Why are these women fleeing in Bihar?

Rehana is on the run. Scared that she might be traced, she keeps moving house. Luckily, she can still afford rented accommodation. Once the leader of a self-help group (SHG) in Begusarai, she now hides from aggressive loan recovery agents who hold her responsible for unpaid debts in her group. Many others in her SHG simply vanished, fleeing their villages under similar pressure. The repayment of microfinance loans is a joint responsibility and defaults by even one or a few can quickly multiply. Rehana saw no other way but to flee to get the loan sharks off her back.

Across Bihar, thousands of women like Rehana are caught in the tightening noose of microfinance debt—loans that initially give hope but often spiral into cycles of despair and exploitation. Geeta Devi in Siwan took a loan of Rs 50,000 to buy animals. She didn’t fully register the repayment terms: a usurious 27.9 per cent interest, which had to be paid fortnightly. Before long she’d defaulted. Then began the endless cycle of recovery agents knocking on her door, resorting to threats and abuses, even lingering into the night to press their demands. It’s been two years and Geeta and her husband live in constant fear.

In September–October this year, Delhi based social activist and human rights campaigner Shabnam Hashmi met 6,000 such women in 20 districts of Bihar over a month and a half. Shabnam admits she had no idea of the extent of indebtedness among the women. She took notes, recorded videos and tried to comfort and reassure the frightened women whose lives had been turned upside down. The media, she says with a trace of bitterness, showed the sunny side of these self-help groups, the success stories. She tried alerting journalists in New Delhi, even while she was travelling in Bihar, but found them preoccupied with more pressing matters like the just-concluded assembly elections.

In this grim landscape of widespread indebtedness, intimidation and heartbreak, she found that many women had taken loans to cover urgent medical costs or their children’s education—and were now prisoners of crushing debt. Radha Devi from Muzaffarpur is one such case. None of the four men in her family were employed and she had to take a loan to pay for her daughter’s education. She lives in terror of recovery agents visiting her home, says Shabnam.

Bihar’s microfinance scene is crowded with lenders like Bandhan Bank, Utkarsh Small Finance Bank, Ujjivan Small Finance Bank, Bajaj Finance, Muthoot Microfin, Svatantra Microfin, Belstar Microfinance and several others. They disburse loans at exorbitant compound interest, at times touching 40 per cent per annum. Borrowers are urged to get one loan to repay another, pushing them further and further into an inescapable debt trap.

The experience was unnerving, says Shabnam. Unsurprisingly, nobody she met during her study, not the women themselves, nor the local activists who put her in touch with the affected women, had any clue of any regulations governing these loans.

Microfinance loans in India operate in a grey area. The key regulatory framework emerged from the RBI’s Malegam Committee report of 2011, which formalised microfinance as a distinct lending category and introduced specific norms. These were operationalised through RBI notifications in July 2013, but a proposed comprehensive law, The Micro Finance Institutions (Development and Regulation) Bill, 2012, aimed at creating a statutory framework, is still pending and has not been enacted.

Nearly half the 6,000 women Shabnam Hashmi spoke to said they were in debt. They had little or no work and the menfolk were mostly unemployed. The women got these loans thinking the instalments had to be paid every month, but later realised that repayments were scheduled weekly or fortnightly. It’s typically when recovery agents start visiting that they become aware of the repayment schedule.

There are even accounts of physical abuse, besides theft of household goods like gas cylinders, roofing sheets, even a goat or two. Women whose husbands are away in search of work in other states face worse, including demands by agents for overnight stays. Sexual exploitation is mentioned in hushed tones, albeit reported as something that happened to others.

In one of the villages, Shabnam says she found entire families had fled to escape harassment. There have been instances, she was told, when agents refused to allow the dead to be cremated till instalments were paid.

While the media is full of all that the NDA government has done for women in the state, Shabnam found the supposed beneficiaries of state largesse are more bitter than grateful. They complain of rampant corruption, including, most recently, being forced to pay Rs 300 to fill a form to avail of the one-time cash transfer of Rs 10,000 announced just before the assembly election. No welfare benefit is available without paying bribes, the women complained. The rates are fixed and everyone must comply.

The ‘Bharat Mircrofinance Report’ prepared by the RBI’s self-regulatory body Sa-Dhan finds that Bihar leads other states in outstanding microfinance credit, which stood at Rs 57,712 crore as of March 2025. Shabnam estimates that 1.08 crore women share the liability and the total liability, including accumulated interest, is much higher.

Her first-person account confirms what leaders of Bihar’s opposition alliance, like CPI ML general secretary Dipankar Bhattacharya, have repeatedly said. The government’s own statistics reveal that over 94 lakh families in Bihar have a monthly income of less than Rs 6,000 or Rs 200 a day, which is lower than base-level MNREGA wages and certainly not enough to support a family of four or five members. The microfinance companies have unleashed a reign of terror in the state, Bhattacharya has been saying in his election rallies, with as many as eight to ten active in a single village.

In the just-concluded election, he points out in interviews, women raised slogans of ‘Dus hazaar mein dum nahin/ Karz maafi se kam nahin (the Rs 10,000 handout is no solution, loan waiver is a must)’. The election time cash transfers will not solve Bihar’s debt crisis and calls for comprehensive loan waivers reverberate across the state.

While the Mahagathbandhan had promised to waive interest on loans disbursed to women, it is not nearly enough, says Shabnam, making a case for at least partial write-off of principal amounts and revised repayment schedules. If loans to big business can be written off, why not these small loans to the most vulnerable, she asks.

The incoming government in Bihar faces a stark challenge: to dismantle the debt trap, restore the dignity of these women borrowers and rebuild trust through a systemic overhaul. These women need more than sympathy; they are owed justice.

(Names have been changed to protect identities.)