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Sri Lanka Human Development Report 2012.pdf

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ural enterprises. Cash in hand and borrowing from family<br />

and friends provide the biggest share of funds for them. 260<br />

Since financial institutions are extremely risk-averse, they<br />

can be reluctant to finance agricultural investments, which<br />

is one barrier to improving output. Credits for crops other<br />

than tea, rubber and paddy are negligible (Figure 5.8). This<br />

hinders innovation, diversification into high-value crops<br />

and adaptation of technologies to boost productivity.<br />

For small businesses, access to finance can be constrained<br />

by low financial literacy, including the lack of skills in<br />

developing feasible business plans and adhering to loan<br />

application procedures. There is a need to both build<br />

awareness, and simplify procedures and rules. 261<br />

To tackle some of these problems, the Central Bank<br />

of <strong>Sri</strong> <strong>Lanka</strong>, after consultation with a cross-section of<br />

stakeholders, drafted the Microfinance Institution Act,<br />

with a series of amendments now under review. The<br />

government has provided funding for microfinance<br />

through government institutions such as the National<br />

<strong>Development</strong> Trust Fund and the state banks.<br />

Access to information and communication<br />

Information and communications technology<br />

infrastructure provides access to technology, knowledge<br />

and innovation; facilitates new management and<br />

Figure 5.8: Commercial Banks: Sectoral Distribution of Loans and Advances Granted to<br />

agriculture and Fishing, 2010<br />

Source: Central Bank of <strong>Sri</strong> <strong>Lanka</strong> 2010<br />

The supply of non-financial services, such as technical<br />

advice, through microfinance institutions is low. Where<br />

these services are provided, they are typically limited in<br />

range and quality. 262 Several ministries, departments and<br />

government acts control the operations of microfinance<br />

organizations, making the regulatory framework<br />

fragmented and confusing. This discourages investment<br />

in microfinance, as do restrictions on the mobilization of<br />

savings.<br />

organizational systems; and opens doors to markets and<br />

global value chains. 263 Although telecommunication<br />

services have improved over the years, they are not<br />

yet adequate to support sustained, robust enterprise<br />

development.<br />

Mobile and wireless services have rapidly increased, to the<br />

point where the entire country is connected. <strong>Sri</strong> <strong>Lanka</strong><br />

Chapter 5 Bridging <strong>Human</strong> <strong>Development</strong> Gaps: Employment and Livelihoods 93

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