You are here

EMMA of the Credit Service Market System

Kilinochchi and Mullaitivu Districts, Northern Province
May, 2012

More than three decades of armed conflict between the Sri Lankan Armed Forces and Liberation Tigers of Tamil Elam led to a steady deterioration of the food security situation along with social and economic infrastructure in the Northern Province of Sri Lanka. Kilinochchi and Mullaitivu are two districts in the north that were severely affected in the final phase of the war, from January to May 2009. In mid-2009, resettlement programs began returning those displaced in the war to their home communities in Kilinochchi and Mullaitivu. Returnees have had access to basic relief in terms of shelter material, food and water and sanitation facilities, in order to re-start their lives and livelihoods, though poverty levels in these areas remain high.

This market analysis seeks to build on the findings of previous assessments looking at household asset holdings and losses by mapping out the various sources of credit available in Kilinochchi and Mullaitivu districts and identifying the constraints households face in accessing these credit options. The study adapted the standard EMMA approach to the post-war resettlement context of northern Sri Lanka and closely followed EMMA's 10-step process including a focus on key critical market systems and a combined gap, market and response analysis. Comparison to a baseline market system was not used in this analysis. The target population for this assessment is war-affected and resettled population in Kilinochchi and Mullativu districts of Northern Province.

The credit market system is characterized by a series of governmental, private and donor-supported organizations operating at the national, district, and community levels. These organizations are linked by credit flows and interest payments and are supported by a variety of laws and regulatory bodies as well as market inputs and services. This analysis found that there are a wide array of credit options available to households in the two districts. However, access to these opportunities is dependent on a variety of criteria, including a household's membership in different community and cooperative groups, previous creditworthiness, current asset holdings and connections to neighbors or community officials. Additionally, the extent to which a household can meet these criteria is strongly tied to how the length of time it has been resettled and its opportunities to build up community relationships and accumulate assets.

Credit services do not reach the majority of resettled people. Households reported that the loan requirements, particularly the need to demonstrate membership in a farmer organization or to prove land title, made these opportunities inaccessible, especially for recent returnees. At the micro level, the limited reorganization of societies and the limited funds available to recapitalize the society results in limited livelihood activities of farming, fishing, small business and livestock, with a direct impact on food security. Other impacts due to the market's constraints include increased mortgaging of assets, such as land and gold jewelry, reducing returnees' ability to invest in livelihoods. In this way, lack of access to credit contributes to their continued poverty.

The report recommends increasing loan funds available to CBOs and cooperative societies; improving the organizational capacity of cooperative organizations; using financial literacy workshops/training as a tool to link households with financial institutions; and advocacy for changes in the collateral and loan structure requirements of the formal banking system and for the expansion of credit.

Report authors: 
Dr. Neavis Morais, Gregory Matthews, Saviriappu Thevathas, Sinniah Kokularajah
Download Report (827.73 KB pdf)



Market type:

Report type: