MFIs to obtain licence to run micro-credit

Oct 2006
Dhaka, Bangladesh , October, 01 2006 - Micro-Finance Institutions (MFIs) will require to obtain mandatory license from the newly set up Micro-Credit Regulatory Authority (MCRA) to continue credit operation in the country.

"Any institution, existing and new ones, will have to obtain the license to operate micro-credit," Bangladesh Bank governor Dr Salehuddin Ahmed, also the MCRA chairman, told reporters after a meeting in his office on Sunday.

MCRA Board of Directors took less than one month to go for the first meeting and take the decision.

The Finance Ministry had formed the 8-member Board on September 7 this year. MCRA came into being on August 27 under the Micro-credit Regulatory Authority Act, 2006, enacted on July 16. The meeting decided to make available the application form for the license from November 1 and the intended MFIs will have to submit the application by February 26 next year.

Application fee has been fixed at Tk 500 while the license fee would be decided later. The MFIs having license are to pay an annual fee to operate their activities.

Before awarding the license, the regulatory authority would consider the state of governance, ownership pattern, command area, source of fund and registration status of the micro finance institutions. "The MFIs will not be able to continue micro-credit operations without the license," said the MCRA chairman. He, however, hinted that the existing MFIs would be eligible under the criteria of licensing.

He said the meeting also formed a 5-member expert committee, headed by Palli Karma Shahayak Foundation (PKSF) deputy managing director Mosharraf Hossain, to look after the technical aspects of micro-credit operation and recommend the Board of necessary decisions.

The expert committee would later consider the issue of interest rates being charged by the MFIs, he said, replying to a question. "The MCRA will have the facilitating role besides the regulatory role," said MCRA member Dr Fakhruddin Ahmed, who is the managing director of PKSF.

He said the authority would provide MFIs with a legal basis as well as ensure accountability and transparency of micro-credit operations. The number of NGOs is estimated at more than 20,000 operating in Bangladesh. Many of them are involved in extending micro-credit. However, PKSF maintains around 200 partner organisations who have a total 6.5 million borrowers.

Source : The New Nation

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