Move to inject Tk 8.0b into microcredit sector

The Microcredit Regulatory Authority (MRA) has taken a move to inject around Tk 8 billion in cash into the country's microcredit sector.
It took the move to inject the money by cutting microfinance institutions' (MFIs) deposit funds from 15 per cent to 10 per cent and surplus reserve funds from 10 per cent to 7 per cent.
The microcredit regulator made a proposal to this effect and sent it to the finance ministry for approval.
The MRA took the decision at a recent meeting with the country's MFIs.
"We think MFIs are now stronger than ever before. They can divert the funds to borrowers," MRA director Shazzad Hossoin told the FE.
According to Microcredit Regulatory Authority Act, every MFI must maintain 15 per cent liquidity fund of its entire compulsory, voluntary and term deposit or whatever the name assigned to the deposit funds, in the savings account of a scheduled bank of the branch offices.
The act states, "Liquidity fund is maintained in the form of minimum 5 per cent in cash and the remaining portion as fixed deposit.
"MFIs also must create reserve fund using 10 per cent of its total income surplus (accumulated surplus or profits), which is known as surplus reserve fund."
The act also says, "Reserve fund must be maintained in a bank account of a specified scheduled bank under the supervision of the head office of relevant MFI."
MFIs may use funds for other programmes to alleviate poverty of the clients subject to approval from the authority concerned, according to the act.
According to the MRA, 5 per cent of deposit fund and 3 per cent of surplus reserve fund totals Tk 8 billion.
The people involved with the sector have welcomed the move, saying that it will strengthen both the MFIs and borrowers.
Former Chairman of Credit and Development Forum (CDF) Mosharraf Hossain said the initiative is at an initial stage.
"The issue was discussed recently at the meeting with MRA. This is a very positive move for the sector," he added.
At present, the sector has more than 20 million borrowers and 26 million members with outstanding loans amounting to around Tk 420 billion.
The MRA in September last year issued licences to 198 micro-financiers on condition that they operate microcredit for three years.
According to the MRA, there were 686 MFIs in the country. With new ones, the number of MFIs now stands at 884.
The MRA director said as the sector has expanded significantly, they need more liquid money now. Injection of Tk 8 billion will certainly help boost the sector, he added.
    bdsmile@gmail.com