MONEYLENDING IN THE EAST. T HE first object which strikes the
eye and arrests the attention of the Egyptian tourist as he approaches the town of Luxor, is not a ruin or an obelisk, but the house of the local moneylender. This highly coloured -and castellated structure stands out on the bank of the Nile in unblushing crudeness, and its stucco splendours are alluded to by peasants and donkey-boys with feelings of awe if not of admiration. The fact that the most visible thing in this thriving little town should be the -usurer's palace, is most significant. It is a picturesque reminder that the real Eastern question is the question of the moneylender. Throughout Asia and Mahommedan Africa, from Rangoon to Mandalay, from the Sunderbunds to Peshawur, from Zagazig to Tetuan, the absorbing iproblem of social and political concern on the domestic side is the problem of rural indebtedness. The gombeen- man is a terror in Ireland, but in the East he too often holds the peasant in his grip, body and soul. Under native rule, this is accepted as the natural fate of the tilling-man ; but in places where European Governments -are supreme, the moneylending difficulty is a constant preoccupation to those whose duty it is to superintend the course of justice, and to look after the welfare of the common people. If, in India, the reports, the laws, and the projects for making new laws, or amending old ones, on the subject of moneylend- ing. were to be collected and classified, it would, we believe, be shown that for the last hundred years the Government had never had the problem out of their thoughts. Governor-Generals come and go, and with them new codes, new policies, and new systems of administration ; but whether in the Punjab or in Bengal, in Southern or in Central India, the moneylending ques- tion remains unsolved and apparently insoluble. That is, the Government is perpetually annoyed and put to shame by seeing the peasantry entering into ridiculously improvident bargains, and then, through some defect of -contract, losing their land for a debt which they have paid back six times over. How to stop this waste, misery, and injustice, without at the same time inflicting a mortal injury on the whole system of contract, is the difficulty. The moment the Legislatures try to put difficulties in the 'way of the usurer enforcing the bargains which he has made, they are brought face to face with the fact that every obstacle thrown in the way of enforcing the repay- ment of money lent increases the rate of interest. The moneylender, harassed, as he calls it, by a new law directed towards controlling his operations, says, and perhaps says truly,—' Under the new arrangement, it will often be .terribly difficult to get in my debts. I shall be certain, in -fact, to lose a third of them altogether. I must then, in self-defence, put another 1 per cent. per month on my interest. In that way I may be able to recoup myself.' Experience shows that is invariably what happens when 'the State makes it bard to collect money lent. Every obstacle in the way of enforcing repayment raises the rate of interest. When usury is absolutely forbidden it may reach 20 per cent. per month. Hence Governments are always very reluctant to interfere directly with the money- fender by such schemes as forbidding him to sell up his debtor, or by forcing him to leave the debtor a living patrimony. The Egyptian Government, according to a telegram in Monday's Times, is about to take a very bold step in the direction of solving the moneylending problem. " The Finance Committee, under the new scheme, will lend small sums in Lower Egypt, repayable after the gathering of the cotton crop, at the rate of Q per cent. per month for interest, or 6 per cent. per annum. No one, however, will be granted an advance of more than £2 per acre of his holding, with a maximum of £10." Since the fellaheen -often pay as much as 3 to 6 per cent. per month for small loans the benefit to them will be very great. To illustrate the terrible burdens now borne by the peasants the Times' correspondent relates how a certain landholder, on being -told that he could borrow money from Government at 6 per cent. interest, replied, " Where is the advantage ? I get it now at that rate." He thought it meant per month, not per annum. In other words, he had been paying some 70 per cent. per annum. The measure is for the pre- sent only tentative and to the extent of £10,000 capital, but, if successful, will be further developed. No doubt the immediate relief to the peasant will be very great, but in spite of that we are not sure that the plan is a wise one. The fellah, though hardworking, is very improvident, and he is only too likely to borrow, first the Government's money, at 6 per cent. per annum, and then the usurer's, at 6 per cent. per month. Again, these loans, if widely taken up, as they are sure to be, unless the scheme is virtually abandoned, will often put the Government in the odious position of having to enforce payment by threat of eviction. No doubt the fact that the maximum lent is to be £10, and that on a five-acre farm, seems to preclude the notion of a forced sale, or at any rate of eviction ; but considering the scarcity of ready money among the peasants, it might well happen that the peasant, pressed to pay the Government loan, would have recourse to the usurer at specially ruinous rates. Lastly, there is a danger that the fellaheen will come to regard the interest on the loan as a new tax. They will forget that they ever had and spent the principal, and they will come to look upon the extra nine or ten shillings a year as an increase in the Government tax. On these grounds, therefore, it seems to us probable that the Government had better keep to its proper functions, and not embark on a system of moneylending which, if it is to be safely conducted, must be on a very small scale, and which, if enlarged, is full of peril. Still, Egypt is a small place, and a place so easy to govern that things can be done there which would fail elsewhere, and we admit that it is quite possible that a plan which would mean anarchy in India would succeed there. We shall, then, watch the experiment with great interest and sympathy, though not without misgiving. In truth, we should have preferred another plan for beating the usurer on his own ground. We would recognise a certain number of moneylending companies, on condition that they would never charge more than 6 per cent., never allow arrears to roll up beyond one year, never lend more than a certain fixed sum per acre. In consideration of these rules, we would allow the authorised lending com- panies certain special facilities for collecting interest and enforcing repayment of their loans. In this way the fellaheen would be able to borrow without being cheated, while at the same time the Government would not appear to be collecting more money. Very likely there are objections to this plan ; but it seems to us that in this direction lies the best hope of direct Govern- ment intervention.
Another method, and perhaps the best of all, is to apply the principle of an equitable settlement to all dis- putes over small loans of money secured on land. That is, whenever a moneylender sued on an agreement to borrow and lend, the Court should at once consider, not the law, but the equity of the case, and inquire (1) how much was really received by the borrower, (2) how much had been paid back in the way of capital, either directly or by payments of interest, over, say, 12 per cent. per annum. That is, if the Court found that interest at 24 per cent. per annum had been paid for seven years, they would carry 12 per cent. to the capital account. The Court, after such an investigation as this, would decide what was the amount really due. One great advantage of this scheme would be that it would not force the money-, lender to raise his rate of interest because of the obstacles put in the way of getting repayment. The first principle on which the Court would act would be to give back to the usurer everything he had paid out of his pocket, and reason- able interest thereon. Finally, the Court might be allowed, if it judged fit, to inflict punishment upon a debtor who had obviously borrowed in order to defraud.the money- lender. Such cases are by no means unknown. Again, it must always be remembered that, though the money- lender is often a great evil, he is also often a great boon to the peasant. The function of the moneylender is a very important one, and the rural communities of the East could no more dispense with him than the City could dispense with Lombard Street. We must not try to get rid of the moneylender, but merely to keep him in order. He is not a disease in the social body, but merely a function which is apt to become disordered in weak subjects.
Previous page
