Nararative aproach to study business model of flower sellers and rule of micro finace

NARRATIVE APPROACH TO STUDY BUSINESS MODEL OF FLOWER SELLERS AND ROLE OF MICRO FINANCE Dr.K.Prabhakar, Professor Velammal Engineering College,kprskr@gmail.com V.N.Aruna,BE PGPBA,Aruna.v

NARRATIVE APPROACH TO STUDY BUSINESS MODEL OF FLOWER

SELLERS AND ROLE OF MICRO FINANCE

Dr.K.Prabhakar, Professor Velammal Engineering College,kprskr@gmail.com V.N.Aruna,BE PGPBA,Aruna.v.n@gmail.com

Abstract

Flower sellers are part of Tamil culture They are found in every town, predominantly women Use of flowers for different festivals, occasions or as an expression of auspicious nature of event is part flock lore of Tamil culture However, it is not restricted to Tamilnadu and may be generalized for other parts of India However, their business models are least studied and seldom cared for by management researchers One of the estimates indicates the flower market in Chennai is one hundred cores per annum providing employment to approximately one lakh thousand women As predominantly the business is carried out by women with less education, narrative approach has been used to obtain information and make some inferences The model given by www.businessmodelgeneration.com is used to discern different dimensions of business For this study 20 flower sellers were interviewed –mainly about their background and their business model with Focus on how they manage their finances and role of micro finance Also included in this report are insights from 3 others who are a part of the world of micro finance – Mr Matt Duncan

of the Grameen foundation, Ms Rebecca, centre leader of Equitas in Choolaimedu and Mr Viswanathan, a local money lender or in international terms money shark Some of the results are counter intuitive; they prefer the money shark The inferences are given in the form of points to ponder on what should be done by state, administration or civil society to help these millions who are just have no voice or just not worthy to reach except during elections.

Key Words: Business Models, Self Help Groups, Micro Finance Institutions, Money Sharks, Usury Interest rates, flower business

The key words are defined here as they are not universal and contextual in the case of Tamilnadu and India

Business Models

A business model describes the rationale of how an organization creates, delivers, and captures value - economic, social, or other forms of value The process of business model design is part of business strategy In theory and practice the term business model is used for a broad range of informal and formal descriptions to represent core aspects of a business, including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies Hence, it gives a complete picture of an organization from high-level perspective

Self Help Groups

These definition of self-help group is specific to Tamilnadu and the information can be obtained from the website (http://www.tn.gov.in/dtp/shg.htm).SHG is

group of rural poor (includes urban poor; included by researcher) who have

volunteered to organise themselves into a group for eradication of poverty of the members They agree to save regularly and convert their savings into a Common Fund known as the Group corpus The members of the group agree to use this common fund and such other funds that they may receive as a group through a common management Though the norms appear out of reach for rural poor and women, it has been observed by researcher due to strong value systems some of the women groups do follow the norms This aspect is needed

to be researched further The group formation will do keeping in view the following broad guidelines;

Generally a self-help group may consist of 10 to 20 persons However, in difficult areas like deserts, hills and areas with scattered and sparse population and in case of minor irrigation and disabled persons, this number may be from 5-20 The difficult areas have to be identified by the State Level SGSY Committee and the above relaxation in membership will be permitted only in

such areas Generally all members of the group should belong to families below the poverty line However, if necessary, a maximum of 20% and in exceptional cases, where essentially required, up to a maximum of 30% of the members in a group may be taken from families marginally above the poverty line living contiguously with BELOW POVERTY LINE definition: as per Government of India, earning at Rs 10 or less per day approximately, per person, considered as below poverty As per the Government of India, poverty line for the urban areas

is Rs 296 per month and for rural areas Rs 276 per month, i.e people in India who earn less than Rs 10 per day This amount will buy food equivalent to

2200 calories per day, medically enough, to prevent death This actually translates to Rs 3650 per year or US $ 75 per year These SHGs are planned to help the families of occupational groups like agricultural labourers, marginal farmers and artisans marginally above the poverty line, or who may have been excluded from the BPL list to become members of the Self Help Group However, the (ABOVE POVERTY LINE) APL members will not be eligible for the subsidy under the scheme The group shall not consist of more than one member from the same family A person should not be a member of more than one group The BPL families must actively participate in the management and decision making, which should not ordinarily be entirely in the hands of Above Poverty Line (hitherto referred as APL) families Further, APL members of the Self Help Group shall not become office bearers (Group Leader, Assistant Group Leader or Treasurer) of the Group

