Second Big Problem: Desperate Borrowing & Exploitative Lending

In the last article,we saw that the biggest boon which is also the biggest problem in villages in the concept of satisfaction with what people have. The next biggest problem is desperate borrowing and exploitative lending.

Numerous reports have brought to light the exploitative lending through unimaginable lending rates by the unorganized lending sector comprising of local money-lenders. There are instances where the lending rates have exceeded 100% on a monthly basis. The villagers who mostly depend on agriculture, cattle-rearing or small cottage industries require credit when weather conditions are adverse, for marriages and similar family functions and even for paying fines when they go against the village rules. In most cases, the local lenders provide credit at higher rates especially because the villagers require quick access to credit and banks take time to process even small loans of Rs.10,000. At the same time, most of the villagers are illiterate and they shy away from the hassle of paperwork. along with this, it becomes difficult for the villagers to understand the concept of interest payments + installment payments of the principal.

Since, the villagers do not get to see the bankers regularly or on a daily basis, it becomes very difficult for them to trust the banks.

On the other hand, the money lenders in the village are generally the wealthy class in the village who are highly influential.

This type of desperate borrowing and exploitative lending has led to many villagers losing their land, cattle and other property and at the same time a vicious cycle of inheriting debt and bestowing debt to the offspring.

What can be done to remove this problem is the big question?

First, there needs to be awareness amongst the villagers. We need to educate them to take advantage of the multiple benefits that the government is inclined to provide them through cheap financing.

We also need to address the credit needs through innovations in microfinance.

Operational efficiencies of the rural banks need to be developed to cater to the villagers.

What do you have to offer or say???