Updated: October 15, 2021 6:27:51 am
Jema Naik bursts into tears on being reminded of her loans. “My mother has been disturbed ever since a loan collection agent knocked at our door and abused her,” the 50-year-old’s daughter, Ranjata, says.
Naik is an ASHA worker in Pokhrighat village of Odisha’s tribal-majority Kalahandi district. Early last year, she borrowed Rs 30,000 from a private microfinance company for her elder son’s wedding. Months later, with Covid curbs squeezing the family’s income to just the Rs 50-70 her husband earns every day from grazing cattle, she took another loan of Rs 25,000.
Both loans were taken at an interest of 23.78 per cent, and Naik’s family is now caught in a debt trap. It is also among several families in the district whose earning members have migrated for the first time to other states to help their families repay loans taken during the Covid year. “Two of my brothers are daily wage workers in Kerala,” Ranjata says.
According to district officials and residents, most of these loans were taken for weddings, medical treatment and post-monsoon house repairs. “We have received inputs that people in many villages are relying on these microfinance companies and we have been trying to reach out to assist them,” says Additional District Magistrate, Kalahandi, Sarat Chandra Srichandan.
“The loss of income due to restrictions on movement during the pandemic and very few work opportunities at the village level are the main reasons. Many families had to rely on loans to make up for the loss of income. This has led to an increase in migration for work from the region,” says Sameet Panda, co-convenor of Odisha Khadya Adhikar Abhiyan, a Right to Food activist who conducts regular field visits in this region.
“To address the problem, it is necessary to take public sector banks to the people, make them more accessible to the poor. Also, it is essential that the government place restrictions on the high interest rates charged by private microfinance firms,” says Panda.
This migration, however, does not reflect in official records, making it difficult for officials to track this trend on the ground. For instance, records show that 4,171 people from the district migrated to other states for work between 2018 and 2021. However, during the pandemic last year, the district recorded the return of 40,982 migrant workers from various states.
In Niali village of Lanjigarh block, 17-year-old Bulu was the first from his family to move out of the state for work. “We were unable to pay the installments for a loan of Rs 30,000 that we took to rebuild our house after heavy rains. I had no work during the pandemic, and we are a family of seven. To repay that loan, I had to take another loan and our house is still incomplete,” Bulu’s father, Janik (34), says.
“Bulu left for Hyderabad in September to work in a garage. What other choice do we have?” he asks.
Kalahandi has 19 public sector banks operating across 13 blocks and catering to a population of 15.8 lakh. But according to local officials and residents, private microfinance is easily accessible, with “more lucrative” terms.
“Visits to government banks are tedious, with long queues and lengthy processes. In the case of microfinance companies, the loans appear lucrative because small amounts are sanctioned. We don’t have to travel anywhere or wait outside banks, the agents come to the village. We can take multiple loans and pay them over a long period,” says Subha Bag, a 30-year-old from ASHA worker Naik’s Pokhrighat village.
The tenure of micro loans in rural areas are usually for a minimum of 20 months with installments to be paid every fortnight. The loans are easy to avail, and provided with hardly any collateral, although delays in payment lead to heavy fines.
Public sector banks have been trying to reach the rural population with multiple loan schemes, says a senior banker involved with operations in the region.
“People in rural areas must be made more aware of these schemes. The interest rate is as low as 4 percent in some of them. But it is true that there are connectivity issues in some blocks that pose a major roadblock to smooth functioning of the banks, making routine procedures a tiring affair,” says the banker from a leading public sector bank.
Officials say they are aware of the private microfinance companies, but there is no official assessment on the number of such lenders. “In most cases, these are companies which don’t operate from here but have an employee stationed in the district,” says Srichandan, the Additional District Magistrate.
Bag warns that once families fall into a debt trap, there is hardly any option but to approach the private lenders again. “I first took a loan of Rs 40,000 and then another of Rs 26,000 to pay the first one. I have more than 27 installments to pay. Initially, I had to pay Rs 700 every 15 days. We thought we could manage and took the loan to construct another room,” she says.
“But now, the room is yet to be constructed. And my husband left for Kerala in August to rescue the family’s finances.”
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