Report on Microfinance institution sector performance SANASA

·         Technical efficiency of Microfinance institution sector performance SANASA:

Technical efficiency in the form of better results that provides a complete pair of inputs to develop the output for the users. Any organization is considered more efficient that utilize the minimum number of input and then produce the maximum number of output as technology, capital, labour and material. No unemployment of resources also required by technical efficiency. The rate of technical efficiency also determines by dividing the real output from the given inputs by the highest potential output from given inputs*100. So if any factor and worker were underemployed then its potential of output also missing. (economicshelp.org, 2019)

·         Pure efficiency of Microfinance institution sector performance SANASA:

Pure efficiency or pure technical efficiency is the type of efficiency that determines also the inefficiencies of the system and also the size of operation according to information. The efficiency measure according to VRS assumptions is also included in the pure technical efficiency. Due to managerial underperformance, the pure technical efficiencies also determine and consider all the flows and weak areas according to the performance of the organization. There are many different situations occur when the pure technical efficiency is determined and measurement the organization's performance according to its operations and technical set up.

·         Scale efficiency of Microfinance institution sector performance SANASA:

Any production or manufacturing of units determine the scale efficiency when the operational size if the maximum and after some modification, the efficiency also minimize. Aggregate capability divided by the technical efficiency than the value of scale efficiency also determine. Scale efficiency also explains in terms of its manufacturing and also explain if the unit mass is differing then its efficiency also effected due to its actual measurement and any change brings down the overall product down. Scale efficiency help to explain the different facts related to the measurement of the units and also help to maximize the results related to output. (KUMAR, 2008) 

·         Differentiate chart of DEA models: DEA is a form of methodology that use in the organizations to assess the efficiency in the number of entities and using a set of incommensurate inputs to develop the simple set of incommensurate outputs. It helps to compare the products of different organizations according to their efficiency. It uses the task of fractional programming but it also uses the linear programming for the units of different tasks under the system of evaluation.

 (Coelli, 2009)

1.      Microfinance institution performance in Sri Lanka SANASA:

A new discipline for academic research is micro-finance which is based on an effective and unique approach. Traditional financial intermediaries have not enough focused on this new discipline. Normally ignored by the traditional financial intermediaries, consensus results present that financial services are extended to the poor people by the microfinance institutes. Access to the finance is essential in order to meet the objectives of empower women, improved healthcare system, utilization of goods and services, access to the educational institutes for all, create wealth, raise of productivity, encourage entrepreneurship, and reduction in poverty. Research findings of Kipesha elaborate on the maximization of goods production. Research explains that to maximize the production of the goods and services of the firms, efficiency as a better use for the utilization of resources in better order.  Just like Sri Lanka, regarding the efficiency of microfinance institutions very limited research work is done, particularly in the developing and poor countries.  Some studies which considered only financial efficiency did not give attention to social efficiency.  To include microfinance services, this social efficiency research work has vital importance for the policy makers and managerial staff, considering this requirement many new financial institutions are opened in the rural areas of Srilanka after the year 2005. Furthermore, many activities of the commercial banks are diversified to serve the poor Srilanka microfinance industry is evolved as a key player. (charitonenko, 2002)

·         Cooperative rural bank of Microfinance institution sector performance SANASA

Colombo District Co Operative Rural bank, incorporated in 1994, to personal and corporate customers. The prime purpose of this group is to provide various services related to finance and banking in the market of Sri Lanka. The Company working in three areas: Commercial, wholesale and retail. To do business, these services are centred upon the commercial banking wholesales services. Moreover, this service of retail is also licensed. By the establishment of a huge network in a socially responsible way covering the entire country SriLanka the bank exists to deliver services in all customer segments. Considering distinct objectives, strategic action plan, a monitoring system, and success sharing system with relevant people, the bank has made it possible to achieve success goals and superior financial services in the competitive banking sectors during last few years. In the cooperative rural bank reaching greater heights as good cooperate governance and corporate management based on directors who are fully committed towards organizational goals bank is projecting accomplishment of its aims and goals. Although, the overall wellbeing of the banking system has become instrumental.

