March 13, Kathmandu. By Kushal Basnet
Without proper access to the financial system, people across Nepal have historically resorted to unreliable sources. The burgeoning cooperative crisis in the country is a result of the people’s quest for an easy source of financing. Scores of borrowers have fallen into the trap of ‘loan sharks’– the moneylenders charging high and illegal interest rates.
A batch of loan shark victims from across Nepal launched a protest in Kathmandu about two weeks ago, with many arriving in the capital on foot. The protesters marched the cold streets of Kathmandu, demanding the return of their land plots and other assets. Notably, such moneylending often happens in the form of mortgage loans, making the borrowers bound to agree to the unfair terms and conditions. The complexity of loan sharking arises not only from the ill intent of the moneylenders but also from the lack of access to financial institutions and low financial literacy among the people.
This week, the victims reached an agreement with the newly formed government. In the presence of Home Minister Rabi Lamichhane, representatives of the Ministry of Home Affairs (MoHA) and loan shark victims signed an agreement. The two parties agreed to “end” the loan sharking crisis by forming an inquiry commission to investigate the issue and recommend long-term solutions.
The commission will investigate the cases forwarded by Nepal Government to Nepal Police and cases registered after forming the commission. It will study the registered cases for forced signing, inflated figures, and illegal interest rates. The commission will report the cases of loan sharking to the Department of Money Laundering or other concerned authorities. Additionally, the agreement states that the commission will recommend fund allocation for relief and compensation for the victims in the upcoming budget.
With a sigh of relief, the victims have started to return to their homes. However, this is not the first time they protested, pressurising the government to address their concerns. A year ago in April, the government led by the same Prime Minister Pushpa Kamal Dahal ‘Prachanda’ had signed a five point agreement with the victims, paving the way for forming a similar commission. In July last year, the parliament endorsed a new bill against loan sharking. It has provided that individuals who indulge in loan sharking can be imprisoned for up to seven years and fined up to 70,000 rupees (530 US Dollars). Despite the legal provisions, the victims had to resort to the streets.
The new three-member commission, like its predecessor, has been formed under the Commissions of Inquiry Act (1969) and has a tenure of three months. Of over 28,000 complaints registered, the last commission reportedly resolved about 5,000 cases. While there is no clear roadmap on how the new commission will deal with a pile of complaints in the limited time, the new government has managed the growing discontent–even if temporarily.