Sri Lankan Credit Unions Struggle to Rebuild

A Sri Lankan credit union representative stands on the site of a coastal credit union completely destroyed by the tsunami.

As Sri Lanka begins the long process of rebuilding after one of the worst natural disasters in history, many credit unions are beginning to comprehend the difficulty of the task ahead of them.

According to L.B. Dasanayake, general manager for SANASA, the Sri Lankan credit union federation, the extent of the damage in many regions is still not fully understood. Reports from regional managers continue to trickle in, says Dasanayake, who expects a nationwide survey to be completed by early February.

Currently, SANASA knows of over 200 credit unions that have been destroyed and another 500-600 damaged, a number that Dasanayake expects to rise as more information arrives from the remote Eastern region and Northern Tamil-controlled areas.

Few of the country's credit unions are computerized, says Dasanayake, making reconstruction an extremely difficult process. For some, such as Matara District Union, the process will be easier. The district office has long had a requirement that local credit unions send summary data monthly. This will ease the process of reconstructing records, even for those credit unions that have lost their books, according to Normunds Mitzis, WOCCU Uzbekistan project director and member of the Sri Lanka assessment team.

Waterlogged accounting records dry in the sun.

Others, however, are not so lucky.

The Kaburugamawa Epitamulla Godakanola credit union building was completely destroyed by the tsunami, leaving little more than a pile of rubble on the beach. "We are asking families to bring in their passbooks, to attempt to rebuild our records," says the credit union's manager. "But many do not have them because they were washed away." The manager believes that a partial record can be created from their 2004 audit report, but says that it may take months to accomplish this.

The loss of furniture, safes and cash is another challenge for credit unions attempting to rebuild after the tsunami. For many, their entire store of cash has been swept into the sea. So much cash has been lost by coastal credit unions, other financial institutions and individuals that the Central Bank of Sri Lanka has begun printing additional currency to compensate.

The greatest risk to fragile credit unions, however, may not be from the physical damage they have sustained. Already, local government officials and borrowers are asking the credit unions to completely forgive all loans to coastal residents.

"There is pressure to write everything off," says Nimal Martinus, regional director at a Norwegian NGO involved in relief efforts in Sri Lanka. This, says Martinus, would be extremely challenging to SANASA and other lenders in the area. "All institutions should be trying to restructure loans in response to the needs of their clients, but the loans should not be written off."

Individuals or organizations wishing to support the Tsunami Disaster Relief Fund can make a contribution through the World Council of Credit Unions' Worldwide Foundation or the National Credit Union Foundation (US). Information can be found on both websites www.woccu.org or www.ncuf.coop. To date, WOCCU and NCUF have received nearly $300,000 from credit unions and credit union partner organizations to support rebuilding the devastated South Asia credit union movement.

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented more than 290 technical assistance programs in 71 countries. Worldwide, 51,000 credit unions in 100 countries serve 196 million people. Learn more about World Council's impact around the world at www.woccu.org.