Sabaragamuwa Volume 18Number 1 August 2020 30-42

SabaragamuwaUniversityJournal

Volume 18 Number 1 August 2020 pp 30-42ISSN 1391-3166 eISSN 2386-2041httpdoiorg104038susljv18i17752

copy 2020 Sabaragamuwa University of Sri Lanka

Impact of Samurdhi Program on Poverty AlleviationAn Empirical Investigation of Samurdhi Beneficiaries in Kopay DS

Division in Jaffna district

Thavarasasingam Hlowast and Balagobei S

Department of Financial Management University of Jaffna Sri Lanka

lowastHemaluxjini3outlookcom

AbstractThe aim of this study is to investigate the impact of Samurdhi Program on poverty alleviation in

Kopay DS Division Two hundred questionnaires were issued to the Samurdhi beneficiaries of KopayDS division in Jaffna district Sri Lanka Such as Kopay north (J262)Irupalai South (J257) Urelu(J267) and Urumpirai south (J265) divisions Urelu (J267) and Urumpirai south (J265) divisionsOut of which 177 questionnaires only could be collected Hence 177 Samurdhi beneficiary familieswere incorporated as samples Correlation analysis and multiple linear regression analysis were usedto analyze the data and examine the hypotheses by using the SPSS The adjusted R2 0250 for themodel implies that approximately 25 of the total variance in poverty alleviation can be determinedby all dimensions of Samurdhi program as the independent variable in this model Further the modelreveals that the remaining 75 of variability was not explained in this model In this study the findingsrevealed that there is a significant impact of Samurdhi program on poverty alleviation Microcredit hasa positive and significant impact on poverty alleviation Livelihood activity has an insignificant impacton poverty alleviation Welfare has a positive and significant impact on poverty alleviation Based onthe findings the researcher can conclude that Microcredit and welfare activity is effectively worked andlivelihood activity needs to improve itself

Keywords Income level Livelihood activity Micro credit Poverty alleviation Samurdhi ProgramWelfare activity

Introduction

Poverty is a complex and multidimensionalsocial phenomenon It is widespread and includesa broad worldwide population from childrento the elderly and not excluding ethnic mi-norities Poverty has been one of the biggestand most challenging problems and obstacles tohuman development not only for under-developedor developing countries but also for wealthiereconomies the developed world Hence fightingpoverty has become a global theme According toKesavarajah (2011) poverty is the lack of basichuman needs such as clean water nutrition healthcare education clothing and shelter due to theinability to afford them so poverty is a majorthreat to the world

The year 2017 was declared as the year ofpoverty alleviation in Sri Lanka through thepromotion of inclusive growth in keeping with thesustainable development goals of the United Na-tions The Department of Samurdhi Developmentlaunched a people empowerment program last year

targeting to empower 125000 families selectingnine families from each GramaNiladhari division toachieve the target of no poverty by 2030 Estimatesreveal that around 6 percent of the populationin the country yet live below the poverty line ofearning less than one US$ a day Statistics alsoreveal that nearly half of the worldrsquos populationlives on less than $250 a day while over 13 billionlive in extreme poverty living on less than $125 aday

Microfinance is one of the widely acceptedinstruments or poverty alleviation throughoutthe world It has been used in Sri Lankaspanning for over several decades [Ganga et al2005] The Micro Finance Institutions (MFIs)empowering the poor people because they areproviding financial and non-financial services toenhance their living standard by providing thefacilities for poverty alleviation health nutritioneducation and self-employment opportunities andhelping to get capital and independent incomeand contribute economically to their family andsociety [Yogendrarajah 2014] In her study she

30

Sabaragamuwa University Journal 2020 V18 NO1 pp 30-42

founds that micro finance provides financial andnon-financial services such as small loans savingsmicro leasing micro-insurance and money transferto assist the very poor people for their self-income generating activities Since independencesuccessive Sri Lankan Governments and Non-Governmental organization have launched severalmicrofinance programs for poverty alleviationincome generation programs which include theestablishment of Thrift and Credit CooperativeSocieties JanasaviyaProgram SEEDS Agro microcredit service National Development Fund andrecently the Samurdhi Program [Kumari 2014]

As a developing country Sri Lanka has a longhistory of social programs and food subsidiesin particular The major one of these is theSamurdhi program which was introduced in1995Its main goal was to reduce poverty inSri Lanka through development based on publicparticipation However few researchers arguethat Samurdhi as a social welfare Program issuffering from inefficiency miss-targeting and lackof transference [Damayanthi 2014 Kesavarajah2011 Thibbotuwawa et al 2012]

Ismail et al (2003) investigated that basedon the program design the key components ofthe Samurdhi include compulsory and voluntarysavings human resource development (productiv-ity development training training in accountingfunctions training of executive committees andmaterial resource development) establishment ofSamurdhi Bank societies (responsible for theprovision of credit) a community developmentprogram labor-intensive peoplesrsquo projects smallindustries development and social developmentPrograms

Furthermore the most of the research has beendone in the wide area of microfinance world-wideas well as in Sri Lankan wise only few studies havebeen done in Jaffna District and no one has beenhighlighted on Samurdhi program particularly inthe Kopay Division Hence this study attemptsto investigate how as a social assistance programthe Samurdhi program impacts the poverty levelMainly it focuses on the Kopay DS division inJaffna District

Numerous studies have been contributed to theempirical evidence on the broad area of Micro-finance over the past years [Abdul-MajeedAlaroamp Alalubosa 2019 Atiase amp Dzansi 2019

