- Expected to make the announcement tomorrow
- Allocations for the program tops Rs. 1 Billion
The relief package by the Government for families caught in the microfinance debt trap will initially only be effective in the North and North Central provinces, State Finance Minister Eran Wickramaratne told Daily FT.
The Government is expected to announce the decision to write off microfinance loans worth over Rs. 1 billion given by State and private finance institutions tomorrow in Jaffna. The program will not be extended to the Eastern Province, which has also been dealing with debt-related socioeconomic issues, with a number of suicides being attributed to disputes related to loan problems.
“We will go to the East as well but for this moment, it will only be the North and North Central provinces. I am fully conscious of the situation as there are more women-headed households in the East,” the Minister said. “We are going to take in the smaller debts and write off some of those payments in the North and the North Central Provinces initially. Tomorrow, we will make the initial announcement. The program will be rolled out under the guidance of the Central Bank under the existing financial system,” he said.
Explaining the decision to intervene, the Minister said that the Government is particularly concerned about the situation in the North due to the high number of women-headed households who have been caught in the debt trap.
“What happened in the North is a little different. Some institutions may be registered, some may not be registered with the regulatory authorities as they are running as microfinance agencies. Some have given loans at exorbitant interest rates, and probably not really understood the projects, and they are unable to collect it,” he said.
Further, Wickramaratne explained that the situation in the North differs from the rest of the country as they are a post-war community recovering from the conflict, which may have put significant strains on their ability to effectively function, regarding the economic commitments that they under took.
“There may be a lesson for everyone here. There needs to be more studies done on the matter.”
Acknowledging the limitations and need for intervention at different levels, Wickramaratne said that a host of agencies, including funding institutions, non-government organisations and Government bodies, will be working on programs to increase earning capacity of the communities affected by the death trap.
“I don’t think the Government alone can solve the situation. It needs markets, hand-holding and mentoring. The Government will look at the financing of it,” he said.