6 of the 9 people working at our farm are in debt. The rest of the 3 are helping other people in their families pay off debt. The interest rates that they are paying ensure that they might never escape the debt trap. The only way to get out of this is to ensure that they suddenly make a lot of money quickly or get access to cheap (close to 0% interest rate) loans.
Why are they in debt?
All of the women who are in debt are in debt because they have taken loans on behalf of their husband or son or son-in-law. There are two reasons for the loans : medical expenditure or business ventures that have not succeeded.
The public healthcare system should be good enough that the women of the country are not put through such financial distress. But, some of the men are not recovering because they cannot give up their addiction to alcohol or tobacco.
Some of the men failed at their first business and couldn’t repay the loan. So they convince or often even threaten women in the house to take a personal loan, from private money lenders at exorbitant interest rates. The men promise that they will pay off the loans; but they seldom do because the business didn’t perform well as they expected it to. If the women are not able to pay off the loan, they take another loan to pay off the original loan. And the women get trapped in the cycle of high interest rate debt.
What can we do?
As employers, we can only offer competitive salaries. We practice organic farming which generates employment for more people. But the economics of agriculture are not in favour of paying physical labourers a very handsome wage. So, their day job cannot be a source of quick money. There is actually no guaranteed source of quick money, least of all agriculture. Also, a tiring 8 hour job doesn’t leave any room for a second job.
Therefore, the only way we can help them to get out of the debt trap is to get them access to low interest credit. We have already started a programme with a couple of women who needed it the most. We plan to extend credit to the rest or the folks as well.
In the long term, we want to enable savings and inspire a frugal simple way of living so that they or next generation do not face such a situation again. Only time will tell if we succeed in supporting them through these hard times.
Regards
Sudhakar
I’m not sure about that. We need another Gandhiji to come and popularise simplicity..
Our workers (only three regular) also know they can count on us in need. We give interest free, slow repayment loans whenever they need it. So they don’t get too desperate. One of them is careful with his money and saves for a rainy day but the other two are extravagant, spending huge sums on rituals, functions, etc. We’re unable to convince them that they don’t need to prove anything to anyone. So they still get into debt despite having a decent income. Show-off rituals are a curse of our society. Of course the Ambani wedding was in a different league!
These rituals are like ponzi schemes. Once a few people in the village start spending extravagantly, the rest of the folks get peer pressured into celebrating grand. I am sure these bubbles keep bursting till the village collectively run out of money.
Kudos to you two for helping out the women and attempting to bring about a change in their spending habits. All in all, it comes down to the decisions that the folks take (societal obligations, peer pressure etc.). This constant cycle of loans has to be broken at some point to see a positive outcome.
Modern society has created too many aspirations, but hasn’t provided widespread economic opportunities to large swathes of rural population. So, it is not just the decisions that they take. It is also the decisions that all of us take collectively as a society.
I agree!
Have you considered social investing / lending platforms such as Milaap or RangDe which provide low interest credit for needy individuals?
Not yet. We haven’t reached that scale yet. Both Noushy and I have worked for Milaap btw. So we understand microfinance quite a bit. 🙂