Move to divert Tk 16b risk fund to micro credit loan account

Ismail Hossain | Published: March 04, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

The micro-credit regulator is set to take a move to abolish nearly Tk 16 billion loan risk fund and divertÂ the money to the loan account.
The micro-finance institutions (MFIs) have long been deducting Tk 5.0 or more for Tk 1,000 loan to use it for mitigating the risk of loans.
As there is no legal provision, the MFIs deduct the charge from loan under many different names. Â
The fund stood at Tk 16 billion now and the Micro-credit Regulatory Authority (MRA) thinks MFIs do not need the provision anymore.
A MRA director told the FE that they were preparingÂ the directive to be sent to MFIs to abolish the provision and use the money as loan.
He said the MRA created some other alternative options including loan write-off provision, classification provision etc to mitigate the risks of micro-credit loans.
"Besides, as the rate of repayment of micro-credit loans is more than 99 per cent, there is no justification of having this huge sum as loan risk fund at this stage," he said.
The authority also thought the practice started when there was no regulator for micro-credit sector but now the MRA has built a strong ground.
"The Tk 16 billion addition to the sector will certainly strengthen the micro-credit more effectively and many more new clients could benefit from the move," he said.
However, Credit and Development Forum Chairman Emranul Huq Chowdhury said if the MRA makes such a move, MFIs would oppose it.
The country's MFIs are running micro-credit under a very risky situation and they do not keep any collateral against the loan, he pointed out.
"So we need the fund and we hope the MRA will sit with us before finalising the decision," Mr Huq said.
Currently, the number of MFIs stands at 906, including 208, which got licences for three years to prove their ability to continue operation.
The sector at present has 20 million borrowers and 26 million members and its total outstanding loan is now Tk 350 billion.
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