Microcredit Revolving Fund
Fifteen years after Sri Lanka's civil war ended, communities in the Northern and Eastern provinces still face limited livelihood opportunities and exploitation by predatory microfinance institutions charging above 25% interest. Families — predominantly headed by women — become trapped in vicious cycles of debt, taking loans from multiple lenders just to survive, with some seeing no way out.
The Aram Initiative has partnered with Vanni Hope, an Australian-based NGO with established experience in community development and microfinance, to implement a revolving microcredit scheme in Eastern Province. Our scheme offers loans at 10% interest, with repayments recycled back into the fund to grow it — creating a self-sustaining financial ecosystem that serves more people over time.
This isn't just about lending money. It's about rebuilding the social fabric of war-affected communities through capacity building, financial literacy, and collective empowerment.
How It Works
Phase 1 — Assessment & Formation
Vanni Hope conducts a feasibility study with Rural Development Officers to understand local credit culture and community dynamics. Lending groups are established, organised into clusters of 5–6 groups. Each cluster has a society committee that reviews loan applications, disburses loans, and collects repayments. Vanni Hope provides quality control, with initial capital allocation matched to group capability.
Phase 2 — Ongoing Support & Monitoring
Field officers visit twice monthly to deliver training, assess business progress, identify challenges (crop diseases, supply disruptions, market access), document repayments, and provide mentorship.
Phase 3 — Training Programmes
The curriculum develops sustainable business practices through modules on business planning, bookkeeping, marketing, financial literacy, savings mobilisation, and cooperative management. The approach prioritises capacity building over simple loan recovery.
Different loan types are offered: startup loans for new businesses, input loans for business supplies, and hire purchase loans with longer repayment schedules for larger investments. As the fund grows through repayments, more people can participate and existing beneficiaries can access larger loans to scale their microenterprises.
Aram's Role
- Monthly monitoring of accounts on repayment dates, ensuring accurate record-keeping and flagging potential issues
- Fortnightly direct check-ins with communities to collect data on progress and challenges
- Using collected data to design training programmes addressing emerging needs
- Supporting digitisation of records (Vanni Hope currently maintains manual records)
- Improving documentation, accounting systems, and media communication
Current Progress
- Longest-running scheme: 1.5 years in Kilinochchi and Trincomalee (funded by Empower Projects)
- Started with 15 beneficiaries, now serves 40
- Current fund size: approximately 1.8–1.9 million LKR
- Zero defaults across all beneficiaries
- 12 schemes launched across Kilinochchi, Trincomalee, and Jaffna
- Empower Projects has funded a subsequent project based on success
Future Vision
- Cooperative evolution: scaling lending group solidarity into collective bargaining units
- Community asset models: shared infrastructure like tractors, irrigation, processing equipment
- Market power through unity: villages negotiating collectively with ethical buyers
- Financial identity: documenting repayment history for formal banking access
- Technology-enabled scaling: digital platforms for repayments and ledgers
- Generational impact: building infrastructure for the next generation's opportunities
Get Involved
This initiative needs people like you. Whether through volunteering, mentoring, or contributing expertise, there are ways to help.