Sidhi, Madhya Pradesh: “Mood gehen ha karza ma. Jitni kamai ni ha, us se jyada byaaz badh rha har mahine (The head is weighed down in debt. The interest I pay each month is far beyond what I earn).”
The thin, tired frame of Ram Sajeevan Rawat, 45, was testament to the burden of the Rs 24,000 he owed a money lender, the amount almost 70% of his approximate annual income as a construction worker.
Rawat may have to repay far more because there is no loan agreement, so the moneylender will decide what Rawat must return as interest. He could charge anything. Rawat confessed he would not know.
Speaking in a dialect of Hindi and Gondi called Bagheli, spoken by almost 60% of the people in Madhya Pradesh (MP), Rawat has another name: Sankha Kol, after the Adivasi Kol tribe to which he belongs.
As his two names indicate, he inhabits two worlds, and the money he borrowed comes from the world outside his village and tribe, where the moneylender lives.
Sankha Kol lives with his family—wife, two sons and younger daughter—in a village called Madwa, home to about 350 families, in the eastern district of Sidhi, 552 km west of state capital Bhopal and 30 km from the district headquarters of the same name.
He earns Rs 300 a day, as and when he gets work, about eight to 10 days a month. Business is better in the summer and rainy months when he repairs the leaking terraces of kuccha or semi-permanent houses.
Sankha Kol is one of thousands of uncounted people living at or below the poverty line—the vast number, Adivasis from tribal communities—ensnared in debt traps laid by illegal moneylenders.
A 2019 survey by the National Centre for Financial Education, a nonprofit, found that only 23% of people in MP were financially literate enough to understand how to manage their money. In a 2018 report, Crisil Inclusix, a financial inclusion index launched in 2013 by analytical ratings and research company Crisil, ranked MP 25 out of 36 states and union territories on financial inclusion.
Sankha Kol’s situation is not uncommon. Rural and semi-urban MP has been in the grip of illegal moneylenders for decades, with the first law to tackle usurious lending first formalised 87 years ago in 1934.
The reason his story is now relevant is because the state government has amended that law and is now trying to end such money lending, but, as we found, without much success because it has not considered the details of and flaws in the implementation of its new policies
Laws Tightened, On Paper
In March 2020, just before Covid-19’s first wave triggered India’s migrant crisis, the government of Congress Chief Minister Kamal Nath fell. Unplanned lockdowns devastated the national economy, with the poor and migrants the worst sufferers.
After indebted farmers took their lives, chief minister Shivraj Singh Chouhan of the Bharatiya Janata Party in August 2020 said no loans would have to be paid in cases where the moneylender had no licence.
In September 2020, fresh amendments to the Madhya Pradesh Moneylenders Act 1934 outlawed unlicensed money lending. The new provisions capped interest rates charged by licensed moneylenders: they could not be more than those notified by the state government from time to time.
We found little to no record in the public domain of how many moneylenders had been issued licences since the amendments. No system was in place to monitor interest rates charged. While moneylenders need to fill up a form at urban local bodies to register, the registration procedure in rural areas is unclear.
Earlier in August 2019, the MP government amended a law called the Anusuchit Jan Jaati Sahukar Viniyam (scheduled castes/ tribes moneylender regulations) 1972, waiving all existing loans owed by tribal people and penalising unlicensed money lending. It made written agreements mandatory.
We found no discernible impact of these amendments.
So, debts continue to pass down the generations, and a single wedding or medical treatment can plunge a family into a lifetime of debt, not just in MP but nationwide.
The Continuing Reign Of Money Lenders
Formal banking systems continue to remain beyond the access of millions, especially rural populations. A 2016 Mint and Indian Human Development Survey (IHDS) analysis found that the probability of receiving bank credit decreases around 12% for Adivasis in rural areas than in urban ones.
Nearly 20% of people in rural India borrow from moneylenders, the bulk without licence, according to the IHDS study.
On 9 February, 2022, the union home ministry told the upper house of Parliament, the Rajya Sabha, that suicides over financial reasons had increased. Between 2018 and 2020, 16,091 people had taken their own lives over bankruptcy or indebtedness—between 3% to 5% of all deaths by suicide across India.
India saw over 150,000 suicides in 2020, an increase of 10% over 2019. The rate of suicides increased by 8.7% during 2020 over 2019, according to 2020 National Crime Records Bureau (NCRB) data. Over 9% of deaths by suicide were in Madhya Pradesh, third nationwide after Maharashtra and Tamil Nadu.
A quarter of those who died by suicide were by daily wagers, with indebtedness responsible for over 3% of all suicide cases across India in 2020.
