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

Donor Strategies
There should be a concerted shift away from short term funding towards medium
and long term funding of microfinance schemes, especially in the North and East
region. This means moving away from funding relief based interventions and
annual funding cycles towards microfinance activities that are focused on
enterprise development and economic recovery.
It is essential that this funding include adequate planning and design phases prior
to the release of monies to partner organisations and ensure that effective
performance indicators, training programmes and transparency in financial
accounting and management of the scheme and the partner organisation are preconditions
of funding.
It is strongly recommended that donors focus on funding microfinance activities
not as components of wider programmes but as specialised project activities and
that they concentrate their funding towards partners that are prepared to act as
professional MFIs specialising in microfinance with linkages to other economic
development activities or international agencies and organisations that are
prepared to build strong microfinance competencies within their organisational
structures.
There should be an increased emphasis on the funding of technical assistance
activities that include funding for specialist training, sponsoring research into
markets, technology, business information, innovative delivery mechanisms and
specialised interest groups.
Donors should develop their own in-house microfinance expertise by, for
example, becoming members of CGAP, joining the Microfinance Network of Sri
Lanka and developing guidelines for partner organisations and setting standards
of good and best practice.
GoSL Strategies
The GoSL should move away from the direct implementation of microfinance
schemes towards indirect models of intervention that rationalise and streamline
existing government programmes and focus on delivering microfinance services
through professional MFIs. It is essential that the government ensure the
sustainability of its present microfinance schemes as a matter of urgency to
protect existing levels of supply and act to encourage a more competitive
environment through the elimination of subsidies and increased
'commercialisation'.
The government should not engage in debt relief but should continue to target
specialist interest groups and the most vulnerable with grant funded activities.
The GoSL should move to create a stronger regulatory environment in partnership
with the microfinance practitioner community and engage in the development of
professional standards and training institutions within the sector. Specifically the
GoSL should restructure and depoliticise such programmes as Samurdhi, SFLCP,
REAP and PAMP.
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