Source: Daily Mirror.

Original news wire available here.

SRI LANKA, August 22 – Sri Lanka is reportedly a microfinance market with over 80 percent of households having total borrowings of less than USD 900 (Rs.100, 000).

A survey carried out by the German Technical Cooperation (GTZ) has found that the outreach of financial services in Sri Lanka is quite extensive with over 82.5 percent of households having accessed financial institutions for savings and credit requirements. However, significant disparities do exist across regions and sectors with the estate sector identified as under-served in relation to the urban and rural sectors.

The survey covered 3, 000 households across 22 districts, excluding Kilinochchi, Mullaitivu and Vavuniya. Although the survey covered access to financial services in general, the objective was to determine the access to microfinance services and to identify barriers to access.

It has been found that microfinance institutions play an important role in the country with over 60 percent of households having accessed these institutions for the financial needs. Institutions such as Samurdhi Banks are particularly important for the lower income groups – more than 50 percent of households in the first quintile have obtained loans from Samurdhi Banks and almost 40 percent have saved with the same. Outreach of financial services has been fairly extensive with 82.5 percent of households having access to financial institutions for their savings and credit needs.

However, disparities have been observed across sectors, regions and income groups. Given that 80 percent of households in Sri Lanka are from the rural sector it is possible though that there are pockets of remote areas where access to finance is very low. There is a strong savings culture in Sri Lanka with nearly 75 percent of households having saved in a financial institution.

However, the estate sector lags behind with a figure of 68.5 percent and provinces such as the Northern, Eastern and North Western having a savings rate of approximately 65 percent. It has also been found that state banks are generally more popular for savings with over 75 percent of households saving in these banks. This is mainly due to the fact that these banks are seen as reliable and safe.

Domestic private banks are notably playing a fairly significant role in the Northern and Eastern provinces especially in the case of savings. This is in marked contrast to the rest of the country and could be attributed to the limited outreach of financial institutions.