How demonetisation affects farmers at the mercy of moneylenders

Almost every farmer across India's arid cotton-bearing central plateau is a hostage, in one way or another, of the moneylender. The present demonetisation has come as a blessing for them.

For centuries, moneylenders have monopolised rural Indian credit markets. Families have lost land, farmers have been asked to prostitute their wives to pay off debts and, when all else has failed, borrowers have killed themselves to end their misery.

An inescapable cycle of debt continues to grip rural India, particularly its farming class. Yet, the public image of menacing debt collectors does not reflect the actual plight of India’s three million farmers.

Moneylenders have been around for generations, but their business has boomed ever since India's economic priorities shifted, with globalisation, from agriculture to industry.

The arrival of high-cost seeds and pesticides and the attraction of bumper harvests have added to the debts.

In Bina, about 40 kilometre from Nagpur, where I spent almost two years during my career in development finance, I relentlessly pursued a one point agenda: banish the moneylender.

But as has been the lesson of all social and economic experiments and policies: a moneylender is an all-season vampire whose unique DNA makes him resistant to all bugs.

The village moneylenders have hearts harder than that of the jackal.

In every village, moneylenders are reviled, and their business seen as squeezing out the blood of poor farmers. Yet, villagers know there is no life without the loan-shark.

The rapacious moneylender, who plugs the gaps in rural financial services, is also the man they turn to in times of need. You can’t banish him from the financial planet. He remains indelible.

I found that nearly all inhabitants in the village had been compelled at some time or the other to call on the sahukar, the jeweller-usurer, a pot-bellied man with a skull as smooth and shiny as a billiard ball and face blacker than the bottom of a cooking pot.

No matter how much distaste he provoked, the sahukar was the key person in the village. He was its banker, its moneylender, its pawnbroker, and very often its vampire. One must ask, as I did while living in rural India, where the capital of the poor came from, since that is one thing that capitalism requires.

Across the poor countries you will find most tiny businesses being financed by moneylenders. You will always get the common and ubiquitous answer.

“I get my money where everyone else does.” “Where is that?” “Everyone knows. I get it from a five-six.” “What is a five-six?”

“It is the place where you borrow five rupees in the morning, and pay back six rupees in the evening.”

It is possible to get day loans in the vegetable market that provide 100 rupees in the morning that have to be repaid with 10 rupees interest by dusk.

In Bina village, all dirt tracks converged at the house of the sahukar, like the threads in a spider’s web, and along the tracks came desperate families.

Some brought their wife’s ornaments wrapped in bits of rags; others brought the produce from their fields. Sometimes the women would walk in and remove their glistening nose studs, their wedding chain, and bangles and hand them into the poaching hands of the moneylender. Others had nothing to pledge but their own bodies.

The moneylender swallowed everything, and nothing that entered came out, and the house grew and bulged.

The moneylenders had already sucked the poor dry of their assets and their sleight-of-hand accounting had left the villagers’ principal debt untouched by the repayments, which were marked up against the interest.

During my engagement with rural India I found the moneylenders would survey potential customers with the sleepiness of crocodiles and pose an instant offer with a heavy interest tagged to it, but which would be so honeyed and sweetening that it appeared a tempting solution to the customer’s financial woes.

As long as you keep paying the moneylender’s monthly interest in time you will find him the sweetest person earth. All moneylenders carry an air of messiahs as long as you allow them to bleed you.

They are willing to extend credit, but at highly extortionate rates – sometimes exceeding 50 per cent, and keeping borrowers in lifelong penury.

Popular cinema and classic literature tells many pathos-filled narratives of India's poor caught in that karmic cycle of poverty. Those stories inevitably end in tragedy.

Farming distress has attracted a new breed of moneylenders. Anyone with some disposable cash — from shopkeepers, government officials and policemen to village teachers — lends in the hope of making a killing.

But the moneylender is a creature a poor cannot ever get freedom from, nor can he ever avoid him howsoever seething his repulsion may be for him.

Destiny and Nature have forged a perennial and cruel bond between him and this monster.

A current of dread runs through the country’s suicide ravaged farmland as their debts pass from husband to widow, from father to children. Most villages are locked into a bond with village money lenders — an intimate bond, and sometimes a menacing one.

They find themselves locked in a white-knuckle gamble, juggling ever-larger loans at usurious interest rates, in the hope that a bumper harvest would allow them to clear their debts, so they could take out new ones.

This pattern has left a trail of human wreckage. As they say once you walk you get trapped in the moneylenders grip you have little chance to loosen yourselves.

The grip becomes firmer and you remain a captive till your death.

The picture which Nobel laureate Gunnar Myrdal presented in his memoir Asian Drama almost five decades back remains the same despite gigantic efforts of both the private and public sector in bringing large swathes of people into the folds of formal finance.

“When the moneylender sees that he can benefit from the default of a debtor he becomes an enemy of the village economy. By charging exorbitant interest rates or by inducing the peasant to accept larger credits than he can manage the moneylender can hasten the process by which the peasant is dispossessed.”

But the most heartening feeling for me is that today Bina is moneylender free. Three years back, Bina’s earth struck coal and that signaled the financial death of the moneylender. Every inch of land got a price tag.

Bina’s 3,000-strong community is slowly abandoning the village which is being acquired by coal barons. Lalita Jangde whom I lent a loan of Rs 5,000 to relieve her of a moneylender’s debt is a transformed women now.

I still remember her scary face and trembling body when she came barefooted to me and didn’t have even the courage to speak. She now owns assets of around Rs 60 lakh.

Her house is far more plush and grander than mine. But she still values those five thousand rupees that I lend more precious than her present fortune. “It was a great event in my life. It liberated me from the chains of a moneylender,” she exclaims with a great heave.

That is the value people put on freedom from a moneylender.