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

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ZOA works with community groups in villages and other than savings and credit schemes assists their clients with social mobilisation, education and psycho-social activities. The microfinance segment of the programme takes up approximately thirty percent of the funding. The process is integrated into one of social and economic mobilisation with the intention of building structure of savings and credit rather than a total orientation towards income generating schemes. Donor funding for microfinance includes monies from UNHCR, UNICEF and WFP that over the past two years have granted funds of some SLR 1,500,000. They have also received approx. SLR 2,000,000 from AusAID for community development work in the East during 1999 and 2000. Funding cycles are short term without time to undertake adequate research or baseline studies and, therefore, there is no impact assessment with staff relying on anecdotal information, as with the majority of practitioner activity in Sri Lanka. ZOA assists in the capacity building of Community Based Organisations in the training of CBO officers in simple financial accounting and management practices with bank accounts for the funds operated by the CBOs requiring two signatures and ZOA oversight. Loan disbursement is decided by the CBO committee with loans ranging between SLR 5,000 to SLR 10,000 and are granted for income generation projects, mainly in agriculture and animal husbandry. The CBOs’ set the interest rates but ZOA encourages a market related level of at least twenty-four percent. There are localised penalty schemes for late repayment that include a financial penalty of 5% on the outstanding loan balance. In Mannar there are twenty societies operating microfinance schemes. Of these eight are independent and sustainable, four require further mentoring and training, four are fairly inactive and four are not functioning at all. The well-managed societies have been able through careful financial management to increase their original funding by fifteen percent after deducting non-performing loan portfolios and expenses. The microfinance operations in Mannar are aided by a combination of wellorganised CBOs, good field staff and a proactive and committed Government Agent. ZOA staff do not have formal training in microfinance but have learned from on the job experience and networking. It is planned that as these microfinance schemes mature they will ultimately be passed to another national or international development agency. 97
(b) Granter-Practitioner National Ministry of Plan Implementation One of the main bodies responsible for rural and regional development activities, including microfinance, is the Ministry of Plan Implementation. The Ministry has implemented numerous projects since its inception in the 1970s, with microfinance activities gaining more importance as a poverty alleviation tool over time and progressively becoming a central component of most of these projects. Historically, projects have been largely district based with a few being implemented at the provincial level. Individual projects typically receive separate donor funding. Projects have in turn been supported by the Asian Development Bank, IFAD, NORAD, CIDA, SIDA, JICA, Netherlands, the World Bank, GTZ, UNDP and FINNDA (GoSL, 1995). Earlier projects (commenced in the 1970s) were called Integrated Rural Development Projects (IRDPs) and were not particularly microfinance focussed. Some projects, such as those in Kegalle and Matara, did have a credit component, partnering with banks, but in the main IRDP projects were strongly infrastructure oriented. By the 1980s many projects had started to include credit components. Typically, this involved loaning project funds through the Bank of Ceylon and the Peoples Bank, at subsidised rates of interest. Projects primarily revolved around the provision of agricultural loans and credit volumes were low, as were repayment rates. In general, the banks were not keen to provide credit as a poverty alleviation tool and did not develop specialised microfinance programmes. By the 1990s, IFAD funded projects in Wayamba, Anuradhapura and Badulla were explicitly targeting very poor rural households (in the dry-zone areas) and social mobilisation and savings and credit activities were starting to become leading project components organised at the small group and village organisation level in conjunction with participating banks. 13 The social mobilisation process typically involved five to seven villagers (women) joining together to form small groups and then individual Small Group leaders to join together to form Village Societies. Small Groups meet on weekly or bi-weekly basis with savings at predetermined levels and accumulated funds being lent as quick loans to needy members (at reasonably high interest rate of five percent per month). Generally, loans were granted to meet unexpected financial needs of a member’s family (for example, a child’s sickness) and borrowers repaying within the shortest possible time. Each Small Group deposits its excess savings with the village society. The village society maintains proper books of accounts with the Financial Secretary recording all financial transactions including savings, loan disbursement, capital repayments, interest income, and other expenses. The size of loan increases from Small Group upwards. At the group level, loans are mainly for consumption and emergency needs. 13 In Wayamba each Village Society represented by 3 elected leaders joined together at the level of each DS area to form a divisional level society though this has not been done in the other two projects. 98
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National Microfinance Study of Sri
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(b) Lenders .......................
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Introduction into the pawning busin
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Microfinance Overview .............
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Savings ...........................
