Sri Lanka Rural Indebtedness Vs Urban Indebtedness

Subject: Economics
Pages: 7
Words: 1914
Reading time:
7 min
Study level: PhD

Research topic: How effectively does the establishment of indebtedness law deal with rural and urban indebtedness in Sri Lanka?


Sri Lanka gained independence in 1948 from Britain. In the post-independence period, the country has witnessed growth and transformation of its main economic aspects especially in the rural areas (Lea 1983). Before independence, Sri Lanka had been ruled by three major colonial countries: Portuguese, Dutch, and British. The arrival of these three countries in Sri Lanka’s society had far-reaching consequences especially with regard to the economic, social, and political development of Sri Lanka (Lea 1983, p.129). Some of the new developments initiated after independence included the introduction of several subsidiary schemes for the rural sector such as paddy cultivation loans, certified price for grains (Kelegama and Mel, 2007), colonization, free education, free medical facilities, fertilizer subsidies, low-interest loans, microfinance schemes and many more (Jugale, 2003). The major aim of these schemes was to transform Sri Lanka’s rural economy on which the majority of the population lives and depends. The subsequent results of these schemes were evident especially with the transformation and development of the rural sector; incomes among farmers increased to higher levels and the general social lives of many people were uplifted.

As the rural economy was witnessing great changes and transformation, the urban sector was suffering from numerous acute problems. The exploitation of traders and business people in the urban areas was rampant, with procedures for obtaining loans being stringent and biased. In addition, credit facilities from moneylenders and banks were characterized by exploitation and high interests rate, hence the majority of businesses were lost to banks and moneylenders due to debt defaults. In this chaotic and exploitative environment, Sri Lanka law was only premised on debt recovery. In addition, there was largely no legal system to rehabilitate sick business units and generally, banks auctioned property unrestricted for those who defaulted in their payments.

The subsequent progress and development of Sri Lanka since independence has been carried out largely in a clear absence of indebtedness law. The result is a manifestation of rural and urban economic sectors that still exhibit characteristics and elements of the independence period. Therefore, in midst of these scenarios, a question that can be asked is whether the establishment of a clear indebtedness law can result in the improvement of both rural and urban sectors.

Statement of problem

Colonial rule had a myriad effect on the economy of Sri Lanka specifically in rural areas where traditional agriculture was replaced with profit-motivated and commercial agriculture. As a result, Sri Lanka witnessed the decline and disintegration of its traditional system of settlements and the associated socio-economic setting (Udoporuwa, 2007). More so, the presence of the British in the country led to the transformation of Sri Lanka’s traditional agricultural economy and its related social system in the country as plantation and export-based agriculture replaced the traditional peasant agricultural economy. Sri Lanka’s traditional rural economy was neglected and community sense bypassed by colonies as profit-motivated agriculture became predominant. As a result, pre-independent Sri Lanka was characterized by a rural economic sector that was backward in nature, while people were ravaged by poverty, and indebtedness among people was high and they earned meager incomes (Udoporuwa 2007). The post-independence period was characterized by new developments, which the country initiated especially in rural areas, and the aim was to see the transformation of the rural economy.

The issues of rural and urban indebtedness remain a problem in Sri Lanka even after 60 years of independence. The problem can be associated with the absence of a clear law that can act as guidance in the overall economic sector of the country. Many research reports have been carried out on the rural economic development of Sri Lanka, the urban economic structure, problems that both rural and urban traders face in post-independence Sri Lanka, and even strategies to realize maximum performance of these sectors. Interestingly, little literature exists on how effectively indebtedness can be dealt with, and this is linked to a lack of appropriate indebtedness law. Therefore, any attempt to carry out in-depth research work that is accompanied by implementable recommendations is encouraged, especially given the enormous effort Sri Lanka is employing in improving its rural and urban sectors. There is no primary data and information especially from participants in rural and urban economy on how an indebtedness law should be developed. In this regard, it can be perceived that the establishment of the law needs to take into account the stakeholders varied needs and the economic environment in post-independence Sri Lanka. In the line with these, the research paper will make an attempt to integrate all the necessary data and information that can be appropriate in the development of indebtedness law, and this will be generated from respondents involved in rural and urban economic sectors.

Research Rationale

Indebtedness is an issue that rural traders and urban businesspeople in Sri Lanka have had to deal with for a long period. Numerous efforts in other areas have been witnessed, but the issue of indebtedness for traders and farmers has inadequately been dealt with. As Sri Lanka promotes efforts to transform its rural and urban economic sectors, there is a great need to understand both sectors, the developments initiated, and also indebtedness problems that traders still face. The understanding is that, with the presence of indebtedness law, Sri Lanka will be able to realize great transformation in its rural and urban economic sectors. Motivated by these, the research paper aims to carry out thorough research, the investigation into the indebtedness law as well as how effectively the law can be constructed and applied with the context of Sri Lanka.

