Online edition of Daily News- Features: by Chandani Jayatilleke
Micro-financing plays a crucial role in developing rural economies. Micro-finance refers to small scale financial services which include savings, credit and other financial services such as insurance.
These services are not normally provided by commercial banks due to high administrative costs and lack of necessary human resources to handle micro-finance.
In addition to providing financial services, gender issues and marketing of the produce of small scale entrepreneurs are also important considerations in the provision of micro-finance, according to the Central Bank.
In providing micro-finance, it is necessary to adopt innovative policies and procedures to maximise the number of borrowers while keeping the cost low.
However, there are many banks and other financial institutions that have initiated micro-credit programs in the rural areas.
Although there are many micro-financing schemes that are available islandwide, the full potential of this sector is yet to be tapped.
"Many rural people in this country still do not have proper access to banks and savings and micro-finance schemes," says a senior banker H. M. K. B. Helarawa who is the General Manager of the Kandurata Development Bank (KDB).
KDB established by Parliament Act No. 6 of 1998, is one such bank which is contributing much to the poverty alleviation programs in the Central Province in keeping with UN's Millennium Development Goals to reduce poverty by 50% in 2015.
In this context, the bank has launched many micro-financing and entrepreneur training programs to empower the rural people thereby, reducing poverty in the villages in the central Province, bank's General Manager Helarawa told the Daily News.
Explaining the objective of the bank he said it was set up to cater to the small and medium entrepreneurs, especially those who do not have collateral to deal with large commercial banks.
"We go to the grass roots level and understand the difficulties of the people/the youth who want to make a living through a small business. And provide them finances accordingly," the GM said.
Many banks asks collateral and village people do not have such collateral. Naturally, they turn to the local money lender or 'Polee Mudalali' who would not ask for collateral but charges interest rates as high as 5 to 10% a month.
This is one point why the poor become poorer.Because the poor borrower becomes a debtor for life as he will have to keep on paying high interest rates while no money is left to save or to further invest. This is what happens in many villages, Helarawa said.
Therefore, people any longer cannot afford to take money from such lenders. They need banks which could provide them credit facilities and entrepreneur skills.
"This is where we step in. As Kandurata Development Bank, we are concerned about contributing to the poverty alleviation programs in the Central region. Already we have three programs in Kandy, Matale and Nuwara Eliya with the support of JBIC and WEF." In one of such program, the bank tells the villagers to conduct group discussions among themselves as to finding out why they are poor and what they can do to overcome poverty and various other issues in their villages. "This is an eye opener for them. They come out with various ideas and we try to help them accordingly," Helarawa said.
And at the same time the bank encourages them to save - and to start with five rupees. "When we say this to people, other people may laugh. Some would ask how a poor villager can afford to save five rupees. Or some would ask, how could you ask the poor to save by starting with a five rupee coin. But it is possible - you need to encourage them to do so. For instance we have been able to increase their savings to millions of rupees over the last several years," Helarawa said.
The bank has also appointed Gramiya nayakes to encourage savings among villagers. At present KDB has 32 branches in the Central Province and there are lots of people who have succeeded in their business having taken loans from the KDB. "For instance, a young person took a Rs. 2000 loan, a few years ago to purchase a push-bicycle and a few bushels of paddy to start a small business by selling the rice in the pola.
Today, this man has developed his business to such a height, he has the capacity to take a loan up to Rs 2 or 3 million," Helarawa. said.
In a move to expand the bank's business and services to people, the bank plans to sign a Memorandum of Understanding (MoU) with the Central Provincial Council. "Our aim is to develop small and medium enterprises and entrepreneurs through this program. We have had discussions with various officials and institutions who could help us in this exercise."
"My personal opinion is that if we get together, we can do much to support the poor to overcome their poverty issues and help in the process of poverty alleviation," a determined Helarawa said.
Speaking on the future plans of the bank he said they would start more programs to train schools leavers in entrepreneur skills and develop the agricultural sector in the Central Province.
