Philosophy III Term Paper

Exploitation of Villagers due to Financial Illiteracy

Integrated Program in Management

Indian Institute of Management, Indore

Group No. : 14

AARJAV SETHI 2016IPM002

AISWARIYA LAKSHMI A 2016IPM009

ASTHA SRIVASTAVA 2016IPM026

BHAVANA GIRI 2016IPM029

DIVYA DATTA 2016IPM037

MANIK THAKAR 2016IPM057

NAMRATHA VELIVELLI 2016IPM063

ROMI SATYARTHEE 2016IPM087

 Exploitation of Villagers due to Financial Illiteracy

Abstract:

India resides 17.5% of the world’s population, but 76% of the adult population in the country is
financially illiterate. Financial knowledge is an important prerequisite to live a quality life, as it
can help the poor to lift them above the poverty line. There is a positive association between
financial literacy, annual income, landholding, and well being of the farmer. New techniques like
Microfinance and government schemes have been established in India which might help in
financial inclusion. All this is going in vain, as the latter doesn't have the skills to incorporate
them, and are instead taking help from big farmers or zamindars, ending up exploited.
In this paper, we analyze the ethicality of this situation. The financial illiterate ones are almost
always trapped in the hands of the greedy moneylenders. The paper declares that this does not
pertain to the principles of morality according to three sound ethical perspectives. The most
feasible solution lies in imparting knowledge or skills to the financially illiterate, by NGOs or
government officials.
The just course of action lies in the financial inclusion of the complete population of India, which
will avoid instances of exploitation.

Keywords: Financial illiterates; Indebtedness; Exploitation; Agriculture; Government schemes

Background and set up:
India is a large country with huge population. It’s one of the fastest growing economies
with its focus on growth and methods to develop vibrant and stable financial system. But for this
all these developmental goals, the citizens of India need to be financially literate. So the question
arises that, what is financial literacy and why is it important?
‘The knowledge of credit, financial, debt management and their confluence is termed as
financial literacy’1. A person is financial literate if he/she can make financially responsible
decisions. These decisions are integral to our everyday lives. It includes the understanding of how
an account works or how credit card is used or the change in interest rates, etc. It impacts the
daily decisions of an average family.
When it comes to rural areas, people face hurdles in accessing financial services due to a
plethora of reasons. As a consequence, the lack of financial inclusion for rural people obstructs
them from participating in economy and thereafter improving their lives. They may have bank
accounts, but that alone does not ensure financial inclusion for them. They are not able to put
their savings in their saving accounts and get benefited out of the financial services. Their lack of
awareness and illiteracy along with their dependency on bank staff results in frauds and further
holds them back to use the financial services. Also, the village money lending system on which
mostly farmers rely upon is very much defective. The sole aim of the moneylenders is to extract
the maximum profits from the farmers. They make wrong entries in their account books, charge
very high interest rates and extract high prices for the goods they sell to the farmers. On the other
hand, when time of purchasing the produce comes they buy goods from them at very low prices
giving them very low or no profit of margin for their year-long hard work.
In course of time, as the amount of debt increases the real motive comes into play:
Seizing the farmers’ lands and other valuable assets they own with the moneylenders were very
much interested in since the beginning. The farmer in order to repay has to give all these assets to
the moneylenders and in this way they are trapped in the hands of the moneylenders. Even
though some manage to use the bank services on their own, the distance becomes a factor and
they are not able to visit banks frequently.

