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

the time period of the project, with end of project evaluations being undertaken in
every case.
The experience USAID had from the microfinance schemes instituted in the past
projects has been good especially with the Women’s Development Federation in
Hambantota. However it believes that there is a need for more formal
microfinance training and exposure through cross visits to other MFIs. There is a
tendency towards dependency on subsidised funding by the partner organisations
and USAID believes that very few MFIs’ in Sri Lanka are truly financially
sustainable.
Looking towards the future USAID believes that microfinance schemes can be
made more relevant if added to by schemes involving business development
services and that ‘software’ training and technology inputs are essential in the
recovery of the conflict damaged economies of the North and East region.
(b) Lenders
Lender organisations include the National Development Trust Fund, the DFCC
and the Regional Development Banks.
The DFCC
The DFCC was established in 1956 and was then known as the Development
Finance Corporation of Ceylon. With a capital of SLR 8 million it has grown to a
large wholesale and retail development banking organisation with a capital of
some SLR 26 billion. The DFCC has given loan support to a number of industrial
sectors in Sri Lanka including, Agriculture, Apparel, Tea, and Power as well as
urban housing.
In the past the bank undertook 3 experiments in directly funding microfinance
operations in agriculture and found that due to its own lack of physical outreach
and ability to be proactive at the lower levels of operation the schemes failed.
Since this time the bank has provided loan facilities for small and medium
enterprises and in the year 2000 its loan portfolio was in excess of SLR 2,500
million involving more than 1,700 business units in the SME sector.
A large part of the SME lending was for start-up projects, whilst the rest was for
modernisation, expansion and to a lesser extent the relocation requirements of
these enterprises. Funds for SME lending operations were mainly obtained from
local and foreign lines of credit, whilst the remainder was funded from the
resources of the bank itself.
The DFCC functions as the Administrative Unit of the World Bank and Global
Environment Facility assisted Energy Services Delivery (ESD) Project Credit
Programme. This project encourages the private sector, NGOs and cooperatives to
provide electricity services using environmentally sustainable renewable energy
resources.
Both grid-connected and off-grid projects are promoted. These include private
sector mini-hydro projects selling power to the CEB, community-owned microhydro
schemes for villages that are not on the grid and stand alone solar home
systems providing electricity to households for basic applications such as lighting,
refrigeration, radio and television.
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