Bill to set up robust body to regulate money-lending, microfinance industry

An authority with a wide range of regulatory powers will be set up to regulate money-lending businesses and the microfinance industry to protect people from false, misleading schemes and scams, according to a new bill.

The bill, published by the Ministry of Finance, Economic Stabilisation, and National Policies this week, seeks to repeal the Microfinance Act, No. 6 of 2016, and replace it with legislation that contains tough regulations.

Under the bill, those who engage in money-lending business are required to be registered with the authority. It will have the power to determine whether a person is engaged in such business activities by considering the frequency of transactions.

Those who violate the law or commit an offence under the proposed law would be subjected to a magistrate trial along with a fine of a maximum of five million rupees, five years imprisonment, or both.

The authority is vested with the power to cancel the licence of a company if it is carrying out improper business transactions that are detrimental to depositors or restrain or remove any director of the licensed company from carrying out any activities. In addition, the authority can impose an administrative fine of a maximum of two million rupees on the licensee or any member of the board of directors, manager, or employee for violations of the law.

The body is also armed with powers to review any agreement or contract entered into by a customer or any other person with the "licensee and vary the terms of such agreement or contract, including the terms relating to repayment, interest rates, and charges, where it considers that such contract has been entered into without due regard to the interests of borrowers and any other stakeholders or prudent commercial practices," the bill said.