Report on Savings Mobilization by Microfinance Institutions in Sri Lanka
This report discusses the legal position of deposit-taking Sri Lankan MFIs in relation to government-funded programs. It makes recommendations to the Lanka Micro Finance Practitioners Association (LMFPA) on legal measures it can take if MFIs are prevented from taking deposits.
The paper examines whether current policy violates the right to equality by preventing microfinance NGOs from taking deposits while their counterparts in government-funded programs operate without regulation. Study findings indicate that deposit taking activities of government-funded programs are also unlawful if they do not have the permission of the Monetary Board.
The paper makes recommendations to regulators, policy makers and the LMFPA to rectify the issue. Recommendations to the LMFPA include:
- Obtaining licenses to operate as specialised banks or as finance companies;
- Getting permission of Monetary Board to take deposits from members under Section 76A (1) of the Banking Act;
- Conducting dialogues with policy makers on the proposed Finance Business Act;
- Challenging the Finance Business bill;
- Lobbying for enactment of a separate law on microfinance.