Gunatilaka amp Salih 2017 Kim et al 2018Mahmood et al 2014 Punjabi 2010 Sayvaya ampKyophilavong 2015 Toindepi 2016 Weerasingheamp Dedunu 2017] Most of these studies were basedon the data largely from other developing countriesand little evidence from Sri Lanka [Damayanthi2014 Gunatilaka amp Salih 2017 Kesavarajah 2011Kumari 2014 Rizphy amp Jayasinghe-Mudalige2010] Largely in Sri Lanka empirical studieshave been generated with a variety of institutionsthat related to the microfinance as explanatoryvariables which might potentially be associated forthe poverty alleviation increase in household in-come women empowerment and self-employmentThese micro finance institutions are banks non-governmental micro finance institutions and someresearchers have been done regarding SamurdhiProgram and poverty in Sri Lanka but it isvery least in Jaffna particularly in Kopay DSdivision [Damayanthi 2014 Gunatilaka amp Salih2017 Kesavarajah 2011 Kumari 2014 Rizphy ampJayasinghe-Mudalige 2010]

Furthermore many researchers have acceptedthat microfinance is an important tool to alleviatepoverty and enhance the living standard ofpoor people in the developing countries [Addae-Korankye 2012 Morduch amp Haley 2002] As adeveloping country Sri Lanka has a long history ofmicro finance institutions its services particularlyto the poor and there are a number of reasonsthat could have contributed for the enormousachievement in poverty reduction the SamurdhiProgram may be one of the major reasons for suchachievement

However there is limited Knowledge on thepoverty alleviation through the microfinance pro-grams of Samurdhi in Kopay DS Division Since3947 of the total population of KopayDS divisionhas fallen into the category of income is under Rs5000 per month as at December of 2018 [SHB2019] Hence there is a need to identify the povertyalleviation

There is a contradiction whether the Samurdhiprogram is an effective vehicle to reduce povertyand there are number of criticisms of the Samurdhiprogram and its implementation Therefore anevaluation of performance of the Samurdhi Banksis timely Since this is the major program ofgovernments towards poverty alleviation in SriLanka there is a need to evaluate the program andits implications from time to time

31 copy 2020 Sabaragamuwa University of Sri Lanka


Here researcher could note as per Damayanthi(2014) arguments miss-targeting lack of trans-parency accountability efficiency and effective-ness equity and social justice as well as informedcitizenry are some serious governance issues whichmake an impact on the Samurdhi ProgramIn thisresearch context researcher has been used povertyalleviation as dependent variable and Samurdhiprogram as independent variable

Thereby researchers could take those problemsand issues mentioned above as gaps Hence thisstudy is willing to fill those research gaps andis formulating the following research question asa research problem ldquoHow the Samurdhi programimpacts on the poverty alleviation particularly inKopay DS Division in Jaffna district Sri Lankardquo

To formulate an answer to the above researchquestion the researcher prepares the followingobjective It is to investigate the impact ofSamurdhi program on poverty alleviation in KopayDS Division Further this study examines theimpact of Samurdhi activities such as microcredit livelihood and welfare on poverty alleviationindividually

Focusing on the importance of this issuethere are numerous previous literature that havebeen done on poverty alleviation and Samurdhiprogram Based on the empirical evidence thestudy develops the integration between the basicconcepts such as poverty and Samurdhi program

Gunatilaka et al (1997) states that the wordldquoSamurdhirdquo is derived from a local term meaningprosperity and the program comprises a short-and long-term strategy The short-term strategyinvolves poverty cushioning components such asincome support social insurance and social devel-opment programs The long-term strategy involvespoverty alleviation through social mobilizationempowerment and integrated rural developmentThe program claims almost 1 percent of thegross domestic product (GDP) or roughly half ofall welfare expenditures excluding expenditureson education and health and is the largestwelfare program presently operating in the country[Glinskaya 2000]

Many scholars have documented that theSamurdhi has various components in their studiesAs explained by Glinskaya (2000) the Samurdhiprogram has three major components The first isthe provision of a consumption grant transfer (food

stamp) to eligible households This componentclaims 80 percent of the total Samurdhi budgetThe second component of Samurdhi is a savingsand credit program operated through so-calledSamurdhi banks and the loans were meant forentrepreneurial and business development Thethird component is rehabilitation and developmentof community infrastructure through workfare andsocial (or human) development programs

According to CPI (2017) the key components ofthe Samurdhi program includes the provision of afood stamp to the eligible households accountingfor approximately 80 of the total Samurdhibudget A savings and credit program operatethrough the ldquoSamurdhi banksrdquo with loans destinedfor entrepreneurial and business developmentthe rehabilitation and development programs -productivity development training training inaccounting functions training of executive commit-tees and material resource development

The Samurdhi program has three major compo-nents consumption grant transfer (Food stamp)saving and credit program and rehabilitation anddevelopment of community infrastructure throughworkfare and social development programs [Hair etal 1998]

Generally there is no exact definition for povertyas it is defined in different manner Simply it canbe defined as the inability of the people to attain aminimum standard of living Those people who areunable to satisfy some of the basic needs such asfood shelter clothes sanitation cleaning wateretc are called poor One billion people live onless than $1 a day the threshold defined by theinternational community as constituting extremepoverty below which survival is questionable[Ahmed et al 2007]

The World Bankrsquos mission is to work for aworld free of poverty Punjabi (2010) states thatmore than subsidy the poor need credit lack offormal employment and poverty makes this strataof society non bankable as they do not have anycredit history or documents of employment whichforces them to borrow money from moneylendersand landlords at an exorbitant rate of interestThe poorest people are the vulnerable people whoare living without health nutrition no access ineducation and their per capita income per day willbe below 1 US$ [Rathirani amp Semasinghe 2015]

Sanjeewanie et al (2012) focus on the multiple



Figure 1 Conceptualization modelSource Developed by researcher

dimensions of income household assets and shelterquality of employment empowerment dignityphysical safety and psychological and subjectivewell being as multidimensional poverty indices intheir study Rizphy amp Jayasinghe-Mudalige (2010)examined the impact of Samurdhi microfinanceprogram on poverty alleviation of farmers inAmpara District They used 3 indexes such aswomen empowerment livelihood development andincome generation and the sum of average valuewas taken as the value for the poverty alleviationindex as the poverty alleviation cannot measuredirectly

