Policy Gap: Financial Literacy Must Precede Inclusiveness to Stop Exploitation 📉

A critical policy dilemma highlights that driving financial inclusiveness without baseline financial literacy exposes vulnerable populations to predatory financial mechanics and asset stripping. • Policy Dilemma & Historical Precedent • The Central Bank of Sri Lanka (CBSL) is pushing twin goals of inclusiveness and literacy. • Former Deputy Governor W.A. Wijewardena highlights that literacy must act as a prerequisite to prevent predatory exploitation. • The 1990s Isuru Project (microfinance for poor women) successfully proved that rigorous financial training enables safe banking and sustainable micro-enterprises. • Risks & Regulatory Loophole Exploitation • Unregulated informal lenders exploit statutory loopholes—such as manipulating the century-old Money Lending Ordinance and bypassing the ultra duplum interest cap—to seize high-value collateral (e.g., land worth 25x the principal). • Modern predatory traps, including timber schemes and digital MLM proposals, continually target uninformed borrowers. • The recently enacted Microfinance and Credit Regulatory Authority Act No. 9 of 2026 remains functionally inert at the ground level, failing to protect informal, low-income single earners. • Key Recommendations for CBSL • Shift communication from elite financial spheres to grassroots, accessible media. • Establish community-governed, non-exploitative credit alternatives to shield primary family assets. • Enforce active macroprudential surveillance on predatory informal debt networks.