Bankers and micro-credit experts on Sunday stressed on introducing a separate Credit Information Bureau (CIB) like scheduled banks as the sector has flourished over the years.
CIB can assist the lenders with exchange information among each other about the history of a borrower. Overlapping, shocks and dropout rate in the micro-finance sector are increasing due to lack of CIB for the sector, they said.
Bangladesh Bank governor Atiur Rahman, chairman of the Microcredit Regulatory Authority (MRA), also urged the micro-credit industry to get together to set up CIB on an urgent basis.
‘I encourage MRA and the industry in general to move on the CIB front,’ Atiur said as chief guest while addressing the second and closing day of a conference on ‘Microfinance and Development’ arranged by Institute of Microfinance (InM) in the city.
Atiur said there has been a lot of talk about CIB for last 10 years but sadly little concrete action was taken. ‘I urge the industry to get together to make this happen as it is even urgent than before. The reason is that the size of the industry has grown so much that it is important to know credit histories and multiple borrowing issues before new loans are made,’ he said.
Md Abdul Karim, managing director of Palli Karma-Sahayak Foundation (PKSF) conducted the first session and MA Baqui Khalily, executive director of InM, presented the keynote paper titled ‘Overlapping and Dropout Behaviour of Microfinance Households in Bangladesh’ at the conference.
MM Akash, an economics professor of Dhaka University, and Jashim Uddin, deputy managing director of PKSF, addressed the conference as panel guests.
The BB governor also said that with the advent of mobile phone banking, CIB can truly revolutionise the industry like in other countries as loan officers can receive information about existing and potential clients on their mobile phone.
In Bolivia, for example, if the client of one microfinance institute (MFI) goes and applies for another loan from a different MFI, the CIB immediately sends that message to the mobile phone of the original loan officer.
‘We are striving to maintain the right balance of ensuring that microfinance institutions have the space to innovate while maintaining oversight of poor people’s money,’ the governor said.
BB governor also emphasised on introducing financial literacy programme as it could reduce the dropout problem addressed in an InM research.
While presenting the research findings, MA Baqui Khalily said micro-credit market is matured now. ‘It will contribute to sound development of the sector if a centralised CIB is established. This needs to be carefully examined so that borrowers transaction cost is not high, loan sanction is not delayed, operating cost is not very high for the CIB and the CIB is operationally sound,’ he said.
He also recommended MFIs should introduce low cost new loan products for reducing vulnerability of the borrowing households. MFIs also need to review their policy of loan ceiling that will reduce transaction cost for both borrowers and lenders, he said.
Khalily said MFIs should introduce micro insurance to cover the risk of idiosyncratic and covariate shocks. ‘Both life and property insurance should be developed and introduced. This will reduce the demand for fund for lumpy expenditures and other shocks including repayment of previous loans. Overlapping due to these shocks may be minimised. Microcredit will then have larger impact,’ he pointed out.
The InM research shows that the borrowing households have used more than 60 per cent of the loans for
productive and income generating activities as well as overlapping households had higher growth in net assists than the single or non-overlapping households.
Study shows comprehensive programme for mitigating monga in the north-western region, like PRIME project of
PKSF, contributes to food security and economic outcomes.
The households that had joined the programme became more food secured compared with the never-participants. In addition to this, 68 per cent of the micro-credit receiving farms are more than 80 per cent technically efficient and hence, microfinance leads to improve the performance of agricultural farms and improve food security, the research found.
-With New Age input
