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

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.
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