brand logo

Saving Sri Lankans from a debt disaster

31 Aug 2022

The Morning yesterday (30) reported that a staggering 8.5 million persons have been listed in the Credit Information Bureau of Sri Lanka (CRIB) due to their inability to make due payments pertaining to loans or leasing payments schemes due to increased interest rates. According to the Leasing and Loan Repayment Members’ Association (LLMA), the inability to make due payments is a result of the prevailing economic crisis and the increased interest rates – the loan interest rate went from 8.5% to 18% and leasing interest rate went from 12% to 34% – which is a big challenge for the people whose income has not increased. To deal with this situation, the LLMA requested that the Central Bank of Sri Lanka (CBSL) intervene and direct leasing companies to grant a relief period to repay the leasing instalments without having to pay an additional fine. It is crucial that the CBSL, or any other authority or the Government, urgently makes the necessary interventions to assist these people, and thereby prevent the issue that they may have to face in the event that this situation is left unaddressed. However, the necessary measures cannot be taken only on the basis of the peoples’ concerns, because loan and leasing issuing institutions are also suffering due to the economic crisis. Balancing the concerns of the two sides in a way that ensures that whatever measures that are taken do not pose a significant negative impact on any one party is also crucial. The same issue with regard to repaying loans or paying loan interests first emerged several years ago in the context of high-interest microfinance loans, and The Morning recently reported that the social issues surrounding microfinance loans, especially suicides, still persist. Needless to say, that was when inflation was not as intense, and with the prevailing economic crisis that has affected almost all sectors, the impacts that unpaid loans or increased loan interests can have on the people could be more unmanageable than before. While the economic crisis reduced the people’s ability to allocate money for loan repayments as before, the economic crisis is likely to increase the people’s tendency to take loans. With the economic crisis affecting the people’s income and savings and also greatly increasing the cost of living, many people have reported having to sell or pawn their valuables, and sometimes resort to loans. Due to this reason, the Government should not see this as just an existing issue, but also as a possible future issue that could have far-reaching effects on the peoples’ state of life and the country’s overall production. At the same time, addressing this possible future issue requires great understanding about the present situation, because the difficulties faced by the people in repaying loans or making interest payments have a social and an economic aspect as well. In this context, it is necessary to identify this as a national-level issue and study the nature of this issue more comprehensively in order to reach the aforementioned agreement and possibly take decisions to help the people deal with the situation in the long run. In fact, in a context where loan and leasing repayment-related issues have already affected a large number of people and is likely to affect more people who are not debtors at present, evaluating the nature and the gravity of this issue should ideally be a part of the Government’s social security and welfare programmes too.  At the same time, the Government should be vigilant enough to prevent these types of issues that could possibly stem from the economic crisis, and it should be a part of the Government’s economic recovery plan.


More News..