Labour-tied credit
Also called: Repayment through labour · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Class 10, Ch 3 "Money and Credit"
Meaning
Labour-tied credit is a loan that the borrower repays by working for the lender. Landless labourers borrow from their landowner-employers because no one else will lend to them. Interest rates are high, and the labourers often take fresh loans before the old ones are cleared. As a result, the debt keeps rising and the borrower cannot leave that employer. This can come close to bondage.
Example
Rama, a landless labourer in Sonpur, borrows from her landowner-employer at 5% a month and repays through her labour. She owes ₹5,000 and borrows again before clearing that amount. She stays in spite of poor treatment because the landowner is her only lender (Class 10, Money and Credit).
Don't confuse with
- Interlocked credit: here the loan is tied to selling the crop to the lender, not to working for them.