Money market vs unregistered finance companies
The money market in Sri Lanka has had many secrets that the common
man could not interface with. My aim in this article is to unfold the
reality of the Sri Lankan money market to the public, who lose their
hard earned money to manipulators whether Government or private.
depositors of Sakvithi Ranasinghe
Sakvithi Ranasinghe gave me this opportunity to start this
controversial dialogue. Ranasinghe is a cheater that we all have to
accept. But it is not due to him giving high interest rates; it is only
due to him leaving the country and hiding from the clients and damaging
the trust of the total business.
For that matter, the Government has to bear the responsibility for
not monitoring and registering his company. Because, people had the
psychological understanding about his company, as another financial
company which give high returns for investments.
People do not forget the fraud of the Pramuka Bank, but they need to
get the highest return for their hard earned money and also, to get rid
of the high rate of unbearable tax rates of Inland Revenue.
The Central Bank has announced many companies who are in the money
market but have not registered with the Central Bank. By only not
registering an organisation it cannot become a rogue institute (for some
reason Golden Key credit card company was not in the list though it is
not registered as a financial institute).
The main factor that one has to be aware and understand is the
services rendered by these unregistered companies to the common man.
Conduct of unregistered finance companies
During the following week almost all daily papers advertised many
companies that are not on par with regulations of the Central Bank which
are categorised to be illegal financial companies.
The public too are of the view that these illegal companies have
cheated society enormously by way of manipulating money. But, analysing
a few of these financial institutions, one can understand that they are
not an anti social outfit that cheat the clients.
As an example, one can take Okanda Finance which has been in the
money market for more than 15 years, but have never violated the basic
financial principle of cheating the client, but they gave them
attractive returns on investment. The other is Piyadasa Ratnayake’s
money business at Hungama which is more than 16 years and the client
base is exceed more than 12,500.
Also there are no bad reports for his total tenure of business. Also,
after interviewing a few clients, I have found that they trust the
company and the interest provided. Sriyavi Investments who provide 60%
annual interest keep a surety with the customer according to the value
of the denomination, specially a real estate property.
Those are the back grounds of some of the black listed financial
institutes by the Central Bank that is not registered.
Analysis of money market
I have read in most of the newspapers that some financial experts are
questioning how these companies are giving that amount of unrealistic
interest rates. Also, one had said that due to the rapid flow of client
money, the business will survive upto four years to the maximum.
For that matter, I say “yes” and “no” because the principle says,”
greater turnover will thrive the business. But no. It is not the only
reason for the survival. Most of them have survived and thrived more
than the stated duration.
Now I will unravel the hidden factors of the business.
In Sri Lanka the inflation is around 30% annually. Maintain the value
of the money client needs to get the annual interest at least equal or
more than the inflation rate. Going to a registered company or a bank
gives maximum to 19% (some companies offer 24% annual interest for a
five year investment).
Therefore customers do not have any other option than taking a
In turn banks deduct 5% per month from customers as credit card
interest. It goes as 60% annually, though the Central Bank keeps silent.
At present, we have to analyse the reality of the current money
market in Sri Lanka. Real estates have 150% inflation per year, There
are some businesses that borrow money for 10% interest per day when it
comes to monthly interest 300% and the annual interest is 3600%.
The main businesses under this category includes middlemen trading in
fisheries and the daily retail trading in the Pettah retail market.
Apart from that, middlemen keep very high and unrealistic profit
margins in their businesses. As an example coconut business and the
earlier paddy/rice business (during oligopoly). Over and above that,
most of the export businesses gives high profit returns to the
Then, if these money business companies involved and linked in one of
the stated above businesses, they can provide high interest returns to
their clients as well from 5% to 8% (monthly) respectively.
If the respective companies can offer the stated amounts, these
companies are doing a great service to the country and society in terms
of development and assets/profit sharing which reduces income gaps
between the “haves” and “ have nots”.
Therefore, the Central Bank has to get out from the traditional frame
as well as the grip of the unrealistic bankers oligopoly in order to
give value to money transactions/distribution in the country.
Central Bank’s role
Under this specific scenario, Central Bank has to perform a greater
task. The Central Bank should not destroy the image of these
unregistered finance companies but try to make them the pivots of
Secondly they must get rid of the oligopoly of the Government banks
and the private banks.
I feel at the moment the Government banks and private banks are not
providing the necessary tools for profit and asset sharing and
development of the clients investments because they offer much lesser
interest than the inflation of the country. In simple they help clients
to devalue their invested money.
Thirdly, the CB needs to analyse the reality of the money market in
the country and the market economy and provide proposals and suggestions
to implement healthy money distribution and reduce anomalies.
Finally, decision making should not destroy the national interest and
the Government bureaucracy must not lose the common touch and the ground
Finally implement some devise to protect the nation from cheaters
like Sakvithi Ranasinghe and the same time provide access to maximum
returns on investment and benefit from the money market to the nation
which drives and motivates and makes the nation successful. The country
needs to tap the potential and analyse the reality of society.
There is a need to register these companies with people friendly
regulations. I think the country has benefited more from people’s money
than taxes. We have witnessed what happened to the taxes and how taxes
are utilised for the development, and therefore, taxes should be
Also, it is important to discuss with the banks in the country to
find why they cannot offer high returns to the clients without boasting
of individual development but should be centered on the people of the
This is not an individual responsibility of the Central Bank but
people need to aware, they must develop a public opinion of the subject.
Ministry of Finance should analyse and brief the head of the state
giving a true picture and the situation. This article has a
controversial, out of the box view.
There are more other realistic factors which I am not aware to be
discussed in public to give more insights to the people. It will reduce
the income gap of the nation and provide fair value for investments.