Archive for the ‘Loans’ Category

Emergency loan when the wheat mill broke down

DSC03806
This is the source of one man's income. Its a flour mill, where wheat
is ground into flour. In the village, there is no supermarket where one
can go and pick up a 5lb sack of flour. One has to harvest one's wheat
field first, then take the golden grains to the 'chakki' to be ground.
And flour spoils quickly, insects get into it, so you can't grind a
large amount either, or so say the villagers, so they only prepare for
a week or so at a time.

There
are numerous costs in running this rig, diesel is needed for the motor
and its constantly rising price has been cutting into any profits to be
made for some time now. Any emergency, such as this particular machine
whose engine needed Rs 1300 worth of repairs overnight, can eat up the
entire month's income. The owner estimates his monthly income to be
around 1500 or so after paying for the diesel, the man to help lift 10
and 20 kg sacks of grain and the rent for the space. He charges about
Rs 10 a kilo of wheat (although others say they know where you can get
it done for Rs 5 a kilo).

So what happened when the machine died the other day, how did you arrange for its repair?

I
had to run around and ask my neighbours to see who had some money to
lend me. I managed to find a guy with the Rs 1300 to spare and he
loaned it to me for 2% interest. I told him I'd pay him back over time
from the earnings everyday when the machine was up and running again.
Then I had to go and negotiate for the parts from the shop, arrange for
the engine mechanic to show up and get this thing up and running as
soon as possible.

Is it normal to arrange such loans within the
community or extended social network? Are there any bad feelings if a
close relative asks for interest on a loan?

DSC03801
Oh no, not at all. Its quite the custom. After all its a matter of
money and only someone who knows you and trusts you to repay is going
to lend to you. And of course interest is a part of that deal. Though I
remember back when I'd first lost my job at  the factory, some twenty
years ago, nobody would loan me money, not even at 3% because they had
no gaurantee, now that I didn't have a regular paycheck, that I would
be able to pay it back. Even people who knew me well and had been happy
to lend me money when I used to get a regular paycheck hesitated when I
lost the job. Today of course I have this source of income and they
know it in the village so I am again able to get a quick loan for an
emergency. I can pay it back with each day's earnings.

Yes,
adds another man, this can be a problem, getting a loan if your source
of income is not known or certain, even if everyone knows you very
well. Its not enough to have had a (credit rating) for years, you have
to have a pretty obvious means of repaying the lender before they'll
consider loaning anything to you.

What about the bank? Well, I
went to the bank when I was first buying this set up here, because it
cost a total of Rs 16,000 and nobody had that kind of money available
(except perhaps in harvest season) so the bank saw it was an investment
in an income generation facility and extended me a loan against my land
and house. Of course I paid that back as soon as I could.

Its
been a difficult transition to make for us, I used to have a good job
at the local factory and get a regular paycheck. Back in those days we
even had a bank account and a landline at home, I took my mud hovel and
was able to construct a brick house around it. I could buy groceries
for the month, oil, flour, dhal but today we have to buy what we can
afford when we have the cash in hand. We have learnt to live in the
'now', thinking of today or tomorrow, not like before when we could
think for the whole month or the future, maybe even put away a little
saving in the post office.