15th July 2021: How a female entrepreneur from rural India survived two lockdowns after COVID-19—and a lesson for financial service providers

Savita (name changed), a mother of three, sells cosmetics from her small corner shop (located in a western state of India), which she started in 2016. Savita runs the shop independently without any interference or help from her husband, who is a farmer. The family has no other source of income.

We have been tracking Savita since late October, 2020. After COVID-19 hit India and the first nationwide lockdown was imposed in late March, 2020, Savita’s business was hurt and her monthly income fell from USD 67 to USD 34. The pandemic devastated the economy of the nation and people started to limit their spending on daily necessities—and this reflected clearly in Savita’s business. 

Of her top-five bestselling items, only two—basic clothing items and footwear continued to be sold as before. Yet the sales of the remaining three top-selling items, which were comparatively more akin to luxury items—lipstick, bangles, and shampoo fell almost to zero. Even the wedding season of April to July could not alter this trend, which on other years would have ensured good sales for Savita. Yet she managed to survive the first lockdown, buoyed by the revenue from sales. 

The markets started to open toward the end of the year and Savita’s business started to recover gradually (please see the graph below). The winter season is generally the best season of the year in terms of business because beauty products, fancy clothes, and footwear sell more. She had to close her shop for 10 days because of a death in the family. The months of January and February showed a healthy recovery and sales peaked during this time. Savita mentioned that in her area, the wedding and festival seasons in January-February-March and June-July are the best times for her business and that is evident in the graph—which shows an increasing trend in income till March.

From mid to late March onward, the second wave of the pandemic hit India and COVID-19 cases started to increase. A second lockdown was imposed in Savita’s state in April and it started to ease from June, 2021. Yet when we compare the data on income during lockdown 1 (USD 34, self-reported) and lockdown 2 (USD 93—average net income of April-May), we can see that the impact of lockdown 2 was not as severe as lockdown 1. Why is this so?

Two reasons emerge: (1) Savita’s village had zero COVID cases during lockdown 2—the fear among people were not as high as other parts of the country, hence her sales continued as before, and (2) lockdown 2 had provisions of opening the shop for a few hours. Savita managed to keep her shop open through most of the day. 

Savita’s resilience

Savita, however, continues to grapple with issues in the supply chain for some of her goods—especially footwear and apparel. Two main issues are:

1. The suppliers ask for higher commission—mostly because they know that the lockdown did not affect Savita’s business much. 

2. Savita’s family faces financial stress. They had to buy a laptop for online classes of their children, who are both in secondary school. While their savings have depleted, Savita and her husband intend to buy a camel to help with farm work. The camel will cost ~approximately USD 805. 

Savita and her family do not have any existing loans—neither from formal sources nor from informal sources. Even during lockdowns, she did not take any credit from suppliers or any other resource. She depended on the family savings to buy the laptop as well. Savita reveals that she and her family try to avoid loans. “It is not good to buy something by taking loans. What if I cannot pay it back? Better to wait and save money to buy something that we want”, she says. 

This makes us wonder if specific savings products for women micro-entrepreneurs like Savita can emerge. We will keep engaging with women like her in the hinterlands of India and elsewhere to see how they overcome these challenges. Watch this space for updates.

15th June 2021: Entertainment, social media, digital payment, and online shopping are the main digital use-cases of our diarists

The penetration of smartphones is almost universal among our diarists—24 out of the 25 have a smartphone. While 18 of them use a smartphone and six of them use both a smartphone and a feature phone. One diarist who runs a laundry business has just a feature phone. As depicted in the graph below, entertainment, social media, and communication are three major use-cases for smartphone owners.

60% of the corner shops that use digital payments using the commonly available payment applications—Paytm, PhonePe, and Google Pay. Six diarists use online shopping apps—Flipkart, Amazon, and Paytm Mall.

Diarists who are CICO agents use their smartphones even more. Besides using Facebook, WhatsApp, and YouTube for entertainment, the diarists use these platforms for their work as well. They use WhatsApp to communicate with both bank officials and customers—especially with regular ones like pension holders. They use Facebook to connect with fellow banking agents to keep updated with new rules and regulations. They use YouTube to watch content posted by the Reserve Bank of India (RBI) and other banks to know about the markets, new regulations, and guidelines.

One of our diarists, Rajan from Haryana runs a small eatery from which he sells freshly cooked meals and snacks. COVID-19 was his reason to adopt digital payments. The pandemic made his customers wary of eating unpacked food outside and safety measures assumed utmost importance. Rajan changed his approach to business. Besides using gloves and serving food in disposable plates instead of old newspapers, Rajan began using mobile wallets for transactions. Using digital payments in place of exchanging cash increased his safety, and reduced the concerns of customers, which led to increased footfall. 

For most of our diarists, however, we do not see COVID-19 catalyzing a higher use of digital platforms. All except three smartphone holders were already using digital platforms even before the pandemic. These three non-users reported that they did not use digital platforms mostly because they lacked digital literacy and did not feel any need to use such platforms. As their customers are still willing to deal with cash, the nudge to use digital payments because of COVID-19 was never relevant for them. Hence, they remain outside the digital world and are comfortable in dealing with cash alone.  