According to the All India Debt and Investment Survey 2019, 10.2% of rural Indian households and 4.9% of urban households owe some debt to “non-institutional credit agencies”, in other words moneylenders, relatives, traders and commission agents and landlords or employers.
The survey found that about 35% of rural Indians and 22.4% urban were in debt.
Madhya Pradesh is India’s seventh poorest state by per capita income and has a tribal population of some 15.3 million. Of 230 assembly constituencies, 47 are reserved for tribal representatives. Almost a third of the people in Sidhi district are scheduled tribes, about 12% scheduled castes.
Waiting For A Promised Govt Wedding Dole
Sankha Kol said he took a loan of Rs 15,000 in April 2021 for his older daughter’s wedding from Vaiznath Singh, an animal trader and moneylender, who claimed he charged 5% to 10% interest per month.
In 2006, the Madhya Pradesh government started a programme to financially support weddings in poor and marginalised families. Renamed Mukhyamantri Kanya Vivah Yojana in 2015, the scheme provides Rs 51,000 towards wedding expenses of orphaned, poor, widowed and divorced women.
In most Indian states, many poor families take loans for a daughter’s wedding, only to end up deeper in poverty or even slavery.
Sankha Kol said he restricted his loan from the moneylender to Rs 15,000, after his sarpanch said he could get Rs 51,000 from the chief minister’s programme. It has been eight months since the wedding, but there is no sign of the government money.
“I spent nearly Rs 270,000 lakh on my daughter's wedding, including a dowry of Rs 51,000 cash and household items worth Rs 100,000,” said Sankha Kol, relieved that his ability to pay a dowry ensured a “a good groom” for his daughter, even if it sunk him into debt.
He also bought jewellery and clothes for Rs 25,000 on credit from his local market. “I thought I would pay them after receiving the money from the Yojana,” said Sankha Kol. “ But my application has not been processed even after I made enquiries.”
In December 2021, the sahukaar (moneylender) warned that Sankha Kol would have to “pay interest for every month”, instead of the simple interest that the borrower believed he would have to pay. There is no written agreement.
The sole earning member of his family, Sankha Kol said he was worried. While neither of his two daughters continued school after class eight—because “Kol girls don’t go to high school”—his two sons are still in school, and his youngest daughter, aged 16, helps out at home.
Shyam Sundar Kuswaha, sarpanch of Madwa village, told Article 14 of four people in his village trapped in debt and harassed by illegal moneylenders. Yet he blamed the borrowers.
“I have tried to make people aware they should not fall into the traps of the money lenders,” Kuswaha said. “I also educate them to go to the bank to get loans.”
A Surgery, Musclemen And Fear Of Social Boycott
Foolmant Gond, who belongs to the Gond tribe, borrowed Rs 70,000 in 2018 from a Thakur (an upper caste) moneylender, for a gallbladder operation. The doctor at the district hospital had referred him to a small private hospital in Bhopal.
“I borrowed from laat sahab, though I knew the consequences,” said Foolmant Gond. Laat sahab means big boss, used in earlier centuries for colonial officials. The laat sahab Foolmant referred to is the largest moneylender in these parts of Sidhi district, owner of 30 to 35 acres of land.
Foolmant Gond returned Rs 70,000 within three months. “He had not discussed any terms or conditions of the loan,” said Foolmant. “When I returned Rs 70,000, he demanded Rs 200,000. He demanded a further payment of Rs 100,000 in 2020, after I paid him Rs 56,000 in 2020.”
Foolmant Gond, who lives in Sidhi town, was unaware of the state government's waiver of all loans taken till August 2020 that mostly the poor and especially Adivasis owed to loan sharks.
In June 2020, the laat sahab came to his house, Foolmant Gond said, and “abused my wife and children”.
The money lender threatened a social boycott of the family if Foolmant Gond failed to repay his loans.
“I have already paid Rs 156,000 against a loan of just Rs 70,000,” said Foolmant Gond. “My friends and community members advised me to pay whatever he asks to avoid more harassment, but I simply do not have enough money to continue paying.”
Why Banks Are No-Go Zones
Though Foolmant Gond knew he was being financially exploited, he did not complain against the moneylender, as the government encourages people like him to do.
“Hamari roji-roti , kaam dandha laat sahab aur gurudev (Brahmins) logon ka ghar mein ha. Ek ki shikayat karenge koi kaam nahi dega. Hamar gali chalna tak band ho jayega (Our livelihood depends on the upper castes. A single complaint can put paid to all work coming my way. They won’t even allow me to even walk through their fields),” said Foolmant Gond, who did not ever consider going to a bank.
About 37% of MP’s bank branches in 2018 were in rural areas, with each branch catering to over 10,000 people against India’s average of 9,280. While the proportion of bank branches to population was below the national average, the state ranked above average on credit penetration, according to the Inclusix report cited earlier.
