Micro Finance Institutions in Sri Lanka

Abstract

The formal rural financial sector in Sri Lanka comprises a large number of Micro financial institutions (MFIs). These MFIs, play an important role in meeting the rural credit needs in rural sector in Sri Lanka. MFIs have gained an increasing share of financial assets, which has been particularly helpful for satisfying the growing demand for loans and advances in poor people in the country. However, performance of MFIs in Sri Lanka is less than satisfactory and highly criticized today. Poor performance has been attributed to poor management of assets and consequently, the sustainability of these institutions is uncertain. Moreover, an attention to the efficiency of MFIs in Sri Lanka is more concern to the general public given collapses of several formal and informal MFIs. So, Microfinance is increasingly being considered as one of the most effective tools of reducing poverty. Microfinance has a significant role in bridging the gap between the formal financial institutions and the rural poor. The Micro Finance Institutions (MFIs) accesses financial resources from the Banks and other mainstream Financial Institutions and provide financial and support services to the poor. This article reveals which is the Micro Finance Institutions and its role in Sri Lankan economy.