Committee calls for speedy implementation of regulatory law to protect borrowers from excessive interest rates while examining LMSL’s request for exclusive mining rights over 68 coastal mineral sand grids
By The Pulseline News Desk
Sri Lanka’s Parliamentary Sectoral Oversight Committee on Economic Development and International Relations has called for the speedy implementation of the Microfinance and Credit Regulatory Authority Act to strengthen oversight of lending institutions and protect borrowers from excessive interest rates.
The committee, chaired by ruling party MP Lakmali Hemachandra, has discussed the need for a stronger regulatory framework during a recent meeting with representatives of the Sri Lanka Microfinance Practitioners’ Association, according to Parliament.
The discussions have focused on concerns over lending institutions charging excessively high interest rates, particularly through informal practices that can leave borrowers facing severe financial difficulties.
The committee has stressed the need to protect the public from exploitative lending while ensuring that legitimate microfinance institutions can continue to provide financial services.
The meeting has also examined measures to improve access to affordable credit, simplify licensing procedures and establish effective oversight of institutions operating in the sector.
Stronger safeguards for microfinance borrowers
Microfinance services play an important role in providing credit to individuals and small businesses that may have limited access to conventional banking facilities.
However, concerns over high lending rates and inadequate consumer protection have highlighted the need for stronger regulation of the sector.
The committee has discussed the importance of establishing the proposed Regulatory Authority and setting clear deadlines for microfinance institutions to obtain the necessary licences.
Members have also considered simplifying licensing procedures to reduce unnecessary administrative barriers for institutions operating within the law.
Another proposal had involved allowing regulated microfinance institutions to accept limited public deposits under appropriate supervision. Such a mechanism could expand their funding options while ensuring that deposit-taking activities are subject to regulatory safeguards.
The discussions have also explored ways to provide microfinance institutions with access to lower-cost funding, which could help reduce the interest rates charged to borrowers.
Concessional funding to reduce lending costs
The possibility of obtaining concessional financing from international institutions, including the Asian Development Bank (ADB), was also considered during the meeting.
Access to lower-cost funding could help eligible institutions reduce their borrowing costs and potentially pass those savings on to customers through more affordable lending rates.
However, the effectiveness of such measures would depend on the terms of the financing, the institutions receiving the funds and the extent to which lower funding costs translate into reduced interest rates for borrowers.
The committee’s discussions reflect the need to address both the regulatory shortcomings and the funding constraints that can affect the cost of microfinance services.
Effective regulation would also need to ensure that borrowers receive clear information about interest rates, repayment obligations and the consequences of default.
The proposed framework is expected to play an important role in balancing access to credit with safeguards against abusive lending practices.
LMSL seeks exclusive rights over 68 mineral sand grids
In a separate matter, the committee has examined a request by state-owned Lanka Mineral Sands Limited (LMSL) for exclusive mining rights over 68 grids containing mineral sand deposits along Sri Lanka’s northeastern coastline.
LMSL has requested that the identified deposits not be allocated to private institutions.
The request places the allocation and management of mineral resources under renewed scrutiny, particularly regarding the balance between strengthening the state-owned company’s operations and ensuring transparency in the granting of mining rights.
Mineral sands are valuable industrial resources used in several manufacturing applications. Their extraction and processing can create export opportunities, but the management of deposits also requires clear licensing arrangements and appropriate oversight.
The committee has considered the request in the context of LMSL’s operational requirements and the need to ensure that decisions on mineral resource allocation are made transparently.
It has decided to issue recommendations concerning mining rights and operational support for the state-owned company.
Alleged irregularities in mining licences
The committee has also reviewed concerns over previously issued mining licences, including alleged irregularities in the approval process.
According to the information released by Parliament, details relating to certain irregularities had been referred to the Criminal Investigation Department (CID).
The referral places further emphasis on the need for proper scrutiny of mining licences and accountability in the allocation of valuable natural resources.
However, the specific allegations, the licences concerned and the status of any investigations were not detailed in the information provided.
The committee has also considered measures to strengthen transparency in future licensing decisions, with the aim of ensuring that mineral resources are managed through clear and accountable procedures.
The issue is particularly significant where competing interests involve state-owned enterprises and private-sector applicants seeking access to commercially valuable deposits.
Balancing public protection and economic development
The committee’s discussions had covered two areas with direct implications for economic development: access to affordable credit and the management of natural resources.
In the microfinance sector, the priority is to establish effective regulation that protects borrowers without unnecessarily restricting access to legitimate financial services.
In the mineral sands sector, the challenge is to ensure that the allocation of mining rights supports commercially viable operations while maintaining transparency and accountability.
The committee’s recommendations on both matters could influence the regulatory environment for lending institutions and the future management of Sri Lanka’s mineral resources.
The next steps will involve advancing the microfinance regulatory framework, determining the appropriate arrangements for licensing and funding, and considering LMSL’s request alongside measures to improve transparency in mining approvals.
Both issues highlight the importance of effective oversight in protecting the public interest while creating conditions for sustainable economic activity.
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