“National tragedy.” That is how Finance Minister Mangala Samaraweera described the problem of prevalent household indebtedness in Sri Lanka, when he recently announced the government’s decision to write off debt of LKR 1 lakh or less, incurred by 75,000 women in 12 drought-affected districts across the country.
The move, aimed at providing relief to those caught in a debt trap created by microfinance companies charging exorbitant interest rates, was inevitable. There were multiple protests by affected women in the island’s north and east, where debt, compounded by other post-war challenges, is acute.
The decision will cost the government LKR 1 billion (roughly $6.2 million) and there are few comparable efforts by any government in the region to take on the peculiar challenge that the once-celebrated microfinance schemes have thrown up.
Although significant from the point of view of borrowers, the move can at best address only a symptom. While the debt write-off brings huge relief to borrowers, only sustainable livelihood options can prevent them from turning to predatory lenders again.
At least in the north, there is an acknowledgement of this, a decade after the war ended. Policymakers are now looking at micro, small and medium scale enterprises (MSMEs) to rejuvenate the economy, linking local resources, livelihood and income generation.
In the pre-war era, Jaffna’s local industries — such as rice mills and glass factories — were active, much like industries in the rest of the country. In 1983, Jaffna district had 3,121 manufacturing units, where more than 18,000 people worked, according to the Department of Statistics.
The Industrial estate in Atchuvely, Jaffna, set up in 1971, then consisted of 36 factory units. In the 30 years of war, almost all the factories that functioned out of 25 acres of the estate’s developed area were destroyed. Though the estate was revived in 2014 with Indian assistance, only five medium scale industries — including light engineering, sheets and cement-based products — function out of it, employing a little over 100 persons.
Scope for revival
Experienced professionals familiar with the industrial sector in Jaffna since the 1970s think there is space for revival of small and medium industries. V. Senthan, an engineer based in Jaffna, emphasises the need to use local resources in the industries. “Nothing like our palmyra tree to combat poverty,” says the 70-year-old. From fruit-based products, mats made out of its leaves and fibre to toddy and arrack, the options are many.
Some see more scope for diversification, but also point to serious gaps. “There is a need for a strong training component. We have to respond to the realities of the industry and market today,” says Mailvaganam Jananayakam, a retired engineer. And this is where he sees value in Indian engagement. “The exchange does not even have to be at a governmental level, but if groups of young people get to visit a place like Coimbatore, they can get some useful insights on how to develop industries,” he adds.
The government has also allocated LKR 1 billion to the north to strengthen 50 producer cooperatives to increase livelihoods. Further, the government is trying to boost entrepreneurship, by making rural credit available at relatively reasonable interest rates. Northern Tamils have welcomed these initiatives, even as they await clarity on how the different schemes might actually be implemented on the ground. Much would depend on that.
Meera Srinivasan works for The Hindu and is based in Colombo.
