Old City vendors caught in web of illegal financing... HYDERABAD: The vibrant markets of the Old City during the holy month of Ramzan are hard to miss. A cursory glance at the hawkers pushcarts loaded with pyramids of perfectly arranged fruits and the plush ethnic wear showrooms give one the impression that business in the area is booming. But all is not hunky-dory here. A closer look reveals the dark underbelly of a thriving but illicit trade which fuels many of these businesses at exorbitant interest rates. That of illegal financing. Sample this: An estimated 6,000 new seasonal vendors, in addition to the existing 5,000 from underprivileged backgrounds, converge in the Old City during Ramzan. Hoping to cash in on the fervour of the month, most seek a loan, usually between Rs 1,000 and Rs 20,000, to set up businesses. While some manage to scrape through, many face losses. But, in any case, smiling all the way to the ?bank is the financier. The hawker selling perishable goods needs money to buy fruit. In the absence of capital, he seeks cash from a moneylender. Payments must be made within the stipulated time. Otherwise, he will be persuaded, humiliated, his family threatened and even manhandled till he yields, says prominent activist Ali Asghar, who has studied illegal financing in the Old City. The unauthorised financier is much different from a pawnbroker who is registered with the authorities, he clarifies. A few complaints have been registered about auto drivers being harassed by musclemen of financiers. These individuals retain vehicle documents and even seize them, thereby not allowing the driver to repay the money, says a police officer, requesting anonymity. The modus operandi is simple. The terms and conditions of lending, without the risk of leaving a paper trail, are clearly explained to the borrower. Loans once taken are to be returned within 100 days. The interest is deducted at the time of handing over the loan and is increased if the ?beneficiary defaults on the payment. Although no proper study was done on the size of business, activist estimate that it is worth tens of crores. So what factors compel denizens to approach the neighbourhood financier despite being well aware of the hazards? Researcher M A Moid explains: The financier is seen as a tough benefactor who is willing to help at odd times. The unwillingness of banks to hand out loans, which require collateral, coupled with the abysmal awareness among lower income groups of government schemes is the primary reason. The escalating cost of healthcare, education and marriage leave them with no choice. Another alarming trend is that of borrowing from Peter to pay Paul, Moid observes. Self-help groups have met with little success, he adds. Not limited to being bankers of the lesser privileged, the unorganised money lending business has gained a firm foothold in the business centre of Madina, Pathergatti and Gulzar Houz. A textile merchant from Pathergatti, on the condition of anonymity. admitted that prominent traders too are beneficiaries of tier one financiers. Banks do not give loans within a week whereas bigger players from financing do. Working capital is essential and a cash crunch can be disastrous, he says.
Posted on: Sat, 19 Jul 2014 18:12:09 +0000
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