Abstract
Various organizations are involved in micro-financial programmes in Sri Lanka. There is limited knowledge on the impact of microfinance on the livelihood improvements among poor coastal communities who were affected by Tsunami in Eastern Sri Lanka. This study investigated the effectiveness of microfinance support for coastal communities’ livelihood development in Trincomalee. A survey was conducted using stratified randomly selected 99 microfinance beneficiary households in three identified coastal villages in three Grama Niladhari Divisions in Kinniya. The analysis was based on 2006 information as a benchmark. The analysis was conducted using a multiple linier regression with the factors determining the revolving fund efficiency (RFE). The study found an average of 39.5% and 14.2% increase in income and private savings, respectively in agriculture sectors. Although the poor and the poorest groups have been reached by microfinance institutions, 65% of their clients seem to be from the non-poor groups. About 90% of the young people reported lack of opportunities for modern livelihood supports. The RFE was 0.32% indicating that it was not well adopted in practice. This may be due to lack of responsiveness of the Community Based Organizations (CBO). The results of multiple regression analysis showed that age, education and family income and weakly facilitated RFE was affected significantly by private savings. To improve livelihoods of poor coastal communities, effective capacity building of CBOs on microfinance management, training and technical supports to young people in alternative non traditional livelihoods and creating market opportunities are important. <strong>Key words</strong>: Livelihood; Microfinance; Coastal Communities; Eastern Sri Lanka DOI: <a href="http://dx.doi.org/10.4038/tar.v22i3.3706">http://dx.doi.org/10.4038/tar.v22i3.3706</a> <em>Tropical Agricultural Research </em>22(3) (2011) 330-336
Highlights
Credit is often seen as an indispensable vehicle for the poor to alleviate hunger and poverty, it has its own drawbacks
A total of 99 recipients of microfinance were stratified according to the livelihood activities and with 33 individual households were randomly selected from three villages in the Kinniya Divisional Sectary Division (DSD) in 2009
To share the knowledge of the area, and discuss the issues related to microfinance, key informant interviews were held with Community Based Organizations (CBO), Rural Development Officers and Grama Sevaka Officer (GSO) in the selected villages
Summary
Credit is often seen as an indispensable vehicle for the poor to alleviate hunger and poverty, it has its own drawbacks. Microfinance is provision of small credit to the poor without securing collaterals. Microfinance, along with savings and micro-insurance products, is meant to provide financial services to the poorest who do not have access to formal financial institutions. The beneficiaries are safeguarded from money lenders, and get an opportunity to develop as micro-entrepreneurs (ProMiS, 2007). In Sri Lanka anecdotal evidence has shown that there were widespread livelihood issues. The rural poor have no easy access to get loans and grants from commercial banks or financial
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