Sri Lanka is poised to establish an independent regulatory body to oversee the microfinance and moneylending sector. This initiative comes as part of a new bill presented to parliament this week, aiming to amend the Microfinance Act No. 06 of 2016, according to Deputy Minister of Finance and Planning, Anil Jayantha.
Jayantha noted that despite efforts through the Microfinance Act No. 06 of 2016, the existing frameworks have been unable to fully regulate the microfinance industry. While the current law regulates only a few companies under the Central Bank, the new bill seeks to bring a broader range of lenders under the jurisdiction of the proposed regulatory body, the Microfinance and Loan Regulatory Authority.
The Deputy Minister highlighted the proliferation of unregulated digital lending applications across the island. “The system of lending through online and mobile phone applications has spread extensively, yet only about four companies are registered as microfinance businesses with the Central Bank,” Jayantha explained.
The proposed bill introduces stringent penalties, including a maximum fine of 5 million rupees and prison terms of up to five years for those found guilty of illegal lending or violating the act’s provisions. Jayantha emphasized the critical societal discussions surrounding microfinance, particularly its devastating impacts on rural village livelihoods.
The Microfinance and Loan Regulatory Authority will be governed by a board of seven members, which will include ministerial appointees. The bill also proposes the creation of a dedicated fund to ensure the authority’s independence and operational stability.
If enacted, the Microfinance and Loan Regulatory Authority will have the authority to investigate unethical recovery practices and establish legally enforceable standards for interest rate calculations, according to Jayantha. (Colombo/Mar5/2026)
