NEWS reports in The New Nation on Thursday said Micro-credit Regulatory Authority (MRA) has cancelled license of ten more micro-finance institutions (MFIs) because of gross irregularities in their loan activities meant for various poverty eradication programme. Their closure were ordered as the news reports said for violating the rules and engaging in self-seeking activities instead of using the fund from the government and donor sources to help the poor. In fact this is not something new and the MRA has so far cancelled licenses of 74 such MFIs from 2011.
It is also noticeable that the MRA has awarded new licenses to 204 MFIs or non-government organizations (NGOs) during the period to operate in areas as the sponsors of such organizations prayed for. There is no doubt that MFIs are playing a significant role to combat poverty and to bring about improvement to the life of the poor throughout the country. Field statistics show a total of about 686 MFIs are serving around 20 million borrowers now in the country with a loan outstanding of Tk 35 crore. They are engaged to help the poor to run small businesses and earn their livelihood.
But it is no secret that the high rate of interest that most MFIs are charging is not only exploitative but also the owners of most MFIs treat them as private business, except some big ones having institutional set up. They have certain accountability system such as in Grameen Bank and BRAC in loan operations and recovery but their number is not quite big. Most others are not transparent and in fact being run as pocket organizations of powerful individuals. Their relatives operate them with hefty salary and other benefits.
It is also no more a secret that ruling party men easily get registration of such MFIs to use specific government fund for improvement of environment, health, education, sanitation and such other needs of the poor. Needless to say most such money does not reach the beneficiaries and this may partly explain why new registration is going on along with cancellation of some others.
We know that the MRA has been set up to bring discipline in micro-credit organizations enforcing transparency and accountability in their financial system and field operations. But inside story suggests they have to make compromise in real life to entertain request from powerful quarters. In our view the MRA could do better if it were able to reduce the number of MFIs to force the remaining ones to be highly compliant of financial discipline and make them answerable to people. NGOs are using tens of crore taka annually in the country with many of them seriously misusing the fund. Mere cancellation of licenses is not enough; laundering of people’s money must stop.
