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Sanasa Development Bank - the poor man's capital mobilizer



Founder Chairman of the Sanasa Development Bank Dr. P.A. Kiriwandeniya.
Pictures by Sumanachandra Ariyawansa

Sanasa Development Bank Ltd, has revolutionised banking practice by not only establishing its customer base among the poor of Sri Lanka but by also mobilizing financial resources among the city-based rich and siphoning them to those areas of the country where poverty is starkly present.

Thus, Sanasa Development Bank, as its founder Chairman Dr. P.A. Kiriwandeniya reveals in this interview, is not only a means to narrowing the wealth gap in the country but also a chief catalyst in national development.

Q: What's the mandate of the Sanasa Development Bank?

A: Sanasa is a movement. It has within it some 8,500 community-level and primary level societies. Sanasa was set up by a Cooperative Act; it is some kind of Cooperative Society.

But based on these community organisations we founded our company, which is involved in direct business. A cooperative is usually involved in social welfare activities also. It is involved in various activities at the community level including those of a financial nature. But based on the Sanasa community societies we believed we also needed a strong financial and business arm.

So we introduced a four pillar approach. We analysed the market economy and found four areas which are very profitable. One is the banking and financial industry. Second is the insurance industry, third the construction and development industry and fourth, the production and marketing industry.

These are the most profitable areas in the market economy. One of the most basic problems faced by the rural poor is that they do not possess proper financial services. There is no insurance industry in the rural areas.

This is confined to the business community and the upper middle class. The poor have no awareness of the insurance industry, they think it is a luxury. So, there is good potential for growth in the insurance industry. In the area of construction and development, contractors earn considerably.

The poor have no access to these areas. Nor do they have access to scientific and engineering facilities. Then comes marketing which is a big issue for the rural people.

More than 40 percent of what they produce is wasted. There is no proper market network, no purchasing system, nor do the poor possess an organisation to perform these functions.

These four areas we took over. Now we have a very strong network at the village level.

In 1997, after negotiations with the Central Bank, we launched our banking programme, That is, the Sanasa Development Bank was founded. We are like any other development bank, for instance DFCC and the rural banks. Therefore, this is our 10th year as a bank. Sanasa is owned and introduced by the rural poor.

There are two ways in which banks are established. One way is through the State. For example, the National Savings Bank. The other way is for the rich of the country to establish banks. Numerous companies and persons mobilize their capital and establish these banks. Under normal circumstances, the poor cannot establish a bank.

The poor do not possess share capital. So, we a small group, got together, put our resources together and established this bank. This is the first occasion on which the poor, such as farmers, artisans, peasants, school teachers etc, founded a bank.

We contributed Rs. 112 million as our share capital and launched the bank. Our main mandate is to mobilize whatever money is available at the village level.

What other banks do, essentially, is that they mobilize money and invest in the city, and this is used for import and export and other purposes. We, on the other hand, mobilize money in the city areas from among the rich and transfer it to the rural areas.

Q: Any particular enterprises which you encourage?

A: We provide loans for value-added production. For example, modernization of home gardens, farms and livestock. The loan quantum is greater for such value-addition. We also provide loans for cultivation. The focus here is on crops which could be exported or marketed outside one's village.

Then we identify skilled people who have entrepreneurship. We provide money for such people to get more training and more investment. We also introduce some projects - that is, project lending. The targeted group in the latter is also those who possess skills and entrepreneurship.

Sanasa Bank's total credit portfolio is around Rs. 3.5 billion. That is entirely our own savings. This we invest in the rural areas. Money mobilized in developed areas of the country, such as Gampaha, Galle, Kalutara and Colombo we invest in the poorer areas of the country, such as, Monaragala, Matale and Badulla.

Q: How do you mobilize moneys in the urban areas ?

A: In urban areas we appeal to the people. We tell them that if they are supportive of national development they should invest with us. We dram their attention to the beneficial ways in which their money is being invested by Sanasa.

We tell them if they are interested in developing the country they should invest with us because their money is going to the needy people. We are having a very good response from people who genuinely care about the country's development and whose heart is with Sri Lanka. For a small bank we have mobilized a huge sum of money.

Then our primary societies at the village level with excess money deposit such money with us. These are called group savings. The interest rate for such group savings is high.

Farmers groups, womens groups and Death Donation Societies are such groups who invest with us.

Q: Do you operate all over Sri Lanka?

A: Oh yes, even in Jaffna. In Jaffna district we have 167, very active societies. Even in Kilinochchi we run our societies.

We even extend to Mullaitivu and Mannar. We don't discriminate against any community. In the Eastern Province we are operative in Pottuvil, Kalmunai and Trincomalee. So vast is our reach.

Q: What is your experience in loan recovery?

A: Very good. Our past dues are less than four percent. That means our loan recovery is excellent.

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