Millionaires are the biggest loan defaulters in Lanka
The biggest loan defaulters in Sri Lanka are the rich millionaires in
Colombo and not the poor peasants in rural areas. The Bank of Ceylon (BoC)
does not ask farmers to mortgage their land as collateral to obtain
agricultural loans and there are other ways we ensure the security of
loans, said BoC Chairman Dr. Gamini Wickramasinghe.
Dr. Wickramasinghe was addressing an international seminar on micro
finance on “Bank linkages in enhancing access to rural finance in Sri
Lanka organised by the World Bank in collaboration with the Gemidiriya
In agricultural insurance we are strict on crop insurance and the
loans are released on a personal or collective guarantee of small
groups. In the event of any crop destruction, the farmer gets
compensation from the Agriculture Insurance Board and the bank is
flexible to restructure the loan.
However, of the 1.2 million farmers in the country only 50,000 make
use of the financial assistance provided by banks under the new
comprehensive rural credit scheme where the interest rate is 8%.
Around 96% of the farmers still depend on the informal financial
sector where money lenders charge 6% - 15% interest per month, he said.
Representatives from African countries said that the main issue in
rural finance schemes in their countries is collateral.
In response Dr. Wickramasinghe said that various factors contribute
to the success of rural finance schemes in Sri Lanka and low default
High literacy rate, awareness programs on educational workshops,
newspaper articles, TV and radio programs as well as ethics and values
promoted by banks on the banking and credit system have contributed to
We have also focused on promoting subjects such as banking, insurance
and capital markets, he said.
The BoC’s over 30 years’ experience has also contributed to the
success of our rural finance projects. The BoC, a rural bank has 304
branches. We know the realities of suburban and rural life. At present
the BoC implements around 35 special credit schemes to meet the
financial needs of the varied rural communities, he said.
Dr. Wickramasinghe said that the Gemidiriya micro finance scheme is
highly successful and the 98% recovery rate is the highest in the
country. The highly participatory decision making process has led to
better targeting of the poor. It has improved governance, transparency
and accountability at village level.
The BoC is closely associated with the Gemidiriya and provides
financial assistance to village organisations and small groups with good
track records in loan repayment.
The BoC issued loans recently to selected members of Gemidiriya
village organisations in the Badulla district to purchase paddy.
This led to an increase in prices in the open market, for paddy in
the area and the farmers benefited.
The Gemidiriya People’s companies encouraged businesses and the paddy
was sold to women in villages to produce rice, and they earned profits
by value addition. More than 90% of the Gemidiriya village groups
maintain their accounts with BoC branches, he said.