1
https://www.investopedia.com/
http://www.yourarticlelibrary.com
Indebtedness is a major problems concerning to the rural society. This problem is just not related
to one individual. This is a problem which is continuously passing on from one generation to the
next generation. At the end, production is the most important factor; hence if debt or loan is taken
for the purpose of agricultural production we can consider it has an important contributor towards
production. Financial illiteracy is summing up various problems for people (especially in rural
areas). Problems such as indebtedness, poverty, suicides due to failure of repaying loans are the
first hand issues. These all problems further build upon and introduce hurdles such as basic
illiteracy of children due to poverty, malnutrition, suicides etc.
In India where majority of its population is financially excluded and coexisting with
various other financially included sections of population which invests in capital markets and use
other advanced financial products, we need an approach to spread awareness about basic
financial products, to link them to the formal financial sector, educating the existing users of
financial products and services so that they make informed choices and ensuring consumer
protection for all the users of financial products and services.
Currently, The Government of India is focusing upon the setup of the structure and
incorporating basic financial education in school curriculum. It has also tried to appoint trained
agents so that they can establish initial contact with rural people. Another method is using all
channels of mass communication which helps them in understanding key saving, retirement and
investment related problems. But it is often observed that the agents rather than empowering
those people to take prudent financial decisions, are working for their greed. They mislead those
people, do not provide correct information and keep them unaware about various government
schemes. This in turn is back lashing all the efforts to make India Financial literate.
We need to construct a reliable system, a system in which personal ego and motives
doesn’t come in between. A proper structure is needed to cater to the needs of rural people, to
uplift them from their current situations and help them access the financial services. Therefore,
we need to build a model these people can trust and bank upon.
It is known that the agriculture sector contributed 51.9% to India’s GDP in 1950.
Presently it stands at 13.9%, which is very low as compared to 1950. This change in agrarian
culture had lead to increase in Industrial activities. But still a major population of India is
involved in agriculture and they are deprived of many schemes and flagship programs launched
by government, due to multiple reasons.
Some of the recent development in the agriculture and allied sector are as follows:-
Pradhan Mantri Fasal Bima Yojana: - Although this programme aimed to improve the
living condition of the Indian farmers and their members, it failed completely due to multiple
reasons and factors like natural calamities like droughts and floods affecting their yield adversely.
In order to solve this issue, the Government launched PM Mantri Fasal Bima Yojna in early
2016. It was implemented with a budget of Rs. 17,600 crore and thus would provide financial
support to farmers and help them recover their losses. But due many reasons this ultimately did
not help the farmers till now due to lack of awareness and over exploitation by landlords,
government official and their corrupt team members.
Blue Revolution: - The Cabinet Committee on Economic Affairs (CCEA) has approved
Blue Revolution in India. It is a very unique and integrated scheme aimed to increase the
productivity from aquatic culture including both in and outland including aquatic life. The
government has spent almost Rs. 3,000 crore in this scheme to maintain almost 6-8% growth rate
in agriculture sector and sectors related to it.
Energy-efficient irrigation to be implemented
Across the country, about 2/3 of arable land lacks proper planned irrigational facilities.
rd

Considering this problem, Power minister Piyush Goyal said that the government is going to
invest Rs. 75,000 crore to provide energy efficient irrigational facilities to farmers and their
members. It will help us in saving almost 46 billion kWh of power and creating about 20 lakh
jobs to needy people of our society.
Pradhan Mantri Sahaj Bijli Har Ghar Yojana-Saubhagya portal Online
Registration:-
This scheme was launched by government to check the progress of electrification of rural
households in the country. This portal was started by Ministry of Power and New & Renewable
Energy is available at saubhagya.gov.in. This portal will check the process of electrification of
Indian rural and urban households.
Food Regulatory Portal Launched by FSSAI at fssai.gov.in/FOOD REGULATORY
The Indian government launched this flagship scheme as a single interface for the food business
across the country .This portal is available at http://fssai.gov.in/FoodRegulatory and it will help
proper implementation of food laws across the India in a proper and efficient manner.
Analysis of the issue in the light of three sound ethical perspectives:
ABSOLUTIST PERSPECTIVE:

Moral absolutism is defined as the ethical belief that there are absolute standards against
which moral questions can be judged, and that certain actions are right or wrong regardless of the
context of the act. In other words, absolutism argues an action cannot be judged keeping in mind
its milieu, it cannot lie on the right side at one time and on the wrong side in another case. Any
criminal act is almost mostly accompanied by the wrongdoer’s justifications for committing it,
but it doesn’t make it any more right. An action if judged to be morally wrong by an absolutist
would still hold the same ethicality if you were to zoom a hundred years forwards or backwards,
or slide away to the next continent. Any action is always preceded by a cause and followed by a
consequence, but when this cause and effect come into our view, one’s judgment on it begins to
take different shapes with respect to the eyes of the beholder. An absolutist’s motive is to
eliminate the error of judgment which follows suit of a biased, prejudiced mind that can take over
a human mind from time to time. Right should be right even if no one is doing it and wrong must
be wrong even if everyone is wrong. And, that’s exactly what absolutism stands for.

