JEMA Naik burst into tears as soon as she was reminded of her debts. Ranjata, 50-year-old’s daughter says, “Ever since a debt collection agent knocked on our door and abused, my mother is upset.
Naik is an ASHA worker in Pokharighat village in the tribal-dominated Kalahandi district of Odisha. Early last year, he borrowed Rs 30,000 from a private microfinance company for his elder son’s wedding. months later, with COVID-19 Limiting the family’s income to only Rs 50-70, her husband earned a day by grazing cattle, she took another loan of Rs 25,000.
Both the loans were taken at 23.78 per cent interest and Naik’s family is now in debt trap. It is one of several families in the district whose earning members have migrated to other states for the first time to help their families repay loans taken during the Covid-19 year. “My two brothers are daily wage laborers in Kerala,” says Ranjatha.
According to district officials and residents, most of these loans were taken for weddings, medical treatment and post-monsoon house repairs. “We have got information that people from many villages are relying on these microfinance companies and we are trying to help them,” says Sarat Chandra Srichandan, Additional District Magistrate, Kalahandi.
“Restrictions on movement during the pandemic and very few work opportunities at the village level are the main reasons for loss of income. Many families had to depend on debt to compensate for the loss of income. There has been an increase in migration from this area for work,” says Sameet Panda, co-convener of the Odisha Khad Adhikar Abhiyan, a right to food activist who makes regular visits to the area.
However, this migration is not reflected in official records, making it difficult for officials to track this trend on the ground. For example, records show that between 2018 and 2021, 4,171 people from the district migrated to other states for work. However, during the pandemic last year, the district recorded the return of 40,982 migrant workers from different states.
In Niyali village of Lanjigarh block, 17-year-old Bulu was the first person in his family to go out of the state for work. “We were unable to pay the installments for a loan of Rs 30,000 taken 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 out another loan and our house is still incomplete,” says Janik (34), Bulu’s father. “Bulu had left for Hyderabad in September to work in a garage. What other option do we have?” he asks.
There are 19 public sector banks in Kalahandi which are functioning in 13 blocks and cater to the population of 15.8 lakhs. But according to local authorities and residents, private microfinance is easily accessible.
“Visiting state-run banks is exhausting. In case of microfinance companies, loans look attractive as smaller amounts are sanctioned. We don’t need to go anywhere… Agents come to the village. We can take multiple loans and repay them over a long period,” says 30-year-old Subha Bagh of Pokharighat village, an ASHA worker, Naik.
The tenure of micro loans in rural areas is usually at least 20 months, with installments being paid every fortnight. Loans are easy to obtain, and hardly any collateral is provided, although delays in payments result in heavy fines.
A senior banker with operations in the sector says that public sector banks are trying to reach out to the rural population with several loan schemes. “The interest rate in some of them is as low as 4 per cent. But it is true that some blocks have connectivity issues… making routine processes a tiring affair,” he says.
Officials say they are aware of private microfinance companies, but there has been no official estimate on the number of such lenders. Additional district magistrate Srichandan says, “In most cases, these are companies that do not operate from here, but have an employee posted in the district.”
Baug warns that once a family falls into a debt trap, there is hardly any option but to approach private lenders again. “I first took a loan of Rs 40,000 and then took a second loan of Rs 26,000 to pay off 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 out a loan to build another room,” she says.
“But now, the room is yet to be constructed. And my husband moved to Kerala in August to save the financial condition of the family.