I took six rickshaw rides today (excessive and above the norm for one day). Only one of the drivers had enough change for my payment, while the others either had zero change, or not enough to break 100 rs for me. This leads to time spent digging through my bag for spare change, or having to ask passerbys or shops to break change while the driver waits. None of this is new to me, as it seems that at least once a day a rickshaw driver or a kirana shop owner does not have enough change. Meanwhile, ATMs typically only give you 500 and 1000 rs notes, which means you are perpetually trying to find ways to break your bills at nicer places, and end up spending more money in the process.
Of all the problems I see on a daily basis in India, this isn’t high on the priority list. But it’s a customer problem and market problem that someone could come in and solve, and give the drivers and shop owners, and customers, back the time they waste looking for change.
In fact, the Gates Foundation seems to agree and researched this issue in West Africa:
Jon Robinson, who is running the Gates Foundation’s four savings impact random control trials, (see summary here) and co-authors (Lori Beaman and Jeremy Magruder) did a study of 500 or so small and medium sized enterprises in western Kenya. They found that these small informal firms spend an average of two hours per week looking for change to complete transactions. This contributes not only to lost productivity, it means losing 5-8 percent of profits as a result of missed sales – just by not keeping enough change on hand. Robinson and his colleagues conducted two interventions, where they communicated the fact that they were losing money and time to the firms. They found that when firms were informed, they changed their behavior to keep more change and the lost sales moderated (indicating it was a problem of simply not recognizing the problem, rather than some other constraint.)
The complete study can be downloaded here (pdf).
The study’s results point to yet another cost of cash, and another benefit of electronic money, which has no lumpiness and can thus be divided into any denomination or amount you wish without having to make change.
So, my question of the day is, how can we solve the “I don’t have change” problem?