The Financial Express

Microcredit operators demand withdrawal of fees on incomes

| Updated: November 23, 2020 10:27:38

Lankabangla and Fianancial Express Lankabangla and Fianancial Express
Illustrative photo Illustrative photo

Country's microfinance institutions (MFIs) have demanded the withdrawal of annual fees charged by the Microcredit Regulatory Authority (MRA).

In a recent letter, Credit and Development Forum (CDF), an association of microfinance institutions, have sought withdrawal of annual fees.

The regulator should not charge fees for carrying out its operating expenses, it said in the letter.

"We want annual fees gone entirely," Murshed Alam Sarker, chairman of CDF, told the FE.

If a regulator requires taking annual fees from its regulatees, it can't be a regulator, he said.

Currently, NGOs and MFIs are required to pay 0.15 per cent of their incomes as annual fees to MRA. But the system of paying annual fees was changed two years back.

The new system of paying an annual fee of 0.15 per cent on annual income has been introduced since the fiscal year 2018-19. Before that, annual fees for larger NGOs and MFIs were charged based on the total number of borrowers which used to be around Tk 10,000 to Tk 50,000 except 10 larger MFIs.

Murshed Alam Sarker said the annual fee under the new system is much higher than that of the fee under the previous system.

"Suppose that an MFI used to pay an annual fee of Tk 30,000 earlier, now it has to pay Tk 1 million."

He added: "It is unprecedented that a regulator increases the annual fee for their expenses and it fixes this charge on their own without discussion with stakeholders."

He also expressed apprehension that as per the new system, Brac, the largest NGO-MFI, will pay the highest amount of fee and the regulator will depend on the MFI.

"On the other hand, smaller NGOs-MFIs will pay smaller amounts to the regulator, thus will be less important to the regulator," he said.

Finance Director of Buro Bangladesh Mosharraf Hossain said the NGOs-MFIs have long been demanding the withdrawal of such fee.

This fee is now a burden for smaller MFIs due to the Covid-19 pandemic, he added.

However, MRA has not yet replied to the letter.

Lutfar Rahman, Executive Director of Nowabenki Gonomukhi Foundation (NGF), told the FE that new annual fees affected smaller NGOs-MFIs.

He said NGF used to pay Tk 10,000 to the MRA as annual fee. But now it has to pay Tk 350,000 which is much higher than the previous fee.

He questioned how a regulator wants the shares of income of its regulatees.

MRA was established in 2006 to regulate the country's MFIs.

In the microfinance sector, total loan outstanding is around Tk 700 billion (including Grameen Bank, state-owned banks and commercial banks) and savings Tk 300 billion.

The total number of clients of this sector is 35 million (including 8.7 million from Grameen Bank) that accelerates the overall economic development process of the country.

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