But of the 17 tribal districts, just four had an ‘above average’ ranking. The bulk of credit penetration from formal sources was in the non-tribal districts of Madhya Pradesh, while loan sharks ruled in the majority of the tribal districts.
Foolmant Gond explained his decision to bypass banks.
“Agar paisa nahi lautaya time se toh sahukaar marega- pitega par bank koodki kar dega. Bank dausahabs (rich upper caste people) logo ke liye hota (If we fail to return the money on time, the moneylender will only harass us physically, but the bank will seize all our belongings. Banks are for rich, upper castes),” he said.
Balwant Singh (name changed on request), a moneylender in Sidhi district, said he had little use for the law or a licence.
“Politicians and the bureaucracy make laws that favour gamaars (lower castes) and punish us (upper caste),” said Singh. “No one takes a licence to lend money as the laws can be used against us. We just avoid the paperwork. Money is given to only those from whom money can forcibly be taken.”
“We lend for treatment or a daughter’s marriage. We help people, in return we charge interest,” said Singh. “We provide immediate money for medical emergencies.”
Sankha Kol, too, said he had no use for banks.
“They need proof of property holdings to give a loan,” he said. “I only own 0.2 acres of land on which my house is built. Banks won’t give me any money.” Across India, only 20% of SCs and STs own agricultural land.
When banks deny small loans to the poorest, opportunities open up to moneylenders.
“We don't force people to borrow money from us,” said Singh. “They come to us when banks refuse to lend them money.”
Why Moneylenders Are Safe
India has the second-largest unbanked population (190 million) in the world, according to a World Bank report. At the end of December 2020, there were 414 million accounts under the Pradhan Mantri Jan Dhan Yojana (PMDJY), Prime Minister Narendra Modi’s flagship financial inclusion scheme, two-thirds of these accounts in rural areas.
A Reserve Bank of India report in December 2020 raised concerns over the low use of these accounts and recorded that average balances in Jan Dhan accounts was below Rs 3,500.
Unlike poorer folk in thrall of money lenders, landowners can borrow money through the Kisan Credit Card (KCC) programme. For instance, upper-caste farmer Shareebhan Tiwari in Bhata village, also in Sidhi district, owns almost four acres, and when he needs money, he takes loans on his KCC, usually for seeds and fertiliser.
The KCC programme, available in all Indian banks, regional rural banks and cooperative banks, was launched in 1998 to provide farmers term loans for agricultural needs. For instance, the National Bank for Agriculture and Rural Development offers collateral-free loans up to Rs 100,000 under the KCC.
Neither Foolmant Gond nor Sankha Kol knew about KCC, which both could have applied for, as they work as adhiya farmers too. An adhiya—the word means half—arrangement is a verbal contract between a poor farmer and a landowner to equally share costs and harvests.
In practise, the landowner takes all decisions and receives the compensations and farmer benefits, often leaving the poorer partner in debt.
Umesh Tiwari, founder and activist of Roko Toko Thoko, an NGO working for tribal rights, said harassment by moneylenders was very common in Adivasi areas and mostly unreported.
No Complaint, No State Action
The genesis of MP’s attempt to curb moneylending was sparked by suicides, not in Adivasi areas but elsewhere.
Following the death by suicide of a five-member family in Bhopal in November 2021 over failure to repay a loan of Rs 350,000, the failure of laws to tackle loan sharks was evident. The family’s two businesses were seriously hit by the Covid-19 lockdown in April 2020.
The family could not pay the lender’s demand of Rs 200,000 in interest, and were harassed. Bhopal police did nothing when the family approached them. Harangued to the point they opted to take their own lives, the family left a 13-page suicide letter in which the final words were, “hum buzdil nahi, majboor hain (We are not cowards, we are helpless).”
In a similar incident in Sehore district the same month, a fruit vendor took his own life after being harassed by a moneylender. That was when CM Chouhan ordered action in 2021 against illegal moneylenders.
After Chouhan’s orders, a special investigation team (SIT) was formed to investigate illegal moneylending in Sidhi district. Over two months since, Sidhi district magistrate Mujeebur Rehman Khan told Article14 the SIT had received one complaint.
Khan said since Sidhi was a “notified” area, meaning a protected Adivasi area, no money lending licences were issued by the administration. “If anyone complains of harassment by moneylenders, we will act immediately,” he said.
As we found, there is no shortage of money lenders in Sidhi, and Adivasis have no choice but to use their illegal services. Complaining is not an option.
(Anil Tiwari is a freelance journalist based in the Sidhi district of Madhya Pradesh.)
Some names changed to protect identities.