Draft Microfinance Act grabs spotlight at key Asia forum

By Sunimalee Dias

Sri Lanka has sent a strong message to rest of the Asia on the importance of assisting the low income people by pushing for a new Microfinance Act.

There are 2 billion people today living in Asia under US$2 per day.

This was brought to light at the on-going Asia Microfinance Forum 2010 attended by 450 experts from 50 countries. The forum is aimed at achieving greater financial inclusion in Asia organised by the Banking With The Poor Network (BWTP).

The rest of Asia had taken note of the commendable initiative led by the Sri Lankan network involved in providing microfinance solutions for low income households in setting up businesses.

The new Act, which provides for the establishment of a Microfinance Regulatory and Supervisory Authority (MRSA), has recently been drafted. According to the provisions of this Act, the MRSA will be responsible for licensing, registering, regulating and supervising companies, NGOs and co-operative societies engaged in microfinance business, defined as “acceptance of deposits and providing of financial accommodation in any form and other financial services, mainly to low income persons and micro enterprises.”

In the face of these developments gaining ground in Sri Lanka, Foundation for Development Cooperation Director Craign Wilson speaking to the media said now “other countries want to follow what Sri Lanka wants to do.”

In addition an area of increased interest at the forum was on the subject of corporate governance and management, where it was discussed how to ensure senior managers and Directors would comply and enforce regulation within their organisations.

Moreover, in terms of investment, lessons that could be learnt from India was dwelled upon in a bid to improve on the funding to the required projects involving microfinance. This comes in the wake of a significant IPO carried out in India for a related project.

Wilson observed that Sri Lanka was able to provide greater regulatory and policy framework in respect of pushing forward for access to credit among the low income groups. It was observed that a dedicated window should be opened into Sri Lanka in a bid to clearly understand the process involved in carrying out the work in this part of the world.

While noting that there was increased information disseminated among the people, it was pointed out that the media’s increased knowledge on the subject had become the key reasons for the success.

The rich pool of human talent available in Sri Lanka was commended as this factor was a major constraint in most other countries involved in the provision of microfinance solutions.

Citi Sri Lanka CEO Glen Rase told the media that this third biannual meet provided an important opportunity for Sri Lanka to showcase its stability and the peace achieved.

HNB CEO R. Theagarajah observed that the interaction offered during the forum provided the opportunity on finding areas yet to be addressed or missed out in Sri Lanka. He noted that the myth or misunderstanding of access to credit and how the low income people handle it was being tackled and brought to the fore.

BWTPN Chairman and HNB Deputy General Manager Chandula Abeywickrema said that the industry was spreading out into the nine provinces and its operation was carried out mainly through the Rural Regional Development banks and cooperatives while the microfinance institutions were donor driven.

He noted that currently there is a microfinance framework and regulation coming into place in Sri Lanka adding that over four decades diverse groups have been engaged in creating the right environment and spreading out into the regions while the commercial banks today are expressing interest in partnering in microfinance projects.