The Hon. (Ms.) Lakmali Hemachandra, Attorney-at-Law

¶ 01 Hon. Presiding Member, thank you for this opportunity. The Bill before us repeals the 2016 Microfinance Act, No. 6 of 2016—the first law brought to regulate “microfinance.” Under that Act, both microfinance companies and what we today call community financial organizations were placed under regulation: the Central Bank for microfinance companies and the NGO Secretariat for non-governmental community organizations. Banks and finance/ leasing companies were excluded since they were already under the Central Bank.

¶ 02 The key issue was the definition of “microfinance.” The 2016 Act included both company-type and community-type entities in the microfinance definition, placing community finance within that category and under the NGO Secretariat. Thus, the current concept of “community finance” was not separately recognized; it was subsumed under microfinance. Even after 2016, proper regulation was inadequate.

¶ 03 Only a handful of entities are actually registered as microfinance companies, while serious harm—predatory lending—has been done to women by institutions that operate like banks and leasing companies but fall outside this Bill’s regulation. Therefore, in 2024, a new Bill proposed a “Sri Lanka Microfinance and Credit Regulatory Authority” to strengthen oversight, moving microfinance regulation from the Central Bank and NGO Secretariat to the new Authority.

¶ 04 However, a major issue in the 2024 Bill was excluding banks and leasing companies from this regulatory authority. Petitions were filed, and the Supreme Court Determination made clear that you cannot create a selective regulatory vacuum: all entities engaged in microfinance business must be under the Authority, subject to certain exceptions (such as co-operatives and agrarian societies). The throughline here is the definition of “microfinance.” Long before today’s debate, the definition already included community organizations. That must be honestly acknowledged.

¶ 05 In the Sectoral Oversight Committee on Economic Development and International Relations, we discussed community finance organizations twice, including with their representatives, and issued recommendations. Once a Bill is gazetted and referred to Parliament, only limited changes can be made at Committee Stage; the Attorney-General’s Department has clarified which types of amendments are possible there.

¶ 06 Regarding community finance, the Opposition did not focus adequately today, but our Committee recognized the concern. Our recommendations included addressing community finance—particularly women-led societies—through regulations or another mechanism, because placing them wholesale in the microfinance category creates issues. We see a clear distinction: the predatory microfinance operators charge very high interest, have high default rates, and employ abusive recovery practices; community finance operates on membership, in villages, and provides loans at much lower interest, with far lower default rates.

¶ 07 Going forward, regulations or future measures must respect this distinction. Had proper attention been paid in 2016 or 2024 by many now speaking, we might not face today’s situation. As a democratic Government, we must bring good laws for the people—especially women. We firmly assure that we will not adopt policies harmful to the people, women, or community finance organizations, nor subject them to draconian regulation. I conclude. Thank you, Hon. Presiding Member.