The Hon. G.G. Ponnambalam

¶ 01 Hon. Presiding Member, I am pleased to join the debate on the Microfinance and Credit Regulatory Authority Bill. The regions most dramatically affected by microfinance have been the North and East. After the war ended, people there, having been economically devastated for nearly 30 years, were pushed to compete with the rest of the country without any government support to set up enabling conditions. They could not stand that level of competition and fell into profound economic distress. Widows and women who had to hold their families and livelihoods together were trapped in microfinance and badly affected. Many suicides in the North and East are well known to be related to microfinance distress.

¶ 02 Former Central Bank Governor Dr. Indrajit Coomaraswamy visited the North and realized the depth of the microfinance problem, and even suggested that the Government should assume responsibility for those loans, describing it as creating a slavery-like condition. Based on that, those of us from the North and East have long called for legislation to address microfinance harms. We welcome the effort in principle and will not oppose such laws. However, this Bill is based on a 2023 draft that was to address key shortcomings; therefore, we must point out the gaps that remain.

¶ 03 During the war, conventional banking in the North and East was minimal and often restricted. People borrowed socially within their communities. Community-based credit providers mobilized funds and lent among themselves, helping sustain livelihoods. This was especially helpful to affected women and households. This community-based lending culture existed even during the war. The current Bill harms these grassroots and community credit mechanisms by subsuming them under moneylending and imposing a microfinance identity on them. Women’s groups formed under the IRDP and by UN agencies, working for over three decades to build community assets and ensure education and well-being, would be forcibly incorporated as microfinance institutions, destroying their identity and autonomy.

¶ 04 Despite consumer protection being the core objective, the Bill lacks enforceable legal mechanisms and fails to curb profit-driven lending. It also proposes expanding the CRIB to the grassroots. Predatory microfinance by large finance companies has already damaged the credit profiles of low-income borrowers and got them listed as bad debtors. Over 85 per cent of rural people are in the CRIB as bad debtors and cannot access cheap, safe credit. Expanding CRIB coverage without addressing financial exclusion will worsen problems by pushing people permanently to moneylenders.

¶ 05 The right of communities to collectively organize credit is a fundamental tradition and is now recognized in international law. The UN Declaration on the Rights of Peasants and Other People Working in Rural Areas (UNDROP), adopted on 17 December 2018, upholds these collective community rights and recognizes how they have been expropriated and are under threat from neoliberal reforms. Therefore, community-based credit providers must be exempt from this Bill. You can regulate them under a different law, but bringing them under this Bill will disenfranchise them and seriously affect women and extremely vulnerable low-income people, particularly in the war-affected North and East.

¶ 06 Finally, even if we accept this Bill, cases against defaulters are filed by institutions through their registered offices. If the office is in Colombo and the borrower is in Jaffna, that person has to come to Colombo. That is absurd. Microfinance targets the most vulnerable. Expecting defaulters to travel across the country to Colombo prevents them from defending themselves. Amend the Civil Procedure Code so recovery cases can be filed in the area where the defaulters reside.