26th May 2021: What affects the income of branchless banking agents in India?

Data from our Diaries project shows that several factors affect the income of branchless banking agents in rural India. These include the location of the shop, the status of merger or acquisition of the banks they serve, seasonality, and identification of new use cases. 

Mukesh and Vikram (names changed) are both branchless banking agents from our Diaries sample. They are located in a northern state of India and both belong to nearby localities (their homes & shops) and both serve the same bank—a major one in the state.

The data on net income from the branchless banking agency business for both agents mirror each other—albeit with a considerable gap in terms of values.

How can we explain the trends in income? Both Vikram and Mukesh told us that the people in their localities had started to recover gradually from the shock of COVID-19 and their financial situation started to improve as well. And that reflected in the income data of the banking agents as seen from the graph, which shows an increasing trend in monthly net income. When we last spoke to them before the lockdowns in May, the second wave of COVID-19 was yet to disrupt lives in their area and things were mostly business as usual. 

Another factor that contributed to the increasing trend of their net income was a merger that happened between their bank and two other banks. That led to an increase in customers, and in turn, an increase in income. Additionally, the factor of seasonality also changed the trend in net income. March is the time of the year when farmers sell harvested crops to the market. That increases their use of cash-in/cash-out (CICO) and money transfer services and increases the income of banking agents. The fact that Mukesh got permission from his bank to distribute widow pensions and old-age pensions also contributed to his increase in income. 

Yet why does Vikram earn more than Mukesh? The answer lies in location, which can be the single most important factor that determines an agent’s income. Mukesh’s shop is located in a small market in the village and his customer base is limited to locals. On the other hand, Vikram’s shop is located in the main market area of a town that is located close to a national highway and therefore has more exposure to clients from different parts of the area. Vikram’s shop is also close by to the bank branch, which occasionally diverts the customers with small ticket-size transactions to his shop to reduce customer load. All these factors result in high customer footfall, which leads to high income.  

Does Mukesh have any plan to grow his business? Yes, he does. He has already secured the permission of the bank to disburse pensions and it helped to increase his income (as mentioned before). At the time of reporting, he had plans to target another new use case: digital disbursement of salary of the teachers of the local village school through monthly camps. He had already secured permission but the closure of the school due to the pandemic stopped him from materializing his plans. 

We will keep tracking both the diarists and see if Mukesh can overcome the location-related challenge of his business with his enterprising nature. 

5th April, 2021: Ignorance of customers can be bad for business

Toward the end of 2020, India saw a gradual decrease in COVID-19 cases and it continued in the new year. However, the situation significantly worsened at the time of writing. The month of March, 2021 ended with the highest number of fresh cases since 10th October 2020. The second wave of COVID-19 is getting propelled by laxity in safety measures by the people of the country.

The situation reflects in the business of Iftikar, our diarist who runs a medicine shop in a rural area of northern India (please see the graph). Contrary to what popular opinion might suggest, Iftikar’s pharmacy suffered losses as well because of the pandemic. This is primarily due to two factors: a) people delayed their scheduled visits to hospitals and clinics in the wake of the pandemic. As a result, purchases of prescribed medicines fell. b) The pharmacy is located on a highway, which is close to the main market. His sales reduced as far fewer customers traveled for longer distances. 

During our discussion in February 2021, Iftikar revealed that sales of masks and sanitizers, which were sold extensively during the initial months of the pandemic, are almost zero as people have become complacent and have stopped using them. However, during our discussion in early April 2021, Iftikar mentioned that the sales of masks had picked up again but sales of sanitizers were still negligible. 

The ignorance and complacency of the people are proving to be dangerous for public health and it has affected Iftikar’s income as well. 

7th March 2021: A vicious cycle of income and business expenses

Shiv, one of our diarists, runs a shop in Kolkata from which he sells snacks, cosmetics, and food items. 

His shop is Shiv’s only source of income. Before COVID-19, he would earn INR 15,000 a month on average as net income from the shop. During the harshest months of the COVID-19 pandemic in 2020, his earnings fell to INR 8,000 a month. At the time of reporting, his income is yet to reach the levels from before the pandemic. In February 2021, Shiv’s total income was INR 5,670/-. 

Shiv hoped that the situation will go back to the pre-pandemic conditions. Yet a new problem arose as 2021 started. His supplier, with whom he has had a long engagement, became reluctant to supply stocks on credit. As per the existing arrangement, Shiv would pay 60-70% of the cost while buying and pay the rest later. Considering his declining monthly income, Shiv thought it was wise to stock a lesser amount of inventory in his shop. This is evident from the trends in his business expense, as seen in the graph. 

This is a vicious cycle: lesser stocks due to lesser income result in lesser sales and that in turn leads to lesser income. The disturbance in this stock-sales balance might seem trivial, but shopkeepers like Shiv struggle to escape this trap. We have observed this issue in multiple shops from the Indian sample.  

Last Updated: July 15, 2021