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International cooperation

Financial Literacy Alone Insufficient for Real Inclusion in Sri Lanka

Strategic Insights

— 1 min read

Sri Lanka's newly launched initiatives to improve financial literacy are not enough to achieve real financial inclusion, according to a top international partner. Japan International Cooperation Agency (JICA) Chief Representative Kenji Kuronuma emphasized the need for robust regulation to supervise lending institutions and curb predatory practices. He stressed that borrower education is only half the problem, and that lender conduct must also be addressed. Sri Lanka is struggling with a high poverty rate, with over 20 percent of the population expected to remain in hardship for the medium term.

Key Takeaways:

  • JICA's Chief Representative Kenji Kuronuma emphasized the need for robust regulation to supervise lending institutions and curb predatory practices in Sri Lanka.
  • Kuronuma warned that merely educating borrowers is not enough to achieve real financial inclusion, and that lender conduct must also be addressed.
  • Sri Lanka's poverty rate has doubled, with over 20 percent of the population expected to remain in hardship for the medium term.
  • Many people are suffering from excessive indebtedness due to a lack of awareness about the risks of borrowing from the informal sector.
  • JICA is supporting the Central Bank's new awareness campaigns on financial literacy.
  • Japan's 2006 Money Lending Business Act, which imposed a clampdown on lenders, is cited as a potential blueprint for Sri Lanka.
  • Key reforms in the Japanese legislation include capping high interest rates, limiting loan amounts based on annual income, strengthening penalties for unauthorized lenders, and banning harsh debt collection methods.
  • JICA pledged continued support for the Central Bank's dual efforts in education and regulation.

Statistics:

  • Over 20 percent of Sri Lanka's population is expected to remain in hardship for the medium term.
  • Sri Lanka's poverty rate has doubled.
  • Excessive indebtedness due to informal sector lending affects many people in Sri Lanka.
  • The Japanese Money Lending Business Act of 2006 imposed a clampdown on lenders.
  • Sri Lanka is reviewing the Microfinance and Credit Regulatory Authority Act.

Sources:

  • "As Sri Lanka launches new initiatives to boost financial literacy, a top international partner has stressed that merely educating borrowers is not enough."
  • JICA Chief Representative Kenji Kuronuma
  • Japan International Cooperation Agency (JICA)
  • Central Bank (CB) key financial literacy initiatives in Colombo
  • "CBSL's new awareness campaigns, which JICA is supporting"
  • Japan's 2006 Money Lending Business Act
  • Reuters article, "Sri Lanka economy: A comprehensive analysis"

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