Are All Borrowers Victims and All Lenders Loan Sharks?

Introduction

Over the past few years, Nepal has witnessed numerous protests, court cases, media reports, and public discussions surrounding the issue of loan sharks. Many of us have heard stories of borrowers losing land over loans, not getting their property back even after repaying several times the original amount, or struggling to recover signed contracts (Tamsuk) despite making full payment. Some of these stories represent genuine injustice, and those affected deserve to be heard and protected.

However, these stories have also shaped a public narrative in which borrowers are often viewed as victims by default and lenders as loan sharks by default. In Dhanusha district alone, more than 16,754 complaints have reportedly been filed. With approximately 164,136 households in the district, the scale of these numbers is extraordinary.

If we accept every complaint at face value, are we saying that nearly one out of every ten households was victimized by a predatory loan shark? Or is there another explanation that deserves equal attention?

My Story Begins in a Village, Not a Courtroom

To answer these questions, we must first understand the economic reality of many villages in the Madhesh regions of Nepal.

When people hear the words "borrower" and "lender," they often imagine a poor victim on one side and a wealthy moneylender on the other. In many villages, however, reality is very different. Most families live under similar economic conditions. They own small plots of agricultural land, run small shops, work as daily wage earners, or depend on income sent by family members working abroad in Gulf countries. Very few families are truly wealthy, and very few are completely landless. Most people belong to the same broad economic class and face similar financial challenges.

In the past, villages often had a few powerful Mahajans or Mahanthas who controlled large amounts of land and capital. However, over time, land has been divided among generations, foreign employment has brought income to ordinary households, and economic differences have narrowed. Most households now have at least one person in foreign employment, working mostly as a laborer, and if there are people who have some savings, it is mostly from this overseas work. Today, in many villages, the person borrowing money and the person lending money often come from remarkably similar social and economic backgrounds.

How Does the General Lending System Actually Work in Dhanusha?

To understand today's loan-shark debate, we must first understand how ordinary lending actually worked in many villages of Dhanusha.

For as long as I can remember, there has been a commonly accepted interest rate in village lending. The most common rates were 2.5 rupees per hundred per month (approximately 30% per year) and, for smaller loans, 3 rupees per hundred per month (approximately 36% per year), usually with annual compounding. This was not something hidden or known only to a few people. It was a widely understood practice.

I am now over 30 years old. When I was in grades 8 or 9, people would sometimes come to me to calculate interest because I was good at math. Even at that time, these rates were already considered normal and well-established. Based on my own experience, I can confidently say that this system has existed for at least a few decades. These were simply the customary rates that people in the area generally understood and followed, in a place where people could not easily obtain loans from formal banks.

Naturally, One May Ask: If This System Has Existed for So Long, How Did It Begin?

The honest answer is that nobody seems to know for certain.

I once asked my grandfather about its origins. His response was simple: "It has always been like this." Even in my grandparents' generation, people commonly used the term "Teen Paisa," meaning three paisa interest per rupee per month. At a time when calculators did not exist and many people had limited formal education, this system was easy to understand. If someone borrowed 100 rupees, they knew they would owe 3 rupees at the end of the month. Both the borrower and the lender could calculate it mentally without complicated paperwork or accounting.

Over generations, the "Teen Paisa" system became a familiar and accepted part of village life. Whether it originated with the Mahajans or evolved through other local practices is difficult to say. What is clear is that it was not a new invention designed to trap people; it became a long-standing custom that both borrowers and lenders understood and followed for decades.

This naturally leads to another question.

If Everyone Understood the Customary Interest Rate, How Did Tamsuks Become Inflated?

Just like the origin of the "Teen Paisa" system, nobody in my village can say exactly who first started writing inflated amounts in Tamsuks. My personal belief, based on what I have observed and heard from elders, is that at some point someone found a practical way to reconcile the long-standing customary interest rate with a written Tamsuk.

The customary interest rate practiced in many villages was around 30% to 36% per year, whereas the legal interest rate allowed under the law was much lower. Over time, people appear to have developed a local practice of writing a larger principal amount in the Tamsuk instead of writing the actual cash amount together with the customary interest.

Over time, this way of preparing Tamsuks became so common that most people no longer questioned it. Borrowers expected to sign a Tamsuk because it was considered the normal and safest way to document a loan, while lenders viewed it as protection for the money they were lending. Like many other long-standing customs in the villages, people generally followed the practice because it had existed for generations, not because they had carefully analyzed the legal implications behind it.

