In India, teaching and empowering street kids to save money

The big idea: In 2001, Rita Panicker, founder of Butterflies, an Indian nongovernmental organization, was determined to find ways to help the homeless children who worked and slept on the streets. Butterflies had programs addressing education, nighttime shelter and health-care services, but Panicker knew that children could gain a sense of independence, stability and pride by helping them control their personal finances.

The scenario: While some children begged for a living, many earned money through jobs, from rag picking to sweeping floors. The children had difficulty holding on to any cash they earned.

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UNICEF estimated that there were 11 million street children in India. They sleep in shelters, bridges, parks, markets and bus stops. Many run away from home because of physical or sexual abuse.

Most street kids work alone, and girls often work as prostitutes. Many steal to make a living. The children are often taken advantage of by bosses, sometimes even enslaved. Government officials, particularly police, are known to extort money as bribes. Because they fear it could be taken, the children spend their money quickly, ensuring a hand-to-mouth existence.

The resolution: Panicker came up with the idea of creating a type of credit union for the children. Since they had no permanent addresses or official identities, financial institutions would not lend them money. Working with Butterflies, Panicker created Bal Vikas Bank, or the Children’s Development Bank (CDB).

The basics of the CDB were: The children made all the rules and decisions. Volunteers from financial institutions would teach the children banking skills. To open an account, a child had to fill out an application in exchange for an account number and passbook. An initial minimum deposit was required, and the interest was 3.5 percent per month. If the child kept the money for 11 months or longer, they received a bonus of 50 percent interest. A committee made up primarily of children determined who could become a member of the bank

At first, the children were cautious about who could join, turning down “smokers, drinkers, drug-takers, drug-peddlers, bullies, pickpockets or gamblers” — until they realized that these restrictions would disqualify them. If a child wanted to start a business, the volunteers would help draw up a business plan and prepare an application. A loan committee, comprising mostly of children, would consider the application, question the applicant about the business and repayment, and decide on the loan. Panicker was pleased to see that many children had a strong entrepreneurial spirit.

The lesson: As Panicker suspected, the experience taught the children important lessons and helped give them a sense of self-confidence and security. Not only did they learn basic principles of banking, business plans and interest, but they learned to manage money.

Seemingly insurmountable problems in society and business can be addressed with creative and empathetic thinking. Panicker gave the children credit for having skills, talent and responsibilities that many would have discounted.

— Jenny Mead and Patricia H. Werhane

Mead is senior researcher at the University of Virginia Darden School of Business. Werhane is professor emeritus at Darden and Wicklander Chair of Business Ethics at DePaul University.

 
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