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Tuesday, March 5, 2024

SLB Update: Micro Credit and the Rights of the Female Victims in Sri Lanka

Sri Lanka Brief Update. April 2021. Micro Credit and the Rights of the Female Victims in Sri Lanka

1. Victims of microcredit schemes in Sri Lanka started a fast on 5th March 2021 at Higurakgoda, Polonnaruwa district. 85 percent of microfinance borrows in Sri Lanka are women. There are a large number of war-affected minority Tamil and Muslim women in Northern and Eastern provinces among the borrowers. The fast is still ongoing and gathering support among the civil society, TUs and women’s organisations. Images of their struggle are here.

2. They demand that: All microfinance debt be abolished. All microfinance debt collection be forthwith ceased until a debt audit is conducted. All legal action against microfinance borrowers be stopped. Delist all microfinance borrowers from the Credit Information Bureau of Sri Lanka.

A bank system should be established dedicated to women in Sri Lanka.

3. By 2017-18, it was estimated there were over 2.8 million active borrowers, of which 85 per cent are women, with a total loan portfolio of Rs. 94 billion rupees (this is an underestimate as this figure is derived from 37 institutions, which omits potentially thousands of informal operators). Predatory practices of the loan providers range from extreme interest rates up to 220 per cent. (Samanthi Gunawardana 2020)

4. According to the former Finance Minister “most of the microfinance and finance companies have ruined the financial sector of Sri Lanka. Especially in the Northern and North Central parts of the island. Some depositors and borrowers of these microfinance companies are in a pathetic condition. In the absence of payments, the officers of these companies have started obtaining sexual bribes from borrowers, especially from young women who are unable to pay back.”

5. Number of reports attribute around 200 suicides to microfinance debt over the last few years. But a list of such suicides is not available.

6. Successive governments have promised to provide solutions to address their demands. But so far no tangible action has been taken. Although Parliament enacted the Microfinance Act, No. 6 of 2016 (the Act), which came into effect on 15th July 2016 there were many microfinance providers that are not under the purview of a regulatory authority says Central Bank.

7. Microfinance was part of the post-conflict development and rebuilding strategy of the Rajapaksa led government through initiatives such as ‘Uthuru Wasanthaya’ (Northern Spring) and ‘Nagenahira Navodaya‘ (Eastern Re-Awakening).

8. The goal of the system was to lift people out of poverty by enabling borrowers to sustain their livelihoods through financial inclusion and economic empowerment. No study was available to assess the achievement of the above-mentioned goal in Sri Lanka over the years. This is crucial, given that there is no evidence that microcredit actually helps to alleviate poverty in countries where it is broadly used, in particular when the private sector is deeply involved in lending the funds.

9. “Before microfinance, we earned a daily wage and ate, if we didn’t have any food, we starved. We did not have big dreams; like everyone else we had certain needs and likes but did not think that we had to take loans to improve our lives. When these people came to the village it was like a fairy tale come true but then it spread like a virus!” – Charitha, a victim from Mullaitivu

10. The methodology adopted by finance companies in giving loans and recovery of instalments is crude and abusive. Each company has employed a team of field officers to issue loans and collect the interest and the instalments. The income of field officers and their job security depends on the number of loans given and the effectiveness of the recovery of instalments. (Victor Ivan 2019)

11. Instalments are being collected weekly or fortnightly, not monthly. The field officers are young men and the debtors they have to deal with are women. The field officers would visit the defaulters and stay in their houses till the outstanding instalments are paid and that the field officers would make these visits particularly at night when their husbands were away from home. (Victor Ivan 2019)

12. United Nations Independent Expert Bohoslavsky’s (2019) recommendations to the Sri Lanka Government has not been implemented so far.

(l) Adopt and effectively implement a robust and comprehensive regulatory framework in the field of microfinance applicable to all types of microfinance service providers; it should include guidelines on assessing the credit risk of loans and interest rates, and regulate and restrict the actions that lenders can take for collection, in accordance with international human rights norms and standards;

(m) Amend the legislative framework in place to ensure that usurious microcredits are void (or voidable), and afford victims the right to request the return of money as compensation;

(n) Declare a moratorium on repayments until the laws and regulatory frameworks referred in section V of the present report are adopted and effectively implemented, in order to prevent groups at heightened risk – in particular women – from being further exploited by lenders.

13. The struggle for justice by the victims of Micro Finance schemes is a human rights issue that comes under ESC rights. Victims belong to all communities of Sri Lanka. International Human Rights Community needs to address their concerns as well.


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