Govt. to setup separate body to monitor MFIS
At present, the regulation and supervision of the micro finance sector in Sri Lanka is carried out by various government agencies which adopt different regulatory requirements and standards
While barring Licensed Commercial Banks (LCB) from engaging in leasing from June 1, 2016, the Government has decided to establish a separate body to monitor Micro Finance Institutions (MFIS).
The Cabinet has approved the relevant memorandum submitted by Prime Minister Ranil Wickremesinghe as Minister of National Policies and Economic Affairs.
He told the Cabinet that Sri Lanka’s micro finance sector had gained a considerable level of maturity over the years.
“As a result, diverse types of institutions providing micro finance services including co-operative societies, commercial banks (both state-owned and private) and development banks, NonGovernmental Organizations (NGOS) and International NGOS have evolved,” he said. “At present, the regulation and supervision of the micro finance sector in Sri Lanka is carried out by various government agencies which adopt different regulatory requirements and standards. As a result, the regulation of MFIS has become complex and non-uniform. The institutions providing micro-finance facilities are subject to prudential or non-prudential regulation according to the nature of their establishment such as nonbank MIFS and bank MFIS. These shortcomings could lead to misappropriation in the micro finance sector and cause numerous hardships to the targeted beneficiaries in obtaining micro finance facilities. Hence, it is important to establish a system to streamline the micro finance business sector.” The Cabinet has directed the Legal Draftsman to prepare the necessary legislation for this purpose.
Prohibiting the commercial banks from being involved in the leasing business through the 2016 Budget, Finance Minister Ravi Karunanayaka said private and state sector commercial banks must establish separate, independent companies to carry out their leasing business and it must not be a part of the group. The proposal is meant to strengthen and expand the opportunity for the non-bank finance sector.