New microfinance regulations approved by Cabinet

Friday, 19 July 2013 03:44 - - {{hitsCtrl.values.hits}}

Large companies to come under CB but Divi Neguma schemes exempted

Cabinet yesterday approved new regulations for microfinance institutions, which is aimed at improving monitoring and administrative functions. The proposal, which was presented by President Mahinda Rajapaksa, groups microfinance institutions into three tiers. Under Tier I large microfinance institutions will come under the direct supervision and examination by the Central Bank. Tier II will comprise of small microfinance organisations that will be supervised by Central Bank approved audit firms. In the last tier institutions falling under the Commissioner of Cooperative Development and Registrar of Cooperative Societies, Divi Neguma Department and Board of Management of Divi Neguma community based bank and banking societies and the Commissioner General of Agrarian Development will be exempted from the Central Bank regulation and will come under the regulation and supervision of the authorities already empowered under the relevant statutes. “No person other than a licensed microfinance company and an exempted entity can carry on microfinance business after the enactment of the proposed Act,” the Cabinet paper added. However, provisions of the proposed Act will not apply to banks licensed under the Banking Act No. 30 of 1988, Finance Companies licensed under the Finance Business Act No. 42 of 2011 and community-based organisations established with social objectives and engaged in microfinance business, as determined by the Central Bank. Registered cooperative societies, entities formed in terms of the Agrarian Development Act No. 46 of 2000 and organisations established under the Divi Neguma Act. No. 1of 2013 are exempted from the application of the provisions of the proposed Act. The Act will now be presented in Parliament for approval. (UJ)

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