The Hon. Nishantha Jayaweera - Deputy Minister of Economic Development

¶ 01 Hon. Presiding Member, I am pleased to speak on the Microfinance and Credit Regulatory Authority Bill presented for approval today.

¶ 02 Even the Opposition accepts the need to regulate microfinance activities. They also note that cooperative and community-based societies should not be brought under it—we agree. Recently, many app-based and other outfits mushroomed, extending small initial loans via mobile apps—Rs. 2,000, 3,000, 5,000—after collecting exhaustive personal data, including relatives’ contacts and workplace details. Weekly interest charges are extremely high on an annualised basis. Borrowers often clear the first small loan, after which the institutions credit further amounts—Rs. 10,000, and even Rs. 50,000 or Rs. 100,000—without clear consent, then demand repayment with huge interest. When people try to return funds, the institutions call relatives and employers, threaten them, and socially destroy borrowers. Many have suffered gravely. They organised and appealed to the Government to stop these practices. This is a serious social crisis that must be managed.

¶ 03 The Bill’s main aims are: - Regulate microfinance institutions (MFIs). - Protect borrowers. - Cap excessive interest rates in the microfinance market. - Rescue people from debt traps. - Bring all lending outfits under one regulatory Authority.

¶ 04 Some questioned why banks and big licensed institutions are not here. Licensed banks and major financial institutions are already regulated by the Central Bank; hence further parallel regulation is unnecessary. The bulk of the microfinance market includes cooperatives, NGOs, and unregulated outfits—these are the focus here.

¶ 05 On definitions: if someone lends money for interest, or if profit/loss sharing is agreed for an activity, that is a microfinance business. However, cooperatives registered under Cooperative statutes, Samurdhi community banks/societies, and organisations under the Agrarian Development Act are excluded from this Authority’s scope.

¶ 06 On client protection: institutions under this Authority must: - Enter into clear agreements before lending. - Assess repayment capacity to prevent over-indebtedness. - Disclose interest rates transparently. - Provide a loan statement on request. - Treat clients fairly and respectfully.

¶ 07 The Authority will have a Board comprising ex-officio members and subject experts, including Central Bank nominees. The Board will regulate and supervise registered entities, coordinate, develop policies, educate the public, and handle licensing and registration. Operating without a licence will be an offence. Community organisations like death benefit societies are excluded unless specific regulations are made to bring abusive actors into scope.

¶ 08 This will strengthen the financial sector’s orderliness and benefit society. I conclude by supporting the Bill. Thank you.