Based on the theoretical frame the conceptualmodel given in Figure 1 has been developed torepresent the relationship between Samurdhi andpoverty alleviation The Samurdhi program con-sists of microcredit livelihood activity and welfareactivity whereas poverty alleviation is measured byincome level health nutrition housing conditionand asset accumulation

The following model is expressed to investigatethe impact of Samurdhi program on povertyalleviation based on the variables used in the study

Poverty alleviation =β0 + β1MC + β2LA

+ β3WA+ εit

where β0 β1 β2 and β3 are regressioncoefficients MC is micro-credit WA is WelfareActivity LA is Livelihood Activity and εit is theerror term

Previous Studies and Hypothesis devel-opment

Nowadays some debates are going on aboutthe effectiveness of the Samurdhi program Ef-fectiveness of the Samurdhi Program has been a

substantial national debate during the past decadeand much of this discussion has focused on theeffectiveness of its targeting [Gunatilaka 2010]

Rizphy amp Jayasinghe-Mudalige (2010) inves-tigated the impact of Samurdhi microfinanceprogram on poverty alleviation of farmers inAmpara District and identify the constraintsassociated with Samurdhi micro credits to thepoor In this study a questionnaire-based surveywas used to collect the data from 60 farmers inthe Addalaichanai Divisional Secretariat divisionTheir findings revealed that the poverty allevi-ation is significantly affected by the Samurdhimicrofinance program by using multiple regressionanalysis In addition they suggested that the in-spections of Samurdhi development officers shouldbe made by the Samurdhi authority to make betterimprovement through the Samurdhi microfinanceprogram the efficient use of microcredit should beincreased

Gunatilaka amp Salih (2017) finds that Samurdhirsquosgroup savings and intra group credit componentand Samurdhi bank program are functioningas important sources of emergency credit forbeneficiaries It also works better in rural areasthan in urban areas Also it is heavily reliant onthe income transfer component and it has someconstraints such as infrastructure bottlenecks andimperfections in the market for technology

Sanjeewanie et al (2012) carried out a studywith an application of multidimensional povertydata to the policy needs to improve the effec-tiveness of the national social protection programSamurdhi in Sri Lanka For the purpose ofthis study data from a pilot survey in theBadulla District were used to compare Samurdhihouseholds with non Samurdhi households in



relation to deprivation in multiple dimensionsThey also argued that any program aiming topromote people out of poverty needs to be basedon a good understanding of the nature of povertyamong the target group The findings of the studywere that Samurdhi households are deprived in thedimensions of quality of employment dignity andpsychological and subjective well being which havepractical implications for the design and delivery ofSamurdhi

According to Thibbotuwawa et al (2012)Samurdhi generates a significant impact onhousehold welfare on income consumption andeducation despite the inefficiencies and politicalinterferences associated with distribution of in-tended services This study finds out the ldquoImpactof microfinance on household welfare Assessing thecase on the Samurdhi Program in Sri Lankardquo Forthe purpose of this study Household Income ampExpenditure Survey (200607) data were used toestimate the impacts of lsquoSamurdhirsquo on the statusof household income health education and foodand non-food consumption

Gunawardane (2014) found out that theSamurdhi credit program plays a major role inempowering women in Sri Lanka Specificallythe evidence suggests that access to creditfor poor women has increased income in theirfamilies Kumari (2014) investigated the impactof Microfinance on small entrepreneurships in SriLanka Her findings revealed that the Samurdhiprogram is giving priority to develop the incomegeneration programs in the area and it was creatingfew employment opportunities for village women

Kesavarajah (2011) investigated poverty andEconomic support in Sri Lanka The objectiveof this context is to shed light on the effects ofthe governmentrsquos Samurdhi expenditure on povertyreduction in Sri Lanka She has reached the conclu-sion which confirms that the targeting outcomesof Samurdhi are inadequate and Samurdhi transferprogram emerges as inefficient program and alsoshe found that The Samurdhi Programappearsto lack in the checks of accountability andtransparency Samurdhi officers are influenced bythe local politicians Politicization is embedded inthe design and influences of both the selectionof Samurdhi administrators and the selection ofbeneficiaries Further she has suggested that itis vital to redesign the Samurdhi program andincrease the Samurdhi expenditure in a bid to

reduce poverty and meet other development goalssuch as human development and improvementin productivity of workers through improvededucation and health

According to Damayanthi (2014) SamurdhiProgram is suffering from serious governanceissues such as miss-targeting lack of transparencyaccountability efficiency and effectiveness equityand social justice as well as informed citizenry Sheconducted this research to examine the governanceissues in governmentrsquos major poverty alleviationprogram - the Samurdhi programin Sri Lankafor the purpose of this study she used bothprimary and secondary data Primary data wascollected through questionnaire survey key infor-mant discussions and focus group discussions inselected eight districts The quantitative data wereanalyzed using the simple statistical method andqualitative data and information were analyzedthrough descriptive methods

In another study Damayanthi (2014) aimedto explore the ongoing issues of mal-targeting inthe Samurdhi program and their effects on theactual poor and overall program effectiveness andwhy errors in targeting occurred in the safety-net and livelihood development components ofthe Samurdhi program in Sri Lanka and thesubsequent effects on the poor as well as on theprogram itself Qualitative methods were usedto collect and analyze data and her findingsrevealed that among a number of criticisms onprogram implementation is mal targeting or lack ofproper targeting Peoplesrsquo dependency mentalitypoliticization of the society and outdated incomelevel cut-offs were identified as major reasonsfor mal-targeting Major outcomes of the mal-targeting include disruptions to social harmonyand decline in effectiveness of the program

