“The CRIB doesn’t have most of the information relating to the micro-finance clientele. So we have discussed this matter with the CRIB,”
“Now they are looking at creating a separate information system for the micro-finance sector though it is yet in the initial stage.” Munasinghe said.
Even though the micro-finance industry is partly regulated through the Central Bank and other government institutions, NGO related micro-finance players are not regulated other than through the companies act.
“Only the banks and finance companies currently have access to the CRIB. That is because this sector doesn’t have a proper regulation. That is one reason; why we are pushing for a regulation.” Munasinghe stressed.
LMFPA which has been recognized by the Central Bank as the coordinating body for micro-finance institutions in Sri Lanka has prepared a draft on micro-finance regulation and supervision and submitted the same to the government's 100 day program monitoring committee.
The Draft has currently been placed on the department of project management and monitoring web site for public scrutiny.
An additional secretary of the policy planning and economic affairs ministry told LBO that one person has submitted a proposal to the ministry in addition to the amendments proposed by the finance ministry.
The draft act seeks to establish an authority for the purpose of registering, licensing, regulating and supervising micro-finance business in Sri Lanka.
It also seeks to strengthen such institutions and to protect and minimize risks to depositors and customers.
“This act also intends to create the legal basis for keeping a certain percentage of loan micro-finance institutions are lending to its customers as a security against the loan,”
“So that’ll be like a revolving fund and benefits another customer who wants to take a loan,”
“Currently it is illegal to keep such deposits unless it is a finance company. That law came into effect in 2011 through the finance business act.” Munasinghe said.
However the provisions of the finance business act does not apply to institutions licensed under the banking act and cooperative societies registered under a provincial council statute.
Munasinghe further stated that international donors and investors who are willing to invest in the micro-finance business have been discouraged by the lack of local regulation.Currently, there is no concrete mechanism to coordinate micro-finance activities with other policies aimed at promoting poverty alleviation and rural development.