Very Bankable Poor of Sri Lanka Offers Opportunity for Micro Finance

14th October 2010, www.lankabusinessonline.com

Sri Lanka's poor are reliable borrowers and repay loans, offering a growth opportunity for micro-finance especially in rural areas, deputy finance minister Sarath Amunugama said.

Developing countries like Sri Lanka must not rely solely on export-led growth as in the past given sluggish recovery and rising protectionism in advanced economies, he told the Asia Microfinance Forum 2010 in Colombo.

The forum is looking at the role of microfinance in ensuring that poor and low-income people have access to reliable financial services.

"The poor are very bankable," Amunugama told the forum organised by the Banking With the Poor Network and the Foundation for Development Cooperation.

"All studies done on micro-credit show that the repayment ratio is much higher than in large commercial banks where a lot of time is spent on non-performing loans (NPLs). There are very few NPLs among the poor - they are bankable."

Amunugama said the government wants to ensure more equitable growth to help poor people, especially in rural areas improve living standards as half the island's economy and growth has been concentrated in the western province where the capital Colombo is located.

"In that context micro finance is most important," Amunugama said.

"You cannot develop lagging, undeveloped areas and create internal markets without providing financial infrastructure that is necessary to develop rural areas, particularly the poorest of the poor."

Amunugama said many microfinance initiatives come from Asia such as Bangladesh's Grameen Bank which found the best business people are women.

"It is the women who go to the market, who trade, largely it is women who need capital and new innovative structures to bring them into affluence."

Amunugama said migrant workers who have returned and start their own businesses were potential clients for micro-finance services.

"We have a highly pro-growth rural and poor population. We have one million Sri Lankans working abroad in various capacities, well known for enterprise, hard work, sending us huge amounts of money.

"When they come back they are mentally ready. They need capital - they are a large reservoir of people who are already pre-disposed to efficient rural activity. So we must now find structures and policies that can generate growth through these people."

"Rural growth is the next phase," he said. "We have to create value in our rural areas and ensure they contribute to growth."

Related Info:
Asia Microfinance Forum 2010 Begins in Colombo with 450 Delegates from 50 Countries