When tourism-related activities boomed on the Manaslu trekking route, many people living in the area ventured into the hotel business while existing hotels expanded their capacity.
But when the entire tourism sector witnessed an unprecedented slump due to the Covid-19 pandemic, entrepreneurs who invested in hotels by taking loans with interest rates as high as 36 percent per annum are now in distress as the hotels have been shut down for the most part of the year in the region.
Ganesh Karki, a hotelier, complains that he is in a stage where he does not know if he should cry out of despair or laugh out of frustration. “After failing to provide the required services to tourists coming to my place, I decided to take a loan at whatever interest I had to pay to increase the capacity of the hotel,” Karki says. “But last year, there was a fall in tourist numbers due to dengue and this year, Covid has completely ruined business.”
Karki informs that he took a 160,000 rupee loan with a 36 percent interest rate per annum from a local loan shark. “I have paid Rs 240,000 as interest alone and still, the principle has not been reduced by a single rupee,” Karki says, “My creditor does not stop demanding money even when he can see that my business has not been running at all.”
The creditor demands the interest amount every day and when Karki cannot pay on time, he doubles and then triples the interest, adding to the total due amount. Not only Karki, many other hoteliers in the Manaslu area have also fallen into the trap of compounding ‘meter interest.’ Ram Kumar Gurung, ward chairman of Chumanubri Rural Municipality-3, says that there are many complaints about non-payment of loans at 36 percent interest.
“Initially, the tourists started coming here in droves and hoteliers ran out of places to keep them. So they took loans at exorbitant interest rates to increase their capacities,” Gurung explains, “Now that the business has been down for months, they have been unable to pay their dues and the creditors come to us with complaints.” The ward office has been mediating between the creditors and debtors by asking the debtors to pay at least the principle first and the accrued interest at a later date.
Businesses in the area were forced to take personal loans at high-interest rates because the banks refused to invest in the tourism sector, says Karki. “Had the banks invested in our business, as they do in the cities, we would have been in a better situation,” Karki says. Residents complain that the banks do not even operate properly in the area. Consumer committee members are forced to walk for seven days to get to Gorkha Bazaar, the district headquarters, at the end of the fiscal year because the banks in the rural municipality do not offer complete banking services.