Sri Lanka: 20,000 MFIs to be regulated under Micro- Finance regulations: CB Gove...
Colombo, Sri Lanka, January, 09 2011 -
Around 20,000 Microfinance institutions (MFIs) are to be regulated under the Micro- Finance Bill to be presented in parliament soon.
This would help prevent wastage and abuse of financial resources in the micro sector, he added. It will also tackle corruption and failures in implementing micro level projects, he said.
There are some 26 million savings accounts in Sri Lankan MFIs. A senior official of the Finance Ministry told the Business Times that Sri Lanka’s microfinance institutions will come under a dedicated authority to be set up under the new bill to regulate these institutions and make their supervision more effective. The Microfinance Regulatory and Supervisory Authority will be responsible to license/register, regulate and supervise institutions (Companies, Non-Governmental Organizations Co-operative Societies and societies which are registered under the Companies Act, Voluntary Social Service Organizations (Registration and Supervision) Act, that carry on the microfinance business.
The official 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. Several non governmental organizations which have grown very rapidly in the past decade are also operating micro finance schemes without any regulatory or supervisory controls.
At present there is no single body to regulate and supervise the operations of all MFIs. Instead, several Ministries, Departments and Government Acts control the operation of MFIs. The regulatory requirements and standards of each of these regulatory bodies are different, complicating the current regulatory framework. The institutions providing microfinance facilities are subject to prudential or non-prudential regulations according to the nature of their establishment.
However the official said that several MIFs have expressed their concern on the capacity of the regulatory authority to supervise the MFI and the cost of such supervision. The cost of supervision, which will be paid by the MFIs as a license fee, will eventually be borne by the poor clients of the MFIs. The increased cost of the administration and reporting requirements will ultimately be passed onto the clients as well, these MIFS alleged.