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Hundis:

We, in India, are more familiar with hundis as they are commonly used. They
are internal bills of exchange in one of our own languages, and have been
prevalent in India long before the dawn of civilization elsewhere. Hundis are
Darshani (sight bills) and Miadi or Muddati (time bills) on the basis of the
time allowed to the debtor. Hundiana is the commission sometimes deducted
by the lender from the amount advanced.

Specimens of the two types of hundis used in India (translated in


English) are given below:
Literature Review of Money Lenders
Issue Discussion References

 They usually provide short-term finance of


small loans - which is ideally suited to low-
income groups, who cannot digest' larger
loans, and do not prefer long-term
commitments.
 They provide loans to borrowers
expeditiously and in a flexible manner, thus
making finance available immediately, when
Advantages of
it is needed and with a minimum amount of
money lenders paper-work and official requirements.
 They function in close physical proximity to
the borrower, enabling frequent contact and
thus dispensing the need for collateral
requirements.
 They do not have fixed business hours, and
therefore provide loans as and when
requests are made.

 They are unorganized and do not have any Sundharam, 1996:


contact with other sections of the banking 523-527
industry Tannan,1954:9-21
 They combine money lending with trading GoK, 1968 ADB, 1990
and commission activities and thus
introduce risk into their business.
Disadvantages of  They do not distinguish between short-term
money lenders and long-term finance and also in the
purpose of the loans.
 They follow traditional methods of keeping
accounts and do not give receipts in most
cases.
 They charge high rates of interest in
proportion to banking institutions.

 Money lenders play a useful role in


providing credit loans to sectors not
supported by commercial banks.
Relationship with
 Money lenders may borrow from
Banks commercial banks during high demand for
credit, by using bills of exchange or their
own funds as security.
 Credit provided by money lenders is timely -
that is, it is available immediately when it is
most needed - need for quick/timely credit.
 They do not maintain regular business
hours, and usually work throughout the day
Key Implications
- thus making themselves available to
of Money
borrowers at any time - flexible business
Lenders: hours.
 They live or work close to the residences
and work places of their borrowers, and are
hence easily accessible - close
physical/psychological proximity.

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