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Sri Lanka has initiated microfinance activities early in the 20th century by introducing loan schemes to farming communities through cooperative societies. Microfinance is providing financial services to households and small enterprises which are excluded from the traditional commercial banking system including the people who are seeking the microfinance credits belong to the low income, self-employed or informally employed. Through microfinancing it is expected to facilitates the income generation activities and capacities of the low-income segment of the economy and thereby enhancing the living conditions of the low-income people by providing opportunity for them to actively participate for the economic development of the country. Financial inclusion refers to the access of using convenient and affordable financial services and products to satisfy the needs of individuals and the business. At present, micro finance sector including Cooperative micro finance services has developed and providing innovative financial products for financial inclusion of the low-income segment of the society. Thus, the focus of this study is to identify the financial inclusion on microfinance credit to the low-income segment in the society to enhance their living condition. Most of the low-income people are having lack of access to basic financial services due to lack of financial literacy and other constraints such as inability of providing collaterals and strict credit terms. The low-income segment of the society is preferred to getting finance from informal sources rather than the formal financial services. Low-income individuals will be better able to participate to income-generating activities after receiving appropriate microfinance loans, which will improve their ability to save and their standard of life. 78 The methodological technique of the study was inductive and qualitative which conduct a systematic review of literature as desk research and the content analysis was carried out to arrive the conclusion. As per the findings microfinance support savings and investments, ensure smooth consumption patterns and food security, enterprise development, enhance social interconnection, creation of more diversified income sources, better education for children, Severity of poverty reduction, empowerment, reduction of social exclusion. Further, inadequate physical and financial infrastructure, unsupportive policy environment, limited institutional capacity, inadequate investment in the rural areas, inadequate support in social capital development, microfinance misconceptions were the challenges for financial inclusion. The results confirmed that Sri Lanka has increased financial inclusion after the liberalization.
Microfinance, Poverty Alleviations, Financial Inclusion
Karunarathna, T., & Dissanayake, D. (2023). Financial inclusion on microfinance credits for poverty alleviation in Sri Lanka during the post-liberalization era. A desk exploration. Sri Lanka Journal of Co-operative studies, 2(2), 77-96.