Learning for Sri Lankan MFI s

From the country of Microfinance

POVERTY
Human poverty:
The lack of essential human capabilities like
literacy and nutrition.
Income poverty:
The lack of sufficient income to meet
minimum consumption needs.
Absolute poverty:
The degree of poverty below which the
minimal requirements for survival are not being met
Isolation poverty:
The lack ness of getting the required information on
the required time because of poor communication
channels

POOR
Who are living with poverty
Not so poor -

Very near the poverty line and

there are some fluctuations in
satisfying their needs. If some
unexpected disaster happens,
they will fall under the poverty
line.
PoorBelow the poverty line, face the
constant difficulty to satisfy all of
their needs.
Hard core poor / Struggling poorFacing severe difficulty to satisfy
their basic needs even.

National Figures- Bangladesh

Country population is around 142-159 million.(2005-2007)
Around

45% of the population is below the poverty line

(2004 Estimation)
Around 100,000 staffs are working in Microfinance sector
for 30,000,000 borrowers.
Average Figures

Monthly Income

(In Taka)

Monthly Expenditure (In Taka)

Not
So
Poor

Poor

Hard
core
poor

10,000 4,000 1,000

8,000

National Figures- Sri Lanka

Official Poverty line
The persons living in the households whose real per capita
monthly total consumption expenditure is below Rs.1423 in the
year 2002 in Sri Lanka are considered poor.
Year
Poverty Line
2002

Rs.1423

2004 (May)

Rs.1526

Source: http://www.statistics.gov.lk/poverty/OfficialPovertyLineBuletin.pdf

Year

Population below national poverty line

Rural

Urban

Total

1991

22 %

15 %

20 %

1996

27 %

15 %

25 %

Source: http://indexmundi.com/sri_lanka/percentage-of-population-below-national-povertyline.html

Vision of the Leaders

Hunger free Bangladesh

- ASA
Beggar is my neighbor - A policy of promoting oneself at the
expense of others
- GRAMEEN BANK
Happy and prosperous women in their family life
- TMSS
Improving the quality of life of poor- Promoting the asset less
people too by creating the environment for income generating
activities
PKSF
Next generation should enjoy the prosperity of the life and
everyone should get the medical and all other facilities
- MRA

Ethics Bangladesh MFI Sector

Lending to woman client is the best for small loan size as well as

man is the best for big loan size

- ASA

Sustainability of the MFI is not worth when the community did not

overcome from the poverty

- TMSS

The degree of risk is low when lending to various clients as small

size loan

- RUPALI BANK
Performance based financing is too effective

- PKSF
Every year launching new credit program
- SONALI BANK

Sample diagram of MFI growth

FSS

OSS
Operation initiated
with commercial
orientation and
gradually diverted the
path towards Social
orientation

MFI s Growth

COMMERCIAL
ORIENTATION

PRIMARY
ACTIVITIES
SECONDARY
ACTIVITIES

SOCIAL
ORIENTATION

Commercial
High Orientation

Low

Impact
on High
Poverty

BANGLADESHI- MFI s
Almost at the saturation
level
SRI LANKAN MFI s

Low

Under
Serving the society
Feasible way to reach

How to direct Commercial Orientation

Creating adequate legal regulatory frame work and
greater access to commercial source of funds will
allow to reach the potential benefit of the
Microfinance operation
Stakeholder of Microfinance commercialization:
Government / Delegated Supervisory Authority
Funding Agencies
Supporting Agencies
MFI Itself

FOR SRI LANKA.

Roles of the Government

Create and maintain enabling policy environment
Adopt appropriate regulations for the fund access
Improving the legal framework for the secured transaction
Analyze the environment and create suitable methodology
for sustainable microfinance delivery.
(Ex: Lower repayment micro credit programs
should be handled with grant but not with borrowings)
Allow the licensed MFI s to mobilize the deposits under the
supervision of assigned delegated supervisory authority of
Central bank.
Focus on Grant-based approaches to assist the hardcore
poor (Ex. Interest free loan)

FOR SRI LANKA.

Roles of the Funding agencies

Supporting to the enabling environment
MFI s capacity development
Promoting innovation
Establish strong network within the MFI s
Support to the micro enterprises (clients of the MFI s)

FOR SRI LANKA.

Roles of the Supporting agencies

Educate the MFI s to use standardize accounting practice
Educate to conduct subjective audits

(Ex: CGAP, IAS etc)

Drive them towards the relevant rating

Size of the MFI

Purpose of Rating

1. Small

To find out the limitation for growth

2. Medium

To find out its competencies

3. Large

To find out its strengths

FOR SRI LANKA.

Roles of the MFI

Balance Commercial and Social Objectives
Increase the cost efficiency

(Ex: Weight the risk of the assets on existing products as

well as on designing a new product)
Develop the capacity of the organization as well as the
clients ( Parallel development)
Improve the operational methodology
Polish the life style of the members in safety and health
(Ex: Arrange to register their marriage of the members)
Strengthen the webs of the social safety nets

HINTS to improve operational methodology

COMPONENTS

CHECK THE ADOPTABILITY FOR YOUR MFI

1. Image of MFI

Profit Orientation Vs Social Development

2. Confident on poor

Genuine Vs Risk

3. Products

Flexible Vs Standardized

4. Loan Size

Adequate Vs Standardized

5. Loan Relevancy

Sector based (Urban & Rural) Vs Standardized

6. Collateral Preference

Borrower dominant Vs Lender dominant

7. Collateral Value

Bigger than loan size Vs Smaller than loan size

8. Loan Security

Compulsory saving Vs Loan insurance

9. Income Generation Loan Collect compulsory saving Vs Initial grace

procedure
period only with interest
10. Loan Disbursement
and Collection

At centre/ group level Vs Individual level

HINTS to improve operational methodology

COMPONENTS

CHECK THE ADOPTABILITY FOR YOUR MFI

11. Members Group Size

Small Vs Big

12. Control the client by

Rules & regulation Vs Aware their ownership

13. Loan Guarantor

Group member Vs Spouse

14. Staff Force

Women led Vs Men led

15. Loan& Field Officers

Same person Vs Different persons

16. Field Officer

Same gender Vs Different gender

17. Deal with Bad Debt

Rescheduling Vs Introduce debt collection team

18. Members Attraction

By flexible credit product Vs By credit + +

19. Scholarships for

Self employment Vs Higher education

20. Improve Productivity by Staff development Vs Hiring external consultant

See the eyes of the poor children!!!

Make their dreams become true.

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