May 2009 marked the end of Sri Lanka’s nearly three decades long armed conflict, leading to a surge in optimism for stronger economic growth and poverty reduction. Yet even with the conflict, Sri Lanka has posted strong growth rates, putting the country on track to achieve most MDGs by 2015.
During the last five years, poverty has declined rapidly. For example, the poorest Southern Province has cut poverty in half, from 28% in 2002 to 14% in 2006/7. However, significant challenges loom large, not least addressing reconstruction in the North and East of the country.
Further south though, the vast disparity between the wealthier Western Province and the so-called “lagging regions” has long been cited as one of the country’s most severe obstacles to growth. After all, two-thirds of the population resides in these “lagging regions” of the country, where poverty rates are more than double that in the Western Province.
To help bridge this gap, an innovative rural development program has empowered local communities in three southern provinces to find their own solutions to their development challenges. The program, known as Gemi Diriya or “the strength of the villages”, is helping villagers identify, prioritize, plan, fund, and implement their own development needs.
“Gemi Diriya is about enhancing people’s livelihoods and ensuring a better quality of life,” said Meena Munshi, World Bank project leader. “This is achieved by focusing not only on community infrastructure but also on social services, skills development, access to micro-finance for small businesses and micro-enterprises, and partnerships with the private sector."
The program is being implemented over 12 years in three phases. The World Bank supported the first phase of the program with a $51 million IDA grant in 2004, and approved on September 10, 2009 an additional $75 million IDA credit for the second phase. Since its inception in 2004, Gemi Diriya has touched the lives of close to 900,000 poor Sri Lankans in over 1,000 villages in Uva, Southern, and Sabaragamuwa Provinces.
The program has financed 2,140 community infrastructure subprojects, generated about 18,500 jobs, and provided support for livelihood activities to 140,000 households. Before the project, about 70 percent of households in the project villages had no access to credit and marketing facilities. Now, almost 20,000 self-organized savings and production groups are actively mobilizing savings. Savings groups have used their cumulative savings of $5.25 million to leverage credit equal to about ten times that amount, and have invested $17.6 million in more than 125 types of income generating activities.
Munshi said the participatory nature of the decision making process has led to better targeting of the poor and improved governance, transparency and accountability at the village level.
“An independent evaluation showed that 90% of community members reported feeling empowered and having a sense of ownership over the project,” Munshi said. “About 98% repay loans with their savings and make new investments. And about 50% of households indicated an improvement in their economic and living conditions, all exceeding targets.”
Focus on Women and Youth
Unemployment rates in Sri Lanka also reflect regional disparities. They are much higher in rural areas and among youth and women.
Gemi Diriya therefore gives priority to youth, women, and the most vulnerable groups in its decision-making. Youth and women now comprise 66% of decision-making positions at the village level. In addition, the community-owned and savings-led microfinance system allows them to generate and accumulate resources that are used to leverage additional funds from other government agencies, banks, and the private sector.
The vast majority of rural households in Sri Lanka depend on agriculture for their incomes. However, weak linkages to markets and poor infrastructure such as irrigation and electricity supply remain severe constraints.
Munshi says most farmers are disconnected from the market, unaware of market opportunities, and are largely ignored by agribusinesses as sources of raw material.
“Farmers’ incomes are hampered by poor linkage roads, by limited storage facilities and absence of wholesale markets,” she said. “This leaves the farmers with no option but selling separately to middlemen whose margins amount to a high share of the farm gate price.”
In its second phase, Gemi Diriya is putting more emphasis on how to improve productivity, competitiveness and ultimately the incomes of poor producers. This will be achieved through linking community institutions to local governments and addressing accessibility and connectivity constraints. It also aims to strengthen the value chains of key economic sectors by aggregating producers into federations to facilitate better market and financial sector linkages. Gemi Diriya is also expanding its reach to two more provinces (North Central and Central). By 2016, the program is expected to benefit 7 million people in 5,000 villages.