Micro finance for sustainable development

by Lalin FERNANDOPULLE

Micro finance is essential for Sri Lanka to empower rural youth and make them micro entrepreneurs for sustainable economic development, said Deputy General Manager, Marketing and Retail Banking and Chairman, Banking with the Poor Network, HNB, Chandula Abeywickrema.

He said micro finance has contributed in a major way to alleviate poverty in the country by empowering the poor with access to capital and making them micro entrepreneurs.

Over 70 percent of the population lives in rural areas which has less access to finance for their livelihood development. Micro finance provides capital for sustainable livelihood.

"Access to finance through the banking network is low in Sri Lanka due to the high risk and transaction costs.As a result the need for micro finance in Sri Lanka has grown and its contribution to poverty reduction and sustainable economic development in the country is commendable" Abeywickrema said.

He said micro finance is not merely providing credit to those who don't have access to finance but educating them to become micro entrepreneurs and support the rural economy.Micro entrepreneurs contribute to maintain social order and sustain the rural economy.

"The education system in Sri Lanka does not make youth employable. The reason for youth frustration and uprising is that they are not included in the economic fabric of the country. Making youth employable is one of the aims of micro finance", Abeywickrema said.

The roots of micro finance in Sri Lanka could be traced back to the Co-operative Societies and the Sanasa Movement which have been promoting self-employment in the country.

Both has played a salient role in promoting micro finance in the country.

Alleviating poverty and improving the living condition of people has been a pressing need in many countries across the world.Micro finance is a means by which developing countries have been able to reduce poverty by generating income and creating employment in the rural sector.

Micro finance started in Bangladesh with the Gramin Banking concept introduced by Professor Muhammad Yunus in 1976.

Abeywickrema said field officers are vital to drive a successful micro finance program in the country.Field officers support and share the vision of the micro entrepreneur."Passion, patience and commitment are pillars on which micro finance is based on.The loan recover rate of micro finance is high compared to the banking sector", he said.

Poverty alleviation, income generation, employment creation, financial education, creation of multiple income generating revenues for banks and rural economic development and the benefits of micro finance.

Financial inclusion, a developed notion of micro finance provides access to savings, credit, remittances and insurance.

Abeywickrema said the micro finance industry should be regulated and added that the government is in the process of introducing regulations for the sector. "Reducing the transaction cost, increasing the number of field officers and making financial services available, accessible and affordable are some of the major challenges of micro finance", he said.

The Asia Micro Finance Forum (AMF) hosted by HNB will be held in Colombo from October 12-15.The conference will focus on the future direction of the micro finance industry in Asia.

AMF is organised by the Banking with the Poor Network based in Singapore and it is the largest Asia based micro finance network.The Forum which takes place once in two years was held last in Vietnam in 2008.