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Library » Microfinance and Conflict in Sri Lanka - Towards a Sustainable Socio-Economic Development in the North and East

Microfinance and Conflict in Sri Lanka - Towards a Sustainable Socio-Economic Development in the North and East
Mar 2007, Tritschler, F. & Bartocha, D.

How can microfinance help conflict-affected Sri Lanka?

This paper attempts to answer the question: “To what extent are microfinance operations possible in conflict -affected areas, and what are the special adjustments that need to be made to project design, in order to potentially contribute to conflict transformation”?

The paper states that:

Microfinance plays an important role in social and political development within conflict-affected environments,
It helps poor people easily deposit and withdraw savings, thus helping them cope with external shocks and insecurity,
However, microfinance in conflict includes more risks, higher operational costs, an unfavourable political environment, limited human resources and market distortions.

The paper examines the situation in Sri Lank and finds that:

Microfinance institutions (MFIs) in the North and East of Sri Lanka face higher risks and operational costs than MFIs in other parts of the country,
Repayment rates are worsening and there is a complete non-existence of training facilities,
Demand for microfinance exceeds supply,
Rising living costs, increased production for local markets, and the need to rebuild businesses lead to higher demand for loans.

The paper concludes that:

The provision of microfinance services in post-conflict settings requires the same standards as microfinance in a non-violent setting,
However, microfinance needs to continuously adapt to the rapidly changing requirements and demands in post-conflict and immediate-conflict environment.

The paper ends with a set of recommendations for development partners and practitioners operating in a conflict-affected environment.

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Publisher(s):
Deutsche Gesellschaft für Technische Zusammenarbeit
Promotion of the Microfinance Sector