Sustainability of Business Development Services: Evidence from the Sri Lankan Microfinance Sector

Abstract

This study explores the issues faced by Microfinance Institutions (MFIs) in Sri Lanka in sustaining their business development services (BDS) and the strategies that they use to overcome these issues. A multiple case study methodology was used in the study to conduct an in-depth examination of six microfinance institutions in Sri Lanka. The findings show that MFIs in Sri Lanka face issues such as lack of donor money, central bank regulations, and low client demand for BDS which hinder the financial sustainability of BDS in MFIs. MFIs therefore, employ several strategies to circumvent these issues, including the use of coupon systems, charging a fee from the client, obtaining commission from the buyers for market linkages, and linking credit to the BDS programme in order to sustain their BDS programmes. The findings are useful to microfinance practitioners, policy makers and contribute to the knowledge domain of microfinance.