At the beginning of the 1970s, the industrial countries accounted for about 80%of world oil consumption. Today, they are down tolittle more than 50%. Already, China uses more totalprimary energy than United States.  Developing countries are in the process ofconsuming a substantial amount of energydue to alarming growth, industrialization, urbanization etc. With a tight and volatile oil market, combined with sharply risingconsumption in emerging countries there is renownedconcerns about energy security. Various models are beingimplemented in these countries with the help ofdonors and local governments toenhance the use of renewable energy fora sustainable development. Use of renewable energy for rural electrificationhas not progressed as anticipated regardless of provisions of subsidies &other measurers by governments. InSri Lanka, the primary energy contributions in 2009 to nationalenergy supply were 51% from biomass, 44.8% from crude oil and petroleumproducts, and 3.6% from hydroelectricity and other renewable sources. The useof non-conventional energy resources, NCRE, (small-scale hydropower, biomass,biogas and waste, solar power and wind power) in Sri Lanka is of a relativelysmaller scale (<1%) and therefore its contribution is presently of lowsignificance in the macro energy picture. Regardless, the energy policydocument of the government of Sri Lanka has set a target to reach a minimumlevel of 10% of electrical energy supplied to the grid to be from non-conventionalrenewable energy in 2015. Inthis context, this study attempts to analyse the strengths and weaknesses ofthe existing financial and institutional models for renewable energydissemination for rural electrification in Sri Lanka and to recommend possiblemeasures needed for better financial and institutional models. In addition to aliterature survey, a questionnaire survey was carried out with power producers,financial institutions and government and non-government organizations in therenewable energy business to obtain their perception for better analysis.