Microcredit borrowers get more repayment flexibility

The latest amendment to Microcredit Regulatory Authority Rules, 2010 has granted borrowers of microfinance institutions (MFIs) even more repayment facilities, adding quarterly, half yearly and one-time instalments on top of weekly, fortnightly and monthly options.

A gazette, issued in this regard by the government on Sunday, mentions that eight sub-sections of five clauses in the rules have been amended, and one other is revoked. This is the second amendment of the MRA Rules 2010.

The first amendment – which came in 2015 – covered issues related to MFI administration. The second amendment has mostly focused on MFI operations, resource mobilisation and operation during natural disasters, an analysis of the latest gazette shows.

As per the new amendment, every MFI must secure permission from their board of directors to buy or sell any property. Besides, the government move has introduced major changes in activities that would allow the MFIs to ensure more capital flow for lending money.

Sub-section 3 of provision 24 has been amended, allowing MFIs to lend 60 per cent of their portfolio, instead of the previous 50 per cent. Moreover, MFIs can now lend 40 per cent of its voluntary deposits, which was previously 25 per cent.

Similarly, lending from the term deposit has been increased from 25 per cent to 50 per cent. Every MFI now has to deposit 10 per cent of its total deposits to banks, which was previously 15 per cent.

According to MRA officials, the authority is optimistic that the new changes would inject an additional Tk 25,000 crore into MFIs’ financial resources.

Speaking to The Business Post, MRA’s Director (Planning, Research and Offsite Monitoring Department) Mohammad Yakub Hossain said, “The financial resource mobilisation pattern in the microfinance sector is quite different from the banking or financial institution systems.

“The financial resource mobilisation in microfinance is multifaceted. Keeping the latest changes in mind, we are assuming that they will ensure a Tk 20,000 crore to Tk 25,000 crore inflow in the MFIs.”

Emranul Huq Chowdhury, founder and principal adviser to the socio-economic NGO Antar, said, “The Microcredit Regulatory Authority rules – even after the latest amendment – lack effective guidelines for emergency situations.

“The amended rules also do not mention anything about tackling the rising inflation, which is severely impacting the MFIs. Besides, the MRA had claimed that the amendment will have better financial resource mobilisation, but this is not the reality.”

He added that MFIs can now lend 40 per cent of its voluntary deposits, but the MRA had previously mentioned increasing this limit to 50 per cent.

MRA Executive Vice Chairman Md Fashiullah said, “The amendment was made to make the rules more beneficial to MFI clients, including under-privileged borrowers residing in the remote areas.

“Besides, we have also looked after the interest and accountability of MFIs.”

He continued, “That is the reason why the borrowers’ repayment period has been increased further. Banks rarely agree to finance microenterprises in the country. “So, to ensure a better investment atmosphere for even those residing in the remote areas, the scope of using the deposits has been widened.”

Fashiullah added that latest changes to the rules have been introduced for the benefits of the disadvantaged and underprivileged people, and such amendments will continue to come.

“Of course the MFIs will seek better and better advantages. But we will always focus on changes that can benefit the marginalised,” he said.