Microfinance Sector in Sri Lanka: Opportunities and Growth Strategies

Financial inclusion for low-income households in the developing world has the power to propel the economic and social development of the country as well as alleviate the ill effects of poverty. Microfinance institutions play a key role in ensuring access to formal financial services, especially for the low-income population. Sri Lanka, an island nation located in the Indian Ocean, is one of the fastest growing economies in South Asia, and is classified as a lower middle income country. It has a significant low-income population segment whose financial needs are served by many existing microfinance institutions in the country. However, there is limited industry data and monitoring mechanisms for the microfinance sector in Sri Lanka, leading to lack of clarity on the market structure, market potential and avenues of growth for the existing players.

This paper is an attempt to bridge this information gap and present a high-level understanding of the Sri Lankan microfinance landscape as well as highlight a few market opportunities and growth strategies. The authors of this paper have closely studied the Sri Lankan microfinance sector in the last two years. They have worked with a few leading practitioners and interacted with policy makers and capital providers to gather insights into the Sri Lankan market.