A Culture of Dependency how the exploitative practises of microfinance companies are plunging families into debt

The exploitative practices of banks and micro-financing companies based in the North and East are bleeding citizens dry, even after they have already been devastatingly impacted by war.

Those who have traveled along the A9 highway would not have missed the large signboards on either side of the road.

The institutions who are putting up these signboards claim that their focus is to assist the people who suffered for the past 30 years, to regain their livelihood and improve their economic status. The people living in this area obtained loans for several reasons, including to resume farming activities, redeem assets that they had mortgaged, self-employment, house renovation, and so on. They continue to obtain loans.

Nine years after the end of the war, these micro financing institutions have revealed the real motive behind establishing their presence in the North and East. They have managed to create a new culture among the people - the culture of dependency. The war took away everything from the people.

The banks and micro finance institutions have forced people, once determined to live with dignity, towards helpless situations where they feel compelled to take their own lives.

Last year, an incident in Jaffna remained in the public consciousness for several weeks. A housewife died by suicide along with her three children, since she could not repay her loans. Her husband also died by suicide a few months ago.

This was followed by suicides in Jaffna, Mullaitivu, Batticaloa, and Kilinochchi.

The people are of the view that some of these institutions deliberately target women to offer them loan facilities. Some of them provide loans only to women in order to entrap them in their schemes.

The finance company first sends an agent into the village. The agent chooses a woman as the main contact. Through her, the agent gathers a group of around three to five persons from the village. The said woman includes her relatives in order to obtain the loan facility. Together they obtain the loan and pledge to repay the installments on a weekly basis. In addition, they obtain the loans after pledging that if one person fails to pay an installment another member of the group would pay it on behalf of him or her.

However, the ground reality is very different. In the event one of them does not pay an installment, the other members of the group are pressurised and harassed by the agents who come to collect the installments. There have been several instances where agents who visit villages and households have used unprintable language on helpless women who were unable to pay their installments.

One woman who had experienced this told ‘Maatram’ that her husband had left her because of this situation.

Another woman said that she was almost driven to suicide due to pressure from her relatives and neighbours who were also members of the group who had obtained the loan along with her.

Many of these women who have obtained multiple loans spend most of their time looking for money to settle the weekly installments. The agents use public shaming as a technique to compel these women to pay their loan settlements. A mother wept to us stating that her daughter committed suicide after she was publicly humiliated by such agents.

Unable to handle the pressure from other members of the group, many of them are compelled to borrow loans from other institutions and individuals in order to pay off their installments, thereby burdening themselves with more loans.

Most of the women who spoke to us admitted that they had signed documents without reading the content. They pointed out that the content was in English and that the agents did not explain the conditions mentioned in the documents. In addition, they also said that the agents did not hand over the documents after they had signed them.

Political and economic Analyst Akilan Kadirgamar pointed out that there was a lack of awareness among the people on the conditions laid out by financial institutions. He pointed out that many of these institutions lured the public by mentioning that a National Identity Card alone was sufficient to obtain loans.

“Generally banks levy interest of 8% onwards for loans while it is 14% onwards for loans for self employment. In addition the interest rate for pawning is from 15 to 21%. But the micro finance institutions levy exorbitant interest. When we investigated into the matter we came across situations where some have levied interest from 40 to 220% even though in the documents they mention only 24 to 28%,” he said.

More than 3000 people took to the streets to protest against these micro finance institutions in February. They also handed over petitions to the Governor and the District Secretariat. But this did not yield any result. The companies continued to harass people and no action was taken by the authorities against companies which indulged in unethical practice.

While mentioning that the government could intervene and take steps to provide compensation for the people, Akilan Kadirgamar pointed out that the time to repay a loan of one year could be extended to five years. He also said the government could take steps to cancel all interest for the loans.

Many women from Mullaitivu have found themselves trapped by the lending institutions. Maatram met with women who had borrowed for many different reasons including for self-employment, to emancipate themselves from abusive husbands, to repay loans, to redeem items that they have mortgaged, and to build houses. Some felt compelled to attempt suicide and were saved. Some continue to live a hidden life as they cannot repay the money.

