Northern Finance

Feb 13, 2010 (LBO) – Sri Lanka’s central bank is planning a 100 million US dollar re-finance fund for the northern Jaffna peninsular which is seeing an economic revival after a highway to the south was opened with the end of a decades long conflict. The Northern Regional Development Fund will channel loans to businesses in the region through existing banks.

Already a three billion rupee (26 million US dollar) re-finance scheme for small loans called Vaddakin Vasantham, or Northern Revival which was set up by the Central Bank, has seen a flood of loan applications.

The new fund is being started following request made for a special development bank for the region at a forum attended by Central Bank Governor Nivard Cabraal last month in Jaffna.

“We will create a fund of about 100 million US dollars,” Cabraal says. “If we set up a special bank, we will have to set aside several billion rupees to capitalize it and it will also have operating expenses.”

“By channelling the funds through existing banks we can make sure that all the money will go to the people.”

The central bank is also looking for space to set up a regional office in Jaffna.

Banks are rushing to open branches in the north after a war with Tamil Tige