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60 microcredit lenders lose licences

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60 microcredit lenders lose licences

Sohel Rahman, thereport24.com:

The Microcredit Regulatory Authority (MRA) cancelled licences of 60 micro-finance institutions (MFIs) in more than four years for failing to comply with the related rules. Of them, the licences of four were cancelled in 2011, 17 in 2012, 19 in 2013, 16 in 2014 and four until September last in the current year, according to MRA sources.

The MRA said the Microcredit Regulatory Authority Act was enacted in 2006 with a view to bringing the MFIs in every corner of the country under a regulatory framework so that the interest of depositors can be protected. Under this law the MRA was formed with the Bangladesh Bank governor as its chairman. The MRA rules were framed in 2010. The gazette notification was made on the rules on January 17 in 2011.

The MRA also said soon after formation of the MRA a total of 757 organisations were given licences for rendering microcredit services in phases against 4,240 applications. Of them, 60 licences were cancelled in the last more than four years. At present the number of licensed MFIs is 697. But of them, the licences of three MFIs were suspended for one year. The three MFIs are the Maharam Ali Memorial Foundation (Kaduti Bazar, Chandina, Comilla), Kaduti Bazar Small Traders Association (Kaduti Bazar, Chandina, Comilla) and the Institute of Rural Development (222/Kha, Malibagh Second Floor, Flat C2, Dhaka).

The MRA invited applications for licences in the second phase in 2011. A total of 1,212 applications were received that time. Of them, 202 were awarded licences for the time being.

When asked about the approval and cancellation of licences for microcredit operation, MRA Deputy Director Md Yakub Hossain told The Report, “Usually an organization must have at least 1,000 clients and a capital of Tk 40 lakh for conducting the microcredit operation at the field level. But it was found that most of the organisations could not meet the condition.”

He also said, “Besides, many others are there who launch such organisations for different purposes. But when they come to take the licences, they find so many requirements they need to meet and ultimately feel discouraged and close such organisations. We also force closure of such organisations, if we see any deviation in complying with the law. But that we do not do all of a sudden. It is done through a process. Such organisations are first asked to show cause and they are given a timeframe for complying with the related rules. If necessary, they are given more time. Still if it fails, then the licence is cancelled.”

“The MRA is doing its duty with transparency keeping in mind the issue of interest of the depositors in case of approval or cancellation of any licence,” he claimed.

The reasons, for which the MFI licences were cancelled under the Microcredit Regulatory Authority Rules 2010, are: breach of conditions mentioned in the certificates, false or fabricated information or deeds submitted for taking licences, involvement in any trade that can harm the interest of the depositors, failure to comply with the instructions as set out in the section 44(2) of the MRA Act and any punishment for the organization for an offence under any law.

When asked whether the licences were cancelled or suspended for any financial corruption, Md Yakub said, “As all these conduct microcredit operations, there is no scope of any big financial scam. Besides, we are always keeping an eye on them. Apart from that, those MFIs that lose their licences are kept under monitoring. The refund of money of the depositors and the process of winding up the organisation’s operation are closely monitored. If necessary, the local administration’s help is taken in that case. In case of any failure the legal recourse is taken.”

Md Yakub Hossain said the organisations that faced legal action so far included the Programme for Research and Publication of Poverty (PREP—House No. 531, Road No. 8/A, Block B, Chandgaon R/A, Chittagong) and Grameen Sangstha (Pashchim Shanbanda, Post Office-Baliartek Bazar, Manikganj). Besides, the Sonali Unnayan Foundation at 218/9 Begum Rokeya Sarani, Mallik Plaza, 4th floor, Sher-e-Bangla Nagar in the city was closed after several rounds of investigation into its irregularities.”

Ends/thereport24.com/AR/Oct 11, 2015