Government to regulate micro finance institutions countrywide

In the wake of irregularities and complaints of harassing poor creditors, the Sri Lanka government is to regulate 15,000 microfinance institutions that are illegally operating in the country.

The Cabinet of Ministers approved publishing the new draft Bill on the Microfinance and Loan Regulation Authority in the Government gazette and subsequently tabling it in Parliament for its approval.

The microfinance victims who have been terribly affected by the debt trap and are also overwhelmed with economic and social issues in mostly rural areas of the country, are still waiting for a sigh of relief.

Over 2.4 million women countrywide who are unable to repay their loans due to high interest rates, have to face physical and mental harassments, including death threats from some finance companies and debt collectors, several social service activists told the Times online.

The proposed Microfinance and Loan Regulation Authority is empowered to safeguard the right of creditors who have defaulted their loans due to present economic hardships, Presidential Secretariat sources revealed.

The draft Bill, prepared by the Legal Draftsman, later received the Attorney General’s clearance, a senior official of the president’s office said.

15,000 microfinance institutions are illegally operating in the country. However, only 54 companies have been registered with the Microfinance Association and only those who obtained loans from those companies enjoyed the benefits given by the Government on several occasions.

According to the Central Bank, only four institutions have been registered with the Monetary Authority including Berendina Micro Investments Company Ltd, Lak Jaya Micro Finance Ltd, Dumbara Micro Credit Ltd and Sejaya Micro Credit Ltd.

A women’s rights activist noted that the Central Bank’s inaction was the main reason for the present situation of microfinance institutions, as it always overlooked the issue, claiming that they did not have necessary powers to regulate the industry. (Bandula)