|
|
 |
 |
| Sunday, 14 December 2003 |
 |
|
 |
Business |  |
| News Business Features Editorial
|
ADB approves US$ 150m loan package for Lanka The Asian Development Bank (ADB) has approved a loan package of US$ 150 million to Sri Lanka comprising a US$ 70 million package to establish a more sustainable rural finance system and a US$ 80 million package to develop conflict-affected areas. The Rural Finance Sector Development Programme aims to revive the rural economy and promote private sector-led economic growth, a news release from the bank's headquarters in Manila said. It comprises a programme loan of US$ 50 million to support policy and institutional reforms in the rural finance sector, and two project loans of US$ 10 million each to promote rural enterprise development and institutional strengthening. Sri Lanka's rural finance sector remains fragmented and the institutions suffer from weak governance, poor repayment rates, high transaction costs, weak supervision, and recurring losses. The loan will 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 in expanding the rural finance market. 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. "If Sri Lanka's rural economy is to be revived, a systemic response is needed to address constraints facing the rural finance sector," Ashok Sharma, Senior Financial Economist, ADB said. "The creation of a rural finance system offers the prospect of reducing rural poverty more rapidly and in a more sustainable way than through welfare-oriented assistance, which would only be a stop-gap measure." Under the project, lending support equivalent to US$ 10 million will be provided to rural finance institutions that meet predetermined eligibility criteria to issue small sub-loans to micro and small enterprises. About 10 per cent of the credit will be for conflict-affected areas and three quarters for women entrepreneurs. A capacity building component will help rural finance institutions develop new client-centred products and the credit line will help in the immediate delivery of credit products in resource-poor and conflict-affected areas. "While the program will directly support 10,000 small and micro rural enterprises and 850 community sub-projects, the real benefit will be felt through the outreach expansion of rural finance institutions using their own resources, estimated at 200,000 new clients," Sharma added. The loan comes from ADB's ordinary capital resources (OCR) with a 15-year term, including a grace period of three years. The rural enterprise development project loan also comes from OCR, with a 25-year term including a grace period of five years. Interest is determined in accordance with ADB's LIBOR-based lending facility. The other project loan comes from ADB's concessional Asian Development Fund, with a 32-year term, including a grace period of eight years. Interest is one per cent per year during the grace period and 1.5 per cent per year subsequently. The Ministry of Policy Development and Implementation is the executing agency for the programme, which will be carried out over four years till end-2007. The rebuilding the northern and eastern areas project will focus on the most-severely conflict-affected districts: Jaffna, Mannar, Kilinochchi, Mulaitivu, Vavuniya, Trincomalee, Batticaloa and Ampara. In these areas it will rehabilitate essential infrastructure and restore community livelihoods. Project activities will include rehabilitating 500km of major roads to provide reliable links in areas where most of the network is in poor condition, power transmission, distribution and rural electrification systems, small-scale community infrastructure in particular schools, water supply, irrigation, health centres and minor roads. The project will also help a large number of rural communities restore viable social and economic conditions for both residents and displaced people returning home. The package will also finance a technical study to provide Jaffna with permanent and reliable water supply and sanitation systems. |
|
News | Business | Features
| Editorial | Security Produced by Lake House |