The supply and demand for microfinance have a major difference in the financial system of the country. In the formal sector, private commercial banks great concentrate in the short term lending to medium and large enterprises and also salaried employees. Only a few micro finance programs are profitable for the banks and give them long term benefits. (crbbank.lk, 2017)

·         Thrift and credit co-operative societies SANASA

The areas of township and rural sites in the country are populated with the Tamil people who can only understand the Tamil language. Although these are named Tamil people as the name implies in the north and east areas of the country. Umbrella organizations working in these federations of thrift and credit cooperative societies are dealing with around eight thousand societies and communities to ensure appropriate micro-finance services for these territories and rural areas of the country. 
A primary society that serves the population living in the villages and communities of east and north areas is known as  “Primary SANASA Society”. Additionally, the organization is also famous as SANASA federation because it concerns with the movement of people in this area. Federation is also named as the movement in some areas. Federation is mainly working for the largest group of people. Services supported by this organization are also in the Sinhala language as the majority of people living in these areas speak the Sinhala language. People of this area have given credit to the SANASA for improvement in their lives and the success of this movement.  

In Sri Lanka, the SANASA is the Sinhala acronym for the credit cooperative societies and movement of thrift. Records present that for 8424 primary societies the only working network of micro-finance is SANASA in the east and north areas of Sri Lanka.  Additionally, SANASA also covers other provinces of the country. Around 805000 people belonging to different religions and races are a member of this organization and movement in Sri Lanka. In Srilanka, the total population coverage. by multiple sociocultural political and economic issues, The internal strengths of this movement and organization were the reason that contributed in its survival and resulted in the growth of movement while protecting it from getting devasted by ethnic conflicts. An area designated for the societies is used for the primary societies function and operation.  There are several reasons behind the unique name and objective of "Sanasa movement” in Sri Lanka:

1.       It is the organization which follows a cooperative philosophy among the whole community and its members.

2.      From the last 100 years, the organization has successfully managed to work independently on cooperative principles.

3.       In its service to humanity, Nonpartisan and nonpolitical present

4.      as Sanasa Community,  Sanasa family has members from various castes, religions, and ethnicities.  

5.       by the centre has the democratic right for governance, Bottom up management style where each village entity guided.

6.      to the corporate institutions, Utmost transparency from the grass root level.

7.        to express opinion and vote, Supremacy of the member. (sanasa.coop, 2019)

·         Samurdhi societies:

The Samurdhi programme also known as prosperity program was implemented in 1995. The program was focused on public participation based development in the country. Moreover, the prime objective of the program was to bring down the poverty level in Sri Lanka. In the late 1990s, Samurdhi was successfully working in 21 districts of the country. However, total districts are around 25. The main goal was to reduce poverty thus under this program many resources including food stamps were distributed and divided in the families of poor people in accordance with their requirements and needs. After this, one-third of the national poverty line was developed for households in 1998. Samurdhi programme had these components:  

1.      Total 80% of the programme budget was spent on the distribution of food stamps in the eligible and needy households.

2.      Samurdhi banks presented a programme for credit services, savings in the banks, and a fixed interest rate based loans offered to businessman and entrepreneurs for the startup of a new business.

3.      Through various social forces and workfare development and rehabilitation of community was ensured. Moreover, various training programs were offered regarding this e.g. training in accounting functions, productivity training, and materials resources development.  

In 2003, the government of Sri Lanka requested to world bank for the provision of non-lending technical assistance for team working in the Samudhi program. From the beginning to now, Samudhi program has been changed a lot as reforms are made. Currently, reforms have divided this program into two main categories which include empowerment program and relief program.

In this relief program, some other programs are introduced with different themes. For instance, nutrition program, social security program and cash transfer program are included in this relief program. The Department of the Commissioner General of Samurdhi (DCGS) was established in 2008 as a kerosene program of relief in Sri Lanka. Moreover, this program was related to the dry ration stamps distribution. This program was mainly started for IDPs (internally displaced people). For these IDPs, ministries and financial departments are responsible to accomplish financial allocations and needs.

