MFIs warned not to run profit-making enterprises

Business Report :
The Microcredit Regulatory Authority (MRA) has warned microfinance institutions (MFIs) that they will face a penalty if they run any profit-making enterprises other than microcredit operations.
In a recent circular, the MRA said it had come to its attention that some MFIs were selling goods under the guise of microcredit operations and making a profit from the sales.
The circular said that, according to clause 24(3) of the Microcredit Regulatory Authority Act 2006, no microcredit institution is allowed to undertake any program or enter into any transaction that is contrary to the provisions or objectives of the act, or to run businesses or offer any other services without the approval of the MRA.
MRA Executive Vice Chairman Md Fashiullah, in the circular, said MFIs were awarded licences to run microcredit operations and that if they ran profit-making enterprises they would no longer be considered MFIs.
He said that the MRA Act clearly prohibits profit-making activities by any MFI.
The warning notice has been sent to all NGO-MFIs that are subject to the MRA’s regulatory purview.
The MRA was established by the government under the Microcredit Regulatory Authority Act 2006. It serves as the central body to monitor and supervise the microfinance operations of non-governmental organizations in Bangladesh.
According to recent changes in the income tax law, MFIs will have to pay taxes equal to the tax rate of companies if they do not keep the income from service charges of microcredit operations in a revolving fund.
MFIs and non-government organizations (NGOs) have opposed the change, arguing that there is no need to add this provision to the law as they already pay income tax and value added tax (VAT) during the acquisition of assets.