Why Do We Need Money Lenders?

Although the country is well known with a strong network of financial institutions. A money lender comes into picture when it becomes difficult for the small rural banks to provide loans to small farmers because of the strict KYC and collateral requirements. If you in search of moneylenders to avail loans, you can try the best money lender in toa payoh.

  The Functions Of Moneylenders

  1. To give short-term loans is the main function of money lenders. Loans may be given for consumption purposes, to meet social and religious obligations or the needs of farmers for seeds, cattle, fertilizers, etc.
  2. Generally loans are given on the borrower’s personal security. However,moneylenders grant loans on the security of costly things in urban areas and against land or crop in rural areas.
  3. Sometimes the moneylenders show a strict attitude while lending, charging interest, & recovery of loans as they have a personal knowledge about the reliability of borrowers .
  4. In rural areas, moneylenders are quite influential persons as they adopt pressure strategies in the recovery of loans, such as forcible occupation of the cultivator’s land, caste disapproval, pressure from panchayats, etc.

Importance of Moneylenders

  • There is a huge importance of moneylenders in rural India because of the inability of institutional financing agencies like commercial banks and cooperative banks.


  • They meet the short-term financial requirements of farmers, landless agricultural workers, marginal farmers, rural artisans, and petty shopkeepers and traders.
  • They give loans for consumption needs, for social and religious ceremonies, and for such productive purposes as seeds, fertilizers, cattle etc.
  • Professional moneylenders provide loans on personal security. As every borrower knows the professional moneylenders personally, the borrower can get the loan easily.
  • When the importance of moneylenders was assessed from the All India Rural Credit Survey Committee it was found that in 1950-51 nearly 70 % of the total borrowings of cultivators was accounted for by professional and agricultural moneylenders , and only 3% was contributed by the organized institutions like commercial banks and cooperatives.
  • In 1960-61 All India Investment and Rural Debt Survey estimated that the moneylenders accounted for 49% of the total borrowings by farmers.


So by going through the above article we could conclude that lending isn’t a bad activity.  Infact,  it plays a crucial role in the life of people who are in need of loans for their small businesses, to buy any asset or to buy seeds, fertilizers, etc. for farming without paying high rates of interest. When commercial banks are inadequate to provide loans then moneylenders come into picture.