Sri Lanka announced Wednesday it would waive debts for 200,000 women unable to repay microfinance loans and cap lending rates after a number of borrowers in drought-hit areas killed themselves.
Government spokesman Rajitha Senaratne said women in a dozen districts who had taken small loans from microfinance institutions would have their debts forgiven and interest paid off with immediate effect.
Lending rates from microfinance institutions, some of which were charging up to 220 percent interest, would be capped at a maximum 30 percent, he told reporters in Colombo.
Dozens of indebted women in Sri Lanka’s battle-scarred north, areas also in the grip of drought, have committed suicide, according to local media reports.
The finance ministry said the women, including many war widows, had taken loans up to 100,000 rupees ($625) from micro lenders but witnessed their loans balloon with interest.
The rates far exceeded Sri Lanka’s prime lending rate of 11.42 percent and credit card interest rates of 28 percent.
“We have anecdotal evidence of suicides by people who were unable to repay high interest on their microfinance loans,” spokesman Ali Hassen told AFP.
The debt forgiveness will apply only to women borrowers, Hassen said.
“We are making this concession to women because they are the most vulnerable,” he said. “Most of the microfinance loans have been obtained by women.”
Official figures show that the total outstanding microfinance loans amounted to about 9 billion rupees.
Sri Lanka’s economy grew at 3.1 percent in 2017, its slowest rate in 16 years.
But the island forecasts growth of 5 percent in 2018 as the country recovers from the lingering effects of drought and floods last year.