When farmers owe their souls to the landlords they call friends

Published on 30 November 2018

Pauline Oosterhoff

Research Fellow

Bishnu Prasad Sharma

In Nepal, the impact of bonded labour as a result of borrowing for labour migration often leads farmers and their families into spirals of  debt.  With an increase in migration from one community to another, new research from The Institute of Development Studies (IDS) reveals the complex relationships at play.

Nepal Flickr /::ErWin  (CC BY-SA 2.0) 

Bonded labour in Nepal

Bonded labour is seen as a form of “modern slavery” and can take many forms.  The relationship between employee and employer may be characterised by, or formed due to, a loan taken by the employee or his/her family or an advance paid to the employee or his/her family in cash or in kind.  In such a relationship, the employee does not have the freedom to choose his or her employer and cannot negotiate the terms and conditions of her/his working arrangements. In Nepal,  Agricultural Bonded Labour is rooted in historical relations of patronage between upper caste landlords and lower or scheduled caste landless peasants.

Moneylenders in small villages in Nepal often treat their impoverished clients terribly. They may seize their property, call in government authorities or employ violence–whatever leverage is necessary to recover the loans they have made, often at exorbitant interest rates. But how would those indebted villagers act if the tables were turned? Would they treat each other with fairness and understanding, and use their access to capital to improve the lot of the community?

According to recent research in the Terai, the low-lying region of southern Nepal, the answer is: probably not. “If I were a moneylender and somebody took a loan from me and didn’t pay it back, I would take their cattle or their land. If they have none, I would call the police or beat them and their family up” an older man told us in a village in Saptari district near the Indian border. His family is living in bondage to the zamindar, a local landlord who lent him over 130,000 rupees (865 GBP) to send his son abroad to work in the Persian Gulf. Within six months the son came home due to illness. The son now finds himself working off his debt to the landlord; it is unclear how long this will take.

Bonded labour and migration trends in Nepal

He is not the only one.  Out-migration from the Terai to other districts in Nepal, and to India and the Persian Gulf, has increased rapidly over the last few decades. Historically, most migration was rural to urban within the country’s borders, with some people going to neighbouring India or Tibet. With globalisation however, workers have migrated further afield, in particular to the Gulf States and Malaysia. The eastern Terai region now has the second highest emigration rate in Nepal.

Globalisation has led to the feudal systems changing forms but not disappearing.  The debts that peasants take out to pay for migration tie the migrants and their families to landlords in a system of agricultural bonded labour, known as “Harwa-Charwa”. In Maithili language, Charwa denotes a landless person who herds cattle. Harwa denotes a landless person who works on other people’s land. Both terms imply bondage to landlords.

The majority of the villagers are “Dalits” (members of the lowest social group in the Hindu caste system) or Muslims. 65 of the village’s 102 households do not own the land they live on, and illiteracy rates are high. Income-generating opportunities are scarce. Historically communities in the Terai like these have strong extended social networks across the Indian border in Uttar Pradesh and Bihar. These cross-border social and kinship networks are cemented through marriages and seasonal migration by unskilled labourers. The zamindars have helped finance the cost of unexpected life events-–sudden death and disease–as well as migration and marriages.

In many cases, the servitude in which land owners hold those to whom they lend money makes them essentially slaveholders. Like other slaveholders just across the border in India, they rationalise their behaviour with paternalistic thinking. They justify bondage and high interest rates by observing that lending money to families with little or no assets is risky. In their view, they are doing these families a favour. It is easier for them to maintain such generous self-assessments because the villagers over whom they hold power agree. Another male villager describes the caring and forgiving nature of his zamindar:  “I had borrowed 105,000 rupees (700 GDP), which had grown into 500,000 (3,500 GDP) in just a few years’ time. My zamindar was kind. He gave me a reduction, I only paid 350,000 (2,500 GDP).

Borrowing laws routinely being ignored

Such interest rates and terms of borrowing are illegal in Nepal. By law, annual interest rates by money lender or middleman cannot exceed 10%, and the total sum owed over a period of time cannot exceed the original amount which you borrowed – but the law is routinely ignored. A 60-year-old farmer who had borrowed 1000 (7 GDP) rupees from a moneylender twenty-nine years ago and paid back 800 rupees was temporarily arrested this year, because his debt- the sum of the loan and the interest- had risen to 165,000 (1,100 GDP). His case is registered at the high court and being reviewed. Yet the Dalit villagers we met often argued that the zamindars’ terms are better than those offered by the estimated 35 official private moneylenders in the area

Monthly interest rates in the area run between four and five per cent (48-60 per cent per year). The zamindars tend to ask for four percent, while moneylenders are more likely to ask for five percent. “The zamindars ask us to sign false papers for false amounts,” one villager told us: if they borrow 100,000 rupees, the zamindar may ask them to record a loan of 400,000 to make the interest rate look lower. Yet everyone we spoke to trusted the zamindars more than the moneylenders. “The zamindar knows us and our families. They only loan to their own people,” one villager said. “Sometimes they also give us a piece of land to work on.”

Prevalence of loans in communities living with bondage in Nepal

Most households in villages like these reported having taken out a loan. Households living in bondage always borrow money through loans but perhaps surprisingly only at a slightly higher level than the borrowing of those households who do not have members living in bondage. Households with bonded labourers take loans more often from money lenders and employers at relatively high interest rates.

One of the things that makes bondage, and its structurally unequal and exploitative power relationships, so complex and difficult to eradicate is that bonded labourers and zamindars articulate the justification of its existence in similar terms.

Studies have found that it can be rational for poor farmers in areas with limited opportunities for investment or income to make a high-risk bet by borrowing money to send family members abroad to work. On the other hand, it can also trap people in cycles of debt. Cheap credit (such as much-lauded micro-credit programmes) has been found to increase the prices demanded by labour traffickers. This can increase the debt owed by villagers, which then forces them to take out more loans to migrate.

Land registry and alternatives to bonded labour

Households with exclusively bonded labour have the lowest proportion of land ownership. So helping them officially register the land they live on might help those people seen as Harwa-Charwa to show their assets and therefor obtain better terms of credit. However it also raises questions about how to invest borrowed money and how we can generate sufficient income in remote border areas which often go neglected by large scale development projects.

Slavery eradication and development programmes are trying to help people generate income, offering vocational training to make candles, soap, or incense. But participants often lack the capital to start a business. “I would need around 30,000 rupees (200 GDP) to buy all the ingredients,” says one woman who was a participant in the vocational training and a member of the credit and savings group. Beyond the start- up costs, is there any certainty around the sustainability for these businesses.  For example, could she offer prices that could compete with industrially-produced versions of these products? She does not know; market research was not part of the training. And who will lend her that money?

Bishnu Prasad Sharma is a researcher at Action Aid Nepal and Pauline Oosterhoff, is a Research Fellow at IDS

The views expressed in this opinion piece are those of the author/s and do not necessarily reflect the views or policies of IDS.


In partnership with
PRAXIS, India Freedom Fund


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