Off the Record 067: Meter byaj is predatory lending
Issue 067 • 02 September 2022
It’s September 2, 2022, and you’re reading Off the Record, the weekly newsletter from The Record. We are an independent, ad-free, digital news publication out of Kathmandu, Nepal that is currently on a publishing hiatus.
I’m Pranaya Rana and in this newsletter, we’ll stop, take a deep breath, and dive into one singular issue that defined the past week.
You can read Off the Record for free by visiting this link or subscribe on our website to receive this newsletter in your inbox every Friday.
Good morning, good afternoon, and good evening from autumnal Kathmandu. It is September and while the monsoon rains are slowly subsiding, they’re not gone yet. The weather has gotten noticeably colder though, which is a good thing since the cold will hopefully kill off the mosquitos that currently have Nepal in the grip of a dengue outbreak.
Dengue fever
Dengue cases have now been reported in 72 districts and nearly 3,000 people have contracted the disease. On Thursday, Kailali reported the country’s first related death. Lalitpur has reported the highest number of cases so far, followed by Rupandehi and Kathmandu. Dengue cases have been rising steadily since August and while the colder weather will likely reduce the dengue mosquito population, the monsoon is predicted to only subside by mid-September, and that means more rains and more stagnant water, and more dengue mosquitos.
Dengue is treatable and most hospitals and health posts across the country are equipped to handle this disease. Problems arise when cases rise exponentially and health care centers get overloaded with patients. What the authorities must do is attempt to destroy the mosquito larva in standing water by throwing out the water or spraying it with pesticides, like Lalitpur and now Kathmandu have been attempting to do, albeit with little success. It would be best if there was no standing water in the first place but given Nepal’s topography and the state of urban infrastructure in cities like Kathmandu and Lalitpur, that’s nigh impossible. On a personal level, individuals should utilize mosquito repellants and netting. But it does seem like the Aedes mosquito — easily identifiable by its tiny size, striped body colors, and an almost preternatural instinct to dodge claps — has acquired some sort of immunity to common mosquito repellants. At least in my home, they fly around merrily despite the AllOut Extra that purports to specifically kill dengue mosquitos.
Let us hope that the authorities can control the spread of the disease at least long enough for autumn to set in properly.
Cholendra JaBaRa defends himself
In other news, the hearing of suspended chief justice Cholendra Samsher Rana before the federal Parliament’s Impeachment Recommendation Committee began on Wednesday. Rana began his defense by saying that the entire process was null and void because the impeachment motion was presented before the House five months after it was filed. According to the constitution, any such motion must be presented within 15 days at the most. Rana further alleged a conspiracy against him involving the political parties, the Nepal Bar Association, and other Supreme Court justices. On Thursday, the second day of questioning, Rana further argued that it was against the “principle of natural justice” for those who filed the impeachment to be on the hearing committee.
The impeachment motion against Rana was filed in mid-February by 98 lawmakers, comfortably over the one-fourth members of the House of Representatives required by the constitution. The motion, however, requires a two-thirds majority in order to pass. Without the support of the opposition CPN-UML, the largest party in Parliament, the motion will not pass.
There are many allegations against Rana, from rigging the bench to demanding a ministerial position for a relative of his. For a brief summary, read this old newsletter from October 2021:
The process will likely plod on for a few more weeks as the committee reportedly has over 40 questions for Rana and in two days, they’ve only managed to go through six. Rana, who was automatically suspended when the impeachment motion was filed in February, retires in December so if the motion is not passed by then, it will become null and void. Given the pace of proceedings and how long it took for the motion to even get a hearing before the House, it is likely that Rana will simply retire in ignominy.
President Bhandari is still miffed
This past week, the Legislative Committee of the Parliament’s Upper House passed the Citizenship Amendment Bill, which had been sent back by President Bidya Bhandari for a review. The bill, which will be discussed further in the Upper House, will likely be passed as it is with no amendments. Then, the bill will again be sent to the president, who will have no choice but to authenticate it.
President Bhandari, however, has continued to meet with various political actors and seek their views on the bill. Just this week, she met with the Nepali Congress, the UML, and the Maoist party. It seems that President Bhandari will respond to the bill being sent to her again in some form or the other. What that response could be, I don’t really know but with elections in November, any overreach by the president could have serious consequences.
