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

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The operating conditions of the conflict affected area and the absence of government sponsored schemes that target the poorest and major service providers means that both savings and credit activities are present at much lower levels in the North and East region than elsewhere in the country. The districts of Jaffna, Batticaloa, Trincomalee, Mannar and the Wanni area all have less than one quarter of the levels of loan activity found anywhere else in the country. The district of Jaffna has an average of over SLR 3,000 in savings for every family, however the districts of Trincomalee, Mannar, Batticaloa and the Wanni area all have averages of less than SLR 600 in savings for every family. 5. Key Findings The findings of the study are structured according to supply, funding and practitioners issues and detail the key and main characteristics of the microfinance sector. The key findings of which are. The study found that: The supply of microfinance in Sri Lanka has the following key characteristics: Broad-based coverage of microfinance activity throughout most of the country. High levels of supply relative to the overall population. High levels of supply in the Southern Province and the districts of Kurunegala, Polonnaruwa and Puttalam. Low levels of supply in the North & East Region. Microfinance savings activity in Sri Lanka has the following key characteristics: High levels of savings mobilisation relative to the overall population. High levels of savings collateralisation relative to the number of loans disbursed. Increased levels of savings mobilisation among the poorest. Microfinance loan activity in Sri Lanka has the following key characteristics: High levels of loan uptake relative to the overall population. Broad range of different types of loan activity. Significant levels of loans for enterprise development purposes. Service provider activity in Sri Lanka has the following key characteristics: Wide range of service providers. Wide range of microfinance products. Increased competition in the market place in the last five years. Increased niche marketing. 27
The funding of microfinance activity in Sri Lanka has the following key characteristics: Most micro credit activity is funded through savings. There is a need for widespread technical assistance funding throughout much of the country. There is little need for large-scale direct grant in aid funding of ‘hard’ financial instruments other than in the North and East region and possibly second tier wholesale organisations. There is an urgent need for a range of economic recovery initiatives encompassing both ‘hard’ and ‘soft’ policy instruments that focus on wide scale enterprise development to be funded in the North and East region. Broad based community targeting should be accompanied by the funding of schemes that specifically target ‘special’ groups such as, demobilised soldiers, those incapacitated by conflict, widows, female-headed house holds and youth. There are a number of key issues and themes that are central to the practice of microfinance in Sri Lanka: The long-term sustainability of present microfinance schemes is of the greatest concern throughout the country as whole. Issues of ‘political capture’ of microfinance services in Sri Lanka is widespread, reaching through government managed programmes, the cooperative movement and the state controlled commercial banking sector. Most of the sector remains highly subsidised. Most microfinance enterprise development schemes operate on too short a time scale, are badly planned and have inadequate monitoring and evaluation, and financial management systems. There is a need for externally accredited microfinance training in Sri Lanka. Targeting of women has been a key component of microfinance since its inception and most microfinance schemes in Sri Lanka target women to a significant degree. 6. Recommendations The overarching recommendations of the study are that: The sustainability of present microfinance schemes be ensured to protect the current high levels of supply nation wide. Economic recovery initiatives urgently be deployed in the North and East region. The recommendations section contains a series of additional recommendations aimed at different aspects of the sector and its stakeholders. These are presented both at a national level and with specific regard to the North and East region. Recommended strategies to the donor community and the GoSL are summarised below. 28
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 26 and 27: As a result the banks are moving aw
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
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Large tracts of land have become to
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Public markets, shops, guest houses
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The previous thriving local economy
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The Wanni Access to the area known
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Remembering that these intervention
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This type of situation is seen thro
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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:
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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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