HNB launches micro finance insurance scheme

Hatton National Bank (HNB) and HNB Assurance Ltd have introduced a micro finance insurance scheme for clients of the HNB Gami Pubuduwa (Village Awakening) micro finance scheme. A spokesman for the Bank said that this is the first micro finance insurance scheme in Sri Lanka and it has been designed to cover both life and liability of the borrowers.

New customers of the Gami Pubuduwa program will be entitled to the insurance scheme which indemnify damage against fire and natural hazards including tsunami. In death or total permanent disability of a borrower, HNB Assurance will pay the outstanding dues of the loan to the bank and the sum assured to the dependents. The sum assured is equal to the loan amount.

With the new insurance cover borrowers would be more comfortable in finding guarantors for their credit facilities. To get the insurance cover, the applicants do not require to undergo any medical tests if they are under 55 years. Another significant feature of the scheme is that the bank would bear 50% of the cost of single premium on behalf of the borrower.

Addressing the launching ceremony of the scheme HNB Managing Director R. Theagarajah said that banking in rural areas is essential for the economic development of South Asia. In the region, 900 million of the population are poor and of them 600 million are living in rural areas.

Sri Lanka is no exception and financing is the major challenge faced by farmers, small industries and small traders in rural areas. Before borrowing they should start saving and develop a relationship with a bank. Banks are in far away towns and branches and are not open in rural areas due to costs, security and other reasons. Those people do not have a relationship with banks and there is no interest or motivation to save.

As a result there is no track record when they want to get finance. Theagarajah said that the HNB recognised this and launched Gami Pubuduwa in 1989 to provide financing to people in rural areas. We recruited 100 persons from the rural community and trained them for the bank and retained them in the community. They know about the people better than any banker and for the last 15 years they have been working for Gami Pubuduwa. Micro financing is not our CSR program and it is a line of business, he said.

G.W.