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.