Bangladesh: Loan sharks thrive on NGO inaction

Dec 2007
Patuakhali, Bangladesh, December, 14 2007 - Small entrepreneurs affected by Cyclone Sidr are now at the mercy of loan sharks, also known locally as 'mahajans', as the NGOs in the district stopped disbursing fresh loans.

In the absence of the NGOs, the moneylenders have been charging high interest rates -- 15 to 20 percent monthly -- for lending money to the affected entrepreneurs who desperately need financial assistance for reviving their businesses lost to the cyclone.

Many business owners, especially poultry and vegetable farm owners or small shop owners, whose businesses have been torn down by the cyclone now do not know where to turn to for the much-needed financial assistance that would help them get back on their feet, said locals.

Sobahan Gazi, 45, from Panpotti union in Galachipa upazila, said, "The small shop I had launched with Tk 20,000 loan from Sap [South Asia Partnership] has totally been destroyed by the cyclone."

"I do not have any money to restart my business. Even though Sap is not currently collecting my loan instalments, they did not disburse any fresh loan to me either," said Sobhan adding that finding no other alternative, he had to get a loan of Tk 35,000 from a local mahajan named Mizanur Rahman.

Jabbar, 30, and Khalil, 35, of the same area also got their loans from the same moneylender for a monthly interest rate of 15 percent.

When contacted, moneylender Mizanur Rahman justified the money lending business by saying, "Why shouldn't I receive interest from locals when the banks pay me interest for the money I keep with them?"

Paper bag manufacturer Sufia Begum, 36, from Charkhali village in Mirzaganj upazila started the business with a Tk 10,000 loan from an NGO in the area.

After Sufia lost everything to the cyclone, she sought a fresh loan from the NGO to start over. But the NGO rejected her request saying that operations of the NGO have been suspended till March 31, 2008.

Sufia had to turn to a local moneylender for a Tk 5,000 loan with a monthly interest rate of 20 percent.

Kuddus Howlader, 32, Moriam Akhter, 25, and Fuljan Bibi, 45, from the same village also had to approach the local moneylenders for high-interest loans as NGOs such as Asa, Brac, Grameen Bank and Uddipan have suspended loan distribution.

Salim, a small businessman from Bahalgachhia of sadar upazila, said, "Since I have only one outstanding instalment payment against the Tk 10,000 loan I got from SSDP [a local NGO], I requested them to receive the payment and endorse a fresh loan for me. But they turned me down and said that all their activities including receiving instalment payments and disbursing fresh loans have been suspended until further notice from their head office."

The government should ask the NGOs to receive instalment payments from the willing borrowers and allocate fresh loans among the affected entrepreneurs, he added.

The loan sharks are taking advantage of the situation and preying on the helpless people as the NGOs have suspended their micro credit programmes, said Afsar Habib, of Codec (Community Development Centre), an NGO.

Sap official Abdul Mannan said people from the low-income group would be the worst victims of the loan sharks unless micro credit operations are resumed in the cyclone-affected areas soon.

AGM Mir Moshiur Alam, deputy commissioner (DC) of Patuakhali, at a meeting in his office on Thursday asked all local NGOs to suspend collection of instalments from the borrowers and at the same time assist the cyclone victims revive their businesses with fresh loans.

The NGO officials however told the DC that since the monthly payments they collect are part of their revolving fund and without recovering a huge amount of outstanding payments from the borrowers, they would not have sufficient funds readily available for disbursement as loans.

Source : The Daily Star

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