Financial Inclusion of the Marginalised by Sharit K. Bhowmik & Debdulal Saha

Author:Sharit K. Bhowmik & Debdulal Saha
Language: eng
Format: epub
Publisher: Springer India, India

4.2 Types of Moneylenders

Moneylenders are important informal source of credit for a large number of vendors. However, moneylending activity is carried on by various means. They have a number of schemes under which they lend money. These different schemes have been described in this section. The type of schemes and their terms and conditions vary from city to city but the process is similar. However, two or more schemes may operate in the same city depending upon the circumstances. Three different daily schemes operative in three different cities have been explained here in order to show the mechanism. The rate of interest charged by them under these schemes is the special focus of the discussion. The schemes of lending are decided by the moneylenders. From the data, one common thing among moneylenders across all the 15 cities has been noticed that moneylenders across 15 cities prefer to lend money on a day-to-day basis. They prefer to provide short-term loans of small amounts because it has a 100 % recovery rate and the rate of return is higher if they lend on the day basis. Moreover, the vendors are under constant supervision and pressure to repay the money on time. We have portrayed some cases below in order to explain how the day-to-day scheme works (Boxes 4.1 and 4.2):

An old CITU activist and a local hawkers’ leader explained how the concept of moneylenders has infiltrated in the Kolkata market. The moneylenders are generally referred to as kabuliwalas or Hindustanis (north Indians). Their main business is moneylending and they disburse loans at exorbitant rates which they collect their instalment on daily or weekly basis. The moneylending business had originated in Sealdah in central Kolkata. According to the activist, at the time of Congress government in Bengal, the hawkers were harassed because they were engaged in petty trade practices which were considered as illegal by the then ruling government. They were subjected to torture by the police and the municipal authorities, their goods were confiscated every now and then and the hawkers had to arrange funds to release them from the authorities. Thus, hawkers in Sealdah were very harassed by the local goons, the police and municipal authorities. Their goods got confiscated and they were charged a big amount for release. The moneylenders took advantage of this situation and offered them loans to release their wares. This particular community of moneylenders thrives on the existence of exploited hawkers. The working of the moneylenders is widespread and vey flexible. It is very suitable for those persons who need large amounts of money at particular times of the year. Garment vendors said that they needed funds at the time of festivals such as Durga Puja and Dussehra, Chaitra sale and Poila Boishakh (Bengali New Year Festival).

A case of 60–72-day scheme in Kolkata has been explained here. The loan period is 60–72 days and the daily repayment varies depending on the loaned amount. The loans range from Rs. 2,000 to 50,000 and the interest charged is very high, almost 20–30 % per month (Box 4.

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