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

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As a result the banks are moving away from microfinance as part of their overall product range towards developing specific ‘in-house’ operational units or specialist divisions. However they are presently still obliged to deliver some limited ‘general’ microfinance products mainly due to ongoing government rural credit programs that contain microfinance components. 3. Microfinance in the North and East Region of Sri Lanka Part C of the report summarises the intervention environment for micro finance in the North & East. The survey found that alongside traditional savings and credit activities, microfinance project implementation in areas affected by conflict has three main features of differentiation, namely: Microfinance can be implemented in cases even where the local infrastructure has been devastated. Microfinance is a flexible tool that has the ability to assist relief interventions to meet a community's basic needs and is used by a range of actors for different reasons across the relief spectrum. Microfinance is an effective economic recovery tool that helps to regenerate local economies and form a bridge into economic development. The survey reviews the 'enabling environment' for microfinance interventions in the region in terms of people, economic livelihoods, markets, infrastructure, governance, security and demand issues. The survey found that broadly there was a positive environment for microfinance intervention throughout the region but that the region itself is highly localised and any intervention strategies need to be planned based on knowledge and research of local conditions. The survey found that the infrastructure, utilities, services and immobile capital assets of this region have over the past eighteen years been eroded by conflict resulting in the region’s economic decline. A large number of communities have been displaced and formal employment even in the primary industries has fundamentally declined. The region has been excluded from the major microfinance interventions managed through and by the central government for the past decade and a half and although the state and private commercial banks in the region operate current and savings accounts, access to credit is limited. There has been some continued access to microfinance through the TCCS, however due to the conflict and displacement many branches and some of the district unions have become defunct. The Cooperative Rural Banks that continue to operate in the region are taking deposits, but the majority are only considering disbursing loans with grant in aid funding from the international community. Most access to microfinance for the communities in the region is through interventions by international donors, agencies and organisations either directly or implemented through regional and local non-governmental organisations. This has resulted in a proliferation of NGOs utilizing microfinance for a broad range of services including, health, education, social services, village infrastructure as well as consumption smoothing and income generation activities. 25
The Government Agents and the LTTE ‘local authorities’ in the region act as focal points using district committees for the overall planning of where and whom the interventions reach, they however are somewhat restricted by the dictates of the local military commanders of both protagonists. Since the ceasefire in December 2001 there has been a rapid opening of distribution routes, relaxation of the pass system and a growing flow of goods and services are entering the region. The report maintains that if the region is to be revived economically then, there is an urgent need for a concerted shift from short-term relief-based interventions to medium-term planned initiatives focused on economic recovery that employ development based approaches. Microfinance in this context is concerned with helping to foster local economic growth through ready access to financial services for all and access to enterprise development services for the entrepreneurial poor. Given that the process towards a negotiated settlement is successful then the international community also needs to position itself for full-scale economic rehabilitation and development activities as the flow of returnees and economic recovery starts to take hold placing increasing stress on the regional infrastructure. Microfinance in this context is concerned with an increased formalisation of service provision, building the linkages and providing the services that allow the development and flow of small business activity. 4. The Supply of Microfinance in Sri Lanka A national level survey of microfinance savings and credit activity was undertaken on a district-by-district basis. All the main service providers were approached and a questionnaire was distributed to include NGO organisations at the local level. The survey represents an estimated seventy five percent of microfinance supply nationally but was unable to collect district level data from the commercial banking sector or capture the activities of some of the smaller NGOs. Significant levels of savings and credit activity are present in all districts and most village communities have been mobilised. In terms of micro-credit, the survey found that nearly two million microfinance loans with a value of SLR 14.4 billion were disbursed during the year 2000. This is the equivalent of one loan for every two families in the country or SLR 4,299 for every family in the country. The highest concentration of loans disbursed was found in the districts of Polonnaruwa, Puttalam, Hambantota and Matara each having double the national average. The highest volumes of monies lent were found in the districts of Matara, Kurunegala, Hambantota, Polonnaruwa, Puttalam and Galle. The survey found that there were over seven million savings accounts with a value of SLR 23.6 billion as of the 31st December 2000. This is the equivalent of two savings accounts for every family in the country or SLR 7,047 for every family in the country. The districts of Hambantota, Kurunegala, Matara and Polonnaruwa all had averages of more than three savings accounts for every family. Fourteen districts had equivalents of more than SLR 5,000 in savings for every family in the district. 26
Page 1: National Microfinance Study of Sri
Page 4 and 5: (b) Lenders .......................
