Govt. says putting final touches to new microfinance law

By Yohan Perera 
The government at the moment is putting final touches to a law covering microfinance, to save the borrowers from exorbitant and unnecessary charges and other malpractices, Finance and Mass Media Minister Mangala Samaraweera said yesterday. 

Samaraweera revealed this at the opening session of the Regional Policy Forum of the Asia Pacific Rural and Agricultural Credit Association (APRACA) hosted by Bank of Ceylon (BOC), in Colombo. 

“The government is drafting new measures for the microfinance sector, stipulating industry standards and to protect the borrowers from exorbitant and unnecessary charges and other malpractices commonly seen in the industry,” the minister said. 

“The proliferation of unethical lending in microfinance has led to a crisis situation in some parts of the country. To address this, the government of Sri Lanka has written off microfinance debts of more than 45,000 women, which amount to more than Rs.1.2 billion. It is essential that steps are taken to prevent such irresponsible lending recurring in the future,” he added. 

Samaraweera stressed that the government should encourage more responsible lending practices. 

Focusing on the Enterprise Sri Lanka concessionary lending programme, the minister said 20,000 have applied to the participating banks for this scheme since its inception and the government anticipates further growth in these figures. 

He said loans are being provided at preferential rates even for differently-abled people, other than women.

APRACA Chairman Shiba Shrestha said the policy forum is a matter of interest and concern for millions of small and micro entrepreneurs that are the backbone of both developing and developed economies. 

“Financing SMEs plays a key role in promoting entrepreneurship and ultimately strengthening society and eradicating poverty,” he said.

Shiba said the APRACA, since its founding in 1977, has made continuous efforts to promote the development of rural financial institutions for enhancement of rural livelihood through varieties to rural and agricultural credit facilities in the region.  “During the decades, the number of member institutions of the APRACA has been increased up to 94 financial institutions spread over 24 countries,” he added. 

APRACA Vice Chairman and BOC General Manger, who is tipped to become the next APRACA Chairman, said it was a privilege to host the 70th policy forum and 21st General Assembly and to provide a platform that guides members to develop innovative strategies to ensure financial stability and fiscal sustainability.