Private Money Lenders Helping Farmers in India

[Corey Dutton]

India’s farmers are primarily funded by National Banks. According to a recent article published in ‘The Times of India,’ approximately 75,000 farmers were unable to obtain crop loans this year. These farmers were assisted by private money lenders operating out of the local villages. And these lenders are not of the new micro-lending variety, like Kiva.org, these are local hard money lenders in India that are providing these loans to the farmers there.

And if you’re complaining about the interest rates charged on private and hard money loans in the U.S., you are really going to fall out of your chair when you hear the interest rates charged by these private money lenders in India. 5-10% monthly!! (This is what the article reported, but this is most certainly a typo in the article). I don’t think these rates would be sustainable for any borrower, much less a poor, rural farmer in India.

But if the interest rates charged by these loan lenders in India is between 5-10% per year, which seems more likely, this is still making loans available that otherwise would not have been available. Once the National Banks in India have lent out their available capital to the local farmers, it’s all gone.

As exemplified by farmers in India who used local private money lenders to fund their crops, hard money and private money loans are greasing the wheels of the world economy in so many ways.