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By this author: Gallardo, Joselito S. ;&nbsp; Randhawa, Bikki K. ;&nbsp; Sacay, Orlando J.

Authors: Gallardo, Joselito S.; Randhawa, Bikki K.; Sacay, Orlando J.

Source: A Commercial Bank's Microfinance Program, September 2002 , pp. 1-34(34)

Publisher: World Bank

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Abstract:

Launched in October 1989, Hatton National Bank ' s (HNB) Gami Pubuduwa (GP) or "" village reawakening "" program provides banking services to households in rural and semi-urban areas in Sri Lanka through GP units operating in 20 administrative districts through HNB ' s branch network. The report addresses four issues pertaining to HNB ' s microfinance operations: 1) What motivated HNB to undertake a microfinance program? 2) Can a privately-owned commercial bank successfully downscale part of its operations for microfinance? 3) What adjustments in regular banking operations are needed to build a profitable microfinance program? 4) Is a microfinance operation consistent with a privately-owned bank ' s profit-maximizing objective? Principal lessons gleaned from HNB ' s microfinance experience are: a) A clear objective and basis for motivation are core elements of successful microfinance programs. b) Management has carefully selected and trained experienced staff from mainstream banking operations to carry out the program and established a clear career development path. c) Deposit products are designed to conform to income and employment characteristics of the rural villages served. d) The transfer price mechanism used for "" purchasing "" excess deposits from GP units is the same as that used for HNB ' s regular branches. e) Institutional commitment, operating autonomy and a management environment conducive to responsive business decisions enhance program sustainability.

Keywords: South Asia; Banking; Commercial banks; Institution building; Nongovernmental organizations; Poverty mitigation; Rural poverty; Revolving loan funds; Microfinance; Sri Lanka; South Asia