Sociocultural Practices that Make Microfinance Work: A Case Study from Sri Lanka

Microfinance is an inherently social process. Over the years, it has emerged as an essential means for providing financial services to the “underbanked” population in developing countries. This paper presents a qualitative study focused on understanding existing cooperative practices associated with microfinance in rural Sri Lanka. Through semi-structured interviews, group discussions and visits to microfinance centres, we found that microfinancing involves much more than financial transactions, rather it is strongly habituated in the sociocultural fabric of communities. Our findings show that three factors affect the cooperative process of microfinancing: trust and credibility, community support, and familial assistance. Using examples from the field, this paper discusses the importance of these factors in microfinance activities and contributes an elaborated account of cooperative practices that support microfinance processes. We also highlight how the local sociocultural structures and practices shape the way microfinance processes are being handled. We contribute towards an in-depth understanding of such practices that can be useful for microfinance institutions (MFIs) and technology designers. Consequently, we advocate for an intermediary path for technology interventions where technology and people work together rather than technology replacing people.