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Dirty tactics used by micro lending companies in Batti area
As many as 50 complaints of cases of harassment and intimidation including cases of sexual harassment by persons collecting payments due to finance companies and by other persons lending money have been reported to the District Secretary of Batticaloa.
According to District Secretary Ms. P. S. M. Charles finance companies which have started different micro finance schemes targeting residents in rural areas are using intimidation and threats as tactics to push people to pay the interest on loans obtained and also return the capital. “The Central Bank stipulated interest rate is a maximum of 15% but some of these companies are charging up to 29% interest. I have already informed the Central Bank Regional Office in Trincomalee about the situation. Most of these finance companies hire local people as recovery agents without checking their back ground and they use all kinds of tactics to recover the money. There are cases of physical and verbal harassment that has been reported,” Ms. Charles told the Sunday Times.
According to V. Kamaladas, the President of the Island Association of Local Non-Governmental Organisations in Batticaloa District, most of these finance and leasing companies have soft micro loan schemes targeting women.
“Finance recovery agents started visiting houses at odd hours and even on Saturdays and Sundays. They have started threatening and harassing the women and many individual money lenders do the same. Many cases of sexual harassment have occurred as well but women are unable to tell anybody as this is taboo,” he explained adding that most women are reluctant to go to the police on the issue.
Reporting on information the organisation has received, he said women who spoke to him regarding the matter complained that the lenders visit their homes at odd hours.
“One woman from Arasadithivu said that the agents visit the borrowers at odd hours, knocking at the doors while they are asleep. Financial institutions give easy repayment loans, and when the repayment is delayed officers of such companies are said to negotiate with women to obtain sexual favours in return for delaying demands for repayment,” Kamaladas said . Sarala Emannuel, the manager of the Suriya Women’s Development Centre also confirmed that there is a growing trend of finance companies issuing soft loans targeting women in most of the rural areas in Batticaloa.
“As far as we have seen there is an increasing trend of finance and leasing companies with mobile units going into to rural areas. They target women with various schemes offering monthly and weekly repayment options. These services are brought almost to their doorstep. For many women repayment is difficult and the interest keeps mounting. We know of at least one case of suicide that took place due to this issue. There is a growing rate of female suicides in Batticaloa and we are concerned if this could be one of the reasons,” she said.
The rural communities in these areas are mostly made up of low income families resettled after the war. Ms. Emannuel explained that the women who obtain these loans lack understanding on what it means to obtain and repay such loans.
“These schemes are different to other schemes offered by State affiliated organizations. In one case we calculated the woman has paid an interest of almost 40% after borrowing Rs. 25,000. Usually most well established organisations charge an interest of 5% to 12% unlike these new companies” she said, adding that there are schemes that are available to buy home appliances on similar easy payment schemes with interest.
Under conventional loan schemes given by banks most loan applications are assessed on the capacity of the borrowers to repay the loans and the borrowing trend has been low.
“The banking sector has been reluctant to give loans based on assessments of the capacity to pay back. However these finance companies seem to have circumvented this and issue the loans” Ms. Emannuel said adding that measures taken should focus on regulating the activities of the finance companies instead of placing controls on the women who borrow.
As a temporary measure Divisional Secretariat officials and Grama Niladharis in Batticaloa District hasve been instructed to monitor the activities of finance companies in their areas. “I have informed the Divisional Secretaries and Grama Niladaris to register all companies in their areas and given instructions to finance and leasing companies operating in Batticaloa district to inform the Divisional Secretary when they visit the relevant areas. The issue is with the new entrants. Most of the long standing companies carry out ethical business, and some even carry out awareness campaigns but it is all wasted due to these new entrants,” Ms. Charles said.
In addition plans are under way to hold a formal discussion with the finance companies and the Central Bank (CB) officials within the next two weeks.
According to H. M. Ekanayake, Director of the CB’s Department of Supervision of Non-Bank Financial Institutions (NBFI) the Central bank has given instructions to the District Secretariat and Central bank regional office to discuss the issue with the finance companies.
“These finance companies are licensed companies which should be allowed to conduct their businesses. The District Secretariat or other officers cannot prohibit them from conducting business. We have got complaints from finance companies stating that the GA (District Secretary) has banned them from conducting business in certain areas.
The issue crops up when repayments are due and agents visit customers at odd hours. I was informed that the recovery agents visit at nights as well. The micro loan schemes have different recovery periods – daily, weekly and monthly – and often the companies send agents to do the collections. We have asked the companies to do so without upsetting the community,” he said.
Additional reporting by Deva Achchudan
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