Tuesday Oct 21, 2025
Tuesday Oct 21, 2025
Tuesday, 21 October 2025 04:38 - - {{hitsCtrl.values.hits}}
A law that does not fully recognise the experiences of affected women, effectively regulate predatory practices, and curtail the proliferation of microfinance will have devastating consequences
The Feminist Collective for Economic Justice (FCEJ), expressing its deep concerns over the economic degeneration and rising household indebtedness in Sri Lanka, has accused the Government of failing to enact effective regulation against predatory lending practices and moving forward with a new Microfinance Bill without adequate public consultation.
The FCEJ, a network of economists, academics, activists, university students and lawyers, issuing a statement on 17 October has claimed that the National People’s Party (NPP) Government has ‘lost touch with the realities on the ground’ one year after assuming power.
“Tilvin Silva, General Secretary of the JVP – the main party in the coalition government, made a recent media statement that they have no information of anyone in Sri Lanka suffering from hunger. Contrary to the claims of the ruling party, our experiences working with grassroots women’s groups have revealed an overall degeneration of people’s lives in the face of harsh austerity policies the NPP has chosen to continue,” it stated.
In its statement the FCEJ has claimed that the NPP Government was also going with the same laws and policies of the previous Governments. “We are deeply concerned that while several laws and policies rolled out by the previous regime continue to trap people in poverty, the same laws and policies are being merely trimmed and re-proposed by the current government. Will the new Microfinance Bill, which yet again has not been placed before the people for public consultation, be the latest knot in the noose?” it claimed.
The FCEJ highlighted how austerity policies and inadequate incomes are forcing households, particularly women, into a devastating microfinance debt trap, leading to food insecurity, loss of assets, and increased domestic violence.
“Many are falling deeper into the household debt trap. It is leading families into food insecurity and financial ruin. Households are compelled to turn to microfinance companies or informal lenders due to inadequate incomes, increased cost of living and reduced government investment into economic activities in their localities, in the context of the economic crisis,” the FCEJ said.
According to FCEJ’s observations, across the country, poor working-class households, whether in rural agriculture, fishing communities, or urban areas, are caught in this debt-trap system.
“As the economic crisis at the household level deepens, households are financially depleted. Low wages, austerity driven high costs of living and inadequate state support and state protections from exploitation have created perfect conditions for a growing and exploitative microfinance loans sector,” it observed.
The FCEJ revealed that desperate households initially turn to neighbours and loan ‘sharks’ before moving onto microfinance companies, which include online and mobile-based lenders, NGOs, cooperatives, and the State schemes like Aswesuma and Samurdhi.
“Even when low-interest credit lines through self-help groups or cooperatives are initiated, these loans are often utilised merely to pay off existing exploitative loans. Microfinance companies, particularly those utilising extremely high daily and weekly interest-levying schemes, employ severe extraction tactics, often relying on threat, physical and verbal abuse, and intimidation,” it said.
Calling for urgent measures, including State-led debt relief, comprehensive data collection on the impact of microfinance, and new legislation to ban exploitative practices and curb the proliferation of microfinance companies, the FCEJ also claimed that the economic crisis, characterised by inadequate incomes, increased cost of living, and reduced Government investment into local economic activities, is forcing households deeper into a debt trap.
The FCEJ had recorded the stories of women who were caught in these deadly microfinance debt traps and found that the debt crisis has caused financial losses – assets, including jewellery, vehicles, houses, and land and small savings trying to meet basic needs, among women.
Starvation, poor health, suicide and intimidation have also been cited as effects of debt trap in the FCEJ’s statement. It has stated that women are paying loan instalments by starving themselves and their children and visible malnutrition and neglect were observed in Thalankudah while indebtedness has caused increased domestic violence and health issues.
The debt crisis has also resulted in suicides and attempted suicides. “One woman died by suicide because she could not repay a debt taken to build a small house; another woman attempted suicide due to threats from loan collectors,” the FCEJ has asserted.
It further stated that in 2016, the Microfinance Act No. 6 was enacted as a response to the growing unregulated microfinance providers but the Act had failed to address many of the key concerns surrounding predatory practices, exploitation of vulnerability of the poor and was instead merely loosely regulatory.
According to FCEJ, in January 2024, the interim Government tabled the ‘Microfinance and Credit Authority Regulatory’ Bill in Parliament, where the Bill was challenged before the Supreme Court for failing to regulate large finance companies and to effectively address harmful practices.
“The Court determined that several clauses of the Bill were unconstitutional and can only be passed with a special majority in Parliament. The Ministry of Finance withdrew the Bill, following the determination of the Court,” it stated.
Subsequently, a nine-member Committee was appointed to review the Microfinance Bill and have public consultations at all levels. “However, no public consultations took place. One microfinance victim and two persons representing community credit providers were burdened with representing microfinance victims in Sri Lanka in the review process. They opposed the basic framework of the Bill and demanded that a fresh approach be taken to understand the crisis and the nature of policy and regulatory solutions needed,” it further said.
“Ignoring those demands, in August 2025, the Cabinet of Ministers of the NPP Government granted policy approval to present the new Microfinance and Credit Regulatory Authority Bill to Parliament. At the time of issuing this statement, it was reported that the Bill has been gazetted, however, no such Bill is accessible on the government printer’s website for review,” the FCEJ claimed.
Issuing several urgent demands, the FCEJ argued that a law that does not fully recognise the experiences of affected women, effectively regulate predatory practices, and curtail the proliferation of microfinance will have devastating consequences.
The FCEJ’s key demands include, initiating a fair State-led debt relief program and including necessary allocations in the upcoming Government Budget, gathering national data on the impact of microfinance and household debt, ensuring new legislation explicitly addresses predatory and exploitative practices, including implementing interest rate caps, restrictions on access and activities of microfinance companies, and strong consumer protection practices, acknowledging the impact of the economic crisis and initiating a program for local economic regeneration to prevent further indebtedness and strengthening mediation boards to deal with debt dispute resolutions in a fair and humane manner, given the enormity of the problem.
