The tangled web of debt

Neighbors and earthquake victims of Jaffe, VDC 3, in the Tamakoshi area of Dolakha, Astha Magar and Kumar Karki had just returned from a planned trip to Sindhuli. The purpose of their travel was to purchase the required raw materials to continue their houses’ reconstruction process. Both of them were keen to keep its momentum and, thus, had also pooled all their money.

However, when they did come back with a truck full of bricks, it was apparent that they weren’t happy. “I think we just got robbed in broad day light,” said Magar, dejected, before launching into the details of her and her neighbor’s current expenses.

Magar explained that the cost of the clay bricks alone for just two rooms was threatening to be more than Rs 126,000. On top of that, the truck owners that were transporting sand to her village were stating that a single trip would cost Rs 19,000.

“It’s why we decided to purchase only half the required materials,” said Karki adding that he had even suggested taking the long route to Sindhuli instead of just going to the capital, Kathmandu, because the cost of raw materials are said to be comparatively cheaper in the former location. But all the money that he and his neighbor had received from the first tranche of grants (Rs 50,000 each) plus a chunk of their Rs 100,000 loan taken from a local cooperative had been used on bricks alone.

“This doesn’t look good for our financial future,” he said, “Sometimes it really feels like I will have to spend the rest of my life repaying the loans that I will need to take to rebuild my house.”

At this point, Magar wistfully looked over at the riverbanks near the site where he and Karki, along with couple of their relatives, were unloading the pricey bricks from the truck. The riverbanks are full of huge boulders that were previously used for building homes in their village. He knows his costs would be dramatically reduced, should he choose to use them. However, lack of labor in his village meant he couldn’t entertain that option.

Narratives like these, of earthquake victims like Karki and Magar going into debt because of soaring prices of construction materials and shortage of labor, are increasing by the day. The National Reconstruction Authority (NRA) may continue to push their commitment to adhere to grant distribution deadlines but, even when they do get the third tranche of grants, beneficiaries wonder how they will move ahead with a life full of debt.

This difference between the actual investment and the government grants is proving to be significantly more for many and homeowners’ lack of financial resources seems to be one of the most common reasons for delays in reconstruction.

For instance, a couple of meters ahead of Karki and Magar’s construction site, Kalawati Mahat shares that, in the last two months, her family has only managed to complete the foundation of their new home. Since her husband worked at an army base and couldn’t take days off, the responsibility had fallen on her shoulders. Currently, she is trying to reach out to a local cooperative for monetary assistance.

Mahat explains, “We added Rs 150,000 of our savings to the Rs 50,000 government grant and bought bricks. We still haven’t paid the full amount for the sand that was used. Since my husband knew the dealer, thankfully, he gave it to us on loan.”

Now if she is to continue the building process, she and her husband need to find ways to cover extra costs, from more raw materials to extra labor. Having considered all their options, they have now decided to put their land as collateral and take out a loan.

Applying for this loan happens to be a big decision for them because Mahat doesn’t have a job. She and her husband know that her husband’s Rs 18,000 monthly salary will all be used to pay the monthly interests which she shares are around 18 percent in her area.

On top of that, she feels guilty of neglecting her seven- and four-year-old children. This year both of them will be going to school and her husband has to figure out a way to cover their academic expenses as well.

“The next decade or so is going to be an absolute stretch for us financially,” she sighs and her family certainly isn’t the only one dreading this very predicament at the moment.

The government had initiated a low-interest loan program for earthquake victims because they saw such future financial perils for many. But the program, where the central bank provided funds at zero interest to commercial and development banks which in turn loaned the funds to victims at two percent per annum, was dismissed by banks for being mostly unserviceable, and there have been no substitute programs in its place.

Anil Sharma, executive director of Nepal’s Bankers’ Association claims that only about 800 low interest loans have been given so far. “First of all, the fund that needed to be created by the government hasn’t materialized,” he explains, adding, “This process requires significant paperwork and human resource. We also need to secure the bank. If a loan was to default, who is going to take the responsibility?”

According to Sharma, personnel from both the bank association and the government are still regularly keeping tabs on the issue but they haven’t yet been able to move ahead from their disagreement on the proposed policy and replace it with a more feasible one.

So, in the meantime, across earthquake stricken villages like Jaffe, people are turning to local cooperatives. So much so Sang B Tamang shares there is already a long waiting list for loans. The last time he checked he was told he was 26th in line. Still, so far, it is his best chance to rebuild his home.

“I don’t have well-off relatives to borrow money from,” says Tamang, “That is what some villagers are doing. You either borrow money from relatives or go abroad to work. Six of my friends have left. But I have no such plans and the only thing I can do is wait.”

Anticipating these financial burdens, when some organizations had come around with programs trying to assist earthquake victims in developing skills to improve their income source, Tamang says he was one of the first ones to volunteer.

It’s the reason he currently works as a mason. He earns Rs 1,000 to Rs 1,200 on any given day. And though this certainly is far good pay then it has ever been for masons, he shares his calculations show that when his loan does come through, he will be repaying it for the next five years at least.

Initially, the thought had him over worked and stressed for months, he confesses. But now, he believes, he and his village have surrendered to their debt riddled present. “Unless the state chooses to be proactive and assist us with our precarious financial futures, I fear, everybody is in the same sinking boat,” he concludes.