December 5, 2023, 9:55 pm

Mustafa Kamal Akanda

2022-09-25 02:43:42 BdST

INAFI Bangladesh conducts a small-scale study to understand the challenges faced by the MFIs

Recently INAFI Bangladesh; global network of development practitioners conducted a small-scale study to understand the challenges faced by the Microfinance Institutions (MFIs) and their clients during the pandemic and the coping mechanism they adopted to fight with the situation, and hold a Report Sharing Seminar on Saturday at the  Auditorium of BRAC Centre Inn.

The report sharing seminar was inaugurated by Executive Director of INAFI Bangladesh, Ms. Mahbuba Haque.

In her speech she shed lights on aim and activities of INAFI Bangladesh and brief background of the study. Moreover, she welcomed all the guests and participants.

The business session was moderated by Mr. Md. Emranul Huq Chowdhury, Founder and Principal Advisor, ANTAR. INAFI Programme Manager Ms. Tasnova Farheem made a presentation on the study.

As major findings it has been found that due to COVID-19, 83.9 percent respondents faced reduced income/loss in business due to the pandemic, 40 percent MF respondent mentioned- no work/loss of job, 22 percent respondents said- unable to pay loan instalments on time and 21.3 percent of all respondents mentioned- adversely affected as prices of daily essentials increased.

Some of the main coping mechanisms mentioned by the respondents are taking loan (from any source), withdrawing/using savings, reducing expenditure, selling/mortgaging asset and receiving assistance among others where the respondents in lower income range mostly said about taking loan and the respondents in higher income range mostly said about using/withdrawing savings for coping with the financial crisis during COVID-19.

Major challenges mentioned by the MFIs include, on-time loan realization as clients faced loss of income; Frontline staffs faced obstacles during branch visit (especially in rural areas) from the local administration and social community; Faced difficulty in institutional fund management as income decreased; Crisis in staff management as some MFIs struggled to pay full salary and bonuses on time, some experienced unusually high staff turnover and some mentioned vulnerable state of staffs’ mental health.

Major responses by the MFIs to cope with the challenges include: Offering refinancing loans for the borrowers who have been financially affected by the pandemic either under the Government’s stimulus package, PKSF’s LRL or with their own fund; Rescheduling loans for borrowers who could not pay instalments on time; Emphasizing on client verification process before providing loans; Allowing payment of higher number of advance installments; Increasing the ceiling for consecutive loans; Offering rebate on service charge who repay multiple instalments together in advance; Savings requirement for taking loan was made flexible; Returning fixed amount of savings through mobile wallet; Advocacy with local administration; not curtailing staff benefits; Informative trainings, awareness building and counselling programs for staffs; Adopting specialized programme in agreement with a psychological wellness centre to ensure the mental well-being of all the employees; Ensuring fund flow by taking loans from banks and other financial institutions or using organization’s emergency funds; Market linkage initiatives to boost the business of their clients;

Based on the findings of the study the recommendations are:

- Exploring possible cost-sharing mechanisms for offering DFS to MFI clients: The concerned Regulators can form a unique policy to bring about 30 million clients under the coverage of DFS

- Encouraging MFI clients to invest in savings at MFIs: MFIs may consider increasing the rate of return on various savings instruments. On the other hand, the regulator can take necessary initiative to amend the policy concerning the ceiling on voluntary as well as term deposits.

- Using a portion of the surplus fund of the MFIs for emergency response without pre-approval: The regular may make a provision by indicating a specific percentage of the surplus fund which the MFIs would be able to use for corporate social responsibility activities during crisis and emergencies without prior approval and will require a post approval. The CSR activities as well as types of crisis and emergencies can be specified by MRA

- Providing mental health support for MFIs’ staff members: MFIs may consider providing mental health support for their staff; Initiating hotline for lodging complaint; Organize regular refresher workshops or exposure visits to reduce the monotony of work of staff.

The presentation was followed by Panel Discussion. Panelist, Dr Sakib Mahmood, Research Fellow and Assistant Professor, BIGD, BRAC University. Participants were allowed to share their view during the Open Discussion, where some important feedback came mostly from the representative of microfinance sector as well as some recommendations was made towards the honorable Guests related with the sector.

Mr. Md. Fashiullah, Executive Vice Chairman, MRA was present as the Guest of Honour for the seminar. He praised the initiative INAFI Bangladesh and all who were engaged with this study.

He also shed light on the amendments MRA has already made regarding making the savings accumulation flexible for the MFIs, as well as some additional amendments in a few other areas which are yet to be published.

He also added about planning of new initives like MRA wallet through which the MFIs will be able to run digital financial service.

Dr Tapash Kumar Biswas, Deputy Managing Director-4, PKSF who was also present as Special Guest said the recommendations that came from the study can be helpful in future planning for the sector.

Mr. Sheikh Mohammad Salim Ullah, Secretary, Financial Institutions Division, Ministry of Finance, Government of the People’s Republic of Bangladesh who was present to grace the event as the Chief Guest extended his special thanks to INAFI for the study.

In his speech he also focused on the fact, how fast Bangladesh has been able to come out of the danger of COVID-19 with the leadership of the honorable Prime Minister of Bangladesh.

He stated that, also research should be undertaken to find if there is any gap between the condition of the group of people who received benefit of the stimulus package of the govt and who did not.

Lastly the Chair of the Seminar, Mr. S. N. Kairy, Chairperson, INAFI Bangladesh delivered his speech. He shared his warm thanks to all the present guests and participants.

He thanked the all respective personnel and stakeholders who extended necessary support throughout the study.

Moreover, he praised commitment of the EVC MRA for initiating immediate directives to ease the situation for the clients of the sector as well as the MFIs during COVID-19.

He said, we should focus on undertaking more informative researches in the coming days.

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