RegAlertRule · CBSL · 3 Dec 2018 · Direction No. 8 of 2018
Maximum Rate of Interest on Microfinance Loans
The Central Bank of Sri Lanka issued Directions under the Finance Leasing Act to cap the maximum interest rate on Microfinance loans granted by Specialized Leasing Companies at 35 percent per annum. This regulation applies to all Microfinance loans issued from the date of the directive and defines such loans as those for individuals or groups engaged in income-generating activities or micro enterprises. Specialized Leasing Companies are required to report these loans via the Financial Information Network and must adhere to the statutory definition of micro enterprises based on turnover and employee count.
CENTRAL BANK OF SRI LANKA
03 December 2018 | FINANCE LEASING ACT DIRECTIONS | No. 08 of 2018
MAXIMUM RATE OF INTEREST ON MICROFINANCE LOANS
In terms of the powers conferred by section 34 of the Finance Leasing Act, No. 56 of 2000, the Director of the Department of Supervision of Non-Bank Financial Institutions issues Directions on maximum rate of interest on Microfinance loans for Specialized Leasing Companies (SLCs).
| 1. Applicability and scope | 1.1. | The Central Bank of Sri Lanka introduces a maximum rate of interest on Microfinance loans with the objective of protecting the customers being charged with exorbitant interest rates on Microfinance loans granted by SLCs. |
| 1.2. | This Direction will be applicable for all Microfinance loans granted from the date of this Direction. | |
| 2. Maximum Rate of Interest | 2.1. | SLCs shall not charge a rate exceeding 35 percent per annum (effective annual interest rate), inclusive of all other charges on Microfinance loans. |
| 3. Definition of Microfinance Loans | 3.1. | Loans granted for individuals/individuals under Group Lending System for income generating activities, which include loans for establishing and managing Micro Enterprises. |
| 4. Reporting Requirements | 4.1. | SLCs shall report the Microfinance loans under code 3.1.4.9.0.0-Microfinance Loans in the Financial Information Network (FinNet) return NBL-MF-03-BS - Balance Sheet. |
| 5. Interpretations | 5.1. | “Micro Enterprises” shall mean enterprises in the manufacturing and service sector with an annual turnover of less than Rs. 15 million and employees less than 10 [Source: National Policy Framework for Small Medium Enterprise Development issued by Ministry of Industry and Commerce]. |
(Signature)
W. Ranaweera
Director, Department of Supervision
of Non-Bank Financial Institutions, Central Bank of Sri Lanka
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- Issued under
- Act No. 56 of 2000Not in RegAlert
“In terms of the powers conferred by section 34 of the Finance Leasing Act, No. 56 of 2000”
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