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 rates that people in the area generally understood and followed. For people who grew up in these villages, this was simply how lending worked. We saw our parents, relatives, neighbors, and elders borrowing and lending money in the same way. When a practice has existed for generations, people rarely question its origins or legality they simply assume that this is how things have always been done.

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.

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 the long-standing local interest practice with a written Tamsuk.

The customary interest rate practiced in many villages was around 30% per year, whereas the legal interest rate commonly written in a Tamsuk was 10% per year. Since the legal rate was roughly one-third of the customary rate, a local practice appears to have developed in which the amount written in the Tamsuk was often around three times the actual cash amount. For example, if someone borrowed NPR 100,000 in cash, the Tamsuk might commonly be written for around NPR 300,000 with a stated interest rate of 10% per year. In practice, this produced a return that broadly reflected the rate people had been following for generations.

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, and certainly not because most ordinary lenders intended to exploit borrowers by writing three times the amount in the Tamsuk.

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.

Was the Tamsuk Inflated to Exploit the Borrower's Need?

One reasonable question is whether lenders wrote a higher amount in the Tamsuk simply because the borrower was in urgent need and had little bargaining power.

In some cases, that may have happened. A person in financial trouble can be exploited, and such cases should be examined seriously.

But it would be wrong to assume that every inflated Tamsuk was created in that way.

In the village transactions I grew up seeing, writing a higher amount in the Tamsuk was already a known practice. Borrowers generally knew the customary interest rate before taking the money, and lenders followed a method that had already been used for many years.

There is also an important pattern.

Across Dhanusha and other districts, the Tamsuk was often written for roughly three times the amount actually borrowed.

If individual lenders were simply increasing the amount according to how desperate a borrower was, we would expect the numbers to vary a lot. One lender might write twice the amount, another four times, another five times.

But when the same three-times pattern appears again and again across different lenders, borrowers, villages, and districts, it suggests that this was not simply an amount invented by each lender for a particular borrower.

The number also had a practical logic.

If the customary interest was around 30 percent a year, but the Tamsuk showed interest at around 10 percent, writing about three times the actual principal produced roughly the same yearly interest.

This helps explain why the same three-times pattern appeared so often.

There is another point that is often overlooked.

In many villages, only a small number of people traditionally wrote Tamsuks and other agreements. The same writer could prepare documents for many different borrowers and lenders over many years.

If every lender was independently trying to exploit a desperate borrower by writing an arbitrary inflated amount, the writer would also be in a position to notice that something unusual was being done. At the very least, we might expect the writer to question why one lender wanted two times the amount, another wanted five times, and another wanted some completely different figure.

But these writers repeatedly prepared Tamsuks using the same general pattern, including the familiar three-times amount.

But when the same pattern appears across many unrelated transactions, and the same limited group of local writers repeatedly documents it, that is another sign that the practice was already established and commonly understood in the community.

There is also another detail: these Tamsuks were not usually signed only by the borrower and lender. There were generally two witnesses who also signed the document.

If the three-times amount had been something completely unusual or invented by a lender only to take advantage of one desperate borrower, the witnesses also had a chance to notice it and question it. Yet we do not commonly hear that witnesses objected to the three-times pattern itself at the time the Tamsuk was written.

When the lender, borrower, document writer, and witnesses were all part of the same process, and the same pattern continued across many transactions, it gives further reason to ask whether this was an already accepted local practice rather than something secretly invented by individual lenders.

This distinction matters.

There is a big difference between saying:

"You are desperate, so I will force you to sign a Tamsuk for three times the money."

and saying:

"This is the way loans have traditionally been documented here, and both sides understand the arrangement before the transaction."

The first can clearly be a sign of exploitation.

The second may still raise serious legal and policy questions, but it does not automatically prove that the lender intended to cheat or exploit the borrower.

An inflated Tamsuk should therefore not, by itself, be treated as proof of exploitation.

The more important question in each case should be:

Was the Tamsuk written according to an existing and commonly understood local practice, or was it manipulated in that particular case to deceive, pressure, or exploit the borrower?

If the System Was So Exploitative, Why Did Entire Villages Continue Using It for Decades?

This is perhaps one of the most important questions we should ask.

If long-standing village lending system was inherently designed to exploit people, why did entire villages continue using it openly for generations? Why did the same borrowers return to the same lenders? Why did families recommend those lenders to relatives and neighbors? Why were these transactions carried out openly in front of communities?

From what I have observed, the answer lies in how the system actually functioned.

Most borrowers took loans for a specific purpose—such as foreign employment, farming, medical treatment, weddings, or other urgent family needs. The expectation on both sides was that the money would be returned within a reasonable period, often before the accumulated interest became an unbearable burden. In many cases, borrowers repaid the loan in good faith, lenders received their money back, the Tamsuk was torn up, and the transaction ended without dispute.

Of course, not every borrower was able to repay on time. Sometimes crops failed, foreign employment did not work out as expected, businesses suffered losses, or family emergencies delayed repayment. As the years passed, the loan continued to compound, making it increasingly difficult to repay.

