It is correctly stated that countries have a strong network of banking systems to cater to the financial needs of their people. Banks and financial institutions provide loans at a small rate of interest. Some time ago, it was highlighted that banks are not accessible to the poor and marginalised classes of society. In view of the above problem, various small rural banks and schemes were set up by the Central Government. Now, the question arises, how money lenders came in picture. Some sections of society are inaccessible to approaching banks for their financial needs, and that’s where money lenders provide them with credit to cater to their financial needs. This article provides a general overview of who money lenders are, as well as their roles and importance in the country’s financial needs.

Who are money lenders?

Money lenders are people or small groups of individuals who provide short-term credit to the small sections of society which incur a high rate of interest. The rate of interest on loans is usually higher than the band and financial institutions because the risk involved in providing credit is also high. Money lenders have been in existence since ancient times. They were often called sahib, sethji, etc. in rural areas of the country. Sometimes, they provide loans against gold, silver, food grains, etc. and good at personal loan in toa Payoh central. The period of repayment of loans provided by moneylenders is for a short term. Why do

People choose moneylenders over financial institutions?

It is no doubt that financial institutions like banks and NBFCs (Non-Banking Financial Institutions) provide loans to individuals at a low rate of interest. Various schemes were set up by the Government to provide loan to the small scale farmers and small scale industries with a minimum rate of interest and the loan is provided for long term.  So, why do small classes prefer moneylenders to banks, despite the fact that they charge high interest rates and only offer short-term credit? The reason behind this is that banks in reference of providing loan to the people requires more paperwork and documents as compared to the moneylenders. Moneylenders provide them with loans on the basis of their credibility in the village or town.


Money lenders are the person or a small group of individuals who provide short term credit at high rate of interest to the smaller sections of the society who are unable to access the facilities provided by the financial institutions. It is to be concluded that availing credit from money lenders should be the last option when all the doors are closed for accessing the services of banks and financial institutions.