Microfinance loans under scrutiny over excessive interest rates

Sri Lanka’s Parliamentary Sectoral Oversight Committee on Economic Development and International Relations has called for the speedy implementation of the Microfinance and Credit Regulatory Authority Act to regulate lending institutions and protect borrowers from excessive interest rates.

The committee, chaired by MP Lakmali Hemachandra, discussed the matter during a recent meeting with representatives of the Sri Lanka Microfinance Practitioners’ Association.

According to Parliament, particular attention was given to lending institutions charging excessively high interest rates through informal practices, causing financial hardship to the public.

The committee stressed the importance of establishing a fair regulatory framework while ensuring that properly functioning microfinance institutions can continue their operations.

Discussions also focused on simplifying licensing procedures, allowing regulated microfinance institutions to accept limited public deposits under supervision and providing access to lower-cost funding.

The possibility of securing concessional funding from international institutions, including the Asian Development Bank, to help reduce lending interest rates was also considered.

The committee further examined consumer protection measures, the establishment of the proposed Regulatory Authority and deadlines for institutions to obtain licences.

Meanwhile, the committee discussed a request by state-owned Lanka Mineral Sands Limited (LMSL) seeking exclusive mining rights over 68 grids containing mineral sand deposits along Sri Lanka’s northeastern coastline.

LMSL requested that these deposits not be allocated to private institutions.

The committee also reviewed concerns over previously issued mining licences, including alleged irregularities, and noted that information relating to certain irregularities had been referred to the Criminal Investigation Department (CID).

The committee decided to issue recommendations on mining rights and operational support for LMSL, while also considering measures to strengthen transparency in future mining licence approvals. (Newswire)

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