By Aanya Wipulasena

Gimani Anupama breaks down as she recalls the ordeal. Speaking about it brings back bad memories.

“But it must be said. Something like this mustn’t happen to anyone else,” she said.

Anupama, 51, a resident of Polonnaruwa (about five hours from Colombo) and a single parent, took a loan of Rs 10,000 ($49.93) for the first time nearly three years ago.

She said she didn’t want to burden her parents and brother, and since then, she has taken about seven loans from so-called microfinance institutions in the hope of starting a business.

But she wasn’t expecting the nightmare that followed.

This year, she took a new loan from Nippon Lanka to restart a small shop where she sells goods like incense sticks, toothpaste, and sugar.

She has to pay Rs 600 ($29.96) for 65 days to settle her loan.

With the cost of living skyrocketing in Sri Lanka after the recent economic crisis, the price of goods has increased three-fold.

Anupama’s shop is also doing poorly and she has fallen behind in paying off her loan.

“Sir [the debt collector] knows my situation. He knows that I am widowed and helpless at this moment,” Anupama said.

“When I was by myself at the house one day, he came and said he’ll help me settle my debt.

“He said, ‘If you agree to what I say, I can write off this loan’.”

Anupama said he was indicating he wanted to have sex with her.

“I froze in fear. I felt helpless. I didn’t know what to do.”

Protests calling for regulation

Anupama hasn’t told anyone what happened. She’s afraid people will judge her and worries about her son’s future.

But she’s not alone. In 2018, thousands of women took to the streets calling for immediate intervention from the government to regulate the microfinance sector and bring the issue into focus.

Since then, women have been voicing their grievances. However, activists say little was done.

Radika Gunaratne, lawyer and founder of Parivartan, an organization focusing on gender justice, said over 200 women have died by suicide after falling into debt to microfinance companies.

The complaints against microfinance companies that Gunaratne came across during her work were mostly focused on gender-based violence.

“Women got scared when they were told that the police would be involved in debt recovery. They [microfinance institutes] also started to go to courts and warrants were sent to the women’s homes,” she said, adding there were instances where the police had also threatened the borrowers.

She said women had lost their properties attempting to pay off their debt, usually three times more than the loan they took.

‘We lost everything’

Kanthi Menike, 50, lives with her husband and two sons in a rented house in Ganangolla, Polonnaruwa.

Before the COVID-19 pandemic, they were living in their own home. Their business, transporting coconuts to cities, was also flourishing.

In hopes of expanding the business, Menike took a loan to buy a small truck, but their life came to a standstill with the pandemic. The business collapsed and the truck was involved in an accident.

Menike and her husband were forced to sell their house to settle the debt and support themselves. Now they pay Rs 4,000 ($19.97) in rent. Her eldest son works as a lift operator to support his brother’s education.

“I will never take a loan again. We lost everything,” she said.

In an emailed response to ABC Asia, the Central Bank of Sri Lanka (CBSL) said it had received nearly 200 complaints against licensed microfinance companies and unregulated money lending institutes.

These complaints included high interest rates and unethical and abusive recovery practices.

Only four microfinance companies were registered with the CBSL. Activists said thousands of institutions provided loans to women.

“The existing regulation in Sri Lanka does not cater to most of the concerns,” Sri Lanka’s State Minister for Finance Shehan Semasinghe said.

“We do understand the existing law even does not have the primary requirement of registering yourselves as a lender. This is the fight.

“We do understand that about 93% of borrowers are women. Most of the loans have been taken for consumption purposes which don’t have a return.

“We will ensure that we will very soon implement the law in Sri Lanka which was not in existence before.”

‘It is a debt trap’

A Microfinance and Credit Regulatory Authority bill was proposed by the government to regulate the moneylending and microfinance industry. It will repeal a former Microfinance Act.

However, according to Gunaratne, the proposed bill will only strengthen the big players in the industry or “the loan sharks”, wiping out any competition including community credit providers.

President of the Lanka Microfinance Practitioner’s Association (LMPA) Priyantha Dematagoda said they set up a hotline for victims to complain but didn’t receive any serious complaints.

“Mostly [they asked to] either give more grace period or request to write off any penalty fees,” he said. Many who had issues, he added, were “wilful defaulters”.

“At the grassroots level, people have formed organizations on their own and started lending under microcredit. They do not have to get registered, but they exploit the situation,” he said. Nippon Lanka is not a member of the LMPA.

The number of complaints that were received by the CBSL or the association only reflects the tip of the iceberg.

Gunaratne said the issue was further aggravated by Sri Lanka’s economic crisis, with more women taking loans to take care of families.

“The entities that provide loans encourage victims to reloan. It is a debt trap. These women have less repaying capacity,” she said.

– abc.net.au