Deposit Assessment in Sri Lanka

This paper examines the supply and demand for microdeposit services in Sri Lanka. It discusses banking sector trends, formal and semi-formal institutions for deposit mobilization, informal mechanisms, role of government, consumer protection measures and payment systems for banks in Sri Lanka. It also examines microdeposit service providers, products, methodologies and their scalability in the country. Findings indicate that:

• State owned banks have achieved admirable outreach due to their various services and proactive government measures;
• Banks have downscaled fairly well to low income client segments, but actual usage is not high, although outreach is high in terms of number of accounts;
• Co-operatives are strong contenders in the savings sector, with effective outreach to the low income segment, but high politicization and mismanagement hinders their performance;
• Thrift and Credit Co-operative Societies suffer from poor financial management and governance;
• Informal saving methods are very popular among the poor;
• Current regulation considers deposit mobilization by NGO-MFIs illegal, although they are popular financial service providers among the poor.

The paper concludes with recommendations in the areas of regulation, capacity building, financial literacy and products and delivery mechanisms to improve microdeposit services in Sri Lanka.