Managerial Aspects relating to the group governance

1 The group should devise a code of conduct (Group management norms) to bind itself This should be in the form of regular meetings (weekly or fortnightly), functioning in a democratic manner, allowing free exchange of views, participation by the members in the decision making process

2 The group should be able to draw up an agenda for each meeting and take up discussions as per the agenda

3 The members should build their corpus through regular savings The group should be able to collect the minimum voluntary saving amount from all the members regularly in the group meetings The savings so collected will be the group corpus fund

4 The group corpus fund should be used to advance loans to the members The group should develop financial management norms covering the loan sanction procedure, repayment schedule and interest rates

5 The members in the group meetings should take all the loaning decisions through a participatory decision making process

6 The group should be able to prioritise the loan applications, fix repayment schedules, fix appropriate rate of interest for the loans advanced and closely monitor the repayment of the loan instalments from the loaned

7 The group should operate a group account preferably in their service area bank branch, so as to deposit the balance amounts left with the groups after disbursing loans to its members

8 The group should maintain simple basic records such as Minutes book, Attendance register, Loan ledger, General ledger, Cash book, Bank passbook and individual passbooks The sample preform for maintenance of above records by the group is in the Annexure II for guidance These could be used with necessary changes/ modifications wherever required

9 Fifty per cent of the groups formed in each block should be exclusively for the women In the case of disabled persons, the groups formed should ideally be disability-specific wherever possible, however, in case sufficient number of people for formation of disability-specific groups are not available, a group may

comprise of persons with diverse disabilities or a group may comprise of both disabled and non-disabled persons below the poverty line

Definition of Microfinance and MFIs

Microfinance services as “providing financial assistance to an individual or an eligible client, either directly or through a group mechanism for : i an amount, not exceeding rupees fifty thousand in aggregate per individual, for small and tiny enterprise, agriculture, allied activities (including for consumption purposes

of such individual) or ii An amount not exceeding rupees one lakh fifty thousand in aggregate per individual for housing purposes, or physisuch other amounts, for any of the purposes mentioned at items (i) and (ii) above or other purposes, as may be prescribed.”

MFIs could play a significant role in facilitating inclusion, as they are uniquely positioned in reaching out to the rural poor Many of them operate in a limited geographical area, have a greater understanding of the issues specific to the rural poor, enjoy greater acceptability amongst the rural poor and have flexibility in operations providing a level of comfort to their clientele There are several legal forms of MFIs However, firm data regarding the number of MFIs operating under different forms is not available It is roughly estimated that there are about 1,000 NGO-MFIs and more than 20 Company MFIs Further, in Andhra Pradesh, nearly 30,000 cooperative organizations are engaged in MF activities However, the company MFIs are major players accounting for over 80% of the microfinance loan portfolio (www.nabard.org)

Usury Interest Rates

Usury was interest above the rate allowed by law Today, usury is commonly used to refer to the charging of unreasonable and excessive rates of interest

Loan Shark or a Kandu vaddi money lender

A loan shark or kandu vaddi money lender in local parlance is a person or

body that offers unsecured loans at high interest rates to individuals, often

enforcing repayment by blackmail or threats of violence They are generally

part of criminal-police-politician-judiciary network and most of their tactics are

