Understanding ICT's Role in Microfinance to Improve Financial Inclusion in Northern Sri Lanka
18 Pages Posted: 29 Sep 2017
Date Written: September 27, 2017
Microfinance industry has faced an exponential growth within developing regions over the last two decades. Sri Lanka has jumped on the microfinance bandwagon just like its South Asian counterparts. MFI’s elusive focus was to provide affordable financial services to the poor, low-income households. As a result, microfinance has been firmly established as one of the main contributors towards achieving Financial Inclusion. Microfinance interest rates are high in Sri Lanka mostly ranging from 20% to 72%. This is due to the high risks involved and high transaction costs. MFI’s customers are mostly rural dwellers residing in geographically dispersed areas with a sparse population is one of the leading causes of high transaction costs. Based on thirty women micro-loan borrowers who were interviewed through qualitative focus group discussion and in-depth interviews conducted within Northern Province of Sri Lanka, It was seen that majority of the microfinance agents/officers followed time consuming, costly and manual practices. Such as manually filling the forms, conducts regular weekly meeting to collect repayments and visits the head office to update information and handover the repayments collected. This paper aims to discuss on how ICT usage can reduce transaction costs and streamline loan management practices by improving efficiency and effectiveness. This paper further seeks to explicate microfinance’s role to achieve financial inclusion within the Northern Province, Sri Lanka.
Keywords: Financial Inclusion, Microfinance, Gender, ICT, Digital Literacy
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