Co-Written by Prema Revati and Senthil Babu
(This is the second essay in our series on the distress deaths in the Cauvery delta districts of Tamil Nadu, which has now climbed into the 250s.)
Credit is what sustains farming and everyday life in the district, and this year, given the non-release of adequate amounts of water from the Cauvery, demonetisation, and the drought, credit became rather dear.
Speaking to farmers and their family members, particularly the women of the household, across 4 blocks in Nagaipattinam district, we were able to gauge the amount of distress by the desperation that attended their seeking of loans.
In this context, we thought it important to provide a brief appraisal of how credit works in two contexts: a) with respect to cooperative credit, or that which is provided by the cooperative society towards farming operations b) credit provided by Micro-finance institutions (MFIs) and other private players, and accessed mostly by women, and for their daily needs, including of health and education.
The note on cooperative loans is necessarily brief, given that there is a general paucity of information and also the fact that in this season, the distress is so rife that it is not possible to actually sit and discuss the details of how credit is accessed – or not – over a period of time. What is presented here is based on discussions with various farmers – and it is more in the nature of a summary. With respect to MFIs, it has been possible to build a more nuanced picture, for women were willing to talk and share their views on their credit responsibilities.
Together, these two narratives indicate the role of credit in rural peasant life, and how in times such as the present, credit flow is as central to life in the delta as the flow of their much loved Cauvery.
On Cooperative Credit
Across Nagapattinam, most farmers are dependent on various forms of credit to continue their farming activities. From what we have gathered, speaking to farmers in four blocks of the district, the main sources of credit are:
- Co-operative credit – this is the best possible credit for a farmer since it is interest-free and given out through local co-operatives and is based on the extent of farming. The interest is subsidised by the state and in times of flood and drought these loans generally get waived by the State.
- Bank Loan – Given out by the nationalised banks and in some instances by private banks these loans are also given out based on extent of farming. There is no subsidy on interest or any possibility if waiver in times of distress.
- Other sources of credit include: MFIs, private money lenders, private and institutional lenders, including kin, to whom jewels may be mortgaged for interest, or simply as jewels. Fertiliser and seed traders give loans in advance and collect after harvest with interest.
Many farmers and the women that we spoke said that they find these other sources of credit, that is MFIs or money lenders easier to access, and that the procedure for other loans is far more complicated and those sources are also not easily accessible. Further, clear mortgage loans like jewel loans are taken by many in Nagapattinam from private institutions like MuthootFinance and ManappuarmFinance, and only a very small percentage of farmers have pledged jewels at the co-operative societies or with nationalised banks.
The difficulties in accessing co-operative credit
- Not every farmer in a village is a member of the co-operative society which gives out loans only to its members. Long term members and local political factors determine who could become a member or otherwise.Temple tenants on the other hand are eligible to become members provided they could produce relevant certificate from the Village Administrative Officer (VAO). Old members lose membership if they default, share croppers cannot become members.
- For instance, in the case of the Sembiyanmadevi Society, there are 1000 members. Of these, only 300 are eligible members for a total land of 2500 acres. About 200 have never accessed loans and as for the rest, one must surmise that they either belong to the category of defaulters orof those who have never applied for a loan. The Sikkal Cooperative Credit society operates over 3000 acres and about the same number of farmers – and the situation as to how many actually access loan is not bound to be all that different.
- When it comes to distribution of loans, there is no fixed and uniform amount that is decided beforehand. It varies with the individual farmer’s need as well as on how influential that farmer is in fixing the loan amount. In any case, the actual decision of who gets and how much each farmer gets is decided by the President and the Committee. In practice, many small farmers do not get loans. In the Sembiyanmadevi Society, the total loan allocation for 2016was 1.5 crores. The Regional Nodal Agency, in this case, the Kumbakonam Central Cooperative Society deducted the interest for this total amount and released about one crore for disbursal.
- The elections to these societies are fought along political lines. Most of the times, it is the ruling party that captures the leadership of the society. This becomes an instrument of patronage both along political as well as caste lines.
