Press Coverage
Financial Times Role of Micro Financing in poverty reduction & Tsunami Rebuilding United Nation's commitment to reduce poverty through targeted millennium development goals and the large extent of work to build up the earning capacity of Tsunami affected families have created a wider role for the Micro Financing agencies. Consultative Group to assist the Poor (CGAP) a global resource center for Micro Finance formed of a consortium of 28 public and private development agencies, after having carried out three Country Level Effectiveness and Accountability Reviews (CLEARS) in Cambodia, Nicaragua and Madagascar carried out a review in Sri Lanka in October. CGAP was created by the major donor countries to be a resource to the industry in setting standards, providing advisory services, undertaking research and development and funding innovations in the field. Addressing a press conference in Colombo recently Dr Brigit Helms Lead Micro finance Specialist of the CGAP said that Sri Lanka was selected for review due to the large donor base involved in Micro Finance and the significant challenges making aid effective after Tsunami. Speaking further she added that approx USD 250 million remains committed by the international community and not disbursed yet. Analyzing the local review she added that Sri Lanka has a long history in micro financing and around 14,000 access points are in operation catering to an average of 1300 beneficiaries per point. This is comparatively good in contrast to overcrowded situations in countries like Philippines. Some of the leading Micro Finance operators in Sri Lanka are co-operative and rural Banks, Seeds (Sarvodaya), Sanasa Bank and Samurdhi movement. Micro Finance is a combination of Charity plus Financial Services that should be capable of sustaining themselves to be of service to poor. Recent CGAP survey propose the following action plan for the funders Short Term - Collaborate, Communicate and take stock Medium term-Build common vision, increase transparency Long term Poor people too are in need of variety of financial services such as credit, savings, cash transfers insurance etc, they e look upon the local money lender as their major funder and often pay as much as 20 per cent per month interest. They lack access or acceptable collaterals to reach the formal Banking system. At the same time micro financing too cannot afford to offer lower rates as it costs much more to manage large no of small loans. If the lenders costs cannot be covered their growth and sustainability will be affected. Lower transaction costs, varied financial services and effectively reaching the unbanked poor are keys to achieving sustainability. According to the Central Bank in 2004 a total of 1.9 million families benefited directly from the income supplementary program of Samurdhi, representing a nearly 40% of the population. However according to the census & Statistics population living below the poverty line is around 19 per cent. Annual Samurdhi programme cots around RS 9billion. This situation may well have worsened after the tsunami with adverse effects to the livelihoods of people in the coastal belts. A large number of them were self reliant on minor fishing, coir yarn, trade, agriculture tourism etc. This situation offers a huge opportunity for micro finance to lend a hand to rebuild the livelihoods of the affected people in addition to the existing projects. Entrepreneurs dependent on micro Finance are poor people lacking funds, basic skills and knowledge to deal with formal sectors, but their capability in capacity building and self reliance could direct them to be key players in the economy to expand to higher levels and provide growth and employment. With a rural population of nearly 80 per cent and with almost half of them being around the poverty line access to basic financial services is a key issue to poor people. Access to sustainable financial services has proved to be a catalyst for enhancing the incomes of the poor. This is the only practical way to move the poor from survival to growth through health, education and housing. Sri Lanka must work with commitment to utilize the available micro financing expertise opportunities especially from the developed countries to move people out of the poverty line. The poor must be made to live with honour and dignity by providing them the required financial strength to be partners of economic progress. In a highly Import dependent economy Poverty cannot be reduced by fairy tale promises that cannot be fulfilled.
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Press Coverage
