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

This credit programme became effective in July 1997. The number of
Participating Credit Institutions (PCI) that channels these funds grew to 6 by the
beginning of the year 2001. By the end of the 2000 financial year the PCIs had
collectively approved 13 grid-connected mini-hydro projects, 13 off-grid village
hydro schemes serving 660 households and financed the successful installation of
3,200 solar home systems.
The cumulative refinance amount and actual disbursements by PCIs stood at SLR
1,031 million and SLR 854 million respectively, representing an increase of 80%
over the cumulative position in 1999.
A World Bank Power Sector Mission visited Sri Lanka in January 2001 at the
request of the government to increase the amount of funding for this project so as
to sustain its momentum especially as Sri Lanka has a present deficit in power
supply against a growing demand.
In 1998 the DFCC Bank was appointed as the apex institution to manage the
credit component of the Dry Zone Participatory Development Project assisted by
the ADB and the International Fund for Agricultural Development (IFAD). The
credit programme targets development of micro enterprises based on a
participatory development concept in the Kurunegala, Chilaw and Puttalam
Districts.
During the financial year ending 2001, 626 projects were funded with
disbursements for the year being SLR 7.9 million, the DFCC Bank as the apex
organisation has maintained a recovery rate of 100% for this project segment
whilst the partner lending organisations have achieved an average of 90%
recovery.
The DFCC is empowered to recycle funds from recoveries and believes that the
developmental nature of the scheme, coupled with sustainability of the funding
arrangement, makes this a good model to follow in the area of micro credit.
The National Development Trust Fund
In recent years, Asian countries like Bangladesh, India, Philippines, Thailand,
Nepal and Sri Lanka have seen the emergence of second tier organisations that
fund microfinance practitioners through loans rather than grants. Such
organisations, if independently structured and managed and staffed by competent
micro finance specialist staff can be an effective means for donors and
government alike to channel funding and capacity building assistance to MFIs.
Outside of conflict-affected areas, there is a strong case for a single organisation
such as the NDTF to provide MFI monitoring and evaluation services that could
be out sourced by donors and practitioners alike. Equally the NTDF could
arguably play a role in the setting and enforcement of reporting standards.
The National Development Trust Fund (NDTF) is the largest national level
secondary loaning agency for microfinance in Sri Lanka. Originating as a World
Bank project, it has now evolved into a government project. The NDTF is funded
entirely from the credit funds left over from the World Bank loan for the
Janasaviya Trust Project.
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