Household debt has plagued the North and East since the war ended in Sri Lanka. Activists and journalists have long highlighted the consequences of predatory credit and the devastating indebtedness faced by the war-torn people; from rural indebtedness, to debt accrued from the Indian Housing grants to the debt trap with lease hire purchasing.
More than such writings, the crisis on the ground, with increasing rates of suicide and attempted suicide, half built houses and protests by people have awoken donors and policy makers to the crisis of indebtedness. The Centre for Poverty Analysis (CEPA) was commissioned to study debt accrued with donor-funded housing schemes, and more recently by the Swiss Development Cooperation to evaluate their financial counselling initiative, which aimed to alleviate house-building related debt.
CEPA recently launched their report titled, ‘No Silver Bullet: An Assessment of the Effects of Financial Counselling on Decision-making Behaviour of Housing Beneficiaries in Jaffna and Kilinochchi’. In an article in the Island yesterday, CEPA summed up an exchange between its researcher and its Chairperson as follows:
Dr. Gunasekara suggested that the state must waiver all debt. Dr. Indrajith Coomaraswamy who moderated the discussion said in response that the private sector will not be willing to do this and ‘somebody has to bear the cost’. Who this ‘somebody’ is, is a deeply political question. After all is not the state ethically obliged to reconstruct the destroyed houses given that it also played a part in the 30 year long conflict? In this light, to expect the state to waiver all debt does not seem too unreasonable.
Given the level of indebtedness in the war-torn regions, such debt must indeed be waived. The critical question is how and what the debt waiver should look like. Should the banks bear the cost of such predatory lending? Or should the state bear the cost? As we all know, soon after the subprime mortgage crisis in the West, states came forward to bail out the banks. The nexus of the neoliberal state and finance capital determines such policies, and the hegemonic trajectory has been towards increasing financialisation. Banks will be protected by the state, whether it is in the West or in Sri Lanka. However, the financial sector should be challenged and the process of financialisation reversed, otherwise such predatory lending will continue after the waiver. And such a move will depend on mobilisations and protests by the people confronting the power of finance lobby.
The CEPA Report provides the following two recommendations as part of its six points of recommendations:
Encourage implementing agencies to introduce financial counselling to housing beneficiaries as it is a useful process to identify vulnerable households, their financial difficulties, and tailor housing support accordingly.
With the support of state institutions and the private sector, launch a systematic financial awareness campaign in war-affected areas to promote better financial management and responsibility among people.
This brings me to the question of counselling, which has been a contentious issue after the Rajapaksa regime denied the space for psycho-social counselling in the post-war North and East, fearing that war-time abuses may be exposed in the process. To my knowledge there were no such restrictions on financial counselling to the people.
Last year, at the Social Science Study Circle, a left forum in Jaffna, a progressive psychiatrist spoke on the issue of indebtedness, and blamed in part the financial sector for increasing rates of suicide, attempted suicide, and trauma in the North. In counselling his patients, he said, he recommends not paying back debt if it means hardship. He strongly rejected blame on the individuals and called on the audience to reflect on the broader social and economic processes. He has also written to that effect in his column in the Jaffna-based Valampurii newspaper.
The donor approach is different with their focus on individual households and their debt. One wonders whether the donors will next implement psycho-social counselling programs to indebted individuals. The donors may then request an NGO or some researchers to evaluate whether their program has been effective in alleviating the illness of indebtedness. This is the problematic character of the aid industry and its workings; it determines the agenda, creates facts on the ground and then dictates the questions of research and analysis.
Counselling when it targets individuals without a social perspective pathologises individuals. Similarly financial counselling begins by blaming individuals for their indebtedness. In the longue duree, however, financial counselling is much more than such blame. It is also about the ways in which the process of financialisation reaches deep into the everyday life of people. It is in fact, tutelage on individual behaviour and decision making, including the promotion of increased use of financialised products. Financial counselling seeks to transform the sensibilities of individuals so that living with increasing financial products becomes part of everyday life, even as social bonds of solidarity and collective forms of social protection are broken. In short, it is the production of neoliberal subjects in the interest of the accumulation of finance capital.
In reality, what may be most needed is counselling for the state, the banks, the donors and their agents to reverse the process of financialisation. And the name for such counselling is protest.