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

Comment freely given from one of the field offices:
“No specific evaluation done on the ongoing programmes. However, some
of the assistance provided has been very successful in terms of actual
increase in income, savings leading to increased investment and rate of
payment. Others have proven to be more problematic, especially when
failure occurs and beneficiaries are left with nothing but the debt.”
UNICEF is to be congratulated in undertaking what is a difficult area of
professionalism in normal circumstances let alone in ‘the face of conflict’ and
anecdotal field evidence appears to show broad community support for these
interventions. However there is an urgent need for partner organisation and
clientele training in microfinance good and best practice standards as well as
training in enterprise development and management.
The United Nations High Commissioner for Refugees
UNHCR first became involved in funding microfinance schemes in 1993 and this
continued up until 1999 when it was decided that no further investment would be
made by UNHCR in microfinance. The schemes are of the revolving loan fund
type and UNHCR provided funding to operational agencies/organisations such as
CARE, Sewa Lanka, Sarvodaya and in Jaffna the Government Agent’s Office to
initiate schemes through implementing partner organisations such as NGOs, Cooperative
Societies, CBOs and Divisional Secretariats.
The districts covered by the schemes include Mannar, Kilinochchi, Mullaitivu,
Vavuniya, Trincomalee, Jaffna, Anuradhapura and Puttalam. Since 1993, a total
of 378 projects at a value of over SLR 81,000,000 have been implemented. An
evaluation of the schemes in 1998 by an independent team found that in the main
the schemes were both operationally and financially unsustainable and that there
was a lack of financial management and an absence of standards of good and best
practice.
It can be argued that as these schemes are operating in the areas affected by
conflict and that the communities had suffered constant displacement requiring
urgent economic mobilisation after relocation and resettlement and that this was a
better solution than to give outright grants. The position of mobilising
communities into groups and reintroducing the savings and credit disciplines, it is
believed would lead to the attainment of sustainable livelihoods.
With the cessation of hostilities and the possibility of a prolonged ceasefire the
microfinance schemes that have survived need to be urgently restructured into
schemes utilising good practice standards with the objective of attaining financial
sustainability.
Given that the sister agency UNDP has microfinance competencies it could do
well for UNHCR to pass across at least those schemes operating in Jaffna under
the government auspices, so that they can become a private sector network of
microfinance access that can be developed into a nationally managed resource in
an area that needs urgent rehabilitation to its micro economy. 11
11 The information contained in this section was gleaned from reports, evaluation studies and
other international and national organisations as well as direct field observation and was not
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