New Bill to control micro finance business

A new authority with a wide range of regulatory powers is to be setupped to regulate money lending businesses and the microfinance industry to protect citizens from false, misleading schemes and scams in the country.

The new bill, published by the Minister of Finance, Economic Stabilization and National Policies this week sought to repeal the Microfinance Act, No. 6 of 2016 and replace it with legislation that contains tough regulations.

Under the bill, those who engage in moneylending business are required to be registered with the authority and the body is vested with powers to determine whether a person is engaged in such business activities by considering the frequency of transactions as well.

Those who violate the law or commit an offence under the proposed law would be subjected to a Magistrate trial along with a fine of a maximum of five million rupees or five years imprisonment or both.

The Authority is vested with powers to cancel the license of a company if it is carrying out improper business transactions that are detrimental to depositors or restrain or remove any director of the licensed company from carrying out any activities. In addition, the authority can impose an administrative fine of a maximum of two million rupees on the licensee or any member of the board of directors, manager, or employee for violations of the law.

It is also armed with powers to review any agreement or contract entered into by a customer or any other person with the "licensee and vary the terms of such agreement or contract, including the terms relating to repayment, interest rates and charges where it considers that such contract has been entered into without due regard to the interests of borrowers and any other stakeholders or prudent commercial practices," the bill said.