No bar for an MFI to lend to or borrow from another MFI

The country's microfinance institutions (MFIs) can lend to or borrow from other MFIs.

In this regard, the Microcredit Regulatory Authority (MRA) has recently issued guidelines, titled 'Policy on Financing of Microcredit Institutions by Microcredit Institutions, 2022', in a bid to make the microcredit sector inclusive and sustainable.

MRA will form a coordination cell to monitor financing activities among MFIs and appoint a focal person to be ready to assist both financiers and recipients.

According to the guidelines, an MFI with Tk 750 million capital and minimum Tk 3 billion loans in balance is eligible to finance another MFI.

The interest rate or service charge cannot be more than 9.0 per cent.

Both financing and recipient MFIs have to have a record of being profitable for consecutive five and three years, respectively.

Financing MFIs can monitor activities and train staff of the loan recipient MFIs.

Chairman of CDF, a platform of MFIs, Murshed Alam Sarker said the bigger MFIs will not be interested in financing smaller ones in fear of loans going bad.

"But it is okay if any NGO-MFI wants to provide funds to another MFI under the terms and conditions," he said.

The NGO-MFIs, which were financially well-off, used to finance smaller MFIs before the regulator took charge of the sector. MRA suspended the practice in 2011.

Industry insiders said MFIs cannot finance other MFIs under the terms as cheaper finance is not easy now.

According to the latest MRA statistics, around 750 MFIs are registered under MRA. Of the total, 10 MFIs hold more than 70 per cent market share.

Industry insiders said, with the fixed service charges, large MFIs wouldn't lend money to smaller MFIs.

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