Microfinance is driving many Sri Lankan borrowers to despair

IN PARTS OF Sri Lanka’s north and east, some women keep track of their microloans by the day of the week the collectors come. Others identify the lenders by the colours of their collectors’ shirts. Monday loan, Tuesday loan, blue shirt, yellow shirt: small, unsecured loans promoted by the government after the decades-long civil war ended in 2009 have enmeshed many women in hopeless debt. A central-bank official says his employees have talked desperate borrowers out of killing themselves. At least 170 committed suicide last year.

Nalani Wickremesinghe, from Baduraliya in the south, has taken loans from 11 companies, only two of which are registered with the central bank. The first was to pay for her husband’s medical treatment. Then he fell at his workplace and is still bedridden. She has borrowed 500,000-600,000 rupees ($2,800-3,400) in total—but has no idea of the interest rate. She has already pawned, and lost, her gold jewellery. Struggling to feed her family, she has little option but to borrow again.

In Nachchikuda, a coastal village, Sri Sundara Gowri sits in her front yard—not far from the satellite dish she bought on hire-purchase—and relates how she had five loans, three of which have been at last paid off. The first, of 25,000 rupees, was taken ten years ago after she returned from prolonged displacement to...



via The Economist: Finance and economics Business Feeds

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