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They
would have borrowed from a usurious moneylender either to
take care of a sick mother or to get a daughter married or
for a pilgrimage. Where we would complain about a 16% bank
interest or shy away from a 18-24% private loan, these poor,
ignorant and helpless workers borrow at 'Rs. 5 per month'
- which translates to an annual interest of 60%. Some borrow
at even higher rates. They might have borrowed only Rs 5000
for a wedding - but end up paying Rs 250 - 300 every month.
Compounded every month, the real interest rate is 75% or more
per annum! This is a lot of money for a worker earning only
Rs 1000 - 2000.
The
answer lies in creating thrift and credit institutions. Most
of the poor splurge when they have a little extra cash. They
neither have access nor are aware of simple savings mechanisms
and hence when they need cash they borrow at high interest.
If we can pool their surplus cash this would be adequate to
serve their credit needs.
This
is exactly what organizations like Cooperative Development
Foundation of Hyderabad are doing. Members of a neighbourhood
pool their monthly savings of Rs 30 - 50 per household. They
are eligible for loans up to three times their savings. When
a loan request is made, the members who are familiar with
the situation confirm that there is genuine need, and then
decide on the amount and rate. Usually the interest rates
are about 24% per annum (Rs 2 per month). You will be surprised
to know that the recovery rates are almost 100%.
In
Warangal and Karimnagar districts 386 such thrift cooperatives
have come up with a total membership of 83,000 and savings
of Rs 17 crores! Every month they are adding over Rs 36 lakhs
to the kitty! The impact on the local community, rural economy
and social and political fabric has been profound. Many poor,
obscure men and women are now highly respected leaders. What
is more, over 48000 members are women!
In
Hyderabad there are lakhs of unorganized workers who are now
in debt trap for want of a credible thrift and credit network.
Their total debt may be of the order of Rs 100 crores, and
the monthly interest they pay would be Rs 5 crores! And yet
if their savings can be harnessed, they can lend themselves,
and pay no more than Rs 2 crores per month as interest. This
is the kind of work which transforms lives.
Great
acts of piety and fear of god are of no consequence unless
practical work is done to improve the lot of our own people.
A worker with no money or social security and consumed by
the anxiety of having to confront his money lender, will be
listless, inefficient and desperate and soon turn to crime
and violence. We need to help organize thrift societies in
each neighbourhood. What is more, they do not need outside
resources. All it takes is a bit of our time, energy and management
skills.
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