Damayanthi amp Champika (2014) attempted toevaluate the performance of Samurdhi Banks inpoverty alleviation as well as for identifying theissues and difficulties faced by beneficiaries and of-ficers in eight districts considering district povertylevel The findings show that approximately 57percent of the Bank customersrsquo family incomehad increased due to the Samurdhi Programandit has also contributed 38 percent to increase ofassets As the authors have noted fifty percentof the bank customers did not face any problemrelated to service delivery and getting servicessmoothly But among the weaknesses or issues



faced by the customers were that regulatedaccount balance for loan was high releasing thesubsidy allowance was delayed some of the officersdid not provide efficient and effective services andthat the maximum loan amount was not enough

Ganga amp Sahan (2015) carried out a detailedanalysis of Sri Lankarsquos social protection systemand examines the relationship between socialprotection and labor market outcomes such as thelabor force participation and employment statusThe study revealed that the value of monthly cashtransfers received under many social protectionprograms including the Samurdhi and PAMAremain low much lower compared to the nationalpoverty line which identifies the minimum level ofincome required for a person per month to meethisher basic needs The study found out thatthe Samurdhi cash transfer program suffer fromsome targeting issues of inclusion and exclusionerrors lack of coordination of among programsimplemented by different bodies and duplication ormultiplicity of programs targeted towards certainvulnerable groups Budgetary constraints andinequitable distribution of limited resources acrossprograms and population segments Moreover thestudy stresses the need for improving lsquotargetingrsquo inprograms like Samurdhi and make better use of thelimited resources available for social protection forthe benefit of the lsquomost needyrsquo groups

Mahmood et al (2014) explore the impact ofmicrofinance loans on poverty reduction amongstwomen entrepreneurs in Pakistan This exploratorystudy is based upon an empirical investigation of123 semi structured interviews as well as in-depthsemi structured interviews with a subsample often women entrepreneurs who secured microfinanceloans for their new or established enterprisesEmergent results show that access to finance isimportant for female entrepreneurs and helps themrealize their potential as entrepreneurs

Toindepi (2016) argues that business prioritiesof commercial microfinance providers differ sig-nificantly to those of development microfinanceproviders and this impact on the program designwhich means clients of each regardless of comingfrom the same target group may have differentexperiences The microfinance concept evolvedfar beyond any single philosophical or ideologicalconfinement that there is now need for formalrecognition and acknowledgment that commercialand developmental microfinance paradigms are

parallel models of approaches whose continuousevolution is less likely to converge in the nearfuture so should be treated separately

Abdul-MajeedAlaro amp Alalubosa (2019) explorethe option of Sharrsquoah-compliant microfinance asa viable alternative to many previous approachesadopted by the Nigerian State in tackling themenace of poverty in the land The findings revealthat the suggested Sharrsquoah tools are viable andsustainable in lunching microfinance projects inthe Nigerian context Kim et al (2018) showthat technical efficiency (TE) of MFIs in Vietnamis considerably high with the average TE scoreand efficiency of scale being 855 and 947respectively Size age outreach and market targetof MFIs are found not to be the determinants ofefficiency while capital structure is

Sayvaya amp Kyophilavong (2015) find thatvillage development fund program has a positiveimpact on household income and expenditurebut that the impact is statistically insignificantAtiase amp Dzansi (2019) indicate that microfinancehas contributed to employment generation andpoverty reduction in the Greater Accra regionof Ghana through the provision of microloans tonecessity entrepreneurs to engage in various typesof income-generating activities However necessityentrepreneurs faced loan inadequacy issues coupledwith under-financing difficulties

This study has formulated the following hypoth-esis as in line with the theory and previous studiesin order to examine the relationship between thevariables

H1 There is a significant impact ofSamurdhi Program on poverty alleviation

H1a There is a significant impact ofmicrocredit on poverty alleviation

H1b There is a significant impact oflivelihood on poverty alleviation

H1c There is a significant impact ofwelfare on poverty alleviation

Methods

This study examines the impact of Samurdhiprogram on poverty alleviationin Kopay DS Divi-sionIt is based on a positivist paradigm and usesa deductive reasoning in establishing the causesand effects of a thus social phenomenon [Husseyamp Hussey 1997] The reasoning is deductive



Table 1 Measurement for variables and concepts

Concept Variable Indicator Key references

SamurdhiProgram

Microcredit Size of loan [Jayasuriya 2007]

Interest rate repaymentLivelihood activity Employment opportunity [Kumari 2014]

Training technical assistanceWelfare activity Food stamp [Jayasuriya 2007]

[Sharif 2005]Housing planningSocial welfare payments

Povertyalleviation

Income level Income [Jayasuriya 2007][Damayanthi amp Champika 2014][Rizphy amp Jayasinghe-Mudalige 2010]

SavingConsumption

Health and nutrition Food consumption[Fasoranti 2010]

Medical facilityHousing condition Water

[Sanjeewanie et al 2012][Thibbotuwawa et al 2012]

ElectricityAssets

Asset accumulation Household Business assets[Fatima amp Qayyam 2016][Damayanthi amp Champika 2014]

because the hypotheses are derived first andthen the related data will be collected later toconfirm or negate these established hypothesesBryman amp Bell (2007) indicate that deductiveapproach is related to quantitative researchthat follows objectivism ontological realism andepistemological positivism Gill amp Johnson (2002)argued that the development of a conceptual andtheoretical structure prior to its testing throughempirical observation is needed in a deductiveresearch method As a result quantitative datawas used as the evidence required for testing thehypotheses in this study

