Where We Work : Sri Lanka : Microfinance

BRAC started working in Sri Lanka in the Spring of 2005, a few months after the devastating Asian Tsunami of 2004. By 2007, BRAC shifted focus from disaster relief to longer term efforts in revitalising affected enterprises and economies through microfinance.

We focus on both the economic and social needs of our target borrowers in Sri Lanka, recognising and understanding that communities of borrowers require multiple interventions to move out of poverty.

Microfinance initially paves the way for BRAC because it harnesses the power of the group as both an economic and social unit offering support and security for the loans of its members. Microfinance groups or Village Organisations (VOs) can later become a community-based delivery platform for information and services such as health care, education and livelihood development. This approach to development has a multiplying affect by not only helping individuals but their entire community pull itself out of the spiral of poverty.

BRAC believes that community partnerships and institution building are essential in sustainable development and in spreading knowledge to future generations.

Since lack of capital was one of the main impediments to expansion and growth of small business, microfinance was identified as BRAC’s greatest development opportunity in Sri Lanka. With its long and successful history of microfinance in Bangladesh, BRAC quickly established a sustainable microfinance presence in Sri Lanka.
 

Programme Description

BRAC’s microfinance programme in Sri Lanka goes beyond lending financial assistance to poor women. The programme acts as a recruitment and capacity building platform for BRAC to expand further across the country.

The entry point for BRAC into many deprived areas in Sri Lanka is through the provision of microloans to poor women who act as highly effective conduits for development interventions in their communities.

Microloans

We deliver our microfinance service through Village Organisations (VOs) which organise poor women together into groups to improve their socio-economic positions. BRAC believes community partnerships and institution building are essential for poor women if they are to change their economic, social and political conditions.

BRAC’s microfinance Branch Officers conduct area surveys and consult community leaders and local elders to select the 20-40 members of each Village Organisation. Prospective members must have been residents of the village or area for at least five years.

Only one member of the household is considered and widows are encouraged to join.

The group is then sub-divided into smaller peer groups of five, each with its own elected leader. The members of the small groups take co-responsibility to resolve peer repayment problems. The VO meets weekly with its assigned BRAC Credit Officer to discuss credit decisions, make loan payments, and discuss issues of common interest.

Microloans are exclusively for poor women participating in the VOs. Borrowers range in age from 18-60 with no minimum education requirement. BRAC lends to women who are not served by other microfinance institutions.

Key Features of a Microloan

• Loan repayments in equal weekly instalments
• No physical collateral needed
• 12-20% interest rate
• Death benefit provided, 10,000 rupees (USD 91)
• Services delivered to member’s village
• Available in rural and urban areas
•   5% refundable security amount in reserve
• 7% annual benefit on security balance