Miners of mica, a multipurpose mineral widely used in the global cosmetics, automotive and electronics industries, are unable to pay off loans with exorbitant interest rates to local money lenders, including mica traders, deadlocking many in debt traps and risks of bondage.
Annual rates over 200 percent are common and miners are often unable to repay for months or years in the key mica districts of Giridih and Koderma in the poor but resource-rich Jharkhand state. Child labor in illegal mica mines has been documented for some years, but debt traps and risks of bondage are under-reported.
“The entire village is under debt. There are lots of money lenders,” said 40-year-old Sarju Rai who picks mica daily in abandoned mines together with his seven children.
Local loan sharks include mica traders, merchants and managers of illegal mica mines. Sometimes loan deals by mica traders restrict miners to sell mica only to the traders and at a price set solely by them.
“I took a loan from two mica traders. The interest is 10 percent monthly. I don’t know how to pay back,” said Sarju Rai. “I have to sell only to them, if I am going to sell to someone else, then I have to repay first. The rate these people quote is final,” he says.
Other miners tell about similar binding loan conditions. Artisanal mica mining is the dominant income source for many villagers and generates $1.5-3 daily.
Inherited Debts and Risk of Bondage
Miners incur debts for a variety of reasons. Many take loans to finance unexpected costs up to $700-800 for medical treatment of lung problems, broken limbs, weddings, and funerals. Many interviewees had multiple loans and often were unable to pay off anything for years.
“Three years ago I got a loan from a money lender of 4,100 Indian rupees ($60) and til now I have been unable to repay. The interest is 10 percent monthly,” said Ramu Gazi who holds three loans of around $560 in total.
“I got a loan of 40,000 Indian rupees ($560) for my caesarean delivery four years ago. I haven’t paid back anything and interest has been accruing,” said Dulti Devi, who earns $0.75-1.5 from a usual day in the mines.
Debts of deceased parents or siblings are passed on to miners by money lenders, a traditional practice according to local experts.
“My younger brother Dobrra (also a mica miner, ed.) died of tuberculosis recently. For hospital and medical costs, he got a loan of $350 from a money lender. Now it is my responsibility to pay this,” said 40-year-old Sangala Shoren, who owes $560 himself to the same money-lending mica trader. He also owes $280 to a clothing merchant for his 14-year old son’s marriage two years ago, which he hasn’t repaid anything on yet.
“I took loan of $425 from a money lender who is mica merchant for my father’s last rituals,” said 24-yearold old Suresh. “I also have another loan of $425 that my father took for my sister’s marriage from this lender. I have repaid $70 until now.”
Debt traps and bondage are prevalent in India and its neighboring countries in a variety of forms, depending on the economic relationships between lender and borrower.
“Debts play a major role in situations of bondage in South Asia. Inheriting a debt from a parent, or agreeing to exploitative conditions to obtain a loan, can trap individuals in situations amounting to bonded labor,” said Urmila Bhoola, the UN Special Rapporteur on Contemporary Slavery.
Children Working Off Parents’ Debts
Children help parents in the mines, so families can generate as much income possible for food, everyday costs, and the debt repayments.
“I go along with my kids to work in the mines. The older boys and girls go down into the mines and bring the sand and dump to the surface, where I and my younger kids pick the mica,” said Barki Hazda whose family’s loans total 35,000 Indian rupees ($490) for a daughter’s marriage and food supplies.
Barki Hazda earns 50-200 Indian rupees ($0.75-3) from a day in the mica mines together with her eight children. Her husband left to find work in Koderma, a bigger city 70 km away from their remote village, after pressure from the money lenders. “I have not got any receipt or any agreement. We can only believe them. Whatever they say, we have to give,” she said.
Child labor in illegal mica mines has been documented for years, but debt traps and risks of bondage are under-reported. Following a Guardian investigation of BMW, VW, and General Motors’ supply chains in 2016, brands announced they would step up supply chain due diligence.
In 2017, L’Oreal, Coty, Chanel, and other of the world’s biggest cosmetics brands joined hands in the Responsible Mica Initiative, a multi-stakeholder initiative aiming at ending unacceptable working conditions including child labor in India within five years. Car paint producers such as PPG and Axalta soon became members. OECD began covering mica from 2017 in its annual minerals forums.
Now, the Responsible Mica Initiative supports interventions in 80 villages and the Dutch NGO Terre des Hommes Netherlands in 61.
Empowerment initiatives in mica villages focus on access to better education for children, access to government welfare schemes for families as well as generating additional income opportunities – within agriculture, livestock, crafts – to reduce the need for the children’s household contributions and need for loans. Thousands of families in the main mica districts have recently been linked to governmental health insurance such as the Ayushman Bharat scheme.
However, mica mining villagers continue to incur substantial debts for medical costs, marriages and emergency needs. Formal banking is limited to bigger cities, too far away for most mica miners.
Could Decent Interest Rates Reduce Child Labor?
If mica miners had access to loan schemes with reasonable rates, they would save more on repayments than they would lose from making children go to schools instead of mines.
“It would be better if mica villagers had more choices in borrowing money. We request formal banking services to expand into rural areas and for the government Livelihood Mission programme to be effectively implemented,” said press officer Jos de Voogd from Terre des Hommes Netherlands. He continued, “Through our income generating activities we reduce the traditional bonded relation between local money lenders and mica miners.”
NGOs estimate that around 80 percent of villagers depend on loans with exorbitant rates from local money lenders such as mica traders. Annual rates up to 120 percent (non-compounded) and 213 percent (compounded) are widespread. Lack of repayments for several years results in compounded rates up to or beyond 1000 percent.
A survey by the Responsible Mica Initiative and local partners from late 2018 in 143 villages showed that around 15 percent of mica-dependent households were totally dependent on contractors for financial emergencies which they repay by working for their contractors, and that around two-thirds arrange money from local lenders.
Some villagers point to micro finance services as a possible solution.
Mica miners closer to cities such as Koderma and Domchanch borrow from micro finance institutes with lower rates, where borrowers, often women, group together to share responsibility for repayments.
“I cannot get loans from banks with low interest rates. It is too far away,” said Runuma Devi. Instead she borrows from microfinance providers as part of a group with 12 women. “The agent comes to our village in the first week of every month to collect.”