Thursday, 10 April 2014 01:45
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Government Agent slaps bizarre conditions sans consultatio
The microfinance industry is up in arms over overnight restrictions placed by the Government authorities in the Batticaloa District, a move which some fear could be extended to rest of the Eastern Province.
Following a recent meeting, the Government Agent and District Secretary of the Batticaloa district has issued new guidelines for micro credit activities.
One requirement is that micro credit institutions have to work with the GA’s approval with Divisional Secretaries recommendations. For this, microfinance companies have to provide details of their project and list of beneficiaries.
The Batticaloa GA has also fixed 12% per annum as the maximum rate of interest and that collection of weekly interest will not be allowed.
Loans given by microfinance firms must be recommended by the Divisional Secretary and conditions of the loan must be relaxed.
The GA has also banned individual house visit by representatives of microfinance firms. Promotion of consumption loans will not be allowed.
Microfinance firms are also urged to avoid duplication of beneficiaries and that the companies must conduct a monthly review meeting at the District Secretary’s level. NGOs should get the GA’s special approval for micro credit activities.
Lanka Micro Finance Practitioners Association (LMFPA) President S.W. Kiriarachchi said the conditions set without consultation were contradictory to the best practices of microfinance.
The move by the local authorities follows alleged malpractices by microfinance companies in the district, which the LMFPA has denied.
“We have already raised this issue to the Central Bank and have asked for an appointment for discussion. We are also in the process of obtaining legal counsel regarding the guidelines that were circulated among MFIs in the Batticaloa District. In addition to this we are also writing to the Government Agent and District Secretary of Batticaloa,” Kiriarachchi said.
