1,130 additional NGOs await microcredit licenses

| Update:
Dec. 19, 2021, 1:30 p.m.

Some 1,130 non-governmental organizations (NGOs) have applied for a license to conduct microcredit operations across Bangladesh, and all of them can be conditionally approved.

Sources indicate that the government has decided to grant conditional licenses for three years to all new applicants from microfinance institutions (MFIs) subject to meeting their application requirements.

“We have already awarded four licenses last week and the process will continue until all applications have been fully scrutinized,” said Md. Zillur Rahman, director of the Microcredit Regulatory Authority (MRA).

While all applications are eligible for a license, he added, the MRA has decided to license all of them.

The Microcredit Regulatory Authority begins licensing after eight years to expand small loan operations into new areas across the country.

Last February, the regulator invited applications following growing interest from new NGOs which had applied for a license to lend to the poor according to the government’s recipe to make them autonomous by undertaking small vocations.

NGOs registered under one of these laws – the Companies Registration Act, the Trusts Act 1882, the Social Welfare Agencies (Registration and Control) Ordinance 1961, and the 1994 companies – can apply for a license.

Each of the interested NGOs is required to show 3.0 million Tk in their bank account as a deposit for the start of operations. The amount will be used for the granting of small loans subject to the authorization of the MRA, according to its circular.

The selected organizations should have a minimum of 300 small clients and an outstanding loan of Tk 4.0 million each in the first year, which will represent a minimum of 600 clients and a loan of Tk 7.0 million per year. second year, and a minimum of 1000 customers and 10 million Tk ready in the third year for obtaining the final permit.

NGOs which are now engaged in various development activities, with the exception of microcredit, will be able to apply for a license.

MRA director Zillur Rahman said it could take around three years to assess all applications.

“We are short of manpower, it will take a long time to assess all the applications … it may take three years,” he told FE.

In July 2006, the government of the day enacted the Microcredit Regulatory Authority Act 2006 to place NGOs-MFIs within a regulatory framework, which came into force on August 27, 2006.

The MRA then launched a first call for applications for microcredit operations, in particular for the legalization of those that were already underway.

“We received 4,300 applications in 2006-07, but found only 758 NGOs competent for microcredit operations,” Mohammad Yakub Hossain, another director of the MRA, told FE earlier.

During the second phase, the MRA solicited applications from 37 poverty-stricken districts and received 1,212 offers.

The regulator then demarcated the zones to avoid overlap of small lending / borrowing services and also to help meet the goals of government poverty reduction programs.

The MRA finally granted 122 authorizations in 2014 after three years of observation.

However, the regulator canceled the licenses of 133 NGO-MFIs at various stages for breaches of compliance in their operations. Currently, around 750 NGO-MFIs operate under the authority of the regulator.

Registered MFIs serve around 40 million of the country’s 160 million inhabitants.

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