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Millions of rural people, who bank on small loans for financing family ventures and small businesses, cannot borrow money even to meet their emergency needs during the Covid-19 lockdown, stakeholders lamented.
The global pandemic that broke out in Bangladesh in early March has led to suspension of operations of the microfinance institutions (MFIs), which sector leaders claim, are not in a position to pay salaries of their staff members.
Graduated from the state of supporting basic needs to funding farm and non-farm activities and micro enterprises, microcredit, experts said, still has a huge demand in the country, the birthplace of microfinance.
There are almost 30 million recipients of microcredit across the country, who were mostly unbanked earlier, according to the MFIs. For small loan programmes, an amount of Tk 117 billion is injected into the rural economy every month.
The Covid-19 crisis has exposed how much such loans have reshaped the rural economy and how desperately the rural people need money, observed leaders of a number of non-governmental organisations (NGOs) that operate microcredit programmes. Various organisations have reportedly distributed Tk 1.4 trillion as microcredit among 26.77 million recipients.
The NGO leaders have called on the government to allow the MFIs, especially the grassroots ones, to support the people with health and financial services, by complying with ‘social distancing’ rules to prevent the spread of coronavirus.
They also seek suspension of the NGOs’ loan installment to payable to Palli Karma-Sahayak Foundation (PKSF), a government-funded organisation which provides finance to MFIs.
The MFIs are yet to be covered by emergency support packages like the financial stimulus packages worth 777.5 billion announced by the Prime Minister for export industries, services and farm sectors.
Currently, small and medium-sized NGOs are spending their surplus with subsidy from PKSF on health, education, disaster management, refugee relief, agriculture, livestock, fisheries, old people care and integrated rural development programmes, noted Rezaul Karim Chowdhury, executive director of COAST Trust, which is working under the PKSF.
Saying that both disbursements and recovery of loans remain suspended in all 64 districts, he pointed out that nearly 250,000 staffers, who are working in the sector, might be deprived of salaries in coming days.
The contribution of the microfinance to gross domestic product (GDP) is estimated at 12.50 per cent. Chowdhury added that Bangladesh is the top country in South Asia in term of financial inclusion, largely because of the microcredit operations by the MFIs.
Some 1,500 organanisations, including 220 affiliated with the PKSF, are engaged in distribution of microcredit. However, a total of 758 MFIs (as of December 2019) have been licensed by the Microcredit Regulatory Authority (MRA), an oversight body formed in 2006.
The MRA is discussing with and giving update to the higher authorities about the current situation and demands of the MFIs, Amalendu Mukherjee, Executive Vice Chairman of the MRA told the FE. He mentioned that the MRA has also asked the MFIs not to consider a loan as bad loan as if a borrower is unable to repay until June 2020.