Skip to main content

Farming interest and debt

One of my uncles landed in a huge debt years ago because he borrowed some money from his neighbor to pay his children’s education. As per the village norms the monthly interest rate was extremely high and compounded too. But for a poor farmer that’s the only way to educate his sons and daughters. It may be quite expensive to borrow from a rich money lender but what is the only option? What banks charge is a peanut compared to what our farmers in the villages pay.

I heard compounded interest is illegal in our country. And that’s great news; we need such policies to protect our poor farmers from such exploitation. But the situation is different. It is the farmers who direly need money far more than the rich people’s need to lend them.

For instances people in my village use strange interest calculation method and the rate is 5% per month, which means it is 60% per annum. Now if you can afford to lend some money, you will be rich overnight. But at the same time we must look at the risk involved in such matters.

Let’s say PaSsu borrows Nu. 10,000 from me to buy a pair of oxen to plow his field and I charge him an interest of 5% per month. Then by a simple calculation PaSsu owes me:

By the end of 1 first year

Principal Amount: Nu. 10,000/-

Interest rate 5x12 = 60%p.a

Nu. 10000+6000 = 16000/-

By the second year - Nu. 25600/-

By the end of third year - Nu. 40960/-

By the end of fourth year - Nu. 65536/-

And by the end of fifth year- Nu.104857.60

Wow, isn’t that a lot of money?

But lets’ say PaSsu is a wise man and decides to avail a loan of Nu. 10,000 from BOB for 5 years at an interest rate of 15% per annum:

By simple interest calculation method:

PaSsu pays Nu 6000 as interest after 5 years and principal amount of Nu. 10,000/-

Now you will think you will receive a lot of money if you lend it to farmers. But let me warn you, if you think you can lend them, be ready to lose half the amount. I am wise enough to refuse PaSsu’s need. That’s a joke by the way. But most rich people won’t lend you money.

Comments

  1. Are you selling your policy? Well In my village our Goenpa has a huge reserve of public money, and rate is just 10% per annum...in a way I have a better village than most others...
    Well the problem is given here by a right person, is this right person going to do something about it; going from village to village and telling people about it? You remember they can read, so you must make it as a TV AD or something else villagers understand.

    So I have to pay you Nu.104857.60 at the end of fifth year...god I will run away, or may be pay back 10,000 and ask " Did I take more than that?"

    ReplyDelete

Post a Comment

So what do you think?

Popular posts from this blog

Bloggers are not journalists

To say bloggers are not journalists is to say oranges are not carrots. Bloggers are not journalists. That’s true. But can bloggers become journalists? Maybe. Can journalists be bloggers? Yes. In fact, it would be only proper and appropriate for journalists to blog their opinions as opposed to being 'politically' correct all the time. So why call oranges carrots when they are what they are?
Well, it is true – bloggers have no training in journalism. That’s why they are bloggers. And for the same reason they are  not journalists. No bloggers have ever claimed what they blog can qualify as ‘journalism’.  We all do what we love the most and give our best in whatever we are doing either reporting news or blogging. 

Journalists do it as careers. Bloggers do it (mostly) for hobby and out of passion. Most journalists also do it with great passion - that's true. The journalists get paid for doing their jobs while bloggers derive pleasure doing it. Journalists cover (report) stories eve…

The Story Thief

When we were growing up in a small village in the central Bhutan, we would gather around our grandparents every evening in a room that would be dimly lit with a kerosene lamp. Our grandparents or the elderly members of the family would then take turns to entertain us (siblings and cousins who lived under the same roof) with their stories. Such was the only form of entertainment we had had then.  
Our grandparents would start their stories, which they probably would have heard them from their grandparents. A young poor boy becomes a successful farmer by a turn of luck, a man fights a bear, a poor boy accidentally marries a rich man's beautiful daughter, a lame monkey helps a boy find great wealth, a rooster regrets his action after he mistakenly accuses his wife and young men go on business trips to buy cattle, among many others. We grew up listening to many such stories. Sometimes, the storyteller would narrate the same story again and again, and yet every time it sounded more magi…

A 'holiday' for meat vendors

This Bhutanese month (May 16 - June 13) is observed as Saga-Dawa, a holy month in the country. It is popularly or infamousely known as the time when the sale of meat items is banned in Bhutan. And it's also an opportunity for us to put a light brake on our mighty meaty appetites. Consequently, restaurants are encouraged to serve their customers rich vegetarian meals during the period. Similar ban is also observed every first month of the Bhutanese calendar.
But going by what's happening, the saga-dawa is a month long mandatory and government sanctioned holiday for the butchers and meat vendors. Being holy month does not really make a difference to the menus in the restaurants from rest of the  months in the year. 
Meat is available in all the restaurants and even small eateries ensure that their customers are served their favorite dishes. They're only being wise and practical because if they don't serve meat their customers would move to the restaurant next-door that ser…