Predatory lenders

It is generally believed that “love of money” is the root of all evil in recent times, but in our country the “existence of dishonest money” is more of an evil. We have our very own Shylocks in our midst in the shape of private money lenders who lend at an exorbitant interest rate, usually as high as 90 percent to 140 percent! Surely these unbelievably high interest rates amount to a “pound of flesh”. But the government has more or less turned a blind eye to this black economy. After a delay of more than three years, the Punjab Assembly Standing Committee on Revenue has finally approved The Punjab Prohibition of Private Money Lending Bill 2003, which if implemented would put an end to the private money lending business in the whole province. Among other things, the bill asks for the repeal of the Punjab Money Lenders Ordinance of 1960 that protects private money lenders, even though the irony of the matter is that this ordinance has never been implemented. The ordinance allows licenses to be distributed to private money lenders, who would be penalised if they charge a “compound interest, or simple interest at a rate higher than seven and a half per centum per annum or two per centum above the bank rate, whichever is higher, in the case of a secured loan and twelve and a half per centum per annum in the case of an unsecured loan.” They are to be monitored by the Additional Commissioners (ACs) and their records have to be maintained in a register. To this date, there has been no record of any register containing such information. This ordinance is only limited to the official documents, as is the case with many other laws.

Before partition, the Hindu baniyas were notorious for lending money to underprivileged people, who then had to pay the debt with high interest. After partition, the baniya was replaced by our feudal landlords whose prey was, and still is, the illiterate peasant. The peasants need seasonal loans for their crops and other social reasons such as weddings, sudden illness or accident, etc. There is no banking mechanism in Pakistan that would allow these people to get a loan, as they do not have any collateral to offer. The feudals are the only ones who would offer them loans, but on stringent conditions. This has led to bonded labour, marriages of young girls to older men as a repayment of debt, violence, murders, and many other human rights violations.

The Banking Companies Ordinance 1990 prohibits any company to function as a bank. If a company is not allowed this privilege, then how can an individual? The reason is that our assemblies, be they national or provincial, are swamped by the feudals who would not want to give up their parasitic business of money lending, thus not allowing any bills to pass that would curtail this trade. It is time the government implements laws that would prohibit this practice all over the country and sets up a monitoring mechanism under the local bodies or a separate regulatory body. In order to successfully eliminate this practice, the government needs to replace it by mainstream legal means. A micro-credit banking system that would offer loans to the poor on easier terms must be started. If the government cannot implement such a banking system and only abolishes the practice of private money lending, given the unrequited demand for credit, this informal trade may well be driven underground.