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BY The Collective of Women Affected by Microfinance
Debt is the most common source of slavery. In contemporary Sri Lanka, the unpayable debt accumulated through microfinance loans has led to exploitation, dispossession, and terms resembling debt peonage. A chain of high-risk loans paid at usurious rates to women with no regular income wiped out their savings and assets. Doubly bound by the obligation to repay her debts and take care of her family, the indebted woman is forced to exercise dangerous and poorly paid jobs, that is to say as labor in the factories of tailoring, contract labor in the Middle East, day laborer on agricultural farms or as sex workers.
As the examples from plantations, rural and post-conflict areas show, non-repayable debts have also forced children out of school and resulted in child labor. An estimated 2.8 million women are trapped in unpaid microfinance-related debts. The financial violence emanating from harmful microfinance adds to the domestic, work and legal violence that women experience. As a result, more than 200 women have committed suicide. As the Collective of Women Affected by Microfinance, we have been exposing the nature and consequences of predatory loans from microfinance institutions and demanding state intervention to address the issue since 2018. The microfinance crisis has been worsened by the collapse of livelihoods due to Covid-19. pandemic. The austerity policies emanating from the economic crisis will take a heavy toll on women in debt.
We would like to stress that the exploitation of women by debt is a direct consequence of proposing financialized solutions to the problems of livelihood, work and wages. Instead of making fundamental changes to the structures of the economy that create and perpetuate gender-specific forms of poverty, solutions such as microfinance have made poverty a profitable business for large financial corporations and finance capital. The United Nations (UN) has also played a proactive role in mainstreaming this reckless approach over the years. In addition to celebrating 2005 as the International Year of Microfinance, the UN has also hailed microfinance as a best practice for reducing poverty as part of its flagship programs of the Millennium Development Goals (MDGs). as well as the Sustainable Development Goals (SDGs). Predatory financial firms use the SDGs to validate their lending practices and attract investors. UN partner organizations like the World Bank and the Asian Development Bank have actively assisted and encouraged the commercialization of microfinance. Many other international non-governmental organizations continue to support and fund predatory microfinance companies despite outcry from abused and indebted women over the years.
The report of the United Nations Independent Expert on the Effects of Foreign Debt and Human Rights in 2018 illustrated the detrimental effects of microfinance debt on women. He also made several recommendations to the Government of Sri Lanka (GoSL) that the government has yet to implement.
Representing the victims of microfinance, we draw your attention to the following recommendations;
Investigate the situation of the microfinance crisis in Sri Lanka: The government, policymakers, and the financial lobby have discredited and challenged the victims’ accounts despite widespread protests and evidence of predatory microfinance. Sri Lanka lacks national data on microfinance and the crisis. Any political action aimed at solving the problem must follow a thorough exploration of the problem. Facilitate a microfinance debt audit: The usurious rates at which microfinance loans are disbursed allow lenders to perpetuate a vicious cycle of debt collection. Many microfinance borrowers claim to have paid off their debt, but companies continue to force them to pay more. A Debt Audit Will Help Unravel This Problem And Formulate A Debt Abolition Plan Educate GoSL on the way forward to abolish microfinance debt: Any solution that does not succeed in eliminating the debt does not concretely solve the microfinance crisis. The unavailability of national data and a debt audit makes debt abolition impossible at present. Microfinance regulation to protect borrowers: The need for stability in the financial sector, which drives GoSL’s logic to regulate the financial sector, has benefited lenders at the expense of borrowers and community-owned lending mechanisms. A law that considers creditors to be protected requires borrowers to pay unpayable debt. Stability interpreted in terms of core capital requirements favors large finance and pushes community-owned credit providers out of the market Community credit programs: Numerous regional examples prove that commercialized microfinance is responsible for the current microfinance crisis. Instead of promoting development, commercial loans have dispossessed and made borrowers dependent on debt. Community-owned credit where people have the autonomy to decide the terms and goals of the loan is better suited to the development needs of communities. Significant social development: Financialized solutions to fight poverty have completely failed to guarantee people’s right to development. It cost their autonomy and trapped them in low-paid, abusive and dangerous jobs. The lengthy Covid-19 pandemic illustrates how dominant debt-driven poverty solutions, in addition to damaging government social security programs like Samurdhi, have also eroded people’s resilience to fight crises. Transforming economic development to create decent jobs, empower small farmers and fishermen and benefit small and medium entrepreneurs would trump financialized solutions
(The Collective of Women Affected by Microfinance is a group that fights against predatory microfinance practices that seriously affect the well-being of women in Sri Lanka)
The views and opinions expressed in this column are those of the author and do not necessarily reflect those of this publication.
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