Sri Lanka

This study is part of a series of guided case studies aimed at exploring whether and under what conditions the application of a value chain approach can help accelerate economic growth in conflict-affected environments. This study attempts to ascertain the ability of a value chain analysis to determine the impact of the violent conflict and governance failures in Sri Lanka on the fisheries industry in the southern part of the country. The study used the analysis to compose recommendations for effectively developing the capacity of the fisheries sector to contribute to equitable economic opportunities in Sri Lanka.

This is a Microlinks community contribution.

Chandula Abeywickrem describes how Hatton Bank (HNB) of Sri Lanka links youth and rural poor to financial services through both formal and informal avenues. By investing in entrepreneurs at a young age, HNB believes that they are shaping loyal customers who will ensure sustainability of the program as they graduate from microfinance to larger loans.

Drawing on the World Bank's Moving Out of Poverty dataset, this investigation explores the life stories of 125 women who have lived through violent political conflict in four countries: Colombia, Indonesia, the Philippines, and Sri Lanka.  Two key findings emerged. First, the women living in communities directly affected by violent political conflict rated more highly on empowerment measures than the women living in communities that did not experience conflict. Second, once the violence drew to a close, the set of conflict-affected communities that experienced the most rapid recovery and poverty reduction were also characterized by more empowered women than the set of conflict-affected communities with lower rates of poverty reduction.

The life stories reveal that conflict and recovery, while bringing great suffering, also presented new opportunities for many women as traditional local structures, livelihoods, and gender norms were disrupted. During periods of violence, many women helped their households cope by diversifying and intensifying their economic activities. In the aftermath, they often continued to play more active economic roles as they struggled to recover and rebuild. In some cases, effective post-conflict reconstruction and development interventions created new opportunities for women to improve their livelihoods, access finance, join new groups, and, more rarely, become politically  engaged. In these ways, women often gained more independence and contributed actively to the recovery of their families and communities. The communities with both extensive poverty reduction and women's empowerment were characterized by reasonable levels of local security , access to active markets, and local governance that was adequate enough to attract and make good use of post-conflict aid.  The report presents broad recommendations for interventions that take advantage of a window for programming interventions that build on these positive but time-limited forces.

Although an increasing number of specialized microfinance institutions have shown that microfinance can be profitable (usually following years of subsidies for start up and innovation) and an increasing number of banks have entered the microfinance market, literature and data on the profitability of microfinance in commercial banks are essentially non-existent. Under the AMAP Financial Services Knowledge Generation project, DAI and ACCION completed case studies of two institutions, Hatton National Bank in Sri Lanka and CREDIFE, the service company of Banco del Pinchincha (see Related Content) with the objective of measuring the profitability of each institution's microfinance unit. The two case studies present the initial efforts with the two banks in accurately costing and measuring the profitability of their micro credit products.

This study covers two microinsurance schemes in Sri Lanka, ALMAO and Yasiru. Both operate through local organisations that manage all fieldwork. The local partners recruit clients/members, collect premiums and administer claims. The main target group for both ALMAO and Yasiru is the rural poor.

This paper was commissioned by the “Good and Bad Practices in Microinsurance” project. Managed by the ILO’s Social Finance Programme for the CGAP Working Group on Microinsurance, this project is jointly funded by SIDA, DFID, GTZ, and the ILO. The major outputs of this project are:

1. A series of case studies to identify good and bad practices in microinsurance
2. A synthesis document of good and bad practices in microinsurance for practitioners based on an analysis of the case studies. The major lessons from the case studies will also be published in a series of two-page briefing notes for easy access by practitioners.
3. Donor guidelines for funding microinsurance.

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As more and more commercial banks become intrigued by the idea of entering the microfinance market, the lessons learned from some of the more experienced players become crucial in evaluating requirements and potential benefits. Hatton National Bank (HNB) in Sri Lanka operates its microfinance department as an internal unit, that is, as a division or product within the bank. The performance of Hatton Bank's program provides key lessons for achieving profitability under this model.

HNB opted to integrate microfinance into its traditional banking operations rather than establish a separate subsidiary or new company to conduct the microfinance activities. Microfinance does not even exist as a separate division within HNB; rather, the Gami Pubuduwa product (GP or Village Awakening product), falls within the Development Banking Unit branch operations.

The presence of the GP field officers in villages, whether they are branch- or village unit-based, is strong. The village units are located centrally, in modest, sparsely furnished buildings that are often left unlocked when the GP field officers are out so that villagers can wait inside for their return. This village involvement exemplifies one of the GP program’s main strategies: to bring banking to the rural villages of Sri Lanka, providing not only microcredit, but financial services in general.