News
People urge urgent end to exploitation by micro-finance companies
Northern Civil Societies (CS) urged the immediate intervention of the Central Bank (CB) of Sri Lanka to address the continued exploitation of war-affected people by micro-finance companies and unauthorised financial institutions issuing loans under soft terms that leads to debt.
CS representatives met CB Gov. Dr Indrajit Coomaraswamy in the last two days, when the latter visited the North this week, and apprised him how vulnerable, war-affected people are being targeted and ‘trapped’ and exploited by these companies.
Gov. Coomaraswamy’s visit was to review rural level indebtedness of stakeholders in five Districts, and discuss measures and strategies to overcome the issues, as a pilot project.
Kilinochchi District Secretary Suntharam Arumainayaham told the Sunday Times that he explained to the CB Gov. on the current debt condition in the District, where almost everyone who borrowed from finance companies are finding it difficult to settle them.
“The top priority of these micro-finance companies is not to develop the livelihood of the war-affected, but to exploit them even further, for profit.”
“The issue of indebtedness also leads to other social issues including family breakups due to poverty. People are compelled to obtain more loans to settle other loans. These conditions finally lead to suicides,” he said, explaining the recent increase in suicide attempts.
Gov. Coomaraswamy said the CB is formulating a mechanism that includes effective, practical interventions to address this issue by identifying its root causes, who are the most distressed and how the CB could elevate them from the current predicament.
“We have come to listen. Our colleagues have compiled an initial report which has set out broad parameters of the problem, making clear to us this is a serious problem which needs to be addressed,” Gov. Coomaraswamy told the CS representatives.
“Of course, as the Regulator, we have certain limitations on what we can do. We want to focus on registered financial institutions. However, we want to try and raise the profile of this issue, so that, we can have a multi-round approach to address this,” he said.
CS representatives, particularly, organisations representing women-headed households, pointed out how the vulnerable communities are facing many hardships.
Recently, the Kilinochchi District Secretariat issued an order banning representatives of micro-finance companies from visiting residences of beneficiaries after 5 pm, following complaints alleging misconduct were lodged by women-headed families.
At the meeting with the CB Gov. yesterday, Kilinochchi CS complained that govt authorities turned a blind eye to this issue, though it was brought to their notice many times in the past.
Iranaimadu Farmers Union Secretary Muththu Sivamohan told the Gov. the CB should be held accountable for the current scenario, as all micro-finance companies are registered under the CB which regulates them.
Meanwhile CS representatives in Jaffna requested Gov. Coomaraswamy to introduce a moratorium period that would enable the people to repay their loans, once they are gainfully employed.
Former Vice Chancellor of Jaffna University, Pon Balasundarampillai, who attended the meeting, told the Sunday Times that most of the finance institutions in the province misled the public with false hopes and promises ending in a debt trap.
“We have sought urgent CB intervention to address this issue with adequate steps such as moratoriums and termination of loans granted to drought-affected farmers. The strict regulation is a must,” he said.