MFIs seek political support from government

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The government should expand policy support for microfinance institutions to recover from the fallout of the Covid pandemic, the International Network of Alternative Financial Institutions said on Saturday.

INAFI made the recommendation during a report-sharing seminar on “Effects and Impact of the Covid-19 Pandemic on MFIs and their Clients: An In-Depth Study”.

He said the regulator should come up with a one-size-fits-all policy to bring about three crores of customers under digital financial services cover.

He also said that the regulator should change the policy regarding the cap on voluntary deposits as well as term deposits.

This can motivate MFIs to encourage borrowers to deposit more savings in MFIs, he said.

A clear and comprehensive guideline is needed to specify the duration of special provisions such as the management of loan loss provisions and loan classification that would help MFIs operate in a uniform manner while maintaining discipline within the sector.

The government should also strengthen monitoring to ensure the proper implementation of its various directives by all MFIs in times of crisis.

It also asked the regulator to set aside a provision indicating a specific percentage of the excess fund that MFIs could use for CSR activities during crises and emergencies without prior approval and will require ex-post approval.

Sheikh Mohammad Salim Ullah, secretary of the Financial Institutions Division of the Ministry of Finance, said the coronavirus pandemic could have slowed the growth of the economy for a few months, but could not stop it.

Due to the natural calamity, some people sold their assets and withdrew fixed deposits for survival, but government initiatives helped people recover from the losses significantly, he said.

The Executive Vice President of the Microcredit Regulatory Authority, Md Fashiullah, said the country has recovered significantly from the pandemic thanks to various government initiatives.

He said that the MRA had taken initiatives to change the rules to facilitate the activities of MFIs.

INAFI is a global network of development practitioners.

It was internationally registered in The Hague, Netherlands in 2000.

INAFI Bangladesh is the national chapter of INAFI Asia working in Bangladesh since 2003.

INAFI has researched microfinance and microenterprises to see the effect of the pandemic on them.

It covered 442 borrowers and collected information from 22 MFIs on challenges and policy changes due to the pandemic.

The research period was before the pandemic, from March 2020 to June 2021 and the recovery period from July 2021 to January 2022 and covered nine districts.

He revealed that 28.7% of borrowers lost their jobs, 21.7% failed to pay loan installments and 83.9% saw their incomes drop during the pandemic.

The average monthly income of all respondents has been reduced by 20.4% and monthly expenses have dropped by 5% since the pandemic.

Most respondents took out loans, withdrew savings, cut spending and sold assets to ease the crisis, the report said.

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