Administrators may run troubled MFIs

The government is bringing amendment to the existing rules to make a provision for appointing administrator to salvage any micro-finance institutions (MFIs) in trouble, officials said.  
In the meantime, they said, the Microcredit Regulatory Authority (MRA) has finalised the rules and the gazette will be published next week.
There was no rule in the Microcredit Regulatory Authority Act 2006 and the Microcredit Regulatory Authority Rules 2010 about appointing administrator to micro-finance institutions.
"Recently MRA took punitive action against some faulty MFIs and removed chairmen or CEOs on several allegations but could not appoint administrator for lack of such rules," MRA Director Shazzad Hosoin told the Financial Express Tuesday.
Administrator will be appointed for intermediary period until the MFI concerned improves and gets a new CEO in the management change.
He said MRA is taking tough stance on troubled MFIs. The Authority wants to improve the situation if any serious fault is found.
"If the MFI cannot be improved, we cancel the licence," he added.
"We have so far cancelled licences of 54 MFIs on various charges, including misuse of funds, shortage of funds and breach of lending-rate terms," he said.
Mr Shazzad said the MRA scrapped the licences for breach of 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.
Since its inception in 2006, the Authority 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 for licensing, monitoring and overseeing MFIs, as microfinance has been a private-sector initiative all along.
Such institutions on small lending flourished without any formal regulatory entity in most parts of the world.
Though Bangladesh has been pioneer of micro-credit, it lagged behind some countries in enacting a regulatory framework for this sector.
Over the years, it has made a number of changes to its rules and regulations.
Currently, 697 MFIs are registered with the MRA. These registered NGOs are serving more than 40 million out of the country's 160 million people.
Currently, MFIs under the MRA have Tk 300 million outstanding loans. The number of total clients of this sector is 35 million.
The Authority is now in a process of granting licences to 350-400 more MFIs.    [email protected]