The morning routine in Palivelupa village, 100 miles north-east of Hyderabad in central India, has been established for years. Once the buffalo are taken to the fields, the tea made and the children sent to school, the women meet under the big neem tree and wait for the debt collectors.
Until recently, Rama Peadda Boiana, a 29-year-old farmer’s wife, laborer and mother of three, was in charge. “She was hardworking and clever,” Boiana’s sister-in-law, Taj Mani, told the Guardian. “That is why she ran the group.”
And that could be why she took her own life. Just after the new year, Boiana drank pesticide in the fields outside Palivelupa. She survived for four days in hospital. There were many reasons for her suicide, but the sums she and other local women owed to half a dozen microfinance firms played a big part. Some say Boiana felt responsible for the trouble the villagers were in. Others allege she used others’ repayments to pay off her own debts. “We are hardworking people. That’s all,” said Boiana’s husband, Chera Lu, 36.
The story of Boiana and of Palivelupa is that of a good idea gone drastically wrong, devastating the lives of millions of desperately poor people, threatening a banking crisis and revealing the dark side of India’s economic growth. Pioneered in Bangladesh in the late 1970s, microfinance involves granting small loans that no conventional bank would give to the very poor, allowing them to launch small-scale economic ventures. Around 30 million households in India have received £4bn in such loans over the past 15 years.
In recent months, however, the industry has been thrown into crisis as it has become clear that a significant number of borrowers – between a tenth and a third, depending on the estimate – cannot afford to repay their loans.
At the heart of this financial and social disaster is the central state of Andhra Pradesh, where the past five years have seen the aggressive selling of loans to often illiterate villagers, followed by equally aggressive debt collection.
“I have nothing, less than nothing left,” said Victoria Bandari, who lives in a one-room mud and brick home in Palivelupa. “All I have is debt, which I will pay for the rest of my life.”