Book: Microfinance – A study of the concept
Author - Dharmabandu Atapattu Reviewed by Sunimalee Dias A study on the subject of microfinance is found in the book titled “Microfinance” by Dharmabandu Atapattu who has thoughtfully dedicated this text to bankers, lecturers, students, investors and professionals of microfinance.
The author gives the reader a complete sense of the subject of microfinance in the first part of the book that looks at its evolution and what it has become today with the new regulations coming into force. The book also takes a look at how microfinance impacts on socio-economic conditions of society both globally and locally but the author only details this in a theoretical perspective with little criticism on existing strategies and how it could be progressed further.
Mr. Atapattu keenly links the subject to poverty in general and the specific situations of poverty as a study on how microfinance has looked at increasing its outreach to assist in the eradication of this aspect of society.
Interestingly though the author later in the second part of the book accounts in detail the Sri Lankan perspective of this subject and how this concept of microfinance has indeed existed when it was still a kingdom without abject poverty in existence. Later he takes the reader to the colonial era bringing together with it the vices of poverty and the need for microfinance and its eventual existence even then.
The first chapter starts out with an introduction on the link of microfinance and banking stating “Microfinance essentially includes ethical and moral values and social responsibility to eradicate global poverty as a noble mission.”
He goes on to discuss in detail the origins of the banking system since its inception in Mesopotamia; the first use of paper money and its later spread to Europe and the eventual establishment of Central Banks and monetary authorities. A brief sub-section distinguishes between microfinance and micro credit.
A study of the fundamentals of microfinance is explained in the second chapter. Here the book talks about the risks involved in loaning to people and the type of poverty levels addressed by the microfinance sector. Clearly identifying the poor he explains they fall into sub segments namely the poorest of the poor, poor, and poor entrepreneurial. However, the microfinance institutions generally lend only to the less poor, labouring poor and the poor entrepreneurial as others below this ranking of poor would be provided assistance through the subsidies and the like.
This chapter takes into account the average size of micro credit loan and a closer look at how this is identified in Sri Lanka which interestingly has no nationally accepted policy. The author also talks about the different aspects of microfinance and the Small and Medium Enterprise loans as well as studying the channels of microfinance.
Mr. Atapattu details the models of microfinance in his third chapter starting out from the Grameen Bank model founded in Bangladesh and how the system was found to have weaknesses as well. The microfinance aspect is looked at through the co-operative and union model into which Sri Lanka also has been involved in since 1911. Sanasa Development Bank and other micro credit banks as rural banks started out as cooperative rural banks functioning as retail banking or microfinance agencies. The author also discusses the emergence of the Janasaviya and Samurdhi concepts that assisted the less poor people of the country.
The central banking systems also were capable of working on these models and these methods are also studied in this chapter.
In the fourth chapter a further look at the development of microfinance is studied that looks at how this concept has today gone beyond the idea of charity and “started to encompass ideas that it should work with the people and for the people.” This is discussed in detail in the Replication of Microfinance Models section in this chapter. This then moves onto the identifying the microfinance products and tools in the next chapter namely the credit service products; savings service products; insurance service products; remittance service product; other services product ; and the non financial service products of business development and social service.
The sixth chapter talks about the socio-economic impact of microfinance in which it states that of the estimated seven billion population in the world those living on less than US$1.25 a day is 1.4 billion and one billion poor people living on less than $1 a day and 162 million living on less than $0.50 a day.
The legal and regulatory framework of the microfinance institutions are still being studied and the seventh chapter delves into the areas of the need for regulation; the rationale for this; the authorities to regulate such institutions; and questions furher to find out if this regulation could act as a burden or a trap for the poor.
Chapter eight spotlights on microfinance in Sri Lanka as the opening chapter of the second part of the book and which commences from the ancient period upto the colonial era. In fact, the author highlights how self sufficiency during the pre-colonial era had not given rise to poverty within the communities but Mr. Atapattu does talk about a microfinance system in place due to the barter and monetary systems in place at the time.
The next chapter moves into the post independence era towards a poverty alleviation system through microfinance. The emergence of the Janasaviya programme is discussed in detail in this chapter in addition to other social benefit programmes initiated in the country.
Mr. Atapattu admits to finding poverty in Sri Lanka mainly in rural, urban, coastal and estate areas although it is considered a rural phenomenon in the country in the 10th chapter that also looks at how poverty is distributed on the island.
The final chapter talks about microfinance and its empowerment of women as this is the section of the community most vulnerable but strong in payback terms and has a control on finances at the home front.
The author of the book is currently serving as a senior visiting lecturer of more than 20 years on banking and finance and microfinance at the National Institute of Cooperative Development at Polgolla. He has also written more than 15 research papers related to rural credit and microfinance and published in Central Bank publications and many other reputed journals. Mr. Atapattu has also authored the Sinhala book on European Economics History in 1968.