SVU of Central Bank signs MoU with RDB

The Seva Vanitha Unit (SVU) of the Central Bank of Sri Lanka has entered into a Memorandum of Understanding (MoU) with the Ruhunu Development Bank (RDB) in an innovative scheme designed to improve the capacities of the lesser privileged entrepreneurs. A pilot project was launched, to cover two communities in Hambantota. This is expected to expand into other areas later.

In this scheme, SVU has placed an advance with the RDB without interest, in order that such funds could be granted as loans to women members of “Isuru Development Societies”, initially in the two selected villages of Bopallassa and Kadiragoda, so that they could carry out small enterprises.

Loans that the women entrepreneurs will be entitled to will be limited to Rs 50,000 and the RDB will process the credit applications, perform the credit evaluations using their already available expertise and undertake the collections. To cover its overheads, the RDB will charge a nominal interest from the recipients of these loans.

One of the conditions in the MoU signed by the SVU with the RDB is that the Bank will be expected to provide advice and credit counselling to these recipients whenever necessary. Another condition is that the recipients obtain an insurance cover to protect themselves and the bank from non-repayment of the loan in the case of the recipient’s demise or her partial or total disability.

The insurance premium which will be very minimal is expected to instill in the recipients the discipline of protecting themselves from risk. The recipients will also be expected to open savings accounts in the RDB.

The Central Banks Regional Development Department’s Poverty Alleviation and Micro Finance Project (PAMP) has already organized many village communities to form ISURU Development societies.

Accordingly, the Regional Development Department’s assistance was also obtained by the SVU, through an initial visit to Hambantota to physically interact with prospective recipients and select the first two village societies. The PAMP contains components such as:- (a) skills development of beneficiaries, (b)training and enterprenual development, (c)formation of groups and societies, (d)upgrading knowledge in basic social components such as health and education, and (e)leadership skills development and management skills development.