Microfinance institutions (MFIs) and other organizations offering microfinance products are to be regulated under the Micro- Finance Bill to be presented in parliament soon.
All organizations providing microfinance will be required to register with the authorities and conduct their business according to the new standards, which are intended to prevent waste and abuse of financial resources, the Governor of Central Bank Ajith Nivard Cabraal said.
The new bill would set up a dedicated authority to regulate all organizations that offer microfinance products. Currently several ministries and departments operating under various government acts control the operations of different types various of MFIs.
The Governor noted that the growth of microfinance in Sri Lanka is hampered by the lack of a consistent regulatory and supervisory framework, governance issues, and lack of technology and shortage of skilled personnel. Samurdhi Banks, Cooperative Rural Banks and Thrift and Credit Cooperatives, Regional Development Banks and other institutions from the ‘formal’ financial sector have ventured into microfinance.