Examining Counsellor Expertise: Evidence from the Sri Lankan Microfinance Sector

Posited in the context of the exacerbating conditions of the economic crisis, the shortage of financial resources in the small and medium-sized enterprise market, and the low standard of living of the population in a number of countries, microfinancing is one of the effective tools to stimulate entrepreneurship. Microfinancing is the issuance of small loans and other services, such as business development services (BDS), which also comprise components of financial literacy, business registration, market linkages, thereby serving as a reliable mechanism to support low-income individuals to start and grow their businesses and to alleviate poverty in the country. Microfinance Institutions (MFIs) use innovative techniques, such as group lending and gradually increasing loan sizes in order to provide these services. The systematic analysis of the existing scientific literature on microfinance revealed the lack of comprehensive research on the significance of counsellor expertise in the provision of BDS. Thus, the objectives of the present study were to understand the meaning of counsellor expertise, to see how counsellor expertise could help owner-managers in different areas of their businesses, and to examine how the organizational factors affect the expertise of the counsellors. A case study method was used to carry out the study. Accordingly, six MFIs were selected as cases, and a microfinance manager, a counsellor, and three owner-managers/clients from each MFI were interviewed to collect the data. The findings show that the counsellor expertise is twofold: business knowledge and experiential knowledge. It was evidenced that, while the business knowledge of counsellors helps owner-managers in record keeping, business plan preparation, and financial literacy, the experiential knowledge helps owner-managers in networking, business linkages, and different industries. The findings also reveal that the type of MFI, the type of linkage, and counsellor selection method influence the expertise of the counsellors. Therein, the findings are useful both to the practice and the knowledge domains in microfinance setting.