Microfinance and Credit Regulatory Authority Bill to be presented to P’ment next week

A meeting chaired by Finance State Minister Shehan Semasinge on the Microfinance and Credit Regulatory Authority Bill in progress

The new Microfinance and Credit Regulatory Authority Bill would be presented to Parliament next week, the Finance Ministry said.
The bill will regulate the money lending and microfinance businesses, so that their customers are protected from any unfairness.
The bill will repeal Microfinance Act. No. 16 of 2016, to ensure greater protection to customers. 
The announcement was made by Finance State Minister Shehan Semasinge in an update on X, formerly Twitter.
On March 23, 2021, the Cabinet approved to empower the Microfinance and Loan Regulation Authority by repealing Microfinance Act No. 6 of 2016. In October 2023, the Cabinet of Ministers approved publishing the new draft bill on the Microfinance and Loan Regulation Authority in the Government Gazette.
Sri Lanka has over 11,000 microfinance institutions in operation, out of which only five are registered. The remainder operates without having to abide by the regulations and rules imposed by the finance sector regulator, the Central Bank.

Due to such institutions not being monitored, majority of the customers of such entities have fallen victim to unfair treatment. Such entities impose exorbitant interest rates, staring from 40 percent to a staggering 200 percent.
The government last year stated that efforts are underway to make it mandatory for microfinance institutions to be registered and an independent authority would be established to regulate these entities.
Informal microfinance institutions are highly concentrated in the rural areas across the country.
The Central Bank highlighted that unregulated microfinance activities may lead to illegal deposit mobilisation, exploitation of customers through excessive interest rates and unethical recovery methods. It cautioned that poor corporate governance in these institutions would lead to poor repayment rates, high transaction costs and recurring losses, leading the organisations to distress.