Now, let’s look at the act of “Exploitation of farmers due to their financial illiteracy”,
from the eyes of an absolutist, to whom none of the consequences and the details preceding the
act are visible but only the money lenders or any other party taking advantage of the financial
illiteracy of the farmers to fit their own interests. What makes an absolutist pass judgement on
exploitation to be ethically wrong? Exploitation only leaves the weaker side far worse off than
they already were, depriving them of what they are entitled to, favoring the stronger party with
underserved benefits. Here, in this case, the farmers don’t possess the knowledge to take optimal
financial decisions which wouldn’t leave them in neck deep debts. Because they hesitate stepping
in the banks due to the innumerably multiplied fears pulling the strings in their minds and the
bundled heap of doubts that they fail to jump over, they fall prey to the greediness of the loan
sharks. Even if they finally emerge out of it, it is only torn, shred to pieces to be left with close to
nothing on the streets with their families weighing heavily on them. In many cases, it goes
beyond the worst imagined, where in the farmers decide the only way to escape the trap they got
into is to escape the world entirely and end their lives. And the lenders who lent some money and
took away everything walks unharmed out of it, to go repeat it to someone else. That’s why the
act of “Exploitation of farmers by taking advantage of their financial illiteracy” would never fail
to befall as morally, ethically wrong before the eyes of an absolutist.

Utilitarianism perspective:
Utilitarianism judges a course of action based on the utility it provides. Utility is defined
as usefulness of a performed action. This theory focuses on the consequences of the action that
one chooses. The action is considered ethically right/ best if it provides the greatest happiness of
the greatest number. And if it promotes the reverse of happiness, the action is wrong. It analyzes
the cost-benefit aspect of the course of action.
Villagers are mostly exploited by the money lenders who put very high interest rates on
the money they lend. And when farmers lose their profits due to various factors like late
monsoons, floods, drought etc. they go back to these money lenders, who take advantage of their
situation and charge further high interest rates. This leads to debt consolidation and the farmer
will never be able to pay for his debts. Had they known about the schemes the government
provides and the comparatively low interest rates that banks provide, they would never be stuck
in this debt cycles. Hence, the worsened financial status of the farmers makes them opt their only
way out, which is committing suicides. In India, in a year around 6000 farmers commit suicide
due to their financial illiteracy combined with the exploitation by the money lenders. With this
most of the families lose the breadwinner of their family and fall into complete poverty. In some
cases, the whole family commits suicide. Here, though a few money lenders are profiting, the fact
that a lot more farmers and their families are negatively affected should not be forgotten. And
Utilitarian perspective says that if the action provides any pain, it is morally not permissible.
Hence, the exploitation by money lenders is unethical according to this perspective.
Also, this issue is not merely a conflict between money lenders and farmers. It is of
national significance. The government, citizens of the country and the economy would be well-
off if the villagers are financially educated. ‘Financial literacy, and education, plays a crucial role
in financial inclusion, inclusive growth and sustainable prosperity’ 2 said the former Union
Finance Minister, Pranab Mukherjee while delivering a speech on Financial Literacy in the year
2010. When the people of the country are in a state where they can understand basic financial
concepts, they can protect themselves from any financial risks, get benefitted with the schemes