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List of Tables Table 1 Microfinance
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Table 70 Ratnapura District Microfi
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JBIC MFI MFN MIS MPCS MSME NCPPDP N
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Figure 1 Map of per Capita Value of
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Figure 3 Map of per Capita Value of
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Executive Summary This report provi
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Practitioner Microfinance Activity
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As a result the banks are moving aw
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The operating conditions of the con
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Donor Strategies There should be a
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Introduction to the Study The objec
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The survey does not claim to repres
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Introduction Socio-Economic Overvie
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These five years saw a spate of new
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The 'Economic Stream' Employment is
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Microfinance Clients and Beneficiar
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1. Funders of Microfinance in Sri L
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CIDA believes that microfinance act
Page 48 and 49: The Department For International De
Page 50 and 51: NOVIB Partnerships tend to be long
Page 52 and 53: HIVOS The HIVOS Desk concentrates o
Page 54 and 55: Over time SIDA noted that the loan
Page 56 and 57: Comment freely given from one of th
Page 58 and 59: the time period of the project, wit
Page 60 and 61: Only a very small part of the US 50
Page 62 and 63: The demand for loans from this fund
Page 64 and 65: Without permanent access to institu
Page 66 and 67: This broad strategy means that the
Page 68 and 69: Beneficiary targeting was generally
Page 70 and 71: The FCSs were developed the followi
Page 72 and 73: CARE's new strategy commits the org
Page 74 and 75: Each CBO determines the level of in
Page 76 and 77: The project’s overall approach re
Page 78 and 79: Figure 6 GTZ/JRP - Project Interact
Page 80 and 81: The Social Development Foundation F
Page 82 and 83: There are no sector-based quotas ap
Page 84 and 85: Over the past five years SCN has as
Page 86 and 87: UNDP in the North & East - The Jaff
Page 88 and 89: In December 2001 a new UNDP Program
Page 90 and 91: From previous experience and lesson
Page 92 and 93: World Vision Lanka WVL believes tha
Page 94 and 95: Membership Development 3500 3000 25
Page 96 and 97: Table 14 World Vision - Gramashakth
Page 100 and 101: At the village society and bank lev
Page 102 and 103: In Wayamba the sustainability of th
Page 104 and 105: Table 15 Badulla IRDP - Summary Dat
Page 106 and 107: DZPDP/WHRDA credit operations comme
Page 108 and 109: In the initial years they did not f
Page 110 and 111: Table 18 SPRDP- Loans 1993 to 1999
Page 112 and 113: (c)Lender-Practitioners The Central
Page 114 and 115: Society members have access to cred
Page 116 and 117: The RDBs were re-structured in 1998
Page 118 and 119: Table 25 Value of Loans Disbursed b
Page 120 and 121: The total savings and credit issued
Page 122 and 123: Table 29 Samurdhi - Loans by Distri
Page 124 and 125: In 1998 SEEDS converted to a separa
Page 126 and 127: Within the loans from SEEDS funds t
Page 128 and 129: The Arthacharya Foundation practice
Page 130 and 131: The program was assisted by some li
Page 132 and 133: However in general the majority of
Page 134 and 135: Table 33 Growth of MPCS CRBs -1990
Page 136 and 137: As at the end of December, 2000 a s
Page 138 and 139: Some 1,176 of the 1,476 Co-operativ
Page 140 and 141: A total of 74 NGOs were identified
Page 142 and 143: Finally only a small proportion of
Page 144 and 145: Table 38 TCCS Active Societies and
Page 146 and 147: District Unions - National Federati
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4. Facilitators a) National Level F
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International Centre for the Traini
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Funder-Practitioner Microfinance Ac
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As practitioner experience increase
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Introduction and Approach The major
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State-Owned Banks The Bank of Ceylo
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Starting in 1994, the NCRCS is aime
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The Seylan Bank The Seylan Bank ent
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Figure 9 Linking of the RBIP Tools
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People's Fast reduces loan processi
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In addition, RBIP monitors the impl
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The Hatton National Bank Case Study
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Seylan Bank Case Study The Seylan B
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Until 1961 private pawnbrokers were
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Bank officials stated that PSC staf
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The urban PSCs have on average more
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The lack of flexibility has induced
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From the borrowers perspective not
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The Peoples Bank, on the other hand
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Introduction and Approach Internati
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Displaced populations are dependent
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Large tracts of land have become to
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Public markets, shops, guest houses
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The previous thriving local economy
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The Wanni Access to the area known
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Remembering that these intervention
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This type of situation is seen thro
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People IDPs in welfare centres, sho
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World Vision has been working in al
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small entrepreneurs have received t
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The exception to this is a governme
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There has been some continued acces
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Introduction and Approach A distric
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The MPCSs were equally disrupted an
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The main body of the survey is pres
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Local NGOs 11 NGOs were identified
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Local NGOs 1 NGO was identified in
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Local NGOs 1 NGO was identified in
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Local NGOs 2 NGOs were identified i
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Local NGOs No NGOs were identified
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Gampaha District Microfinance Overv
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Hambantota District Microfinance Ov
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Jaffna District Microfinance Overvi
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Staring in 1998 each DS received SL
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Matale District Microfinance Overvi
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Matara District Microfinance Overvi
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Moneragala District Microfinance Ov
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Nuwara Eliya District Microfinance
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Polonnaruwa District Microfinance O
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Puttalam District Microfinance Over
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Ratnapura District Microfinance Ove
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Trincomalee District Microfinance O
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Vavuniya district Microfinance Over
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The Wanni Area Microfinance Overvie
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Summary Microfinance Activity by Ac
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The NGO questionnaire survey identi
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World Vision Lanka works in 5 distr
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Given that these figures do not inc
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Overall, 13 of districts had levels
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Averages Value of Loans Table 78 Av
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Volume and Number of Loans The surv
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Findings The key and main findings
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Service Providers The service provi
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those incapacitated by conflict, wi
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Cultures of Dependency in Microfina
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Strategic Recommendations The key s
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Conclusion The study found that the
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Charitoneko, S. and D de Silva (200
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Remenyi, J (1991). Where Credit is
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Technical Appendix
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