The Hindu Business Line : The moneylenders of Meloor

Surprisingly, not a single woman from the cross-section of people at Meloor village had any grouse, rancour or apprehension about the extortionist practices of the ‘Tamil boys’. It would seem that they meshed perfectly with the social fabric of these villages, providing funds at times of dire need.

— K. K. Mustafah

Self-help groups such as Kudumbasree have mushroomed in rural hamlets resulting in credit volumes going up.

C. J. Punnathara

The world will never be the same for Anitha Suresh and Shaji S. These rural women from Meloor village in Kerala, who had to scrounge and plead for loans from the usurious money-lenders are today being besieged with funds from a variety of organised and unorganised sources. Not only that, the volume of loans on offer has gone up substantially while the rate of interest has come down drastically. Also, the deployment of these borrowed funds has been for productive purposes rather than for consumptive expenditure.

Does this imply that the government-initiated financial inclusion and inclusive growth for Rural India has suddenly become a reality? The answer is both yes and no. For one, the Tamil Nadu-based moped-borne youth, the purveyors of usurious credit, remain as much a nuisance as ever. They make their calls at these rural households right from dawn, only to revisit them at noon and finally make a parting call at dusk — offering fresh credit and making daily collections on their outstanding dues.

Surprisingly, not a single woman from the cross-section of people this writer met at Meloor village had any grouse, rancour or apprehensions about the extortionist practices of the ‘Tamil boys’. It would seem that they meshed perfectly with the social fabric of these villages — a source of funds during their times of dire need. And their social practice of extending credit remains unheard of and un-practiced in Urban India.

“Absolutely no collateral was required, not even a scrap of signed paper which these merchants of credit could make recoveries on. But instead, they ensured that the credit extended was always small, within our repayment capacity,” said Shaji S. Not surprisingly, the credit was almost always extended to women. Men seldom entered the account books of the Tamil boys.

Persistence, not pressure

These boys are really industrious, confided Mr P. P. Babu, President of the Meloor Panchayat, making it a point to call at the household at dawn before the women left for their daily work, at noon to see if they came back for lunch and also at dusk to make their daily or weekly collections from the womenfolk.

Almost always it was persistence and not pressure that ensured that the women repaid their loans. Social stigma was another factor that ensured compliance to the system. Among the men, it would seem that neither persistence nor social stigma worked.

The moped-borne Tamil boys are almost invariably the front for rich farmers with large landholding from Pollachi, Tiruchirapalli, Madurai and Tirunelvelli districts of Tamil Nadu, who have huge agricultural surplus to disperse into the lucrative realm of money lending.

The front-man in charge of the operation often stationed himself at the local township of Angamaly and would unleash his team of moped-borne boys on the hapless women. Despite all the seeming goodwill that the Tamil boys enjoyed, they are not really harbingers of joy and goodwill.

But they package their loans in easily repayable packets. Loan amounts are often in the Rs 1,000-5,000 range — within the reach and capacity of these rural women. For a loan amount of Rs 5,000 the boys give Rs 3,750 to the women, keeping Rs 1,250 as advance-interest. The amount would be collected in 10-weekly instalments of Rs 500 each. The disbursal and collection are compressed into a two-and-a-half month cycle.

Though they do not charge penal interest for weekly default, the rates still remain atrociously high. When Rs 1,250 is charged for an actual loan of Rs 3,750, the rate of interest works out to 33.33 per cent (even if we overlook the fact that the interest is front-loaded). Collected in 10-weekly instalments, the outgo works out to 3.33 per cent a week. On an annual basis, the cumulative interest works out to a staggering 170-plus per cent.

Yet the women have no rancour. This has been their traditional source of short-term emergency fund in times of dire need. And being rural women of limited means, they have never had any access to other forms of formal credit. But all that has changed now.

Role of self-help groups

Self-help groups such as Kudumbasree have invaded these rural hamlets and the volume of credit available has grown even as rates of interest have plunged. And most of these loans are going into productive investment sectors, triggering healthy returns as well.

But there is a catch, points out K. K. Madhu, Chairman of the Organisation for Women Empowerment and Rural Development, a local NGO. The problem of plenty has resulted in women taking a loan from one organisation to repay a loan taken from another. Sati Babu, member of the Meloor Village Panchayat and its welfare committee, says that most women, including herself, do not perceive the rates being charged by the moneylenders as usurious. Several women continue to borrow from the Tamil boys and manage the repayments using organised systems of credit, including micro-credit and bank loans.

The subsidy component

Micro-credit and bank loans seem to have opened new vistas for these rural women. But it has not always been for the good, says Mr Madhu. There is a huge subsidy element involved when commercial banks give credit to women’s collectives. Agrees Shaji , who, with four other women from the local SHG, had approached a local commercial bank for a Rs 1 lakh loan for opening a textile and sari painting unit. The loan was sanctioned and the shop has been operational for over a year. It has been a blessing for the women since the loan also ensures a subsidy component of Rs 50,000. The women will have to effectively pay back only Rs 50,000 of their loan.

But both Mr Madhu and Sati Babu have apprehensions. How many women take such loans looking at the subsidy component alone? Will several of them back out if the subsidy element were removed? Ultimately, they say, only the productive investments will survive, and the ventures pursuing the subsidy component will falter.

Access to credit

There can be no doubt that the high-decibel campaign of financial inclusion and inclusive growth are having a positive impact on the pockets of organised rural economy.

The glass walls between swank urban-based banks and rural women such as Anitha, Shaji, Sati, Jinu and Raji have been shattered. They no longer have any apprehensions in approaching formal financial institutions for obtaining credit. Their access to credit has expanded from the moped-borne boys to micro-credit institutions, from their own women’s collectives to formal banks and financial institutions.

Now, South Indian Bank is in the process of adopting this village and making it moneylender-free. It is no mean task, seeing how well-entrenched the Tamil boys are in the social milieu. The sudden access to easy credit might have eliminated their fears of banks, but that does not imply these rural women have become financially literate. They are still quite a long way from being able to distinguish the beguiling usurer from benign lending institutions.

No doubt, like Urban India, Rural India also needs its version of short-term contingency credit at short notice, often at penal rates of interest.

The entry of micro-credit, banks and financial institutions has reduced the vulnerability of rural women to money sharks. Financial inclusion through micro-credit and formal lending institutions is increasingly shifting the balance from consumptive to productive expenditure. Though the process has begun, however, it is still quite far away from the final goalpost.

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