Central Bank Seva Vanitha Unit signs MoU with Ruhunu Development Bank

The Seva Vanitha Unit (SVU) of the Central Bank of Sri Lanka 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. In this regard, a pilot project was launched, to cover two communities in Hambantota which is expected to expand into other areas later.

President of the Seva Vanitha Unit - Roshini Cabraal handing over the cheque and exchanging documents with Daya Palihakkara - chairman of the Ruhunu Development Bank.

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 two selected villages of Bopallassa and Kadiragoda, so that they could carry out small enterprises. Loans granted for women entrepreneurs 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 Bank's 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, management skills and development.

It was due to these advantages that the SVU chose to identify the members through the ISURU societies in the selected villages and since training is already being carried out, the SVU was of the view that providing loans to this category of people who are being trained in the above skills, would ensure that there would be a greater chance of the project being successful.

The SVU has plans to expand this scheme to other villages in the Island as well, and hopes to interact with other Regional Development Banks in the future.

The MoU was executed on the 30th of July 2009. After the signing of the MoU, the exchange of the documents was carried out between the President of the SVU Roshini Cabraal and the Chairman of the RDB Daya Palihakkara. Speaking on the occasion Cabraal stated that the SVU's focus in the past few years has been to assist women and children in a number of ways. In order to widen its reach the Unit is now embarking on innovative projects that would help entire communities of people.

In that way more people would benefit and this new scheme is one such project. She also expressed her gratitude to the Director Regional Development of the Central Bank of Sri Lanka and the Chairman and staff of the Ruhunu Development Bank who supported and assisted the Seva Vanitha Unit to design and commence this new and exciting project.