IMPACT OF MICRO-FINANCE ON RURAL MICRO-ENTERPRISE DEVELOPMENT IN SRI LANKA

Micro-enterprises and micro-finance have proven to be successful in rural villages to improve the quality of life of the rural community. The main objective of this study was to investigate the impact of micro-finance on rural microenterprise development by using economic variables of development. To select the sample of the study, Multi Stage Sampling Technique was used and it included both micro-finance client entrepreneurs and micro-finance non-client entrepreneurs. As the study mainly depended on primary data, a field survey was carried out in ten Grama-Niladhari Divisions within Kuliyapitiya-West Divisional Secretary Division. Based on the objective of the study, five hypotheses were developed for economic variables of business income, household income, household expenditure, employment generation and savings. After the statistical testing, the hypotheses that were developed for business income, household income and household expenditure revealed that there was a significant difference between micro-finance client entrepreneurs and non-client entrepreneurs but no such difference for employment generation as those micro entrepreneurs were mainly sole proprietors and highly depended on family labour. However, the variable of savings was not tested statistically because both groups of entrepreneurs were reluctant to give their savings data and it was analyzed qualitatively. Accordingly, client entrepreneurs’ objective of saving was to improve their businesses where as non-client entrepreneurs’ objective of saving was to support their family matters. As the conclusion, the study recognizes that a provision of financial services through micro-finance programmes is not sufficient to develop micro-enterprises and they need “credit plus” approach from such programmes. Keywords: Development, Economic Variables, Micro-Finance, Micro-EnterpriseFor full paper: fmscresearch@sjp.ac.l