Micro Finance Act soon
To protect stakeholders, ensure sustainability:
Ramani KANGARAARACHCHI
The Government is enacting a Micro Finance Act to protect
stakeholders and ensure sustainability of micro finance activities.
Central Bank Deputy Governor Priyantha Fernando delivering the key
note address at the Micro Finance Asia Forum at Cinnamon Grand Hotel
yesterday said operations of micro finance providers are controlled in
different ways by different Government authorities in Sri Lanka which is
not conducive to the healthy development of the micro finance business.
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Priyantha
Fernando |
Under the proposed Micro Finance Act, a Micro Finance Regulatory and
Supervisory Authority will be established to perform the functions and
responsibilities of licensing, regulating and supervising companies,
non-governmental organizations, co-operative societies and other
entities engaged in micro finance Business. He said that while this is a
welcome development, it needs to be properly guided and controlled, if
the desired results are to be achieved at the national level.
According to the Act, Micro Finance Institutes (MFIs) will be
authorized to provide credit for different types of economic and trading
activities, excluding foreign exchange transactions.
Housing will also be an eligible activity.
Apart from lending and deposit taking, MFIs will also be permitted
and encouraged to provide various other ancillary services including
storage and safe custody facilities, hedging facilities, investment
advice and other advisory and training support to micro-enterprises.
The Micro Finance Regulatory and Supervisory Authority will also have
powers to determine various parameters of MFIs and their operations.
Minimum Net Assets and the minimum ratio of liquid assets to be
maintained by MFIs, types and maximum maturity of investments they can
make, maximum customer limits applicable to deposits and advances, upper
limits for maturity and interest rates for advances and deposits and
maximum charges rates of commission applicable to other services are
some parameters to be fixed by the proposed Micro Finance Authority.
Fernando said MFIs will be required to maintain a Reserve Fund and a
Deposit Protection Fund in the stipulated manner.
The minimum prescribed ratio of credit allocation for low income
persons and micro-enterprises will also have to be maintained. “With
these provisions, the proposed Micro Finance Act seeks to strengthen the
Micro finance sector and to ensure the healthy and viable growth of all
Micro finance Institutions with professional, prudential and transparent
management so as to protect and further the interests of all
stakeholders and to achieve greater financial inclusion, Fernando said.
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