In an effort to resettle the 300000 Tamil people relocated due to ethnic conflict in the Northern part of the country, the Sri Lankan government has launched a USD 26 million microfinance loan program to spur local agriculture and business in the region. According to a press release on the Reuters portal, the efforts to rebuild the war-torn Northern region of Sri Lanka – which has been dubbed ‘Northern Awakening’- will support ‘the resumption of economic activities in agriculture, livestock, fisheries, micro and small enterprises’. A related release on the Sri Lankan newspaper Daily Mirror states that the launch of the scheme was announced by the Sri Lankan President Mahinda Rajapaksa following a meeting with heads of banking institutions to discuss the role of the banking sector in the development of the Northern Province. As per available information, the Central Bank of Sri Lanka (CBSL) will initially disburse the earmarked sum of USD 26.12 million under the loan scheme at a concessionary rate of interest among eligible Micro, Small and Medium scale Enterprises (MSMEs) through certain Participating Financial Institutions (PFIs). These PFIs which have already been identified by the CBSL include the Bank of Ceylon, People’s Bank, Hatton National Bank, Commercial Bank, Seylan Bank and SANASA Development Bank.
Under the proposed scheme, credit facilities would be available for a wide range of projects namely agriculture and related activities, livestock development projects, fisheries and related activities, micro/ small scale enterprises and trade and other self employment projects. The Regional Development Department of the CBSL will be responsible for the implementation of the loan scheme and will be in operation with effect from this month. As per information released by the CBSL, the PFIs are expected to provide 90 percent of the total sub project cost, subject to a maximum limit of LKR 200 K (approximately USD 1740) per borrower. The remaining 10 per cent is contributed by the borrower either in cash or kind. The rate of interest to the borrower will be 12 percent per year and the repayment period could be extended up to a maximum of 5 years including a maximum grace period of 6 months depending on the nature of the activity. Under the scheme, the PFIs will be refinanced by the CBSL at 6 percent per annum.
The Northern Province of Sri Lanka, which includes the districts of Jaffna, Killinochchi and Mannar among others, represents 13.5 percent of the total land area of the country and approximately 6 percent of the total population of the country. As per available information, the CBSL has identified the forests, wetlands, lagoons, bays and places of tourist attraction as well as agricultural land in the Northern Province as a base for economic development. In a related development, the Board of Investment of Sri Lanka (BOI) recently revealed that several ‘local and foreign investors’ have also shown interest in infrastructure projects in the Jaffna peninsula, as per this press release on the Indian daily The Hindu.
An island nation in the Asian sub-continent, off the southeastern tip of India, Sri Lanka has been witness to an on-and-off insurgency against the government by the Tamil Tiger separatist organization which fought to create an independent Tamil state. The insurgency that has existed for most of the last 25 years has caused significant hardships for the population, environment and the economy of the country, with over 80,000 people officially listed as killed during its course. In May 2009, the President Mahinda Rajapaksa officially claimed end of the insurgency and has been working on a plan since to resettle most of the internally displaced persons (IDPs) within 180 days.
As per a 2007 estimate by the World Bank, 23 percent of Sri Lanka’s population lives below the poverty line. It is also estimated that nearly 70 percent of Sri Lanka’s population does not have access to banking facilities. The unmet demand for microfinance in Sri Lanka stands at approximately USD 1.2 billion, as per this 2008 MicroCapital press release.
By Bharathi Ram, Research Assistant
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