MICROCAPITAL BRIEF: Government of Sri Lanka Proposes Long-Delayed Regulations for Microfinance Institutions (MFIs)

The government of Sri Lanka recently proposed a three-tier regulatory and supervisory framework updating a previously proposed law that, if passed, would be applicable to Sri Lankan microfinance institutions (MFIs) that accept deposits from the public. The “first tier” stipulates that the Central Bank of Sri Lanka (CBSL), the nation’s central banking authority, will directly oversee large-scale MFIs in the country. The “second tier” stipulates that CBSL’s approved audit firms will supervise small-scale MFIs. The government’s guidelines for defining large- and small-scale MFIs are unavailable. The “third tier” lists various exceptions to the Central Bank’s regulations of the previous tiers, including exemptions for MFIs falling under the governmental departments of the Commissioner of Cooperative Development, Registrar of Cooperative Societies, Divineguma Department and Board of Management of Divineguma Community Based Bank and Banking Societies and the Commissioner of Agrarian Development as well as other community-based organizations that will be determined by CBSL [1].

If the long-delayed act passes, only MFIs that are licensed or exempt will be able to offer savings services in Sri Lanka. However, the new regulations still need to be passed by parliament in order to become law [1]. Although parliament has not yet disclosed when the act will be reviewed, the initial proposal was introduced in early 2011.

In the year 2012, CBSL had total assets of LKR 1.28 trillion (USD 10.1 billion) and return on assets (ROA) of 10 percent.

By Michael Averell, Research Associate

About Central Bank of Sri Lanka (CBSL) Established in 1950, the Central Bank of Sri Lanka (CBSL) is the nation’s central banking authority. The core responsibilities of CBSL are to ensure the stability of the nation’s financial sector as well as the economy as a whole. In the year 2012, CBSL had total assets of LKR 1.28 trillion (USD 10.1 billion) and return on assets (ROA) of 10 percent.

Sources and Additional Resources

[1] Colombo Page: “Regulatory and supervisory framework proposed for Microfinance Institutions in Sri Lanka,” http://www.colombopage.com/archive_13B/Jul18_1374160210CH.php

MicroCapital story, October 21, 2012, “MICROCAPITAL BRIEF: Central Bank of Sri Lanka Hopes Third Time is Charm for Microfinance Institutions Law,” https://www.microcapital.org/microcapital-brief-central-bank-of-sri-lanka-hopes-third-time-is-charm-for-microfinance-institutions-law/

MicroCapital story, April 20, 2011, “MICROCAPITAL BRIEF: Central Bank of Sri Lanka (SBSL) to Regulate Microfinance Institutions (MFIs),” https://www.microcapital.org/microcapital-brief-central-bank-of-sri-lanka-cbsl-to-regulate-microfinance-institutions-mfis/

MicroCapital Universe Profile: Central Bank of Sri Lanka (CBSL) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Central+Bank+of+Sri+Lanka+%28CBSL%29

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