Of Teej and comedians
One final issue of import before we move on to the deep dive. This past week was Teej, the Hindu festival largely celebrated by Bahun-Chhetri women. On Teej, women traditionally fast all day in order to invite long life and good health for their husbands. In the weeks leading up to Teej, it is customary for friends and family to throw ‘dar’ parties where women gather to eat, drink, and dance before the fast. In recent years, these dar parties have turned into wholly celebratory events where women, away from the confines of the home and the presence of judgmental men, have finally been able to indulge themselves. Predictably, men haven’t been happy. Every year, when photos and videos of these parties appear on social media, there are accusations of ‘bikriti’, a corruption of traditions and values.
This year, things got even worse with the appearance of numerous videos on social media of women performing a dance step that men thought was too ‘provocative’. The step in question is basically a twerk but instead of just getting down on your haunches, you get down on all fours and thrust your hips up and down. This was apparently a bit too much for many men who took to social media to harass these women, call them derogatory names, and burden them with societal bikriti. Some women were even forced to issue public apologies.
This happens periodically when certain groups get riled up over innocent issues and end up turning them into national debates. Here, the answer is clear cut: let women do what they want to and mind your own business. The dance step isn’t hurting anyone and it sure as hell isn’t destroying our culture and traditions. The weeks leading up to Teej are a small respite for women to be themselves and indulge in activities they enjoy. If it involves some alcohol and a bit of dancing, so be it. After all, men do the same thing almost every week.
But also this past week, a different kind of moral policing happened too. Apoorva Kshitiz Singh, a stand-up comedian, was taken into police custody for some insensitive jokes he made about the Newa community. I’ve heard those jokes and they’re painfully bad. They’re really quite unfunny. But, being unfunny is not a crime, and the jokes themselves don’t seem to be actively insulting. They’re jokes, bad ones, but still jokes. But the Newa community didn’t take those jokes too lightly and proceeded to file a case against the comedian, landing him in jail.
Comedians and artists have been similarly hounded in the recent past — comedian Pranesh Gautam for a satirical film review, rapper Vten for his music, and singer Prakash Saput for his music video. The constitution allows for free speech but with conditions. It provides broad interpretary leeway to the authorities to decide what those conditions are. Free speech is of course not absolute but in Nepal, it seems to be applied whenever anyone takes offense. However, bad Apoorva Kshitiz’s jokes might have been, they did not warrant an arrest. The Newa community could’ve boycotted him and his shows. They could’ve criticized him. They could’ve done a dozen other things in response but instead, they chose to use state machinery to put him in jail and silence him. And that I do not agree with.
This free speech issue deserves a newsletter on its own and perhaps I will devote one to it in the near future. But for now, let’s get to our deep dive of the day.
The deep dive: Meter byaj is predatory lending
Photo: The Kathmandu Post
Their stories are all the same. They took out loans for small amounts — between Rs 1 and 10 lakh — from local moneylenders by putting up their land and their homes as collateral. Generally, they needed the money to either go abroad themselves, send their children abroad for work, or start a small business. Once they began to receive money, they attempted to pay back the loans, often paying three-four times the amount they had taken. Only, they were told time and again that the interest still needed to be repaid. No matter how much they paid, it seemed like the interest only kept increasing. Their lands and property were seized. They lost their homes. And still, the interest accumulated.
Colloquially, this interest is called ‘meter byaj’ because the interest rate increases as fast as the numbers on a water meter. The interest rates are often levied on a weekly or monthly basis and can range anywhere from 10 percent to 60 percent. The loans are given out by moneylenders, rather loan sharks, who are more gangster than bank. The principal amount may be repaid but the interest never will and so, they threaten and beat up debtors and seize their lands and property.
The victims of these predatory loan sharks have been in Kathmandu for over a month now, protesting. They have been demonstrating regularly at Maitighar Mandala, demanding that the government take action against these unscrupulous money lenders. In mid-August, the government duly formed a task force to look into this loan sharking but the protestors are rightly skeptical, given the nexus between businessmen and politicians that goes right from the top down to the local level. In order to place more pressure on the government, the protestors, united under the banner of a Kisan-Majdoor Sangharsha Samiti (Farmer-laborer Struggle Committee), organized a march to the prime minister’s residence in Baluwatar on Thursday. They’re demanding that the police not release any accused lenders on bail and that they look into the properties of the lenders.
