Loan activities of micro-finance institutions ((MFIs) and overlapping of loans taken by their borrowers are set to come under the microcredit regulator's scanner.
Officials said the Microcredit Regulatory Authority (MRA) was considering establishment of a micro finance (MF) credit information bureau (CIB) under the CIB of the Bangladesh Bank (BB) for the purpose.
The central bank would assist the MRA in running the sub depository, they also said.
The move was taken mainly to cut the operating expenditure in the MFI sector, they further said.
Establishing a separate CIB for the country's MFI sector would help avert overlapping of loans, absorb shocks and address the dropout of borrowers, a high official of the MRA said.
The CIB would also reduce transaction cost for both borrowers and lenders and bring down the demand for funds, he said.
The MF CIB would be similar to that the BB is running for the country's scheduled banks. So, the operating cost would be low, if the MF CIB is established under the BB, according to sources.
The board of the MRA had discussed the issue in its 37th meeting that was held at the BB recently, sources said.
The board decided in the meeting not to take the financing to the tune of US$ 0.01 million offered by the Department for International Development (DFID) for the project, sources said. But the fund would be spent for another project.
There will be no operating cost, if the MF CIB runs under the central bank. But the operating cost, if it is run by any other operator, will stand at US$ 2.32 million in five years, according to the MRA..
If established, the MF CIB would provide information on the credit flow to poor people in different areas of the country, Md. Shazzad Hossain, director of the MRA, told the FE Tuesday.
"It will help the MFs expand operating areas and also help the government prepare its plan to reduce poverty in different zones," he said.
With establishment of the MF CIB any information on loans provided by banks and MFIs to the borrowers would be available simultaneously and thus it would help avert overlapping of loans, he added.
The existing BB CIB keeps credit information on people taking loans from commercial banks, development banks and financial institutions.
"We have long been making preparations for establishing the MF-CIB that will keep the credit history of MFIs' borrowers. The CIB will help lenders exchange information among them about the history of borrowers,'' an MRA official said.
Alarmed by a loan default culture as a result of multiple borrowings, MFIs have long been demanding a system to be put in place to provide them with the potential borrowers' credit history.
Presently, there are 1.931 million borrowers under the country's 698 MFIs, according to the MRA data.
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