (SC/ST) community. After a decade of loyal service, the two-stroke auto rickshaw, which the government had banned in 2008 because it was heavily polluting, started giving her problems. “I had engine problems, for which I spent Rs 5000, then I had to change the tyres, the small repairs never stopped,” says Malliga. Besides the pain of having to pay for these repairs, what hurt Malliga more was that the two-stroke auto had to be hand-cranked to be started, her shoulder started to hurt. On most nights she would writhe in pain finding it difficult to sleep.
This January her woes came to an end as she was able to dispose her old two-stroke auto and replace it with a spanking new four-stroke with a push start thanks to Three Wheels United (TWU), a Bangalore-based social enterprise. TWU is trying to change the living conditions of auto drivers by giving them access to affordable loans, providing with insurance and boosting their incomes through advertising.
Malliga became the sole earning member in her family after her younger brother died unexpectedly. She takes her of her sister-in-law, niece, mother and an elder sister who’s physically challenged. More than half or Rs 5,600 of the Rs 10,000 she earns monthly is paid towards the loan, after taking care of other expenses, she is left with no money to save. She hopes for a better life for her niece.
The story of TWU and an ISB graduate:
In 2009, Ramesh Prabhu, a chartered accountant with an MBA from International School of Business (ISB), was a regular corporate type working in the banking and financial industry busy setting up a trading desk in Noida. He read about Dutch social enterprise (TWU) that was trying to reduce emissions by conducting a competition called the ‘hybrid tuk-tuk battle’ that had four Dutch and three Indian universities participating. The battle was to design a hybrid eco-friendly system for auto-rickshaws to reduce CO2 emissions and improve the living conditions of drivers. HAN’ds On Eco Tuk designed by the students of Hogeschool Arnhem and Nijmegen (HAN) emerged as the winner. Using a LPG direct injection system they managed to save up to 26 per cent energy and reduce fuel costs by 53 per cent.
For Prabhu, the timing was good as TWU, which was started by Stef Van Dongen from the Enviu Foundation, were looking for an entrepreneur who could implement the project in India as the test market. After the initial meeting Prabhu quit his job to start TWU (registered as Three Wheels United India Services in India). “What excited me and motivated me was that tech was the focus but it included socially inclusive economic model. Auto drivers are mostly viewed as being bad. The disease is not known just the symptom. Drivers are most exploited and jumped at the opportunity to build this from co-creation model from scratch,” says Prabhu.
TWU conducted meetings with 500 auto drivers through an NGO partner to understand the situation on the ground a bit more and finally came up with their social business model.
The tale of Bangalore auto drivers:
In a recent study in Bangalore, participants were told to take an auto ride. They were put through a battery of tests before and after the ride. The results were alarming. For most participants their blood pressure had increased, breathing had quickened, and hearts beating faster. They were all displaying classic signs of severe anxiety.
All right, I have to admit, the study is fictitious. I just made that up, but if you were somebody who has traveled in an auto and have dealt with Bangalore auto drivers, you would find it easy to believe right? Auto drivers refuse to take you where you want to go, they demand excess fares, pick up fights, take you on a joy ride and never seem to have change. In Bangalore the devil wears khaki and rides on three wheels. There are many Facebook groups deriding them, and this is not without good reason; so far, so true.
But there’s more.
Most auto drivers live a life of constant misery. Your ride into hell ends the moment you get out of an auto, for the drivers it is never-ending. Other than the monotony of driving an average of 100 km on Bangalore’s noisy, pot-holed, polluted roads; they have to deal with paying bribes and fines to cops, worry about fixing their autos that is in constant need of repairs, suffer from low self-esteem because of a lack of social status and after paying the owner a daily fee most live a hand-to-mouth existence.
These facts I did not make up. According to a 193-page study done IISc’s Centre for infrastructure, Sustainable Transportation and Urban Planning (CiSTUP) on the auto rickshaw sector, like a lot of blue-collar professions, auto drivers have been priced out of Bangalore that caters mainly to its well-paid tech community.
According to the study, a typical driver in Bangalore earns Rs 5,000 to 9000 per month. If he rents his vehicle he saves Rs 300 savings per day, if he owns the auto he saves Rs 500. 90 per cent live in rented houses paying and pay between Rs 2000 to 5000 as rent. 52 per cent of drivers said they have paid fines/bribes to the police that accounts for Rs 100 to 500 per month. A majority or 62 per cent are the sole earning members of their family supporting anywhere between two and five members. Auto drivers are dependent on agents who help them get finance, necessary permits and licenses. There are approximately 1.25 to 2 lakh auto drivers in the city, with 40 per cent being owner driven and the rest being rented.
