MFIs fights against pandemic to survive25 September 2022
Staff Reporter :
Country's most of the Micro-Finance Institutions (MFIs) and their clients had to fight for coping with the mechanism adopted for them to overcome the situation during the Covid-19 pandemic.
According to the findings of a study conducted by INAFI Bangladesh, a global network of development practitioners, due to the COVID-19 pandemic, around 83.9 percent respondents faced reduced income or loss in business due to the pandemic while 40pc had to face loss of work or job, 22pc were unable to pay loan installments on time and 21.3pc adversely affected by price hike of daily essentials.
In a seminar held on Saturday at BRAC Centre Inn in Dhaka, the study report was disseminated and the findings of the report were shared with the media.
The INAFI Bangladesh conducted a small-scale study to understand the challenges faced by the MFIs and their clients during the pandemic and the coping mechanism they adopted to fight with the situation.
Moderated by founder and Principal Advisor of ANTAR Emranul Huq Chowdhury, INAFI's Programme Manager Tasnova Farheem presented the study report in the seminar.
INAFI's Executive Director Mahbuba Haque gave inaugural speech in the seminar held with its Chairperson SN Kairy in the chair.
Among others, while Financial Institutions Division Secretary Sheikh Mohammad Salim Ullah, Executive Vice-Chairman of MRA Md. Fashiullah, Deputy Managing Director of PKSF Dr Tapash Kumar Biswas and Research Fellow of BIGD of BRAC University Dr Sakib Mahmood also spoke the programme.
Focusing on the facts, FID Secretary Sheikh Mohammad Salim Ullah elaborated the government's initiatives to come out of the danger of COVID-19 with the leadership of Prime Minister Sheikh Hasina.
He stated that the 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 government and who did not.
MRA Executive Vice-Chairman Md. Fashiullah shed light on the amendments MRA and has already taken steps 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 initiatives like MRA wallet through which the MFIs will be able to run digital financial service.
Mentioning the main coping mechanisms, the report said the respondents had taken loan from various sources, withdrawn or used savings, reduced expenditure, sold or mortgaged assets and received assistance. The respondents in lower income range mostly said about taking loan and the respondents in higher income range mostly said about using or withdrawing savings for coping with the financial crisis.
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 installments 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 installments 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, it was recommended to explore possible cost-sharing mechanisms or unique policy for offering DFS to MFI clients, encouraging MFI clients to invest in savings at the MFIs by increasing rates of return on various savings instruments, using a portion of surplus fund of the MFIs for emergency response without pre-approval and providing mental health support for MFIs' staff members.