The Center for Poverty Analysis (CEPA), a research institute based in Colombo, points out that the unsupervised process of micro credit lending and microfinance activities have resulted the rise of many socio-economic problems among rural women in Sri Lanka.
Microfinance is defined as ‘the provision of financial services to low-income people’, by the Central Bank of Sri Lanka (CBSL), and the process of microcredit lending has been long present in the country.
Microcredit lending in Sri Lanka is done with the intention of allowing women to access credit and establish microenterprises, thus enabling them improve their livelihoods with the end goal of alleviating poverty.
However, in the recent past, unmonitored microlending activities have not only placed a heavy financial burden on female borrowers but also caused social issues with major repercussions.
CEPA Researcher Chandima Arambepola says that women increasingly borrowing money for consumption and non-investment related activities has become very problematic as they are unable to pay their debts.
“When we asked for what purpose they borrow, it was revealed that it’s not necessarily for livelihood improvement. If there are shortcomings in the consumption or in the household economy women tend to borrow. Women borrow on behalf of their husbands, children and for other social commitments such as funerals,” says Arambepola.
This, she says, has resulted in social issues such as women migrating to the Middle East to pay off debt, women becoming victims of verbal abuse of certain officers, tensions with their spouses and causing indebtedness induced suicides.
“Many women are reluctant to talk about their borrowing habits because of the negative stigma attached to being a woman who has borrowed beyond her capacity. There is a trend which was not very apparent before pushing women to migrate to pay off the debt that has been accrued as a result of microlending” says the researcher.
CEPA also says that unmonitored microlending has restricted women continuing traditional saving habits such as ‘Seettu’ and therefore points out the importance of monitoring microlending activities.