(UN Special Rapporteur on Contemporary Slavery comments on the Microfinance Crisis in Sri Lanka)
I was informed that as a result of micro finance loan schemes targeting marginalized women, mainly in rural areas, children under the age of 16 are being forced into child labor to repay loans.
The microfinance scheme I mentioned earlier is another serious problem affecting women in rural, single-family households. Many of them do not have income generation opportunities and are unable to get loans from registered banks so they decide to rely on loans to support their family and / or business. Microfinance companies are said to target them as an easy prey. Their interest rates are very high, 20-30% per week or even more depending on the companies. Several intermediaries have informed me that contracts from various companies are written in languages that women do not understand (eg English) and that they sign them without a full understanding of their implications and consequences.
Many women fall into debt because of rising interest rates. It is reported that this has led to more than 200 women committing suicide in the last few years. A number of intermediaries have informed me that many afflicted women turn to sex work or other demanding employment such as domestic work, which is full of exploitation and abuse.
The so-called manpower recruitment agencies are often associated with microfinance companies, which sometimes hire indebted women to work in the free trade zone and elsewhere. It has also been found that microfinance agents who collect money on a weekly basis regularly seek sexual favors for a relaxed repayment, which clearly exposes their risk.
Furthermore, many microfinance institutions appear to be affiliated with sub-recruitment agencies that facilitate migration for foreign employment, including in Middle Eastern countries. Under the condition that the women concerned migrate for foreign employment, these agents provide them with incentives to repay the loan.
The Government has so far not taken any effective and timely action to regulate and monitor these exploitative microfinance institutions and as a result I am deeply concerned that they will continue to operate.
I was informed that members of institutions such as the police could be associated with microfinance institutions, and therefore complaints filed with the police would not go ahead and would hinder women’s access to justice and redress. Other agencies, such as the National Human Rights Commission, are not sufficiently active in investigating human rights violations related to the activities of microfinance institutions. The Government has informed me that it is bringing in a legislative amendment to formulate a mechanism for regulating microfinance institutions and I urge them not to delay further.
recommendation:
Conduct a formal and independent investigation into the behavior of microfinance institutions. Deduct unfair and excessive debt, and the introduction of effective control and oversight of them, including interest limits
Ensuring access to affordable credit through savings and credit (thrift) societies; Co-operative Banks and Rural Development Banks (Regional Development Banks)
Representatives of the Women’s Collective Affected by Microfinance met with UN Special Rapporteur on Contemporary Slavery Tomoy Obokata, who is visiting Sri Lanka on December 01st.