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

The key difference between the NDTF and PKSF is that institutional
strengthening of partner organisations is a focus of PKSF whilst this is not really
considered at all by the NDTF. PKSF brings a whole package of loans coupled
with institutional strengthening for its partner organisations, assisting the weaker
partners rather than just rejecting loan applications.
For the NDTF to become a creditable and neutral ‘player’ in microfinance it
needs to be converted into an autonomous body like the PKSF with donors being
able to use it both as a conduit for funding microfinance on a sustainable basis
and an organisation to assist the capacity building of microfinance agencies
throughout the country.
(c) Granter-Lender
The Asian Development Bank
The ADB approved its microfinance development strategy (MDS) in June 2000.
The MDS emphasises the importance of developing sustainable microfinance to
fully harness the potential of microfinance for poverty reduction in the Asian and
Pacific region.
“The outreach of service providers can be expanded on a sustainable basis
only if they adopt a commercial approach. However, neither the
commercialisation, defined as the expansion of profit-driven, marketbased
financial institutions serving the microfinance market, nor its
various facets and implications for the microfinance industry are well
understood by microfinance stakeholders in the Region.” (ADB, 2000a)
Furthermore, the ADB states that
“Over the past two decades the interest in microfinance has grown rapidly
and multi-lateral lending agencies, bilateral donor agencies, developing
and developed countries governments, non government organisations, and
a variety of private banking institutions all support the development of
microfinance.” (ibid.)
Despite this growth, as concluded in the recently completed Rural Asia Study,
“rural financial markets in Asia are ill prepared for the twenty first century.”
(ADB, 2000b)
The ADB believes that approximately 95% of some 180 million poor households
in the Asia and Pacific Region still have little access to institutional financial
services and that the provision of efficient microfinance services for this segment
of the population is important for a number of reasons (ADB, 2000a):
Microfinance can be a critical element of an effective poverty reduction
strategy. Improved access and the efficient provision of savings, credit,
and insurance facilities in particular can enable the poor to smooth their
consumption, manage risks better, build their assets gradually, develop
their micro-enterprises, enhance their income earning capacity, and enjoy
an improved quality of life.
Microfinance services can also contribute to the improvement of resource
allocation, promotion of markets, and adoption of better technology; thus
microfinance helps to promote economic growth and development.
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