National Development on a planned basis in the Maldives was initiated
in 1985, atoll development in particular has been given a very high
priority in the National Development Plan. The first plan covering
the period 1985-1987, and the subsequent documents stressed the need
to reduce the disparity that has been existing between the capital
Male' and that of the atolls. In Maldives the disadvantaged groups of
people, namely those living in the atolls are synonymous with the
poor, although there is no absolute poverty in the country as in the
sub continent. Therefore any focus in the Atoll development in the
Maldives could be regarded as a poverty alleviation focus in the
national context. In Maldives poverty alleviation primarily means the
reduction of regional disparities in living conditions since poverty
problem in the country are primarily related to remoteness of islands
and lack of services due to mainly sparse population. In addition to
income, the governments definition's of poverty therefore include 11
other factors: access to electricity, transport, communication,
education, health, infrastructure, potable drinking water, recreation
facilities and selected consumer goods, the quality of housing and
the natural environment, and the incidence of food security and
The overall economic development
witnessed by the Maldives over the last two decades has been very
impressive. However, during the recent years (1997 to 2000), the
growth rate of Gross Domestic Product (GDP) has moderated to more
sustainable levels. The average rate growth for the last four years
has been approximately 6.8 percent, which is significantly higher
compared to regional growth rates and the growth rates of the Least
Developed Countries (LDC). The South Asian region witnessed a growth
rate of 5.9 percent between 1997-2000 while the LDCs during the same
period experienced a growth rate of 4.5 percent.
sustained growth in GDP was largely attributable to the expansions of
the tourism sector (which contributes to over 70 percent of foreign
exchange receipts of the country) and due to its spin offs in the
sectors such as transport and communication. Tourism sector's
contribution to the GDP is over 33 percent, while the contribution of
the transport and communication sector were a little over 15 percent.
The traditionally dominant fisheries sector's contribution to the
GDP has been steadily declining in the recent years and stood at 6.0
percent in 2000. Construction sector, which has experienced a surge
in the last decade, contributes to 3 to 4 percent of GDP while the
manufacturing sector dominated largely by fish processing and garment
industry contributes to about 9 percent of GDP.
Loans from this account ranges from Rf 25 thousand to 7.6 million.
Categories include agriculture, printing, embroidery and tailoring,
launderette and dry cleaning, operation of clinics, filming, graphic
designing, electrification, taxi service, repair and maintenance
Electrification Project is being carried out since 1999 with a
revolving fund of Rf 10 million with the objective of electrifying
smaller islands. As at June 2002,36 islands have been electrified
under this project. Loans range from 120 thousand to 500 thousand
with a service charge of 8 percent per annum.
government channels credit to the fisheries sector through two
schemes – the first being the allocation of funding that is made
for fishing boats. A total of about 200 loans have been provided for
fishing boats (boats, mechanization etc) of which over150 were
financed from external donor funds and about 60 out of Government
budget. Outstanding number of borrowers stands at close to144.
Financing of Rf 641,300 is currently provided for fishing boats
constructed by Maldives Industrial Fishery Company (MIFCO). The
financing term is 10 years with bi-monthly payments calculated as a
hire purchase arrangement with title passing to the lessee upon full
and final payment. The full cost of the boat is financed under the
scheme. Since 1998, 60 boats have been financed at the request of
Ministry of Fisheries Agriculture and Marine resources (MOFAMR) for a
total cost of Rf35,7million. MoFT maintains the loan repayment
has also been provided by MOFAMR for fish processing. By the end of
2001 from an allocation of Rf3 million, Rf2.19 million has been
disbursed to 256 borrowers in 33 islands in 8 atolls. The loan size
ceiling is Rf25,000 and loan term for borrowers is two years
including a six-month grace period. The interest rate is 7 percent
that includes the 6 percent charged by MoFT to MOFAMR and 1 percent
administrative charge by MOFAMR. Loan disbursement is by cheques that
are cashed in a BML branches. Loan repayments, in cash, are collected
through the Island or Atoll Office.
of Womens Affairs and Social Security (MWASS) since March 2000 has
allocated Rf1 million out of budget for micro credit to disadvantaged
women with half of this money allocated to Male' and half outside
Male'. By late 2001 loans of Rf 15 thousand each were made to 35
borrowers in Male' using up the full allocation. Loan allocation to
women outside Male' are yet to be disbursed as few loan
applications, according to MWASS, meet satisfactory standards. Loans
are disbursed through the MWASS and loan repayments are collected by
BML branches in Male and the Atolls.
Development-Banking Cell (DBC) of the Bank of Maldives was
established in June 1990. Ever since its inception, the DBC has
played a pivotal role in providing and promoting development-banking
activities targeted mainly to the Atolls. The bank is currently
undertaking two major projects – The Atolls Credit and Development
Banking Project (ACDBP) and the Southern Atolls Development Project (SADP).
