Lanka Microfinance Practitioners’ Association promotes responsible financial inclusion

The Sri Lankan microfinance industry has had a vibrant history throughout the past three decades. Microfinance was observed as a poverty alleviation tool helping thousands of low income households to become financially sustainable and improve their livelihood.

However increased competition in the recent years and influx of institutions motivated by profit without giving adequate commitment towards its social dimension has brought many negative impacts to the industry. 

Multiple lending and over indebtedness, unaffordable interest rates of some institutions, unethical collection practices and disregard to client protection principles are some of the issues that has brought much disrepute to an industry that was once flourishing in Sri Lanka. 

Though the policy framework to regulate microfinance institutions in Sri Lanka is established, there is no visible impact resulting from the delay in the implementation of this policy and inadequacy of the policy framework for the existing industry. 

The State action to write off microfinance loans in response to over indebtedness issues arisen due to the prolonged drought in certain parts of the country has brought the industry to a level nearly collapsed. The industry issues are also taken for the political advantage of certain national as well as regional political movements.

Therefore, the Lanka Microfinance Practitioners’ Association (LMFPA) identified the national need of creating the awareness of Responsible Financial Inclusion among key stakeholders of the industry. LMFPA sought creating a platform for industry players to review and understand the underpinning issues of the situation and design and develop strategies to mitigate immediate impacts of the crisis and to overcome such situations in the future. 

The International Workshop on Responsible Financial Inclusion held on 23 and 24 July in collaboration with the Centre for Banking Studies, Central Bank of Sri Lanka aimed at creating awareness among the high officials and senior management of the industry stakeholders.  The workshop focused on raising awareness about the Client Protection Principles developed by the Smart Campaign, an organisation that works globally to create an environment in which financial services are delivered responsibly by raising awareness, setting standards for consumer protection, providing tools and trainings, and offering a client protection certification program. 

Through this program, led in partnership with the Smart Campaign, the LMFPA intended to elucidate the importance of responsible financial practice to microfinance service providers and for policy makers to create a regulatory framework that protects the best interest of low income borrowers. 

The entire program was held in two stages. The first program focused on creating awareness and dialogue amongst CEOs (Senior Management) of MFIs and senior officials of Government Regulatory bodies such as the Central Bank, National Secretariat for Non-Government Organisations, Ministry of Finance, Credit Information Bureau and the Insurance Regulatory Commission of Sri Lanka. 

It was a two-hour market convening session in the evening on the day before the International Workshop day. The second stage was the two days engagement in the form of a workshop targeting senior managers of MFIs and senior staff of regulatory bodies. The workshop was a grand success as it was participated by more than 100 officials representing a wide range of stakeholders, from regulators, NGOs, MFIs, bankers and Non-Bank Financial Institutions.

The success of the program was possible thanks to the generosity of several partners both local and international. The LMFPA acknowledges the main partner Proparco of France, and other International partners such as Grameen Credit Agricole and Symbiotics for their support. The LMFPA would also like to thank its local partners Sejaya Micro Credit and Stromme Micro Credit for their valuable contributions to make this event a good success.