Agriculture remains the cornerstone of Sri Lanka’s economy, ensuring food security, generating employment, and alleviating poverty, especially in rural areas. With its fertile soil, diverse climates, and abundant water resources, Sri Lanka has historically been agriculturally self-sufficient. However, systemic challenges, such as limited access to modern technology, market inefficiencies, and financial difficulties, continue to hinder the sector’s growth. Among these, financial challenges pose the most significant barrier for small-scale vegetable farmers.
The gravity of the situation is reflected in the 2022 Annual Police Report, which recorded 200 suicides linked to debt problems, many involving farmers. These statistics underscore the urgency of addressing the financial struggles faced by the agricultural community. Therefore, to overcome its persistent challenges and unlock its true potential, it is essential to understand farmers’ financial dynamics and borrowing behaviour.
This study, rooted in interpretivism and inductive reasoning, employed a qualitative approach to understanding the farmers’ borrowing behavior. Utilizing purposive sampling, our research team visited Uva Paranagama on September 14 – 16, 2024, limiting the scope of the study to Uva Paranagama. They interviewed over 30 farmers to understand the realities of their financial struggles. Structured face-to-face interviews and observations formed the basis of primary data collection, ensuring the authenticity and richness of the insights gathered. Thematic analysis was employed to identify patterns and emerging themes within the data.
Uva Paranagama, a picturesque region in Sri Lanka’s Badulla district, is renowned for its vibrant vegetable cultivation. This area is home to a resilient population primarily engaged in paddy and vegetable farming, with crops such as beans, carrots, onions, cabbage, eggplant, lettuce, and beets. Despite their diligent efforts, many farmers in Uva Paranagama face significant financial hardships.The region has one of the highest poverty levels in the district. In 2018, Uva Paranagama had a population of 83,518, with 6,069 households benefiting from the Samurdhi welfare program, covering 24,883 individuals. Nearly one-third of the population depends on government assistance, highlighting the community’s economic vulnerability.
Farming in Uva Paranagama, like in many other regions, can be profitable if everything goes according to designed plans. However, farmers often encounter numerous challenges that disrupt their plans and threaten their livelihoods. These challenges include undiagnosed crop diseases, unpredictable monsoon patterns, pest infestations, and damage from wildlife. One farmer shared a story about his failed tomato crop: “I invested 250,000 rupees in a tomato plantation. When it was time to harvest, a massive surge of weeds destroyed the entire crop. None of the tomatoes survived. The weed problem has become uncontrollable”.
With tears in his eyes; one farmer lamented, “Sir, look at those forests. Once a week, a large group of monkeys come to our fields and destroy our crops. Just look at my small plantation (Thawana); they’ve also ruined those young plants”. According to the farmers, these monkeys have become more dangerous and uncontrollable. They believe that the monkeys have lost their natural food sources due to deforestation and are now coming into the villages in search of food.
Another significant issue is market unpredictability. One farmer explained, “We planted onions, hoping for a good market price. Unfortunately, everyone else in the country seemed to plant onions simultaneously, resulting in a market excess. Our onions rotted in the ground.” The village, known for its Welimada potatoes, saw many farmers abandon this crop due to government-imposed price controls and potato imports during harvest.
Farmers argue that potato cultivation is high-yield, requires less labor, and produces the most nutritious potatoes that thrive in their soil. However, they are no longer growing potatoes. They claim that when they stopped, large-scale traders took over, and with the government’s halt on imports, these traders monopolized the market, profiting from inflated prices. While these claims cannot be verified, they have been consistently shared by the villagers and are presented for open discussion.
These anecdotes illustrate the significant challenges faced by the farmers of Uva Paranagama. These difficulties leave them feeling helpless, forcing them to alter their initial plans and resulting in greater financial demands they cannot afford. Consequently, they are compelled to resort to borrowing.
Given these difficulties, farmers frequently use credit to cover their daily living expenses and future agricultural investments. The most common method of borrowing is pawning gold jewelry. In our survey of 30 farmers, all reported pawning their gold to secure the necessary funds. Local government banks are familiar sources for these loans. However, farmers often express frustration over the high interest rates and the bureaucratic hurdles, such as collateral requirements and complicated paperwork.”Interest rates are high, and it’s difficult to meet all the banks’ requirements,” one farmer explained. “We don’t have time to wait in long lines at banks, as we have so much fieldwork to do. Some of us pawn our jewelry because it’s the easiest way to get a loan. Our jewelry is always at the bank”.
In addition to bank loans, farmers also borrow money from local credit unions, such as “Kantha Samithi,” “Awamangalaya Samithi,” or “Linda Samthi’’. These unions offer small loans with minimal requirements, often backed by just two guarantors. These loans have lower interest rates of around 5%and short repayment terms, usually about three months. Farmers find these small loans, typically around Rs. 15,000, much easier to access than bank loans, as they involve fewer bureaucratic challenges. “We rely on these smaller loans because they are quick and don’t require much paperwork. We use the money to fund our next crop, and it’s easier than dealing with banks,” explained another farmer.
Upon reviewing the borrowing records of these small unions, we observed that nearly all villagers are members of at least three unions and have taken loans from each of them. One union officer shared that they initially offered loans of Rs. 10,000. However, due to overwhelming demand from almost every villager, they reduced the loan amounts. Later, they even had to limit the number of recipients because collecting repayments became increasingly difficult, pushing the union to the brink of closure due to a debt trap. The evidence clearly shows that almost all the villagers are burdened by debt. This highlights the prevalent borrowing behavior in the village.
Farmers believe the government can help them overcome various challenges, especially by offering technical guidance on modern farming methods. One farmer mentioned, “If the government could advise us on new farming methods, it would make a huge difference,” adding that better techniques could improve yields despite the effects of climate change. Beyond technical support, farmers are calling for government intervention in price controls, better access to fertilizers, and addressing the impact of foreign agricultural imports, which they argue threaten local markets.
They also expressed concerns about the poor state of the village’s irrigation system, which hasn’t been repaired in years, forcing them to spend more on water management. They believe that with government help, these systems could be restored, reducing costs and improving efficiency. Finally, farmers suggest the government establish an integrated supply management system to regulate crop production and distribution, ensuring fair prices by preventing market gluts and shortages.The farmers of Uva Paranagama are a testament to resilience and perseverance. Despite facing numerous challenges, they continue to strive for sustainability and growth. However, their struggles may persist without targeted support, whether in the form of better farming practices, fair market conditions, or improved infrastructure. Addressing these challenges is not just about economic growth; it is about preserving the livelihoods of those who form the backbone of Sri Lanka’s agricultural sector. With the right interventions, the farmers of Uva Paranagama can overcome these obstacles and continue to contribute meaningfully to the nation’s agricultural economy.
Waruni Jayalath and Waragana Weerasingh
Lecturers, Department of Industrial Management, Faculty of Business, University of Moratuwa
Dr. Gayithri Kurupu
Senior Lecturer, Department of Industrial Management, Faculty of Business, University of Moratuwa
Nipuni Jayasiri, Hasithi Sudusinghe and Oshini Samaraweera
Undergraduates, Department of Industrial Management, Faculty of Business, University of Moratuwa.
