Savita was a small farmer. She planed to cultivate wheat on her 1-hectare land. Besides seeds, fertilizers and pesticides, she needed cash to buy water and repair her farm instruments. She estimated that his working capital itself would cost a minimum of Rs 3,000. She didn’t have the money, so she decided to borrow from Tejpal Singh, a large farmer. Tejpal Singh agreed to give Savita the loan at an interest rate of 24 percent for four months, which was a very high-interest rate.

Savita also had to promise to work on his field as a farm labourer during the harvest season at Rs 35 per day. Savita knew that this wage is quite low and she will have to work very hard to complete harvesting on her own field, and then work as a farm labourer for Tejpal Singh. Savita agreed to those tough conditions, as she knew, that getting a loan is difficult for a small farmer. Yes, Savita’s condition would have been different if she could get a loan from the bank at a low rate of interest.