Sri Lanka

Rebuilding Livelihoods in Sri Lanka through Microfinance

In 2004, a 9.0 magnitude earthquake in the Indian Ocean resulted in one of the deadliest tsunamis in history. Sri Lanka experienced a high casualty rate with 35,322 killed or missing and 516,150 people displaced from their homes.

Relief International was one of the first international organizations to deploy medical and emergency services to Sri Lanka. The emergency relief team worked in refugee camps on the eastern coast, the hardest hit region. It was through these efforts that Relief International identified the demand and need for financial services in rebuilding the country.

The Pottuvil fishing community, located on the southeastern coast of Sri Lanka, was offered the opportunity to participate in Relief International’s sponsored Association for Rural Community Savings (ARCS) program. There are 38 community-based organizations (CBOs) in the Pottuvil District, with 683 active borrowers and clients as of March 2013. ARCS structures its savings and loans program using a community-based organization model. This allows the tight-knit community to use social capital as a tool for collateral substitution. The members of the Pottuvil CBOs have access to behavioral information not typically available to loan officers. Because the CBO itself approves or rejects each loan, and because loan renewal is contingent upon successful repayment from the entire CBO group, members benefit from the collaborative process.

The Thamari CBO in Pottuvil has achieved significant growth since its inception due in no small part to this collectivist strategy. This CBO initially pooled its savings to begin issuing loans of 500-1,000 LKR (US $4-$8). They gradually increased their loans to 5,000 LKR (US $40) and weekly savings to 50 LKR ($0.40). ARCS pooled these members together and gave them access to greater financial resources. After consistent and timely repayment, the Thamari CBO now has the ability to take out loans of 150,000 LKR. The Thamari group savings were merged into a full portfolio that ARCS uses to support similar programs throughout Sri Lanka.

Alli, a neighboring CBO in Pottuvil, has had similar success in the ARCS microfinance program. Y. Rajini is a 37-year-old mother of two who joined the Alli CBO after the tsunami destroyed many local businesses. With her loans and savings, she purchased a small tractor to transport bulk items such as firewood to support the local rebuilding process. Rajini’s insight into the community’s development needs is representative of Relief International and ARCS’s microfinance mission. The loans offered a means of empowering locals to initiate effective grassroots solutions.

Rajini used a portion of the profit from her tractor services to buy land to expand her rice paddy business. Managing a diverse slate of small businesses hedges against the inherent risks associated with owning a business. Her intuitive financial decisions are impressive given her lack of access to financial services before ARCS began operating in Pottuvil. Right after the tsunami hit, her monthly income was around 15,000 LKR (US $120). Since joining ARCS, it has nearly tripled to 40,000 LKR (US $320). Rajini’s improved income enables her to send her two daughters to school. She has also invested in jewelry for her daughters as an alternative means of saving.

The resourcefulness she has shown in building a successful livelihood has made Rajini an inspiring role model for her daughters and peers. Her success is one of many examples of how Relief International’s relationship with ARCS’s microfinance program has bridged immediate emergency relief efforts with Relief International’s long-term vision of sustainable development.