Abstract:
The purpose of this study was to understand the legal framework of Sri Lanka related
to the microfinance industry and identify more development criteria and drawbacks.
The present rapid growth in the economy makes more opportunities for business
concepts. As well, more needs and wants create more monetary requirements of the
nation. Therefore, these two perspectives lead to more financial requirements,
especially in small scale and even group level. Financing those micro level enterprises
or groups is more complex if there is a low regulation framework persisting in the
country. It is very significant in studying this kind of topic, as its appropriateness with
the timeliness.
The main objective of this study was to identify the discrepancies of the legal
framework of the microfinance industry in Sri Lanka and Bangladesh while making
suggestions for more improvements to the legislations for Sri Lankan regulations. In
this study, information was taken from the Microfinance Acts, Rules and regulations
of Sri Lanka and Bangladesh which had to be analyzed
This research study presents the legislations of microfinance in Sri Lanka and
Bangladesh separately and moreover, discusses the similarities and discrepancies in
Sri Lankan regulations by comparing the regulations in Bangladesh. Accordingly,
absence of a designated Authority for microfinance industry as the regulator is a more
significance finding among few major findings. As well, less customer protection
focus and unclear definitions while some are in silent will lead to weaken the legal
framework. Other important findings are less Government involvement to the legal
framework and deposit taking restrictions. These are leading to discourage in
registration for MFIs with the legislation. Further, this research was concluded with
some policy recommendations based on findings to develop a proper regulatory
structure for the country as a holistic approach without addressing a narrow down the
industry.
