2026-03-04 / Debate: Microfinance and Credit Regulatory Authority Bill - Second Reading and Committee Stage 2026-03-04
## Summary
Hon. G.G. Ponnambalam spoke in support of microfinance regulation in principle but raised significant objections to the Microfinance and Credit Regulatory Authority Bill, with particular concern for war-affected communities in the North and East. He argued that these regions, economically devastated by nearly three decades of conflict, were especially vulnerable to predatory microfinance practices, which he linked to widespread indebtedness, a slavery-like condition described by former Central Bank Governor Dr. Indrajit Coomaraswamy, and suicides among women borrowers.
Ponnambalam contended that the Bill threatens to destroy longstanding community-based credit mechanisms in the North and East by classifying them as moneylending institutions, thereby stripping women's groups and solidarity-based organisations of their identity and autonomy. He further criticised the Bill for lacking legal enforcement mechanisms for consumer protection, failing to curb profit-driven lending, and proposing to expand CRIB coverage without addressing the existing financial disenfranchisement of rural borrowers, over 85 percent of whom are already listed as bad debtors. He invoked the UN Declaration on the Rights of Peasants (UNDROP, 2018) to assert that community credit organisation is an internationally recognised collective right.
Ponnambalam demanded that community-based credit providers be exempted from the Bill and governed by separate legislation, and also raised a procedural concern that requiring borrowers from distant regions such as Jaffna to attend legal proceedings at a Colombo-registered office was unreasonable and unjust.
Hon. Presiding Member, I am pleased to participate in this debate on the Microfinance and Credit Regulatory Authority Bill. The regions worst affected by microfinance are the North and the East. After the war ended, those people had been economically devastated for nearly 30 years. Instead of creating facilities for them, the then Government pushed them into competition with the rest of the country; they could not cope and fell into deep distress. Women who lost their husbands, trying to protect their families and livelihoods, were badly affected by microfinance and fell into a trap. Suicides in the North and East were mainly due to microfinance — a well-known fact.
Former Central Bank Governor Dr. Indrajit Coomaraswamy, after visiting the North, including Jaffna, understood how deep this problem is. He said the Government should take over microfinance debts of affected people because it had created a slavery-like condition. We brought this into focus. On that basis, we have long insisted on bringing laws to address microfinance.
We welcome such regulation and will not oppose it in principle. But this Bill — updated from the 2023 draft after some issues were to be rectified — still has shortcomings. During the war, banks rarely lent in the North and East; arrangements were not there, and sometimes Governments prohibited it. In that context, our people used community-based credit — a particular group formed a fund and lent within the community to sustain livelihoods. This was a great help, especially for vulnerable women. This culture existed even during the war: community-based credit providers. It gave great strength to our people.
The Bill destroys grassroots and community credit mechanisms by subsuming them under moneylending. These grassroots organizations, founded on principles of solidarity, mutual aid, participatory governance and economic justice, are not moneylenders operating for profit. The Bill imposes a microfinance identity on community credit practitioners. Women’s groups created under IRDP and by UN organizations, working for decades to build community assets and ensure education and well-being of women, are forcibly incorporated as microfinance institutions, destroying their identity and autonomy. Despite consumer protection being the core objective, the Bill fails to introduce legal enforcement mechanisms to ensure it. Nor does it establish regulations to curb profit-driven lending.
The Bill also proposes to expand the outreach of the Credit Information Bureau (CRIB) to the grassroots. Predatory microfinance lending by big finance companies has harmed the credit profiles of low-income borrowers and got them enrolled in the CRIB as bad debtors. More than 85 percent of rural people are in the CRIB as bad debtors and cannot access cheap and safe credit. Expanding the CRIB without addressing the financial disenfranchisement of low-income people will worsen the problem by pushing them permanently into the hands of moneylenders.
The right of communities to collectively organize credit is not novel; it is a tradition and now a right in international law. The UN Declaration on the Rights of Peasants and Other People Working in Rural Areas (UNDROP), adopted on 17 December 2018, upholds these collective community rights while recognizing how such rights and the commons have been expropriated and are under threat due to neoliberal reforms.
Therefore, community-based credit providers must be exempted from this Bill. If you wish, bring separate law to regularize them. But bringing them under this Microfinance and Credit Regulatory Bill will disenfranchise them and seriously affect women and extremely vulnerable low-income people, particularly in the war-affected North and East.
Finally, if we accept this Bill, any case filed against defaulters is done from the registered office of the institution. If the office is in Colombo and the borrower in Jaffna, the borrower must come to Colombo. That is ridiculous. Microfinance targets the most vulnerable. Expecting defaulters from one end of the country to come to Colombo, simply because the financial institution is registered there, effectively makes it impossible for them to defend themselves. Amend the Civil Procedure Code so cases can be filed where the defaulters reside.
Hon. Presiding Member, I also wish to raise a matter for the Hon. Minister of Fisheries. Two fishermen of the Annai Velankanni Fisheries Society — Selvaraja Rajkumar and Thangarajah Amalraj — have been missing at sea for six days. Indian fishermen near Kachchativu have informed their counterparts here that they saw them. The Police and Navy were notified, and I, too, was informed. It has been six days with no action. Please take responsibility for this matter.