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

As of December 31, 2000, the bank had written off microfinance loans amounting
to SLR 271 million equalling amount some 27% of their total microfinance loan
portfolio. The bank estimates that as of August 31, 2001, the net loss of its
microfinance activities was SLR 43.7 million.
The Bank is currently restructuring its microfinance products, terminating those
that have become obsolete and unprofitable and replacing these with a more
focused range of microfinance credit products under the government’s ‘100 days’
action programme.
The People’s Bank
The Peoples Bank started providing microfinance and mobilising rural savings
from its inception in 1961 but similar to the Bank of Ceylon, these were dictated
by government directives. As of June 30, 2001, the Bank estimates that the
outstanding loans provided by them between SLR 10,000 – SLR 100,000 each
(their definition of microfinance) numbered 194,200. No value for total
microfinance loans outstanding was available but the bank estimated their average
microfinance loan to be about SLR 10,000 as of June 30, 2001. The interest rate
charged on loans was between 10–14% per annum, on a monthly declining
balance, depending on microfinance product. Interestingly, the bank is in the
process of setting up a microfinance division.
Table 43 People’s Bank - Microfinance Portfolio and Sources of Funds.
Loan and Deposit Portfolio
Information
June 30,
1999
June 30,
2000
June 30,
2001
No. of active loan clients NA NA 194,200
No. of cumulative loan clients 553,400 610,200 642,300
Avg. loan amt. per client (SLR ) 7,800 8,500 10,000
Total Sources of Funds (SLR Million)
Subsidised project loans (e.g., NDTF) 308 275 228
Source: Self-reported data provided in response to the Country Study Questionnaire for
the ADB commercialisation study referenced previously.
The New Comprehensive Rural Credit Scheme and the Surathura
Diriya Credit Program.
The NCRCS and the SDCP are government subsidised microfinance schemes that
are implemented by the commercial banking sector and were key microfinance
programmes of the two state banks during 2000.
Both of these programmes are heavily subsidised and the shortcomings of
government subsidies emerges during evaluation where despite interest and/or
refinance facilities, recovery rates of these two programmes implemented by the
Bank of Ceylon were 76 and 67 percent, respectively. However, the recovery rate
of the Bank of Ceylon’s Small Enterprise Development Programme, which used
the bank’s own funds, had a recovery rate of 81% despite charging a higher
interest rate.