Paper

A Commercial Bank's Microfinance Program: The Case of Hatton National Bank in Sri Lanka

Examining Hatton National Bank's microfinance program

The HNB Gami Pubuduwa or "village reawakening" program is aimed to provide banking services to households in rural and semi-urban areas in 20 administrative districts in Sri Lanka.

The paper addresses four issues regarding HNB's microfinance operations:

  • What motivated HNB to undertake a microfinance program?
  • Can a privately-owned commercial bank successfully downscale part of its operations for microfinance?
  • What adjustments in regular banking operations are needed to build a profitable microfinance program?
  • Is a microfinance operation consistent with a privately-owned bank's profit-maximizing objective?

It outlines principal lessons from HNB's microfinance experience as:

  • Clear objectives and a basis for motivation are core elements of successful microfinance programs;
  • Management carefully selecting and training experienced staff from mainstream banking operations to carry out the program and establishing a clear career development path;
  • Deposit products designed to conform to income and employment characteristics of the rural villages served;
  • Keeping the transfer price mechanism used for "purchasing" excess deposits from new banking units the same as that used for HNB's regular branches;
  • Institutional commitment, operating autonomy and a responsive management aid program sustainability.

About this Publication

By Gallardo, J.S., Randhawa, K. & Sacay, J.
Published