More benefits for microfinance companies soon

by Lalin Fernandopulle

A regulatory Act for the microfinance sector will benefit microfinance institutions and the SME sector, said David Bartocha, Junior Expert - German Technical Cooperation (GTZ)-ProMis addressing a workshop on Global Trends in Microfinance organised by the ILO at the HNB Towers on Tuesday.

He said a regulatory Act will help microfinance institutions to gain recognition, be commercially viable and competitive in providing financial assistance to the SME sector.

Though the Act will not specify the interest rates of microfinance institutions it will help institutions to reduce interest rates by increasing the outreach and the number of borrowers, Bartocha said. He said that as far as poverty reduction and SME development is concerned Sri Lanka is where Cambodia was in 1999, where a regulated microfinance system placed the country on a sustainable growth path.

The regulatory Act will require that microfinance institutions maintain financial statements, and adhere to all banking regulations.

Bartocha said microfinancing is only a tool and not a solution for poverty reduction and SME development in a country.

It is not mere granting credit but access to finance and quality of service that is required to reduce poverty and develop entrepreneurial skills of the rural community.

The Grameen Bank of Bangladesh introduced by Prof. Yunus, Bancho Sol Bank of Bolivia and the Ratyat Bank of Indonesia have helped to reduce poverty and develop the SME sector in those countries.

Samadanie Kiriwandeniya of the Sanasa Development Bank, said when Sri Lanka has a good model for microfinance why look for models from other countries.

To gain maximum benefits from microfinance, the cultural backgrounds of communities must be taken into account and solutions should be community based, she said.

Enter Growth is a program initiated by the ILO to develop SME sector enterprises at village level and provide consultative services for state officials at village level programs.

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