ROLE OF MICROFINANCE IN EMPOWERING POOR RURAL HOUSEHOLDS: A CASE STUDY IN BERENDINA1 IN SRI LANKA

Abstract

Microfinance has played a significant role in poverty reduction in Sri Lanka throughout the last decades. Although studies have been conducted all over the world regarding the impact of microfinance on poor rural households; referring to Sri Lankan context, the impact of microfinance on poor are less documented. Therefore, this study was conducted to identify the role of microfinance in empowering poor rural households with the objective of assessing the impact of microfinance on micro enterprises, assessing the impact of microfinance on household level improvement and to identify the areas to be improved in the current institutional practices. The study was conducted with reference to Galigamuwa Branch in Kegalle District of Brenendina Micro Investments Company Limited with a sample of 126 clients selected using multi stage cluster random sampling technique. The data collection employed a pre- structured questionnaire and collected data were analyzed descriptively. The findings of the study revealed that Berendina Micro Investments Company Limited adopted credit-plus approach in microfinance to serve its clients in the modes of loans and enterprise development services. The clients were empowered socio-economically with the effect of microfinance credit-plus approach through starting and expanding microenterprises in different sectors generating different types of employment opportunities as well as improving basic facilities at household levels including essential infrastructure facilities. Further, the study identified necessary changes to be made in the current practices of credit program and enterprise development program with reference to clients’ perception that will guide the institution towards providing a better service to its clients in the future.

Keywords: Enterprise development services, loans, microenterprises, microfinance, poor rural households