The Effectiveness of Microfinance Services on Poverty Alleviation: Comparative Analysis of Anuradhapura District and Colombo District in Sri Lanka

Abstract

Purpose: The purpose of the study is to determine the effectiveness of microfinance services on household income to alleviate poverty in both rural and urban areas of Sri Lanka, and which area has successfully used microfinance services to alleviate poverty. Design/Methodology/Approach: The researcher chose Anuradhapura as the rural area and Colombo as the urban area to conduct the study. In this regard, data was collected from 280 microfinance beneficiaries in the Anuradhapura and Colombo districts using a survey questionnaire. Microfinance services such as micro-credit and micro-entrepreneurship training were employed as the independent variables in this study, with poverty alleviation as the dependent variable. Simple random sampling was used to collect the data then were analyzed using SPSS software. Findings: According to the study's findings, both entrepreneurship training and micro-credit have a statistically significant positive relationship with poverty alleviation in both districts. According to the regression results, entrepreneurship training is more effective in reducing poverty in the Colombo district, but microcredit is more beneficial in the Anuradhapura area. Conclusion: The findings highlighted that microfinance services are more effective in alleviating poverty in urban and rural areas of Sri Lanka. Further, micro-credit services were more effective in urban (Colombo) areas than in rural (Anuradhapura) areas in Sri Lanka. However, the micro-entrepreneurship trainings were more effective in rural areas than in urban areas in Sri Lanka. Therefore, the researcher suggests that microfinance services should be promoted to alleviate poverty in Sri Lanka while more micro-credit services to urban areas and more micro-entrepreneurship training to rural areas.