Special credit scheme to develop North
*Rs.3,000 m earmarked to be disbursed initially under loan scheme
*Loan Scheme envisages meeting investment needs of people
President Mahinda Rajapaksa officially launched a Special Development
Credit Scheme titled ‘Awakening North’ which is exclusively designed for
the development of the Northern Province by the Central Bank of Sri
Lanka (CBSL) at a meeting at Temple Trees yesterday with CEOs of Banking
Institutions to discuss the contribution of the banking sector in the
Northern Province development.
Senior Presidential Advisor Basil Rajapaksa MP, Deputy Finance
Minister Ranjith Siyambalapitiya, Central Bank Governor Ajith Nivard
Cabraal, CEOs of participating credit institutions and senior bank
officials attended the meeting.
CBSL has introduced a Special Loan Scheme under the title ‘The
Awakening North’ to provide credit facilities for capital investment for
the resumption of economic activities in agriculture, livestock,
fisheries, micro and small enterprises. This could boost the livelihood
development of the people in the Northern Province.
Rs.3,000 million is earmarked to be disbursed initially under the
Loan Scheme at a concessionary rate of interest among the eligible
Micro, Small and Medium scale Enterprises (MSMEs) through Participating
Financial Institutions (PFIs) identified by the CBSL. The Northern
Province comprising the districts of Jaffna, Killinochchi, Mannar,
Vavuniya and Mullaitivu, covers a land area of 8,290 sq. km, represents
13.5 percent of the total land area of the country.
The estimated population is around 1.3 million or approximately six
percent of the total population of the country.
Accordingly, the new Loan Scheme primarily envisages meeting the
investment needs of the people to restart their livelihood activities.
Under this scheme, they could obtain facilities from the banking sector
to commence new income generating activities (IGAs).
The Northern Province has many resources. Its natural resources
including forests, agricultural land, wetlands, lagoons, bays and places
of tourist attraction would provide a solid base for economic
development in the Province. The major irrigation schemes, - Iranamadu,
Giants Tank, Muthuaiyankaddukulam, Pavatkulam, Thannimairippukulam and
Vavunikulam, and other minor irrigation schemes spread out in the
Province will facilitate the agricultural and livestock development
activities of the people. There are many viable IGAs already identified
to restore the livelihood of the people, with the assistance of the
banking sector. Even under the conflict situation, the Northern Province
produced 10 percent of the total annual paddy production of the country.
In the production of Other Field Crops (OFCs) such as red onions (40
percent of country total), Chilies (10 percent), Green Gram (14
percent), Ground Nut (25 percent) etc., the Northern Province
contributes significantly to the total production of the country.
It has been estimated that 129,000 fishermen, representing 20 percent
of the total fishermen of the country, live in 219 fishing villages in
the Northern Province. The total fish production in the Northern
Province stood at 25,900 MT, representing 12 percent of the country’s
total in the year 2006.
This shows that IGAs in the fisheries sector could be developed
substantially in the coastal areas with the provision of banking
facilities to the potential borrowers in the Northern Province.
Under the proposed Loan Scheme, credit facilities would be available
for agriculture and related activities, livestock development projects,
fisheries and related activities, micro and small scale enterprises and
trade and other self- employment projects.
The PFIs are requested to provide 90 percent of the total sub project
cost, subject to a maximum limit of Rs. 200,000 per borrower.
The rate of interest to the borrower is 12 percent and the repayment
period could be extended up to the maximum of five years including a
maximum grace period of six months depending on the nature of the
activity. The PFIs are eligible to obtain refinance from the CBSL in
respect of loans granted under the scheme at six percent per annum.
The following Financial institutions which operate branches in the
Northern Province, have been identified as the PFIs under “The Awakening
North” Loan Scheme.
Bank of Ceylon, People’s Bank, Hatton National Bank, Commercial Bank,
Seylan Bank and SANASA Development Bank.
The PFIs are permitted to provide credit facilities to eligible
borrowers to commence new income generating activities or to expand
their existing IGAs.
As usual, the prospective borrowers are required to provide at least
10 percent equity contribution of the estimated cost of the project.
The borrower could bring the equity capital in the form of cash,
kind, material or managerial capacity. Security/collateral for such
borrowing could be determined by the PFIs in negotiation with the
borrower according to the creditworthiness of the IGA and the respective
The Loan Scheme could be made a part of the efforts of the Government
to rebuild the Northern Province.
The Regional Development Department of the CBSL will be responsible
for the implementation of the Loan Scheme. The Loan Scheme will be in
operation with effect from July 2009.