Micro-financing plays a crucial role in developing rural economies. Micro-finance refers to small scale financial services which include savings, credit and other financial services such as insurance.
These services are not normally provided by commercial banks due to high administrative costs and lack of necessary human resources to handle micro-finance.
In addition to providing financial services, gender issues and marketing of the produce of small scale entrepreneurs are also important considerations in the provision of micro-finance, according to the Central Bank.
In providing micro-finance, it is necessary to adopt innovative policies and procedures to maximise the number of borrowers while keeping the cost low.
However, there are many banks and other financial institutions that have initiated micro-credit programs in the rural areas.
Although there are many micro-financing schemes that are available islandwide, the full potential of this sector is yet to be tapped.
"Many rural people in this country still do not have proper access to banks and savings and micro-finance schemes," says a senior banker H. M. K. B. Helarawa who is the General Manager of the Kandurata Development Bank (KDB).
KDB established by Parliament Act No. 6 of 1998, is one such bank which is contributing much to the poverty alleviation programs in the Central Province in keeping with UN's Millennium Development Goals to reduce poverty by 50% in 2015.
In this context, the bank has launched many micro-financing and entrepreneur training programs to empower the rural people thereby, reducing poverty in the villages in the central Province, bank's General Manager Helarawa told the Daily News.
Explaining the objective of the bank he said it was set up to cater to the small and medium entrepreneurs, especially those who do not have collateral to deal with large commercial banks.
"We go to the grass roots level and understand the difficulties of the people/the youth who want to make a living through a small business. And provide them finances accordingly," the GM said.
Many banks asks collateral and village people do not have such collateral. Naturally, they turn to the local money lender or 'Polee Mudalali' who would not ask for collateral but charges interest rates as high as 5 to 10% a month.
This is one point why the poor become poorer.Because the poor borrower becomes a debtor for life as he will have to keep on paying high interest rates while no money is left to save or to further invest. This is what happens in many villages, Helarawa said.
Therefore, people any longer cannot afford to take money from such lenders. They need banks which could provide them credit facilities and entrepreneur skills.
"This is where we step in. As Kandurata Development Bank, we are concerned about contributing to the poverty alleviation programs in the Central region. Already we have three programs in Kandy, Matale and Nuwara Eliya with the support of JBIC and WEF." In one of such program, the bank tells the villagers to conduct group discussions among themselves as to finding out why they are poor and what they can do to overcome poverty and various other issues in their villages. "This is an eye opener for them. They come out with various ideas and we try to help them accordingly," Helarawa said.
And at the same time the bank encourages them to save - and to start with five rupees. "When we say this to people, other people may laugh. Some would ask how a poor villager can afford to save five rupees. Or some would ask, how could you ask the poor to save by starting with a five rupee coin. But it is possible - you need to encourage them to do so. For instance we have been able to increase their savings to millions of rupees over the last several years," Helarawa said.
The bank has also appointed Gramiya nayakes to encourage savings among villagers. At present KDB has 32 branches in the Central Province and there are lots of people who have succeeded in their business having taken loans from the KDB. "For instance, a young person took a Rs. 2000 loan, a few years ago to purchase a push-bicycle and a few bushels of paddy to start a small business by selling the rice in the pola.
Today, this man has developed his business to such a height, he has the capacity to take a loan up to Rs 2 or 3 million," Helarawa. said.
In a move to expand the bank's business and services to people, the bank plans to sign a Memorandum of Understanding (MoU) with the Central Provincial Council. "Our aim is to develop small and medium enterprises and entrepreneurs through this program. We have had discussions with various officials and institutions who could help us in this exercise."
"My personal opinion is that if we get together, we can do much to support the poor to overcome their poverty issues and help in the process of poverty alleviation," a determined Helarawa said.
Speaking on the future plans of the bank he said they would start more programs to train schools leavers in entrepreneur skills and develop the agricultural sector in the Central Province.
