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

The demand for loans at the current rate of 7% per annum indicates that there are
NGOs that are willing to take loans for microfinance rather than depend on grants
from the donor community.
In year 2000, disbursements from the fund were SLR 263.8 million. This
represents a massive growth from the SLR 52.8 million disbursed in 1998 and
SLR 87.6 m disbursed in 1999 respectively. Of this, NGOs have borrowed SLR
150.1 million compared to SLR 26.7 million in 1998 and SLR 70.1 million in
1999.
Overall, the biggest growth was in year 2000 was by four of the Regional
Development Banks. The district wise analysis shows that in as much as 11
districts only 1 or no NGOs beside SEEDS or Sewa Lanka took loans.
Moneragala with 6 NGOs and Badulla with 5 NGOs, Kandy with 5 NGOs and
Ratnapura and Kurunegala with 4 each are the other main districts where NGOs
took loans.
The demand for loans was greatest in Anuradhapura with SLR 52.6 million but of
this as much as SLR 36.6 million was from Rajarata Provincial Bank alone. The
next biggest demand was from Kandy with SLR 40.8 million where the
Kandurata Development Bank took SLR 20.4 million and a local NGO Kundasala
Praja Sanwardene Padanma took SLR 10.6 million.
Polonnaruwa although having only 3 borrowers had a demand for SLR 27 million
with SEEDS taking SLR 20 million and Rajarata Development Bank taking SLR
6.9 million. Badulla also showed a big demand of SLR 23.2 million largely due to
SEEDS taking SLR 12.9 million and a local agency Economic and Rural Services
Bank Service SLR 6.1 million. Moneragala took SLR 19.1 million through 6
separate local NGOs taking loans.
Analysis shows that some agencies or agencies in some districts take loans more
than others are due to their familiarity with and knowledge of the scheme. For
example the biggest single agency to have taken loans in Rajarata Development
Bank and this is due to the fact that its General Manager was a former employee
of Janasaviya Trust Fund being the former name for NDTF.
In Moneragala and Badulla there has been a larger number of NGOs taking loans
as an opinion maker and a leader of NGOs in the area has initially taken loans and
advised others to follow suit.
Some large NGOs such as Sewa Lanka utilise the loans as part of their total
portfolio that is also made up through a large proportion of grant funding giving
them the ability to move money from one source to another for repayment
purposes even if the credit itself is not repaid in time. Other agencies such as
SEEDS have good repayment records and could borrow more but prefer to
balance grants and loans in a financially mature and responsible manner.
Only a few TCCS District Unions have been granted loans as 9 district TCCS
Unions are blacklisted for not paying Janasaviya loans. A total of 38 NGOs were
granted loans. The NGO survey revealed only approximately one third of NGOs
taking loans and grants concurrently. This would suggest that many NGOs are
prepared to make the switch from grant in aid to loans and the NTDF’s policy of
charging a 7% interest rate is an effective tactic to successfully encourage NGOs
to change the source of funding.
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