Foreign Banks Destroyed Philip Gunawardena’s Dream of a Cooperative Development Bank


Ananda Meegama’s chapter on ‘A Bank for the People’, in his book on Philip Gunawardena, describes the battles fought by this Minister of Food and Agriculture to uplift the rural majority through real investment in their dark sweat and bright tears…

Philip Gunawardana & the Making of Plans

[adapted from Ananda Meegama’s Philip Gunawardena & the 1956 Revolution in Sri Lanka]

“The vested interests, the banks, the insurance companies, the blackmarketeers, landlords, capitalists, rubber, tea and coconut estate owners, all thought if the cooperatives became a success, if the Cooperative Development Bank Bill became law, and such a bank was established in this country, with a 100 branches in the first year, and 200 branches in the second year, there would be no room in the country for them.

That is the reason why the sharks led by Mr NU Jayawardena and others told the SLFP, ‘The time is up, the capitalist ship must be saved…’ The removal of Philip Gunawardena and Industries Minister, and the assassination of SWRD Bandaranaike soon followed.”

Ten years after 1948 independence, there was only one indigenous commercial Bank of Ceylon. All the others were foreign-owned banks, using local people’s deposits to give large loans and credits to foreign companies. Most countries, including the white countries, prohibited their nationals by law from depositing money in foreign banks. “We allow foreign bankers to use our money to maintain and extend the foreign stranglehold on our economy.”

There was more money than ever circulating in the villages; however, none of it was used for rural development. The attempt to set up a Cooperative Development Bank was sabotaged by the foreign banks in alliance with “spurious and artificial agitation” by the then-private Lakehouse media, led by Minister of Finance Stanley de Zoysa. The same forces who attempted to undermine the Paddy Lands Act, and the same forces who ended up assassinating a Prime Minister.

Ananda Meegama’s chapter on ‘A Bank for the People’, in his book on Philip Gunawardena, describes the battles fought by this Minister of Food and Agriculture to uplift the rural majority through real investment in their dark sweat and bright tears…

Surveys of village Sri Lanka in the late 1930s, by Professor BB Das Gupta and BR Shenoy, showed the village being bled by the high cost of credit, lacking institutions to invest in development. Philip Gunawardena explained to Parliament how the surveys showed the “fabulously rich coconut planters of Chilaw”… and the “rubber barons of Horana” did not represent those rural populations at all.

The need of the hour, then as of now, was for long-term credit transactions to take away the power to enslave villagers by the “private loan agencies, individual moneylenders, landlords and merchants” who were/are the main sources of finance.

Where new cooperatives and technology were introduced there was “remarkable progress’ yet the state had to actively support and direct the cooperative movement. Laissez-faire, which had “imprisoned the 45-year-old cooperative movement” had led to “45 years of stunted growth” and had been confined by law to credit alone, rarely helping to buy equipment or fertilizer. They were also fragmented into 10,500 co-op societies of 70 different types.

Philip wanted Multi-Purpose Cooperative Societies (MPCS), in alliance with cultivation committees, to “institutionalize all rural credit, plan and execute” agricultural development schemes, undertake minor village irrigation and construction projects, marketing, distribution, promote industries, public utilities and full employment. This was why Philip wanted a Cooperative Development Bank (CDB) to lend to the MPCSs.

The colonial government had prevented the Bank of Ceylon from being made into a State Bank, and it ended up being “controlled by prosperous lawyers and other sharks”, doing little for cultivators. The Agricultural and Industrial Credit Corporation was worse, helping speculators to fragment valuable tea and rubber properties, while the Cooperative Federal Bank was a mess. The later People’s Bank has also failed to invest in development.

Interestingly, the Central Bank had agreed with Philip on the need for a CDB. but then at “every point there was opposition, opposition from the Finance Minister, opposition from the Leader of the House and the Minister of Lands and Land Development, opposition from all”… “safeguarding the vested interests, the capitalists, the exploiters, the imperialists”. The Minister of Finance got the Daily News to join in the attack. In January 1959, in his resignation speech, Philip pointed out that the Minister of Finance Zoysa had even submitted a memo opposing Philip’s right as Minister of Food and Agriculture to present the Bill.

Philip pointed out that the existing commercial banks did not find it profitable to invest in industry, trade or agriculture. Philip wanted to give the CDB the power to grant loans to co-ops and individuals, for loans for building rural works, for financing agricultural industries, to operate as a commercial bank and as a pawnbroker.
Under pressure from the foreign banking interests (also screaming by US Time Magazine and England’s Economist) they got the SLFP to throw out the “progressive elements” in the government.

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