Badrul Ahsan :The Microcredit Regulatory Authority (MRA) has put a cap on investment by micro finance institutions (MFIs) in fixed assets with 35 percent of their cumulative earning.The microcredit regulator in a circular recently imposed the restriction on fixed asset purchases in public interest and also to strengthen the sector.The regulator also directed the country’s MFIs to liquidate fixed assets above 35 per cent of cumulative earning surplus and readjust by one year from this circular. According to the circular, the outstanding loan of an MFI must be 90 per cent of total sum of 85 per cent of clients’ savings, entire amount of loan from any source and 50 per cent of cumulative earning surplus.Shazzad Hossain, a director of MRA said that though there was no certain directive on the cap of investment on fixed assets, the Micro Credit Regulatory Authority Act 2006 and MRA Rules 2010 stated many times how to spend funds of a MFI and whether it can invest in fixed assets. According to 32(3) clause of the Micro Credit Regulatory Authority Act 2006, no microcredit institution, without prior approval of the Authority, shall use or invest the deposit in any head other than the heads decided by the MRA.Besides, Section 35 of MRA Rules 2010, no microcredit organisation will use the deposit fund for purchase of any moveable or immovable asset or to meet any expenses.”We have got concrete proof that some of MFIs took bank loans, but did not use it for loan purpose. They invested the fund in making immovable assets by purchasing lands or erecting big buildings,” Shazzad Hossoin said. However, Emranul Huq, Chairman of Credit and Development Forum (CDF), a national association of Bangladeshi MFIs, said the circular is not rational.He said the cap on investment on fixed assets should be at least 50 per cent of cumulative earning surplus.”The MFIs in Bangladesh cannot take away profit from an organisation. They have to reinvest the money. So investing it on fixed assets will strengthen a MFI,”Emranul Huq said.According to the industry insiders, most of the top MFIs might have to liquidate large portion of their fixed assets as they have invested more than 35 per cent of their cumulative earning surplus. Disagreeing with the allegation, Emranul Huq said, “The MRA should also extend one-year time for adjustment of assets if any MFI has fixed assets more than 35 per cent,” he said adding that without liquidating the MFIs’ fixed assets, they can also adjust by increasing outstanding loan.”
