The Central Bank of Sri Lanka (CBSL) has received close to 200 microfinance complaints in 2023 mainly related to higher interest rates and “unethical” loan recovery practices, The Daily Morning Business learnt.
In response to an email query by The Daily Morning Business, the Financial Consumer Relations Department (FCRD) of CBSL said they have received 51 complaints on microfinance loans provided by licensed microfinance companies or finance companies while receiving another 148 complaints on microfinance loans by unregulated lending institutions in 2023.
According to CBSL, out of the complaints received on microfinance loans provided by licensed microfinance companies or finance companies, the main concerns were high-interest rates and concession requests while concerns related to unregulated lending institutions included unethical or abusive recovery practices and disclosing personal information to third parties apart from high-interest rates.
Finance Companies and Microfinance companies which are licensed by CBSL under Finance Business Act No. 42 of 2011 and Microfinance Act No. 06 of 2016 for engaging in microfinance business activities, come under the supervision of the Department of Supervision of Non-Bank Financial Institutions of CBSL.
It said that the complaints against licensed institutions were referred to the relevant microfinance companies by the FCRD for consideration and settled the matters in a mutually agreeable way while respective regulatory departments within the CBSL were informed of any complaints that needed special attention.
“In the case of unregulated lending institutions, it is not required to obtain a licence from CBSL to carry on a lending business using private money without mobilising public deposits and such institutions will not be subject to the regulation or supervision of the CBSL. Hence, CBSL cannot take any regulatory action against unlicensed micro-credit providers.” the response from FCRD said.
However, it was said that the CBSL has facilitated the drafting of the Microfinance and Credit Regulatory Authority Bill for regulating and supervising such individuals and institutions engaged in the lending business, using their funds.
The draft Bill got the cabinet approval in October last year and has now been forwarded to the Parliament to obtain the necessary approval.
“Accordingly, after the enactment of this proposed Act, the institutions/persons engaged in lending business without mobilising deposit will be subject to the regulation and supervision of the Authority which is to be established under the provisions of the said Act.” the FCRD said.