BPL Cards as Collateral

As many of you know, most of CMF's work is survey-driven. At a recent Research Associate confab, several CMF RA's mentioned how difficult it was to design a questionnaire that was able to appropriately capture all the elements of informal loans. Moneylender loans often involve no rate of interest, just an amount of interest, no set repayment schedule, no set collateral, sometimes may involve sharing of profits from the enterprise for which the loan was taken etc.

Wanted to highlight yet another unfortunate example of how innovative moneylender loans can be. This article reports that in Orissa, tribals use their Below Poverty Line cards as collateral for moneylender loans.

The problem of misclassification of BPL households is acute in India with 18% of the cards going to the wealthiest 20% of the rural population. But episodes like this, where accurately targeted households forgo their welfare benefits, makes the situation all the more serious. In effect, what it means is that none of the benefits of the various schemes that target BPL households accrue to the intended beneficiary.