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

The majority operate revolving loan funds and one third of the NGOs stated that a
borrower can take more than one loan at a time. The majority require some form
of collateral and on the whole this takes the form of individual and group level
guarantees and savings, with a few NGOs requiring physical assets as collateral.
Approximately one third of the NGOs provide consumption loans that in
themselves represent relatively a low level of the total loan portfolio. Some 75%
of the NGOs calculate interest on loans on a declining balance and rate stepping is
not wide spread.
Loan capping is practised by some 85% of the NGOs with half of them capping
the first loan at SLR 5,000 and one third have a cap at SLR 10,000 and above.
Most of the NGOs that have phased loan sizes have a second loan cap of more
than SLR 10,000 or above with about half of these having a cap of SLR 20,000
and above. Of those who have a third phase the majority have a cap of SLR
30,000 or above with loans for SLR 50,000 being common at this stage of the
clients credit cycle. Over half of the NGOs had over 75% women borrowers and
approximately 20% of the NGOs had 90% or more women as borrowers.
In terms of portfolio performance management practice on time incentive
repayments with priority on receiving a further loan being the norm, although
prizes, entitlement to training and other services are also practised. In terms of
follow up activity a clear majority of NGOs follow up with letters and field visits
with a periodicity between one and three months after a loan repayment has
become due and not paid.
About half of the NGOs practice ageing of loans and the starting point for ageing
is rarely less than 90 days. Approximately one third of NGOs classify a loan as
non performing after 90 days however over one third of the NGOs do not classify
a loan as non performing until after one year and only 15% admitted to having
written off a loan. Approximately 40% of the NGOs have used mediation
councils to recover repayments and some 10% have used legal redress fort the
same reason.
Approximately half operate a loan insurance or security fund that in the main is
annexed from group savings to cover the risk that ranges from 1 to 10% of the
loan portfolio with the average being 5%. A few NGOs operate government
backed farmers insurance schemes but the majority do not purchase external
insurance products.
Over half of the NGOs admitted to receiving some training in areas related to
microfinance, such as basic book keeping, social mobilisation and accounting.
NDTF were frequently cited as a source for training of both microfinance and
enterprise development.
More than half of the organisations said that the S & C operations had been
evaluated externally. All of the funding organisations and institutions appear to
evaluate the NGO prior to proposal acceptance but it is not clear to what extent
these funders engage in monitoring and evaluation during and after the lifetime of
the project. With one or two exceptions none of the NGOs have had an impact
assessment of their S & C activities. Several organisations claimed to have
undergone an impact assessment, however only one of them was able to identify
accurate indicators for this purpose.