Civil society groups and the Government have once again reached an impasse over the recently enacted Microfinance and Credit Regulatory Authority Act, with fresh disagreements emerging over the recognition and regulation of community-based savings and credit service providers. 

The Government meanwhile maintains that there is time to review and address issues before operationalising the legislation.

Tensions surfaced following a meeting held at the Prime Minister’s Office on Thursday (26), attended by Prime Minister Harini Amarasuriya and Sectoral Oversight Committee on Economic Development and International Relations Chairperson MP Lakmali Hemachandra, alongside representatives of community-based financial collectives and civil society representatives.

The discussion focused on the long-standing crisis faced by victims of microfinance lending and the implications of the new law for community-led credit systems. While the Government signalled openness to further engagement, participants described the meeting as inconclusive.

Suneth Aruna Kumara, representing the National Collective of Community-Based Savings and Credit Service Providers, expressed dissatisfaction with the Government’s approach, stating that authorities appeared disconnected from the realities of community finance.

“We left the meeting with great frustration,” he said, alleging that officials had spoken as though community funds were not significant enough to be recognised within a formal legal framework. He also criticised what he described as a lack of awareness of such systems, despite their long-standing role in poverty alleviation.

Kumara further raised concerns over the Government’s request for the collective to generate data and conduct surveys, arguing that such responsibilities should fall within the State’s mandate. He also questioned assurances that concerns would be addressed during the regulatory drafting phase, noting that no clear solutions had been presented.

The collective had also sought exemption from the provisions of the new act. However, according to Kumara, the Government’s response – that implementation could take up to two years and that adjustments may be considered during the regulatory drafting stage – lacked clarity and assurance.

He added that the discussions had failed to yield concrete solutions, noting that previous engagements had similarly not resulted in meaningful progress.

Researcher and feminist political economist Amali Wedagedara, who also participated in the meeting, expressed strong dissatisfaction with both the timing and conduct of the meeting, describing it as extremely unsuccessful and lacking meaningful engagement.

She noted that stakeholders had requested discussions prior to the passage of the act, but were only granted a meeting after it had already been enacted, limiting the scope for substantive input. She further questioned the intent of the engagement, stating that participants felt the discussion appeared largely procedural rather than a genuine attempt to address concerns.

Wedagedara also raised concerns about the nature of the dialogue, pointing to interruptions and a narrow focus on the legislation, which had, she said, constrained broader discussion on the microfinance crisis and the role of community-based financial systems.

Additionally, she criticised the burden placed on stakeholders to provide evidence and data on issues that had been raised consistently over several years, arguing that such responsibilities should lie with the State.

Responding to these criticisms, MP Hemachandra said the Government acknowledged the complexity of regulating a diverse and evolving sector and remained open to refining the law before it became fully operational.

She noted that a key challenge lay in defining community finance, stating that any exemptions or tailored regulatory mechanisms would first require a clear conceptual framework. The meeting, she said, concluded with an agreement to collaboratively develop a concept paper to better identify and categorise such entities.

Hemachandra claimed the wide variation in the scale of community-based organisations – ranging from small informal groups to entities managing assets worth billions of rupees – complicated efforts to introduce uniform regulatory measures.

She acknowledged that concerns had been raised within the Government regarding the act, adding that there had been consensus to proceed with its passage while allowing space to address shortcomings prior to implementation.

“There is time to review and correct any valid issues before the act is operationalised,” she said, referring to the six-month window before enforcement.

She further indicated that while the Government remained open to continued dialogue, future discussions may be broadened to include a wider range of stakeholders to ensure a more comprehensive approach.

The Microfinance and Credit Regulatory Authority Act No.9 of 2026 came into force on 20 March following certification by Speaker Jagath Wickramaratne.

The act provides for the establishment of a regulatory authority to oversee money lending and microfinance institutions, with the stated objective of strengthening consumer protection and regulatory oversight. It also repeals the Microfinance Act No.6 of 2016 and introduces provisions aimed at coordinating with the Central Bank of Sri Lanka and other regulatory bodies.

Originally presented to Parliament on 26 November 2025, the bill was passed on 4 March.