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

It was envisaged that the Isuru Societies and then the Federations would at some
time take bulk loans directly from the Bank thus by passing the third party
involvement. To date only a few Isuru Societies are eligible to take bulk loans
directly from the Regional Banks. The Federations by and large exist due to the
management assistance given by the project staff again there is no clarity as to the
future role of the Project Office (PDO) that are continued to be financed by the
Central Bank. Should this situation change and the Central Bank stop providing
these recurrent costs, the whether the Project Offices will continue with funding
from the Provincial Banks is unknown.
This is an excellent programme that is assisting the rebuilding of the rural
economies and therefore it is recommended that:
Central Bank give at least 3 years notice to the Regional Banks prior to
terminating the current funding.
Regional Banks should immediately take steps to strengthen the Isuru
Societies as well as the 4 Federations to be able to take bulk loans and
function with less outside support. This can be achieved with external
consultancy and focused training assistance over a planned period.
Project Offices continue even after the Central Bank withdraws as it could
become easily profitable even after the Provincial Banks absorb the recurrent
costs of the office, social mobilisation and training as long as Central Bank
continues to provide subsidised capital from the IFAD loan.
Poverty Alleviation Microfinance Project (PAMP)
This project implemented by the Central Bank operates in six districts:
Kurunegala, Matale, Nuwara Eliya, Badulla, Kalutara, and Hambantota, with loan
funds of SLR 739 million made available by the Japanese Bank for International
Cooperation (JBIC). The project started in early 2001 with social mobilisation
and works and credit is provided by the Regional Development Banks but hopes
to include more NGOs than the previous project.
This project operates in a similar manner as the Small Farmers and Landless
Credit Program initially forming small groups through NGOs and credit been
provided through Provincial Development Banks and through NGOs. Unlike
SFLCP however this project will have a larger number of NGOs as participating
agencies. The project offices have already been set up in the districts and loans
are about to commence. This Project will ensure that a large number of very poor
households in these districts will have easy access to microfinance at very
reasonable rates.
The Regional Development Banks
The Regional Development Banks (RDBs) commenced operations as Rural
Development Banks (RDBs), set-up by the government in 1986, as it was felt that
the two main state-owned banks were not effectively reaching the remote rural
areas or the smallest customers. The RDBs Banks were under Central Bank
management and financed entirely by the government. A total of 22 Banks were
established in all districts, excluding the North & East region.
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