Page 6 and 7: Introduction into the pawning busin
Page 8 and 9: Microfinance Overview .............
Page 10 and 11: Savings ...........................
Page 12 and 13: List of Tables Table 1 Microfinance
Page 14 and 15: Table 70 Ratnapura District Microfi
Page 16 and 17: JBIC MFI MFN MIS MPCS MSME NCPPDP N
Page 18 and 19: Figure 1 Map of per Capita Value of
Page 20 and 21: Figure 3 Map of per Capita Value of
Page 22 and 23: Executive Summary This report provi
Page 24 and 25: Practitioner Microfinance Activity
Page 28 and 29: The operating conditions of the con
Page 30 and 31: Donor Strategies There should be a
Page 32 and 33: Introduction to the Study The objec
Page 34 and 35: The survey does not claim to repres
Page 36 and 37: Introduction Socio-Economic Overvie
Page 38 and 39: These five years saw a spate of new
Page 40 and 41: The 'Economic Stream' Employment is
Page 42 and 43: Microfinance Clients and Beneficiar
Page 44 and 45: 1. Funders of Microfinance in Sri L
Page 46 and 47: CIDA believes that microfinance act
Page 48 and 49: The Department For International De
Page 50 and 51: NOVIB Partnerships tend to be long
Page 52 and 53: HIVOS The HIVOS Desk concentrates o
Page 54 and 55: Over time SIDA noted that the loan
Page 56 and 57: Comment freely given from one of th
Page 58 and 59: the time period of the project, wit
Page 60 and 61: Only a very small part of the US 50
Page 62 and 63: The demand for loans from this fund
Page 64 and 65: Without permanent access to institu
Page 66 and 67: This broad strategy means that the
Page 68 and 69: Beneficiary targeting was generally
Page 70 and 71: The FCSs were developed the followi
Page 72 and 73: CARE's new strategy commits the org
Page 74 and 75: Each CBO determines the level of in
Page 76 and 77:
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
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Table 18 SPRDP- Loans 1993 to 1999
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(c)Lender-Practitioners The Central
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Society members have access to cred
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The RDBs were re-structured in 1998
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Table 25 Value of Loans Disbursed b
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The total savings and credit issued
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Table 29 Samurdhi - Loans by Distri
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In 1998 SEEDS converted to a separa
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Within the loans from SEEDS funds t
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The Arthacharya Foundation practice
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The program was assisted by some li
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However in general the majority of
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Table 33 Growth of MPCS CRBs -1990
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As at the end of December, 2000 a s
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Some 1,176 of the 1,476 Co-operativ
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A total of 74 NGOs were identified
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Finally only a small proportion of
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Table 38 TCCS Active Societies and
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District Unions - National Federati
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4. Facilitators a) National Level F
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International Centre for the Traini
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Funder-Practitioner Microfinance Ac
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As practitioner experience increase
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Introduction and Approach The major
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State-Owned Banks The Bank of Ceylo
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Starting in 1994, the NCRCS is aime
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The Seylan Bank The Seylan Bank ent
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Figure 9 Linking of the RBIP Tools
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People's Fast reduces loan processi
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In addition, RBIP monitors the impl
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The Hatton National Bank Case Study
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Seylan Bank Case Study The Seylan B
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Until 1961 private pawnbrokers were
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Bank officials stated that PSC staf
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The urban PSCs have on average more
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The lack of flexibility has induced
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From the borrowers perspective not
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The Peoples Bank, on the other hand
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Introduction and Approach Internati
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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
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This type of situation is seen thro
Page 202 and 203:
People IDPs in welfare centres, sho
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World Vision has been working in al
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small entrepreneurs have received t
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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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Page 238 and 239:
Page 240 and 241:
Page 242 and 243:
Page 244 and 245:
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
Page 262 and 263:
The Wanni Area Microfinance Overvie
Page 264 and 265:
Summary Microfinance Activity by Ac
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The NGO questionnaire survey identi
Page 268 and 269:
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
Page 274 and 275:
Averages Value of Loans Table 78 Av
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Volume and Number of Loans The surv
Page 278 and 279:
Findings The key and main findings
Page 280 and 281:
Service Providers The service provi
Page 282 and 283:
those incapacitated by conflict, wi
Page 284 and 285:
Cultures of Dependency in Microfina
Page 286 and 287:
Strategic Recommendations The key s
Page 288 and 289:
Conclusion The study found that the
Page 290 and 291:
Charitoneko, S. and D de Silva (200
Page 292 and 293:
Remenyi, J (1991). Where Credit is
Page 294:
Technical Appendix
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