"My daughter’s husband was fine when they got married. Later, he got addicted to alcohol and constantly harassed her to borrow money. She was physically harmed by her husband who asked her to do anything to borrow money. My daughter borrowed money through the scheme where you can get loan as a group. Her husband wasted the entire money on alcohol and fled the home, and has not returned yet.

The lender has been frequently harassing my daughter. Even the other members of the group with whom she had taken the loan had also pressurized her. I saw with my own eyes when a woman slapped my daughter. We could not bear to see her like that. So we brought her to our home. She seemed at peace.

On January 1 last year she said that she was going to her place to clean up the house for the New Year. But she never came back. We later received the news that she had died by suicide. It was in this house. She was three months pregnant when she died. She was young.

Since we are not in a position to look after all three children we have handed over two of them to a home run by a church. The third child is with us.

We got to know that she had borrowed loans from five institutions, including banks, only after her death."

"I have four children and my husband was working in Qatar. I educated my children with the help of the money he sent. At the same time, I started to build a house as well. I opted to go for a loan since I did not have sufficient money to complete the house. On top of that, some of the members of the ‘seettu’ group of which I am in charge have vanished without giving the money. (‘Seettu’ refers to a practice where participants agree to pool money together, with a different participant receiving the pool each month). Since I am in charge and answerable to the other members of the group, I borrowed another loan to pay for them. Now the amount I have to pay has skyrocketed thanks to the high interest rate. I use my husband’s money and my own earnings to pay back the loans.

My husband who came from abroad was very angry once he got to know the situation and moved to his mother’s house. “You did not build the house with the money I sent. You are in debt. I cannot repay your loans, and I do not want to live with you,” he said before leaving. I decided to die by suicide having become of fed up of life. I am now talking to you only because of my children.

I am currently working at the Civil Defence Force. The agents have also started coming to the farm maintained by the force. I don’t mind them coming to my home and embarrassing me. But they are coming to my work place and disturbing me. Our officer in charge has warned me that he will fire me from work if this continues.

One of the agents called me on the phone and said he will come the day after tomorrow and for me to keep Rs. 30,000 for loan repayment. He told me to settle the amount by even selling the house, and threatened that he would even come to my work place. If he comes then I will lose my job. I will have no option but to die.

My children tell me to sell the house to repay the loan. But if I sell it my children will not have anything for them. I don’t know what to do."

"I borrowed Rs. 60,000 as loan for *Saroja akka (sister). We got the loan as a group of three individuals, agreeing that we would repay the installment every week. She had made the payments for four weeks only. She had not paid afterwards at all. The agent will come home at random moments and would sit inside. He will not budge an inch. The children come and hide behind me due to fear when they see the loan agent. The neigbours started to talk bad about me since the agent used to come frequently to my home. That is why I moved here, said *Birundha.

She has been staying at a home managed by a church since January. But her future at the home has also become unstable due to the frequent phone calls by the agent.

Maatram spoke to *Saroja akka last week. She said she would make the payment before six months had passed. But the agent has threatened to file a police complaint against her. She is unsure of what course to take

“The company people tried to take away my television set which was bought when my husband was with me. I borrowed Rs. 30,000 from someone and managed to redeem it because we had already paid installments for many months for the television. Now I will have to repay that amount as well,” Saroja added.

“The document which I signed when getting the loan was in Tamil as well. I could not read. But no one, not even the agent read it out to me clearly. If that was read out, I would not have gone for the loan,”

“I cannot continue to stay here. For how long can I stay here with their help? The future of my children is very important. Nothing would match up to the feeling you get when you earn for your food."

"I obtained loans to build up my grocery shop. I took out five loans. My son sends Rs. 30000 which is enough to pay two of the loans. He studied really well. We had to spend Rs. 250,000 to send him to Qatar. They cheated us. They said they will pay him Rs. 50000 salary. But my son says he is paid only Rs. 40000. He sends me Rs. 30000 after he spends for himself. But the people here are gossiping around saying that he sends me Rs. 50 to 60000.

I have two sons who are still schooling. My daughter works at a textile factory and she has taken up the burden to repay two of my loans.

The other day as I was bringing my grade 4 home from school, the loan company agent started scolding me in front of other students. Just imagine how my child would have felt at that time.

