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| Thursday, 22 January 2004 |
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$70 m ADB loan to revive rural economy The Asian Development Bank (ADB) has granted a loan package of US $ 70 million to revive rural economy in Sri Lanka. The agreement to this effect was signed yesterday by Secretary, Ministry of Finance Charitha Ratwatte and ADB Country Director John R. Cooney. The program aims to revive the rural economy and promote private-sector led economic growth. It comprises a program loan of $ 50 million to support policy and institutional reforms in the rural finances sector, and two project loans of $ 10 million each to promote rural enterprise development and institutional strengthening. Sri Lanka's rural finance sector includes savings, credit insurance, and payment services, comprising cooperative rural banks, regional development banks, the National Development Trust Fund, and Samurdhi Banking Societies. However, the sector remains fragmented and the institutions suffer from weak governance, poor repayment rates, high transaction costs, weak supervision, and recurring losses. The program loan will also promote policy changes that emphasize good governance and improved operations of rural finance institutions. It will help draw up a legal and regulatory framework and institutional reforms, and expand rural finance in conflict-affected areas. It will also support the demand side of rural finance by involving rural communities in partnership with non-government organisations in identifying, planning, executing, and monitoring sub projects. The project loans will strengthen key sector institutions that provide training in rural finance, and improve efficiency of service delivery, sector supervision, and outreach expansion. |
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