By Lahiru Pothmulla
Sri Lanka should establish an interest rate cap for all financial institutions and individual lenders operating in the microcredit business to assess the credit risk of their loans and regulate and restrict the actions they can take to collect the loans in line with international human rights standards, a UN expert said yesterday.
Juan Pablo Bohoslavsky, the UN independent expert speaking on the Effects of Foreign Debt on Human Rights expressed these views during a news briefing
The UN expert commented in length on macroeconomics, finance and human rights in Sri Lanka and said microcredit has a long history.
“I learned that while the universe of borrowers is broad, women in poor and war affected areas are specially targeted by microfinance financial institutions, which charge their loans with up to 220 percent interest rate and apply compound interest,” he said.
Since these lenders do not follow any particular guideline to assess the credit risks of these loans, combined with usurious terms, Bohoslavsky said a very high number of women in the country default on their debts and get trapped in an exploitative financial system.
He said the Central Bank regulates only those financial institutions that receive and manage deposits from the public.
“For them the government has established a 35 percent interest rate cap. However, a large part of the microcredit volume is channelled through non-regulated lenders who do not have any restriction in terms of the interest rate they can charge. I urge the government to establish an interest rate cap for all financial institutions and individual lenders operating in the microcredit business and also to pass and effectively implement a robust and strict regulation including guidelines on how microcredit lenders have to assess the credit risk of their loans and regulate and restrict the actions they can take to collect the loans in line with international human rights standards. Law should establish that usurious microcredit are void (or voidable) and provide victims the right to request the return of the money as compensation,” he said.
He also urged the government to declare a moratorium, until this legislation is passed, in order to prevent vulnerable groups-in particular women-from being exploited and abused by lenders.
The Sun Siyam resort collection is the biggest hotel portfolio in Maldives and the proud owner of 4
Thalassaemia is recognised as a common genetic disorder in Sri Lanka. The disease occurs due to haem
Enterprise technology solution provider, Pyxle, celebrates 15 years of success this year. The compan