Lead MFIs envisaged for taking anti-poverty drive into top gear

A government move is now in top gear for introducing Lead MFI (micro-finance institution) System to coordinate poverty-reduction programmes at the root level.
The Micro-credit Regulatory Authority (MRA) is preparing the new model of action under the poverty-alleviation recipe.  
"Lead MFI System is a kind of replication of Lead Bank System. Under the system, a leading MFI will coordinate the poverty-reduction programmes at the upazila level," Md. Sazzad Hossain, Director of the MRA, told the FE Friday.
Lead Bank System is being practiced in banking where a bank oversees the arrangement of loan syndication. The lead bank is paid an additional fee for this service, which involves recruiting the members and negotiating the financing terms.
Mr Sazzad Hossain said the difference is here that the Lead MFI will not oversee only loan but also other poverty programmes.
"Suppose, 200 people are eligible for credits in an upazila, but under the existing system 150 people are getting the credit facilities. The lead MFI will find out why the rest are not under MFI credit programme.
If those left out are in need, they must get credits," he said to explain the system.     
The proposal is now at the draft level. The authority is evaluating the programmes.
The MRA is planning to organize meeting with stakeholders before finalizing the Lead MFI System. After necessary modifications, the regulator hopes it to be introduced from March.  
He said the Lead MFI will coordinate with other poverty-eradication programmes initiated by government agencies and other national and international agencies so that the programmes are not overlapped.
"I'm sure once the programme is introduced, the micro-credits will reach a new height," he said.
Though there is not any apparent study how much contribution MFIs have on the poverty reduction in the country, but sector-insiders think it is significant.
"Currently it is said that microcredit is contributing 2.5 per cent to the country's GDP, but we think the figure is not correct," Mr Hossain said.
He said microcredit has expanded a lot over the years after the formation of MRA, but there was no in-depth research on the contribution.
Currently, Bangladesh Institute of Development Studies (BIDS) is conducting a research to assess the contribution of micro-credits to the gross domestic product (GDP)
Currently, 745 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 MRA is now in a process of granting licenses to 350-400 more MFIs.
The then government in July 2006 enacted the Microcredit Regulatory Authority Act 2006 (Act No. 32 of 2006) to bring the MFIs under a regulatory framework, with effect from August 27, 2006.
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