In a bid to rescue families being crushed by mountains of debt, the Government has rolled out an extensive relief package for 12 drought affected districts, writing off micro-finance loans taken by women in these regions and offering a state subsidized loan scheme, Prime Minister Ranil Wickremesinghe and Finance Minister Mangala Samaraweera announced in the Northern capital of Jaffna yesterday.
Microfinance loans taken by women in these regions, valued at Rs 100,000 or less will be written off under the relief programme. The Government will pay back these loans, while the micro-finance companies have come to an agreement to waive the high interest attached to these borrowings, Minister Samaraweera noted.
The write-off would cost the Treasury Rs.20 billion and be paid back over a period of five years, Prime Minister Ranil Wickremesinghe told the gathering at the Jaffna District Secretariat yesterday. Micro-finance companies were lending to desperate people struck by drought and poverty at interest rates of 40-200% per annum, the Premier noted.
The measures were part of an effort to address an exploitative cycle of debt, in which women were worst affected especially in the war-affected districts of the North and East and drought- affected districts in the North Central and North Western Provinces.
“Loans taken from micro-finance companies at exorbitant interest rates have placed people’s lives in peril. Unable to manage the debt, some women in these regions have taken their own lives,” the Finance Minster told large crowds at the Jaffna District Secretariat last afternoon, where a high level Government delegation rolled out the measures. Borrowers in the gathering were urged to fill applications to apply for the write off and hand them over to the District Secretaries of their respective districts.
Minister Samaraweera said his Ministry had decided to submit a Cabinet proposal to cap micro-finance interest rates at 30% per annum in a bid to prevent these companies from lending to vulnerable communities at ‘predatory’ interest rates. The Government would also work to better regulate these micro-finance companies and bring amendments to the Micro-Finance Act in order to prevent the manifestation of similar debt traps and exploitative lending programmes.
Under the Enterprise Sri Lanka subsidized loan scheme, the Government proposes to pay 50% of the interest of loans granted to people in need, he added. The Government will pay the interest component directly to the Bank, the Minister noted.
“Many of the women who took the first loans under Enterprise Sri Lanka in the North were hoping to finish building their houses, or pay off loans they took to get solar panels for their homes, so they do not need to pay for electricity again,” he said.
“Women in this country need never become the prey of loan sharks again,” Minister Samaraweera asserted.
In the second phase of the Enterprise Sri Lanka project, the subsidized loan scheme will be rolled out all over the island, in order to pull people out of debt, the Finance Minister claimed.
State Minister for Finance Eran Wickremaratne, Industries Minister Rishard Bathurdeen, and UNP MP Vijayakala Maheswaran, and TNA MPs M.A. Sumanthiran, Marvai Senathirajah and E Saravanabhavan attended the event at the Kachcheri.