2
https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/NSFE016072012.pdf
that the government is providing and also investing their money at a proper place for future
benefits. This leads to the stability of the financial status of the country as a whole.
Hence, considering the utility obtained by making the villagers financially aware
outweighs any pain caused to the people who are benefiting from this exploitation.
Virtue Ethics Perspective
This is a major approach in normative ethics. In this perspective, the character of the
concerned individual or group is required to be virtuous or just. The individual in question should
perform morally ethical action and should refrain himself from committing any false or incorrect
one. The person in question should have a righteous character in the sense that in no situation
should he conduct a dishonorable deed. It is assumed that if the individual in action is virtuous,
then she will always act in an ethically moral way, and its consequences will always be ethically
beneficial.
The big farmers take undue advantage of the lack of financial knowledge. In this case, the
big farmers who are exploiting the financial illiterate farmers or the agricultural laborers are the
individuals in action. Instead they could have resorted to techniques for betterment of the
underprivileged community like teaching them or informing them about the schemes. This could
have been a just course of action according to the Virtue Ethics perspective.
Another improper action here is the incompetence of the government in implementing its
policies effectively. Had the farmer known about government schemes or the lesser interest rate
charges of government banks, he would have been less burdened. The schemes and plans go in
vain, since the ones who are in dire need of it are the ones oblivious to it.
The big farmers who exploit the financial illiterate ones are corrupt, unjust, unethical and
dishonest. It isn’t a desirable or a ‘good’ character attribute in an ideal person.
The government officials, though formulate new policies for their welfare, are also not
doing their jobs properly. They don’t work ideally, or this issue wouldn’t have been a social
problem.
Virtue ethics concentrates on the person, rather than the action. It examines the moral or
ethical nature of the person who is performing the action. Thus, it is an unethical action
performed on the part of the big farmers or the government employees, according to the Virtue
Ethics perspective.
Solution
The average Indian villager lives an illiterate life, devoid of basic education and know-
how about the world around him/her. There is an urgent need to impart at least a rudimentary
level of education to the common poor to fully take advantage of the changing world, and place
India among the top notches of global power. We suggest some basic changes in the government
schemes, such as higher integration among the multiple varied schemes running, creating a point
of responsibility and contact for the resultant unified program and most importantly, ensure
practical implementation, rather than words and figures on paper. Words and figures on paper are
ideal, but only when the common man can comprehend and express them on his own. By
imparting knowledge to villagers, they will be economically better off and the number of suicides
would get decreased. Eventually, the whole economy gets stabilized owing to the fact that every
citizen is capable of taking best financial decisions. Soon enough the whole country will start
making better financial decisions, which best fit everyone’s interests. Thus, providing greatest
happiness to the greatest number of people.
By imparting some basic education, the villagers and rural poor will be able to better
grasp elementary economics and market dynamics, which can be leveraged into higher
economical returns and a better quality of life. At the same time, being cognizant of one’s legal
rights will allow them to demand the same and prevent exploitation by the rich and educated
elite. Government schemes, though high in number, fall short of having an effect since the
intended beneficiaries are oblivious of the schemes, and of the correct envisioned
implementation, and thus the benefits are embezzled away by the bourgeoisie.
Moreover, there should be measures taken to stop the money lenders from exploiting the
villagers/farmers. Though they are getting benefited, by going with the absolutist perspective,
they should understand that what they are doing is unethical. The moral standard should be
absolute, whether or not you are benefitting from the action. Certainly, they cannot have high
interest rates because there is no one to question them. Here, the main reason these farmers
approach the money lenders is that the process of taking loan from banks involves a lot of work
and time. In such cases, the public should be made aware of the pros of taking loans from banks
and cons of borrowing money from big farmers. The long processes of taking loans should also
be made simpler for the villagers. The government should make sure that the banks easily
available for the villagers to borrow money.
Apart from this, there can be a few private initiatives/NGOs which can provide financial
literacy to the villagers. Also, being responsible citizens, and for the greater good of the
community, people who can impart their financial knowledge to others, can take their time out,
visit villages and volunteer for the cause. Hence, by doing so the volunteers are being kind and
helpful, even though they are not directly gaining anything from it. Thus action being performed
is ethical according to the ethical perspective, virtue ethics.
Here is the summary of a project to show that the above mentioned suggestion is actually
plausible in reality.
References:

 Alexandra M. Sakellariouv (2015) Virtue Ethics and its Potential as the Leading Model
Theory http://www.inquiriesjournal.com/articles/1385/virtue-ethics-and-moral-theory
(accessed on Dec 2, 2017)
 Press Information Bureau, Government of India, Ministry of Agriculture (21 Nov, 2015)
An Umbrella Scheme ‘Blue Revolution’
http://pib.nic.in/newsite/printrelease.aspx?relid=131762 (accessed on Dec 6, 2017)
 Press Information Bureau, Government of India, Ministry of Food Processing Industries
(01 Nov, 2017) Launch of Food Regulatory Portal Announced
http://pib.nic.in/newsite/PrintRelease.aspx?relid=173151 (accessed on Dec 6, 2017)
 Press Information Bureau, Government of India, Ministry of Power (12 Jun, 2017) Three
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Dec 4, 2017).
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