By Uditha Jayasinghe
An estimated 20,000 microfinance institutions in the country will be regulated under new legislation approved by the Cabinet of Ministers.
On a proposal made by President Mahinda Rajapaksa, who is also the Finance Minister, all microfinance institutions will be brought under the direct supervision of the of the Central Bank, Cabinet spokesman and Media Minister Keheliya Rambukwella said.
“The new bill would set up a dedicated authority to regulate all organizations that offer microfinance products, which will in turn report to the Central Bank,” he stated at a press conference.
Currently several ministries and government departments control the operations of different types of microfinance.
According to the Finance Ministry around 26 million savings accounts are operational in these institutions.
The new regulations were first proposed in early 2011 with Central Bank Governor Ajith Nivard Cabraal insisting that the growth of microfinance in Sri Lanka is hampered by the lack of a consistent supervisory framework, governance issues, lack of technology and shortage of skilled personnel.
“Audit firms under the supervision of the Central Bank will also assist in enforcing regulations,” he added.
Microfinance companies falling under the Commissioner off Cooperatives, Registrar of Cooperative Societies and the Commissioner of Agrarian Development will come under the purview of authorities empowered under such statutes. Institutions coming under the Samurdhi Authority will come under the regulation of and supervision in terms of the structure stipulated in the proposed Divineguma Development Act and the Central Bank to set principles and standards periodically in respect of institutions that are being regulated under this third tier.