Finance ministry rejects proposal of charge on microfinance income

Ismail Hossain | Published: November 02, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The ministry of finance has turned down a proposal to impose a 0.15 per cent service charge on the interest income of microfinance institutions (MFIs).
The microcredit regulator sent the proposal in January, saying the service charge will be used to meet the expenditure of improving service quality of the regulator.
The first-ever such proposal in the country has come as replacement of the annual fee, the country's MFIs pay to the Microcredit Regulatory Authority (MRA) a year based on the number of borrowers an organisation has.
The MRA wanted to introduce the new service charge from 2017. But turning down the proposal recently, the Finance Ministry said the regulator should not get such fund from MFIs.
"The amount was very nominal in comparison with the sector's total interest income and the new service charge aims to meet the expenditure of improving service quality of the MFIs," MRA director Shazzad Hossoin told FE.
"This is nothing new. Other regulatory bodies in the country impose such kinds of income generating charges," he said.
Credit and Development Forum (CDF) Chairman Emranul Huq Chowdhury said while the forum members welcomed the move, they were ready to pay the service charges as well.
"We were all ready to help improve the MRA with this fund but at the same time we welcome the new decision by the ministry," he said.
Mr Huq, also Executive Director and CEO of UDDIPAN, said the MRA needs more financial support from the government as the sector is growing day by day. But the government is reluctant to provide as much support as the regulator needs.
The sector at present has 20 million borrowers and 26 million members with outstanding loans amounting to around Tk 400 billion.According to the MRA, there are 686 MFIs in the country now. With the addition of 198, the number of MFIs will reach 884.
The MRA wanted to earn some Tk 150 million from the newly-proposed service charge from around Tk 75 billion interest income of the sector.
"We will again try to convince the ministry about the service charge, I hope they will understand the need of the charge," Mr Hossoin added.
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