People in Sri Lanka’s war ravaged regions in the North and East are increasingly becoming indebted compared to those outside the region as financing needs especially for rebuilding basic amenities like houses have escalated post-war, a recent study showed.
Average debt as a proportion of income in the three districts of the North and East, Vavuniya, Batticaloa and Jaffna compared from year 2010 level to year 2013, has cumulatively seen an average increase of a staggering 146.77% despite Sri Lanka’s national average (overall) recording a mere increase of 20.83 percent, a study done by Centre for Poverty Analysis based on the latest Household Income and Expenditure Survey (HIES) statistics showed.
According to the survey, debt as a proportion of income increased in Vavuniya District by a drastic 185.99% (from a year 2010 average of 31.5% to 90.09% by year 2013), Jaffna by 93.35% (from 33.12% to 64.03%) and Batticaloa by 160.96% (from 22.33% to 58.28%) whilst the overall ratio for Sri Lanka was recorded to be 35.30% in 2010 and 42.65% in 2013.
Senior Researcher, Centre for Poverty Analysis (CEPA), Vagisha Gunasekara during a recent forum stated that the debt to income ratio had risen in all districts except Anuradhapura, Galle, Kalutara and Hambantota.
According to the report, the ratio in Kilinochchi and Mullaitivu for 2013 stood at 40.09% and 46.54% respectively. However, the percentage for the year 2010 had not been tabulated by the department.
Analysts in the North stated that the staggering increase in the ratio was due to the rapid increase in presence of banks and financial institutions following the cessation of hostilities in 2009, and the urgent need for cash to rebuild damaged property and embark on businesses.
However, the experts stated that the majority of borrowers were helpless when the businesses collapsed and property value fell.
In addition, the lack of proper awareness on money borrowings had resulted in people obtaining loans from multiple institutions and then struggling to repay them.
Accordingly, the borrowers had used the money on rebuilding houses and furniture and not invested on ventures that generate income.
The Jaffna Chamber of Commerce stated that many had invested on property, which also did not yield the expected income for the borrowers.
An official attached to the Bank of Ceylon who did not wish to be quoted stated that many of those who had not repaid their debts were willful defaulters. “If they explain their situation, then the banks will give them a solution by way of rescheduling and restructuring their repayment schemes,” the official said.