Opening Markets through Strategic Partnerships--Hatton National Bank

As more and more commercial banks become intrigued by the idea of entering the microfinance market, the lessons learned from some of the more experienced players become crucial in evaluating requirements and potential benefits. Hatton National Bank (HNB) in Sri Lanka operates its microfinance department as an internal unit, that is, as a division or product within the bank. The performance of Hatton Bank's program provides key lessons for achieving profitability under this model.

HNB opted to integrate microfinance into its traditional banking operations rather than establish a separate subsidiary or new company to conduct the microfinance activities. Microfinance does not even exist as a separate division within HNB; rather, the Gami Pubuduwa product (GP or Village Awakening product), falls within the Development Banking Unit branch operations.

The presence of the GP field officers in villages, whether they are branch- or village unit-based, is strong. The village units are located centrally, in modest, sparsely furnished buildings that are often left unlocked when the GP field officers are out so that villagers can wait inside for their return. This village involvement exemplifies one of the GP program’s main strategies: to bring banking to the rural villages of Sri Lanka, providing not only microcredit, but financial services in general.