It also throws light on why drivers refuse to take passengers where they want to do. Reasons given include: trips are too short, won’t get a passenger on return journey, done for the day, need to drop off auto at owner’s residence, needs to run errands, slow traffic, bad roads, too far and no LPG bunks.
“We learned 75-80 per cent of all autos are not owned, but rented, there are many drivers who after 10-18 years still did not own the autos- because they did not have access to banks. Going through private financiers will increase the costs involved to almost double the cost as they charge 36-80 per cent annually. They repossess the auto if they don’t pay for a month or two,” explains Prabhu.
Rolling out TWU:
They started with a study between November 2009 and April 2010. By June, they had a clear understanding of model and drilled down to the most critical aspect, that of partnering with banks that would provide loans at attractive interest rates. This would prove difficult because most auto drivers do not have the necessary papers required to procure a loan. Prabhu spent June to September forming the company, getting funding and forming the team.
They also used this time to scope out driver groups and tie up with Corporation Bank and Pragati Gramin Bank. Each group works on the microfinance principle of joint liability, one driver stands responsible for the other drivers, each group has four to five drivers. By October 2010 they had started.
“We have 500 plus drivers grouped together, 150 have got loans so far and another 350 in the documentation process. 75 per cent is funded by banks , drivers get 15 per cent (22-23k from driver 14-15 k from TWU) with ‘Namma Auto’ providing the 10 per cent guarantee. All autos are registered on driver’s names but hypothecated to the respective banks. Once the drivers have self-selected themselves into a group, savings accounts are opened so that they can save the Rs 22,000 to Rs 23,000 that is required as a down payment.
The response so far has been good, drivers make a daily payment on their loans and have been prompt with payments, repaying more than what they were supposed to. Loans that were supposed to be repaid in 60 months are expected to be to be closed in 45 months. Since drivers work on daily cash flow method, all drivers have to pay their EMIs on a daily basis.
Other than the acquisition of new autos that costs less to maintain and becoming owners, the biggest benefit for drivers is the tie-up that TWU has with corporates for advertisements that earns them an extra income that’s anywhere between Rs 500 and Rs 1500. Malliga for example has decided not to take the Rs 500 she earns from advertising and instead set if off against her monthly loan burden.
Dealing with auto drivers comes with its own unique set of problems. They are not part of banking system, possess no health or life insurance, due to lifestyle and living conditions are prone to health problems (leading them to borrow for healthcare and food), suffer from low self-esteem, earn a paltry Rs 150-200 per day as net income, and also have their vices like drinking, smoking and gambling.
Therefore only drivers who have been living in same area for 2-3 years, with known family members through their partner NGOs organizations and history of participation of working with community are given loans. “We don’t give loans to migratory drivers. All of them have to have a license, auto badge and have the necessary documents,” adds Prabhu.
TWU plans to consolidate 2000 plus drivers by mid-2014 and expand either directly or through a franchise into another city. “We are working on mobile apps for Android and iPhones and will roll it out by the end of 2012. The autos will be equipped with GPS; this will help us connect passengers with those drivers who want to go in that direction,” explains Prabhu.
Prabhu should be cognizant of the risks that are associated with organizing a sector that has been largely resisted change. Expanding on a 2007 pilot by the State Transport Department, Padmashree Harish founded Easy Auto in 2009 that enabled commuters to book an auto through SMS or an interactive voice system. 2500 Bangaloreans signed up by paying Rs 75 for the 250 strong Easy Auto. Autos came equipped with GPS, LCD monitor that displayed advertisements, a water bottle, first-aid kit and a radio. Auto drivers were provided with soft skill training, a Rs 1 lakh insurance and given Rs 2,000 to purchase a uniform and for annual maintenance.
It failed to take off. Reasons given were a lack of revenue, fleet not owned by Easy Auto, few autos (needed a minimum of 1000 vehicles), no Easy Auto stands and difficulty with procuring new permits.
Prabhu says that TWU has already broken even earning revenues from fees for the services provided to the drivers, sales incentives from auto companies and a cut from advertising displayed on autos.
The journey may have been rather smooth for TWU so far, but Prabhu should know that the ride will get tougher, just like the potholes he navigates in Bangalore everyday .
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