The Village of Randna Pokuna burdened by micro- finance loans

 

Drops of rains that fell for several nights have failed to dispel the dryness in the environment. A train that was stopped at the train station left the station with a hoot. Several kilometers need to be covered from the Hingurakgoda town to reach our destination. It is namely Punagalaawa, Randana Pokunagama Village.

Although it belongs to the Hingurakgoda Divisional Secretariat it is situated close to Polonnaruwa. Whatever be its situation, reaching there is a tiring task since the village receives public transportation according to a time table.

Although we are not in search of a new story, it is a problem that has not received a solution for a while. During the last presidential election period the micro-financing trap was discussed on both the major platforms and solutions thereto were promised. But up to date no solutions have been received. It does not seem like solutions will be received either.

The travel partner of this journey is none other than Jayathissa from Kawudulla.

The perfect partner for this journey is also him. That is because he has been there behind when this problem was being documented for years. Without stopping there, he had taken steps to empower and be a strength to the women who have fallen to the micro-financing trap.

Although before elections they said this problem will be solved now no one speaks about it. People don’t know what to do now. People fell for those promises and voted. Now people have come to a stage where they think twice.

And not just that, now those who come to collect debt are not the agents of the institutions, but those who resemble Caesar. So there is an increase in the threats to people.

He is explaining the current situation during our journey. With the attention of the Government and officers to this problem having decreased following the Covid pandemic, the debt-financing institutions are taking different steps to afflict the people.

As per the micro-financing activists, according to non-official numerical data there are close to three thousand micro-financing institutions within Sri Lanka.

This is confirmed because we were able to observe numerous informal microfinancing institutions on our various field visits to the Polonnaruwa district. Some institutions resemble temporary boutiques. Nonetheless only four micro-financing institutions have been registered with the Central Bank of Sri Lanka. But that is not the serious situation; according to the micro-financing professionals’ association the number of institutions engaged in micro-financing activities that are registered with them are currently fifty-three. What is this contradiction? What is the reason for this serious situation?

Licensing, regulating and supervising Banks and selected non-bank financial institutions are stipulated as some of the functions of the Central Bank of Sri Lanka. Under that it is also specified that the Central Bank of Sri Lanka regulates and supervises non-bank financial institutions such as licensed finance companies, specialized leasing companies and micro-financing companies. This is done as per the Finance Business Act, the Finance Leasing Act and the Micro-finance Act.

But so far the Central Bank of Sri Lanka has not declared a single microfinancing institution that is not registered i.e. not licensed as illegal nor has it closed them down. In a setting where the Central Bank is evading its duties it is not too difficult to understand the dangerous situation that has arisen with regard to the subject of micro-financing.

The first house we entered when we reached the village of Randana Pokuna is that of Gnanawathie Manike. She has obtained a micro-financing loan amounting to Sixty Thousand Rupees and has directed used that amount to finance her self-employment.

“I took the money and was paying it back well. After that I got sick and it became difficult to pay back the debt. Then they said they will give another loan so that I can pay my old debt. I also did not have anything else I could do. They come to my house every day and threaten and go. Finally I agreed and took another loan. They set-off the old debt against that. By that time I had paid off around forty-eight thousand rupees. But they set-off close to seventy thousand.

From there onwards I did not have anything else I could do. I had to pay five or six thousand rupees per month. Finally they lodged a case against me. But I won the case in the end.”

The stories in the village resemble that of Gnanawathi Manike. Her story is special because she has succeeded in litigation. Her case has been led by Attorney-at-Law Radhika Gunarathne. It becomes clear from Gnanawathie’s story that a lot of micro-financing institutions have granted these loans to people and have trapped them deliberately as well as against the law. These microfinancing institutions are trying to pave a way for these people and make that itself backfire and strike them.

While we were speaking to Gnanawathie, several other villagers who have heard that we have come started coming there one by one.

“One day they have come to our house to collect the debt. I was not there that day. I had gone to the town. It was only my mother who was at home. My mother had said no one is at home so to come another day. But the person who had come at nine o’clock in the morning has stayed at the house until the evening. When I came home that day it was late. When I came home the person who had come was not there. But he had left after scolding my mother a lot. We thought since the President said we will be given a relief this trouble would lessen. But the already existing trouble have only worsened” said Kumari.

The reasonable question that if a loan is taken the loan should be paid off, if the debt can’t be paid the responsibility for that should be taken not by the institutions that loan money but by those who obtain loans might occur to you.

Suneth answers this question.

The livelihood of most people in these villages is agriculture. Those who are engaged in other employment are rare. If the cultivation is harmed by drought, or by animals these people are deprived of their livelihood. Since the cultivation was continuously harmed in the foregoing period it was difficult for these people. So they got into the habit of taking loans.”

