Govt. writes off micro finance loans up to Rs. 100,000

Finance Minister Mangala Samaraweera has announced that the government would write off the non-consumption loans granted to women by all registered finance companies up to Rs. 100,000.

He said the government had also decided to introduce an interest rate cap of

30 per cent per annum on all future loans given by microfinance companies.

The decision was taken by the Cabinet of Ministers, on the recommendation of the Minister Samaraweera.

“This scheme will initially be limited to women who have obtained microfinance loans for non-consumption purposes in the drought-affected districts of Trincomalee, Ampara, Batticaloa, Jaffna, Mullaitivu, Kilinochchi, Vavuniya, Mannar, Kurunegala, Puttalam, Anuradhapura and Polonnaruwa where cultivations were affected consecutively for five seasons,” the minister said.

Accordingly, women who had obtained loans amounting to Rs 100,000 and below can apply for a complete write-off of the loan, he said. “The General Treasury will reimburse the loss incurred by the microfinance companies for having written off the capital component of the loans. The government has allocated Rs 500 million for this year to initiate the reimbursement programme. The microfinance companies will have to absorb the interest component of the loans written off," he said.

The persons who are benefited by this debt relief programme will be included on a priority basis to provide new loan facilities launched under the Enterprise Sri Lanka programme with a maximum of a two-year grace period, he said.

Microfinance institutions are currently providing microloans without collateral via a door-to-door strategy quoting high-interest rates starting from 40 per cent to 220 per cent per annum for women seeking economic relief and income generation sources. When multiple loans are obtained under the microfinance scheme, people have to pay a much higher interest than the initial loan amount due to the higher interest premium. So the government has intervened in a timely manner to protect rural women from falling into a debt trap by imposing an interest rate cap of 30 per cent on future loans, he emphasised. (Chaturanga Samarawickrama)