52nd Open Forum on Poverty Tuesday, 31st March, 2015

“Debt for Development? Understanding the effects of credit as a development intervention” Concept Note

Every quarter, the Centre for Poverty Analysis (CEPA) hosts an Open Forum, as a platform for professionals to discuss their research and/or experiences on poverty and related issues, while disseminating knowledge to a wider audience outside the research community.

For a long time, donors and practitioners have used microfinance activities to alleviate poverty by creating income and jobs. This practice was based on the assumption that by integrating the poor into the economic circuit, microfinance was automatically promoting development. Since the end of the war in 2009, microfinance institutions and banks have mushroomed in the country, including in the North and East. How do we understand this phenomenon? Some argue that the increased competition brings new financial products, lower interest rates and greater access to credit. However, there have also been negative impacts, ranging from over-indebtedness to the collapse of financial institutions. In recent years, donors have become more concerned about the quality of their interventions. With the experience they have gained on the limits of microfinance, local government authorities in a few districts in the North and East have expressed concern about the link between indebtedness and various social issues, such as suicides and the collapse of family relations. The media has reported several incidents connecting debt and suicide as well. In this context, a dialogue about understanding credit and financialisation in relation to development is important. The purpose of CEPA’s 52nd Open Forum is to discuss the idea of credit as a development intervention and what it means for eradicating poverty in developing countries. It will provide a much needed space to discuss the effects of access to finance for development. Specific objectives of this Open Forum are:

to understand the role of microfinance as a development intervention in Sri Lanka; to understand how microfinance is connected to the larger political economy of

development interventions; to identify the conditions under which access to microfinance exacerbates

socioeconomic vulnerability; and, to identify ways of addressing the negative effects of debt on individuals and

communities recovering from conflict and/or disasters. More generally, the Open Forum will discuss the role of microfinance and the politics of financial inclusion of the poor, inviting alternative ideas on the economic empowerment of marginalised groups.