We noticed that this point raised by Suneth is very important. In a setting where the majority of people in these villages have made cultivation their main livelihood, a lot of other occupations in the village are also based around cultivation. For the village blacksmith to repair the broken equipment, to repair the broken plough, the people in the village need to cultivate. For the person who repairs machinery, the machinery needs to depreciate. For the person who owns machinery to earn an income from those machinery paddy fields needs to be ploughed, paddy needs to be harvested. For the village shop owner to sell something the people in the village need to have money. The occupation cycle of the village needs to be active.

From 2016 onwards, for about three years, there had been a strong drought in these areas. The farmers have become really oppressed in the face of it and they ran the risk of losing their livelihood. The above mentioned occupation cycle became affected by this and it became difficult for the majority of the villagers to supply their daily meal.

“We took these loans to start something” said Sumedha.

Accordingly, even if they searched for job opportunities there was no fixed job market within the village and, since the livelihood they have been engaged in for a long time is farming, they lacked the intellectual capacity required to create new job opportunities.

“It is really difficult for us to obtain a loan from a bank. It takes months. We have to find someone who is engaged in government employment and we have to get them to agree to sign giving an undertaking on our behalf. So getting a bank loan is like a dream for us” said Podimanike.

However, we observed that a lot of people have taken steps to choose easy and usual job opportunities. They have supplied the capital required for this via micro-financing. This is because it is quite easy to obtain these micro-finance loans.

The micro-financing institutions have understood the situation within the villages well and they have extended their scheme within the village quite early. They have established women’s associations within the village and have appointed group leaders who are then used to convey messages. Accordingly, via these associations they have been granting loans by making each other liable.

Therefore, if anyone from the village who needs a loan can connect three other women that first person can obtain a loan. Since the procedure is that simple a lot of rural women got attracted to it.

However, since these loans are not subject to proper regulation, the excessive interest rate has victimized a lot of people who obtain loans.

The island-wide story about micro-finance loans is the same. It is just the identity of those who get trapped that differs. It is always the same people that sets the trap.

“Although, I ran the boutique using the loan that was initially taken, the installments were paid off from the leftover loan amount itself. The money earned from the boutique is used for daily expenses and there is nothing left to pay off the debts. When the loan amount is depleted I took money on interest to pay off the loan. When that gets stuck, the same people who gave the loan came and offered another loan. Now there is no way to pay that loan. All the gold jewelry in the house are pawned” one lady from amongst the crowd said. Tears are streaming down from her eyes.

Similar to what we observed in other areas, these mothers have had to subject themselves to the various misbehaviors of those who come to collect debt.

“They tell us to pay the debts one way or another. When we say we don’t have money they tell us to sleep with someone and pay. They come and blame us in obscene language. They have blamed my mother and daughter and gone one day because of me” said one lady.

Micro-financing institutions target women for these micro-finance loans.

Therefore, it is women that are victimized island-wide by this micro-finance issue.

But so far it does not seem that Women’s Organizations are voicing their protest to this micro-finance issue.

“When the debt collectors come I go and hide. Then my son says no one is at home. Then they blame the son and go. They blame using language that is not good for a child to hear. I do not understand what to do. We are already trapped. There is no escape” said Nishanthi.

“We thought there will be a solution to this problem after the presidential elections. We have been UNP supporters for generations but this time we voted for Gotabhaya Sir hoping there will be a solution. Even the earlier government, although they said they will reduce the loan amounts, only did that for their known people. they are all misleading us. Now they will say something and avoid this” said Nilanthi.

These people have become political pawns. Although we can simply say that they are misled, it is human for a person who is holding a death warrant to be trusting of someone. But how are we to explain someone coming into power by preying on their fears and then discarding these people thereafter?

The stories of all these people are the same. What they say are also similar. What they are asking for is similar. They want a solution to their problem. This is the hope of eight lakhs of families that are not just from the Randana Pokuna village.

Out of the main issues that were discussed on the largest election platform of the country i.e. the presidential election platform the micro-financing issue was one of the most prominent. Although 9 months have lapsed since the President has assumed duties he is yet to resolve the micro-financing issue as was promised to the People on the election platform. Further, the Central Bank of Sri Lanka has not shown any interest in a matter that received such country-wide discussion.

The behavior of those who should be accountable for the country’s fiscal prudence is problematic.

200 lives have been lost so far due to this issue. Who is responsible for these lives? How many more lives should be lost before the officials take a decision?

That was the question written on all the villagers’ faces when we left Randana Pokuna. That question ought to be answered by the same officials who avoided their duties and left people to commit suicide.