- Temple tenants (those who hold tenancies on land belonging to the temples in the delta region) could access credit given they produce RTR and are members for a long time as is the case with Sembiyanmadevi Society. The rest of the tenant farmers or sharecroppers do not get any access to credit.
- The other major hurdle in farmers accessing this credit is the lack of timeliness in the delivery of credit. Usually there is a long delay in the allocation and disbursal process in relation to the sowing season. This also what makes the case for state announced loan waivers in case of floods or drought.
- The other major problem reported is the sheer inadequacy of the loan amount itself, for any farmer to complete the cropping cycle in a season. There is a cap for the maximum loan that a farmer can get. If a farmer is supposed to get 15,000 to 20,000 per acre of paddy, and even if he owns 5 acres, he is not supposed to get more than 90,000. In this season, most farmers reportedly got far lessper acre. Another factor in this season is also that even the promised loan amount did not come as one single instalment. Instead it was staggered over several payments because of demonetization, and in effect did not meet the demands of the cropping cycle.
- In case of Nagapattinam district this season, a seasoned farmer, Dhanapal argued that if one calculates the loan amount in terms of total cultivated area, it would only cover about 11 percent of the sown area in the district.
In the case of farmers, who have taken crop loans from banks, the one obvious disadvantage is that they do not get the facility of loan waivers announced by the government in cases of crop failure. In some instances, in the past, the interest has been waived.
The Question Still Remains: A story of MFI credit flows in Nagapattinam
In the face of declining profits in agriculture, farmers and agricultural labourers in Nagapattinam district are dependent at present on various kinds of loans from a variety of service providers to even to conduct their day to day survival. The Prime Minister’s announcement last year that he will double the agricultural income by 2022 remains a tragic joke in Nagapattinam district as farmers and agricultural labourers seem to have lost whatever their meagre income has been in the past due to the drought and non-arrival of Cauvery water.
In the week that we spent in various villages in the four blocks we could sense the dense presence and fast-paced growth of various MFIs. Most of the women we interviewed had taken loans from a minimum of 3 MFIs to a maximum of 6.
The general process of getting a MFI loan seems to be a set of detailed meetings. As Pechimuthu an ex-panchayat president of ChinnaVerkudi Village explained, “They come and hold at least five meetings. They explain the repayment process. They ask everyone to take collective responsibility and then only sanction the loan.” The foot soldiers of these various MFIs come into the village through a contact from another village or personal contacts. In some cases, the villagers told us that there are agents who bring these MFIs into a village. Once they come in they setup a group of 10 to 20 women and hold meetings
While there are important clauses in the credit form authorising the MFI to outsource the recovery, and allowing them to securitise the portfolio to raise monies in the stock markets (for instance, this is the case with the MFI, Belstar) the important clause that matters for the women who borrow is the collective responsibility that they undertake – to ensure that individuals pay up their respective loan instalments.
Based on a credit recovery model, pioneered by the self-help groups that have been in place for more than a decade now, this has since been adopted by MFIs. While the MFI loans are essentially individual loans – unlike the earlier SHGs model, where loans were granted typically to groups – the group mode is preferred by the MFIs to create a voluntary pressure mechanism and recovery node at the village level.
This way, the recovery process is rendered local and distributed among the women themselves. It would appear as if that the elaborate infrastructure of credit delivery run by these companies, with the army of men hovering around the villages, promising credit to those in need has substituted the entire financial institutional machinery in the villages.
However this may be, in the present conditions, it is the assurance of timely credit that has made the MFI model even more decisive when it comes to sustaining household economies in the region. In Vadakalathur even as fifteen odd women were filling up forms for getting new loans from Asirvad few hundred metres away, an Asirvad group was sitting in the scorching sun well after lunch time as three of its members were not able to pay their repayment that day. So, what would they do?
“What can they do? They’ve been sitting under the tree from morning and they’re still there. The officer will not leave until everybody has paid. So, they must beg borrow or steal and pay up. Otherwise the whole group has to sit there until the payment is made” said Jamunarani, one of the women that we spoke to. The women who were filling up forms for loans from that same MFI said that, “It’s become a routine for us. When the moneylender comes in the morning we run and hide. In Kuzhu loan (group loan) we can’t even do that.”
