MICROCAPITAL STORY: Bangladesh Micro-credit Regulatory Authority Begins Issuance of Licenses to Microfinance Institutions

Bangladesh’s Micro-credit Regulatory Authority (MRA) has begun the process of issuing its first licenses to microfinance institutions (MFIs). The MRA was formed in August 2006 when the Bangladesh government passed the Micro-credit Regulatory Authority Act. The law requires all MFIs operating in Bangladesh to apply for and receive a license issued by the authority. MFIs with existing operations were given a deadline of February 26, 2007, to apply. According to recent information, the MRA received approximately 4,000 applications of which 700 were approved. MRA officials completed field inspections of at least 200 MFIs to verify the accuracy of application information and about 60 MFIs were asked to deposit license fees in order to receive their licenses. The MRA plans to issue more licenses after the first phase is complete.

To be considered for a license, MFIs must complete an application and submit it to the MRA office at the Central Bank of Bangladesh. The MRA then examines the application to evaluate the MFI’s source of funds, ownership, and internal governance. The law applies to both non-profit and for-profit institutions. In addition, the law dictates that institutions must separate micro-credit financial operations from other development activities. Once an MFI receives its license, it is subject to MRA monitoring and supervision. If MFIs do not comply with MRA mandates, they are subject to disciplinary action. The policy is designed to create transparency and accountability in Bangladesh’s growing microfinance market.

As of December 2005, the Central Bank of Bangladesh estimated country-wide micro-credit programs reached over 17 million borrowers of which about 62% were below the poverty line. Non-government organizations (NGOS) served about 60% of total borrowers.

-Steven Craig

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https://www.microcapital.org/cblog/index.php?/archives/396-Bangladesh-Microfinance-Agency-Requires-MFIs-to-Register-for-Licenses.html

Additional Resources:

Bangladesh Bank: http://www.bangladesh-bank.org/fnansys/fnansys.html#mfi

Microfinance Gateway: http://www.microfinancegateway.com/content/article/detail/37487

All Headline News: http://www.allheadlinenews.com/articles/7008177918