VEHICLE OF POVERTY ALLEVIATION: Micro Finance has come to be regarded as an accepted vehicle of poverty alleviation though the topic is not without debate notably in respect of its contribution to a rapid boosting of a national economy. Who provides micro-finance? When you look at Sri Lanka, there is a plethora of micro-finance providers.
There are the international organisers who pressurize the Government to be active in the provision of micro-finance to the poor so that they are pushed over the poverty line. There are countries which bilaterally encourage the provision of micro-finance.
Then, there are the International Non-Governmental Organisations (INGOs) as well as the local NGOs in the fray of providing micro-finance to the poor. The former either does it directly or through the local NGOs of their choice.
The international organization and those bilaterally supporting countries channel micro-finance with Government's contributions through the Finance Ministry and the Central Bank via the recognized micro-finance institutions namely the Development Banks. State Commercial Banks and the willing Private Banks. To reach the grass-roots, some of them use the financial intermediaries operating at national, regional and local levels.
The National Development Trust Fund (Former Janasaviya Trust Fund) also an important disburser of micro-finance through its partner organizations (POs). In addition, there are micro-finance components in many development projects under various ministries and departments. So we have a jumble of micro-finance providers.
All of their roads, they say, lead to poverty alleviation. But has the poverty really decreased over the year. The urban poverty is being contained at 8%, However, 25% of the rural population is poor, Estate poverty has increased to 30%. On the whole, a minimum of 23% of the population outside North and East remain poor.
According to the Department of Census and Statistics (DCS), no significant dent has been made in poverty alleviation over the past decade or so. As a matter of fact, DCS expresses its doubt about the possible attainment of the poverty alleviation targets envisaged in the Millennium Development Goals (MDG), that is, reducing the overall poverty to 13% set for the year 2015.
Most of the other MDG 2015 goals have been already achieved or achievable by that year. But perhaps not poverty that continue to haunt us severely despite many development strategies launched and that many micro-finance windows are said to be in active operation.
Micro-finance has gone down the pipe-line admirably well from the national level to the regional level and from the regional level even to the local levels with less vigour during the past decade or two. But the local level has micro-finance gone to the deserving and for the intended purposes? Of the deserving too, has it gone to the poor at the bottom layers? This remains the grey area in the path of micro-finance flow.
Arm-chair micro-finance theoreticians at the national level in particular appear to be fond of adducing many reasons for this clogging of micro-finance near the door-steps of the deserving borrowers, having moved it so far from the national level through the regional level and even to the periphery of the local level.
The reason or reasons may vary from location to location, types of intended activities for which micro-finances are made available, supply-driven nature of the micro-finance provision, interest rate structures, not meeting adequately the credit pluses so vividly spoken of but not provided or inadequately provided, consumer preference and consumer tastes unfavourable to what are being produced in income generating activities of the poor supported with micro-finance, micro-finance beneficiaries using their income generating activities as marginally supplementing the traditional family income source which is something else (e.g. farming), the poor with many worry-beads around their necks in a perpetual struggle to get rid of them being compelled to divert their resources and micro-finance received or receivable less for the intended income generating activities which are often time-specified, resource-specified, produce-specified activities that the beneficiaries are unable to comply with and many other reasons not clearly known to the micro-finance wizards at national and even at regional levels. Hence, the grey area referred to earlier continue to remain not cleared.
So we have two problems in hand. One is that at the national level we have no effective pivotal point which very effectively look for who provides micro-finance in what amounts, to whom for what, when, where, under what terms and conditions etc.
These may be well expressed on paper backed with statistical tables but what is expressed on paper and what is on the ground are often found to be not the same. This pivotal point be it under the Ministry of Finance (with National Development Trust Fund as its Secretariat) or the Central Bank (with the Regional Development Department as its Secretariat) or any other organ deemed fit enough should be empowered to look into the workings of all the micro-finance providers who should be made responsible to report to it.
It should also be empowered as a clearing house where information should be called for, collected, collated, processed and disseminated to micro-finance providers and other relevant agencies so that there is a high degree of transparency and information exchange facility among the numerous stakeholders.
There has to be an open understanding. The micro-finance providers are so many, who knows that for the same purposes beneficiaries have taken loans from different sources? Some have taken loans to repay loan installments of previous loans! So the information at the beneficiary levels should be accurately collected and stored.