As the name of the committee must make clear, the victims are largely farmers, laborers, and peasants, mostly from the Tarai but also from across the country. They are poor and most are uneducated. Most don’t have enough collateral to get loans from banks and financial institutions and even when they do, they are either unaware of the processes or have to travel far in order to visit a financial institution. It can also be intimidating to visit a bank, where the officers ask lots of questions and demand that many lengthy documents be filled out. This can discourage many from visiting banks in the first place. It is generally easier to get a loan from a local moneylender, but it is also all the more dangerous.
According to the 2017 Civil Code, interest rates on individual loans cannot exceed 10 percent. Section 478 (2) of Part 4, Chapter 15 states:
The amount of interest which the creditor is entitled to collect from the debtor pursuant to sub-section (1) shall not exceed ten percent of the principal per annum.
Given that many of these moneylenders are charging way above 10 percent, they are clearly in the wrong here. But these lenders have promissory notes, known as ‘tamasuk’, signed and/or fingerprinted by the debtors. These notes often outline the principal amount to be much higher than the actual amount loaned out. If a farmer takes a Rs 100,000 loan, the promissory notes could detail a principal amount as high as Rs 400,000, in addition to a 36 percent interest rate. The farmer is either illiterate and unaware of what he is signing or is forced to go along for fear of not getting the loan in the first place.
But even in this case, moneylenders have a rationale. The promissory notes expire after 10 years and it is only after that time that lenders can file a case in the courts. The court can force the debtor to pay back the principal amount along with 10 percent interest as mandated by law. In such a case, the lender would miss out on the high-interest rate initially agreed to. But if the principal amount itself is set higher than originally loaned out, the court will force the debtor to pay that written amount, not the amount taken. The moneylender thus makes enough money back.
Are you with me? If not, let me give an example. Let’s say Hari Das takes a Rs 100,000 loan from Ram Bilas at 36 percent interest per annum. Hari Das sign a promissory note stating that he’s taken a loan of Rs 400,000. After 10 years, if Hari Das has not paid back the loan, Ram Bilas can take him to court and Hari Das will be forced to pay Rs 400,000 plus 10 percent interest. At simple interest not compounded, that would amount to another Rs 400,000 so Ram Bilas would get a total of Rs 800,000. Now if the promissory note had mentioned the actual amount taken, i.e., Rs 100,000 then all Ram Bilas would receive is Rs 200,000 in total. If Hari Das had paid Ram Bilas 36 percent interest yearly, over 10 years, he would’ve paid Rs 360,000, plus the initial principal of Rs 100,000.
It’s flimsy, outright illegal, logic but so it goes.
The farmers and peasants are thus trapped in a vicious cycle. They take out loans so they can find a way to escape poverty but the loans only force them deeper into poverty. Most of the money made abroad by themselves or their children goes towards repaying the loans, which never seems to be repaid. And they have no means to make a living anymore, forcing them to sell off land and property, if not to pay the loans then to survive on a daily basis.
But because this problem affects the very poor in the most rural areas, it is rarely a priority for any provincial or federal government. As for local governments, they are often in cahoots with the moneylenders who finance the election campaigns of the officials. It is the same business-political nexus that exists at the federal level, just on a smaller scale. So when these poor victims go to the police or the courts to seek justice, they are either turned away or their cases are turned against them because they signed the promissory notes. The very fact that high-interest predatory usury is illegal in Nepal rarely seems to be an issue.
The current protest in Kathmandu has been a long time in the making. For decades, people have suffered under these moneylenders. The loan sharks been caricatured in films and television shows, even in songs and novels. Everyone knows about the unscrupulous moneylender in the village. In 2016, the Center for Investigative Journalism published a lengthy article detailing numerous anecdotes regarding this very practice. And yet, the problem persists.
As the issue was building over the past few weeks, I read numerous articles and editorials about this. They always seem to call this issue a “complex” issue and hint that there is no real easy answer. Forgive my non-financial perspective, but to me, it looks pretty simple. The moneylenders are doing something illegal — charging very high-interest rates at a personal level. The Civil Code clearly states 10 percent as the maximum. Whether they have promissory notes or not is irrelevant because as I understand it, you cannot sign a contract where the terms themselves are illegal. So the government needs to crack down on these moneylenders and render their illegal contracts void. If they are out a few lakh rupees then so be it. They shouldn’t have attempted to fleece poor people of their life savings and their properties.
