New laws to govern microfinance companies

Wednesday, 13 January 2016 00:22 - - {{hitsCtrl.values.hits}}

New laws on licensing, regulating and supervising companies carrying out microfinance business were moved in Parliament yesterday.

The proposed laws will govern the registration of non-governmental organisations accepting limited savings deposits as microfinance non-governmental organisations, the setting up of standards for the regulation and the supervision of microfinance non-governmental organisations and micro credit non-governmental organisations and to provide for matters connected.

However, provisions in this Bill may not be applicable to licensed commercial banks or a licensed specialised bank within the meaning of the Banking Act No.30 of 1988, the finance companies within the meaning of the Finance Business Act No. 40 of 1988, the co-operative societies registered under the Co-operative Societies Law No. 5 of 1972 and co-operative societies registered under Statutes of Provincial Councils, a Divineguma community based bank and Divineguma community based banking societies established under the Divineguma Act No.1 of 2013, as well as entities formed in terms of the Agrarian Development Act No. 46 of 2000.

According to the Lanka Microfinance Practitioners’ Association, since the 1990s, there has been a rapid increase of private sector commercially oriented NGO microfinance institutions (MFIS) all over the country with large inflows of subsidised funds from international donors. These MFIs drew lessons from international best practices of microﬁnance in providing ﬁnancial services to the poor. Recently, many finance and leasing companies have also entered the microﬁnance market with ambitious expansion plans. However, recent reports have revealed the vulnerable rural communities being ripped off by microfinance companies by showcasing women centered development in the absence of proper regulations.