Abstract:
Drawbacks of the Formal Financial System in rural areas, the rural people prefer to adopt
with Informal Financial System according to more motivation and reasons in village
level. Even though varieties of formal financial systems are introduced in our country,
many institutions were expanded and more types of financial tools, packages were
introduced, our people still operates the informal financial systems particularly in rural
areas than urban area. Therefore this study focused on the reasons for informal financial
system in village level. The objectives of this study are to identify the reasons for
informal financial system and evaluate the level of the system. In order to achieve the
objective, the Akkaraipatu village is selected and issued questionnaire among the 150
people and small business men, data were collected and analyzed by using univariate
analysis. The result of the study shows that there is various factors influence in
involvement of informal financial system in Akkaraipattu village and the system in
Akkaraipattu is found in high level. Based on the findings, some recommendations are
given to strengthen the informal financial system as formal system. Findings of this study
help bank managers, policy makers and informal suppliers to better understand about the
reasons and level of Informal Financial System.
