NDB ‘Divi Aruna’ microfinance loans gear rural livelihood development

Promoting the national cause of livelihood development at grass root level through sustainable financial inclusion has always been a key focal area for NDB. The bank has pioneered many initiatives in this regard truly fulfilling its commitment towards this worthy national cause.

With the socioeconomic boom subsequent to the cessation of the 30-year civil war, the bank has intensified its growth strategies towards the rural sector which essentially forms the backbone of the country’s economy. Considering that over 80% of Sri Lanka’s population of 19.7 m consists of rural population, NDB’s focus and emphasis on the rural economies is both vital and timely.

In furtherance of the above objectives, a revolutionary new loan scheme titled ‘Divi Aruna’ – awakening of lives – commenced in June 2010, aimed at developing livelihood for prospective entrepreneurs not within the mainstream of banking.

The philosophy for introducing this scheme underlies the thinking that in the economic resurgence that will generate many growth opportunities, where industries like fisheries, agriculture and infrastructure development are poised to take off, the improvised and marginalised individuals in the rural sector may lose out if not given a helping hand at inception.

Although the project initially commenced in the north and east, the scheme now extends to the south as well. It has the significance of a microfinance project geared to livelihood development. It is a product that does not deal with individuals but with groups .The primary feature of this initiative is that no collateral is taken as security for the loans. Loan approval is primarily based on the bank’s evaluation of the applicant’s vocation and its confidence in the success of the enterprise.

The ‘Divi Aruna’ loan scheme also aims to promote a savings culture while including the marginalised and the overlooked into the main banking stream. Supplementing the ‘Divi Aruna’ loan scheme is an investment based savings scheme where it is mandatory for the borrowers to contribute an additional agreed amount every month towards a savings build up which could be used as collateral for any future expansion of business activity. Since most ‘Divi Aruna’ borrowers indicate a tendency to graduate to the SME sector within a short period, such savings build up is vital both from a personal and business point of view.

In this regard, it is interesting to note that according to a recent study conducted by the Lanka Micro Finance Practitioners Association, micro finance institutions in the country account for deposits to the value of over Rs. 55 billion with approximately five billion depositors. The said sum also includes the loan security deposits made by the borrowers of these institutions.

Since many of them live from day to day, usually spending more than they actually earn, the ‘Divi Aruna’ scheme gives the option of saving a specified sum monthly. The scheme has not only uplifted their standard of living and given them confidence to enter the mainstream of banking but has also offered them a wide array of value additions such as ATM cards, thereby instilling in them a sense of belonging to the community.

To date, NDB has financed projects across a gamut of industries through its ‘Divi Aruna’ loan scheme. These projects range from purchasing boats, equipment and nets to providing working capital for women engaged in making dry fish, financing tractors for farmers, purchasing equipment for pottery makers and livestock for dairy industry as well as granting financial assistance for infrastructural improvement .

An analysis of the projects funded up to date under the scheme reveals that the fisheries sector has accounted for the majority of loans granted while dairy and agriculture sectors have also been given equal prominence. In addition, traditional crafts such as pottery and cane products have also benefited from the scheme. As to geographical distribution of projects, the north and east have been predominantly benefited. Nevertheless, equal emphasis has been given to the other parts of the country on a need basis.

Today, ‘Divi Aruna’ has evolved as an integral part of NDB’s business proposition. ‘Divi Aruna’ financing activities have now become synonymous with every branch expansion and the bank has substantially increased its industry coverage to cover many livelihood schemes lying at the bottom of the economic pyramid.

It is envisaged that ‘Divi Aruna’ would be further expanded and streamlined to include targeted market segments such as small scale agriculturists, cultivators and milk farmers who already maintain supplier linkages with industry leaders, registered community based organisations already functioning at grass root level which qualify within the predetermined criteria established by the bank, and any new organisations formed under the supervision and guidance of NDB.

It is also envisaged that the expanded product coverage would include micro leasing, micro livelihood loans and financing of community based organisations and/or their members on a selective basis in addition to empowerment and capacity building programs.

The ‘Divi Aruna’ initiative will continue to contribute immensely to NDB’s objective of financial inclusion and the scheme has also become a tool to inculcate the savings habit among the hard working, underserved yet most deserving economic sector.