NGOs must ensure provisioning against disbursed loans

FE Team | Published: October 25, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Sarwar Zahan
The government is going to make it compulsory for the non-governmental organisations (NGOs) engaged in micro-credit operations to ensure provisioning arrangement for loans disbursed, sources said.
Finance ministry sources said it might be made mandatory for the NGOs to ensure such provisioning in the form of government bonds.
An order is likely to be issued in this connection for the micro-credit operators, they said.
The decision of the government will be implemented through the Micro-credit Regulatory Commission (MCRC), supervised by the central bank.
The central bank is actively moving with the proposal, central bank sources confirmed.
The MCRC has started issuing licences to selected NGOs distributing micro-credit and about 100 of such organisations have received licences to operate so far.
Some more organisations will get temporary permissions for running micro-credit programme. All the organisations will have to keep cash in the form of bonds as provisioning arrangements, they said.
The percentage of provisioning against disbursed loans for the NGOs will be similar to that of the commercial banks, sources said.
The central bank has initiated the move with the support of the finance ministry in order to stimulate increased private sector participation in the bond market, central bank sources said.
The move will also help emergence of a new source of fund outside the banking sector and it will also facilitate development of the bond market. The government puts emphasis on finding new and innovative sources for deficit financing, sources added.
The central bank is also interested in developing and widening the secondary bond market and searching new investors for the market expansion.
The government bonds are now traded in the market through selected primary dealers. The same dealers will be allowed to trade the bonds purchased by NGOs, sources said.
The MCRC is working to gradually issue licences to a total of 1,000 NGOs throughout the country for operating micro-credit and it has selected 130 organisations in the first phase, they said.