The loan sharks of Hyderabad and dying humanity

The thriving mult-crore illegal finance market of Hyderabad old city seems to be passing through its bad phase, with most of moneylenders cooling their feet in the jail due to the recent police crackdown. Till now more than 77 financers have been arrested and 72 cases have been booked mostly under sec 384 of extortion in last 15 days.

Some of the arrested financers are Abid Ali, Zaheeruddin Siddiqui, G. Satyanarayana, Charanjeet Singh G Madan Yadav, G Sai Kumar, A Arjun, Charan Singh, A Dasarath, A Sonu, Narender, Manohar Lal, A Prabhakar, B Sudershan, R Pappulal Prajapathi and Mohd Khalid. They have been arrested by the south zone police under whom old city area of Hyderabad comes. The drive of the police against the illegal financing began after a married man committed suicide reportedly because he owed about Rs 3 lakh as an interest amount to his financer for the Rs 1 lakh he had borrowed. This is only one of many suicides and violent deaths due to the illegal finance in old city.

According to police, there are about 10,000 financiers or moneylenders, mostly illegal, operating from the Old City area of Hyderabad with 86% of Muslim population. The illegal financers are not just carrying out business against the law, but in an inhuman way. The minimum rate of interest starts from 30% and it could be as high as 50-100%. But this is not the end. If a person has to pay Rs 100 as interest rate, and if he missed one day's installment, he would have to pay double the amount. That is, if he did not pay on Monday, he would have to pay Rs 300 on Tuesday -- payment for Monday and Tuesday and a penalty of Rs 100.

The clients and target of the illegal financers include auto-rickshaw drivers, petty traders, fruit vendors, daily wage earners because most of them will be illiterate and most easy to fall into the trap, and moreover they make the substantial part of the population in the old city area.

Mohammed Siraj of Riyasathnagar in the Old City went to a local moneylender seeking Rs 10,000 as he had to organize chilla, the 40-day ceremony of his sixth child, and pay fee for his eldest daughter to get enrolled in a junior college. The moneylender promptly handed him Rs 9000, after deducting installment for 10 days in advance. The interest was Rs 100 per day. While Siraj had to crust out 30 per cent additional amount as interest, the loan had to be cleared in four months. Any late payment would attract additional interest. It has been five months and Siraj's debts have only mounted. Unable to pay the loan, one of his 'grave' mistakes was to falter on his regular payments.

Hafiz Mohd Kareem is an autorickshaw driver from the Amberpet area, he borrowed loan of Rs 50,000 from an illegal financer from the old city on the interest rate of 30% for the purpose of repairing his auto and some renovation work of his house, he kept the papers of his auto as a surety. He told TwoCircles.net that he thought he could pay back the amount on the weekly basis by working extra at nights. But after three years he owes that financer 3 lakh rupees due to his failure to pay the amount regularly; the penalties imposed on him increased the borrowed amount manifolds, after the threats from the financer, he was forced to give his house documents as a surety.

When a big money is going to be lended or lended money is going to be forced out from debtors, the financier takes surety. This could be in the form of a "gift-deed", where the house or some other property is "gifted" to the lender. The lender uses the term "gift" to escape extortion charges. Only after the full repayment is made, the deed is cancelled. Several moneylenders have become rich by swindling properties and are now dipping in real estate.

There was a similar case of a woman from Khazipur area who had taken a loan of Rs 1 lakh but has so far paid interest of Rs 3 lakh and in the process mortgaged her land. The principal loan amount still remains to be paid.

Mohammed Yusuf, a fruit vendor from Mir Alam Mandi, did not know that the Rs 15,000 he borrowed more than a year ago from a local moneylender would spiral into a debt trap. He told TwoCircles.net he borrowed the money to expand his business. Shortly after few months he realized he can never repay the debt amount due to the draconian terms of the lender. Aggravated by the harassment from the lender, he approached the police but Yusuf had already paid Rs 24,000 towards the interest, the debt amount remains unpaid.

The moneylenders are thriving in the old city on the misfortune of their borrowers. Lenders lend money for short durations of time by charging excessive rates of interest. The borrowers have to make weekly or even daily payments with interest proportion that could range anywhere between 20-50 per cent or even some times 100%, depending on the need of the money by the borrower. These moneylenders are musclemen, many with police profile, known as ‘Pahelwans’, they even have the support of local political parties or MLAs. These Pahelwans operate through a network of agents, sub-agents, bookkeepers and collectors. In many cases, police are aware of their illegal businesses but turn a blind eye to their activities in return of ‘Mamool’ or occasional ‘chai paani’ to the local police officers.

If borrowers fail to pay the amount at regular intervals with acute rate of interest the pehalwans have their way to get the money out. Abuses and confiscation of the household items are a common thing for lenders, but loan sharks have gone a mile ahead and maintaining their own private torture chambers, where the defaulters are beaten and roughed up for several days so that next time he won’t default or refuse to give the payment. If that was not shocking enough then there were some instances of the pehalwans abducting the wife, sisters or daughters of the debtors. In fact, in June 2009, an alleged illegal financier Mohammed Arshad reportedly pushed a girl, Sameera Begum, from the historic Charminar after her mother failed to repay the Rs 20,000 money borrowed from the loan shark. The girl died after battling for life for a few hours. According to her mother she paid more than Rs 25,000 only as an interest amount, and her daughter was kidnapped by that financer when she refused to pay the loan amount. When she complained to the police about her daughter’s abduction, the financer killed her daughter. However, the police now say that the girl was pushed down owing to other reasons including a romantic angle, not the loan taken by her mother.

The illegal financers exploit the abject poverty and pressing needs of their borrowers. Money is available for any one who is willing to pay the interest. There is not much of paper work involved and that's what makes it appealing. From daily to 100 days finance, a variety of schemes and interest rates are in mode.

Syed Mukhtar, an autorickshaw driver of Talabkatta took a loan of Rs. 50,000 two years ago from Salaam pehalwan to perform his daughter's marriage. Till now he has paid Rs. 80,000 interest by joining different chit funds. Later he took another loan of Rs. 10,000 when he fell short of money for purchasing furniture. And on this amount he has paid Rs. 20,000 interest. On defaulting of payments Mukhtar was beaten up reportedly by the goons of Salaam Pehalwan and his autorickshaw was confiscated. Now he is working as a watchman at an auto garage in Bhavaninagar.

Nasreen Begum had no idea that she is falling in a debt trap when she borrowed Rs. 10,000 five months ago from a financier in Bhavaninagar. She was in need of money for the treatment of her husband. Till date she has paid Rs. 25,000 towards interest while the principal amount still remains uncleared.

The main question remains what is forcing these poor gullible residents of old city to fall into the vicious circle of illegal finance. There is clear lack of access to the financial resources. The problem is being compounded more as banks shy away from lending to the poor. Banks, especially nationalized banks, should come forward to help the poor Muslims as prescribed by the central government to provide loans to the minorities in the priority sector. There is a popular perception among the residents of the old city that poor Muslims of the old city cannot get loans even for starting businesses to sustain themselves, leave alone personal consumption. Even though many account holders in the banks are the residents of the old city but the banks are hesitant to provide loans in the semi-slum areas of the old city even if the documents are in order, because of the assumption that recovery can become a problem later.

------Courtesy: Two Circles