ECONOMYNEXT – Sri Lanka’s unregulated financial institutions thrive on the financial ignorance of the people by exploiting vulnerable households, Ravi Abeysuriya, an investment professional, said.
“Many unregulated financial institutions operate in the country because they thrive on the financial ignorance of the people,” said Abeysuriya, Director of CFA Society Sri Lanka, the local chapter of Chartered Financial Analysts institute.
Financial literacy means a combination of financial knowledge, skills, attitudes and behaviours to make sound financial decisions, based on economic and personal circumstances, to improve one’s financial well-being.
A recent joint study done by the Finance Ministry and Central Bank officials found that unregulated lenders have exploited and charged the borrowers as high as 200 percent interest, Abeysuriya said.
“Central Bank can only regulate deposit-taking institution but not very much lending,” Abeysuriya said at the Financial Literacy Public Lecture organized by the Centre for Banking Studies.
The lack of regulation of predatory lending and the financial ignorance of the people have resulted in many suicides in the country.
“Predatory lending is a financial crime,” Abeysuriya said, noting that aggressive lending and the recovery practises of these lenders have caused a lot of indebtedness among borrowers.
“It does not stop at this, sometimes they (lenders) go in to undesirable things such as exploiting the women because they borrowed in the objective of starting a small venture but in the end they had to sell themselves too,” said Abeysuriya.
“Ideal situation is we should have a ‘National Credit Act’ which South Africa has, so that lending can be regulated,” he said.
(COLOMBO, April 10, 2019)