National Microfinance Study of Sri Lanka: Survey of Practices and ...

The participating banks were the Bank of Ceylon, the Peoples Bank, the Hatton
National Bank and the Seylan Bank. However the interest of the Banks in this
scheme was low as initially the project offered a two percent incentive to the
banks to provide credit under the project. It is believed that this was not attractive
to the banks and credit moved slowly with only sixty loans being granted in a two
year period. Although a total of 204 loans to a value of SLR 4.4 million had been
recommended by the project, recently the strategy to re-finance loans was
changed and as of September 2001, 16 loans to a value of SLR 583,000 were
granted by banks
Some of these are being processed, but the project is still experiencing low
interest enthusiasm of the participating banks with slow processing and many
loans taking weeks sometimes months to process. Unfortunately the Bank with
the most interest in micro credit is the Raja Rata Development Bank. However, it
is not a participating agency, probably because it was being restructured at the
inception of the project.
It is believed that new participating agencies such as the Rajarata Development
Bank and SEEDS be included if the credit component is to be able to attain its
required outreach and if this project is to succeed. It is also possible to include
district TCCS as participating agencies after an evaluation of their competencies.
Second Badulla IRDP
In Badulla district the most important poverty alleviation focused project with a
microfinance component is the second Badulla IRDP.
This has by the far the largest social mobilisation component with the largest
number of people in savings and credit in any project currently under Ministry of
Plan Implementation. The project funded by IFAD and UNDP started in 1993 and
its second phase is ongoing with completion targeted for August 2002. Some
41,700 villagers have been mobilised into small groups and of this number 23,589
people are members of 278 village organisations including 18 in the tea estates.
The 278 village societies named Integrated Community Organisations (ICOs) are
registered with the Social Service Department. The remainder of the communities
are mobilised in small groups that will be formed into village organisations. At
present their work is co-ordinated at project level as well as divisional level and
there are social mobilisers responsible for each village.
All of the people involved are now saving at small group level with some savings
graduating to the village society level. A limited volume of credit is given by
some of the small groups as well as at the village society level. 148 ICOs were
given seed funding ranging from SLR 50,000 to SLR 100,000 from the project to
supplement their own funds. The total funds available at village society level for
credit including savings is no more than SLR 500,000 per society.
Besides access to credit through the village societies and the small groups, access
is also available to members through Participating Credit Institutions including
the Bank of Ceylon, the Peoples Bank, the Uva Development Bank, SEEDS,
TCCS and the Prajashakthi District Organisation.
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