APRIL 2

The government is to set up a high-level commission to resolve the woes of the usury victims, who have been demonstrating in the capital for some time to call attention to their plight.

A five-point agreement was reached between the government and usury victims the other day to form the probe commission to address their problems at the next Cabinet meeting. But will the commission help provide justice to the victims whose houses and other property have been seized by the loan sharks? The government is known to give such assurances only to diffuse the crisis at hand. Take the example of the sugarcane farmers, who have still not been paid by the industries even years after the government said it would force them to clear all dues.

This is not the first time that the usury victims have descended on the capital to raise their issue. In August last year, the government had formed a task force to study how the financial crime could be controlled after the victims from various districts kept demonstrating for weeks in Kathmandu demanding justice. On August 13 last year, the government had asked the victims to register complaints against the loan sharks at the District Administration Offices.

Within a week, a total of 1,937 complaints were lodged across the country – almost 69 per cent of them in Madhes Pradesh. As of now, the Ministry of Home Affairs has received as many as 3,351 complaints against the loan sharks, pointing to the gravity of the situation.

The victims are mainly illiterate, poor and economically weaker sections of society who can be easily exploited and duped by the illegal money lenders. There are reports of how fake documents have been prepared to usurp land, houses and other property of the borrowers. For sure, the loan sharks couldn't have operated so openly without close connections with the local parties or powerful people. Some local level representatives have been accused of being a party to the illegal lending practices at high interest rates.

The prevailing laws forbid the local lenders to charge interest rates higher than what has been set by the government. Yet the poor have no option as they cannot get a loan from the banking institutions to meet their immediate needs, such as marrying off a daughter or dealing with a natural disaster, such as a drought, or crop failure. There could be many more victims of the usury system who have not lodged a complaint for fear of goons or not being able to access a loan in the future. Improving rural people's access to loans through the formal channel would help alleviate their plight, but the process would need to be less cumbersome. Financial institutions demand collateral and signing lots of documents, which pushes the poor into the arms of the local money lenders. Today a network of 11,610 bank and financial institution branches provide banking services across the country. With the exception of Saipal Rural Municipality in Bajhang, commercial banks have their presence in 752 of the 753 local levels today.

Taking tough action against the money lenders and improving the banking literacy of the rural people would go a long way in eliminating the usury system from Nepal.

Improving rural people's access to loans throug banks would help alleviate their plight

A version of this article appears in the print on April 3, 2023, of The Himalayan Times.