Prime Minister Mahinda Rajapaksa as the Finance Minister has decided to increase the low interest loans from Rs. 40,000 to Rs. 60,000 in order to relieve the burden on those struggling due to the high interest charged by microfinance companies.
In order to provide relief to those in the North and North Central Provinces burdened by these debts, currently, low-interest loans are made available to them through rural banks and thrift societies.
However, the Finance Minister has been receiving requests to increase the low-interest loan limit.
Therefore, taking note of the requests made by the District Secretariats, public representatives and the people, the Prime Minister had taken the decision to further streamline this low-income loan scheme. These low-income loan schemes are currently operational in six District Secretariat Divisions.
For this purpose Rs. 542 million has been allocated with Rs.292 million allocated for the Northern Province and Rs. 250 million allocated for the North Central Province and has been sent to the rural banks and thrift societies.
In the North Central Province it is estimated that there are around 14,000 who are caught up in the microfinance debt trap but under the Rs. 40,000 loan scheme only around 227 have been granted loans. Out of the allocated Rs. 250 million only Rs. 9.76 million has been utilized to grant low-interest loans.
However, with this decision taken by the Prime Minister a greater number of persons would be eligible to obtain loans. Further, in order to provide greater relief, the interest rate is expected to be brought down from 14% to 9%.
A district committee would also be set up to report the progress of this low interest loan scheme every three months to the Treasury. These operations committees would also be entrusted with the responsibility of encouraging the people to obtain these low interest loans instead of getting themselves trapped in the micro finance debt at high interest rates and saving the rural public from this debt trap.
The Cabinet paper submitted by the Prime Minister in his capacity as the Finance Minister has been approved.