Ravi Abeysuriya said “unregulated financial institutions are the worst. They thrive on the financial ignorance of people for whom they provide services. Abeysuriya later added “aggressive lending and recovery practices have caused high indebtedness. They don’t stop at this. The women who borrow to start a venture end up selling themselves too.”
Abeysuriya was speaking on March 28, at a joint event between the Chartered Financial Analysts and the Central Bank of Sri Lanka on financial literacy. More information is available at www.cfasrilanka.lk
He clarified by saying, “not all microfinance is bad, but there have been so many suicides. The Finance Ministry and Central Bank’s study, have found financial lending finding vulnerable households and charging some as high as 200%.” Abeysuriya later added, “we don’t have a national credit act or something to prevent predatory lending.”
Abeysuriya said “the Central Bank could only regulate deposit-taking institutions. They cannot do anything about the lending that is going on. The ideal situation is a national credit act. We have something very arcane, National Credit Ordinance valid from a hundred years ago.”
He called for a national financial literacy program similar to that done in Indonesia, pointing to the low risk of government securities.
Responding to a question on the budget proposal for accessible scripless securities he said, “the government securities being traded in the CSE is something we asked for 25 years ago. The ideal situation is people should be able to buy all instruments treasury bills, treasury bonds, you name it through the exchange. The exchange is where you trade financial instruments. In Sri Lanka, we have a plain vanilla product just shares and debentures.”
S R Attygalle, Deputy Governor Central Bank said, “from the Central Bank side we have called for RFPs. The CSE has indicated that they would share their trading platform. One would be enough because it is not a big market. Equity and government securities could be traded at one place.”
The relevant area of the budget speech states (point 71); Sri Lanka needs to develop capital markets beyond bank financing. The backbone of a deep and liquid debt capital market is a robust government securities market. We will introduce script-less Sri Lanka development bonds and enable coupon stripping of Treasury bonds. We will work with the CBSL to invest in the necessary infrastructure towards this end.
A member of the public debt department indicated privately that government securities are already scripless. Rajeeva Bandaranaike, CEO, Colombo Stock Exchange, had indicated on questioning that he would look into the impediment preventing online trading of corporate debt via trading portals. DP
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