The USAID Microenterprise Initiative in Sri Lanka

This survey was undertaken to assist in developing and expanding a microenterprise strategy in Sri Lanka. It reveals the current situation of miroenterprise in the country. The vast majority of microenterprises are occasional or periodic income- generating activities by one person based in the household. Supplier credit is an important source of financing for many microenterprises. The government of Sri Lanka, as well as bilateral and multilateral donors, provide assistance through programs aimed at poverty alleviation or microenterprise development. 

With regards to assistance programs, the survey finds that:

• Building of institutional capacity to administer the programs is required;
• Recovery rates for credit are higher when emphasis is placed on meaningful savings mobilization prior to lending;
• MEDP savings and credit societies are not providing financial services at the community level;
• It is more cost- effective to use intermediaries such as NGOs to encourage group participants to identify and develop their own business ideas for start-up;
• Donors agenda for credit volume and disbursement exceeds the capacity of institutions such as NGOs.

The study recommends that if sufficient funding is available, support research and advocacy for policies, extend financial services to those not served by the existing formal banking sector; provide larger scale and more effective outreach programs to rural women and revitalize the regional rural development banks. In the case of insufficient funding, add microenterprise components to existing projects or strengthen existing microenterprise outreach components.