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ABSTRACT
Purpose: This research paper seeks to show how the poverty and certain financing decisions are mutually reinforcing and co-integrated and, why it is happening? The paper also attempts to fill a gap in the literature pertaining to the role of credit weapon and its co-integration with poverty in a country.
Method: An exploratory study design is applied within case study research methodology using critical theory approach. The data collected by interviews and observations are complemented with documentary analysis and post-research events. These cases are from one private bank in Sri Lanka. Anonymity was necessary to protect the real cases therefore, some important background information had to be eliminated.
Results: The research show that the powerful social class, which controls financial capital in Sri Lanka, follow preferential financing policies under the façade of nationalism or patriotism and social responsibility, to protect and strengthen their own socio-economic power base, while neglecting credit applications of potential entrepreneurs from powerless class. Therefore, opportunities are lost to the society/country as a whole, so the poor remains poor while powerful class acquires more power with preferential credit capital resulting that poverty in the society and preferential lending processes are mutually reinforcing.
Conclusions: The paper has important implications for policy makers and promoters of Micro, Small and Medium size Enterprises. The research findings indicate the need to place an emphasis on some radical structural changes in the financial capital mobility system to promote enterprises and employment generation to eradicate poverty in Sri Lanka and beyond.
Keywords: Credit Capital, SMEs, Poverty, Marxism, Sri Lanka.
1.INTRODUCTION
Irrespective of the status of a country, whether developed or not, there is widely accepted consensus on increasing gap between rich and poor not only within countries but also among countries because of unequal distribution of income and wealth to all people in the whole world. Goulet asserts that "It is now apparent that development does not deliver economic wellbeing to all nations and people: in its distribution of benefits, it is not just" (2001, p. 2). Arora and Adhikari argue that credit capital from banks plays a dominant role in eradicating poverty and assert that "...financial Inclusion is crucial for emerging economies in terms of economic growth and to reduce the void between the poor...