"If someone misses even one installment, they double the interest rate. Hence, the borrower gets trapped into a vicious debt cycle," Christian activist Liaquat Munawar. ILLUSTRATION: JAMAL KHURSHID
Like many residents in the Christian locality, Masih, a sweeper, ended up losing his father’s house after he was unable to pay the high interest rate on an informal loan. “I took Rs100,000 in loan for my daughter’s wedding with a 100 per cent interest rate. When I could not make one installment, armed lenders barged into my house, slapped my wife and threw our things out.”
Initially introduced by Afghan and Pathan immigrants, this informal and undocumented lending system has dug its claws deep into the densely populated area of minorities. The money, though easily available, comes at a very high interest rate and, in case of missed payments, the borrowers are subjected to excessive harassment and even forceful takeover of their belongings.
Christian activist Liaquat Munawar said around 300 houses are in lien for informal loans in Essa Nagri, one of the biggest colonies of the minority community in Karachi. “Since informal loans are illegal and undocumented, lenders keep on inflating the interest rates,” he explained. “If someone misses even one installment, they double the rate. Hence, the borrower gets trapped into a vicious debt cycle.”
Starting off with a markup of 20 per cent and going up to 100 per cent, these loans are usually sought for marriage, health and burial expenses. This business is, however, illegal as the informal lenders are not officially authorised.
Asif Younis, who had taken a loan to settle his debts, said the lenders do not hesitate from taking away cheque books, pension receipts and cash, in case of non-payment. “The lenders can settle for gold and other belongings as surety, but they often abuse their power and make unfair demands until the elders get involved.”
Kicked out by her husband, Bina Shiva, a Hindu woman, took her three daughters and moved to a rented house in Old Golimar.
To pay, she borrowed Rs10,000 at 100% interest rate to pay the advance for the house “The lender would often come to my house. He would beat the door, curse me and demand the money. One day he grabbed my hand and tried to break in.” She then approached the Karachi Hindu Panchayat to clear the settlement.
Activists blame their communities for getting exploited but, at the same time, are aware of their vulnerabilities in terms of poverty, unemployment and illiteracy.
Human Rights Commission of Pakistan vice-chairperson Amarnath Motumal said minorities are forced to seek informal loans because of the lack of equal opportunities. “The government should take serious initiatives to eradicate poverty. The ministry for minorities gets millions of rupees but where does the money go?”
Meanwhile, the police have turned a blind eye towards harassment cases. PIB Colony police station DSP Nasir Lodhi said there have been one or two such cases but as the deals are carried out with mutual agreement, no one registers complaints.
In many localities, installment shops give a formal look to the informal lending business by laying out the terms and conditions. “The police and the government have no right to interfere as this is our private business,” said a lender. Been in the business for 10 years, he admitted that they often resort to harsh ways to ensure that the money is returned and the borrower doesn’t go into hiding. “We take documents of their house or vehicles or any other belongings for surety.”
Published in The Express Tribune, February 25th, 2014.
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i thought "soodh" i.e. interest was forbidden in islam?