Govt gives conditional microcredit licence to 50 NGOs in six months

FE Team | Published: July 06, 2024 23:22:24

Ismail Hossain
In the last six months, the government has awarded conditional licences to 50 non-governmental organisations (NGOs) to run microcredit operations across the country. This brings the total number of NGOs with micro finance institutions (MFI) licenses to 400.
The new microfinance institutions will hold conditional licenses for three years to demonstrate their capabilities, according to the Microcredit Regulatory Authority (MRA).
To get a final licence, each organisation must reach specific targets: a minimum of 300 small clients with Tk 4.0 million in outstanding loans in the first year, a minimum of 600 clients with Tk 7.0 million in loans in the second year and a minimum of 1,000 clients with Tk 10 million in loans by the third year.
Each of the NGOs who got the conditional licence deposited Tk 3.0 million in a designated bank account to start operations. These funds will be used to provide small loans, subject to MRA approval.
In February 2021, the microcredit regulator invited applications due to growing interest among new NGOs seeking licences to provide small loans to marginalised individuals.
This initiative aligns with the government's efforts to promote self-reliance through vocational training.
NGOs registered under any of these laws -- the Societies Registration Act, the Trust Act 1882, the Voluntary Social Welfare Agencies (Registration and Control) Ordinance 1961 and the Company Act 1994 -- were eligible to apply for licences.
NGOs engaged in various development activities, excluding microcredit operations, also met the requirements for obtaining a licence.
Over 1,130 non-governmental organisations (NGOs) have applied for licences to run microcredit schemes across the country and all may be granted conditional approval.
The government has decided to award three-year conditional licences to all new MFI applicants, subject to meeting application requirements, according to sources.
MRA Director Zillur Rahman previously said that evaluating all applications could take around three years due to manpower limitations. "We lack manpower, so a thorough evaluation of all applications will be time-consuming. It may take three years," he told The Financial Express.
The Microcredit Regulatory Authority Act 2006 was enacted in July 2006 to establish a regulatory framework for NGO-MFIs. The act came into effect on August 27, 2006.
The MRA subsequently launched the first round of applications for microcredit operations, primarily to regularise existing operators.
"We received 4,300 applications in 2006-07, but only 758 NGOs were deemed competent for microcredit operations," former MRA director Mohammad Yakub Hossain told the FE.
In the second phase, the MRA invited applications from 37 poverty-stricken districts and received 1,212 bids.
The regulator designated these areas to prevent overlap in small lending and borrowing services and to support the government's poverty alleviation programmes.
After three years of observation, the MRA in 2014 awarded 122 licences.
However, the regulator has revoked the licences of 151 NGOs-MFIs in different stages due to compliance-related deficiencies. Currently, around 750 NGOs-MFIs are operating under the regulator.
The registered MFIs serve over 40 million of the country's estimated 160 million people.
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