Hon. Kabir Hashim

¶ 01 I do not see it clearly marked, Sir, but I will proceed given the limited time.

¶ 02 In 2016, the good governance administration presented legislation on this sector, but a Supreme Court decision halted it. Again, under President Ranil Wickremesinghe’s Government, a Bill was gazetted on 27 October 2023 and brought in January. However, the Government did not adequately consult stakeholders or conduct broad social dialogue, resulting in seven petitions and the Court halting that process.

¶ 03 Now this Bill is before us. While timely, we see shortcomings. Consider the informal economy: about 65% of the labour force—some 5.5 million people—operate there, contributing 32–40% of GDP. They include street vendors, petty shopkeepers, handcart traders, home-based producers, daily wage earners, smallholders, fishers, livestock farmers, three-wheeler owners, masons, carpenters, and the self-employed. The Bill should primarily benefit them. Yet community-based and voluntary organisations are anxious because they fear—given the Government’s record with rice, cricket, and energy “mafias”—that this Bill could hand the microfinance space to a “banking mafia.”

¶ 04 Therefore, the Opposition proposes an amendment: include licensed banks and licensed finance/leasing companies within the scope of regulation under this Bill. In 2023, exclusion of banks and non-bank financial institutions led to Supreme Court action. Clause 3 currently speaks of coordination with the Central Bank for co-operatives and Samurdhi banks, but nowhere does it directly regulate banks, large finance companies, or leasing firms for micro-lending practices. If they are excluded, they can continue micro-lending with any charges, undermining the Bill. We oppose that.

¶ 05 The Supreme Court relied, inter alia, on the Central Bank’s 2019 report, which attributed problems to multiple borrowing largely within the microfinance institutions. We contest that interpretation: licensed banks and non-bank finance companies also drive over-indebtedness among low-income and informal borrowers. Data from district courts show that over 95% of related cases are filed by banks and major non-bank finance companies against workers and three-wheeler owners. For example, LOLC Finance PLC’s 2024/25 annual report indicates around Rs. 24 billion in micro-loans; other major finance companies are similarly active. If they are not brought under this regime for their micro-lending conduct, small people will continue to be exploited.

¶ 06 Another major gap: community-based and voluntary organisations. This Bill effectively treats them like licensed lenders, imposing licensing burdens. Historically, community organisations provided small, relationship-based finance where formal banks would not. They should not be crushed under regulatory burdens intended for commercial lenders.

¶ 07 We, therefore, call for: - Bringing licensed banks and non-bank financial institutions under explicit conduct rules for micro-lending within this Bill; - Tailored, light-touch provisions for genuine community/voluntary organisations, with appropriate safeguards and without onerous licensing; - Strong client-protection standards, caps on effective charges, and fair collection practices applicable across all lenders active in micro-lending.

¶ 08 Only then will this Bill truly protect and empower the informal sector that sustains our economy.