Micro-credit Regulatory Authority has so far canceled licences of 49 non-government organisations (NGOs) on various charges, including misuse of funds, shortage of funds and breaching lending rate terms.
The rate of licence cancellation of NGOs or micro finance institutions (MFIs) has increased following formulation of the Micro-credit Regulatory Authority Rules, 2010 in January 2011 and setting some guidelines, said a senior executive of the authority.
“The activities of NGOs and MFIs have come under strict monitoring of the regulator thanks to the new rules and guidelines,” said MRA Director Md Shazzad Hossain.
It had canceled MFIs licences of four in 2011, 17 in 2012, 19 in 2013 and nine so far this year, according to the data provided by MRA. Some are in the pipeline to lose their licences, officials said.
Shazzad said MRA scrapped the licences due to breaching the rules – most of them misused funds and did not comply with some of the directives despite repeated warnings.
He said the MRA’s goal is to eliminate poverty by ensuring transparency and accountability of micro-credit operations in the country.
According to a latest circular, it has been noticed that some MFIs were not operating in line with its directive that no micro-credit institutions would be allowed to take installments on credit from their respective clients within 15 days from the date of lending.
Moreover, the institutions have given credit at lower interest rate instead of 6% on savings set by the MRA.
The regulator also imposed cap on inter-MFI transactions. No MFIs can charge more than 10% as interest during inter-MFI transactions, according to another circular.
Currently, 696 NGOs are operating in the country, serving around four crore of the country’s around 16 crore people. The authority, however, considered issuing fresh licences to more foreign-funded NGOs and MFIs, said the executive.
Since its inception in 2006, MRA has been continuously making efforts for creating an enabling environment for the micro-finance industry for its sustainable development.
Bangladesh has become the first country in the world to establish a separate entity, MRA, under a separate act to licence, monitor and oversee MFIs, as microfinance had been a private sector initiative all along, and flourished without any formal regulatory entity in most parts of the world.
Though Bangladesh has been the pioneer of micro-credit, it lagged behind some countries in enacting a regulatory framework for this sector.
Over the years, it has brought a number of changes in its rules and regulations.
According to MRA statistics, the sector has created direct job opportunities for over 110,000 people – 82% of them are male and 18% female.
The country’s first micro-finance institution Bangladesh Rural Advancement Committee (BRAC) was established in 1972 through which micro-finance activities had started in Bangladesh.