It is difficult even to buy food. My elder brother has been looking after us. If not for him, we would not be getting any food.

Next Monday we will have to auction 10 pounds of gold. We also have our house deeds. It is alright. After all, they are all ours.

We have land. My children have been asking me to sell it and pay off the loans. Earlier people came asking for the land and were willing to pay Rs. 500,000. But when I want to sell it no one has come forward to buy.

I have spoken to a few people about going abroad. If I work abroad for about a year, I should be able to repay my loans."

"When my husband was with me, we mortgaged some land we owned. My husband was the one who did this against my wish. Last January was the final month to redeem the land. I borrowed a loan of Rs. 120,000 for this purpose from an institution. That land was supposed to be given to my daughter who had got married. Her husband had threatened my daughter saying that she would be sent home if the land was not redeemed. That is why I was forced to redeem the land. Otherwise I would not have worried about it.

My husband has left me. Therefore I pay for the loan by cutting overgrown grass and by cooking at other homes. If that is not enough, I would borrow from those nearby for interest and repay the loan. Today the loans which I borrowed to pay the initial loan have increased. I have no one to help me.

I have a son who goes to school. My other son has mental health issues. He studied until grade 9. The principal asked me why I was sending my son who is not in a position to learn and suggested that I board him at a hostel. He is now living with my mother.

Having gone through all these worries I once attempted suicide. My neighbours saved me. I wouldn’t be speaking to you if not for them. When I came home after being in hospital for three days, my son was very weak as he had not eaten anything. What would have happened to him if I had died? He would have been orphaned. I will never again take a decision like that. I will somehow repay my loan.

But the arrears alone add up to a huge amount. If not for that I would have somehow made the payments on a monthly basis."

"My husband is a carpenter. We obtained a loan mainly to develop his profession. We bought a machine, and he is continuing with his work. But we do not have much revenue. If he makes a door or a window, the customers will not give the entire money at once. They will drag their payments for a couple of months.

It was during such a situation that we decided to obtain more loans. We do not know what to do when the loan company agents come to our doorstep and shout. So we obtained another loan and paid the previous loan. So that process snowballed and now we have a large loan to repay. Today we are spending approximately Rs. 100,000 to repay our loans. The agents do not even consider that there are children and shout at us. The children are also psychologically affected because of this. Whenever an agent is coming my seven year old daughter will come running to me and ask me to hide. Or else she would be at the doorstep and tell the agent that her mother is not in.

One day he got all of the people who signed on behalf of me to sit outside my house. He told me that he would let them go only if I paid my money. He made them stay until 1 pm. I somehow managed to collect the amount and pay him.

Every time they come, they leave only after making us weep. The entire day our home would be like a funeral house. Once the agent asked me to spread a white cloth on the ground and sit with my children.

At such times I feel that it would be better if I die along with my family. We have a cow which is about to give birth. But she fell and we had to pay Rs. 600 for the doctor to put an injection. But the cow cannot stand up. It will cost Rs. 3000 for the entire treatment. I had also obtained loans to start a poultry farm. I had about 250 hens. Now all of them have died and I am left with the empty cages."

"I borrowed a loan to renovate the house. I got Rs. 400,000 when my husband was with me. My husband promised that he would also work and help me repay the loan. But he did not give me a single cent. He was always drunk. He sold almost everything at home and spent the money on drinking. He used to hit me whenever he was home. He would find something at home and hit me with it. I don’t know where he went. He never comes home now.

I’m paying for the loan all on my own. My father is a carpenter. He is also helping me with the loan repayment. I would be completely helpless if not for him.

I work for daily wages to pay the loan.

I didn’t know the interest rate when I borrowed the loan. The agent who gave the loan also did not tell me. Every time I pay the installment the remaining amount keeps on increasing. If is ask about it they humiliate me. “It will reduce automatically if you repay it properly,” the agent told me.

The application form which was given when I asked for loan was in English. How can I read it when I have difficulty even in reading Tamil?"

Note: The names of the people interviewed for this piece have been changed to maintain privacy and security.

Translation by Groundviews

View the original story (in Tamil) here.

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