The tension about the payment due grips the entire village well before the actual day, and this becomes the main point of conversation in the entire settlement. The sigh of relief and the resigned smiles on their faces once the dues are paid clearly shows how transient that relief is. And it is for this reason that for everyone we met, it is the MFI loan that is the toughest to deal with. Compared with other sources such as the daily moneylenders or even the risk of the pledged gold being auctioned off with the local informal bankers, the indignation that all members must go through for the sake of the possible non-payment of interest by one person, seems to be a veryharrowing experience. While there is a general sense of resentment among the women about this tactic adopted by the MFI, they also do not want the men or any other political agency to step in to this process. The men generally stay away from the entire MFI lending and recovery process. The women also are conscious of this, for the fear of any trouble that would make the MFI access not available to them. To this extent, the MFI remains to be a women’s enterprise, by far.
But the real pressure of repayment is felt by those who have accessed loans from more than one MFI, as with Selvaranifrom Kilvenmani. She lives right next to the memorial for the 44 dalits who were burnt alive in 1968 – in response to their communist-led struggle for wages and dignity. Selvarani’s husband Manjunathan went to Karur in the 1990s in the first wave of migrations to the industrial belt from the delta. After working there for around ten years when he was home for a holiday he met with an accident which rendered him unfit to work. His son Prabakaran who is 25 years now went to work in a dyeing unit in Karur, when he was only 15 years old. He still works thereKarur but in a different company as a loading and unloading worker. Selvarani’s two other children, a son and daughter, work in Karur and Kangeyam respectively. The son Prakash developed an epileptic seizure and is back home now. Selvarani lives in a thatched roof house. She heads the Equitas loan group and is active in the other loan groups operating in her village like RPL, Lok Finance and GramaVidiyal.
She pays her due for RPL and Lok Finance monthly, pays her Equitas repayment fortnightly and her Gramavidiyal repayment weekly. She has also borrowed money from two money lenders who come to her village daily to collect the daily repayment. “My head is not just spinning its bursting out” says Selvarani. This year’s drought and complete withering away of the paddy crop has put her in distress. “If not for my son’s salary I would have defaulted long ago in this season of acute drought.” But her son and daughter were also in the village when we visited, on a temporary leave due to the demonetisation move which has affected the textile and dyeing businesses in Tiruppur and Karur.
Selvarani’s Loan from Equitas is 20,000 and her tenure is for two years. The interest percentage is 23%. The amount she repays follows a complicated calculation of principal and interest repayment.
But Selvarani is at an advantage. She is the leader of at least three MFI groups in her village and that is probably because she has a cash flow in the household, thanks to the jobs that her son and daughter hold in Karur and Kangeyam. Ironically, her local creditworthiness in Kilvenmani is boosted by the economy of Karur. In such a context, it is a moot question – as to what is a family’s primary income, and what may be viewed as a supplementary income, for beyond a point, any money that is earned is primarily earmarked for interest payment. This marks a shift in priorities to dowith expenditure for a family, when it no longer knows how it spends money and for what purpose. If work was available with assured wages, probably the priorities would not have become so confused
Take the case of Gaythri,Selvarani’s neighbour in the same village whose husband is an agricultural labourer. She has two children who are in primary school but she also has taken the same number of loans from MFIs and money lenders. Her situation is acute and she told us that she dreads the MFI group meetings and the arrival of the money lender every day.
Even when the family has a son working in Tiruppur, like in the case of Arokyamary of Thanikottagam village, her asthma makes her spend around 500 rupees a week – expenses incurred while visiting the local doctor and buying medicines and this puts her in a critical position vis a vis loan repayment. She must pay back the Rs10,000 she has taken from the moneylender which comes up to 100 rupees per day. Her monthly dues for the three different loans and the interest for the jewels she has pledged is anywhere close to 4,000 rupees a month and in addition, she has an educational loan that she accessed to educate her other son who has completed his diploma in Agriculture but is jobless.
