SLECIC helps those going abroad for employment

The Sri Lanka Export Credit Insurance Corporation has now come to the aid of citizens who would be going abroad for employment.

This comes in the form of a Bank Guarantee Scheme especially designed to encourage commercial banks to finance purchase of air tickets.

SLECIC says this is being considered as a significant part of Foreign Exchange earnings and identified as of immense export potential, and area deserving incentives.

The main objectives of the scheme are:

* to alleviate financial difficulties faced by Sri Lankans selected for employment abroad regarding their air passage;

* to promote, export of services resulting in additional foreign exchange earnings to the country;

* to reduce unemployment.

Eligibility
The applicant should

* be between the age of 18-50 years;

* be in possession of a valid passport;

* forward a copy of the offer of employment in a foreign country together with a letter of appointment from the prospective employer or recruiting agency in Sri Lanka;

* Grama Sevaka Niladhari Certificate confirming the permanent residence of the applicant;

* Copy of Registration of Sri Lanka Foreign Employment Bureau;

* Consent to open a Savings Account and an NRFC A/c with the branch of the bank at the time loan is granted.

* A quotation for the cost of air ticket from an approved travel agent (IATA member)

The bank submits the proposal for the guarantee together with guarantee fee and supporting documents as above. The security for advances granted by the banks include two personal guarantors whose monthly income is not less than Rs. 2,500, Rs. 5,000 each. Initially, the Maximum Liability Limit of the guarantee was fixed at Rs. 20,000 which is the actual value of one way ticket. The repayment period under the guarantee should not exceed 24 months with a grace period of 03 months.

The air ticket of the applicant should be purchased from a Travel Agent, a member of the International Airline Travel Association (IATA) and the funds are released directly to the travel agent by the bank o/a of the applicant. When the bank submits the application, the guarantee fee of Rs. 250 and supporting documents for each loan should be accompanied. The premium payable at the rate of .30 cts, per Rs. 100 on the highest balance outstanding should also accompany the monthly declaration to SLECIC in respect of each guaranteed account in duplicate until the entire loan is repaid.

Risks covered
Risks covered under the guarantee included non payment by applicant on whose behalf cost of passage had been granted to the travel agency in respect of overseas employment, due to his/her protracted default or insolvency. Extent of cover was fixed at 60% of the guaranteed loss resulting from inability to recover bank's advances. The bank is obliged to continue recovery action. Amounts recovered are shared between the bank and SLECIC in the same proportion the claim was paid.

Development of the scheme
Originally, the scheme operated on a experimental basis for a period of six months with an exposure of Rs. 10.0 million. The total allocation utilised by the banks as at 10 October 1994 was Rs. 8,167,494. Following the Gulf crisis the scheme was amended.

An up front premium of Rs. 800 for each guarantee was introduced instead of monthly premium. To reduce documentation and minimise paper work commercial banks were requested to furnish quarterly declarations indicating the advances granted and payments received, instead of monthly declaration. The repayment period of the advance granted was also extended from 18 - 24 months. These amendments took place on 30 March 1994.

The Ministry of Labour & Vocational Training launched a programme to generate Foreign Employment for 3000, 000 in 1995 through the Sri Lanka Bureau of Foreign Employment.

On October 12, 1994, the Ministry of Internal & International Commerce & Food extended approval for the scheme of SLECIC until the entire Permitted Limit is exhausted and for the scheme to operate on a revolving limit.

Value of SLECIC guarantee is equal to 100% of the Cost of air ticket. To assist the programme to guarantee foreign employment for 300,000 persons in 1995 through Sri Lanka Foreign Employment Bureau, SLECIC incorporated further amendments.

SLECIC guarantee covers actual cost of air ticket. On 15 August 1995, the Corporation indicated that specific guarantee issued on a case by case basis will carry an up front premium of Rs. 800 and if the cost of ticket exceeds Rs. 20,000 premium will be payable at 5% of the cost of air ticket. The extent of cover to commercial banks under the guarantee was raised from 60 - 66 2/3% to be on par with that of a Pre Shipment Credit Guarantee.

On 12.11.96 SLECIC increased the Guarantee Fee to Rs. 750 which is equivalent to the guarantee fee payable by Small Scale Exporters. Further up front premium was increased from Rs. 800 to Rs. 1000 if the cost of the ticket is Rs. 20,000 or less.

Total exposure under the scheme was raised from time to time and presently operates at Rs. 35.0 Mln. In June 1997, SLECIC launched the Whole Turnover Bank Guarantee Scheme on Cost of Passage Advanced to Sri Lankans Going Abroad for Employment. This was a further innovative approach of SLECIC.

Whole turnover cost of passage scheme
The scheme was indeed an improvement of the original scheme. It offers coverage of 70% of the guaranteed loss that the bank may sustain to the protracted default/insolvency of the applicant. An up front premium of Rs. 1000 is payable by the bank at the time of submission of proposal if the value of ticket is Rs. 20,000 or less and if the value exceeds premium payable will be 5% of the cost of ticket. Declarations have to be submitted bi-annually.

Based on the utilisation of the specific cover the Corporation has fixed the following permitted Limits to the banks under the Whole Turnover Bank Guarantee Scheme covering Cost of Passage.

FBOPF Special Grade - Rs. 2,200 kilo

An all time record price of Rs. 2,200 per Kg was obtained by an invoice of FBOPF special grade produced by Morawakkorale Tea Products Co-operative Society Ltd.

This tea was purchased by Unilever Tea Division and was sold by Asia Siyaka Commodities (Pvt.) Ltd.

The Central Bank's Spot Rates for transactions with Commercial Banks announced on the morning of September 17, 1998 were as follows:

The approximate middle exchange rates of following currencies calculated on the basis of cross rates quoted by Gulf International Bank, Bahrain as it appeared in Reuters Financial Information System on September 17, 1998 were as follows:

Average rates at which the following currencies were quoted by Commercial Banks in Colombo for Telegraphic Transfers at mid-day on September 17, 1998 were as follows:

Average Weighted Prime Lending Rate (AWRP) and Lowest Prime Rate (LPR)
The Average Weighted Prime Lending Rate (AWPR) during the week ended September 11th, 1998 was 15.1 per cent for all banks. The Lowest Prime Rate among banks during this week was 13.8 per cent.

Average Weighted Deposit Rate of Commercial Banks (AWDR)
The Average Weighted Deposit Rate (AWDR) of Commercial Banks for the month ended August 31st, 1998 was 9.6 percent.