above law Sometimes, the interest rates are as high as 300% per year and never

less than one hundred per cent per annum in most of the cases

TABLE OF CONTENTS

2 Objective: 10

3 The flower sellers of Choolaimedu: 10

4 Limitations of the study: 11

5 Narratives 12

5.1 Vasantha: 12

5.2 Kannama.S: 13

5.3 Sivabaghyam: 14

5.4 Lakshmi: 15

5.5 K.Rani: 16

5.6 Uma: 16

5.7 Sakkarai: 17

5.8 Veeramma.M 17

5.9 Indira: 18

5.10 Anjalai: 19

5.11 Gowri: 19

5.12 Aarumugam Ammal: 20

5.13 Vasantha: 21

5.14 Kuppamma: 21

5.15 Shanthi: 22

5.16 Lakshmi: 23

5.17 Leelavathy: 23

5.18 Tamizhchelvi: 24

5.19 Panjaksharam: 24

5.20 Kannatha: 25

6 Business model of flower sellers: 26

7 Other insights and inputs: 26

7.1 Vishwanathan: 26

7.2 Rebecca: 27

7.3 Matt Duncan: 27

8 Observations: 28

8.1 Demographic aspects: 28

8.2 Business aspect: 29

8.3 Financial aspect: 30

Appendix 1: 32

Appendix 2: 33

1. Introduction

The two things that an average Indian buys on an everyday basis are vegetables and flowers Not bouquets or fancy bunches of flowers but long strings of fragrant flowers Flowers are an integral part of daily lives, especially to Hindus who consider them as a

superior form of offering to God However, it is prevalent among other religions It was an anathema for the Tamilians, if the unmarried and married women did not wear flowers in their hair Now, even if they don’t adorn their hair with flowers, they at least make sure that they adorn the pictures of their Gods with flowers Flowers here not only symbolises love, but also worship and respect

Majority of households interacts with a flower seller on a regular basis and this proximity

is the key inspiration to conduct an exploratory study on their way of life In a city that boasts

of dozens of flower sellers in every major street, their sheer number and their nature of their business is apt for an exploratory study on micro finance Some of the questions that need to

be answered are; how do these flower sellers run their shop? What made them get into this business? How do they manage their finances? What kind of a role can MFIs play in the lives

• Financial aspects relating to their life and business cash flows

The sampling method used for this study is snowball sampling

3 The flower sellers of Choolaimedu:

Twenty flower sellers that the researcher had interacted with and 19 of them are illiterate with only one woman who has studied till 8th standard The flower sellers buy flowers in bulk from either the Koyambedu flower market (whole sale market situated 12 kilometres from Choolaimedu or the Parrys market (smaller wholesale market 14 kilometres

from Choolaimedu) (17 of the 20 buy from Koyambedu and the rest from Parrys) They buy flowers every day, early in the morning at 4 am to 5 am Typically, the sell flowers for 4 hours in the morning and 4 hours in the evening Apart from buying flowers, the other expenses that they incur for the business include travel fare, which ranges anywhere between

Rs 30 to Rs 40 per day, depending on whether they take the share auto, deluxe bus or the regular low fare bus At Rs 10 per bundle, the flower sellers spend Rs 20 per day for the thread in which they tie the flowers

Another important aspect of the business is the concept of delivering flowers to the houses of some regular customers 12 of the 20 flower sellers do flower delivery to houses and they collect money from the customers at the end of the month On an average, this amounts to Rs 1000 to Rs 2000, which varies depending upon the quantity purchased Collecting the money on the monthly basis helps them to meet the beginning of the month expenses such as rent, milk, grocery expenses etc

There seems to be no association or any informal body which brings together the flower sellers of Choolaimedu Each seller operates independently and new comers don’t find

it very difficult to set shop as there is no collective opposition from the existing flower sellers Making a profit in this business is a gamble, as they deal with perishable goods, which is of no use at the end of the day The flowers that are not sold are usually given to a nearby temple or go to the dustbin

4 Limitations of the study:

• In this study, only the flower sellers in the Shanmuganar Salai and Choolaimedu high road were interviewed

• The figures quoted for capital investment and profits made are the ballpark sum that were told by the flower sellers and the researcher had no way of verifying it

• The same goes for the amount of money that they borrowed from the money lender The flower sellers have the habit of constantly taking a new loan as soon as an old one

is paid off or to pay newer loans and there is no way to know the total amount that they have borrowed

• The flower sellers, being illiterate, were able to throw little light in the name of the self-help group (now on wards referred as SHG) of which they were/are a member

They joined the SHG based on peer recommendation and in many cases, the group leader being known to them personally

A case by case description of the flower sellers are given below To have a feel of the work place photographs are added

to the business of flower selling With her savings as the capital, she started this shop

With two handicapped sons, this illiterate woman does her best to support the family

to make the ends meet One son has a fruit shop nearby and another is an auto driver With the help of her sons, who sometimes go and buy flowers from the market and her daughters in law who distributes flowers to the door steps of the customers, she manages this shop which she has been running for 10 years.On a small table that is buckling under the weight of flowers worth Rs 500-1000, she runs the shop And as she doesn’t know how to tie the flowers, she outsources it to another lady to whom she pays Rs 100 per day Each day, she makes a profit at the range of Rs 100 to Rs 200 This amount notwithstanding, she regularly borrows money from the local money lender to meet her household expenses To the money lender, she pays an amount of Rs 50 or 100 per day, depending upon how much money she has borrowed

