28th September 2017
India has gargantuan problems. The scale of things in India is so large that it becomes almost impossible for an individual to address them without deep pockets. However, something that can be scaled nonlinearly without equivalent investment is technology. Hence it becomes imperative for us to use technology wherever possible to create a transformation in society. Let us take the example of Serv’d.
Serv’d is a social impact company whose mission is to bring ten million people from the unorganised sector, into the financial agenda of the country. It’s very simply stated like that. Let me explain how that would happen:
If you look at the maid who works in your house today, her agreement with you is most likely a verbal agreement. You would have told her to sweep & mop the floor, do the dishes and for that you would pay her three grand. Other than that, there is hardly any conversation. Question like; how many holidays would she get in a month, if she needed to go to her village for a week would that leave be paid or unpaid, or if she felt sick and needed to take a week off, would that be paid or unpaid leave, and many other questions like these are never discussed. The job takes two hours, and she has to come daily. Most of the time, domestic workers don’t get weekly days off. The flip part of this agreement is that the three grand gets paid to her in cash. Consequently, that money never hits the bank. Many times, when she goes home, her husband might take the money and blow it away somewhere, her mother-in-law might take the money, and she thus has no access to the cash she earns in times of needs.
Now, the reason Serv’d picked maids, cooks, drivers and nannies is because they create a very unique segment. They don’t struggle for survival. For that matter, the household income of a maid or a driver is somewhere between thirty to fifty grand a month. Even if the maid makes three thousand from your house, she also works for two hours at three other houses. So she makes twelve grand. Her husband might be a plumber, an electrician or a driver, and he might make between fifteen to eighteen grand. So between the two of them, they make thirty grand. They might have a son who works as a janitor or a peon. He might make fifteen grand. Now their household income is forty-five thousand rupees a month. And I have only assumed one couple and one child. Most Indian families are larger. And I have not assumed that they work in high-tech sectors.
Now the average middle class income of an Indian is forty-five thousand. And banks are aggressively pursuing these middle-class individuals, trying to sell them credit cards, car loans and mortgages. But when domestic workers want credit, they do not get it because all of their transactions are cash based. Why can’t we replicate the benefits an educated person gets for domestic workers. What is difference between these two segments.
No. 1: What is different is that an educated person works for a company. She has an employment letter from the company saying that her employment is legitimate.
No. 2: Every month she gets a salary slip. She gets money in the bank. And her salary slip says that this money went into that bank.
No. 3: A middle class person has a credit card or a bank loan or a mortgage, and therefore she has a credit score. A maid does not have one.
No. 4: The educated lady has the ability to open a bank account because the bankers are pursuing her. The maid might not have a bank account. With the Jan-Dhan Yojana, the government has enabled her to open a no-frills account; an ability she did not have earlier.
No. 5: A middle-class person has an identity; maybe a driver’s license, a pan card or a passport. Underprivileged people did not have it for the longest time. Now with Aadhaar, that problem gets resolved.
No. 6: She has some assets. She might own a house, a car or a bike. Therefore, the middle-class lady has a balance sheet. The maid does not have a balance sheet. Or even if she has one, it is not legitimate. For example, the maid might own the land on which she has house; it might be a small hut but that land is still an asset. But she may not have the paperwork to prove it’s her land or maybe she has mortgaged it to a loan shark
So how do we break this cycle? If a maid has an identity, a bank account, the ability to connect to the internet with mobile phones, and if we could help build an employment history with associated paperwork, then she might become bankable. Let’s understand how Serv’d does that:
No. 1: Let’s assume that you and the maid get into a contract, where you clarify the terms; x number of days off, y amount of money and z number of benefits. And every month an invoice comes to you from her, which is generated by the system. When you pay, the money goes straight into her bank account. A receipt gets generated and is sent to you. The receipt mentions the same amount that got deposited in the bank. Now fast forward two years; the maid has a contract just as you have an employment offer, she has invoices & receipts just like you have salary slips, and she has transactions in the bank. So now, the bankers can understand her cashflow.
No. 2: What she still doesn’t have is a credit score. So Serv’d plans to work with non-banking financial services companies, to give these people small loans, even if they don’t need it. This builds their credit history. For example, we give the maid three grand which she must pay back in three months. Thus, one record gets created with the rating agency saying that she took a loan & paid it back. Then we lend her ten grand. Thus, another record gets created. Now, in two years, she has five records with the rating agency. So, it is fair to assume that she understands responsible credit management. And because she has a cash flow in the bank, which is backed by documentation, the banks can now give her loans. Today domestic workers borrow money from through the shadow economy for by paying between 180% to 240% in interest per annum. Conversely, banks lend money at just 8.5% per annum. Thus, the maid is at risk of losing her land or her jewellery or everything she owns because she borrows from loan sharks. But the minute we give her access to the same banks that we have access to her life improves significantly. This becomes possible because we have created the same system for her that all of us take for granted every day.
No. 3: We also want to give them group insurance. To put it very bluntly, no company wants to insure these people for health. Most of the time, they plunge into debt because a loved one has fallen sick. If the maid’s mother breaks her hip, she will want to give her the best treatment possible irrespective of the cost. That is when they get into debt. We can’t get them individual health insurance. But Serv’d can become their group insurer and thus give them access to healthcare. They don’t have to take government insurance. Because government will send them to Sassoon.
And no. 4: We want to give them retirement benefits. The average lifetime savings of this segment is around fifty grand. We will try to explain to her what a systematic investment program looks like. She may not be able to put more than two hundred rupees a month or fifty rupees a week. But at some point, that contribution would become a considerable amount. Thus we might be able to bring them retirement benefits.
Once we fix these four things, these people will get the same benefits you and I enjoy. We have gratuity, a provident fund; but Serv’d is giving her the same kind of benefits, then it also brings dignity to the job. Today a maid’s daughter does not want to be a maid. But if we could bring respect and dignity to that job, then it would become a choice. Five years back, nobody wanted to be a driver. But today, because of Uber & Ola there are many people want to be a driver. It became a career choice.
And we look at developed economies like North America or Europe, maids are not looked down upon. There, a career choice is being made by domestic workers who want to maintain other people’s houses. And there is dignity associated with it. If we are able to fix the system, we may be able to bring dignity to the job. And Serv’d is about bringing that dignity to people who work in the unorganised sector. It is about bringing financial inclusion and security in life to them. And that’s Serv’d in a nutshell.