Try investing in a cycle rickshaw
With Sensex at new highs and real estate dizzy, wondering where to invest your money this year? How about buying a cycle rickshaw? While mutual funds can give you a return around 20 per cent to 30 per cent per annum, investing in a rickshaw can fetch you between 12 to 84 per cent.
The catch: there is no formal avenue for the average investor just yet. Smart operators are doing it quietly at high rates while microfinance institutions are offering much cheaper loans to do the same. But there is definitely a fortune at the bottom of the transport pyramid for those who care and dare.
“Almost 47,000 people have taken loans from us for purchasing a rickshaw so far,” informs Chandrashekhar Ghosh, founder and chief of Kolkata-based microfinance institution Bandhan, who believes rickshaws are worth investing in.
Bandhan, which has 411 branches nationwide gets about Rs. 46 crore per month to serve 76,000 new people every month.
A cycle rickshaw with its various components put together costs around Rs 5,000. The owner needs to get a passing licence from the local municipal authorities, which in Delhi costs Rs. 50 per year.
It costs Rs. 400 per month to maintain a rickshaw while rent for enough space to place a rickshaw in a godown would be about Rs. 300, Delhi’s rickshaw pullers say.
A rickshaw puller pays roughly Rs. 25 to 35 per day as rent to the dealer, which on a monthly basis works out to Rs. 750 to Rs. 1,050.
A one-time charge of Rs. 20 is all that a rickshaw puller needs for a licence, something that is rarely used anyway.
“I make about Rs. 120 a day from which I pay off the rent,” said Mahesh, a rickshaw-wallah in West Delhi’s Subhash Nagar.
A rentier makes anything between Rs. 50 to 350 per month on a one-time investment of Rs. 5,000. At this rate, the return can be anything between 12 to 84 per cent per annum, although the reality is likely to be towards the higher end. However, dealers who lend cycle rickshaws to the poor deny they make so much profit.
“Rickshaws do not run throughout the year,” said Suresh Kumar, a West Delhi dealer who rents out rickshaws.
Organised microfinance companies are increasingly challenging the small-time rentiers.
Bandhan, a registered society, offers loans, usually paid back in a year, at an interest rate of 12.5 per cent per annum, and also gets bank funding.
Typically a Rs. 5,000 rickshaw costs Rs. 5,625 under Bandhan’s scheme, which is open only to women, who are considered more creditworthy. But women can borrow on behalf of men.
Alternatively, the owner can pay Rs 125 weekly and pay off the loan in 52 weeks to an institution like Bandhan as against Rs 125 to Rs 245 that he would pay to a dealer only as rent.