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Cooperative Rural Banks: Can They Survive? Evidence Using all Cooperative Rural Banks in Sri Lanka

Author:

Ariyarathna Jayamaha

Department of Accountancy, University of Kelaniya, LK
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Abstract

Cooperative rural banks (CRBs) play an important role in providing the rural credit needs offering loans, pawning facilities and savings in rural sector in Sri Lanka. Last few decades even though large number of financial institutions has been increasing in Sri Lanka, CRBs have gained an increasing share of financial assets, which has been particularly helpful for satisfying the growing demand for loans and advances in poor people in the country. However, in general, efficiency of CRBs in Sri Lanka highly criticized today on their performance in poor management of their assets and consequently, the sustainability of these institutions is uncertain. Furthermore, the numbers of failures in formal and informal small financial institutions have been occurred over the past few decades in Sri Lanka, the efficiency of CRBs in Sri Lanka is more concern.

This study evaluates the efficiency of CRBs in Sri Lanka by using all CRBs operate in Sri Lanka, 1,193 branches, including North and East provinces. A comparative analysis of the efficiency of CRBs is undertaken by districts by using a Total Factor Productivity measurement, Data envelopment analysis (DEA).

It is found that the CRBs in Sri Lanka do not operate efficiently during the period of 2005 to 2010 in providing microcredit activities. This indicates that the survival of CRBs in Sri Lanka in their current form is uncertain in the current financial system. However, the findings suggest that in terms of geographical districts operating, there are significant differences in the efficiency of CRBs. Therefore, the findings of this study contribute to understanding the underlying problems for efficiency in particular all CRBs in Sri Lanka.

DOI: http://dx.doi.org/10.4038/kjm.v1i2.6450

Kelaniya Journal of Management Vol.1(2) 2012:1-15

How to Cite: Jayamaha, A., (2014). Cooperative Rural Banks: Can They Survive? Evidence Using all Cooperative Rural Banks in Sri Lanka. Kelaniya Journal of Management. 1(2), pp.1–15. DOI: http://doi.org/10.4038/kjm.v1i2.6450
Published on 24 Jan 2014.
Peer Reviewed

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