Abstract:
Microfinance company has faced mainly two risks loan recovery risk and
marketable risk. To enhance the market of loans, microfinance companies
introduce different types of easy payment systems. Consequently, the rural
peasants have attracted to the loans. The problem is that they hardly think to
repay the loans. As a result, the loan recovery rate is very low in rural areas.
In this sense, microfinance companies use different attempts for recovering
their loans. These strategies differently harm to the social and economic level
of the rural settlers. According to the UNO report in 2019, 2.8 million of Sri
Lankan people have aggrieved by this microfinance loan, there are 2.4 million
(85.7%) are women. This is one of the biggest tragedies faced by rural families
in Sri Lanka at present. According to the report on the microfinance industry,
89% of the rural sector is inclined to borrow microfinance, at the provincial
level micro-industrial distribution in the southern province is high. This study
investigates the socio-economic problems faced by rural households due to
microfinance indebtedness. The Manikgoda Grama Niladhari Division of
Akuressa Divisional Secretariate Division in Southern Province of Sri Lanka
has been selected for the case study. Both qualitative and quantitative primary
data was collected by questionnaire, interviews, and observations. The study
has pointed out that they are socially and economically downward due to
loans. It means these microfinance loans to rural settlers hardly support their
socio-economic development.