When asked about her awareness about Micro Finance Institutions, she proudly told the story of how she managed to get a loan of Rs 10,000 from XYZ (to protect the identity) recently in spite of her being 58 years old “I gave them a photo of mine that was taken 8 years ago In that I look 50 years old and thus managed to get a loan If I told them that I am

58, they won’t give me a loan.” She giggles Her daughter in law has also got a loan of Rs

10,000 from XYZ For this loan, she has to make a fortnightly payment of Rs 250 for one year She came to know about XYZ through her friends However, she feels that SHGs are not for her as the procedures involved are not transparent enough for her to understand Expansion Plans

Content with the shop, she has no further plans for expansion or generating more income All that worries her now is her 6 year old grandson who has to undergone an eye surgery

5.2 Kannama.S:

Soft spoken illiterate Kannama was watching curiously when I was speaking with Vasantha Kannama and Vasantha have their shops right next to each other and they whispered slyly as how the other person’s business was affecting them Her voice is barely audible and her daughter Kalpana came to my rescue by amplifying what her mother spoke The former Vellore born vegetable vendor had come to Chennai 40 years back and shifted to flower selling business 5 years back as she could no longer lift heavy basket of vegetables The 60 year old Kannama has 4 sons and a daughter She buys flowers everyday for Rs 1000 and makes a profit of Rs 100 to Rs 150 per day Kannama is lucky to have the support of her daughter in tying flowers and distributing it to customer’s houses Also, her 4 sons and her husband pitch in to help her buying flowers from the market In spite of the help from her daughter, she outsources flower tying to a third party as she doesn’t know how to tie flowers

Expansion Plans

Totally unaware of MFIs and SHGs, Kannama prefers borrowing money from the money lender She gets the loan to meet her other expenses and has no intention of expanding the shop further to generate more income “Taking care of a shop of this size by itself keeps me busy If I expand, I will only end up making a loss” says Kannama

It was interesting to note that Kannama is unaware of MFI when her next shop neighbour has got loan

5.3 Sivabaghyam:

Glib and oozing with confidence, Sivabaghyam is a woman of substance When asked about her education her answer set the tone for the rest of the talk –“so what if I didn't have education? I have talent and that’s all that counts” the reply

This 47 year old Chennai born mother of two is a born business woman With her smooth talks and a knack for identifying opportunities, she is least handicapped by her illiteracy Her shop is set opposite to a small temple in the Shanmuganar Salai Apart from selling flowers, she also sells other items that are required for pooja on small scale –coconut, banana, lemon and betel leaves She runs the shop at a capital of Rs 500 per day This may go up to Rs 3000 during festival times and manages to make profit of Rs 100 –Rs 150 per day She says that she can manage the shop with the money she earns by it And she also proudly points out to beautiful fresh Bangalore roses which she always keeps stock

Flower selling comes to her naturally as she has been on and off in this business since she was 10 years old This is also the family business of her in laws Supported by her mother

in law and her husband who ties the flowers, she has a successful business and has managed

to educate her son, who is a BSc computer science graduate Her daughter studied till 10thstandard and is now married She borrows only for family expenses –weddings, deaths and other occasions Her experience with self help group was not all rosy The 10,000 rupees that she had borrowed from SHG required her to pay Rs 275 every 15 days and she quit the group once she finished the loan “1 year is too long a period for repayment and the meetings that one has to attend is a pain in the neck” she says She is comfortable borrowing money from the local money lenders as she can finish of the loan within 3 months and avail another soon after

5.4 Lakshmi:

55 year old uneducated widow with a 25 year old widowed daughter to support is Lakshmi for you Her shop is very small when compared to the previous 3 A small wooden plank set up at a street corner is her shop, which she runs at a capital of Rs 300 per day For this she earns a profit of Rs 50 and sometimes, this may go up to Rs 100 when her capital increases to Rs

