Correct the injustice against the informal sector: Kabir Hashim

SJB MP Kabir Hashim addressing the press yesterday 

By Asiri Fernando

Opposition MP Kabir Hashim yesterday urged the Government to reduce interest rates for Small and Medium Enterprises (SMEs) and those employed in the informal economy.

Hashim charged that Government policies on lending rates are exploiting the poor while offering relief for industry giants and friends during the COVID-19 .outbreak. He pointed out that SMEs and those employed in the informal economy were disproportionately affected due to the pandemic.

“The Government must issue guidelines through the Central Bank to correct this injustice. Today those in the informal sector cannot get a loan without an interest rate of below 15-20%. However, selected few big businesses are issued loans with low-interest rates. There is a significant gap between the two groups. We urge the Government to offer a fair opportunity to SMEs and those employed in the informal sector,” the Samagi Jana Balawegaya (SJB) MP said at a press conference held yesterday.

Hashim argued that the 5-7% interest rates the Government claims are available to anyone were not made available to SMEs or entrepreneurs. The Opposition MP said that nearly 70% of Sri Lankans were employed in the informal sector, citing a recent report on the labour force by the Department of Census and Statistics. 

“Most of those in the informal economy are not protected by the regulations issued by the Government. SMEs, self-employed persons, day wage earners like three-wheeler drives, private transport operators or those who work for delivery services like Uber or PickMe all fall under this informal sector. The Opposition advised the Government to put in place robust measures to offer them relief at the onset of COVID-19 but that has not happened,” Hashim explained.

Hashim claimed that those in the informal sector could not obtain loans from banks at the 5% interest rate the Government had said was available.

“All we ask the Government to do is offer the 5-7% interest loans they give to big business to the SMEs and informal sector. The Government claims they offer loans at 5%, but that is to a selected few and big businesses. Can a small-scale entrepreneur, a small industry owner or a delivery drive go to a bank and get a loan for a low interest rate of 5%? No, they will only be given an interest rate higher than 15% or more. How fair is that?”

Hashim also charged that those who had placed their life savings in fixed deposits were being exploited.  

“The National Savings Bank offers a 5.2% rate for fixed deposits. Many retirees have placed their hard-earned lives savings in these deposits. However, inflation is 6.5% at the moment, which is an official figure. Inflation may be 8% or more. We can’t be sure because of the lack of data. If the interest rate for a fixed deposit is 5.2% and inflation is 6.5%, then our retirees are getting a negative income. It is like the Government is stealing from these persons.”

Hashim also alleged that State banks use such saving from retirees to issue low-interest loans to big businesses. Actions, he said, were forcing those in the informal sector to report to selling what few assets they possess and to pawn jewellery to get by.

“The Government is clearly not serving the common man, if you look at the profits made by big businesses last year, it is clear who the Government bailed out. The tax changes the Government brought have not had the trickle-down effect they claimed the move will have. Only a select few have benefited from this. Those who have benefited are friends of the Government. State earnings have also dropped due to these policies,” he added, urging the Government to take corrective action and offer relief for those already struggling to get by.