P

olicymakers in Sri Lanka

prefer maintaining strict
homo geneity in laws and
policies pertaining to labour
force participation, regard-
less of the contribution made
by women to various sectors of the
economy: the estate sector, the appar-
el industry or as migrant workers fun-
nelling in foreign exchange.
Our national policies remain oblivi-
ous to gender-specific dimensions to
economic development. Consequent -
ly, they fail to identify and cater to the
needs of this vital segment. This insis-
tence by officials, on the uniformity
of their policies and equality between
genders, becomes questionable in the
context of microfinance, since fe -
males are most in need of funding.
Microfinance in Sri Lanka isnt
govern ed by a single comprehensive
legislation. On the contrary, there are
a plethora of laws and regulations that
govern the different sectors, actors
and stakeholders involved. This piece -
meal approach to creating a legal
regime that directly and indirectly
governs microfinance has various
implications.
Firstly, regulation of multifarious
entities that engage in microfinance
activities becomes an arduous pro-
cess. Secondly, this makes it difficult
for regulatory agencies to hold micro-
finance institutions accountable. This
also creates certain loopholes in the
system, as a result of which unregu-
lated microfinance institutions may
accept deposits.
Due to the lack of clarity in the legal
framework, depositors are unable to
ascertain if and when their legal rights
have been violated, or seek redress.
In order to bring a certain degree of
centralisation and uniformity to the
existing regulatory framework gov-
erning micro finance organisations, a
Micro finance Act was proposed. The
proposed act envisages the establish-
ment of a Microfinance Regulatory
and Supervisory Authority. It would
be responsible for licensing, register-
ing, regulating and supervising pub-
lic, private and guarantee companies,
and NGOs engaged in microfinance.
Constituting the regulatory body to
monitor the implementation of the
Microfinance Act has, however, been
a contributory factor in delaying its
legislation. One of the main purposes
of the proposed act is to monitor
microfinance institutions, so as to
safeguard the interests of depositors
customers of microfinance institu-
tions are low-income earners. This
higher level of accountability is ex -
pected to improve the recognition and
ability of microfinance institutions to
obtain funding from foreign donors
and investors.
However, the act is perceived to be
forcing stringent and institutionalised
structures over organisations, particu-
larly those whose strength stems from
their less formal grass-roots-level
mobi lisation strategies. Nonetheless,
it is essential that higher levels of con-
trol and regulation are implemented,
to ensure respon sible deposit taking.
The Govern ments 10-year strategy
(Mahinda Chinthana) sets out certain
goals to achieve for, and on behalf of,
the Small and Medium Enterprise
(SME) and microfinance sectors.
Strategies to meet such ob jectives
include supporting entre preneurial
development by improving marketing
opportunities, subcontracting arrange-
ments, financial assistance, and skills
development and training program -
mes.
The 2013 budget proposed an ex -
pansion of microfinance, with the
inclusion of leasing facilities through
Samurdhi banking societies. In order
to encourage lending to small busi-
nesses, credit facilities were extended
through Regional Development Banks.
These were based on small enterprise
group guarantees and a bond of Rs.
500 million to Lankaputhra Develop -
ment Bank, to implement a credit
guarantee scheme to underwrite cred-
it risks of microfinance and other
banking institutions.
However, it was the view of the
drafters of economic policy, as well as
academics, that the general economic
strategy of the Government is to sup-
port the development of SMEs, as it
has a higher impact on GDP and solv-
ing unemployment than microfinance
does.
This emphasis on SMEs by the
Govern ment displaces, to an extent,
the priority given to the microfinance
sector.
While Budget 2013 contained a pro-
posal for 25 women entrepreneurs to
be identified in each district, the
Microfinance Act (which is one of the
key pieces of legislation, to be intro-
duced) is gender-neutral.
There is also some extent of apathy
on the part of government bodies, on
the need to specify women in policies.
It is perceived as being contrary to
equality.
They also feel that this is an issue
better addressed at the implementa-
tion level. There is, however, an
agreement among donors and re -
searchers that policies and regulation
mechanisms should be attuned to gen-
der sensitivities.
GENDER-SENSITIVE FUNDING
A review of policy considerations on women and microfinance
CEPA is an independent Sri Lankan think tank promoting a better understanding of poverty-related development issues.
It strives to influence related development policy, as it believes that poverty is an injustice that should be overcome.
Courtesy Centre for Poverty Analysis (CEPA)
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