As farmers descend into crisis, a business thrives

A harvest of tragedy

Pushpalata doesn’t know much about the circumstances that pushed Rajesh M to take his life six months ago at the age of 35. Sitting inside the thatched house at Malagaranahalli, 8 km from Maddur, she speaks of her husband in a dazed state.

“He hardly spoke about his troubles and managed things on his own,” she said as she attended to her 3-year-old daughter Khushi, who was suffering from fever. Her son, five-year-old Prakul, listened to the conversation attentively.

Last June, Rajesh had borrowed a gold bangle from his friend’s sister and pawned it to generate Rs 20,000 to arrange funds for the cultivation of a 2.6-acre family plot. “Ahead of the Gauri Ganesha Festival, there was pressure from his friend to return the bangle and Rajesh took a loan from a microfinance company to get the bangle. The chain of debt began then,” said Nagarakere L Krishna, Rajesh’s friend.

Pushpalata with her children in Malagaranahalli, Maddur. Her husband, Rajesh, committed suicide, unable to clear debts. DH Photos/Chiranjeevi Kulkarni

In his death note, Rajesh had listed outstanding dues of about Rs 1 lakh. A group of money lenders knocked on Pushpalata’s door once they heard that the government has released the Rs 5 lakh compensation. They claimed dues to the tune of Rs 3 lakh.

For a rural sector caught in a web of crises, the problems with accessing institutional credit system has pushed it to embrace risks it can’t handle. The microfinance companies (MFIs), which filled the absence of banks in rural areas over the last two decades, are wreaking havoc.

Both business correspondents operating under NABARD as well as MFIs operating as non-banking financial companies (NBFCs) lend loans to farmers by creating joint liability groups. They lend money to joint liability groups, where one person’s default on payments is distributed among other members. “First, they will sit in front of your house and say they won’t leave till the dues are settled. Next, they will start humiliating you till you pay up. There is no way out,” said Virupamma, a villager from Sindhanur, Raichur.

No other way

As getting loans from banks becomes difficult, small and marginal farmers, who account for 72.9% of the total holding, are increasingly taking to the microfinance companies. As per NABARD’s financial inclusion survey (2016-17), at least one person in 40% of households in Karnataka was associated with MFIs. As the cost of cultivation of most of the crops remains higher than the revenue (see box on Page 4), there is no shortage of potential borrowers.

“In Mandya alone, about 15 such companies have spread their tentacles across rural interiors. Though they claim to play by the Reserve Bank of India rules and charge only 16% interest, farmers are paying more than 30%. There is virtually no one to monitor them,” said T Yashavantha, the district convener of Karnataka Pranta Raita Sangha.

The ruthlessness came to the fore during the floods in Kodagu last year, when members of joint liability groups pressured flood victims to pay up or lose their properties. In a video that has gone viral on social media, a woman threatens to commit suicide if members of one such company come to her house at a time they were struggling for food.

Last year, the deputy registrar of cooperative societies in Uttara Kannada district held an inquiry into six companies following complaints of harassment by the residents of Banavasi.

Once seen as innovative solutions to address rural credit demand, microfinance companies have institutionalised the ruthlessness ascribed to private money lenders.

“They have gone to a market that traditional institutions did not occupy. Banks are achieving the priority sector lending targets by giving more and more loans to large farmers. The number of accounts are coming down as the number of land holdings are going up. This naturally leads to exclusion of small and marginal farmers,” said, M S Sriram, visiting faculty, Centre for Public Policy, IIM Bangalore. “Microfinance offers an alternative within the formal sector,” he added.

A former chief general manager at NABARD’s Karnataka circle said that in their drive to reach targets, company agents give out loans without assessing farmers’ capacity. “Any fluctuation in the yield or market price means he or she has to get a loan from another group to pay interest here. Companies deliberately overlook farmers’ credit rating scores and violate RBI rule limiting memberships,” he said.

In Hosur village near Bailhongal in Belagavi district, farmer leader F S Siddanagoudar said several villagers who took loans from three or four MFIs have disappeared. “Some feared attachment of properties but many thought the idea of friends (members of joint liability group) sitting in front of their house over non-payment of interest was insulting,” he said.

Among rural communities, such ruptures in social fabrics are not taken lightly. In Belagavi’s Chikbagewadi, Arjun Rajappa H, 50, a farmer who cultivated leased land, committed suicide last week. “He cleared loans of Rs 2 lakh taken for his daughter’s marriage expenses and borrowed Rs 2 lakh more to buy cattle, when he was diagnosed with cancer. Each injection cost Rs 25,000. After two rounds, he consumed pesticide to avoid further debt as he feared that it will cut off his family from his relatives,” said Sridevi Yellappa, Arjun’s sister-in-law.

Despite this, farmers prefer MFIs rather than banks. “They (MFIs) will come to your home, help you join the group and give money as well. Who wants to wait for hours in banks and spend days on documentation works? Farm needs are immediate, especially during the period of cultivation when high number of loans are distributed,” said Suresha K P, a rural researcher from Mysuru.

He noted that MFIs may be lesser of evils when compared with private money lenders. “But their operations under the guise of rural development needs better monitoring,” he said.

Hundreds of tractors loaded with sugarcane waiting outside a Sugar factory near Saundatti, in Belgaum distric on Saturday. The sugarcane farmers problem sounded in last week winter sessions at Suvarna Soudha and farmers suicide added more problems to the

State yet to respond

Following a spate of suicides, the Andhra Pradesh government enacted a law to regulate such companies in 2010. Last February, RBI set up ombudsman to monitor operations of NBFCs. However, in Karnataka the government is yet to take notice of the protests against MFIs to bring them under the scanner.

Former Union Minister for Rural Development and Panchayat Raj Babagouda Patil said two issues were forcing farmers to take more loans than they can repay. “Commercialisation of agriculture, high input costs and the rising cost of essential services like health and education make one extremely dependent on loans,” he said.

There was no electricity at Chikbagewadi as the dusk fell. Inside Patil’s office, the visibility was reduced. “Tell me, isn’t electricity as important for farmer as it is for a journalist? Often, a farmer’s life depends on how well he waters crops. Why should
he wait till 2 am or 3 am for the 3-phase power to run a borewell or pump? A change in attitude is needed,” Patil said with a smile.

Mysuru and Mandya have topped the list of districts with the highest number of suicides in 2017-18 with 135 and 106 incidents reported, respectively. They are closely followed by Belagavi (94) and Hassan (93).

The four districts account for a major area under commercial crops. “The expectation of high yield and high prices has changed the aspirations of farmers. They take costly loans to pay for high costs of cultivation of commercial crops,” said K B Ramappa, an associate professor at the Institute of Social and Economic Change.

Rammappa worked with Prof A V Manjunatha for the report, ‘Farm Suicides in Karnataka’, which notes that farmers in resource-rich districts of Karnataka have lost coping strategies in the race for money.

Agricultural Price Commission chairman Prakash Kammaradi said there was a need for monitoring cultivation to put a check on commercial crops. “In Karnataka, 26 crops account for 87% of the total cultivated area. Sugarcane, which accounts for 5%, is leading to deaths. We have a situation where farmers plant cane despite a glut in sugar production. That has to stop,” he said.

He said preventing farmer suicide requires holistic measures ranging from preventing a crash in market prices to taking steps for shifting towards sustainable agriculture.

“We have given a list of recommendations, including immediate and long-term measures, that are essential to help the farming community cope with the challenges ahead,” he said.