Microfinance Victims Collective challenge proposed Bill

Thursday, 25 January 2024 01:11 - - {{hitsCtrl.values.hits}}

The Collective of Microfinance victims and community savings and credit providing organisations this week filed three petitions detailing a range of limitations and dangers rooted in the proposed Microfinance and Credit Regulatory Authority Bill tabled in the Parliament on 9 January.

Counsels Ermiza Tegal and Namashya Ratnayake appear on behalf of the two petitions filed by Shiroma Sandamali and Renuka Bhadrakanthi. Ramzi Bacha instructs this case.

Counsels M.A. Sumanthiran and Swasthika Arulingam appear for the third petition filed by Dr. Amali Wedagedara and Vimukthi de Silva, and Ineka Hendawitharana instructs the case.

Petitioners raised concerns with the Bill as it exempts Licenced Finance Companies, Licensed Finance Leasing Companies and Licenced Commercial Banks responsible for predatory microfinance lending from the purview of the Regulatory Authority.

In addition, functions of the authority as outlined in the Bill are intrusive and violate the autonomy of community organisations such as Death Donations and Welfare Societies, Sarvodaya Shramadana Societies and Women’s Organisations engaged in community savings and credit providing activities for generations preceding modern microfinance.

The Bill has overlooked the heterogeneity of the financial landscape open to low-income people. Instead of adopting qualified regulations differentiating credit providers’ scale, capacity, and functions, the Bill clubs not-for-profit credit providers together with pro-profit credit providers, petitioners highlighted.

Regulating for the sake of regulating will harm these community-based initiatives and trample on low-income people’s autonomy and traditional rights to organise their credit services, petitioners indicated.

Furthermore, petitioners emphasised that the proposed Bill falls short of protecting microfinance victims as it lacks legal enforcement. On top of financial violence, finance companies are on the track to criminalise unpayable debt implicating the Police. Petitioners suggested that protection mechanisms for borrowers in the case of microfinance require legal enforcement beyond nominal warnings and codes of ethics.

Women victimised by microfinance have protested for over half a decade, demanding the Government’s intervention to resolve the microfinance crisis. Community based credit providers, too, have highlighted the nature of the microfinance crisis and the explicit role played by the big finance companies in creating the debt deluge by issuing ‘quick & easy’ loans to low-income women.