Wednesday, 6 March, 2013

Usurers abduct minor girl in pursuit of interest dues

Usurers abduct minor girl in pursuit of interest dues

There has been a great deal of talk about Financial Inclusion. I'd like you to take a look at this news item from the Hindu which truly shocked me:

The gist of the above article:

  • Apparently, a poor guy had taken a loan of Rs. 20,000/= (Rupees twenty thousand only) from a local neighbourhood money lender.

  • And he was paying INTEREST of Rs. 1,000/= (Rupees one thousand only) PER MONTH.

  • And he had been paying this interest for several YEARS.

  • After a few years he was unable to pay a few instalments of interest.

  • And the money lender abducted the borrower's daughter under the understanding that she will be released on repayment of dues!

What is shocking is that the entire article in THE HINDU appears to focus almost exclusively on the fact that the girl has been abducted.

It is indeed not merely shocking but also illegal that the minor girl has been held hostage (even assuming that she has not been ill-treated or assaulted by the money lender).

However, it is extremely important to focus on the root cause:
  • It was not merely poverty that forced the borrower into the clutches of the money lender

  • It was not even the absence of Financial Inclusion (After all, there are enough and more of public sector banks and micro finance institutions which give loans at reasonable rates of interest to poor people)

  • The root cause of the problem is Financial Illiteracy of the poor borrower.

Had the borrower had the most basic of education, especially Financial Education, he would have been able to comprehend the kind of interest rates that he was promising to accept in lieu of a loan of Rs. 20,000/=.

With just a bare minimum of Financial Literacy, he would have known the broad prevailing rates of interest for loans. And he would not have got into this kind of trouble in the first place.

I'm certainly interested in suggestions on how to take Financial Literacy to every corner of the country. Especially to the rural areas.

Perhaps the time has come for EVERY branch of every bank to allocate space, time and manpower to provide Financial Literacy

In case this is too expensive for these bankers, the Government should FORCE them to do the needful through a combination of carrots (Tax deductions could be a good carrot) and sticks (Link the same to Government business - only those banks who oblige will be considered for Government business).



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