Whether this practice complied with the law is a separate question for the courts and lawmakers. My purpose here is not to argue that it was legally correct, but to explain how many ordinary villagers understood and practiced the system at the time. Without that historical context, every inflated Tamsuk may appear identical to a fraudulent document even though the circumstances behind it could be very different.

One Story Among Many I Have Personally Witnessed

To better understand the difference between customary lending and predatory lending, let me share a simple example that I personally witnessed.

Ram needed NPR 300,000 to travel to Malaysia for foreign employment. Like many young men from the village, he found it difficult to obtain a bank loan quickly. He therefore approached Geeta Devi, whose husband had been working in the Gulf for many years and had accumulated some savings.

Geeta Devi agreed to lend him NPR 300,000 at the customary interest rate of 2.5 rupees per hundred per month. Both parties understood the customary terms before the money changed hands. They prepared a Tamsuk, signed it voluntarily, and Ram left for Malaysia.

After about nine months, Ram's family returned to Geeta Devi with the principal and the accumulated interest. As is common in many villages, they negotiated a discount on the interest, eventually paying around NPR 354,000 instead of the full calculated amount. Both sides were satisfied, the Tamsuk was torn up, and the matter ended there. Nobody filed a complaint. Nobody went to court. Nobody lost land. It was simply another customary lending transaction that ended peacefully, just like thousands of others across the villages.

Now compare this with the cases that rightly triggered the meter-byaj movement: lenders who allegedly refused to return Tamsuks, repeatedly demanded additional money even after substantial repayment, built networks to lend to large numbers of people, or used documents to unlawfully seize land. These are fundamentally different situations, even though both involve lending.

If the system was so exploitative, why did entire villages continue using it for decades?

The answer is not as simple as greed or exploitation.

For much of Madhesh or rural Nepal, access to formal financial services was extremely limited. Many villagers had no bank accounts, no collateral acceptable to banks, limited financial literacy, and little knowledge of formal lending procedures. Even when banking services became available, obtaining a loan often involved paperwork, guarantors, travelling to nearest city, and delays that were impractical for people facing urgent needs.

Village lending worked differently. Money could be obtained quickly, often from someone the borrower already knew personally. No lengthy procedures were required. In emergencies such as medical treatment, foreign employment expenses, farming costs, weddings, or family crises, speed and accessibility were often more important than interest rates.

This does not mean the system was perfect or that abuses never occurred. However, it helps explain why both borrowers and lenders continued to participate in it for decades. The system survived not because one side forced it upon the other, but because it filled a gap that formal financial institutions were unable to fill.

Who Are the So-Called Loan Sharks?

When people hear the term "loan shark," they often imagine a wealthy individual whose primary business is lending money and exploiting borrowers. However, this image does not accurately describe most general lenders in villages.

Most lenders are ordinary people from the same communities as the borrowers. They are farmers who have managed to save some money after a good harvest, migrant workers who have spent years working in Gulf countries and sending money home, small shop owners or families that have accumulated modest savings over generations. In many cases, the lender and borrower belong to the same village or neighborhood and has known each other for years.

For many of these lenders, the money they lent was not surplus wealth but a significant portion of their life's savings. In fact, many lenders had once been borrowers themselves. For example, a person may have borrowed money under the same traditional system to finance foreign employment. After years of hard work abroad, they saved money and later lent money to others facing similar needs. This means that the line between borrower and lender is often not as clear as it is portrayed today. The same person could be a borrower at one stage of life and a lender at another or both at the same time.

How Two Completely Different Stories Became One?

In my opinion, the issue was never simply the customary interest rate. The commonly practiced rates of around 30% to 36% per year had existed in many villages for decades. Borrowers knew the prevailing rates before taking loans, lenders expected repayment under those customary terms, and written agreements (tamsuk) were executed accordingly. Even today, similar transactions continue to take place in many villages. If the interest rate alone were the real issue, it is difficult to explain why the same system continued for decades before becoming a nationwide movement.

The Beginning of the Meter-Byaj Movement

To understand what changed, we must first go back to the beginning of the meter-byaj movement.

In early 2022, a notorious local moneylender in Sarlahi named Shyam Pardeshi (and later others like Rambabu Yadav) systematically began seizing the lands of hundreds of people in a predatory way. Then the victims realized that they were all being defrauded by the same network of lenders. Unlike ordinary village lending, these cases involved numerous complainants against the same lenders and allegations of repeated predatory practices.

