18 September, 2018

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Micro-Financed Suicides

By Ameer Ali

Dr. Ameer Ali

In 2014, a report by the World Health Organization (WHO) revealed that Sri Lanka ranked fourth highest in suicide rate among a total of 172 countries. On October 2017, according to Tamil Guardian, a young mother with three children in the North, unable to cope with heavy debts, had committed suicide. A month before that her husband also took his life because of the same problem. On 16 may 2018, the same source noted seventeen suicides in the East, because of pressure from microfinance companies. Even though the reported incidents were from the north and east the plague of micro-finance-driven suicides is not endemic but threatening to become pandemic in the wake of increasing financialization of the economy. Already we see protest marches against the rapacity of microfinance companies. Perhaps, in realisation of this tragic development, in January this year, the Governor of Central Bank announced his plan to carry out an island wide household debt survey. How many more lives will be lost through suicide before this survey is completed and remedies implemented is anyone’s guess. While the country is sinking in national debt individuals are committing suicide and welfare of future generations is mortgaged to service debts incurred by short sighted economic policies drafted by corrupt politicians.  

Suicide is not something new and the causes of suicide are also complex. However, widespread debt driven suicides are relatively new and a product of financialized economies. This is an inconvenient truth that promoters of globalization and free market economics are not willing to concede. Yet, it is an ugly fact arising from the failure of the much touted trickle down benefits of free market competition, which in the name of economic rationalism is allowed to operate without any ethical and moral constraints. Sri Lanka after decades of welfarism and market regulation was dragged with vengeance into the free market swirl in 1977, and with frequent environmental disasters and a costly civil war, has now become a victim of free market capitalism.  Rising suicide rate is one of the negative sides of market propelled economic growth. Unregulated markets breed widening inequality, inequality breeds poverty, and poverty causes suicides. They are all systemic.     

One of the most momentous transformations witnessed globally since the 1980s is the increasing financialization of economies. Aided by revolutionary changes in transport and communication technologies, which broke down geographical barriers and squeezed the world into a global village, the financial sector, which until then played a subsidiary role as facilitator to the real economy overturned the structural hierarchy and usurped the role of the leading sector. The wealthy and their institutional financial care takers saw in this new world attractive and novel opportunities to earn higher rates of return by investing in financial products rather than in the real economy. Without getting into any extended explanation of this transformation one consequence of it should be pointed out that is relevant to Sri Lanka, i.e., the growth of finance companies that deal in financial products. According to one study an estimated 14,000 finance companies are providing microcredit in the country. Globally, microfinance is a growth industry that lends small amounts of credit to an estimated world population of nearly 2.5 billion who have no access to or the literacy required to deal with conventional banking. The Grameen Bank in Bangladesh founded by the Nobel laureate, Professor Yunus, was a microfinance and community development institution which greatly helped women in that country by providing an opportunity to get out of grinding poverty. No doubt, the idea of microfinancing is an applaudable invention but the way it operates in many places is utterly deplorable. 

Desperate families are enticed with charming offers and soothing words to fall into a debt trap, which instead of ameliorating their poverty often worsens it and becomes lethal. One needs only to fail one instalment of repayment to the company to realise how viciously the debt burden mounts. Incidents of suicide is an open manifestation of this insidious financing mechanism. The cure for this problem lies not in fine tuning regulations that govern lending institutions, which are the products of the financialised economic system, but to attack the system itself that creates poverty on one side while providing a remedy on the other which kills the patient. This is not to argue that Sri Lanka should give up the market and revert to dirigisme. There are economic areas where the markets can perform better and areas where the state can deliver a better and cheaper product or service. Ultimately however, even the market must be shaped to operate with a human face. In the context of Sri Lanka, we may call for a Buddhist compassionate face. 

