SANASA: Theoretical and Practical Strengths in the Eradication of Poverty in Sri Lanka

Seen as a crown jewel to the Sri Lankan people since its creation in 1978, the thrift and credit movement known by its Sri Lankan acronym SANASA has emerged in an attempt to eradicate the countries poverty. With twenty-seven district unions, seventy five hundred primary societies and seven hundred thousand members (Hulme & Mosley, 1996), SANASA has a presence throughout Sri Lanka. While SANASA, like other co-operatives has been accused of not helping the poor to improve their living standard and for assisting micro-entrepreneurs (Hulme & Mosley, 1996), it should nonetheless be applauded for its strengths in both theory and practice.

Historically, political unrest has followed Sri Lanka making it appear that this country was destined for poverty. With “ethnically based civil war in the north and east, growing numbers of refugees, the JVP insurgency in the south, burgeoning military expenditure, escalating national debt, a downturn in primary product prices, [and] the polarization of incomes” (Hulme & Mosley, 1996) poverty alleviation in Sri Lanka seemed all but a distant fantasy. Moreover, Sri Lanka’s banking system was comprised of policies that did not benefit poor small borrowers or the non-plantation rural sector (Hulme & Mosley, 1996). These conditions spawned the origins of the thrift and credit movements which emerged almost ninety years ago (Hulme & Mosley, 1996). While many attempts failed, in 1977 P.A. Kiriwandeniya a social activist sought to ‘reawaken’ the thrift and social credit movement and founded SANASA.

SANASA finds most of its strength in theory. The organization relies upon four pillars of development which were founded by Kiriwandeniya. These four pillars include banking, marketing, construction, and insurance, and are arguably the reason for SANASA’s success. Through a well managed system of banking, SANASA provides money that is collected through membership fees to its members based on the amount of money that the members have in their savings. Regardless of the size of the desired loan, the members are required to have a minimum of 10 percent of the total requested loan in their savings prior to receiving any funding. The collection of these membership fees create the initial funds which are then loaned to SANASA’s members. When a member receives a loan through SANASA they are required to pay a predetermined level of interest upon it. The income generated from the interest of the loan is combined with the initial membership fees to create the funds available for loans. As the funds available for loans continue to increase, more money is available for borrowing, which assists more members of SANASA in becoming self-sufficient, thereby reducing the number of individuals in Sri Lanka experiencing poverty.

While many of SANASA’s successes can be attributed to theory, far more are found in reality and in practice. One of SANASA’s strengths can be attributed to their banking processes, as the organization contends that “development [is] to be undertaken from within the peoples own resources and capabilities” (Hulme & Mosley, 1996). By contributing to SANASA through membership fees, credit is then available to all members who can then ensure that they are able to produce and sell their own products. Through the production of and selling of their products, members eliminate a middle man, which ensures their self-sufficiency and profitability. To ensure that SANASA members are able to sell their own goods in the marketplace, SANEEPA was created in 1996 to help with the production of and the marketing of activities to ensure that large producers were unable create a monopoly (Hulme & Mosley, 1996).

A second strength of SANASA can be found in the increased profit that is obtained by its members, and a reduced requirement upon them to pay outrages interest on loans. By requiring members to pay a membership share of between 100 to 240 rupees, SANASA ensures that each member contributes to the group collective. Moreover, because each borrower is required to have a minimum of 10 percent of the total requested loan in their savings, SANASA ensures that there is a minimal risk of loss in the case of a failed loan.

Evidence seems to suggest that when put into practice the SANASA model has been effective in reducing poverty in Sri Lanka. In particular, it has been reported that repeat borrowers of SANASA have experienced a sixteen percent increase in their household incomes when compared with new entrants into the program (United States Agency for International Development, 1997). Other evidence seems to imply that SANASA has aided clients in obtaining an eight percent increase in paid employment among clients (United States Agency for International Development, 1997). Finally, SANASA’s extraordinarily high overall loan recovery rate of ninety-eight percent suggests that a co-operative movement can limit losses when all individuals contribute to a community fund (Asian Development Bank, 2004).

As a result of SANASA’s unique attempt to eradicate poverty in Sri Lanka, many researchers have questioned whether applying a similar model to other countries would yield successful results. For SANASA to thrive in other countries, four features would have to be present:

  1. An array of individuals within a specified geographic location would have to come together to meet the monetary amount. (For example in Sri Lanka 100 to 240 rupees was collected from each member when joining SANASA).
  2. A similar organization would also have to ensure that their members adhered to specified rules and regulations. (For example members of SANASA had to have 10 percent of the total loan requested prior to receiving any funding. Also, members were required to pay back the predetermined interest to SANASA which ensured a continued expansion of the community fund).
  3. Group cohesion would also be necessary to ensure that there was a strong enough force to turn a profit. (For example the development of the SANEEPA in 1996 created a unified group of individuals with a collective strength to ensure that stronger producers could create a monopoly).
  4. A similar organization would have to ensure that its members had a strong sense of dependence to one another and to the organization.

As a result of its ability to eradicate poverty in Sri Lanka, SANASA has gained much respect and regard both domestically and in the international arena. Theoretically and practically it functions as a strong body and a strong voice. As a result of its strengths, in the years and decades to come we may find many variations of SANASA throughout the world. However, within Sri Lanka, SANASA has and will remain the crown jewel of poverty alleviation amongst its people.

Asian Development Bank. (2004). Proposed Grant Assistance to Sri Lanka for the Power Fund for the Poor (JFPR: SRI 36586). Manila: Asian Development Bank.
Hulme, D., & Mosley, P. (1996). Finance Against Poverty (Vols. 2) . London: Routledge.
United States Agency for International Development. (1997): Micro-Credit Benefits The Client: Evidence from Control Group Studies (Microenterprise Development Brief Number 36). Washington D.C.: Growth and Equity through Microenterprise Investments and Institutions Project.


NoorinThe first history course that Noorin registered in at the university level was History 265, also known as the History of Co-operatives. While I would eventually choose to major in political science, this course with Dr. Ian MacPherson shaped a belief that I would eventually embrace. The belief that I came to acknowledge was that society needs to work together to define their needs. It was within the latter course and with this newfound conviction that I wrote a variation of the attached paper: "SANASA: Theoretical and Practical Strengths in the Eradication of Poverty in Sri Lanka."

I am currently a fourth year political science student at the University of Victoria. I hope next year to pursue a master's degree in Canadian political science. Other research interests that I have include: gender and politics, electoral politics, peace and conflict resolution, and international political economy.

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Thursday, January 1, 2009


Sri Lanka