State of Microfinance in Sri Lanka

State of Microfinance in Sri Lanka

Prepared for

Institute of Microfinance (InM) As part of the project on State of Microfinance in SAARC Countries

By Anura Atapattu

2009

Disclaimer Any opinions expressed and policy suggestions proposed in the document are the author’s own and do not necessarily reflect the views of Institute of Microfinance (InM). The report also does not represent the official stand of the Government of the countries studied.

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Table of Contents

Introduction 1.1 Introduction and Objectives 1.2 Sri Lanka –Country Context 1.3 Poverty Status in Sri Lanka Micro Finance Models Practiced in Sri Lanka 2.1 Common Microfinance Models: 2.2 Other Key features of MF models Outreach 3.1 Outreach Status as at December 2008. 3.2 Outreach findings of Previous Studies Impact of Microfinance 4.1 Impact of Microfinance on Clients (Demand Side) 4.2. Impact on MFIs (Sustainability of Microfinance Sector) 4.3 Role of Subsidy Microfinance Regulatory Regimes 5.1 Type of Laws within which MFIs are registered. 5.2 Challenges NGO’s and NGO MFI’s face due to inadequate Regulations Competition in Microcredit Market and the Issues of Overlapping 6.1 Nature and impact of competition in the micro credit market 6.2 Impact of overlapping membership in the micro credit sector Challenges Facing Microfinance Sector in Sri Lanka 7.1 Lack of Appropriate Regulation for MFIs 7.2 Weak Portfolio Quality 7.3 Issues in the Village Banking Model 7.4 Fragile Institutions 7.5 Lack of Transparency 7.6 Inadequacy of IT knowledge 7.7 Public Sector Involvement in Retail MF 7.8 Lack of suitable Human Resource 7.9 Inadequate Credit ‘Plus Services’ Financing Microfinance 4 4 4 6 8 8 13 14 14 31 37 37 46 54 55 55 59 61 61 63 65 65 65 66 66 66 67 67 67 67 69

Institute of Microfinance (InM) | 3

Introduction

1.1 Introduction and Objectives

This paper is written as one of the country papers for a study of “State of Microfinance in SAARC...