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

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Table 15 Badulla IRDP - Summary Data Badulla IRDP-Oct 2001 No of Village Organisations - 278 (estates 18) No of Members in Village Organisations – 23,589 No of Members in Small Groups - 18,121 Total Savings and Funds in VBOs for Credit – SLR21.7 million Total Cumulative Credit Disbursed by VBOs – SLR 25.01 million Repayments to date - SLR 15.23 million Recovery Rate -60% Loans Disbursed by Banks & NGOs to members 1993 to 2000 – SLR 32.8 million The repayment rates of loans are poor and at a level that will, over a short time, dissipate the funds. Financial and organisational management at the village level is at best sub-standard. The Second Badulla IRDP Project is to be completed in August 2002 and future of the village organisations and thus of the massive investment in social mobilisation and savings and credit is uncertain. It is believed that the majority of the savings and credit programmes at the village organisations level will collapse unless they are linked to other agencies and projects with urgent attention being essential in building the capacity of these nascent organisations. There is a need for the village society organisations to receive training in both financial and organisational management as well as microfinance training, especially in standards of good and best practice in savings and loans. There is also a requirement for business plan training and marketing as well as specific skills training. There is an urgent need for these organisations to become linked with other more competent partner organisations such as: 1. Poverty Alleviation Microfinance Project – (Central Bank implemented with JBIC funds) 2. SEEDS 3. Future in Your Hands 4. Prajashakthi District Organisations If timely donor assistance is given, the potential of the village organisations to develop into sustainable organisations is high. Currently there is a discussion to establish a trust under the Provincial Council to work towards sustainability of the village organisations and this trust could then be a platform for donors to support. 103
North Western Province Dry Zone Development Project The North Western Province Dry Zone Participatory Development Project (NWP/DZPDP) funded by IFAD commenced operations in 1993 and was completed in March 2000 although the credit component continues. The project operated in fourteen dry zone divisions in Kurunegala (eight divisions) and Puttalam (six divisions) and focused on the poorest villages in these divisions. The initial social mobilisation method followed was for groups of five to seven village women to join together to form Small Groups (SG) and all SG leaders in a village joined together to form the Village’s Self-Reliance Society (SRS). Each SRS represented by three elected leaders joined together at the divisional level of each secretariat to form a Self-Reliance Foundation (SRF). This combination of linked groups represents the poor women of the families below the poverty line in thirteen divisions in the project area. The groups meet either weekly or biweekly and at each meeting, the members collect a predetermined sum of money as each member’s savings with the accumulated savings lent as ‘fast’ loans to the needy members at an interest rate of fifty percent per month. Generally, these loans were granted to meet the unexpected financial needs of a member’s family (a child’s sickness or death in the family) with the borrower making fast repayments of the capital and interest. Each SG deposits its excess savings with the village society and the village SRFs maintains the accounts, with a finance secretary recording all financial transactions including Savings, Loan Disbursement, Capital Repayments, Interest Income, payments and other Expenses. Currently, SRFs and one hundred and twenty village SRSs (seventeen have become inactive recently) are legal entities registered under the Thrift and Credit Co-operative Societies Act and another sixty-three village SRSs are active, having applied for registration and awaiting TCCS registration. Under the current management, SRFs and village SRSs are developing into legal entities owned and operated by the rural poor, these organisations are becoming share-holders owned/driven participatory micro-finance institutions. In thirteen divisions of the district of Kurunegala 183 village SRSs, 1098 SGs are functioning with an estimated 7,486 members who are participating as owners, (each member contributes SLR 500 as share capital), as well as beneficiaries of the participatory microfinance institutions. The office bearers of the village SRSs are currently playing a more active and responsible role in identification, selection and processing of loan applications of its member beneficiaries in the SGs and SRSs, however their roles in the loan repayment process needs further strengthening. To implement the credit component of the project a new organisation named the Wayamba Human Resource Development Authority (WHRDA) was set up under the mandate of the Provincial Council. The WHRDA implemented the project’s credit component from 1993 to June 1997 and during this period it has disbursed project loans amounting to SLR8.5 million with the loan recoveries being retained in a revolving loan fund account being utilised as a rotational credit fund. 104
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National Microfinance Study of Sri
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(b) Lenders .......................
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Introduction into the pawning busin
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Microfinance Overview .............
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Savings ...........................
