Death, devastation and micro credit

The recent rain and floods have caused heavy damage amounting to over Rs. 50 billion to the country and its people. Close upon 50 lives have been lost to the floods, and the resultant landslides. Houses, agricultural crops and livelihoods too have been destroyed, the effects of which will haunt the country for a very long time.

Given the extent of the damage and stupendous cost of repair, foreign assistance is imperative in order to recover from the destruction. Undoubtedly, it will be a Herculean task. However, there is some good news. Already there are indications that foreign assistance is on the way to help the country out of the difficult situation. But the bad news is that it is just being negotiated and approval is awaited.

While the damage suffered to infrastructure could be tackled with the foreign assistance we have been told is coming, the lives of the affected people have to be put back on track. Their lost livelihoods have to be restored and families sustained. As in the case of the IDPs returning to the Wanni after the winning of the war, what they will be offered is perhaps the bare minimum to get back to their normal lives.

In Sri Lanka, although there is a lot of talk about making affordable credit available, none of the affected persons would be able to have access to credit without collateral. This is something most Sri Lankans in the lower strata of society do not possess. Hence, unlike people who own small businesses and are able to provide collateral, these persons who operate micro businesses or cottage industries would not qualify for credit from banks. This would put them at a disadvantage, leaving them nowhere to turn to.

Another thing is that whatever credit they are able to access should reach them quickly. It is this that the Government must actively promote, even if it requires the passing of new laws and regulations or the issuance of special directives to meet the urgent situation and make them eligible for credit. But time is of the essence here and whatever that is done must be done in double-quick time. The usual lethargy seen in Government organisations and among its officials is sure to spell disaster.

In offering support to the people whose lives have been affected by the recent floods to rebuild their livelihoods, microfinance could come in handy. Microfinance is generally available without collateral. Mostly it comes without interest, but if an interest is charged, it is at a very low rate. A good number of persons have benefited by it to improve themselves and their livelihoods.

There are over 100 microfinance institutions operating in Sri Lanka, including commercial banks, Government institutions, rural banks and thrift and credit cooperatives and their successors – the cooperative societies – and the NGOs that help the needy, especially the poorest of the poor, to pick up the pieces and start their lives afresh. Microfinance institutions have been in operation in this country for over 100 years and their services would be welcome to overcome the catastrophe.

SEEDS, an institution coming under Sarvodaya, handles microcredit in Sri Lanka efficiently. In addition, the Samurdhi Programme – the successor to President Premadasa’s Jana Saviya Programme – could play a leading role. In fact, microfinance has been espoused in President Rajapaksa’s ‘Mahinda Chinthana,’ hence there should be no difficulty in making microcredit available to the affected, and soon too, if there is a will. All this could handle the immediate pressing situation.

But there is a hitch – The proposed Microfinance Act that has been pending since 2007 discourages lending without collateral. Moves to amend it would surely give a new lease of life to those who have already suffered enough.