Payback ratio of low income households 96%

Sri Lanka has strong infrastructure for microfinance organisations and German Technical Association (GTZ) will always strengthen the microfinance and the microfinance organisations in the country, development coordinator of GTZ Dirk Steinwand said.

An international workshop for microfinance organised by Sanasa Development Bank Ltd (SDBL) together with GTZ and Committee for Promotion and Advancement of Cooperatives COPAC was held to celebrate the centenary of Sanasa. The main objective of the workshop was to make proposals for policy reforms in microfinance and sharing knowledge on microfinance.

Microfinance is defined as a broad range of financial and non-financial services provided to low income, usually poor households or micro enterprises operated by such households.

Steinwand said that after the tsunami many donors pledged to support tsunami victims who had low incomes. But there should be proper coordination and transparency among the donor community. International standards and quality should be adopted in microfinance.

Nearly 23% of the local population is under the poverty line. Microfinance is an effective tool for poverty alleviation in any country and the world has recognised it as a development tool, Director of SDBL, L. B. Dasanayake said.

According to SDBL, the payback ratio of funds lent for low income households is recorded as 96%. This shows that these communities have the capability to pay the real cost of loans and generate savings.

These rural communities need access for appropriate financial services. But they were unable to obtain bank loans due to lack of adequate banking facilities, stringent collateral requirements, inability of formal financial institutes to meet the basic needs of the poor and cumbersome documentations and procedures.

According to the Central Bank 2,220,000 micro loans have been granted as formal and semi-formal loans last year. Out of these loans 1,308,000 were semi-formal loans and balance were formal loans.

(AS)