SUSTAINABILITY AND OUTREACH ASSESSMENT OF MICRO FINANCE IN SRI LANKA : CASES OF SARVODAYA ECONOMOMIC ENTERPRISE DEVELOPMENT SERVICES LTD AND GAMI PUBUDUWA

Asymmetric information and risk are two main problems in credit markets. These problems are even higher in developing credit markets. Formal financial sectors in developing countries are still growing and are reluctant to provide credit to poor. Micro credit is considered as an effective strategy to overcome this problem and to give poor opportunities to access financial services. Therefore there is a strong need for continuous operation of micro- credit programs. However, many micro credit programs face difficulties in achieving main goals of sustainability and outreach. This study aimed at assessing these two main aspects of success of micro credit programs. A comparison was done between two micro credit programs: SEEDS, Sarvodaya Economic Enterprise Development Services Ltd, and Gami Pubuduwa, a program operated by Hatton National Bank in Sri Lanka. The results showed the program operated by the private commercial bank was achieving success faster than the program by community based organization in relation to sustainability indicator, but SEEDS was in ahead in reference to outreach measures. Findings evidenced the importance of profit orientation and targeting "economically active poor" for the success of micro credit programs. The study was based on primary and secondary data collected during two weeks period of field work activities in Sri Lanka