Following prolonged struggles for their military-occupied land and for answers about their disappeared relatives, Tamils living in Sri Lanka’s north and east are battling a new demon — debt. Almost every family is crumbling under the weight of mounting loans with steep interest rates.
What began as sporadic complaints from affected borrowers is turning into a widespread mass struggle, going by the string of protests last week, in Kilinochchi, Mullaitivu, Mannar and Vavuniya districts, across the Northern Province. Women’s organisations, NGOs, and civil society networks have mobilised people around the cause, said Charles Vijayarathinam Thavachchiri, who leads a women’s group in Kilinochchi.
Following the end of the civil war in 2009, in the absence of jobs and amidst the many failed attempts of the state and development agencies to promote self-employment in a battered economy, people living in the north and the east turned to readily accessible microfinance. They were unaware of the high interest rates — running to as high as 70% — that were seldom revealed in the fine print. “It became common for people to take a new loan to repay an old one. They soon found themselves in a trap, with five loans, massive interest rates and no way to repay,” Ms. Thavachchiri explained.
The problem became so severe over the last couple of years, with several reports of suicides linked to predatory loans, that the Central Bank decided to intervene. After a study that showed a worryingly high prevalence of indebtedness, the Governor of the apex bank visited the north and, more recently, the east, to meet the affected people. The bank has since been raising awareness through campaigns. The Finance Ministry on its part has allocated LKR 500 million (about ₹212 million) this year for debt relief in the north.
Call for a cap on interest rates
Although belated, the responses have offered some promise to the people, but they also want some immediate and concrete steps to prevent further damage. Underscoring the need for rural credit, they point to alternatives by way of low-interest loans from government banks and a possible cap on interest rates of private lenders.
The protesters at Thursday’s rally too made these demands, echoing their Jaffna counterparts’ petition at a protest in February. Similar agitations were held in Batticaloa in the Eastern Province as well.
Finance Minister Mangala Samaraweera told Parliament recently that the government would write off interest amounts on loans less than LKR 1,50,000 (about ₹64,000). He also said new regulations for the microfinance companies would be released later this month.
Nearly 75 members are listed with the Lanka Microfinance Practitioners’ Association, a network of microfinance lenders. The association on its website claims to “provide quality financial services to grass-root communities”. With the likely new regulations, the actual terms of these “services” will hopefully be more visible.
Evidently, microcredit, which was once prescribed as a post-war remedy for all economic ills facing the people, has proved to be a disaster. It has chiefly targeted rural women, many of whom are primary breadwinners, and created havoc in their lives.
The war-affected families await the upcoming regulations with eagerness, while hoping for a more substantive job creation programme from the government and a rejuvenated rural economy.
Meera Srinivasan works for The Hindu and is based in Colombo.