Atolls Credit and Development Banking Project (ACDBP) is being
carried out since 1990 with the objective of reducing the income
disparity between and within the atolls and Male' by introducing
development banking activities.
The total amount of the project fund is US$ 6million of which
US$3 million is a loan from IFAD. The remaining 50 percent is
financed by UNDP (US$389 thousand), the Bank of Maldives (Plc) Ltd.
(US$1.6 million), Government of Maldives (US$506 thousand) and the
beneficiaries (US$400 thousand).
beneficiaries of the scheme are classified into two groups – the
primary target group and the secondary non-target group. The primary
target group consists of :
of 6 persons within the income bracket of Rf 3000 per month, families
of 7 persons within the income bracket of Rf 4000 per month and
Female headed households. The secondary target group is being
financed by the bank from the deposits mobilised by project branches.
Southern Atolls Development Project (SADP) was initiated in 1995 with
a loan of US$ 2.92million from IFAD with the objective of creating
and expanding income generation and employment opportunities by
expanding development-banking facilities. The current total project
fund of US$8.1million comprise of contributions from IFAD
(US$2.9million), OPEC (US$1.5million), UNDP (US$165 thousand), UNICEF
(US$ 70 thousand), Government of Maldives (US$ 613 thousand), Bank of
Maldives (US$ 1.64 million) and the beneficiaries (US$1.179 million).
projects were run in four Atolls under donor assistance since 1997.
The first of these projects was the "Atoll Development for
Sustainable Livelihood project" conducted in Shaviyani, Noonu,
Vaavu and Laamu Atolls. Since 1997 three other projects supplemented
the targeted Atolls namely "South Asian Poverty Alleviation
Project" in Noonu Atoll, "Promoting Sustainable Human
Development" in Vaavu Atoll and "Promoting Income Generation and
Employment Creation" in Laamu Atoll.
The actual impact of these projects on the living standards of
people in Atolls are not known as no proper assessment of the project
has been done to date.
Development Funds (ADFs) has been established with the objective of
enabling development activities to carry on in a sustainable manner
after the completion of the above-mentioned programs funded by the
Government, UNDP and IFAD. Currently the programs are on going in
four Atolls: Noonu, Vaavu, Laamu and Shaviyani. In principle, ADFs
are financed from funds remaining from a previous project, the
community, and the Government in three equal portions. On completion,
total ADF funding will be Rf2.4 million for Noonu Atoll, Rf1.0
million for Vaavu Atoll, Rf1.55 million for Laamu Atoll, and Rf3.05
million for Shaviyani Atoll: a total for the four atolls of Rf8
million of which Rf2.7 million will be from the Government budget.
These funds are earmarked for credit to individual borrowers and for
community-service utilities. Without donor support, Government is
currently unable to extend ADFs to other atolls.
is a wide disparity in the levels of income between Male' and the
Atolls. Male' is the hub of economic activity in the country and
most of the small and large businesses are centered around Male'.
However, the government's recent policy of decentralization, the
activities of the DBC of the BML and the policies of government
geared towards creating better employment opportunities are
increasingly helping to reduce the disparity in living standards and
increasing income levels. However, much remains to be done to address
poverty and income disparity issues. The average level of per capita household income in the
Maldives is about 24 Maldivian Rufiyaa per person per day, equivalent
to approximately US$ 2 per person per day.
the 10 most populated atolls there are an estimated 25,000
households. According to a recent study on Micro finance in Atolls,
based on lending under SADP and ADCBP there is a market potential for
micro credit in the range of 15-20 percent of households which
translates to over 3,750 to 5,000 borrowers in the 10 atolls. At
present the SADP and the ADFs are serving over 1,600 establishments.
This is about 30 percent of the market.
At an average loan outstanding of Rf18,000 , the unmet demand
would be Rf 40 – 60 million and would lead to micro credit in
aggregate being equal to about 5 percent of private sector claims in
the banking sector.
in the conventional sense has little applications in the Maldives
mostly owing to the high setup up costs of any income generating
activity. Regional success stories of microfinace schemes cannot be
emulated in the country without substantial restructuring as any such
scheme to operate successfully in the Maldives would involve high
administrative and transaction costs as a result of the widely
dispersed geographic nature of the archipelago.
Further, banking facilities are not developed in the outer
Atolls. The Bank of Maldives Plc is the only bank that operates its
branches outside Male. This has also resulted in an acute shortage of
awareness of banking services. Therefore, building general public
awareness and broadening the banking network should be and integral
part of the efforts to create a conducive environment to nurture
micro, small and medium enterprise (SME) financing.
If microfinance schemes are to be successful in the
Maldives, the schemes have to be re-engineered in such a way that it
is geared more towards financing small and medium enterprises (SMEs).
These activities should also be particularly targeted to the areas
and regions most in need of infrastructure and service development.
In particular, infrastructure is crucial in generating more
productive employment opportunities.