Sri Lanka’s household debt crisis is deepening as thousands of families, particularly women in low-income communities, are being trapped in predatory microfinance schemes that flourish under weak regulation and policy inaction. The Feminist Collective for Economic Justice (FCEJ) has accused the government of failing to protect vulnerable borrowers, warning that the new Microfinance and Credit Regulatory Authority Bill risks worsening the problem instead of solving it.
In a statement issued on 17 October, the FCEJ a coalition of economists, academics, lawyers, and activists condemned the government for proceeding with the bill without meaningful public consultation. The group claimed the National People’s Power (NPP) administration has “lost touch with the realities on the ground,” one year after coming to power, and continues the same austerity-driven policies of previous regimes that have pushed many into poverty.
The FCEJ said harsh economic measures, low wages, and inadequate state support have left households increasingly dependent on microfinance lenders and informal credit networks. “Many families are falling deeper into the debt trap selling assets, skipping meals, and facing intimidation from lenders,” the group said. In districts such as Thalankudah, researchers recorded cases of women starving themselves and their children to meet loan repayments, alongside reports of domestic violence, ill health, and even suicides linked to unmanageable debt.
Central to the crisis is a surge in predatory lending, with unregulated microfinance companies, cooperatives, and online lenders charging exorbitant daily and weekly interest rates. While the Microfinance Act No. 6 of 2016 was meant to curb such practices, the FCEJ said it failed to protect borrowers and allowed exploitative lending to proliferate.
Earlier this year, a revised Microfinance and Credit Authority Bill was challenged in the Supreme Court for inadequately addressing these abuses. The Court found several clauses unconstitutional, prompting its withdrawal and review by a nine-member committee. But, according to the FCEJ, “no genuine public consultations took place.” Despite widespread opposition, the Cabinet approved the bill in August 2025, though it remains inaccessible to the public.
The FCEJ argues that without proper safeguards such as interest rate caps, borrower protections, and independent oversight the proposed legislation could tighten the grip of microfinance companies over indebted households.
The group urged the government to initiate a state-led debt relief programme, collect nationwide data on household debt, and create community-based mediation systems to resolve disputes fairly. It also called for renewed investment in local livelihoods to prevent recurring cycles of poverty and borrowing.
“The government’s refusal to listen to those suffering the most,” the FCEJ warned, “risks turning Sri Lanka’s debt crisis into a humanitarian disaster.”
