A Reserve Bank of India (RBI) survey carried out in some 300 districts
is
reported to have revealed that the rural poor
continue to rely on neighbourhood moneylender. And RBI has drafted,
what its deputy governor Usha Thorat calls, a concept plan to check
this trend. At a Mumbai symposium she spoke of the need for banking
penetration into remote areas, and to promote financial literacy and
credit counselling.
Financial literacy and counselling are good
things, if you know how to get villagers to listen. When in need they
go to a pawnbroker rather than a bank, knowing very well they are
exploited financially. Credit counselling ? Rural credit seekers care
more for ready access to cash than for low interest rate; they want
prompt service, not paper-work; village money-lender gives them cash
for the asking, and do not ask them for colateral. The only surity on
which a money-lender advances money is his belief in borrower’s
capacity to pay, and his ablility to collect.
I had occasion, and
this was a decade back, to observe credit habit of tea-estate workers
at Valparai in Coimbatore district of Tamilnadu. I was struck by the
number of pawnbrokers in this taluk town. I counted at least six
within a kilometer stretch on the main street. There was a bank on
the main street and it had problem attracting tea-workers, most of
whom borrow on a regular basis from local pawnbrokers. In remote areas
a village provision store, from where villagers buy household
essentials, usually on credit, also advance money to favoured
customers.
Pawnbrokers advance credit on trust; charge interest
rates, calculated on monthly basis. Repayment is due on pay-day, when
money-lenders show up at the tea estates to collect their dues from
workers. By the time a debt is cleared many tea-estate workers seek
fresh loan, and this cycle continues. Pledging jewels, silverware,
household valuables to meet expenses for family functions and special
occasions is not uncommon.
Under the system adopted by pawnbrokers
there is little scope for default by borrowers. Lenders know no such
thing as a loan write-off; and pawnbrokers do not have on their books
‘non-performing assets’ like banks.
Pawnbrokers observe no
holiday; they are open all days, till late in the evening. A worker
seeking a bank loan stands to lose a day’s wages; for banks are open
only on week days and loaning formalities take up time, and, at times,
more than a day.
Relatively low interest rate charged by bank held
no appeal to workers because of a belief that getting loan sanctioned
from banks involved cutback payment.
