Microfinance organizations are facing severe liquidity crunch as depositors withdrew their money and Govt. suspended collection of loan installments for coronavirus pandemic.
However, Microcredit Regulatory Authority (MRA) recently has sought Tk. 5000 crore additional refinancing fund from the government to continue lending by microfinance organizations across the country. The MRA in a recent circular issued on May 09, 2020 asked micro lender’s to re-launch operation by maintaining WHO guidelines. Most of the organizations had suspended their operations informally due to spread and fear of Covid-19 pandemic. “ We asked microfinance organizations to continue operation by maintaining a set of health guidelines as microfinancing is an effective tool to resume economic activities across rural areas,” Mohammad Yakub Hossain, Director MRA told Business Mirror on Tuesday.
Distribution of relief, return of deposit to clients, bringing remittance through mobile financing and operation of agent banking are essential economic activities which micro lenders can operate through their service, Mr. Hossain added. “Poor clients need to continue their agricultural production and distribution channel alive by getting government refinancing schemes where micro lenders should intervene,” Mr.Yaakub Hossain said. He said the circular clearly directed the micro lenders to follow seven directives which included discouragement of physical presence in the office and no yard meeting traditionally organized by micro lenders to collect loan installments. Meanwhile, clients across the country have withdrawn around Tk 800 crore deposit pushing micro lenders to the corner side and seeking for fresh fund to continue operations. “We have returned about Tk 150 crore to depositors who withdrew their money from Brac due to joblessness on the aftermath of coronavirus pandemic,” Asif Saleh, executive director of BRAC Bangladesh told Business Mirror. Apart from the regular activities, the micro lenders including Brac have heavily engaged in providing health services and relief activities across the country along with the government. “Over 30 micro lending organizations formally get approval from MRA to spend their fund as MRA regulation allows them to spend 20 percent of their previous years’ income for charity activities,” Mr. Yakub said.
Bangladesh is acclaimed globally for its success in microcredit operations. ‘Microcredit Regularity Authority’ (MRA) was formed in 2006 to ensure transparency in activities of the micro lending institutions. The high interest rates of microcredit were widely criticised at home and abroad. Then the government fixed the interest ceiling at 27 per cent in 2010. It was said that gradually the rates would be reduced further, but nothing has been done about this over the last decade. The government has decided to slash down interest rates on microcredit provided by the NGOs by 3.0 per cent in order to attain the Sustainable Development Goals (SDGs). The finance ministry approved the interest rates at 24 per cent after an MRA board meeting introduced the recommendation. Experts claim that there is a vital need to continue this microcredit programme throughout the country brushing aside criticism whatsoever coming from any quarters. Millions of people are in dire need of subsistence only. They need microcredit for their survival.