Private moneylenders playing havoc with working class

http://dawn.com/2008/03/30/ebr1.htm


By Sabihuddin Ghausi

KARACHI, March 29: An overwhelming majority of the earning age people, from 16 years to 60 years, are hostage to predatory moneylenders in the villages and even in the big cities like Karachi, Lahore, Multan, Faisalabad, and Peshawar. This situation is a challenge for all the political parties, more particularly for the Pakistan People Party, which got a favourable verdict for fifth time from the voters. The PPP has declared social justice as main motto in its election manifesto.

“Majority of Pakistan’s farmers, fishermen, auto-rickshaw drivers, artisans, technicians, field labourers, seasonal labour in ginning and husking units and a lot others in the cities are for all practical purpose the bonded labour because of their dependence on informal money lending,” an activist of a social service organisation observed. Failure of crop, unexpected financial losses from natural or man-made disasters, abrupt health problems in family or any other calamity bring these persons in unbreakable net of the moneylenders who claim more than a pound of flesh from their borrower victims.

“Read Munshi Prem Chand’s stories to know the social role of moneylenders in the Sub-continent,’’ advised Kashif Rizvi, who pointed out “The moneylenders have been around our cities and villages for generations.’’ Kashif Rizvi is a retired banker and is now associated with a social and religious organisation involved in some educational projects. Kashif says that these moneylenders, who operate in the informal sector and plug deficiencies of formal financial services, have gained tremendous power and pelf in last eight years. ‘’Forming a nexus with stock exchange brokers, commodity traders, private bankers, the powerful landed gentry and the bureaucracy, the moneylenders have hijacked the formal banking system and financial services for their benefit,’’ he pointed out.

In rural areas, where majority of Pakistan’s population lives, the formal financial services hardly contribute 25 to 30 per cent of the financial needs of agricultural credit. More than 70 per cent of the agricultural credit needs are provided by the informal sector moneylenders at “exploitative interest rate of 50 to 100 per cent’’ according to the findings of an official report on Rural Finance.

This report was prepared in the year 2003 for State Bank of Pakistan by a committee headed by Mr Jehangir Tareen who later became a federal minister and included members drawn from top bureaucracy and central banking and politicians.

Since the presentation of the report, the volume of agricultural loans has swelled to Rs200 billion in the current fiscal year, which according to a leader of the farming community is only one-fifth of about Rs1 trillion actual requirement. “As much as about Rs800 billion is being given by the informal sector to the farmers in the current fiscal year,’’ he estimates, and against which the moneylenders literally grab the crop much before it matures. “The farmer is paid just a pittance and remains under debt till the next crop,’’ he said.

The informal sector lending is not in cash but in form of inputs. All these inputs are given almost at double the officially fixed price on credit for which the interest is charged at 100 per cent and more. Last season, the officially fixed price of wheat was Rs425 for 40 kilograms. A large majority of small farmers in the Seraiki belt of Punjab and in Sindh could not even get Rs350. “After disposing of their crop at this price -- Rs350 for 40 kilograms -- majority of farmers are unable to clear their debt and hence have to engage themselves and their family members for service of the moneylender virtually as bonded labour.

Almost 50 per cent of Pakistan’s agricultural land is owned by hardly a few hundred families, who are in the national and provincial legislatures and have been controlling almost every government. The feudal families are closely related to military and other defence services personnel. State institutions are, therefore, geared to serve the landed gentry and a big number of farmers continue to live as indebted bonded labour.

Prime Minister Syed Yusuf Raza Gilani comes from an established feudal family of Multan, which enjoys a religious and spiritual status. But he also belongs to Pakistan’s most radical political party the Pakistan People’s Party that carried out two land reforms and introduced tax on agricultural income for the first time in July 1977.

Late Z.A. Bhutto introduced tax on agricultural income in 1977 budget which was promptly withdrawn or repealed by General Ziaul Haq. By doing so, Zia won over many feudal lords of the PPP on his side. Bhutto also introduced second land reforms in July 1977, which were declared un-Islamic by the Shariah Appellate Bench of Supreme Court in 1989.

“Now that the PPP wants an independent judiciary by way of legislation, millions of small farmers expect a judicial review of the Shariah Appellate Bench verdict,’’ a senior worker of the PPP said. He hopes that as Bhutto and his daughter late Benazir Bhutto rebelled against the interest of their class, the landed gentry Syed Yusuf Raza Gilani should also take up the same course.

The moneylenders are not only strangulating the rural population but are close to the jugular vein of a vast number of enterprising urban people. Fishermen in Sindh and Balochistan are victims of these moneylenders for ages. Fishermen need boats, tools, equipment and fuel and, therefore, need money for fishing trips in deep sea that last from two or three days to more than a week.

The terms on which all requirements of fishermen are met by the moneylenders are not different from what is being given to farmers. Just as the crop is grabbed before it is matured, the catch of fishermen is snatched before it is brought in the auction hall of the fish yard.

Auto rickshaw drivers in Karachi are another example of crude exploitation by the moneylenders. “Anyone, who owns 200 to 300 rickshaws in Karachi, is just like having more than one thousand acres of fertile farm.

The rickshaw is loaned out to a newcomer from the village at Rs300,000 to Rs350,000 on an interest rate of 100 per cent plus. The rickshaw driver is asked to pay at least Rs200 to Rs300 a day to adjust his loan and interest, which is never cleared and he remains eternally indebted to the moneylenders.

The Sindh government in its last budget announced to replace 68,000 rickshaws with new gas-driven 3-wheelers to be given on ownership basis. The powerful transport mafia saw to it that this scheme is never put into operation. The National Bank of Pakistan has offered the gas-driven rickshaws on ownership basis to the unemployed. There are people within the government and in traffic police, who are creating all hurdles to fail this scheme.

But the elections and the induction of a popular government at the federal and at provincial levels has given some hope to the downtrodden and wretched of the earth. The new rulers also come from the same old classes but in new clothes and with a new language. Can they come up to the expectations of the poor people of Pakistan?