N and E favourite microfinance destinations
View(s):The former conflict affected North and East regions have become favourite microfinance destinations even for the formal banking sector, according to industry analysts. “There is a significant microfinance presence in Sri Lanka and the country has one of the highest microfinance penetrations in the world, with an extensive delivery network of over 10,800 outlets,” a Bartleet Religare Securities Report has said.
It has said that according to the Microfinance Industry Report (2009) a diversity of products is not seen in the microfinance sector. “Although many institutions have broad product portfolios, they have almost same features, with different maturities.”
The report was produced by GTZ ProMiS in collaboration with The Banking With The Poor Network.
According to the report, while a few microfinance providers require physical collateral, especially for higher value loans, others rely on collateral substitutes such as guarantors and compulsory savings balance. “Information gathered in an MFI survey indicates annual interest rates on loans vary from around 6 per cent to a maximum of 36 per cent”. The global average interest rate for micro credit hovers around 37 per cent and it reaches a high of 70 per cent at times.
The main sources of funding for the sector are donor grants, savings, soft loans and commercial loans. However, donor grants are now declining with the end of the war, the report added.