Pulling out a shirt from a shelf at her shop in central India, Chandrawati Rajpoot recalls the sleepless nights she had after borrowing money from a loan shark - twice to pay for her sons' college tuition and once for a medical emergency, Reuters reports.
Unable to pay the 5 per cent daily interest on her last loan of 20,000 rupees ($245) in 2019, she was forced to give away her gold bangles - a family heirloom - to stop the moneylender from harassing her.
"In desperate times, (loan sharks) are the only option ... but they are ruthless," said Rajpoot, 44, in her village of Narela in Madhya Pradesh state, recounting how lenders showed up at her home, shouting abuse and threats of violence.
But those days came to an end in late 2020 when she signed up for a low-cost loan programme with a group of local women, in which they act as guarantors for each other - highlighting a growing shift towards formal microfinance among Indian women.
With the help of a loan of about 30,000 rupees, Rajpoot is now the owner of a small dairy herd comprising seven cows and one buffalo, and a shop selling children's clothing.
They earn her about 90,000 rupees a month - or nearly three times what she made two years ago as a farm labourer.
Rajpoot said she was left with enough to easily pay the 1,660-rupee monthly instalment to Spandana Sphoorty Financial Limited, a microfinance company.
"For the first time, I don't constantly worry about how to make ends meet," said Rajpoot, adding that she plans to expand her own businesses, and help her children start their own.
Formal micro lenders are playing an increasingly important financing role in remote and rural areas where banks have limited reach or are unwilling to lend to the poor, industry analysts say.
Nearly two dozen women told the Thomson Reuters Foundation they did not go to banks for loans because they were either asked to provide collateral, which they could not manage without any assets in their name, or do lengthy paperwork - a challenge for those with little to no literacy skills.
More than 75 per cent adults - and over 80 per cent of women - are financially illiterate in India, according to the National Centre for Financial Education.
Shalini Sinha, the India representative for WIEGO, a network which helps informal workers, warned that if poor women were not offered adequate financial knowledge and insurance, it could force them to turn to loan sharks.
From shop owners and jewellers to subcontractors, many locals operate as private moneylenders, who, compared to banks, are more easily accessible and do not bother with documentation.
"(But) the interest charged is so very high ... that she cannot repay the loan, so she takes another one and it becomes a vicious cycle of poverty," Sinha said.
'BORROW WITH PRIDE'
Loan sharks have monopolised the rural credit market for generations in India, often charging abnormally high interest rates of up to 10 per cent a day, financial experts say.
They rarely spare defaulters, using heavy-handed means to collect debts.
In September, a married couple in southern Andhra Pradesh state died by suicide after loan app agents threatened them by saying their intimate photos would be posted on social media.
Andhra Pradesh, once known as the centre of India's microfinance sector, curbed micro lending activities more than a decade ago after a spate of suicides by borrowers, and in 2015 it banned moneylenders from operating without a licence after arresting some 200 people over harassment complaints.
Vivek Tiwari, the managing director and chief executive officer of New Delhi-based Satya MicroCapital Limited, said one of the main challenges for his teams was battling informal lenders in new places.
"They don't want us in these markets," he said, recalling an incident in which his colleagues were held at gunpoint in a northern village by local moneylenders.
Tiwari, also the vice chair of Microfinance Institutions Network (MFIN), a self-regulatory organisation for the sector, said that despite obstacles MFIs were making significant inroads in unbanked and financially unserved parts of India.
More than 60 million Indian women currently hold small, collateral-free loans, impacting as many as 300 million families in the country of some 1.4 billion people, according to the MFIN.
"We are giving more freedom to people. They can borrow and repay with pride. That's why they don't want to get into the traps set by moneylenders again," Tiwari said.
MFIs offer doorstep credit and also financial literacy training, which includes how to access banking services and repay loans responsibly as well as planning future investments and savings.
All of the women interviewed said such programmes not only helped them dodge loan sharks and break debt cycles, but had also equipped them to start small businesses that had eased their cash flow problems, especially during the COVID-19 pandemic.
They highlighted the benefits for household budgeting, their children's education and nutrition, and during emergencies.
Several women said they were most thrilled about generating jobs and incomes for fellow villagers.
"After I bought two sewing machines, I hired a young man to help keep up with the demand," said Kiran Devi, who pays her sole employee 7,000 rupees at her home-based tailor shop, which she started last year with a 50,000-loan in northern Uttar Pradesh state.
Such accomplishments encourage disciplined repayment by women - with timely collections recorded at nearly 99 per cent - which in turn brings other benefits such as access to bigger loan amounts and better terms, industry experts say.
Anshukant Taneja, head of the micro finance programme at the Asian Development Bank (ADB), which has supported more than 8 million female borrowers in India, said such initiatives also boost women's community roles.
With more economic progress and regulatory easing in the country, he hopes to see MFIs deliver other financial products such as micro-insurance, small mortgages and a channel to mobilise savings.
In the meantime MFIs face a series of challenges, he said, including how to manage their portfolios and ensure borrowers have loans that match their income levels to prevent excessive lending, and expanding their programme to remote areas where costs may be high and there are fewer borrowers.
For now, women like Mithilesh Yadav are chalking out future goals with the aid of micro loans. From being a housewife to becoming the owner of small grocery and a tailor shop, the 26-year-old said she had never imagined "living so comfortably".
Over the last seven years, Yadav has taken a series of loans to fulfill some of her childhood ambitions, including owning a home and a car. But she said she was not done yet, with plans to open a beauty salon and buy land for her children.
"My siblings and I struggled a lot. We had to drop out of school early and help our parents with labour work," said the mother-of-two at her store in Madhya Pradesh, where she taught herself how to sew by watching YouTube videos.
"But I still have big dreams. I want to be a successful businesswoman who my children look up to."