While on the other hand, the program started with the theme of empowerment was based on 5 sub-programs including Samurdhi housing programmes, social development, micro-finance program, a rural infrastructure program, and livelihood. (Irigoyen, 2017)

Considering distinct objectives, strategic action plan, a monitoring system, and success sharing system with relevant people, the bank has made it possible to achieve success goals and superior financial services in the competitive banking sectors during last few years. Banking Act and Monetary Law Act are the basis of the legal framework used in Sri Lanka. However, from 2012 banks are following international financial reporting standards for the development of financial reports and financial statements.

·         NGOs- MFIs of Microfinance institution sector performance of SANASA

In this research study, the main focus is on the sector of micro-finance in Sri Lanka. The micro-finance sector has influence from the characterization of traditional issues concerning loans and savings. Only a few products and services are offered in this sector. These products and services include money transfer services and insurance. In this study, many service providers in the micro-finance sector are analyzed. For instance, cooperative rural banks, thrift and credit cooperation and NGOs. The findings made a note of:

1.      Need for the supervisory and regulatory frameworks

2.      Limited knowledge about microfinance and external audit.

3.      Political interferences and an entirely centralized structure for decision making.

4.      Gender focus, specific groups, and limited data available about clients.

5.      The strong dependence of programs on default clients, guarantees, longer processing time, and greater collateral requirement.

6.      Limited access to technologies, operational challenges, and understanding about portfolio management and principles.

7.      Lack of innovation and creativity in the offered products and developed strategies for marketing.  

8.      Inadequate remuneration, limited available options for training, and various kinds of employment opportunities.

·         Licensed specialized banks of Microfinance institution sector performance of SANASA

In Sri Lanka, the banking system is highly diversified. A fine example is the Central Bank of Sri Lanka (CBSL). While on the other hand, two commercial banks: Ceylon Bank and People’s Bank are also working in the diversified system. In the country, foreign banks are 13. While total national saving banks, regional banks, housing banks, private domestic commercial banks and licensed specialized banks are 1, 1, 2, 11 and 3 respectively. However, only US banks are Citibank N.A. An entire island domestic banks are providing financial services. Although, foreign and commercial banks are working under the approval of BOL. The key responsibilities of the central bank include the supervision and regulation of the overall financial system in the country. Banking Act and Monetary Law Act are the basis of the legal framework used in Sri Lanka. However, from 2012 banks are following international financial reporting standards for the development of financial reports and financial statements. Commercial banks are also following advanced standards of IFRS from 2018 under which these commercial banks are required to set aside a provision for future financial losses from operations.

 Reference of Microfinance institution sector performance of SANASA:

Charitonenko, S. (2002). Commercialization of micro finance in sri lanka. 3-20.

Coelli, t. (2009). a Data Envelopment Analysis(computer)program. a guide to DEAP Version 2.1             , 08-69.

Crbbank.lk. (2017). Colombo District Cooperative Rural Bank Union Limited. Retrieved from                 https://www.crbbank.lk/wp-content/uploads/2019/08/CRB-Bank-Annual-Report               -2017.pdf

Economicshelp.org. (2019). Technical Efficiency Definition. Retrieved from                                              https://www.economicshelp.org/blog/glossary/technical-efficiency/

Irigoyen, C. (2017, May 30). The Samurdhi Programme in Sri Lanka. Retrieved from                               https://www.centreforpublicimpact.org/case-study/samurdhi-programme-sri-lanka/

KUMAR, S. (2008). An Examination of Technical, Pure Technical. Eurasian Journal of                           Business and Economics , 33-69.

Modoran, C. &. (2009). Microfinance Institutions in Sri Lanka. Retrieved from                                         https://www.findevgateway.org/library/microfinance-institutions-sri-lanka

Sanasa.coop. (2019). Federation of thrift and credit co operative societeies in sri lanka.                            Retrieved from https://sanasa.coop/