What does it mean to be a farmer in Kurnool (a district in Andhra Pradesh)? One part of the district grows commercial crops such as sunflower and tobacco while another supports nothing but paddy (the Telugu-Ganga Canal influences the soil in way that only paddy can be grown here). Against this backdrop, we wanted to understand the lives of the farmers in the district, what they do for sustenance and how they manage their finances. We travelled across Kurnool and met a diverse cross- section of respondents covering small and large farmers, housewives, small businessmen, Sarpanch and SHG presidents. As a part of our conversations with these respondents, we enquired with them about formal and informal sources of finance available to them, especially through microfinance institutions (MFIs) and their experiences with them. These were in-depth interviews with individuals as well as with groups as other villagers often gathered around us to share their views as well. We also met an officer from a government owned bank to understand his view of the financial options available to his clients.
Following qualitative research methods, we aimed to maximise diversity in our respondent set. The purpose of this post is neither to generalise our findings nor to draw conclusions merely based on our observations from this trip, but to place on record the multiplicity of voices heard from the field on issues at the heart of the microfinance debate. We feel that many of these perspectives and personalised narratives have been missing from recent coverage on the Andhra Pradesh microfinance situation.
[The names of the respondents have been changed at their request to protect their privacy.]
The farmers of Kurnool district are reeling under the damaging impact of fungal attacks on their crops. Vast expanses of black paddy fields greeted us as the two of us travelled to Nandyal in the Kurnool district of Andhra Pradesh.
An excess of rainfall and prolonged wet weather has led to fungal attacks on almost all the paddy fields in the region. (By November 24, 2010, 496,000 hectares have been submerged or otherwise damaged due to the excess rains and yields are expected to be much lower than usual.) These are difficult times for farmers who had toiled hard all through the sowing season, often borrowing to meet their daily expenses in the hope of a good harvest. But their crops are being attacked by a disease that would reduce their yields to less than 50% of normal yields. The question in our minds, as we observed this was, how does a farmer here manage her financial requirements?
“[This year] I planted sunflower and turmeric along with paddy. These commercial crops require high levels of investment. [To make these investments] I rely upon my savings, bank loans against the collateral of my land and on the rental that the small farmers pay for leasing parts of my land”, says Abilash, a farmer with 10 acres of land in Atmakur village.
We ask him what role a microfinance institution (MFI) plays here.
“Only about 10 percent of my investment cost is met by the MFI loan” he replies. “But you should talk to my labourers or the small farmers from the lower caste / tribal colony. They are the ones that keep taking MFI loans”, he adds.
While talking to them we learnt that the “colony” people are the ones who are hired as labourers by the big farmers or lease a piece of land from them. If they choose to lease the land, they have to pay their lease rental upfront because the landlords do not want to bear the risk of crop failure (the big farmers also confirmed the existence of this practice). Since they are from a “lower caste” they do not even consider requesting permission to pay at the end of the harvesting season. They also know that if they take loans from these rich farmers and default, they run the risk of being boycotted by the entire village.
No land documents meant that the lessees had no access to a source of financing such as a commercial bank. Moneylenders or MFIs were the only options left for them to approach. (Self-Help Groups interestingly, had not yet caught their attention, though they are aware of it). “The moneylender does not give us the amount of loan we want. Not because we are not capable of repaying, but because he wants to have us hooked to him. He gives about half of what we need tells us that only if we repay this promptly will he give us more. God knows how much interest I have paid him!” says Ahmed, a “colony” resident who has taken one acre of land on lease.
This means there is still some more money that needs to be borrowed. “We have BASIX, SHARE and Swayam Krishi [SKS] operating here and they have been good to us. My wife took the loan and I was able to take the land on lease, buy some pesticides and fertilisers. Last year, we had a bountiful harvest so I decided to lease more land and cultivate more cash crops. But this year the crops have failed and I have spent all the money I took as loans.”
So what would he do to repay the moneylender and the MFI? “For the microfinance loan, my wife works as a daily-wage labourer and she earns enough to repay the Rs. 250 weekly repayment. But I don’t know what to do with the moneylender. I will have to borrow more from him or someone else to repay his loan” he says.
By now, we are surrounded by some 20 people, all from the “colony” and all of them (excepting 2) had taken loans from MFIs. We asked them if they had ever faced any difficulties in repaying the MFI loans. “Sometimes we do face difficulty”, one of them said. “I have a small piece of land and my wife works as a daily wage labourer. Sometimes, when my wife falls sick, we lose income for a few days. Then weekly repayment becomes difficult. If it was a monthly repayment, we could easily compensate for it by working extra. The recent system of paying monthly has helped us.”
We raise the issue of adequate borrowings and we ask if they have multiple borrowings and why. An elderly farmer in the crowd says, “We told you before that our requirements are never met completely from one source. Why would we borrow from different people if there was no need to do so?”
