Transparency International Sri Lanka challenges Microfinance Bill in Supreme Court

• Says proposed legislation lacks adequate provisions to effectively address and establish a suitable regulatory framework
• Asserts Bill does not conform to the principles of reasonableness
• Points out the Bill excludes certain entities that dominate the microfinance industry

​By Lakmal Sooriyagoda 

In a significant move, Transparency International Sri Lanka (TISL) has submitted a Special Determination petition to the Supreme Court, contesting the ‘Microfinance and Credit Regulatory Authority Bill.’ 
The organisation asserted that the proposed legislation lacks adequate provisions to effectively address and establish a suitable framework for regulating the exploitative and predatory practices observed among microfinance lenders at the grassroots level.

The Bill was placed on the Order Paper of parliament on 9 January, 2024.

TISL has argued in the Petition that the Bill does not conform to the principles of reasonableness, proportionality, natural justice, separation of powers and legal certainty as required, and thus is in violation of Article 83 of the Constitution as read with Article 3 and 4 of the Constitution.

The extortive and predatory practices faced by victimised customers/borrowers of microfinance schemes, among others include, sextortion/soliciting of sexual bribes, physical, mental, and emotional harassment and intimidation, and the application of extortive interest rates in the granting of loans.

The Petition states that the Bill fails to adequately regulate all entities that engage in microfinance activities in a manner that would address the pervasive issues that have adversely plagued the sector.
The Petition points out that the Bill excludes certain entities that dominate the microfinance industry, such as licensed commercial banks or licensed specialised banks, licensed finance companies, registered leasing establishments, etc.

TISL has further noted in the Petition that the provisions in the Bill grant undue sole discretion to the subject Minister by allowing him to specify persons who may carry out money lending without license from the Microfinance and Credit Authority, and grant exemptions to a class or category of transactions. It further states that Clause 65 of the Bill attempts to create an information-concealing regime that is in complete violation of Article 14A of the Constitution from which the Right to Information Act No. 12 of 2016 flows.

Therefore, the Petition requests the Supreme Court to determine that the Bill, as a whole or in part, is inconsistent with the Constitution. The case will be taken up for hearing on January 24.