Thank God, there’s 0% interest to buy a fridge

H. Singh in Tehelka:

For Bhai Mondal, a fish-seller in Calcutta’s Golf Garden area, business capital comes at a very heavy price of 432 per cent interest per annum. If he borrows Rs 2,000 from the local moneylender, as he does most often, he will pay Rs 50 per day over the 76-day loan period which adds up to Rs 1,800. Just Rs 200 short of the capital.

If he cannot make the cash payments he has to surrender fish of equal value. Even if he were to try to get a better deal, there is no way poor people like him can cross an interest barrier of “one rupee per day per Rs 100 borrowed” which amounts to 365 per cent per annum.

Agli di sells vegetables. Her case seems simpler. She borrows Rs 200 in the morning and parts with Rs 215 to Rs 218 in the evening. The slight variation in the amount to be returned depends on the daily rate and the moneylender’s perception of the intensity of her need. Assuming that she gets the easier option, she pays interest at 7.5 percent per day an annual rate of 2,738 percent.

Read the full article: Cashing in on distress