MRA to examine new model for poverty reduction

The Micro-credit Regulatory Authority (MRA) will hold a meeting with stakeholders on January 11 to discuss launching of Lead MFI (micro-finance institution) System to coordinate poverty-reduction programmes at  grassroots level.
The MRA has recently taken the initiative to launch the new model of action under the poverty-alleviation recipe.  
"We will finalise the model after holding discussions with stakeholders and as per their recommendations," Md. Sazzad Hossain, Director of the MRA, told the FE Monday.
Earlier, he said 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.
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 recruitment of members and negotiating the financing terms.
Mr Sazzad Hossain said the difference here is that the Lead MFI will not only oversee loan but also other anti-poverty programmes.
"Suppose, 200 people are eligible for credit 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 will also get credit," he said explaining the system.
Expressing doubts, Executive Director of BRAC Dr Mahabub Hossain said the model might not be successful.
"No MFI will listen to other fellow MFIs as they have been working with the same dignity under the same regulator," he said.
Chairman of Credit and Development Forum (CDF), a network on microfinance, Md. Mosharraf Hossain said the model will not work if Lead MFI oversees regulatory affairs.
"If it is about coordination of poverty alleviation programmes only, it may succeed," he said.  
However, both of them said the MRA should be strengthened more as the sector has expanded significantly.
The proposal is now at the draft level. The authority is evaluating the programmes.
According to the new model, the Lead MFI will coordinate with other poverty-eradication programmes initiated by the government agencies and other national and international agencies so that the programmes are not overlapped.
Mr Sazzad Hossain said, "I'm sure, once the programme is introduced, importance of micro-credits will reach a new height."
Though there is no apparent study as to how much contribution MFIs make on poverty reduction in the country, 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 the MRA, but there was no in-depth research on its contribution.
Currently, the 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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