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

This report provides a map of microfinance activity throughout Sri Lanka. It analyzes microfinance in terms of:

• The policies and practices of existing actors and environment;
• The supply of microfinance at the district level.

The results of this study are presented through surveys that examine:

• Actor activity and the existing levels of supply;
• Commercial banking sector's microfinance activity;
• Operating environment in the North and East region of Sri Lanka.

The findings paint a positive picture of the microfinance activity as regards supply, savings, loans and service providers.

The authors list the characteristics of funding of microfinance activity in Sri Lanka as:

• Most funding is through savings;
• There is a need for widespread technical assistance funding.

They find the following key issues in the practice of microfinance in Sri Lanka:

• Concern about the sustainability of present microfinance schemes and about the political capture of microfinance activities;
• High subsidization of the sector;
• Inadequate planning, monitoring and evaluation;
• Need for training.

The study concludes with the recommendations:

• Ensure the sustainability of present microfinance schemes to protect the current high levels of supply nationwide;
• Urgently deploy economic recovery initiatives in the North and East regions;
• Donors focus on medium and long-term funding, as well as on technical assistance and research activities.