The population for this study consists of allSamurdhi beneficiaries in Kopay DS Division inJaffna District Sri Lanka Kopay DS divisionconsists of sixteen villages subdivided into thirty-one GramaNiladhari and three Samurdhi ZonesOut of three Samurdhi Zones only one zone calledKopay Samurdhi bank was selected in which thereare four GramaNiladhari (GN) such as Kopaynorth (J262) with the total of 427 Samurdhibeneficiaries Irupalai South (J257) with thetotal of 510 Samurdhi beneficiaries Urelu (J267)with the total of 579 Samurdhi beneficiaries andUrumpirai south (J265) with the total of 875Samurdhi beneficiaries So the total populationof four GramaNiladhari consists of 2391 Samurd-

hibeneficiaries Finally200 Samurdhi beneficiariesin four GN divisions have been selected randomly200 Questionnaires were issued but the researchercould collect only 177 Questionnaires and 23 werenot responded Therefore 177 samples could onlybe incorporated in this study

In this study the primary data was gatheredby using the questionnaire survey in Kopay DSdivision The standard questionnaires with testedreliability were used To examine the hypotheses ofthe study the collected data was analyzed by usingSPSS The measurement of variables and conceptsis indicated in Table 1

Results and Discussion

Following paragraphs intend to answer theresearch question concerning ldquohow the Samurdhiprogram impacts on the poverty alleviation par-ticularly in Kopay DS Division in Jaffna DistrictSri Lankardquo Firstly a descriptive analysis ofcharacteristics of the sample is presented Secondlythe analysis focuses on the correlations betweenthe variables Thirdly effects of Samurdhi programon poverty alleviation are examined to answer theresearch question



Table 2 Demographic characteristics of Samurdhi beneficiaries

Demographic Characteristics Frequency PercentageGender

Male 4 23Female 173 977

Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288

Membership period in SamurdhiBelow 1 year 16 92-3 year 22 1244-5 year 13 735 year 52 294Above 10 year 74 418

Educational qualificationBelow 5 27 153Grade 5-10 73 412OL 58 328AL 19 107

Self-employment typeFarmerAgriculture 27 153Cattle fostering 27 153Sewing 5 28Milk production 5 28Petty ventures 6 34Labour 81 458Handicraft business 1 06Other 14 79None 11 62

Descriptive Analysis

Descriptive statistics of the variables includedin the study have been presented in the Table 2

As in line with the Table 2 it is quite clearthat out of the total respondents investigated forthis study the overwhelming majority (977) ofthem are females whereas 23 are found to bemales from 177 samples It can be concluded thatnowadays women are more involved than men inthe Samurdhi bank activities

Table 3 VIF Analysis

Tolerance VIF

Microcredit 0942 1062Livelihood activity 0878 1139Welfare activity 0905 1105

Dependent Variable Poverty alleviation

Out of 177 respondents the majority fall intothe age group of 31-40 years old which is 322It is followed by 305 of the respondents whoare aged 41-50 years old 288 of the respondentsare aged above 50 years and the rest of the 85are fallen into 18-30 It can be concluded that thepeople from a family who are in the age groupof 31-40 and 41-50 are mostly involved into theSamurdhi program dealings

This table entails that the majority of 418of beneficiaries engaged into Samurdhi programwas 10 years 294 of the clients engaged in 5years 124 of the beneficiaries are engaged intoSamurdhi program for 2-3 years and 9 of thebeneficiaries are engaged in 1 year Further theresults revealed that the majority of the clientsis in the category of grade 5-10 Moreover 328had attained GCE OL whereas 153 of the



Table 4 Reliability Analysis

Dimensions of variables No of dimensions Cronbachrsquos Alpha

Microcredit 7 0723Livelihood activity 5 0698Welfare activity 5 0701Poverty Alleviation 17 0657

beneficiaries had obtained the studies below grade5 It is noted that only 107 of beneficiaries hadattended the AL Table 02 represents that themajority of 458 of total respondents is doinglabour work and 153 of the beneficiaries aredoing Cattle fostering and agriculture Rest of therespondents are doing other work like sewing pettyventures and milk production 11 beneficiariesamounted to 62 of respondents not doing anywork

Multicollinearity Test

In this study multicollinearity is measured usingVariance Inflation Factor or Tolerance test As inline with Table 3 all VIF values for variables areless than 10 then there can be concluded that thereis no any issue on multicollinearity

Reliability Test

According to Hair et al (1998) reliability isldquoextent to which a variable or set of variables isconsistent in what it is intended to measurerdquo Thequestionnaire on this study was circulated based onreliability by using SPSS software with Cronbachrsquosalpha method Thus the internal consistency ofthe Samurdhi program and poverty alleviation ofthis study was tested through Cronbach alphacoefficient

Cronbachrsquos alpha values were assessed for eachvariable with item-scales The reliability of thetest is reported in Table 4 The reliability of themeasures was well above the minimum threshold of060 in every case [Gliner amp Morgan 2000] Thusit can be concluded that all of the measures weregenerally reliable

Correlation Analysis

The correlation was made to examine thepattern or strength of the relationship betweenSamurdhi program and poverty alleviation ofSamurdhi beneficiaries in Kopay DS Division inJaffna district

As per the results presented in the Table 5

microcredit is positively correlated with incomelevel (r=0451) and health amp nutrition (r=0383)at 001 significance level while microcredit ispositively significantly correlated with housing con-dition (r=0284) and asset accumulation (r=0277)at 1 significance level

Livelihood activity is significantly positivelylinked with income level (r=0244) and assetaccumulation (r=0281) at 001 significance levelFurthermore the welfare activity is positivelysignificantly correlated with income level (r=0202p=0007) and asset accumulation (r =0219p=0003) at 001 significant level whereas thereis significant relationship between welfare activityand health and nutrition (r=0152 p=0044) at005 significance level

Regression Analysis

The regression analysis was performed toevaluate the impact of Samurdhi program onpoverty alleviation which is presented in Table 6

Based on Table 6 the value of the coefficientof determination (adjusted R-Squared) is 0250which shows that approximately 25 of the totalvariance in poverty alleviation can be determinedby all dimensions of Samurdhi program as theindependent variable in this model Further themodel reveals that the remaining 75 of variabilitywas not explained in this model It is observed thatthe model is a good fit because the significant value(F-statistic) is less than 005

