What despairing farmers bank on: weekly visit by local moneylender

P Janardhanan, Kannan’s brother who does painting and repair errands for the Tamil Nadu Highways Department, says he kept obsessing about his farm losses. “Kannan was convinced he was a loser, though others tried to tell him they were in the same boat as him.” While two failed monsoons in Tamil Nadu are the main reason for the farmers’ plight, local moneylenders is another.

They operate as little-known microfinance firms such as Grama Sakhthi, Grama Vidiyal, Ekevidas, Janalakshmi and Future Finance, operational not just in the three Cauvery delta districts of Thanjavur, Tiruvarur and Nagapattinam, but also along the entire Cauvery belt including Erode, Karur, Namakkal Pudukottai and Trichy districts.

West Ambalahara village lies next to a now dried-up Vannar river. Here, 45-year-old Vasuki and “partners” had taken a ‘Kuzhu Kadan’ loan — it’s a kind of group loan in a microfinance model. According to N Vasantha, Vasuki’s neighbour who also took a group loan, the lenders prefer giving money to women and only to a group of at least 10 — meaning 10 loans of Rs 18,000 to Rs 26,000 each. “Ours was called Lalgudi Kuzhu.

If one of the members defaults on a payment, others in the group support her as otherwise goons come and trouble all of them. They come when husbands are away and we are alone with children. They collect money every Friday (Vaara Kuzhu) or 28 days (Maada Kuzhu), depending on the nature of the loans. And defaulters are punished with fine — stretching the monthly EMI to another three or six months — or with seizing of originals of ration card, voters ID,” says Vasantha.

Vasuki says they borrowed Rs 26,000. “We defaulted on payment in the 14th month. The loan was initially for eight months, but we were unable to pay as there was no work or yield from the land,” she says. On January 11, her husband P Sekhar committed suicide, eating rat poison, a day after men of the moneylender allegedly threatened him in front of all the villagers.

While the microfinance firms refuse to talk, one of the agents of Ekevidas, who does not want to be named, says they too are under pressure. Claiming to be from a farmer family too, he says he gets paid around Rs 5,000 to 10,000 a month depending on his “collection”. “So we force people to pay the amount during our visits. If I fail in collection, I get paid less.”

Govindaraj, 59, talks of a number of cases when the nationalised banks in Thanjavur region denied them loan despite the necessary documents. “They give us farmers’ loan (core agri business loans) only on gold guarantee. How many of us have gold at home to get a loan?” adds 65-year-old Muhammed Sultan alias EMS. He is known as EMS in this Thanjavur village for being a fan of the late Kerala Communist leader late E M S Namboothirippadu.

At Budalur, 22 km from Thanjavur town, a farmer and a government primary school teacher who doesn’t want to be named, says he goes for NREGA work on his off days to pay back his loans. He claims to have borrowed Rs 2.5 lakh from a leading financing firm in the area to bribe a local politician for his job approval certificate, on the guarantee of his ATM card. “The agreement was that they would return my ATM card after 15 months (he was to pay Rs 3.75 lakh with interest in that time). Now they are insisting that it was 20 months (amounting to Rs 5 lakh),” the teacher says.

M Suresh Babu, who teaches economics at IIT-Madras and has interest in macroeconomics, calls the dependence on private moneylenders a sign of our “collapsing social safety net”, “especially due to the sheer inability and reluctance of funding institutions and banks to meet farming sector needs”.