However, even in such situations, the usual practice in many villages was not to immediately seize land or force families into ruin. Instead, borrowers and lenders often turned to respected members of the community—such as elders, teachers, local leaders, or other trusted individuals—to help negotiate a settlement. If the borrower genuinely lacked the financial means to repay the full accumulated amount, both sides would often bargain according to the borrower's circumstances. From my own observations, many lenders accepted substantial reductions in the accumulated interest in order to settle the matter peacefully.

This does not mean every case ended fairly, nor does it deny that genuine exploitation occurred. But it does help explain why this long-standing practice continued for decades. In most ordinary cases, it relied not only on written agreements but also on trust, reputation, and community mediation. That is a very different reality from a system whose primary purpose is to trap borrowers and seize their property.

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 ordinary village lending transaction that ended peacefully, just like thousands of others across the villages.

Today, Ram is financially stable. His children attend a good school, and the financial difficulties that once pushed him to borrow have largely disappeared. Over the years, I have also seen him lend money to others in the village facing the same circumstances that he once faced. This is why I find it difficult to accept the simple narrative that borrowers are always victims and lenders are always loan sharks. Sometimes, they are the very same people just at different stages of life.

Who Are the So-Called Loan Sharks?

Before deciding who should be called a loan shark, it is worth remembering Ram's story. His experience is very different from many of the cases we hear about today. News reports often describe lenders who allegedly refused to return Tamsuks, repeatedly demanded additional payments even after substantial repayment, built lending networks targeting large numbers of borrowers, or used documents to unlawfully seize land. Although both situations involve lending, they are fundamentally different in nature.

When people hear the term "loan shark," they often imagine a wealthy individual whose primary business is lending money and exploiting borrowers. While that description may fit some genuine predatory lenders, it does not accurately describe many ordinary lenders in villages like mine.

Most lenders are ordinary people from the same communities as the borrowers. They are farmers who managed to save some money after a good harvest, migrant workers who spent years working in Gulf countries and sending money home, small shop owners, or families that accumulated modest savings over generations. In many cases, the lender and borrower belong to the same village or neighborhood and have 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. Lending money was not necessarily their profession or primary source of income. More often, it was a way of helping relatives, neighbors, or acquaintances who needed money urgently, while also earning a return on savings that might otherwise remain idle.

Stories like Ram's were not unusual. Stories like these remind us that the line between borrower and lender is often far more fluid than today's public narrative suggests. The same individual may be a borrower at one stage of life and a lender at another. If that is true, perhaps our understanding of this issue is more complicated than the labels we have come to use.

How Ordinary Lenders and Loan Sharks Became Part of the Same Story?

In my opinion, the issue was never simply the long-standing village interest practice. 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 long-established 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.

The movement did not remain confined to a few districts. As news coverage increased and more people began sharing their experiences, it gradually spread across other parts of the Madhesh region. More borrowers came forward, public attention grew, and the issue became an important political and social topic.

In conversations with many people from my own area, I repeatedly heard a similar story. Some told me that borrowers who joined the movement came to believe that even loans they had willingly taken under the customary lending system could be treated as meter-byaj. They believed that by joining the movement they might not have to repay the remaining debt, could recover land, or could even see the lender being jailed.

I cannot say with certainty how these beliefs spread or who influenced them. However, after hearing similar accounts from many different people, I believe this also contributed to the rapid growth of the movement by encouraging more borrowers to identify their customary lending disputes as meter-byaj cases and join the movement.

When the Distinction Disappeared

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

As the movement grew, the distinction between customary lending disputes and cases involving genuine exploitation gradually became less clear. Cases that arose from long-standing village lending practices increasingly came to be discussed alongside cases involving lenders who had genuinely abused or exploited borrowers.

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

As a result, many ordinary lenders found themselves viewed through the same lens as genuine predatory loan sharks. This does not mean that every complaint was invalid or that every lender acted fairly. Genuine victims existed, and those responsible for exploiting borrowers should be held accountable. However, once customary lending disputes and genuine meter-byaj cases were no longer clearly distinguished, the public narrative increasingly portrayed both as a single problem.

In my view, this is one of the main reasons why districts like Dhanusha have seen 16,754 complaints. The issue is no longer only about identifying genuine predatory lenders. It also includes thousands of disputes arising from a lending system that had existed openly in villages for generations.

That is why I believe the first step toward a fair solution is to separate these two categories. Only then can genuine victims receive justice while ensuring that ordinary villagers who simply participated in a long-standing lending system are not unfairly treated as predatory loan sharks.

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 respected members of the community?

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

If customary lending had been practiced openly for generations, when did every such loan suddenly become meter-byaj?

Can an ordinary villager who lent money to three neighbors under a long-established village 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.

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.

Some readers may still believe that the customary interest rates practiced in many villages were excessive, and that is a legitimate subject for debate. I am not suggesting that such practices should continue unchanged today. There may be good reasons why they should be regulated more effectively within today's financial system. However, that is a different question from whether every individual who participated in those long-standing village lending practices in the past should now automatically be regarded as having engaged in predatory loan sharking. A fair legal and social response should examine each case on its own facts rather than assume they are all the same.

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.

Reference / Source

The following video is included as supporting source material for this article.