We (Guganeshan.M & Suthaharan.P) submitted this abstract to Iconart 2016 conference organised by faculty of Arts of University of Colombo. Our abstract has been approved by editorial committee and presented the research finding at the second day of conference.
Abstract is published in the conference proceeding. Our Presentation Slides can be downloaded here.
Increasing credits to households not only erode earning potential of the targeted population, but also make them far from promoting progress resulting in greater poverty, exclusion and dependence. Globally, there has been much research on excessive credits, which results in negative impact on economic, livelihood and even psychological aspect of the borrowers affecting the quality of life. Impact of this is more harmful among low-income poor households and studies point out original intention of credit for rural empowerment has diminished over time. Within last 5 years Indebtedness sharply increased within the Northern Region as the growth of average debt per family rose from Rs.52, 000 to Rs.194, 000. In addition, number of financial institution per 100,000 people in North has double at the same period which is even more than Western province. Easy credit is available for even without any security to buy anything from consumer durables, motorcycles, and homes to agricultural equipment. Most importantly excessive loans are obtained by people for their day-to-day consumption thus, the borrowed money is hardly being used for any economically viable activity resulting in difficulty to repay. In this article, we seek to explicate the recent trend of excessive credit among northern province and the underlying impact that has created on the livelihoods of rural poor through secondary research and qualitative focus group discussion. Study also attempts to shed lights on woman empowerment, new job creation, and livelihood development within the context of credit growth, which ideally should have been improved those indicators. This paper highlights the measures need to be taken by policy makers to protect low income population from debt trap such as the need for national strategies to improve financial literacy of the citizens through financial education and appropriate financial consumer protection measures.