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

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Starting in 1994, the NCRCS is aimed at providing short-term loans for farmers to cultivate paddy and other subsidiary food crops (including pre-harvest and postharvest handling and processing activities). The total number of loans granted under the program increased from 23,271 in 1999 to 32,339 in 2000 representing a 39 percent increase by number and a percent increase by volume. The total volume of credit disbursed in 2000 was SLR 594 million (CBSL, 2001a) This increase was mainly due to the introduction of the Farmer’s Relief Scheme, which allowed defaulters to pay only 25% of their defaulted loan in order to make them eligible for new loans. The average loan size was SLR 18,000 and the interest rate applicable for on-lending under the program remained at 12 percent per annum during 2000 in spite of increasing interest rates in other sectors of the economy. This entailed a subsidy of 10 percentage points from the Treasury (ibid.) At the end of 1999, this programme cost the government SLR 68 million in interest subsidy paid to the implementing banks, and SLR 117 million of expenses incurred by the CBSL under the provisions of its Credit Guarantee Scheme. During 2000, the interest rate subsidy for NCRCS loans amounted to Rs.40.3 million on total loans of SLR 1,736 million (ibid.). The loan repayment rate for all banks participating in the NCRCS was only 65 percent and it is likely that the subsidised nature of this program exacerbated loan defaults. The cumulative loss incurred by the government and the CBSL under this program up to the end of 1999 was SLR 343 million (Sharif, 2000). The SDCP on the other hand is targeted towards promoting self-employment through micro-enterprise development among unemployed youth. For 2000, the total volume of loans disbursed under this program was SLR 171 million in 3,572 loans with an average size of SLR 45,000 and a cumulative repayment record of 53 percent. Preliminary findings of a survey of defaulters reveal that poor identification of borrowers was a key reason behind low recovery rates (ibid.) Private Commercial Banks Foreign-owned commercial banks have only very few branches in the rural areas of the country and have virtually no focus on microfinance. Of the private domestic banks, Seylan Bank, Hatton National Bank and Sampath Bank 24 also participate in the government’s NCRCS scheme referred to above to provide subsidised loans to paddy and other. It appears that only the HNB and Seylan Bank have shown any significant interest in microfinance outside of government promoted and subsidised programmes. The Hatton National Bank The Hatton National Bank was the first private commercial bank in Sri Lanka to offer microfinance products for self-employment and enterprise development. In 1989 a program called Gami Pubudu was initiated utilising the HNB's own funds with small loans being granted using project feasibility and two guarantors as 24 Sampath Bank are not profiled in this part as microfinance is a very small part of their overall activities and the bank did not provide any information on their microfinance activities. The Commerical Bank do not practice microfinance per se and were reluctant do disclose information on small loans. None of the foreign owned banks undertake microfinance activities.
collateral. Over time, probably due to the entry of others the Bank has shifted its focus from the poor to rural entrepreneurs who may include people that are in the middle class. This shift is most likely due to the wider range of subsidised actors entering microfinance such as Samurdhi. The shift to entrepreneurs parallels the Ministry of Plan Implementation’s focus on Rural Economic Advancement Program that also targets entrepreneurs leaving poverty alleviation to Samurdhi and other programs. Another motive for increasing loan size was the need to make the scheme profitable after experiencing twelve years of marginal losses. The table on the next page contains financial information concerning its microfinance activity however no repayment data was available. The HNB also participates in the government subsidised loan programmes SMILE and Surathura, although not on a significant scale. The move to make the program profitable comes at the cost of moving away from the microfinance on which the program was originally centred with maximum loan amounts of. However, despite HNB's move away from microfinance to the very poor, it must be noted that MFIs and programs in Sri Lanka focusing on the smallest segment has increased sharply in the 1990s especially through the introduction of government programs aimed at the sector. Table 44 HNB Microfinance Portfolio – Loans and Deposits Loan and Deposit Portfolio Information June 30, 1999 June 30, 2000 June 30, 2001 No. of active loan clients 10,347 9,526 9,237 No. of cumulative loan clients 30,605 34,604 38,490 Total amt. of loans outstanding (SLR ml.) 274 310 379 Avg. loan amt. per client (SLR ) 26,000 32,000 40,000 Total amt. of deposits (SLR ml.) 698 747 905 Avg. deposit amt. per client (SLR ) 10,000 10,000 11,000 Total Sources of Funds (SLR Million) Subsidised loan funds from NDTF - SMILE 55.6 55.0 39.6 Subsidised loan funds from NDTF - Surathura 28.1 13.9 10.0 Own Funds 190.7 241.7 328.9 Total 274.1 310.4 378.5 Source: Self-reported data from the HNB
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National Microfinance Study of Sri
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(b) Lenders .......................
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Introduction into the pawning busin
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Microfinance Overview .............
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Savings ...........................
