FINANCIAL inclusion is the bottom line of growth. With Sri Lanka focusing on development the need of the hour has become finding ways to spur inclusive growth.
In such a background the four-day Asia Microfinance Forum that kicked off on Tuesday night with 450 delegates present from 50 countries is immensely important to Sri Lanka. Micro finance is more than micro credit and effective financial inclusion plays a critical role in bringing people out of poverty. If an ordinary person who lives on a hand to mouth existence cannot progress out of poverty then preoccupation in focusing on macro-economic stability is useless. The forum is considered to be the premium microfinance gathering in Asia. Financial inclusion has a positive correlation to improving livelihoods in Asia; hence the industry faces significant challenges. The latter was more so because there was huge disparity in financial inclusion across the region with its being 98% in Singapore, 8% in Papua New Guinea, 28% in Cambodia and 59% in Sri Lanka.
Even though our country has managed to maintain good statistics it is also an indication of how much more work needs to be done in this sphere. Clearly one of the biggest drawbacks is lack of awareness. Most rural poor either approach conventional bankers or send their precious collateral to the nearest “poli” centre rather than availing themselves of micro finance.
Introducing new products and creating a strong presence in development focused areas; particularly the north and east would not only boost micro finance industry but also create much needed impetus for the small and medium enterprises to take off. It would also inspire more and more entrepreneurs to begin their own businesses thereby taking the initiative to drive growth from grass root level.
Financial inclusion is critical as Sri Lanka forges ahead with a heavy accent to infrastructure development, success of which is key to empower the baseline of small and medium enterprises and micro entrepreneurs who are a key part of the value chain yet often neglected. Micro finance has an important role to play to ensure that socio-economic growth gets equitable in Sri Lanka whose economy is largely concentrated in the Western Province. Rural areas are short of growth and wealth hence financial inclusion is critical to address this.
The Central Bank has noted the importance of micro finance but has not been able to actively spur its growth; however they are giving incentives to banks to open into micro loans that would benefit the poor. Clearly there is much that needs to be done in this sector but the returns are high both for the micro financer and overall economy. Impressing upon the clients the importance of paying back their loans and ensuring that the businesses are sustainable are all challenges that the industry has to deal with.
In banking trust is the core component. Therefore the right framework must also be in place for more lending to happen. This means that the industry must engage actively with the government to forge better policy, gain international lessons to tailor make new products for the industry and assure returns to all stakeholders. Just the simple self satisfaction of seeing one person climb out of poverty and empower his family and loved ones then by extension the community is an indication of the power of one. The change one person begins can write the entire future of Sri Lanka.