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

The evaluation report stated:
“The central finding is that greater emphasis should be given to the
commercial viability of microfinance institutions. Earlier Bank microenterprise
finance projects paid little attention to the financial details of
participating institutions, such as loan recovery rates or the costs of
granting and administering loans. Recent projects provide more
information, but it is still not possible to tell if the institutions supported
are designed to ever be financially viable. Bank experience shows that
this lack of attention to financial detail weakens performance.” (ibid.)
In Sri Lanka, The Poverty Alleviation Project was approved in April 1991,
becoming active in September 1991 closed in December 1997. The project was
funded by IDA to US$ 57.5 million, GoSL to US$ 17.5 million and KFW cofinancing
to US$ 10 million this portion being specifically targeted for the credit
and micro-enterprise development component. The UNDP provided US$ 2.5
million for technical assistance of which only US$1 million was disbursed by the
end of the project (World Bank, 1998b)
The major project objectives were:
Increase income earning opportunities among the poor, and
Improve the malnutrition status of pregnant and nursing mothers, and children
less than 3 years of age.
To achieve these goals, the project included five sub-objectives:
Re-orient and expand existing institutional capacity to serve the poor, and
create additional capacity.
Develop credit and other services for promoting self-employment and microenterprise
development through group based lending and entrepreneurial
development.
Expand productive wage employment for the poor through technically,
economically and socially viable rural works projects.
Develop programmes for nutrition interventions for malnourished children
and pregnant and nursing mothers.
Create policy research and programme formulation capacity within the GoSL
(Ministry of Policy Planning and Implementation) to take greater account of
poverty and underemployment issues in overall growth policies and public
investment projects.
The achievement of the project objectives was partial and unsatisfactory. The
overall objectives, expansion of employment opportunities and incomes
among the poor, and the reduction of malnutrition among mothers and young
children, were achieved to a limited extent.
Among the reasons given in the report (ibid.) was that:
The fund's objectives were only partially satisfied. 175,000 households were
expected to increase their earnings, however, only 117,000 micro-enterprises
were established. Of these, about thirty-seven percent survived beyond three
years of operation. Net employment creation was 40,000 jobs, approximately
twenty-three percent of the expected targets.
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