By Mithula Guganeshan –
Indebtedness sharply increased within the Northern Region as the growth of average debt per family rises from Rs.52, 000 to Rs.194, 000. Thus, demonstrating the lack of proper financial education and the discipline required to be financially fit, crucial benchmarks for a successful life. Additionally, ADB report states that higher growth in credit from the private sector would be the key towards achieving sustained economic expansion due to tightened competition. Financial institutions needs to increase their credit growth from the private sector therefore aggressive marketing and campaigns are implemented to attract potential new clients. Any business with financially sound management would weigh their options before obtaining credit from the bank for further developments. Therefore, the obvious choice is to tap the financially illiterate small business owners, those easily buying into the idea of obtaining a loan in the hope of improving their businesses.
Most of the time, these owners are retail or wholesale businessmen and there is potentially no room for further growth in this particular sector within the Northern Province. Clearly justifies the extra ordinary levels of debt within the Northern Province and the number of awards won by the financial institutions for increasing the credit growth. In the end, as promised financial institutions has secured its own future and continues its development- oriented journey whereas the losses incurred by the common businessmen are hidden behind the financial institution’s big victories.
There are businessmen from the Northern Province who have lost millions as interests to these financial institutions and it doesn’t stop there, they have lost their businesses, properties, deposits, and in overall their lives. We need clarity when financial institutions promise us to be a partner for our business, because some partners tend to be interested only in their gains. Why don’t these institutions proudly communicate how they have contributed towards improving private sectors growth especially in the Northern Province, through their financial guidance, if there is any to begin with?
There are instances where additional money was lent by mortgaging properties despite the lack of sufficient earnings from business to repay the initial loan itself. When someone is indebted, the whole family suffers the consequences in terms of depleted savings, psychological stress, borrows anew to repay, sell or pawn assets, subjected to harassment and threatening, suffers from shame/insults and finally seizure of assets. Of course, some may argue that financial institutions exist for this very reason, to lend to people. However, the least these institutions can do is to provide fairness, integrity and some justice to the financially illiterates.
Financial institutions core objective should be focused on guiding everyone towards financial well-being; however, we are observing the ways and means exploited by these institutions to suck people’s life out through the so called financial help lines. How is it ethical when institutions take advantage due to the lack of financial understanding and knowledge? Yet, in the present context, obtaining a signature is deemed sufficient to validate the financial guidance provided by these institutions. Most of the forms provided to the customers are documented in English, even when the customers cannot read a single word.
Financial Institution’s employees are only being trained to be a salesperson instead of actually being a trusted financial advisor, to help us achieve financial well-being. If educating the people financially is too much to ask for, how about meeting the basic requirements and actually caring about the financial wellbeing of the people? Unfortunately, educated people with academic background and sufficient money also fall into this trap.
Everywhere you would see financial institutions promising “better life and opportunities” or “a secure future” advertisements on billboards, posters, newspapers etc. Now the question is whose life is being secured, ours or the financial institutions and its employees? It seems like the prime objective is to keep the society in debt by creating the wants, through the promise of better life but in reality people are being misled towards bitter life. Why do representatives keep dialing our phone lines and ringing our door bells just to push off a credit card, if they are focused on improving customer’s financial well-being.
Sri Lanka needs an external body to effectively regulate the financial service’s processes in order to improve the financial literacy while protecting the financial consumers. People’s financial experiences needs to be heard by documenting the mishaps of the financial institutions within the high credit growth regions in order to serve the financial consumers with fairness and integrity. Currently there is a lack of an external regulation in order to address the complaints fairly. The external body needs to provide confidence to the customers in order to defend their rights by offering the right advice and skills while making financial decisions.
Initially, there was a lack of clarity when these financial institutions flocked towards North with immense interest, following the end of 30 year civil war. However, rising indebtedness validates the reason behind the disproportionate number of financial institutions to population within the Northern Province.