A small group of victims broke the silence and in August 2022, the first major group of around 60 victims traveled from Sarlahi to Kathmandu. They staged a sit-in at Maitighar Mandala for nearly two months, this small protest forced the government and eventually led to the formation of the government's first high-level task force to investigate the issue and later Karki commission was formed. Under intense state pressure, Pardeshi's family was forced to sit down for mediation. In July 2023, the commission successfully pressured Pardeshi's family to completely waive the fraudulent loans of 36 borrowers out of 96 major complaints filed directly against him in that batch. Across Sarlahi, the commission managed to legally nullify hundreds of forged Tamsuks and successfully transferred over 41 Bighas of land back to various usury victims across the district, a significant portion of which belonged to those defrauded by Pardeshi's network. This information spread across the country and some other predatory loan sharks got caught and was forced to return the land back.

These developments were important. They exposed real predatory lenders and gave hope to people who had genuinely been defrauded.

How the Movement Spread

However, in my observation, they also marked the beginning of a second and very different story.

As news spread across the country that genuine victims had recovered land and that the government was actively intervening, many borrowers in districts like Dhanusha also began approaching borrower organizations. Some were undoubtedly genuine victims who deserved justice. But from what I have personally observed in Dhanusha, many others had entered into ordinary customary lending arrangements years earlier, fully aware of the prevailing interest rates and after voluntarily signing written agreements. Nevertheless, these customary lending disputes increasingly began to be presented under the same narrative as the predatory cases that had originally triggered the movement.

Over time, organizations representing borrowers became active in many areas. They encouraged borrowers involved in long-standing lending disputes to organize collectively and seek government intervention. Many borrowers came to believe that participation in the movement could result in reduced settlements, cancellation of debts, or even the return of mortgaged property. Whether every expectation was justified or not, the effect was that a growing number of customary lending disputes were brought under the label of "loan sharking."

When the Distinction Disappeared

This is where the distinction between predatory loan sharks and general village lenders gradually disappeared.

A lender accused by dozens of unrelated families of using fraud, coercion, or forged documents is fundamentally different from an ordinary villager who lent money to a few relatives or neighbors under a customary system that had existed openly for generations. Yet, in today's public discussion, these two very different situations are often treated as if they are the same.

The result is that while the movement succeeded in exposing genuine predatory lenders, it also created a situation in which many ordinary lenders found themselves viewed through the same lens. Once that distinction disappeared, the number of complaints increased dramatically. Hence, in Dhanusha alone, more than 16,754 complaints have reportedly been filed.

The meter-byaj movement exposed genuine predatory lenders. That was an important achievement.

But from my observation, something else also happened.

Gradually, two completely different stories began to merge into one public narrative.

The first story involved lenders who allegedly built businesses around trapping borrowers, refusing to return land, or exploiting dozens of unrelated families.

The second story involved ordinary villagers who lent money under a customary system that had existed openly for generations.

Once these two stories became indistinguishable in public discussion, every lender increasingly came to be viewed through the same lens.

Questions We Should Honestly Ask

If more than 16,754 complaints have been filed in Dhanusha alone, what does that imply?

Does it mean thousands of predatory loan sharks operated openly across almost every village for decades?

Why did entire communities continue borrowing from the same people?

Why did families recommend those lenders to relatives if everyone knew they were predators?

Why were these transactions witnessed openly by neighbors and local leaders?

Did every complaint arise from fraud, or do some arise from disputes over long-standing customary lending practices?

Can an ordinary villager who lent money to three neighbors under a customary system fairly be placed in the same category as someone accused by dozens of unrelated families of systematic exploitation?

These are not questions meant to deny genuine victims. They are questions meant to distinguish one kind of case from another.

Who Is the Loan Shark You Picture in Your Mind?

When many people hear the term "loan shark," they picture a wealthy businessman exploiting poor villagers.

But is that the reality in most villages?

Or is the so-called "loan shark" often the same migrant worker who borrowed money years earlier to go abroad, returned after years of hard labour, saved some money, and later lent a portion of those savings to neighbors?

If the same individual can be a borrower at one stage of life and a lender at another, perhaps our understanding of this issue is more complicated than the labels suggest.

Conclusion

The meter-byaj movement gave genuine victims the courage to speak, and that achievement should never be forgotten.

After examining how village lending actually worked, how the customary system evolved, and how two fundamentally different stories gradually became one, I leave the reader with the same question I asked at the beginning:

Are all borrowers victims, and are all lenders loan sharks?

I believe the answer is no. Genuine victims deserve justice, and predatory lenders deserve punishment. But justice also requires recognizing that thousands of ordinary villagers participated in a customary lending system that existed openly for generations.

Justice begins by separating those who exploited the system from those who simply lived within it.

Only by making that distinction can Nepal protect genuine victims without unfairly treating every ordinary village lender as a predatory loan shark. Justice requires careful examination of each case, not assumptions based solely on labels.