Only around 17 percent of the women in Sri Lanka have been successful in borrowing from the formal and regulated sector of financial institutions, International Finance Corporation (IFC) Country Manager for Sri Lanka and the Maldives, Amena Arif told guests at the launch of the development process for the National Financial Inclusion Strategy (NFIS) in Colombo last week.
She said over 80 percent of the women turn to the unregulated informal financial sector in the country which could put them at a higher risk. The problem is that a large percentage of the unbanked and the underserved, around 31 percent, have no bank accounts.
IFC studies also reveal that around 50 percent of the micro level enterprises in Sri Lanka have no access to financial services and products and that there is less focus on women.
Arif said what is important is not simply to have access to financial services and products but to have access to the right service and products that will provide a sustainable income and pull people out of poverty.
“Therefore, it is essential that people have access to the appropriate products and services under a regulated environment. Around 2.5 billion adults do not have access to simple products and of this around 625 million live in South Asia,” Arif said.
However, IFC notes that the situation in Sri Lanka is no as bad as it is in some of the South East Asian countries.
IFC, a member of the World Bank Group is providing technical and financial assistance to the Central Bank to develop the NFIS which will put Sri Lanka along with over 60 countries that have launched or in the process of developing financial inclusion strategies.
The formulation of the NFIS is in keeping with the policy announced in the Central Bank’s Road Maps of 2017 and 2018.
Central Bank Governor Dr. Indrajit Coomaraswamy said that providing affordable financial inclusion is a prerequisite for sustainable growth in the country and added that access to credit can be improved with a combined effort of all institutions in the financial sector.
However, the governor said that political commitment is essential for the successful implementation of the national financial inclusion strategy. The steering and working committees of the stakeholders need to work together to achieve the goals.
“We see some improvement in the macro economic and the framework to achieve sustainable growth. Key indicators such as inflation is down to 4.5 percent and foreign reserves crossed US$ 7.9 billion by end last year from US$ 6 billion at end 2016. However, improvement in quantity and quality of reserves are essential,” the Governor said.
He said exports had a record year last year and the same applies to the Colombo Stock Exchange. However, the overall levels of growth are still low but they are in the right direction.
“We need to guard against short term solutions. Growth should be driven by exports and it is vital to be on track and not to deviate from the path the country has come so far,” Dr. Coomaraswamy said.
The Central Bank has taken measures to promote financial inclusion by encouraging banks to open up more branches and mandated lending for SMEs and micro enterprises.
“Financial inclusion is not only making products affordable but also improving financial literacy to enable people to use financial products meaningfully,” the governor said.
The national payment platform will be part of the NFIS.
“Financial inclusion entails improving digital literacy to enhance access to products and services,” a World Bank official said.
The country has a wide range of financial service providers, high levels of physical access to banks branches and a high number of accounts. The bank branch density is at 18.6 per 100,000 adults and around 82.7 percent of adults have accounts in financial institutions.
Financial inclusion varies from country to country and there is no ‘one size fits all’ system in the world according to financial sector experts. Financial inclusion refers to access to an appropriate range of financial services at a reasonable cost provided by a range of responsible and sustainable financial institutions. It entails increasing financial literacy among recipients of financial services to enable them to use services to the best advantage.