July 25, 2016 (LBO) – Sri Lanka’s Cabinet Committee on Economic Management has decided to accelerate the license issuing process for Micro Finance Institutions (MFIs).
Though the recently passed Micro Finance Act gives a grace period for NGO’s to obtain a license, the committee has decided to issue licenses well before the grace period lapses.
At a meeting held last Friday, the cabinet committee reviewed the status of the prudential regulation of MFIs operating in the micro finance and micro credit sectors.
The NGO Secretariat has recently sent a circular calling for details from all relevant NGOs operating in the micro finance sector, which is returnable on 29th July.
The Central Bank with the NGO Secretariat is scheduled to draft the necessary regulation on the prudential regulation methodology by end of August, releasing a statement, Prime Minister’s office said.
The office added that strengthening the human resources of the NGO Secretariat for this purpose has also been initiated.
The Microfinance Act no 6 of 2016 requires all institutions that carry out micro finance and micro credit operations to register with the government and obtain a valid license to operate.
It includes NGOs, community based organizations, companies limited by guarantee and other similar organizations.
The new act eliminates exploitation of people by microfinance companies and provides Central Bank power to monitor and regulate financial entities that operate from national to local level.
It also provides the necessary legal status for these institutions who engaged in microfinance activities to carry out their operations without legal consequences.