The Sri Lankan government has decided to write off more than LKR 1 billion worth of micro-credit loans given by state and private financial institutions in the Northern, Eastern and North Central Provinces. State Finance Minister Eran Wickramaratne said that the Government intervention was to ease the hardships caused to families which had been severely affected by this debt crisis.
“As the Government will bear the cost for the debt relief, this initiative will be carried out through government institutions since we are dealing with the taxpayers’ money. Details are being worked out,” he said. The Central Bank as the regulator of micro-finance institutions , is also involved in this initiative and would on July 22 issue a statement, giving details and procedures.
It also learnt that the repayment scheme for those caught in the debt trap would cover loans of LKR 100,000 or less. The beneficiaries will also include women-headed households in eight drought-affected districts of the three provinces. The Treasury has allocated more than Rs one billion for this purpose.
The State Minister said that unregulated lenders had indulged in ‘bad credit practices’ in the war-affected areas, at a time when people were trying to rebuild their lives. Some unregulated companies ventured to these places just to make money. The war-affected people were not familiar with the practices of micro-credit schemes and their crisis had even affected their social life, while the companies were indifferent to the plight of these debt-ridden people, the state minister said.
According to the Finance Ministry’s 2017 report, 11 new applications sought licenses to engage in micro finance lending last year. The total outstanding loan portfolio of major state micro finance institutions stood at LKR 263 billion at the end of last year.
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