More than half of Sri Lankan households were in debt in 2023, with nearly a quarter borrowing simply to meet basic daily needs, including food, according to data from the Department of Census and Statistics. Analysts warn that the widespread reliance on small and personal loans—often cyclical and, in some cases, predatory—has left many families trapped in long-term debt, slowing community-level economic recovery and contributing to broader national fiscal pressures.
In response, the government introduced the Microfinance and Credit Regulatory Authority Act, No. 9 of 2026, in March, aiming to regulate the sector and curb exploitative lending practices. The Act proposes a licensing and registration framework intended to address issues such as coercive recovery methods, intimidation, and other reported abuses within the microfinance industry.
While the objectives of the legislation have been widely acknowledged as necessary and well-intentioned, concerns have been raised over its implementation and scope. Critics argue that the current framework may unintentionally weaken or disrupt long-standing community-based financial systems that play a vital role in supporting vulnerable households.
Experts, community practitioners, and grassroots organisations have cautioned that insufficient consultation during the drafting process has led to gaps in understanding the realities of local credit systems. This includes the perspectives of women and community groups involved in informal financial support networks.
Over 4,000 women from across the country reportedly signed a petition opposing the expedited passage of the Act, calling for greater consultation with affected communities. Representatives from Self-Help Groups also sought engagement with policymakers to share lived experiences of microfinance borrowing and repayment, but say these opportunities were limited.
Self-Help Groups—community-led, self-governed, non-profit networks—play a key role in fostering women’s financial independence through collective savings and credit programmes. These initiatives often provide flexible, accessible loans with minimal service fees, while also supporting broader social empowerment, decision-making, and resilience at household level.
Concerns remain that without careful revision, the new regulatory framework could unintentionally restrict these community-driven financial models, which many argue are essential to both economic inclusion and grassroots development.