Such persistent and shifting priorities at the household level for each woman would not follow the logic of any economist’s prescriptions for improving rural incomes. Such factors are persistent, and do not only have to do with the present conditions brought about by the drought. This of course brings up the question of the credit recovery system – and how that often makes matters worse.
In the loan application for Asirvad and Belstar they clearly state and take approval from the women to shift recovery to any agency. The Belstar application states that, “we…authorise Belstar Investments and finance limited to raise money from financial institutions through securitisation of the portfolio and we agree that they do not have to pay any marginal amount for the same to us.” It is under these conditions that an MFI becomes an institution of coercion. In ChinnaVerkudi the women told us about a “humiliating” incident related to the non-repayment of repayment amount to the MFI Equitas. One member of the group couldn’t pay her due and the Equitas official refused to allow the women to disperse. “After two hours two more officials came. By afternoon some more and by night there were more than 15 Equitas loan collectors and they were refusing to leave and refused to allow the women also to disperse. Only after we raised our voices and told them that we would shoot a video and post it on WhatsApp did they even budge. It was 8 pm by then. But the story doesn’t end there. They left at 8 pm in the night and came back again at 8 am next morning and she had to pay the money.”
In the same village Equitas also tried to issue a voluntary house loan by seeking mortgage of house pattas. “This man came and asked me if I would pledge my house patta and take a loan from him. I was riled and shouted at him asking if I asked him for a loan. This is atrocious that they would come and lure people to even pledge their homesteads.” Says Petchimuthu. She said that at least two people in her village have succumbed to this ploy and have pledged their houses to meet the crushing poverty imposed by the drought.
In Kilvenmani Gayathri told us about the abusive language and intimidating posturing these loan collectors don when someone fails to pay up. In Vadakalathur and Puducherry women told us how they run into the withered-out fields when the money lenders come for their daily due collection. This sort of coercion is not only present in the delta districts but elsewhere too – MFI coercion in Vellore district in 2011 claimed the lives of 11 women and led to the All India Democratic Women’s Association filing a petition in the Madurai high Court Bench, seeking regulation of MFIs. In 2010 in Andhra Pradesh, severe competitive loan selling and later coercion for collection of dues resulted in more than 50 suicides and the AP government came up with an ordinance to quell public outrage.
The staggering interest rates and the complex interest and principal repayment calculations these MFIs deploy keep the women perplexed about the mechanism of this credit in most cases. The many meetings the MFIs organise before giving the credit to the women then means that the only information being imparted to these creditors is about credit servicing and the consequences of non-payment. As Jesurethinam of Sneha a grassroots non-governmental group working in Nagapattinamnoted, “TThese MFIs are looking at women as best repayers and that alone. Despite saying that these credits are for livelihood enhancement etc., they do not recognise women as producers or workers but only as model repayers. This by definition reduces women and leave them with the burden of loan repayment both literally and morally.”
In the current situation, where an unprecedented drought is wreaking havoc on the very survival of the farmers and agricultural workers, the way the MFIs are casting their loan nets, and the way the most precarious sections of these communities are being targeted through the womenfolk into a debt trap,constitute a paradox that movements and activists are unable to put a finger on. In most villages the women consider the MFI loan sellers/collectors as part of a benevolent yet problematic system. As Senthamarai of Chiinaverkuditells us, “Yes we need the loans but we would like it to be on better terms. If it can be made less coercive and more understanding of our predicaments, such as perhaps this acute drought, it could be better.” While the need for credit and livelihoods is a real one the response the delta women are getting in the form of coercive MFIs seems too far away from any solution.
From last September, supposedly the peak season for agriculture in the delta women are meeting all their household expenses (including food and health and education) essentially through non-productive, non-work based income in the form of a loan that accrues very high rates of interest. So, in the absence of opportunity to work or to produce, when an institution like the MFI becomes the sole provider for the needs of the household where is the State? Is it an absent State or is it only present in its policies that enable such MFIs to thrive?
This is based on a detailed survey of 4 taluqs. Prema Revati and Senthil Babu are part of the study team
Read Part I The Cauvery Delta Withers