The people falling into the low-income category are always struggling to get access to external finance. People in rural and urban areas all over the world can have the facilities of external finance through modern banking and financial channels. Family and friends are the closest to whom people go to when in need, and this is mostly accessed without the compulsion to give interests. There are also groups in communities which are known as the Rotating Saving and Credit Associations (ROSCAS) that are formed by people in their communities where, traditionally, they save either in cash or kind and rotate among the neediest in the group.
In Kenya, such ROSCAS are known as Merry-Go-Rounds where usually seven people come together and save either money or sugar or other food items. Every week one member gets all the amount of cash or sugar or other food items so that her/his week is taken care of, thus it is rotated throughout the week. Most of the time the members are women and this is one way how they manage their household needs. In India there are similar activities like the Chit Funds. In Nepal, the most common ROSCA is termed as Dhukuti. Traditionally in villages, 12 households joined to form a dhukuti and contributed either cash or grains which would be given to one family who required the common saving the most every month.
This way, throughout the year, these households had access to external finance or food to tide over the hard times. All over the world, one main source of finance, particularly when the amount exceeds from just a few hundred, is the moneylender in that area. ROSCAS like Dhukutis in Nepal are examples of how communities can help each other by generating means within themselves. However, over the years, instead of maintaining the philosophy of such ROSCAS they have been manipulated by small and big business people, gamblers, and also moneylenders. As a result, this failed to remain a ROSCA but grew on to become another form of gambling and lending which created victims who failed to manage their funds smartly. As a result, the Nepal Rastra Bank had to take steps to control the operation of Dhukutis.
Since the last few months, the victims and survivors of “meter byaji” (loan-sharking) have been staging protests to bring out the atrocities of the moneylenders who have graduated on to become loan sharks. Money lenders are synonymous with loan sharks. Those who operate in an independent capacity or with a professional network offering to provide loans at very high rates are termed as loan sharks. In countries like Nepal, moneylenders were often a source of support and they were mainly the landlords in the villages. They supported needy villagers by giving them food or small amounts of cash in return of work in the villages. Then slowly, some corrupt landlords started giving bigger loans to villagers.
The trust factor between the villagers and the landlords was such that the villagers kept increasing their loans and the landlords took advantage and took over the lands of these villagers when they could not repay their loans. As a result, many villagers became landless. Thus, a system that had commenced in goodwill and social service became an evil business and a means of extortion and exploitation of the poor and the marginalised people. Now the loan sharks can be found in under-banked neighbourhoods, on internet, or through personal networks. Most of these loan sharks of today have funds from unidentified sources, and they work for personal businesses or unregistered entities.
Therefore, as the issues of the “meter byaj” has come up in Nepal, it is important to learn the historical background, financial habits of people, particularly among the rural and the urban poor, and how it has creeped into the society and how smart individuals and groups have learned tricks over the years to exploit more. The simple meaning of “meter byaj” is a short-term loan that charges high-interest rates. In Nepal, this is more prevalent in the rural area but mainly the Terai. Computations of interest known as “meter byaj” in the Nepali language used to be done in modest rates.
After these victims and survivors staged a series of protests, the House of Representatives has recently passed the anti-usury Bill. It has been sent to the National Assembly after which it will be sent to the President for authentication. It is expected that with the passing of the bill the loan shark victims can get relief. This Bill criminalises the practice of lending money by keeping people’s property as mortgages. The bill has provision of sending people to prison for seven years and fine of 70,000.00 if they do not abide by the law. It is a fact that all over the world the loan sharks provide money to needy people but their means of recovering the loan usually is illegal. They resort to pressure and threats to force the loanees to repay by losing everything and at times lives too.
Therefore, to prevent this from happening in Nepal, the bill has provision that if a lender has taken money or property from a borrower in an illegal manner, the borrower is entitled to recover the actual amount of the transaction and any interest paid. The Bill also has provision to return back the property to the borrower. It is a welcome step that the Bill has been passed; however, the victims and survivors of the impact of loan sharks are still raising their voices that the bill does not address their suffering sufficiently. It is very important to look into the traditional, socials and cultural norms related to the financial habits of the people while promulgating and amending laws in the country.
(Namrata Sharma is a journalist and women rights advocate email@example.com Twitter handle: @NamrataSharmaP)