Majority of microlenders defying MRA rules on mandatory liquidity provision

Most of the microfinanciers operating in the country are not complying with the mandatory liquidity fund against deposits provision of the Mirco-credit Regulatory Authority (MRA), officials said.
Under section 34 of the MRA Rules of 2010, (1) "Every micro-credit organisation must maintain 15 per cent liquidity fund of its entire compulsory, voluntary and term deposit, or whatever name assigned to the deposit funds, in the savings  account of a scheduled bank."
 (2) "Liquidity fund may be maintained in the form of minimum 5.0 per cent in cash and the remaining portion as fixed deposit."
As of December, 2013, some 520 out of 645 MFIs violated the required MRA provision to preserve their necessary 15 per cent liquidity funds. Only 125 MFIs maintained the rules, according to the MRA data.
Director of the MRA Md Shazzad Hossain, however, told the FE Monday, "Most of the MFIs have started to maintain the liquidity fund provision."
He also said savings of MFIs clients are not risky because a large amount of loans has been disbursed to their clients, he said.   
The regulator will remind the MFIs concerned which are defying its rules and regulations to maintain the same as early as possible to pick up the provision, sources close to the issue said.
"We hope all the NGO-MFIs under the MRA will be able to protect 15 per cent required reserve fund by December, 2014. But some NGO-MFIs are limping with liquidity problem. As a result, it has been late for them to comply with the provision," a top official of an NGO-MFI said.
It is mandatory for the MFIs to maintain the Act and Rules of the MRA. The MFIs failing to follow the rules would be penalised, he said.
On the other hand, the MFI has to face punishment, if it breaches the regulator's act and rules, sources said.
Section 37(1) of the MRA Act of 2006 says, "If any person violates this act or any rule framed under its purview or commit any offence under this act or in cases where administrative fine can be imposed, the authority in all those matters, instead of filing criminal cases, may impose fines up to an amount of Tk 0.5 million, considering the extent of the violation of the Act or the offence committed."
In 2012, only 128 out of 645 MFIs fulfilled the required liquidity fund as per MRA Rules and 125 MFIs preserved 15 per cent liquidity fund accordingly in 2013, the MRA data shows.
Currently, 696 MFIs are registered and 92 have got licences temporarily from the authority. These registered NGOs are serving more than 40 million out of the country's 160 million people.