Webinar on “Towards a People-Centric Microfinance Industry in Sri Lanka”

“There are many institutions that provide microfinance services in a responsible manner, playing a significant role in the Sri Lankan economy. The government is not ready to neither disrupt this endeavor nor pressurize the majority because of a few players that bring disrepute to a valuable  industry due to their malpractices, however alternative action should be taken to resolve the issues” said Hon. Shehan Semasinghe, State Minister of Samurdhi, Household Economy, Microfinance, Self Employment, Business Development & Underutilized State Resources Development at a webinar organized by the Lanka Microfinance Practitioners’ Association (LMFPA) on 20^th of January 2021.

The State Minister stated that the ministry has already commenced public awareness campaigns centralized from Anuradhapura with the association of the Central Bank and the Department of Samurdhi Development. He also stated that the objective of the government is to implement practical solutions for the people in terms of access to finance. “People should be able to have access to financial services at affordable interest rates and honour them in a timely manner and all financial service providers should work in harmony towards this.”

According to the State Minister, the ministry is in the process of establishing a working committee to find effective solutions to address the issues in the microfinance industry and requested LMFPA to nominate their representatives for same. One of the issues was a revised microfinance regulatory framework where the minister welcomed proposals by the LMFPA to amend the present Microfinance Act. Another important issue is the accessibility to low cost bulk lending for MFIs. For this, the state minister mentioned that discussions are being made with state banks for the provision of same.

The webinar was attended by over 300 participants representing industry stakeholders, regulators, researchers and media representatives. Mr. Imran Nafeer, Secretary of LMFPA who moderated the discussion, stated that one of the main objectives of hosting this webinar was to welcome the first state minister for the Sri Lankan Microfinance Industry and build a foundation to collaborate with the government for the future development of the sector.  In his address Mr. Anura Atapattu, President of LMFPA warmly welcomed the state minister on behalf of the microfinance industry and elaborated on the 16 year long dedicated service of the association and its future strategies to the participants.

The Assistant Governor of the Central Bank Mr. J.P.R. Karunaratne who also participated as a panelist, explained on the positive side of microfinance as a tool for providing quality credit and financial services from the perspective of a financial regulator and stressed on the need for a revamp of the regulatory framework to allow more MFIs to be integrated to it. In this regard a Credit Regulatory Authority Act was drafted by the Central Bank and forwarded to the Ministry of Finance with the inputs of the LMFPA in 2019. He stated that in the national financial inclusion strategy to be implemented, one of the focus areas is MSME finance. He further stated that from a perspective of a regulator, consumer protection is also an important element in the present context of many unethical practices of some industry players. Even though the key objectives of the Central Bank is to maintain economic and price stability, and financial systems stability,  in an emerging market and developing economy like Sri Lanka, economic development is also embedded into these key functions. Therefore financial inclusion should begin from the lowest level of the economy or the informal sector where microfinance plays a key role. The Central Bank has recently introduced a bulk loan scheme under the Smallholder Agribusiness Partnership Programme (SAPP) which is operative through People’s Bank and Cooperative Rural Banks and intends to develop this further in collaboration with other semi-formal institutions for the benefit of the informal sector of the economy.

From a practitioner’s point of view, Mrs.  Shriyani Mangalika, Managing Director of the Hambantota Women’s Development Federation expounded on the importance of an MFI not only as a focal point for low income households to access credit but also as a beacon in developing the social capital of the grassroots communities. Drawing examples from her own organization, Mrs. Shriyani shared that a responsible MFI is not only an organization that needs to earn a certain amount of profit for its sustainability, but channels back its profits to develop the capacities of its customers and their communities.