The sudden collapse of a private finance company leaving hundreds of small-time investors destitute is, for them, akin to what the Wall Street collapse in New York's stock exchange earlier this month, was to thousands in the Western world.
The Sakvithi Finance Company incident may not by itself significantly impact on national affairs, but it has a clear underlying message in the general scheme of things in this country.
The human story of heartbreak among the duped investors is reported in our news pages. The moral of the story is something else. For starters, the Central Bank of Sri Lanka (CBSL) and its supervision unit are expected to monitor these unscrupulous companies.
The supervision unit has been quick with its excuses. It blames a court order that precluded it from naming these errant companies on the grounds that it was "harmful for business", after it published a list of 37 unauthorised financial institutions in a public announcement, and some of them went to court.
Some register themselves merely as companies, and are not permitted to collect deposits from the public. Instead, they accept 'investments', 'debentures' and play 'fund managers' thus circumventing the CBSL regulations with the law unable to catch up with these innovative rogues.
Currently, a deposit of Rs. 200 million is required to register a finance company. Most of those unregistered 'finance companies' lack the capital, systems and controls and the necessary human resources. Recklessly managed, they operate by servicing old deposits with funds coming in from new deposits. Once the inflow of cash ceases or wanes, the system crashes and they cannot meet the pledges to the public.
The CBSL says it has instituted 30 cases against such 'finance companies' in places like Kandy, Hambantota, Anuradhapura, Kurunegala as well as Colombo. This shows that they are duping Sri Lankans everywhere. If Parliament considered the issue significant enough to debate it this week, one might ask what the Parliamentary Committee on Public Enterprises (COPE) had to say when it inquired into these doomed finance companies.
It seemed to take the line of the courts which asked the CBSL not to name the errant finance companies.
Though the COPE report does not spell it out, what we are told this means is that by the CBSL publishing two lists -- of approved finance companies, and those not approved, it is only displaying its impotence in tackling the problem.
The COPE report also refers to non-functioning finance companies and queries the "lethargic manner" in relation to the recovery of a colossal Rs.7,000 million (Rs. 7 billion) which had been granted to failed finance companies in the past. We are told that the Presidential Commission on failed finance companies, appointed following the 2005 COPE report, is to submit its report in a fortnight. Those thousands of depositors of yesteryear and their dependants must surely be anxiously awaiting it.
In the past, influential finance companies that crashed were able to get 'cash for trash' bail-outs from CBSL mandarins with Government blessings. The directors not only got away scot-free, but had their statues erected and their progeny sit as Cabinet Ministers. This is what is wrong with the 'system'. While pensioners and low income earners desperately try to make their rapidly devaluing rupee stretch to meet with soaring inflation, sometimes losing all, there is no punishment whatsoever for those responsible for their downfall. The CBSL will lament the lack of laws, the Police will await instructions that will never come, and generally, everything is done, to do nothing.
There are many ways to wean the public away from these unscrupulous finance companies, and money-lenders. One suggested by bankers is to promote the Treasury Bills concept, firstly by finding a people-friendly name for it. There must be so many other methods, but does the CBSL have the will to execute them?
The picture is bleak, purely because of the overall environment in the country. If the VAT fraudsters can get away with blue murder, politicians and ministry secretaries can get away with their 'commissions' from public tenders and those whom the COPE, Auditor General and the Parliamentary Public Affairs Committee have named in the public service for corruption, mismanagement and waste can get away without reprimand of any sort, is it any wonder that others feel they can take the public for a ride as well?
The enforced ejection of the Treasury Secretary last week was one step in the anti-corruption drive we are witnessing as a counter-move set in motion by a few to arrest this negative trend in the country. For now, let's see how the CBSL - and the Presidential Commission play their part and handle the vexed issue of errant finance companies, past, present - and future.