By Mithula Guganeshan –
Majority of Sri Lankan’s, almost 84% are either financially struggling or suffering according to the survey done by Gallup Healthways in 2014. In other words, people are unable to meet their current financials and future obligations while making choices that allow enjoyment of life. Everything can be attained higher education to dream house however only at the cost of obtaining a loan.
Increasing debt levels not only erode earning potential of the targeted population while serving as a blockage to progress far, resulting in greater poverty, exclusion and dependence.
As stated by Sir Josiah Stamp, Director & President of the Bank of England during the 1920’s, the modern banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight of hand that was ever invented. Banking was conceived in iniquity and born in sin. Bankers own the earth. Take it away from them, but leave them with the power to create money and control credit, and with the flick of a pen, they will create enough money to buy it back again. Take this great power away from the bankers and all the great fortunes will disappear, and they ought to disappear, for this would be a better and happier world to live in. But if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money and to control credit.
Financial Institutions in Sri Lanka needs to maintain a Statutory Reserve Ratio (SRR) of only 6%, the proportion of rupee deposit liabilities maintained as deposits within Central Bank apart from the money provided as credit to the customers. SRR justifies and confirms the truth that the banks create money out of nothing. The twisted modern banking system grabs a share of our earnings continuously in the form of loan repayment and interests, interestingly from money created out of nothing. A witty method used to make the rich get richer while explaining the enormous wealth gained by the key shareholders of financial institutions.
CEO’s of financial institutions proudly claims on newspapers the profits recorded in millions, resulted from higher rates of lending. Sri Lanka still remains as a country with higher borrowing costs which results in an escalated cost of product & services during each value addition stage. How is it fair that the financial institutions charge massive amounts as interests for money that clearly doesn’t even exist? In the past Usury, the practice of lending money at excessive interest rates was prohibited and condemned as it was considered the exploitation of the needy, mainly on ethical, religious and moral stances. However, today’s economy functions only by continuously injecting credit into the system. If the majority of the population doesn’t benefit, why does such a financial/economic system exist? How long would this ignorant system continue, where the rich feed by eating off from the poor?
Microfinance aids to deliver holistic modern slavery
In the recent times, microfinance is aggressively used to increase the profit of financial institutions. Thus, targeting the previously ignored segment, people from bottom of the pyramid with low income and unable to access typical banking services. Microfinance institutions’ justification for their existence is to alleviate poverty and for women empowerment. However, micro finance institutions clearly communicate its purpose is aimed at the opportunity to earn profits from millions of unbanked poor excluded from normal banking facilities. Most importantly these excessive loans are obtained by people for their day to day consumption thus; the borrowed money is hardly being used for any economically viable activity resulting in difficulties to repay. If the notion was to actually reduce the poverty why are extremely high interest rates charged especially from those earning just enough to survive on a daily basis? Certain loans command weekly repayments, borrowing a sum of Rs. 25,000 would lead to Rs.1,000 weekly repayments for 10 months resulting in an interest rate of 70% per annum. How can one alleviate poverty by charging such horrendous interest from poor struggling to survive on a daily basis? It is crucial for Government, NGO’s and social enterprises to step in and work towards reducing poverty effectively.
Microfinance institutions are registered in the share market where shareholders’ interests obviously weigh more than the poor clients. Increasing share prices of certain micro finance companies over the last two years adds an interesting essence to the picture. There is a lack of quantifiable data to illustrate the improvements in terms of the shift from below poverty lines towards the next segment. Generally, microfinance institutions boast based on internal surveys about the particular % crossing the poverty lines, regardless to mention the biasness in the survey results.
Those financially thriving are occupying the top positions in different types of organizations working with a minimal interest towards protecting or releasing people from unnecessary financial burden. Proper financial consumer laws need to be adhered to protect the poor & needy struggling to survive on a daily basis. Lawyers and activists working for people are eventually bought over by the financial institutions, while the people are left with nothing but to defend their own rights or end up as slaves nodding to those in power. Unregulated financial institutions providing excessive credits at higher interest rates bring more harm than good. Government needs to focus and extend its arm in terms of providing financial consumer protection to those struggling and suffering financially.