Main Challenges and Issues in Microfinance Sector in Sri Lanka

Abstract

The World Bank states micro finance reflected as a key poverty reduction strategy especially for third world countries. As a developing country Sri Lankan Micro Finance sector expansion has been limited. Hence, this study was conducted to explore the main challenges and issues in the microfinance sector in Sri Lanka. The exploratory sequential designing technique was used to achieve the main objective. The study was conducted using mixed method. Thematic analysis method was used over 10 interviewed carried with ten top and middle managers of three major micro finance banks (Regional Development Bank, Sanasa Development Bank and Samurthi Bank Societies) as a qualitative analysis technique, despite regression analysis done over data collected through 150 questionnaires distributed among customers in above three micro finance banks. As showed in the results, lack of literacy, moral hazard of the clients, lack of information technology usage were the most significant challenges and issued face by the institutional level and customer level when popularizing microfinance concept among the lower income population. The findings suggested to micro finance providers to educate the micro finance target segment, choose suitable path way to access the poor and proper rewarding system with a valued incentive must be implement to the sales representatives to ensure and enable the development of the formal MFI in Sri Lanka