Currently, the yahapalana regime and its joint opposition have completely wedded themselves to market fundamentalism and finance capitalism. They are prisoners of the IMF-World Bank-Wall Street complex. This is not a sustainable situation in the long run for a small island economy. The country and its economy cannot be insulated from the heat wave of global financial volatility and vagaries of international markets. Even in the Singapore economic model there are subtle constraints in the behaviour of markets and a safety net for the people. It is time the nation looks for a third way or a mixed model with greater role for the state in economic management and safety net for the people. Will the politicians wake up?                                        

*Dr. Ameer Ali, School of Business and Governance, Murdoch University, Western Australia

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Latest comments

  • 0
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    This comment was removed by a moderator because it didn’t abide by our Comment policy.For more detail see our Comment policy https://www.colombotelegraph.com/index.php/comments-policy-2/

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      Thank you Dr. Ameer Ali,
      Insurance companies too are committing day light robbery in Lanka today. AIA, Fair First, Alliance , not to mention the absolutely waste of funds Govt. funds on the Suraksha Insuance policy for school children who are no risk.

      It is the ELDERLY who are also committing suicide and poor of Lanka who need govt. health insurance.

      The above foreign insurance companies need to be regulated and are examples of the financialization of the economy that is seeing the country bleed to international insurance industry which is one big scam to loot lower mid income countries.
      Fair First is Fair fax Virginia US owned now and car premiums have quadrupled overnigtht.
      Sri Lanka is today in the “Middle income country” Debt trap because of Corrupt politicians, an uneducated Finance Minister who dances to the tunes of Washington -IMF and MCC to make the global 1 percent richer with financial crimes and foreign economic hit men who pose as developmnt and economic “advisers” .
      FAKE insuranc

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        Micro finance scheme was used by government to put Tamil people in debt trap to first encourage them to spend and when they fail to pay the loan grab their property, just like the way China is putting countries with corrupt heads of state in debt trap to spend on white elephant projects and demanding real estate when they fail to pay back the loan. There is news that the lending institutions are hiring sword wielding military intelligence groups to do debt recovery by threatening the defaulters.

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        Mohamad Yunus said “Sucking up” rather than “trickle down” is the name of the US owned and operated global financial system, where 48 people own over half the world’s wealth.
        China which is a new comer in the Aid Industry, is not responsible for massive inequality and poverty in the world today, or Debt economies like Greece and Argentina. Rather IMF is forcing depreciation of Lankan currency and magnifying Lanka’s debt crisis , in order that asset stripping can happen – to pay of the debt built by corrupt politicians.

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      Thank you Dr. Ameer Ali,
      Insurance companies too are committing day light robbery in Lanka today. AIA, Fair First, Alliance , not to mention the absolutely waste of funds Govt. funds on the Suraksha Insuance policy for school children who are no risk.

      It is the ELDERLY who are also committing suicide and poor of Lanka who need govt. health insurance.

      The above foreign insurance companies need to be regulated and are examples of the financialization of the economy that is seeing the country bleed to international insurance industry which is one big scam to loot lower mid income countries.
      Fair First is Fair fax Virginia US owned now and car premiums have quadrupled overnigtht.
      Sri Lanka is today in the “Middle income country” Debt trap because of Corrupt politicians, an uneducated Finance Minister who dances to the tunes of Washington -IMF and MCC to make the global 1 percent richer with financial crimes and foreign economic hit men who pose as developmnt and economic “advisers” .
      FAKE insurance is the name of the game!

  • 2
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    ‘Will the politicians wake up?’

    Only if there is money in it for them.

  • 3
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    Let me tell you all. interest is introduced by jewish community in the old age. It came down to humanity from them. In Arabia jewish community did that…… Then it was in Germany Hitler killed many jewish for this economic greeds of exploiting public and now it is Tamils in North and East copy that. I wonder why suicide is increased in that part of SL.

  • 3
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    A. A.

    You are ALWAYS talking about problems Why don’t you suggest a solution for a change, particularly when it comes to matters Economic considering that you are qualified in Economics and are still teaching Economics in Universities/ Business Schools in Australia?

    Won’t be a bad idea for you to start with Micro financing.

  • 2
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    The chief culprit Muhammad Yunus who introduced Microfinance (along with the Grameen Bank) was awarded the Nobel Prize for Economics in 2006 for political reasons.
    The prize worked, and the poor in the Third World are paying the price.

