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

However in general the majority of CAP organisations suffer from poor
accounting and lack of training in microfinance good and best practice standards
as well as low levels of funding for credit. But organisations such as HPDF have
also developed there own creatively successful policies to ensure 100% loan
repayment rates. The HPDF policy is that even if one loan instalment is not paid
then the village society has to take the responsibility for its payment in the
following month to the HPDF that is the divisional level organisation.
This is strictly applied and in the 10 months from January to October 2001, 338
such loans were paid up fully by the village organisations on behalf of members.
This discipline is believed to be an example of a good policy that could be
adopted by other NGOs and CBOs in Sri Lanka. However circumstances such as
drought and floods could be exceptions to the application of this policy.
HPDF provides loans at 36% per annum interest on a declining balance basis and
provides loans for a host of activities as shown in the table below. Their policy is
to give loans based on the individual members needs rather than on externally
directed areas specified by the organisation. The repayment period is also decided
by the members within certain limits giving the organisation a client oriented
focus.
Another difference between HPDF and other CAP organisations is that they have
done away with small group formation since 1999 and only has village
organisations. The reason’s given are that members most of whom are daily paid
workers save time and money by not having weekly small group meetings and
secondly that the HPDF managed to expand its outreach speedily to 50 new
village organisations without going through the time consuming formation of
small groups. The overall impact of this change has yet to be examined in depth
prior to recommending it as a general principle for building outreach.
Although the figures show a growth in 2000 in actual fact the program has
deteriorated and in some areas collapsed since the RDTI ceased direct linkages
and after the termination of SIDA and SLCDF assistance. The sharp growth in
1997 and 1998 was due the influx of new funding from SLCDF for access to
credit for some of the organisations.
Growth is shown only in few districts and projects where the village level
organisations or the divisional level organisations have linked to other existing
projects or have continued to receive donor assistance. Besides SLCDF supported
projects two districts where growth occurred are Badulla and Anuradhapura
where the village organisations linked with the Badulla IRDP and NCP
Participatory Project for credit and training through the District Organisation.
Another example is the divisional level organisation in Habaraduwa where a
Dutch donor ICCO supported the Habaraduwa Participatory Development
Organisation (HPDF) as discussed previously, with SLR 3.6 million funds for
training, credit and other expenses for two years ending 2002.
The CBOs created under CAP program have reached some of the poorest groups
and as seen the highest rate of success or survival has been by CBOs that have
received direct donor support as in the case of the HPDF or have linked with
another larger donor project such as in Badulla and Anuradhapura. It is believed
that other existing CBOs who have no such linkage should urgently form linkages
with other existing donor funded projects or organisations such as SEEDS.
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