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List of Tables Table 1 Microfinance
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Table 70 Ratnapura District Microfi
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JBIC MFI MFN MIS MPCS MSME NCPPDP N
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Figure 1 Map of per Capita Value of
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Figure 3 Map of per Capita Value of
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Executive Summary This report provi
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Practitioner Microfinance Activity
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As a result the banks are moving aw
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The operating conditions of the con
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Donor Strategies There should be a
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Introduction to the Study The objec
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The survey does not claim to repres
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Introduction Socio-Economic Overvie
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These five years saw a spate of new
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The 'Economic Stream' Employment is
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Microfinance Clients and Beneficiar
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1. Funders of Microfinance in Sri L
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CIDA believes that microfinance act
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The Department For International De
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NOVIB Partnerships tend to be long
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HIVOS The HIVOS Desk concentrates o
Page 54 and 55: Over time SIDA noted that the loan
Page 56 and 57: Comment freely given from one of th
Page 58 and 59: the time period of the project, wit
Page 60 and 61: Only a very small part of the US 50
Page 62 and 63: The demand for loans from this fund
Page 64 and 65: Without permanent access to institu
Page 66 and 67: This broad strategy means that the
Page 68 and 69: Beneficiary targeting was generally
Page 70 and 71: The FCSs were developed the followi
Page 72 and 73: CARE's new strategy commits the org
Page 74 and 75: Each CBO determines the level of in
Page 76 and 77: The project’s overall approach re
Page 78 and 79: Figure 6 GTZ/JRP - Project Interact
Page 80 and 81: The Social Development Foundation F
Page 82 and 83: There are no sector-based quotas ap
Page 84 and 85: Over the past five years SCN has as
Page 86 and 87: UNDP in the North & East - The Jaff
Page 88 and 89: In December 2001 a new UNDP Program
Page 90 and 91: From previous experience and lesson
Page 92 and 93: World Vision Lanka WVL believes tha
Page 94 and 95: Membership Development 3500 3000 25
Page 96 and 97: Table 14 World Vision - Gramashakth
Page 98 and 99: ZOA works with community groups in
Page 100 and 101: At the village society and bank lev
Page 102 and 103: In Wayamba the sustainability of th
Page 106 and 107: DZPDP/WHRDA credit operations comme
Page 108 and 109: In the initial years they did not f
Page 110 and 111: Table 18 SPRDP- Loans 1993 to 1999
Page 112 and 113: (c)Lender-Practitioners The Central
Page 114 and 115: Society members have access to cred
Page 116 and 117: The RDBs were re-structured in 1998
Page 118 and 119: Table 25 Value of Loans Disbursed b
Page 120 and 121: The total savings and credit issued
Page 122 and 123: Table 29 Samurdhi - Loans by Distri
Page 124 and 125: In 1998 SEEDS converted to a separa
Page 126 and 127: Within the loans from SEEDS funds t
Page 128 and 129: The Arthacharya Foundation practice
Page 130 and 131: The program was assisted by some li
Page 132 and 133: However in general the majority of
Page 134 and 135: Table 33 Growth of MPCS CRBs -1990
Page 136 and 137: As at the end of December, 2000 a s
Page 138 and 139: Some 1,176 of the 1,476 Co-operativ
Page 140 and 141: A total of 74 NGOs were identified
Page 142 and 143: Finally only a small proportion of
Page 144 and 145: Table 38 TCCS Active Societies and
Page 146 and 147: District Unions - National Federati
Page 148 and 149: 4. Facilitators a) National Level F
Page 150 and 151: International Centre for the Traini
Page 152 and 153: Funder-Practitioner Microfinance Ac
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As practitioner experience increase
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Introduction and Approach The major
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State-Owned Banks The Bank of Ceylo
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Starting in 1994, the NCRCS is aime
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The Seylan Bank The Seylan Bank ent
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Figure 9 Linking of the RBIP Tools
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People's Fast reduces loan processi
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In addition, RBIP monitors the impl
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The Hatton National Bank Case Study
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Seylan Bank Case Study The Seylan B
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Until 1961 private pawnbrokers were
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Bank officials stated that PSC staf
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The urban PSCs have on average more
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The lack of flexibility has induced
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From the borrowers perspective not
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The Peoples Bank, on the other hand
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Introduction and Approach Internati
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Displaced populations are dependent
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Large tracts of land have become to
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Public markets, shops, guest houses
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The previous thriving local economy
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The Wanni Access to the area known
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Remembering that these intervention
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This type of situation is seen thro
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People IDPs in welfare centres, sho
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World Vision has been working in al
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small entrepreneurs have received t
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The exception to this is a governme
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There has been some continued acces
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Introduction and Approach A distric
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The MPCSs were equally disrupted an
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The main body of the survey is pres
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Local NGOs 11 NGOs were identified
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Local NGOs 1 NGO was identified in
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Local NGOs 1 NGO was identified in
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Local NGOs 2 NGOs were identified i
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Local NGOs No NGOs were identified
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Gampaha District Microfinance Overv
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Hambantota District Microfinance Ov
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Jaffna District Microfinance Overvi
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Staring in 1998 each DS received SL
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Matale District Microfinance Overvi
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Matara District Microfinance Overvi
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Moneragala District Microfinance Ov
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Nuwara Eliya District Microfinance
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Polonnaruwa District Microfinance O
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Puttalam District Microfinance Over
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Ratnapura District Microfinance Ove
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Trincomalee District Microfinance O
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Vavuniya district Microfinance Over
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The Wanni Area Microfinance Overvie
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Summary Microfinance Activity by Ac
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The NGO questionnaire survey identi
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World Vision Lanka works in 5 distr
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Given that these figures do not inc
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Overall, 13 of districts had levels
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Averages Value of Loans Table 78 Av
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Volume and Number of Loans The surv
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Findings The key and main findings
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Service Providers The service provi
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those incapacitated by conflict, wi
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Cultures of Dependency in Microfina
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Strategic Recommendations The key s
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Conclusion The study found that the
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Charitoneko, S. and D de Silva (200
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Remenyi, J (1991). Where Credit is
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Technical Appendix
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