A labourer who had never taken an MFI loan interjected, “Do they explain why they take your signature while giving the loan? They have the capability to auction all your property if you don’t repay them on time”. When we ask him if he had read any such document from an MFI, he said he had only heard people say it. We ask them if the MFI had explained the documents and procedure. The others said, “They did, but we did not understand and we were all eager to take the loan.”
When we meet a group of women in a different mandal (Allagadda) the next day, we get some more perspective on the phenomenon of multiple borrowings. The women said they do have multiple borrowings, often up to four MFI loans. A woman who sells sarees for a living says, “I know my neighbour goes for Monday, Tuesday, Wednesday and Thursday groups. I too have taken loans from three MFIs”, says one woman. But why did they take these loans? “Why should we say no when someone gives it to us? We get good income and we know we can pay off the weekly dues easily. Then what is wrong in taking the loans?” she replies.
One of the women says, “When a new MFI enters our village, they first enrol the women who already have an MFI loan. They call us and explain that they are a similar company and that they would offer higher loans. Next, they ask us to bring our friends and they continue to offer loans. We keep taking loans from them because we have a need. Besides, who are they to decide how much I can afford? I know my limitations and I will take as long as I have a need. If I don’t tell them, how will they know if I have already taken a loan [from elsewhere]?” another woman asks. “Even if the MFIs checks on who is borrowing [from multiple sources], we will produce five new faces and as soon as MFI gives them the loan, we take the money from them” said another woman, while others laughed and agreed with her.
The previous day, when we were in the “colony”, we had asked the small farmers and labourers what the loan officer would do if they failed to repay. “They would insist that we repay. They would sit here and ask us to clear our dues. Normally, if my friend has a genuine problem such as illness of a child, we would pool in money and cover her. Didn’t we agree to do it when we took the loan?” they said.
The women in Allagadda also give us a similar answer. “They come here exactly on the same day and collect the amounts from the centres. We believe them because they are very professional. They do not even drink water or even talk to us anywhere else other than at the centres”, says one of the women.
We ask them what would be the officer’s response if they did not pay. “Why would I not pay? Had I not agreed to pay every week when I took the loan? If I do not pay, my group members lend me money for the week. I put in extra work and repay it to them” is the reply. There was strong sense of conviction in their voices. In case of a second default, the woman can still depend on the group to help her again, but not the third time. “The third time is when things become bad”, they say. “Why would I help someone who is not interested in repaying her own loan?”
“How would the loan officer behave then?” we ask.
“He would say that the group can leave the centre only after paying the instalment and I would not blame him for that. But why would I have to sit unnecessarily if it is not my fault? I would shout at the woman [defaulter] for being careless. Anybody, who has borrowed has to pay up. Am I not paying my dues?” replies one of the women.
In all the conversations that we had, the most striking aspect was the absence any mention of high interest rates. In fact, the Sarpanch of a village acknowledged that because of the presence of MFIs, the money lenders had brought down their interest rates.”If the MFIs were not there, the money lenders would create an artificial scarcity and would say that loans were available only at 5 percent per month. Now it is available to us at 2-3% per month”.
When we met the branch manager of a government owned bank in the village and asked him about other sources of finance for the villagers, he said there were about 300 SHGs in his branch and he was all praise for them. “We insist that all the team members to come to the bank when they want to withdraw money”. On the Joint Liability Group (JLG) model used by the MFIs, he said would really be interested in testing out the JLG model. “But unfortunately, I am short-staffed and am not able to spend as much time on forming these groups and managing weekly payments”, he said.
Almost all the respondents we met had heard of farmer suicides. When we asked them how they felt about deaths of their fellow farmers who were pushed to commit suicides, the common response we received was “His family would suffer and he did not think about them. It was his bad luck. Poor guy.” We asked if the MFIs could have pushed them to suicide by their aggressive collection practices, they replied “We know that only some of the stories [of suicides] are real and others are not. For example, a story of suicide reported in a village close-by was an accidental death, while TV showed it as a suicide”. But the others were quick to point out “How do you know? We only know in our village nobody committed suicide”. On MFI staff harassing the borrowers, they said, “Nobody can enter our village and harass us or use foul language against our women and get away with it. We would have not allowed such things to have happened in our village”.
Beyond the MFI
Finally we were curious to know if they were still repaying the MFI loans. They replied, “No, when the MFI person came, we said, we can’t pay this week and he went away silently and came back next week
.” However in Allagadda, the women said they paid up their dues.
We asked them what they would do, if the MFIs were gone or if they stopped giving loans, but they don’t seem to have imagined such a scenario. One common response we got was “Where would the MFIs go?” When we insisted that they imagine such a scenario, they replied that they would somehow borrow from somewhere or someone and manage to continue, but they did not have a clear alternative.
We had to cut our visit short because of the ensuing political situation, but we believe this visit offered a perspective that was worth sharing.