Annual Report 2010 - Ministry of Finance and Planning

6 | DEVELOPMENT FINANCEMicrofinanceInstitutionRegionalDevelopment BankNo ofDepositorsNo ofBorrowersTotalCapital(Rs. Mn)TotalDeposits(Rs. Mn)TotalBorrowings(Rs. Mn)TotalAssets(Rs. Mn)TotalInvestment(Rs. Mn)LoanAdvances(Rs. Mn)3,149,310 986,069 1,112 32,786 3,078 41,948 7,085 32,886Samurdhi Authority 9,250,112 3,907,686 4,265 41,131 43 47,323 42,767 54,250Department ofCo-operativeDevelopment *Departmentof AgrarianDevelopment7,753,670 247,673 - 46,539 26,041 - 11,645 21,837142,161 374,445 448 193 44 1042 363 3,199SEEDS - 150,768 322 319 1,252 5,540 859 3,394GemidiriyaFoundationSANASADevelopmentTable 6.4 > Progress of Microfinance Institutions170,566 119,264 1,711 309 NoBorrowings1,654 NotAllowed2,709334,629 159,434 2,203 - 950 16,445 2,828 38,672NDTF N/A 242,578 798 N/A 1,988 3 1,308 7,782Total 20,800,448 6,187,917 10,863 124,152 33,396 113,966 66,856 164,730* Except the loan amount and deposit figures are up to 2008Source: Survey of Department of Development FinanceIt was found that the total depositof microfinance is Rs. 124 billion ofwhich more than 90 percent areheld by the Government Institutions.Major microfinance institutions utilizearound Rs. 164 billion for lendingpurposes. Different authoritiesare however, responsible for thesupervision of the different typesof microfinance institutions: theSamurdhi Bank Societies (SBSs) areregulated by the Samurdhi Authorityof Sri Lanka, the Co-operative RuralBanks (CRBs) and SANASA Thrift andCredit Cooperative Societies (TCCSs)are regulated by the Departmentof Cooperative Development; theRegional Development Bank (RDB),as well as Commercial Banks andfinance companies fall under thesupervision of the Central Bank of SriLanka; Insurance companies comeunder the scrutiny of the InsuranceBoard of Sri Lanka. But, there are largenumber of microfinance institutionsthat are operating in the country whichare not subject to any supervisoryand regulatory controls. Accordingto the Consultative Group to Assistthe Poorest (CGAP), microfinance inSri Lanka has achieved impressiveoutreach; with more than 15 milliondeposit accounts and 2 millionoutstanding micro loans from apopulation of 20 million. The needfor regulation is therefore, morepronounced when the industry ismature and significant in size, in orderto ensure stability in the financialsystem. Considering the reductionin poverty level from 15.2 percent in2007 to 7.6 percent in 2010 and theincrease in per capita income of thecountry to USD 2,399 in 2010, the needof legalizing microfinance sector isexpressed.A Regulatory andSupervisory Mechanismfor MicrofinanceIn this endeavour, the Cabinet hastaken a decision on 08th June 2006to prepare a draft legislation tointroduce regulatory and supervisoryarrangements for MFIs. Theapproval was granted to present theMicrofinance Bill to the Parliamentby the Cabinet, at its meeting on23rd May 2007. Accordingly, theentire responsibility of regulation andsupervision of MFIs was to be vested inthe Central Bank of Sri Lanka.However, due to the complexity in theinstitutional set-up and operationsof MFIs, it was felt that a separateindependent authority would be amore appropriate arrangement forregulation and supervision of MFIs.294