Among the all three Samurdhi activities consid-ered in the analysis only two Samurdhi activitiessuch as micro credit and welfare activities havea significant impact on poverty alleviation whilethere is not significant impact of livelihood activityon poverty alleviation

In order to test the hypotheses consideringthe probability of t test of microcredit was lessthan 5 Hypothesis H1a stated that there isa significant impact of microcredit on povertyalleviation The findings indicated that the mi-



Table 5 Correlation Matrix

(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1

Livelihood activity (2) 226lowastlowast 10002

Welfare activity (3) 148lowast 297lowastlowast 10049 0

Income level(4) 451lowastlowast 244lowastlowast 202lowastlowast 10 0001 0007

Health amp nutrition(5) 383lowastlowast 0089 152lowast 547lowastlowast 10 024 0044 0

Housing condition (6) 284lowastlowast -0076 0147 0114 517lowastlowast 10 0314 0051 013 0

Asset accumulation (7) 277lowastlowast 281lowastlowast 219lowastlowast 489lowastlowast 293lowastlowast 212lowastlowast 10 0 0003 0 0 0005

lowastlowastCorrelation is significant at the 001 level (2-tailed)lowastCorrelation is significant at the 005 level (2-tailed)

crocredit has a positive and significant impact onpoverty alleviation This finding was supported bya regression beta of 0331with t statistics of 6706and the p value of 0000 This result is collaboratedwith Gunawardane (2014) and Jayasuriya (2007)and contradicts with Gunatilaka amp Salih (1999)The results support hypothesis H1a

Hypothesis H1b stated that there is a significantimpact of livelihood activity on poverty alleviationTable 6 shows that there is insignificant impactof livelihood activity on poverty alleviation (p=0809gt005) So Hypothesis H1b was not sup-ported This finding is contradicting with Kumari(2014)Meanwhile the beta value for welfareactivity is 144 and p value is less than 005Therefore the welfare activity has a significantimpact on the poverty alleviation Thereforehypothesis H1c was supported with findings Thisis contradicting [Ganga amp Sahan 2015]

To sum up the overall result it can be concludedthat the Samurdhi program significantly impactedon poverty alleviation (f value = 20570 P= 0000)This is consistent with the findings of Rizphy ampJeyasinghe (2010) and Sanjeewanie et al (2012)

Conclusion

This study mainly depicts the relationship be-tween Samurdhi Program and poverty alleviationin Kopay DS Division This study incorporatedthe Samurdhi Program as an independent variablewhich includes microcredit livelihood activity and

welfare activity Poverty alleviation is incorporatedas a dependent variable which is measured byusing Income level Health and nutrition Housingcondition and Asset accumulation The aim of thisstudy is to investigate the impact of SamurdhiProgram on Poverty Alleviation in Kopay DSDivision

Findings of the study can be stated as followsthere is a significant impact of Samurdhi programon poverty alleviation Microcredit has positiveand significant impact on poverty alleviation andlivelihood activity has insignificant impact onpoverty alleviation while welfare has positive andsignificant impact on poverty alleviation Basedon the findings the researcher can conclude thatmicrocredit and welfare activity are effectivelyworked and livelihood activity needs to improveitself

Limitations and Suggestions

There are some limitations First there is adearth of activities considered in the SamurdhiProgramme in this study A lot of activities arecarried out under the Samurdhi Programme atvillage level Second the sample size is quitesmall and restricted to only 200 beneficiaries inthe 4 GN divisions in a Samurdhi Zone in theKopay Division Third many factors can affectthe poverty alleviation but in this context ofthe Samurdhi programme only few factors wereconsidered



Table 6 Regression Analysis

Coefficient Std Error t Significant value

Constant 1845 0216 8532 0000Microcredit 0331 0049 6706 0000Livelihood activity 0011 0047 0243 0809Welfare activity 0144 0056 2551 0012

R-squared 0263Adjusted R-squared 0250F-statistic 20570Prob (F-statistic) 0000

Dependent variable Poverty alleviation

The study confirms that the Samurdhi Pro-gramme plays a vital role in reducing poverty andcalls for the Government to adopt economic policieswhich aim at developing Samurdhi activities inorder to help the poor population by making themexposed to better opportunities of employmentand income growth thereby achieving the goal ofpoverty reduction The results found here suggestpossible areas for future research also The areawould be the estimation of Samurdhi activitiesand poverty alleviation relationship using someother poverty indicator (ie head count ratioother-income-based and welfare-based indicators)Apart from this the study also does not take intoconsideration the individual issues of rural andurban poverty separately A promising extensionof this work would be to consider the rural-urbanpoverty reduction and its linkage with Samurdhiactivities separately so that policies can be framedwith an individual focus on rural as well as urbanareas

References

Abdul-MajeedAlaroA amp Alalubosa A(2019)Potential of Sharrsquoah compliantmicrofinance in alleviating poverty in NigeriaInternational Journal of Islamic and MiddleEastern Finance and Management 12(1)115-129 DOI 101108imefm-01-2017-0021

Addae-Korankye A (2012) Microfinance a toolfor poverty reduction in developing countriesJournal of Business and Retail ManagementResearch 7(1) 138-149

Ahmed A U Hill R V Smith L CWiesmann D MFrankenberger T GulatiK amp Yohannes Y (2007) The worldrsquos

most deprived Characteristics and causesof extreme poverty and hunger 43 DOI1024990896297705

Atiase V amp Dzansi D (2019) Microfinanceand Necessity Entrepreneurship The GhanaianExperience Societal Entrepreneurship andCompetitiveness 155-170 DOI 101108978-1-83867-471-720191011

Bryman A amp Bell E (2007) Business ResearchMethods 2nd ed New York Oxford

Centre for Public Impact (2017) The Samurd-hiProgramme in Sri Lanka Asia ampOcenia