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List of Tables Table 1 Microfinance
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Table 70 Ratnapura District Microfi
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JBIC MFI MFN MIS MPCS MSME NCPPDP N
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Figure 1 Map of per Capita Value of
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Figure 3 Map of per Capita Value of
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Executive Summary This report provi
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Practitioner Microfinance Activity
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As a result the banks are moving aw
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The operating conditions of the con
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Donor Strategies There should be a
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Introduction to the Study The objec
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The survey does not claim to repres
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Introduction Socio-Economic Overvie
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These five years saw a spate of new
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The 'Economic Stream' Employment is
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Microfinance Clients and Beneficiar
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1. Funders of Microfinance in Sri L
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CIDA believes that microfinance act
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The Department For International De
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NOVIB Partnerships tend to be long
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HIVOS The HIVOS Desk concentrates o
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Over time SIDA noted that the loan
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Comment freely given from one of th
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the time period of the project, wit
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Only a very small part of the US 50
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The demand for loans from this fund
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Without permanent access to institu
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This broad strategy means that the
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Beneficiary targeting was generally
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The FCSs were developed the followi
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CARE's new strategy commits the org
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Each CBO determines the level of in
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The project’s overall approach re
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Figure 6 GTZ/JRP - Project Interact
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The Social Development Foundation F
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There are no sector-based quotas ap
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Over the past five years SCN has as
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UNDP in the North & East - The Jaff
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In December 2001 a new UNDP Program
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From previous experience and lesson
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World Vision Lanka WVL believes tha
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Membership Development 3500 3000 25
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Table 14 World Vision - Gramashakth
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ZOA works with community groups in
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At the village society and bank lev
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In Wayamba the sustainability of th
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Table 15 Badulla IRDP - Summary Dat
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DZPDP/WHRDA credit operations comme
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In the initial years they did not f
Page 110 and 111: Table 18 SPRDP- Loans 1993 to 1999
Page 112 and 113: (c)Lender-Practitioners The Central
Page 114 and 115: Society members have access to cred
Page 116 and 117: The RDBs were re-structured in 1998
Page 118 and 119: Table 25 Value of Loans Disbursed b
Page 120 and 121: The total savings and credit issued
Page 122 and 123: Table 29 Samurdhi - Loans by Distri
Page 124 and 125: In 1998 SEEDS converted to a separa
Page 126 and 127: Within the loans from SEEDS funds t
Page 128 and 129: The Arthacharya Foundation practice
Page 130 and 131: The program was assisted by some li
Page 132 and 133: However in general the majority of
Page 134 and 135: Table 33 Growth of MPCS CRBs -1990
Page 136 and 137: As at the end of December, 2000 a s
Page 138 and 139: Some 1,176 of the 1,476 Co-operativ
Page 140 and 141: A total of 74 NGOs were identified
Page 142 and 143: Finally only a small proportion of
Page 144 and 145: Table 38 TCCS Active Societies and
Page 146 and 147: District Unions - National Federati
Page 148 and 149: 4. Facilitators a) National Level F
Page 150 and 151: International Centre for the Traini
Page 152 and 153: Funder-Practitioner Microfinance Ac
Page 154 and 155: As practitioner experience increase
Page 156 and 157: Introduction and Approach The major
Page 158 and 159: State-Owned Banks The Bank of Ceylo
Page 162 and 163: The Seylan Bank The Seylan Bank ent
Page 164 and 165: Figure 9 Linking of the RBIP Tools
Page 166 and 167: People's Fast reduces loan processi
Page 168 and 169: In addition, RBIP monitors the impl
Page 170 and 171: The Hatton National Bank Case Study
Page 172 and 173: Seylan Bank Case Study The Seylan B
Page 174 and 175: Until 1961 private pawnbrokers were
Page 176 and 177: Bank officials stated that PSC staf
Page 178 and 179: The urban PSCs have on average more
Page 180 and 181: The lack of flexibility has induced
Page 182 and 183: From the borrowers perspective not
Page 184 and 185: The Peoples Bank, on the other hand
Page 186 and 187: Introduction and Approach Internati
Page 188 and 189: Displaced populations are dependent
Page 190 and 191: Large tracts of land have become to
Page 192 and 193: Public markets, shops, guest houses
Page 194 and 195: The previous thriving local economy
Page 196 and 197: The Wanni Access to the area known
Page 198 and 199: Remembering that these intervention
Page 200 and 201: This type of situation is seen thro
Page 202 and 203: People IDPs in welfare centres, sho
Page 204 and 205: World Vision has been working in al
Page 206 and 207: small entrepreneurs have received t
Page 208 and 209: The exception to this is a governme
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There has been some continued acces
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Introduction and Approach A distric
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The MPCSs were equally disrupted an
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The main body of the survey is pres
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Local NGOs 11 NGOs were identified
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Local NGOs 1 NGO was identified in
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Local NGOs 1 NGO was identified in
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Local NGOs 2 NGOs were identified i
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Local NGOs No NGOs were identified
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Gampaha District Microfinance Overv
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Hambantota District Microfinance Ov
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Jaffna District Microfinance Overvi
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Staring in 1998 each DS received SL
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Matale District Microfinance Overvi
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Matara District Microfinance Overvi
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Moneragala District Microfinance Ov
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Nuwara Eliya District Microfinance
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Polonnaruwa District Microfinance O
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Puttalam District Microfinance Over
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Ratnapura District Microfinance Ove
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Trincomalee District Microfinance O
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Vavuniya district Microfinance Over
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The Wanni Area Microfinance Overvie
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Summary Microfinance Activity by Ac
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The NGO questionnaire survey identi
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World Vision Lanka works in 5 distr
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Given that these figures do not inc
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Overall, 13 of districts had levels
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Averages Value of Loans Table 78 Av
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Volume and Number of Loans The surv
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Findings The key and main findings
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Service Providers The service provi
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those incapacitated by conflict, wi
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Cultures of Dependency in Microfina
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Strategic Recommendations The key s
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Conclusion The study found that the
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Charitoneko, S. and D de Silva (200
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Remenyi, J (1991). Where Credit is
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Technical Appendix
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