Finance Minister steps in to rescue rural masses from the micro financial debt trap

(COLOMBO, LANKAPUVATH) – The Prime Minister Mahinda Rajapaksa in his capacity as the Minister of Finance has decided to increase the low interest loan granted by the government to rescue the people who are burdened with the high interest charged by the microfinance companies.

Accordingly, the low interest loan offered to the people, who are caught in the micro finance debt trap, will be increased from Rs 40,000 to Rs 60,000.

Low interest loans are already being provided through Co-operative Rural Banks and Thrift and Credit Unions to the people in the North and North Central Provinces to free them from the debt burden.

However, various parties have requested the Minister of Finance to increase the ceiling of the current low interest loan.

The Prime Minister has decided to streamline the program, which is being implemented by six District Secretariats, in line with the requests of District Secretaries, Public Representatives and the public.

Already Rs. 292 million for the Northern Province and Rs. 542 million for the North Central Province have been allocated and provided to the Co-operative Rural Banks and Thrift and Credit Unions.

It is estimated that about 14,000 people are trapped in this microfinance debt crisis in the North Central Province, but only 227 people have been provided relief under the current maximum loan limit of Rs. 40,000. Out of the Rs. 950 million allocated for the debt relief, only Rs. 9.76 million had been used.

With the decision taken by the Prime Minister Mahinda Rajapaksa as the Minister of Finance, many more will be eligible for loans. In addition, streamlining the program further, the annual interest rate on loans will be reduced from 14% to 9%.

A District Steering Committee will also be set up to report to the Treasury quarterly the progress of the program as a further step in regulating the lending and recovery of loan.

These Steering Committees will also be tasked with promoting borrowing through thrift and credit union cooperative societies instead of obtaining microfinance loans at very high interest rates and taking steps to free the rural people from debt.

Cabinet approval has been granted for the proposal made by Prime Minister Mahinda Rajapaksa, as the Minister of Finance, in this regard.

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