Boom in private money lending

Private financing has come of age in the Valley and private financers are thriving like never before. If customers want a certain amount from private money lenders, all that is needed is a reference from a respected local person. In rural as well as urban Kashmir private money lending is becoming more popular than any finance scheme provided by the banks.

Nazir Ahmad (name changed) sits in a small room. The walls of the room are decorated with wall hangings.

There is a bookshelf filled with all kinds of books. Nazir is a property dealer and a ‘leading money lender’ in south Kashmir.  He says at present he has an amount of around Rs 20 Lakh out in the market. “Most of the people don’t have time to apply for loan in banks because it’s a hectic process,” says Nazir. “I have my recruits who bring customers and gets commission,” he says. In the past four months Nazir has given loan to 11 customers.Nazir sees logic in everything he does. He opens his small dairy and explains that his scheme of financing is better than any scheme offered by the banks. “I provide my customers every possible help,” he says. “If my customer will apply for a loan in any bank, he has to minimum wait for one month and has to keep mortgage but the loan I give is instant and without any mortgage ,” explains Nazir. “But I only charge them 7 percent in which two percent is for mediators and five percent is for me,” says Nazir.

Private financing is not new to Kashmir. There’s a history of private financing in Kashmir. “Earlier the private financing was confined among Hindus only. It was a sort of trade in their religion,” says prominent poet and historian, Zareef Ahmad Zareef. “One such big name was Ram Soodhur who was a private financer. He used to reside in Aalkadal of downtown area. During the regime of Maharaja Pratab Singh, he had 950 houses in Sher-e-Khas only because he used to occupy houses after people would miss the installment of his finance,” says Zareef.Zareef Ahmad says Pratab Singh later canceled Ram’s registration as he felt insecure.

“He thought he might lose his power because Soodhur was growing bigger and stronger,” says Zareef.  He says among Muslims, when the Afghan rule started in Kashmir, there used to be some Muslims who would lend money on profit basis. “But it used to happen behind the curtains. Same way it is going on now,” says Zareef.There are some money lenders who have their own logic behind lending money. One of such name is Ali Mohammad (name changed), a shopkeeper who hails from south city. He does not believe in depositing money in the bank. He finds private finance more profitable than any other business. “The revenue which I am generating trough lending money is bigger than the interest I will get from the bank,” he says.Ali Mohammad says he has enough executives to attract more customers. “Anyone can bring the customer and can get the commission, but the condition is that both the parties (mediator as well as the customer) should be known to me,” he says.Mohammad has been in the lending business for the past two years and he is happy with whatever he has earned. He has his own principles. “If I lend money to any poor person, I will not ask for interest. I only take the amount which I had given to him,” he says.

Earlier bank policies were the only primary source to get loans on mortgage basis. According to bank experts this method of money lending might be unfair, but it is not something new. Besides, money lenders are providing less interest and more security. The customers also find private money lending service more comfortable than any bank. “Last time when I applied in J&K bank for loan, I had to give at least Rs 4000 as bribe to clerks to push for my case,” says Ishfaq Ahmad. “But I don’t have to pay bribe to a private money lenders,” he says.