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      SJ
      As usual you are with your madness on your direction too. .

      I like to know in which year Dr. Muhammad was given Nobel Prize for economics?

      You should really fix yourself by reading something outside, instead daydreaming everything on the bed in the night..

      • 0
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        Mohamed Yunus was given Nobel prize for peace and nod for economics.

        • 0
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          Thanks for the correction.
          But the point is that it did the job

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        Mallung, just like you, you asked the wrong question.
        The year was right but the award was for something else.
        *
        BTW, what do you do in bed at night? Wet dreaming?

        • 0
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          SJ,
          Year was right! – really really a good luck it seems.
          If you cannot get the difference between Peace and Economics……………………then

          keep continue to take the shower on the bed holding the shower handle tight.

          ( Awadring peace prize to a man or woman means his/her services are recognized by Norvey’s Peace Prize Committee beyond Sirimavo’s achievements. When Lanakwe applied for Sirimavo, after India-China war, they refused to award her. But Dr.Muhammad have got it, whether you keep baffing or not)

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            Mallung,
            Do not bluff, you missed the point.
            And, you have not answered my question about what you do ……
            *
            BTW, can you send me some application forms for the Nobel Peace Prize, it is not for you for what you do ….., and certainly not me, I can assure.

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    Central Bank that is supposed to lay down guidelines and monitor the functioning of this kind of institutions has miserably failed to do their job. Recently, Edirisinghe Trust Investment (ETI) collapsed and about 25,000 low and middle income depositors have run into the risk of losing their savings. It is becoming clear that CB was aware of the situation of (ETI) but failed to take action to prevent the collapse. Billions of Rupees have evaporated and no one knows what has happened to that money. The guy who was in-charge of ETI is now an adviser to Ministry of Finance. Any connection?

  • 0
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    Dr. Ameer Ali. for so,me reason, One idiot is runing every article by giving a completely unrelated title to the article. Why microfinancing is done by companies and not by Banks. There are companies here who doe sthe microfinancing some years ago, they charges over 30% interest rates. They wer bugging poor low income people and with abuse and the govt changed those rules. Now they can charge the maximum rate is 30%. In Sri lanka also, the previous govt paid, in some corrupt govt – bond delas, the govt paid 30% above which it is financial fraud. My question is why it is handed over to FINANCIAL COMPANIES. I heard recently even the JEWELLERY PAWN BUSINESS OF PEOPLES BANK WAS GOING TO PRIVATE BANKS OR COMPANIES. Because, the age old bank jewellery business became fraud as bank employees began replacing genuine gold with fake jewellery.

  • 0
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    Thanks Amir Ali.

    Most of the affected are women (Especially war widows) Dr Muhammad’s Nobel peace prize not anything non configurable, but for his simple theories like microloan to advance the life of the poor (he got peace prize not really economics prize) . Now, worldwide, it is abused to exploit the needy, desperate poor, including in Bangladesh. As the Wonder of Asia, Lankawe is leading on that racketeering aspect too.

    Yes by last month there was some demonstration, but not really awakening. Especially minority politicians are doing poor on this. I believe it was Anura Kumar brought this to parliament under an adjournment proceeding. Further my memory says, Sritharan too talked on it.
    But the activism is very poor from Tamils side, including diaspora groups. When I attempted to talk about Microloan recently with my diaspora friends, almost all of them went to refer Prof. Muhammad; None-none- came to the level of War Widows. For all these, some Tamil Media had reported up to 5 incidents of microloan debacle in a day. Few of them remembered reading the pacific news in the media I was referring, but again none has had released its growth to this level of the societal damage. Some of them confessed they ignored the news at the heading level thinking “Some greedy women had taken some unwanted loan” and discounted it.
    The diaspora organizations, who claim them as freedom fighters, need to teach themselves first what they have to bring to attention of the average civilian.