Damayanthi M N (2014) Good governanceand poverty alleviation programmes in SriLanka special reference on Samurdhipro-gramme 47(1) 43-64

Damayanthi M N amp Champika P J (2014)An Evaluation of Samurdhi Banks in PovertyAlleviation

Fasoranti M M (2010) The influence of micro-credit on poverty alleviation among ruraldwellers A case study of Akoko North WestLocal Government Area of Ondo State AfricanJournal of Business Management 4(8) 1438-1446 DOI 103923jeth201018

Fatima K amp Qayyum A (2016)Remittancesand Asset Accumulation of Household inPakistan

Ganga T amp Sahan J (2015) Social Protectionin Sri Lanka Current Status and Effect onLabor Market OutcomesSarnet working paperno 3



Ganga T Upali W amp Kumara T (2005) Mi-crofinance for Poverty Alleviation in Sri LankaA Household Level Analysis of Outreach andImpact on Poverty Institute of Policy Studiesof Sri Lanka DOI 104038sljssv40i17501

Gill J amp Johnson P (2002) Research Methodsfor Managers Sage Publications Limited

Glinskaya E (2000) An Empirical Evaluation ofSamurdhi Program Background paper for SriLanka Poverty Assessment Report Number 22-535-CE World Bank draft report

Gliner J A amp Morgan G A (2000) Researchmethods in applied settings An integratedapproach to design and analysis Mahwah NJUS Lawrence Erlbaum Associates PublishersDOI 1043249781410605337

Gunatilaka R (2010 March) Safety Netsfor Social Protection Sri Lankarsquos Samurd-hiProgramme In Research Meeting on SocialProtection Policies in South Asia

Gunatilaka R amp Salih R (1999) How successfulis Samurdhirsquos savings and credit programme inreaching the poor in Sri Lanka Institute ofPolicy Studies Victoria University of Welling3

Gunatilaka R Perera R Salih R amp DeSilva C (1997) The SamurdhiProgrammeA Preliminary Evaluation Institute of PolicyStudies Colombo Sri Lanka

Gunatilaka R Salih R (2017) How successfulis Samurdhirsquos savings and credit programme inreaching the poor in Sri Lanka Institute ofpolicy studies

Gunawardane D (2014) Samurdhi Credit Pro-gramme poverty reduction and empoweringwomen in Sri Lanka Rajarata University of SriLankaIRSYRU 286-288

Hair J F Black W C Babin B J AndersonR E amp Tatham R L (1998) Multivariatedata analysis (Vol 5) Prentice hall UpperSaddle River NJ

Hussey J amp Hussey R (1997) BusinessResearch - A practical guide for undergraduateand postgraduate students London MacmillanPress Ltd DOI 101007978-1-349-25262-6

Ismail S J Immink M D C ImminkM D Mazar I amp Nantel G (2003)Community-based food and nutrition pro-grammes what makes them successful Areview and analysis of experienceFood andAgriculture Organization of the United Na-tions DOI 1018356bd7db620-en

Jayasuriya P K (2007) lmpact of the MicroFinance on Poverty Alleviation in Sri LankaSpecial Reference to SammurdhiProgrammeProceedings of the Annual Research Sympo-sium Faculty of Graduate Studies Universityof Kelaniya 55

Kesavarajah M (2011) Poverty and economicsupport in Sri Lanka The case of Samurd-hiprogramme Retrived from httpwwwiiirrucalgarycafilesiiirr26pdf

Kim N Long L amp Sang N (2018) Evaluatingthe Efficiency of Microfinance Institutions inVietnam and the Impact of this Efficiency onPoverty Reduction Global Tensions in Finan-cial Markets 34 167-181 DOI 101108s0196-382120170000034008

Kumari P JA (2014) The impact of microfi-nance on small entrepreneurships in Sri LankaBIOINFO Business Economics 2(1) 06-09DOI 1097352249-1775

Mahmood S Hussain J amp Z MatlayH (2014)Optimal microfinance loan sizeand poverty reduction amongst female en-trepreneurs in Pakistan Journal of SmallBusiness and Enterprise Development 21(2)231-249 DOI 101108jsbed-03-2014-0043

Morduch J amp Haley B (2002)Analysis of theEffects of Microfinance on Poverty ReductionNYU Wagner Working Paper No 1014TheCanadian International Development AgencyCanada

Punjabi N M (2010) Future Trends in Microfi-nance Sector in India In Paper Presentationat UGC Sponsored Two Day State LevelMultidisciplinary Seminar on Microfinance lsquoAtool for Women Empowerment amp PovertyAlleviationrsquo HR College of Commerce ampEconomics Mumbai

Rathirani Y amp Semasinghe D M (2015)Factors determining the women empowerment



through microfinance An empirical study inSri Lanka International Journal of SocialBehavioural Educational Economic Businessand Industrial Engineering 9(5) 2328-2185

Rizphy M amp Jayasinghe-Mudalige U K (2010)Impact of Samurdhi Microfinance Programmeon Poverty Alleviation A Case Study of PaddyFarmers in the Ampara District In Proceedingsof 10th Agricultural Research Symposium 373376

Sanjeewanie K H Silva N D amp ShivakumaranS (2012) Multi-dimensional poverty amongSamurdhi welfare recipients in Badulla districtSri Lanka (PMMA Working Paper 2012-03)httpsnbn-resolvingorgurnnbnde0168-ssoar-360886 DOI 102139ssrn2348183

Sayvaya I amp Kyophilavong P (2015)Does microfinance reduce poverty in LaoPDRInternational Journal of DevelopmentIssues 14 (3) 215-230 DOI 101108ijdi-10-2014-0072

Sharif I (2005) Social interactions electiongoals and poverty reduction evidence from ananti-poverty program in Sri Lanka NationalGraduate Institute for Policy Studies

