Catalog

Commercialization of Microfinance - Sri Lanka

Written by Stephanie Charitonenko and Dulan de Silva

E-mail or fax the Publications Unit at + 632 636 2648 to order the printed version of this publication. Applicable shipping cost will be charged. View Document  Books, Periodicals, Studies, and Reports On-line edition: Free of Charge Hardcopy price: $10.00 ISBN: 971-561-480-9 Publication Date: December 2002 In stock

This study is the second of a series of publications resulting from a regional technical assistance project on commercialization of microfinance. The series comprises four country reports on Bangladesh, Indonesia, Philippines, and Sri Lanka, and a regional report on perspectives on commercialization from South and Southeast Asia.

This study adopts a comprehensive view of microfinance commercialization at two levels:

• at the level of microfinance institutions (MFIs)
• at the level of the microfinance industry.

It then provides a framework for understanding dynamic aspects of commercialization, and based on the framework, discusses progress toward and challenges to microfinance commercialization in Sri Lanka. It also discusses the implications of commercialization and positive approaches to microfinance commercialization while preserving the traditional social objective of MFIs of expanding access by the poor to financial services.

Major findings of the study includes:

• the microfinance industry in Sri Lanka is at a fairly early stage of commercialization
• MFIs serve about 80 % of the potential microcredit clients
• cooperatives play a dominant role in the microfinance market, although their performance varies considerably
• there is inadequate involvement in microfinance by commercial banks.
• government policies and inappropriate interventions discourage new entrants into microfinance and hinder the commercialization of existing MFIs.

The study concludes that "a major shift in mindset on the part of government and funding agencies from seeing microfinance primarily as a poverty reduction tool to adoption of the financial systems view" is needed to address the challenges to commercialization of microfinance in Sri Lanka. "To advance microfinance commercialization, this change in perception will also need to be adopted by the microfinance practitioners themselves."

"The study is expected to contribute to a better understanding of the issues involved in commercialization of microfinance and lead to better approaches toward a sustainable microfinance industry that will provide a wide range of services to poor and low-income households not only in the Asia and Pacific region but also in other regions", says Nimal A. Fernando, Lead Rural Finance Specialist of the Asian Development Bank, who directed the study.

RELATED DOCUMENTS

Commercialization of Microfinance - Bangladesh Commercialization of Microfinance - Indonesia Commercialization of Microfinance - Philippines Commercialization of Microfinance - South and Southeast Asia

View the document [ PDF: 503kb | 78 pages ]. To read, you need Acrobat.

Contents

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Foreword, Acknowledgments, Abbreviations [ PDF: 80 kb | 8 pages ]

Executive Summary [ PDF: 117 kb | 12 pages ]

1. Introduction [ PDF: 104 kb | 7 pages ]

   Methodology and Organization
   Understanding “Commercialization” of Microfinance
   The Sri Lankan Context

2. Progress Toward Microfinance Commercialization [ PDF: 164 kb | 17 pages ]

   Development of the Industry
   Evidence of Microcredit Market Saturation
   Commercialization of Microfinance Providers
   Access to Commercial Sources of Funds

3. Challenges to Microfinance Commercialization [ PDF: 103 kb | 7 pages ]

   Negative Perceptions of Commercialization
   Impediments in the Policy Environment
   Weaknesses in the Legal and Regulatory Framework
   Internal Constraints to Microfinance Institution Commercialization
   Lack of Support Institutions

4. Implications of Microfinance Commercialization [ PDF: 86 kb | 4 pages ]

   Potential for Greater Supply of Demand-Driven Products
   Lack of Clear Profit Potential Curtails Competition
   Potential for Mission Drift

5. Positive Approaches to Microfinance Commercialization [ PDF: 97 kb | 10 pages ]

   Roles of the Government
   Roles of Funding Agencies
   Roles of Microfinance Institutions
   Roles of Support Institutions
   Conclusion

References [ PDF: 50 kb | 3 pages ]

Annexes and Endnotes [ PDF: 89 kb | 10 pages ]