Separate CIB for MFIs getting delayed

The planned setting up of a separate credit information bureau (CIB) for the country's micro finance institutions ((MFIs) has been delayed as the Department for International Development (DFID) will not provide its promised funds for the data centre.
The Bangladesh Bank (BB) recently rejected the proposal of the DFID to create a subsidiary by the central bank to operate and manage CIB for both commercial banks and microfinance institutions under a single management.
The central bank said such a proposal is not realistic.
"The central bank's existing physical infrastructure cannot take the load of huge data operation of microfinance sector and a separate subsidiary is also not realistic," said Bangladesh Bank in response to the DFID proposal.
The central bank's decision to reject the DFID proposal came at a recent meeting at the Bangladesh Bank where central bank deputy governor SK Sur Chowdhury was present.
The government has long been trying to create a CIB for microfinance sector to contain overlapping loans, absorb shocks and halt the dropout rate of borrowers.
Earlier in 2004, before formation of micro credit regulator, there was a project in Palli Karma-Sahayak Foundation (PKSF) with World Bank assistance for software system updating and modification for use as data centre, but it failed.
Later in 2013, the board of the Microcredit Regulatory Authority (MRA) approved its proposal on CIB and its legal aspects.
The International Finance Corporation (IFC) is providing technical support while the Department for International Development (DFID) was supposed to finance the initiative.
According to a recent DFID proposal, which is different from agreed one, the British aid agency proposed a CIB subsidiary for entire financial sector to institute synchronisation process between CIB-Bangladesh Bank and CIB-micro finance.
In its proposal, the DFID said, "This option essentially de-links the operation and management of CIB for commercial banks and non-financial institutions from the Bangladesh Bank and puts them under a subsidiary which could be named as CIB subsidiary for commercial banks and microfinance.
However, the DFID wanted physical operations of CIB to remain still with the Bangladesh Bank and operate as before.
The proposed independent CIB-MF's technical software and hardware will be located at the Bangladesh Bank, but its operation and management responsibility will remain with the MRA, according to the DFID proposal.
It said creation of a subsidiary puts ownership and management of both CIBs at the subsidiary. The management of both CIB-BB and CIB-MF will, therefore, be under a single authority, to be governed by the rules and regulations of a subsidiary, created by the Bangladesh Bank Charter.  
Other than subsidiary, the DFID's two other options were PKSF Option, which can use the PKSF's existing software that was designed under the World Bank assistance in 2004 and MRA-BB option, the least cost option, which would use all IT support from the Bangladesh Bank, including software development.
According to DFID source, the aid agency wants to finance only subsidiary option.
MRA Director Shazzad Hossain said they received both DFID proposal and BB refusal.
"MRA will now go alone in creating CIB with the help of the Bangladesh Bank if the DFID does not come up with financial assistance," he said.  
He said the micro-credit sector needs a CIB which will reduce transaction cost for both borrowers and lenders and bring down demand for funds.
At present, there are more than 20 million borrowers and 26 million members with outstanding loans of around Tk 420 billion.
The CIB needs a huge infrastructure to store and operate these data.
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