Microfinance industry meets Basil over Batti barriers
Thursday, 17 April 2014 00:00
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The microfinance industry has last week met Economic Development Minister Basil Rajapaksa over the recent development where Batticaloa local authorities had imposed new guidelines.
Sources said the Lanka Microfinance Practitioners Association (LMFPA) had a very productive meeting with Minister Rajapaksa who was attentive and supportive.
The Minister had recommended an open dialogue between the Batticaloa District Secretariat and LMFPA to resolve the current situation in Batticaloa. The Minister had also promised to send a representative from his Ministry to this meeting.
In addition Minister Rajapaksa has also welcomed LMFPA’s involvement and sought feedback in the future discussions with regards to the proposed Microfinance Act. He also invited LMFPA to send its proposal to work closely with the Divi Neguma Project.
As an immediate follow up, the LMFPA has sent a letter to the District Secretary of Batticaloa requesting a meeting.
Last Thursday, the Daily FT exclusively reported that the microfinance industry was up in arms over overnight restrictions placed by the Government authorities in the Batticaloa District, a move which some fear could be extended to rest of the Eastern Province.
Following a recent meeting, the Government Agent and District Secretary of the Batticaloa District has issued new guidelines for micro credit activities.
One requirement is that micro credit institutions have to work with the GA’s approval with Divisional Secretaries’ recommendations. For this, microfinance companies have to provide details of their project and list of beneficiaries.
The Batticaloa GA has also fixed 12% per annum as the maximum rate of interest and that collection of weekly interest will not be allowed.
Loans given by microfinance firms must be recommended by the Divisional Secretary and conditions of the loan must be relaxed.
The GA has also banned individual house visit by representatives of microfinance firms. Promotion of consumption loans will not be allowed.
Microfinance firms are also urged to avoid duplication of beneficiaries and that the companies must conduct a monthly review meeting at the District Secretary’s level. NGOs should get the GA’s special approval for micro credit activities.
LMFPA has maintained the conditions set without consultation were contradictory to the best practices of microfinance.
