Tuesday, July 24, 2018

Micro Finance Debt – inability to pay – has nothing to do with region, it is a common issue across the Country

As usual the pontificating donkeys, also known as ministers are hypothesizing debt into the Northern Debt being special which needs to be forgiven, and not the debt taken by women in the rest of the Country. Bull Shit!!

There are philosophical issues that must be addressed and let us do that one by one. Let’s home in on where the real problem lies. It is with the microfinance lending practice of first targeting women, whether they are women headed households or not. The assumption is this population is less likely to default.

Then they pick on vulnerable, as in financially not savvy women and get them to find a guarantor, usually three women cross guarantee for each other, and the money is promptly paid, not looking whether women have any prior experience in paying off such debt.

The predator salesmen are only concerned about their commission which depends on the number of households they can lend to, and has nothing to do with the evaluation of a business plan.

A capping of the interest rates, will result in lower lending to these vulnerable people, as lending criteria will have to change to safer bets. It will prevent these people being targeted. However there is a catch, the need to pick out those who will then go to the local money lender.

In short they will not be forced into taking loans they cannot pay, but will go to the money lender who lends at high rates, without guarantors for expenses, that no one else will lend on. These vulnerable people have NO SAFETY NET.

It is the duty of the Samurdhi Niladari to identify families in this debt trap, for special assistance, and advise them before they mortgage their lands to raise funds. Invariably the local money lender who charges usurious rates, will end up owning the property by default, further pauperizing these families.

It is this vulnerable population, anywhere in the country who MUST be helped. The question is, “how can you identify them?” and intervene before they go from the frying pan into the fire. In short one is helping those trapped in poverty, without the financial savvy to extricate them from this debt burden. Microfinance writes off debt, money lenders take everything, leaving nothing.


  1. Agreed that this is a nationwide phenomenon and not restricted to the North. There is a capacity problem in identifying and intervening only on the population that needs help, not across the board.

  2. The method of remuneration of the sales person should be looked at first, so they don't get rewarded on the loans they write, but on the health of the repayment