Research Questions

Research questions arise from the purpose and aim of the research paper as outlined and explained above. Therefore, below are research questions that will guide this research paper.

  • What are the characteristics of rural and urban economic sectors in post-independent Sri Lanka?
  • What problems do traders and business people face in a rural and urban setting?
  • How well the changes introduced have transformed both sectors?
  • How the establishment of indebtedness law can improve the business situation in both rural and urban settings?

Research objectives

The motivation in undertaking any research work is usually inscribed in the overall objective of the research. Thus, research objectives constitute all those reasons as to why the research is necessary and has to be undertaken and what will be the impact or benefit of the research. The research objectives of this paper will be to develop a deeper understanding of Sri Lanka’s urban and rural economy since independence. The other objectives to be covered include how government programs and changes have influenced these two sectors and how the absence of indebtedness law has affected these sectors and subsequently, generated profound information that can inform stakeholders specifically in the establishment of indebtedness law. Information will be generated through both quantitative and qualitative instruments, and information is perceived to meet certain objectives.


This section aims at providing the structure of the study, which will serve as a guide for the overall flow of the research. Identifying the most appropriate research design, data collection technique, setting and sample of the study, instruments, and data analysis will help in the attainment of the main goal of this research proposal (Strauss and Corbin, 1998). The methodology section is subdivided under the following sub-headings:

Research Participants

It is proposed that this particular study will gauge both constructionist and positivistic approaches (Gergen, 1999 cited in Bakhurst, 2011) wherein, scientific and rational justification shall be implemented in coordination with subjective construction of insights entailed by constructionism (Audi, 2010). To achieve this objective, the research will select participants in the most appropriate way that avoids bias. Therefore, research participants to be included in this study will include traders and business people involved in economic activities, both in a rural and urban setting. The quantitative section will involve the analysis of the responses obtained from the questionnaire surveys, while the qualitative section will be based on a critical analysis of the responses obtained from direct interviews. Sampling processes suggest that probability sampling is appropriate for the next step of the research (Babbie, 2010). Moreover, some selected government agencies will be visited for the collection of information about economic development in Sri Lanka.

Research Design

As this study will utilize both constructionist and positivistic paradigms, the focal point will be to derive objectivity and in-depth analysis of the study. In so doing, quantitative and qualitative approaches are applied. Through a combination of these research designs, data to be retrieved will be gauged using both strengths of qualitative and quantitative designs, which include the strength of validity and reliability found in the quantitative approach, while the qualitative design offers in-depth analysis of data. In this manner, it is expected that a more robust and meaningful conclusion can be gauged by the research (Bryman, 1988 cited in Udokwu and University of Missouri, 2009).

Research objectives and research questions are developed to set the focus of the study. For this research paper, descriptive research will be adopted, implying that the study shall gauge on existing characteristics of the variables under the study within its own natural setting. The study will initially locate and identify respondents in both rural and urban areas involved in economic and trade activities. Information will be collected from them regarding various economic schemes and the overall problems they face. This will involve the administration of questionnaires to the selected respondents. Thereafter, visits will be made to government agencies, and information collected about overall development in Sri Lanka. Key sources of information in the government agencies will include CBSL annual reports, World Bank reports, ADB reports (Duma and International Monetary Fund, 2007).

Proposed Analysis of the Data

The instrument to be utilized is a self-developed questionnaire, which will be composed of ten items, with additional eleven open-ended interview questionnaires. The first set is gauged to inquire the respondents’ opinion and perception on the various economic schemes introduced by the government as well as how they have achieved the set goals. The eleven-item questionnaire will supplement information for the answers derived from the interview with respondents. Data will be analyzed using Microsoft Excel, 2010 version. Various pivot tables in form of frequencies, mean, and mode will be used for cross-tabulation. In addition, graphs of comparison will be used, and other statistical data will be accomplished using different function tools within Excel. Data analysis will be in accordance with the stated research questions. Results expected from the study include the number of economic programs introduced for both rural and urban traders, the level of effectiveness of the problems, some of the current evident problems facing the traders, the extent of indebtedness, and how it led to the decline of business activities, and lastly, some of the initiatives to be undertaken to improve indebtedness law.


The issue of rural and urban development in Sri Lanka needs serious research work that is action-based in nature. Traders are still faced with indebtedness issues that need re-dress most appropriately. The establishment of a clear indebtedness law is seen as a means of enhancing sanity and order in these sectors. As a result, this research paper will try to investigate, through the employment of quantitative and qualitative research techniques, the essence of establishing a clear indebtedness law. It is believed that the implementation of recommendations of the research will enable the realization of an effective sector in Sri Lanka.

Reference List

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