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

Overall, It was found that there is not a uniform demand for microfinance services
throughout the region. Demand appears to grow, accelerate and becomes more
measurable in parallel with the development of social and economic mobilisation
activities that are well managed and have ‘empowered’ community groups at their
core.
Mainly due to a lack of knowledge of the services needed to own and manage a
successful enterprise there is often a perceived lack of demand for enterprise
development services. It is believed that as much as the demand for microfinance
grew as the economic mobilisation of the groups and societies developed, so will
the demand for EDS.
Much of the affordable training was found to be in the area of blue-collar skills
that had little or no relevance with starting, managing and developing a business.
There is a concern in that the provision of EDS in the district specifically
extension services and business management training is minimal and a limiting
factor in economic recovery.
Demand for Level 1 & Level 2 Consumption and Subsistence Loans
Level 1 and Level 2 Microfinance activities lie largely in the domain of the
expanded relief interventions of international agencies and organisations, like
CARE & FORUT, national organisations such as the Cooperatives, Sarvodaya
and other NGOs and CBOs. Where we have seen organised groups that have
started savings and credit schemes there is consistent over-subscribed demand for
credit.
These levels of organised credit and savings represent the starting point for the
emergence of entrepreneurial loan activities and are of primary importance to
microfinance operations. Demand for Level 3 Loans can be ‘jump-started’ by
adding grant-in-aid funding for example, on a one-to-one ratio to the present loan
portfolio of those organisations. This also points to the importance of building the
capacity of those credit groups to effectively manage microfinance activities in
line with good and best practice.
Demand for Level 3 & Level 4 Micro Enterprise Start Up and Expansion
Loans
These levels of microfinance are where it is believed that the most promising
opportunities for microfinance intervention in the North & East lie particularly
level 3, as demand in the 7,500 to 30,000 range is extensive. This is because the
majority of economic recovery in the region is predominantly at the micro level. 37
Batticaloa
The CARE Food Security Project through the micro finance intervention with the
Fishing Cooperative Societies has helped to stimulate demand for level 3 loans,
mainly in the provision of finance for fishing craft and gear.
37 The conflict had previously destroyed the assets, structures and systems of the micro economy,
in large areas of the region in parallel with a massive displacement of the population. Since
October 1999, the front-lines between the protagonists have remained relatively stable in the
Vavuniya, Trincomalee and Batticaloa areas and resettlement and relocation activities have
matured to the extent that basic economic revival has emerged