  • 0
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    I heard rural Banks or Agrarian banks or Govijana SEVA banks (the name given for the last time) are all redundant or went bankrupt. PEoples bank also goes bankrupt very often. MAhapola Lottery started to go bankrupt for the first time. All the employee funds are not making enough for retired. State owned enterprises lost some THRE Trillions, BOC made only 50% of what could have made by them. My guess the economic affairs minister and their cohorts think that LIBERAL ECONOMYis the only answer. Now USA whose MCC is advising how to run the economy, is such a country which imports everything except heavy machinery like things . Eventhat country is moving towards trade protection and they abandoned humongous PACIFIC TRADE PACT which they were negotiating. they want to abandon NAFTA, I heard, from that MEXICO, a poor coutry, lost big time, Because, USA snd all the cheap processed foods which increased obesity, diabetis and many other conditions.

  • 0
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    Gambling is something that adds to the Debt Trap. All sorts of people gamble, I guess, but gamblers include a sizeable number of those desperately in debt. These are the people who should be most concerned about saving patiently and paying off. However, they belong to the segment of people who are least equipped to analyse the problems.
    .
    I wonder whether someone could enlighten us whether gambling is now legal? It seems like it, the way that there are Bookie Shops, and the like.
    .
    We know that State sponsored gambling is very popular. those Rs 20/= tickets. And then hours spent in meaningless fashion in front of T.V. screens. Every time you pay a mobile phone bill also you are encouraged to pin your hopes on “Luck by Chance”.
    .
    Whatever Dr. Ameer Ali writes highlights major problems that we are faced with. Many thanks.

  • 1
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    Thanks Ameer for bringing this scourge to our attention. The elites do not know the various problems faced by those holding the ladder the elites climb.
    Those unable to meet a debt repayment instalment look for the suicide switch. Some of them go to a politician who (almost always for a Santhosam) will organise a relief albeit temporary.
    Suicides in N&E is higher because the N&E politician’s clout is at best a tap.

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      K Pillai,

      Suicides in N&E are higher because N&E politicians (ie Tamil Politicians) in reality don’t give damn about their own people. Eg Sampanthan pretends to be the senior, elder statesman of the Tamils. But he looked the other way when VP was kidnapping 10,000+ Tamil kids to make them in to child soldiers.

      When did Vigneswaran give a damn about Tamisl? He is a Colombo 7 Tamil hypocrite!

      Any way Dr Amir Ali has written another sensible article. The only article Dr Amir Ali wrote which was n’t accurate was the one on the alarmingly rapid rise of the size Muslim population. Perhaps he could re write it.

  • 0
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    Banks & finance companies have a responsibility to check creditworthiness of their customers.

    For the sake of staying competitive in the industry they entice innocent people for loans without stressing the need of feasibility study reports even though they are micro investments.

    It creates doubts whether loans are being made available with deceptive idea to put innocents into debt trap with an eye to grab their wealth in an organized manner.

    There’s a risk in every sphere of life but frightening people by displaying heart patients being rushed to hospitals, houses & buildings in flame & sinking ships to sell insurance policies must be identified as heinous crimes committed to grab people’s hard earned money.

    Another disgusting factor in SL is lottery men in every junction, making it uneasy for the ears of passers by. It’s sad to mention that government pushing people to gamble beyond limits.

    It’s accepted that people in trouble must be consoled but not at all @ the expense of public funds.

    How can a responsible government spend money to cancel credits of a faction of population?

    Are some finance companies doing a dirty business with the participation of high ups of the government?

    Nobody can give entrepreneurship forcefully. Government & financial institutes must understand it.

  • 2
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    When people like Sangakkara are selling international carcinogenic products to rise to political heights, where may I ask will there be any money for safety nets to help the masses weather the volatility and vagaries of the international markets? It seems that Sri Lanka can never have the Singaporean honor codes to look after her masses. In Sri Lanka it’s all about keeping the masses at low-IQ levels, and consolidating the little fluid-intelligence available, to continually screw them (haven’t we all seen the bambala biala sessions around to celebrate screwing of the masses?).

    ps. I mean, nothing wrong with the biala of the masses, but haven’t we all seen the big-shot full of their own importance suddenly indulging in biala-tourettes within their own grouping (that, and dirty-jokes sessions)?

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