Long term, increase access to finance in rural areas. I know there have been projects funded by the World Bank, the Asian Development Bank, the UN, and a number of donor countries regarding financial inclusion and literacy, but clearly, these projects have not borne fruit, no matter what the project reports might say. If they had, there wouldn’t be thousands of people across the country falling victim to these predators. The government, Nepal Rastra Bank, and these donors need to do much more to increase access to small and medium loans, with no collateral down if necessary.
People, especially the poor, are always going to need capital. This is not because they want to do frivolous things but because they usually have no savings and when an emergency comes up or if they want to climb out of poverty, they have no choice but to take a loan. If banks and financial institutions were more welcoming of this sector of people, they wouldn’t have to turn to the local moneylender. If these BFIs, to use their own lingo, had a dedicated person whose job it was to help the poor and illiterate access loans easier, more rural people might just visit these institutions. The goal, of course, cannot just be profit.
The folks protesting in Kathmandu have come a long way and they have already been here for over a month now. It cannot have been easy to leave their homes and survive in this cutthroat city for so long. But they have no other choice. Their lives are quite literally on the line. For what is a farmer without land to till?
In the end, I’d like to leave you with a story from 2016 from the CIJ report. Read this and decide for yourselves if this practice should be allowed to continue any longer:
In 2003, Satyanarayan Yadav of Sarpallo 9, Pachiyari borrowed 13,000 rupees from a local trader Ganga Mahato at the interest rate of 36 per cent. Yadav agreed to pay back his debt by working in Mahato’s farm. After five years of grueling labour in the farm, Yadav fell ill. Yadav had no money for his treatment and Mahato refused to pay for him saying, the man still owed him money. Although villagers managed to raise some money in pittance, Yadav died on the way to Janakpur Hospital.
Even after several years of labouring, Mahato reckons Yadav is yet to pay back his money in principle and interest and has transferred the burden of the debt to Yadav’s wife and four young children.
Ganga Mahato waved the ‘Kapali Tamasuk ’, a promisry [sic] note signed by Yadav and told us, ‘He died without paying me back. So, his famiy must pay me back now. The amount exceeds 100,000 rupees in principle and interest, but I am willing to settle for whatever community members decide.’
Happenings this week:
Sunday - The family of Dilip Kumar Mahato held a press conference in Kathmandu demanding justice for the young environmental activist who was murdered in Dhanusha in 2020 while protesting illegal sand mining.
Monday - Twenty conflict victims and rights activists dispatched a letter to UN Secretary-General Antonio Guterres asking for his support in getting the government and the political parties to refrain from passing a transitional justice amendment bill that still provides amnesty to perpetrators of gross human rights violations.
Tuesday - The federal government lifted import restrictions on a number of luxury goods in view of the upcoming festival season. The goods include tobacco, toys, cards, television sets, and diamonds. Import restrictions have been in place since April in order to conserve dwindling foreign currency reserves.
Wednesday - Suspended chief justice Cholendra SJB Rana appeared for a hearing before the Impeachment Recommendation Committee of the House of Representatives. Rana made mostly legal arguments, saying that the entire impeachment process was faulty, and alleged a conspiracy regarding his ouster.
Thursday - Acting under the orders of Mayor Balen Shah, Kathmandu Metropolitan City began removing large digital billboards from around the city on the grounds that they exceeded the permitted dimensions. An especially large billboard at Tripureshwor, which many had complained about for being too distracting, was also removed.
Friday - Li Zhanshu, chairman of the Standing Committee of the National People’s Congress of China, will be in Kathmandu for a three-day visit on September 12 at the invitation of Nepal House Speaker Agni Sapkota, reported The Kathmandu Post. This will be just the latest in a flurry of high-level visits from China and the United States.
That’s all for this week. Off the Record will be back in your inboxes next Friday. I shall see you then, in your emails, for the next edition of Off the Record.
If you enjoyed today’s newsletter, please consider sharing it with others who might enjoy weekly updates from Nepal.