The Microcredit Regulatory Authority (MRA) moves to form depositors' safety fund to minimise the risk of losses of small savers in the event of non-payment by any micro-finance institution.
However, the MFIs in operation have dissented strongly to the proposal, which is mandatory as per section 19 of the MRA Law-2014.
The MFIs argue that small savers can take loans up to 10 times of their savings from micro-credit entities. So, their funds, by default, are secure with the MFIs.
"MFIs are not banks, they don't require any DSF like banks and financial institutions," says Abdul Awal, executive director at Credit and Development Forum (CDF), a forum for NGO-MFIs.
The forum meets the MRA executive vice-chairman next week with a plea for amendment to the section.
The MRA and MFIs are also going to organise a consultation meeting in May to settle the issue.
Earlier, the MRA in a letter to MFIs said the fund would protect consumer interests.
Such fund will also build public confidence in depositing money with MFIs and reduce risks like panic withdrawal of deposits from financially sound MFIs.
According to the DSF Rules-2014, four types of NGO-MFIs are required to contribute to the fund.
Under the fund, an MFI will pay premiums to MRA annually. The premium will be determined as per the risk-based rankings of MFIs.
A low-risk MFI will require paying low premiums and an MFI with high risk will pay higher premiums.
The MFIs with lowest risks will make 0.06 per cent of their total deposits while those with highest risks will contribute 0.20 per cent to the fund.
The funds will compensate clients if an MFI winds up.
MRA director Md Yakub says the issue is still under discussion. "MFIs were given three months to find a way to comply with the DSF rules."
In 2012, the MRA also made a failed attempt to constitute a Tk 300-million fund in the absence of any specific rule for the same.
It was then planned to raise the money in six years.
The government was supposed to supply Tk 50 million to the fund and the licensed MFIs were to pay the rest in premiums.
Under the fund, a saver is likely to receive up to Tk 3,500 in coverage if an MFI goes out of business.
Nearly 800 MFIs now operate on licences from the MRA.
The total outstanding loans of the authorised MFIs and Grameen Bank have exceeded Tk 800 billion against total savings of an estimated Tk 373 billion.
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