New microfinance authority law comes into force replacing 2016 Act

Sri Lanka has formally brought its fragmented microfinance and money lending industry under a new regulatory umbrella, with Speaker Dr. Jagath Wickramaratne endorsing the Microfinance and Credit Regulatory Authority Bill, paving the way for its immediate implementation.

The legislation, now enacted as Microfinance and Credit Regulatory Authority Act, No. 9 of 2026, establishes a dedicated authority to license, regulate and supervise the microfinance institutions and moneylenders, marking a structural shift in oversight of a sector long criticised for weak supervision and consumer protection gaps.

The new authority is mandated to enforce a stronger legal framework governing the lending practices, with a focus on safeguarding the borrowers, particularly in the underserved and informal segments of the economy. 

It will also coordinate with the Central Bank of Sri Lanka and other regulators, signalling a move towards more integrated financial sector supervision.

The act repeals Microfinance Act No. 6 of 2016, replacing it with broader provisions aimed at tightening compliance, improving transparency and addressing the systemic risks associated with the unregulated lending operations.

Originally presented to Parliament on November 26, 2025, the bill was passed on March 4, 2026, before receiving the final certification by the Speaker. 

It coming into force with immediate effect underscores the urgency the policymakers have placed on stabilising the microfinance landscape amid the ongoing concerns over the borrower distress and industry practices.

The move is expected to reshape market conduct and could accelerate consolidation within the sector, as smaller and informal operators face stricter licensing and compliance requirements under the new regime.

source: Daily Mirror