By Easwaran Rutnam   As the Government and the opposition engage in a war of words on Sri Lanka being entangled in a “debt trap” at the hands of the Chinese, women in the North have been found to be caught in a different kind of debt trap. A UN official, who just concluded a fact-finding visit to Sri Lanka, has found that women in the North are forced to sell their kidneys, or agree to sexual favours in place of repayment of loans. United Nations Independent Expert Juan Pablo Bohoslavsky, made the revelation in a lengthy statement issued following the end of his visit to Sri Lanka. He is an authority on the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social, and cultural. Jaffna-based economist Ahilan Kadirgamar told The Sunday Morning that the economic crisis in the North has been building since the end of the war. He said that the situation has become dire in terms of the rural livelihood. Women most vulnerable Kadirgamar said that women are the most vulnerable and are often found to be caught in a debt trap. “The only option they have for survival sometimes is to take a loan to pay a previous loan. There are others who turn to suicide, or other means, when they have no choice,” he said. Bohoslavsky, in his end of visit statement to Sri Lanka, explains the situation faced by women in the North. “Collectors go to their houses to get paid – sometimes on a daily basis. They stay in their houses for hours until they get repaid. Women are at times exposed to psychological and physical violence by these collectors. It was brought to my attention that, in some cases, women were pressured by collectors to provide “sexual favours” in exchange for instalments. I have learned of cases of borrowers who tried to sell their kidneys to repay the loans. Some leave their villages, suffer domestic violence as a punishment for the “contract breach,” or have to work much harder and more hours to earn sufficient money to repay the debts. Suicides committed by borrowers have been associated to this abusive microcredit dynamic,” he said. Kadirgamar said the Government has taken some small steps to address the issue, yet more needs to be done. The Cabinet had, in July, approved a proposal to write off loans given by the all finance companies to women in drought-affected districts, including in the North. “I welcome that the Government is implementing a program to write off the micro debt taken by women in certain regions affected by droughts, provided they are not higher than Rs. 100,000 and are at least three months in arrears,” Bohoslavsky said. However, he noted that one of the problems is that collectors do not usually allow for long delays in payments, so a number of women, including the most vulnerable, may not find relief through this program; this takes into account the extent to which pressure is put on debtors by lenders. “In market economies, lenders should be responsible for the risks they take. Otherwise, if they always get fully repaid regardless of the interest charged in their operations (which, in the cases studied here, seem to cover a generous credit risk insurance), serious moral hazard problems are created. In reality, this is what has happened – thousands of women without repayment capacity have been granted unfair, leonine loans. This situation highlights the importance of establishing a National Action Plan on Business and Human Rights as well for the financial sector, including all types of institutions and organisations engaged in financial businesses regardless if they are officially registered as such,” he said. Bohoslavsky urged the Government to establish an interest rate cap for all financial institutions and individual lenders operating in the microcredit business, and also to pass and effectively implement a robust and strict regulation including guidelines on how microcredit lenders have to assess the credit risk of their loans and regulate and restrict the actions they can take to collect the loans in keeping with international human rights standards. A better system of protection He said that the law should establish that usurious microcredits are void (or voidable) and provide victims with the right to request the return of the money as compensation. “I also urge the Government to declare a moratorium, until this legislation is passed, in order to prevent vulnerable groups – in particular women – from being exploited and abused by lenders,” he said. Bohoslavsky stated that there are (obviously) financial needs of the borrowers that have to be covered, and it is the State’s responsibility because the poor cannot be forced to pay for public goods via private microcredit. “On one hand, public banks should expand their concessional credit lines to make them massively available for those in need of it most (even a normal interest rate would represent a dramatic improvement for poor borrowers). On the other, it is worth exploring cooperative financial initiatives to enhance the microcredit industry with a purely social goal. This is why I welcome the Government’s launch of a pilot cooperative financial scheme in the North to provide credit to those in need, and by charging reasonable interest rates. I recommend its expansion to all regions in the country,” he said. Bohoslavsky said the serious situation in the field of microcredit shows how relevant and timely the discussion around the legal status of economic, social, and cultural rights in Sri Lanka is. He questioned how Sri Lanka would respond if a debtor, in a desperate situation, makes a case to a court and/or the National Human Rights Commission stating that the principle of ‘pacta sunt servanda’ (often translated as “agreements (or promises) must be kept”) has to be reconciled with her economic and social human rights; such as the right to food and adequate housing. The UN expert advised the Government to support the constitution reform process in order to ensure inclusion of all economic, social, and cultural rights in the National legal system, including their justifiability. He also recommends that courts take into account the international legal obligations, pertaining to human rights, of Sri Lanka when taking decisions on economic and social rights in the country.