Samurdhi – Divi Neguma: Consolidation And Microfinance

By Charitha Ratwatte -February 18, 2014 

Charitha Ratwatte

Sri Lanka’s Central Bank (CBSSL) has detailed a road map for a process of consolidation of the financial sector. The position of the CBSL seems to be that the last quarter century has seen a number of events which justifies this consolidation.

From 1988 to 1990, 13 Registered Finance Companies failed, 11 of which had to be liquidated. The failure of a business group affected eight non-bank financial institutions. Today there is much bazaar gossip about other registered finance companies which are rumoured to be in trouble.

One point of view is that this is a reflection of the highly-fragmented structure of Sri Lanka’s financial system. However, there is another point of view, which does not seem to enter the thought process of the decision makers. That is, that this crisis situation, is in fact due to the incompetence, inefficiency and some say , even corrupt behaviour of the concerned regulators and managers of the financial service institutions, to the extent, it is alleged, of working hand-in-glove in some situations.

There is also, allegedly, the issue of the irresponsible issue of banking licenses and finance company registrations, on questionable criteria and political influence. As the pithy and apt Sinhala saying goes, banking licenses were issued and finance companies were registered “like mushrooms blooming after a shower of rain” – “wassata passe hathu pipenawa wage!”

Another allegation is allowing convicted criminals, ‘ass liquor’ cronies and unfit and improper people to hold positions on bank and finance company boards of management. Some of those characters do not have a qualification even ‘to scratch their backsides with,’ if the need arises, as the popular saying goes.

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