2026-03-04 / Debate: Microfinance and Credit Regulatory Authority Bill - Second Reading and Committee Stage 2026-03-04
## Summary
Deputy Minister Nishantha Jayaweera spoke in support of the Microfinance and Credit Regulatory Authority Bill, arguing it is necessary to address predatory lending practices, particularly by app-based lenders who have trapped borrowers in debt through exorbitant interest rates and coercive collection methods involving personal data. He described a common scheme whereby lenders issue small initial loans, collect borrowers' contact information, subsequently deposit unsolicited larger sums, and then use threats to employers and family members to enforce repayment of inflated interest charges. The Bill proposes to bring unregulated microfinance institutions—excluding licensed banks (already regulated by the Central Bank), cooperatives registered under Provincial Statutes, Samurdhi community banks, and farmer organisations—under a single regulatory Authority, with requirements for written loan agreements, repayment capacity assessments, transparent interest rate disclosure, fair treatment of borrowers, and licensing obligations backed by penalties.
Hon. Presiding Member, I am pleased to speak on the Microfinance and Credit Regulatory Authority Bill presented for approval.
Even the Opposition accepts the need to regulate microfinance. They also said cooperatives and community-based societies should not be brought under this. We agree with that.
Recently, many app-based lenders mushroomed. People who fell into debt with these institutions came to us organised and explained how they were trapped. Typically, they first get you to sign up via a mobile app and give a small loan—Rs. 2,000, 3,000 or 5,000—while collecting your full personal data, including phone contacts and workplace details. For Rs. 5,000 they might charge Rs. 1,500 interest for just a week. Annualised, this is exorbitant. Borrowers repay because the amount is small, and then the institutions unilaterally credit Rs. 10,000 more, and later Rs. 50,000 or Rs. 100,000 into the account without the borrower even asking. When challenged, they say: “The funds have been credited; now repay with interest.” They then demand Rs. 25,000, 30,000, 40,000, 50,000 as “interest” and, if the borrower tries to return the funds, they use the contact data to threaten family and employers, completely destroying the person’s social standing and employment.
Many in our country have suffered like this. Therefore, this Bill’s primary aims are to regulate institutions operating under microfinance, protect borrowers, cap excessive interest rates, rescue people from debt traps, and bring all such lenders under a single regulatory Authority.
Some asked why licensed banks and major financial institutions are not covered. Those are regulated by the Central Bank, so separate regulation is unnecessary. The largest share of the microfinance market comprises cooperatives, NGOs and unregulated outfits—those we intend to regulate. The definition section clarifies that cooperatives registered under Provincial Statutes, Samurdhi community banks and farmer organisations established by law are not brought under this Authority.
On customer protection, any registered institution must:
- Enter a written agreement before disbursing a loan.
- Assess the borrower’s repayment capacity to prevent over‑indebtedness.
- Disclose the interest rate clearly at the time of agreement.
- Provide a loan statement showing amounts due upon request.
- Treat customers fairly and with respect.
The Authority’s Board will comprise ex‑officio members and others appointed for subject expertise, including Central Bank nominees. Its functions include regulating and supervising all registered institutions, coordinating, formulating future policies, public awareness, and licensing. Operating without a licence will be an offence, with penalties provided.
This will bring order to the financial sector and, most importantly, do good for society. I conclude.
Thank you.