Hon. (Dr.) Anil Jayantha - Minister of Labour and Deputy Minister of Finance and Planning

¶ 01 Mr. Deputy Speaker, I move that “the Bill be now read a Second time.”

¶ 02 The principal object of this Bill is to establish the Microfinance and Credit Regulatory Authority, regulate the business of moneylending and microfinance, protect clients engaged in such activities, and repeal the Microfinance Act, No. 6 of 2016. There has been a wide social discourse on microfinance: the spread of small loans to the village level has generated financial, social, and cultural issues, and stakeholders have called for a new law.

¶ 03 The 2016 Act’s framework has proved inadequate. Moneylending—via various names, including online and mobile app-based lending—has proliferated, while only around four entities are registered under the Central Bank in terms of that Act. The need for a new law was recognised: in August 2019, Cabinet approved establishing a Credit Regulatory Authority; again in March 2021, approval was given to proceed with a Bill; in October 2023, approval was granted to present it to Parliament. In January 2024, the Bill was submitted, but petitions were filed before the Supreme Court. Considering the Court’s determination, the Bill was withdrawn in April 2024. Given the continuing regulatory gap, work recommenced in August 2025; approval followed in September 2025, and the revised Bill was presented thereafter. A nine-member committee—including institutional representatives and stakeholders in the micro sector—assisted drafting. Subsequently, the Sectoral Oversight Committee on Economic Development and International Relations reviewed further amendments; the Attorney General’s Department cleared some and declined others. Outstanding matters can be addressed by Regulations and during implementation by the Authority.

¶ 04 Key features: establishment and composition of the Authority (seven members including ex-officio and appointed members), provision for a Director-General, licensing and supervision of moneylenders and microfinance institutions, client protection, investigation and enforcement, and penalties. Serious violations—such as predatory lending—are subject to penalties up to Rs. 5 million and/or up to five years’ imprisonment. A dedicated fund will support the Authority’s independent functioning.

¶ 05 By way of context, research underscores how informal group lending transformed convivial village relationships into pressure mechanisms for recovery. Biopolitical control manifests when borrowers prioritise repayments over daily life due to aggressive collection practices. We must bring discipline to lending practices.

¶ 06 Excessive charges are common: simplified weekly collections can imply annualised rates above 300%—for example, a Rs. 5,000 loan repaid at Rs. 100 per day over 65 days totals Rs. 6,500; superficially 30%, but annualised far higher. This Bill aims to curb such abuses while protecting genuine community-based lending from undue burden via appropriate regulations.

¶ 07 Alongside regulation, the Ministry of Finance proposes programmes to help borrowers exit debt traps and build livelihoods. For 2026, Rs. 95.6 billion is allocated across concessional and interest-subsidised schemes. We intend to channel these through the “Praja Shakthi” National Programme and the Community Development Councils under the Ministry of Rural Development, Social Protection, and Community Empowerment, aligning with the new Authority’s framework to alleviate rural indebtedness and poverty.

¶ 08 Thank you, Mr. Deputy Speaker.

¶ 09 Question proposed.