Impacts of Micro Finance Institutions : Issues and Concepts – An Empirical Study on Sri Lankan Context

Microfinance in Sri Lanka has a long history and Microfinance institutions (MFIs) are established in all forms and dimensions and it can differ in size, practice, legal act, strategy and budget. The reliability is important to the microfinance system and it determines how smoothly an MFI operates. MFIs provide financial and non financial services to local individuals and groups and it’s aim to promote economic activity among low-income earners, for whom access to formal banking services is impossible due to long procedures, collateral and distance. This study investigates the impacts of MFIs on cultural, economic, social and political spheres at local, regional and national level. The research designs both combining quantitative and qualitative tools are used. For this purpose, the secondary data which have been derived from Reports, documents and research papers of NGOs, INGOs, government departments and MFIs. In addition to this, the primary data was gathered through the questionnaire, interviews and observations. For this purpose, however, Northern Province was selected to collect data, the rural areas of Allarai, Ketpali, Navatkadu from Thenmaradchchi DS divisions and Moolai, Tholpuram from Valikamam divisions in Jaffna were selected to collect the data. The concepts of MFIs such as Governance, clients, operations and products have been explained and challenges or issues facing MFIs were taken into account for the investigation of the MFIs in Sri Lanka. Further, it was concluded that there is no significant differences between the variables