Statistical Handbook(2019) DS office Kopay

Thibbotuwawa R M M I Printhika B L D

S Jayasinghe-Mudalige U K amp Udugama

J M M (2012) Impact of Microfinance

on Household Welfare Assessing the Case

of Samurdhi Program in Sri Lanka In 56th

Annual Australian Agricultural and Resource

Economics Society (AARES) National Confer-

ence Fremantle February 7-10

Toindepi J (2016) Investigating a best practice

model of microfinance for poverty alleviation

International Journal of Social Economics

43(4) 346-362 DOI 101108ijse-05-2014-0091

Weerasinghe I M S amp Dedunu H H (2017)

Impact of microfinance on living standard with

reference to microfinance holders in Kurunegala

District International Journal of Business

Marketing and management (IJBMM) 2 16-

23

Yogendrarajah R (2014) Impacts of Micro

Finance Institutions Issues and ConceptsAn

Empirical Study on Sri Lankan Context

Journal of Business amp Management 2(4) 302-

315 DOI 102139ssrn2505432



founds that micro finance provides financial andnon-financial services such as small loans savingsmicro leasing micro-insurance and money transferto assist the very poor people for their self-income generating activities Since independencesuccessive Sri Lankan Governments and Non-Governmental organization have launched severalmicrofinance programs for poverty alleviationincome generation programs which include theestablishment of Thrift and Credit CooperativeSocieties JanasaviyaProgram SEEDS Agro microcredit service National Development Fund andrecently the Samurdhi Program [Kumari 2014]

As a developing country Sri Lanka has a longhistory of social programs and food subsidiesin particular The major one of these is theSamurdhi program which was introduced in1995Its main goal was to reduce poverty inSri Lanka through development based on publicparticipation However few researchers arguethat Samurdhi as a social welfare Program issuffering from inefficiency miss-targeting and lackof transference [Damayanthi 2014 Kesavarajah2011 Thibbotuwawa et al 2012]

Ismail et al (2003) investigated that basedon the program design the key components ofthe Samurdhi include compulsory and voluntarysavings human resource development (productiv-ity development training training in accountingfunctions training of executive committees andmaterial resource development) establishment ofSamurdhi Bank societies (responsible for theprovision of credit) a community developmentprogram labor-intensive peoplesrsquo projects smallindustries development and social developmentPrograms

Furthermore the most of the research has beendone in the wide area of microfinance world-wideas well as in Sri Lankan wise only few studies havebeen done in Jaffna District and no one has beenhighlighted on Samurdhi program particularly inthe Kopay Division Hence this study attemptsto investigate how as a social assistance programthe Samurdhi program impacts the poverty levelMainly it focuses on the Kopay DS division inJaffna District

Numerous studies have been contributed to theempirical evidence on the broad area of Micro-finance over the past years [Abdul-MajeedAlaroamp Alalubosa 2019 Atiase amp Dzansi 2019

Gunatilaka amp Salih 2017 Kim et al 2018Mahmood et al 2014 Punjabi 2010 Sayvaya ampKyophilavong 2015 Toindepi 2016 Weerasingheamp Dedunu 2017] Most of these studies were basedon the data largely from other developing countriesand little evidence from Sri Lanka [Damayanthi2014 Gunatilaka amp Salih 2017 Kesavarajah 2011Kumari 2014 Rizphy amp Jayasinghe-Mudalige2010] Largely in Sri Lanka empirical studieshave been generated with a variety of institutionsthat related to the microfinance as explanatoryvariables which might potentially be associated forthe poverty alleviation increase in household in-come women empowerment and self-employmentThese micro finance institutions are banks non-governmental micro finance institutions and someresearchers have been done regarding SamurdhiProgram and poverty in Sri Lanka but it isvery least in Jaffna particularly in Kopay DSdivision [Damayanthi 2014 Gunatilaka amp Salih2017 Kesavarajah 2011 Kumari 2014 Rizphy ampJayasinghe-Mudalige 2010]

Furthermore many researchers have acceptedthat microfinance is an important tool to alleviatepoverty and enhance the living standard ofpoor people in the developing countries [Addae-Korankye 2012 Morduch amp Haley 2002] As adeveloping country Sri Lanka has a long history ofmicro finance institutions its services particularlyto the poor and there are a number of reasonsthat could have contributed for the enormousachievement in poverty reduction the SamurdhiProgram may be one of the major reasons for suchachievement

However there is limited Knowledge on thepoverty alleviation through the microfinance pro-grams of Samurdhi in Kopay DS Division Since3947 of the total population of KopayDS divisionhas fallen into the category of income is under Rs5000 per month as at December of 2018 [SHB2019] Hence there is a need to identify the povertyalleviation

There is a contradiction whether the Samurdhiprogram is an effective vehicle to reduce povertyand there are number of criticisms of the Samurdhiprogram and its implementation Therefore anevaluation of performance of the Samurdhi Banksis timely Since this is the major program ofgovernments towards poverty alleviation in SriLanka there is a need to evaluate the program andits implications from time to time






















+ β3WA+ εit
































Methods






SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432






















+ β3WA+ εit
































Methods






SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432








+ β3WA+ εit
































Methods






SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432

























Methods






SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432















Methods






SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432





SamurdhiProgram





Povertyalleviation


SavingConsumption




ElectricityAssets













Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432






Age18-30 15 8531-40 57 32241-50 54 305Above 50 51 288








Tolerance VIF













Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432









Reliability Test








Regression Analysis








(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432




(1) (2) (3) (4) (5) (6) (7)

Micro credit (1) 1











Conclusion














References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432









References






















































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432










































43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432




















43(4) 346-362 DOI 101108ijse-05-2014-0091






23





315 DOI 102139ssrn2505432


Documents

Sabaragamuwa Volume 18Number 1 August 2020 30-42