Sharad Pawar’s call to farmers to not pay their debts to “unauthorized” moneylenders is brazen and irresponsible. For all their faults, moneylenders are part of India’s rural credit system. Farmers borrow from them at relatively high rates of interest because they do not have access to cheaper bank loans. There is no other reason why rational borrowers would choose a high-interest loan.
Large-scale wilful default of loans from moneylenders will harm the rural economy in the long run, if it leads to a lenders’ strike. Pawar has also asked the police and party cadre to step in if moneylenders try to force borrowers to pay up. This is stirring rural unrest.
We have few illusions about moneylenders. But they do have a role to play in farming communities. They charge high rates of interest, but, let’s face it, so do microfinance institutions. It is not clear why one is usury and the other is a grand tool for financial inclusion.