Microfinance refers to provision of financial services that include credit, savings, micro insurance, etc., particularly to the low income and vulnerable groups. It is argued that microfinance institutions /programmes play a crucial role in raising production, income, and employment among the poor households. Moreover, access to financial services is expected to help the poor to improve their asset base and strengthen their capacity to deal with risks and vulnerabilities. There are wide range of institutions including Co-corporative Societies (e.g., TCCSs), Non-governmental organizations (NGOs), commercial banks (both state-owned and private) and Development Banks that are involved in providing microfinance services to low income groups. Nevertheless, the impact of microfinance on increasing income and sustaining employment generation through small-scale enterprises is not clear in Sri Lanka. The evidence shows that many small enterprises/ self-employment activities started under microfinance schemes have not been sustained due to various reasons. Moreover, there are a number of issues and challenges related to the outreach, interest rates, training and marketing facilities provided, etc., that need to be addressed in order to improve the benefits of the microfinance institutions (MFIs)/ programmes to the poor. The objectives of this study are: To assess various approaches used by MFIs in reaching/selecting their clients and identify effective ways to improve their outreach to include the poorer segments (extreme poor) and also to serve the needs of these groups.To understand how the microfinance institutions/programmes can improve their role and scope in providing marketing facilities and training/ skill development opportunities to their members. To examine the plausibility to link microfinance institutions/programmes with various government and non-governmental vocational training and skill development programs operating at the national and local levels. To assess the interest rates (both on loans and savings) used by various MFIs and the reasons behind such differences, to see the most appropriate level of interest rates to be used by MFIs that would benefit both the clients as well as the institution.
