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The Microcredit Regularity Authority's (MRA) plea for VAT (value-added tax) exemption on the income of micro-finance institutions (MFIs) has remained frozen for more than three years for bureaucratic tangle.
The MRA in 2018 proposed that financial institutions division (FID) take steps so MFIs get VAT exemption on their earnings since the implementation of the Value Added Tax Act-1991.
To this effect, sources said, the regulator has once again sought steps for exemption of VAT imposed by the National Board of Revenue (NBR).
The FID forwarded the MRA's letter to the NBR for the next course of step in this connection in June 2018.
"The NBR didn't take any step. We'll again send a letter to the regulator, seeking exemption of VAT," a senior FID official told the FE on Thursday.
A senior executive of a leading MFI, said: "We requested the MRA for VAT exemption issue several times. On the regulator's plea, the NBR didn't act."
The country's MFIs are social voluntary organisations. They collect service charges for not their own benefits, he said.
The accumulated surplus funds are disbursed among clients as credit after spending social development and operational costs, the official explained.
He suggested that the government exempt VAT on the total earnings of the MFIs for providing different services by micro-lenders from the VAT Act.
Currently, there is a provision to pay 15-per cent VAT by MFIs on their income, including service charge, admission fee, form, pass book, credit form and other related earnings.
The NBR has a huge amount of unpaid VAT from a good numbers of MFIs to date.
The MFIs are helping the government enhance financial inclusion by bringing unbanked people under its coverage, sector insiders said.
According to them, many poor families depend on the MFIs for funds they require to continue with their small businesses or for other purposes in rural areas.
Most of the clients, especially women, start their business by taking loans from the MFIs, they cited.
As many as 746 MFIs remained registered with the MRA until December 2020.
Available data showed the number of MFI branches at 18,997 as of June 2019 from 15,609 in 2015.
Again, the number of MFI members rose to 32.37 million in June 2019 from 26 million in June 2015.
The total number of loan recipients increased to 25.76 million in June 2019 from 20.35 million in June 2015.
Again, the number of MFI employees increased to 162,175 in June 2019 from 110,781 in June 2015.