News
Micro Finance Cos. lend money sans Central Bank authority
Many Micro Finance Companies (MFCs) operating in Sri Lanka, only use a Business Registration Licence to provide loans to low income people, including farmers, without Central Bank (CB) authority to do so. Hence, when a problem arises between the lender and the borrower, the CB cannot intervene, said senior officials at the CB’s Non-Banking Section.
They are also aware that many of the debtors are regularly harassed by these MFCs, whenever they default on their loan repayments. However, the CB has duly authorised some recognised MFCs, the official added. However, Commerce Ministry Secretary Ranjith Asoka told the Sunday Times that, whenever these MFCs deal with money, it is the responsibility of the CB to take action against them.
“The responsibility of the Registrar of Companies is only to issue Business Registration. He has no authority to supervise MFCs,” Mr Asoka said.
The Secretary further said that loan agreements are written in English and therefore, the debtors, all of whom are poor, don’t really understand the conditions of the loans they are signing for.
Meanwhile, this week, an MFC in Hingurakgoda, Polonnaruwa, had lodged a complaint with the Hingurakgoda Police against farmers who failed to pay their instalments. Accordingly, the police had summoned the farmers to the police station and allegedly compelled them to sign in the police book, assuring they would pay their arrears without any delay.
A senior police officer of the area said he was unaware of the aforesaid incident, and pledged to inquire into it.