500 Lakshmi was formerly running a small Tiffin shop nearby but she quit the business when her knee started troubling her 1 year ago, she started the flower business with the money that she had saved and is helped by her daughter who ties the flowers Lakshmi also outsources flower tying and pays around Rs 30 per day for the labour She manages the shop from the money she earns from it and is supported by her son now and then Her daughter gives beauty treatment to women at their home Lakshmi is wary of SHGs She was associated with one and had successfully repaid the Rs 5000 loan that she had taken But she decided to opt out when they offered only Rs 7,000 for an Rs 10,000 loan “The SHG leader

is not trustworthy they are trying to cheat us” is what she feels

Half way through the conversation, her daughter Amdahl joins us along with her daughter She explains that now they have got a loan from Equitas for an amount of 15,000 Lakshmi’s face beams with pride when she explains that she had used the loan amount to get

a cycle for her granddaughter Lakshmi is now very strict about not taking any more loans from the local money lenders as she feels that she can make the ends meet through her business “You get used to the money and then you start borrowing more and more When I was young, I could cope with the repayment, but now it is no longer wise After repaying the

Rs 15,000, I am planning to sustain without any further loans and support my daughter in whatever way I can” says this devoted mother and grandmother

5.5 Koran:

Seventy year old Rani doesn’t look a day older than 50 and has

a grit in her that enables her to carry on with her life Deserted

by her 2 sons and a daughter, she now lives all alone and sleeps in the verandah of a kind hearted house owner “My husband died with a loan of Rs 1 lakh 7 years back when I managed to finish that, I spent another lakh for my son’s wedding for which am still repaying In spite of that, they left

me all alone now” she laments

A native of Dhindivanam, she came to Chennai 29 years back and has been into the flower business for 12 years When asked about what made her get into this business, she said that when people came to buy fruits from her husband’s shop, they would also ask if he had any flowers Recognising this customer need, Rani started the flower business despite her husband’s protests Before getting into flower business, she was working as a maid

Her age does not allow her to invest more than Rs 100 or Rs 200 per day for the shop and she gets a profit of Rs 25 to Rs 50 per day Very rarely she invests Rs 500 as capital She

is now afraid of taking any further loans, even from the local money lenders as she feels that

at this age, it will not be easy for her to repay “I can sustain the shop with what I earn My needs are also less and I don’t have to support any one anymore So what is the need for borrowing money?” she smiles Though she is aware of SHG (which she associates with misappropriation of funds) and MFIs, she feels that they are not needed for her

5.6 Uma:

Thirty year old Uma is a class apart from other flower sellers as she does this business

to use her time productively, while for others, it is a means of livelihood Her husband, in association with his father, runs a successful garland business This paved the way for Uma to start selling flowers 5 years ago at her own doorstep Flowers worth Rs 150 to Rs 350 is brought from Koyambedu from her husband and her 2 children –a son and daughter who are studying in 6th and 1st standard respectively helps her in delivering the flowers to the homes

of her customers Though she is uneducated, she is determined to provide a good education

for her children With a profit of around Rs 100 per day and sufficient income earned by her husband, she finds no need to borrow money from outsiders However, she has borrowed Rs

3000 and Rs 2000 from her close friends who have started money lending business “I got the money as they have started this business very recently I have borrowed money just to support them” she says When asked about SHG, she says that it is not for her as attending to their meetings always throws a wrench in her schedule With no plans of expanding the

business, she says MFI is not her cup of tea

5.7 Sakkarai:

Into the flower business for the past 20 years, Sakkarai is a proud mother of 2 sons, one of whom has studied polytechnic and another is into the flower business 45 year old Sakkarai is

a Dindukal native and flower business is their family business Her late husband was also in this business

She started her business with a capital of Rs 100, which she had borrowed from the money lender and now she invests anywhere between Rs 250

to Rs 500 per day for her business, out of which she makes a profit of Rs 100 to Rs 150 per day She is unaware of the concept of micro finance and regularly borrows money from the money lender and this sum ranges from Rs 1000 to Rs 3000, depending upon the needs She utilises this money to meet her household expenses and for paying her son’s education loan For the past 7 months, she is a part of a self help group and is raring to get done with it as she finds it difficult to make the monthly payments and attend to the meetings She says that she

is comfortably running her business with the money that it generates Her sons are her pillars

of support and she is keenly looking forward for retirement from the business

5.8 Veeramma.M

True to her name, Veeramma had courageously battled it out with other nearby flower sellers to set up her own small flower shop in the Choolaimedu