Rural economy at risk due to Micro-Financing Organisations

COLOMBO (News 1^st) - A 25-year-old youth from Mawadi Wembu, Batticaloa, committed suicide yesterday (June 10). It has been revealed, the victim took his life as he could no longer pay off loans that he had taken. The victim has been identified as Mogarasa Yogharasa, whose livelihood depended on a cement block manufacturing business. According to his wife, the victim had taken multiple loans from various institutions, which adds up to around Rs. 280,000, for his business. Today, many small scale entrepreneurs in the country have resorted to irregular methods like obtaining money on interest, to fulfil their financial requirements. When plying a trade by obtaining loans at such high interest rates, the trader has to make a profit percentage higher than the interest rate to cover the loan. As this process is not practical, those who obtain loans without a proper knowledge, fall into a debt trap unable to pay off the loan. Speaking in Parliament on 7^th June 2018, Anura Kumara Dissanayake, the leader of the JVP stated that in 2017, 195 people in Sri Lanka committed suicide due to debt related circumstances. According to Dissanayake, there has been a boom in rural micro loan schemes which provides loans of up to Rs.100,000, to be paid back in 50 monthly instalments of 2500 rupees each. He stated that rural communities are usually enticed by such figures and fail to realise the high interest rates they end up paying. Minister of Finance and Mass Media, Mangala Samaraweera also commenting about the situation said that this situation created by micro-finance companies is disastrous. He said that officials and representatives of companies solicit sexual bribes from these women who are unable to pay off their loan instalments. Minister Samaraweera added that they have to find immediate and long-term solutions together with the Central Bank official, for this issue. He stated that on the 22^nd of this month they hope to announce a special relief program for the women who fell victim to these micro-finance companies and that the government would bear the interest of those who have taken loans of more than Rs.150,000.