June 13, 2006 (LBO) – Hatton National Bank, Sri Lanka’s second largest privately owned lender by assets, has stepped up its micro credit programme by offering subsidized insurance policies to customers, officials said Tuesday. By passing on the credit risk to an insurance, HNB also gets a chance to reduce the statutory capital set aside to cover credit risk. In a joint initiative with its insurance subsidiary, HNB Assurance, the bank will pick up 50 percent of premium tab against lending up to a million rupees.
“The idea is to make these small entrepreneurs creditworthy, by insuring their property, mortgage or even life with three simple insurance products,” the bank’s Managing Director Rajendra Theagarajah told reporters.
Over a 17-year period, HNBs micro finance scheme Gami Pubuduwa has disbursed over 3.5 billion rupees worth of loans to start-up businesses ranging from catering, sewing garments, poultry and agriculture.
The bank’s current exposure stands at around 1.5 billion rupees spread over 100,000 customers.
“We disburse around 600 million rupees worth of loans annually. People who fall into this category, usually seek loans from 25,000 rupees up to a million rupees,” Theagarajah said.