Impact of Granting Micro Finance Facilities on the Living Standards of the Rural Poor in Sri Lanka

Abstract

This paper establishes facts to evaluate the impact of microfinance credit schemes in operation, on the actual living standards of beneficiaries of such schemes. In Sri Lanka, micro finance credit facilities are being granted to the rural poor intending the alleviation of poverty and achieving higher living standards. To accomplish same, the Government has tied up with numerous financial institutions and non-governmental organizations through which a substantial amount of capital has been granted to the poor despite the high levels of risk associated with same. Irrespective of the long history and the large number of institutions involved, only limited knowledge is available of its impact on living standards. No proper paper mechanism is in place for such post - credit evaluation. This study intends to fill this gap. The study is carried out in the purposively selected geographical areas of Monaragala and Kegalle, among borrowers under various micro finance schemes. For the clarity of the population it has been confined to beneficiaries of facilities granted through licensed commercial banks. The study establishes three independent variables namely; timely utilization of micro finance funds, utilization of micro finance funds for intended purposes and the risk management ability of borrowers. Dependent variables in assessing the living standards are identified as the household assets, household savings and the household expenditure. Study has utilized primary and secondary data. Primary data are gathered through a structured questionnaire administered to a stratified random sample. The questionnaire was designed to reveal general demographic details of the respondents, enabling more clarified analysis. Secondary data are extracted through documentary sources. It is concluded, as evidenced in data, all factors identified relating to the micro finance schemes indicates a positive impact of varying degrees on the living standards of the beneficiaries cum borrowers, with the management of risk showing the weakest impact.