BoC Thurunu Diriya achieves historic landmark of 1000 young entrepreneurs

Notwithstanding the challenges, the Bank of Ceylon ( BoC) Thurunu Diriya scheme recently achieved a landmark – a 1000 young entrepreneurs benefitting from the scheme and many more in the pipeline.

The scheme was launched over a year ago after the Prime Minister forwarded a research study of young entrepreneurs conducted in South Asian countries, including Sri Lanka, to the Policy Development Office of the Prime Minister’s Office ( PDO/ PMO), to look at the findings of the research team, the PM’s Office said in a media statement this week.

The report found that around 80 per cent of start- up businesses begun by qualified young people; do not survive beyond the third or fourth year. The main reason was that they could not access the second injection of capital, in sufficient volume, required for the expansion phase of the business at reasonable rates of interest, without collateral, or government servants as guarantors or other conditions imposed by lending institutions across the spectrum.

The research study found that after qualifying from a technical course or graduating with a degree or diploma, and in some cases, serving in an enterprise as an intern, trainee or even as an employee, the young entrepreneurs set out on their own business, rather than look for the traditional “permanent and pensionable” government employment or paid employment in a private enterprise.

These young people, raise initial seed capital from the legendary sources of “Friends, Family and Fools”, a classmate or batchmate, who was already employed, parents or a relative who is employed abroad, or generous hearted do gooders, who dole out grant funds to people who they consider “genuine,” the statement said.

The problem however was that money lenders, pawn brokers, hire purchase institutions were inherently exploitative and unaffordable. The traditional 'Seetu' group, does not provide the volumes required and is virtually unregulated and most often the money contributed vanishes. State and commercial banks demand collateral, guarantors, the state banks especially, government servant guarantors.

It was then that the PDO/ PMO was given the challenge of designing a loan scheme to arrest this problem. After wide ranging consultations, the PDO/ PMO designed the parameters of a scheme. Professionally qualified young people, under 30 years of age, who have a registered business for three years, who have a viable business loan, who are not on the CRIB list as a defaulter, and have one year's audited accounts available would be eligible, for a loan up to Rs. 500,000 without collateral, with guarantee of parents or a relative and one more account holder of the same bank branch of the lending bank, as introductory guarantor.

The BoC’s publicity division came up with the brand name “Thurunu Diriya”. The loan scheme was launched in March 2018. In one year, by August 2019, the BoC branches had financed 898 entrepreneurs. In the month of September 2019, the landmark number of 1000 entrepreneurs was reached.

In the course of practical implementation and operation of the scheme, some pragmatic changes have been made. The Thurunu Diriya age limit was pushed up to 40 years, as Nominated Officers said that most entrepreneurs had started their businesses in their 30’s. Further feedback suggested that registering a business was a massive obstacle course, with huge challenges. So a simple remedy of a certificate by the Grama Niladhari certifying that the business was in existence for three years, endorsed by the Divisional Secretary, was accepted. Certified annual accounts were substituted for audited accounts, as most entrepreneurs, did not have audited accounts.

Although at the design stage, gender was not an issue, in fact over 60 per cent of borrowers in Thurunu Diriya are women. Meeting the employment aspirations and expectations of educated and qualified females is a major challenge for Sri Lanka. Free education and free health services have facilitated large numbers of qualified women wishing to participate more actively in the economy. The traditional responsibilities of child bearing, child rearing and nurture, home making, looking after elders, etc is an additional responsibility thrust upon females.

Professionally qualified women, who had started Beauty Culture enterprises, sewing businesses, catering enterprises, child care facilities, plant nurseries, in their homes, have taken Thurunu Diriya loans for the expansion phase of their enterprise.

A perennial question is non-performing loans and presently in the case of Thurunu Diriya, it stands at 1.46 per cent. The normal tolerable rate for the financial services sector is 5 per cent. Thurunu Diriya is doing well, and a number of defaulters have been rehabilitated and are now performing due to the intervention of the Nominated Officers and other officials.