Allegations of non- compliance with MRA directives against TMSS

Allegations have emerged against Thengamara Mohila Sabuj Sangha (TMSS), one of Bangladesh’s largest microfinance institutions, over the alleged violation of directives issued by the Microcredit Regulatory Authority (MRA). Concerns have also been raised regarding loan-related charges imposed on borrowers, delays in refunding savings deposits to the families of deceased members, and the working conditions of field-level employees.

According to information provided by TMSS, the organization serves more than 1.5 million borrowers through 1,056 branches across the country. Supported by funds from the Palli Karma-Sahayak Foundation (PKSF), commercial banks and its own resources, TMSS has grown into one of the country’s largest microfinance networks.

Insider sources say the organization is also among the leading recipients of PKSF funding.
Allegations of product sales despite regulatory restrictions:

The Microcredit Regulatory Authority issued Circular Letter No. 76 on July 4, 2023, directing licensed microfinance institutions to refrain from engaging in commercial product sales or supply activities through their microcredit operations.

However, allegations have surfaced that TMSS has continued to facilitate the sale of electronic household appliances on installment arrangements.

One prospective customer, Sujanur Rahman, alleged that he was unable to purchase a refrigerator from the Chaksutrapur branch due to limited availability. He further claimed that branch officials suggested taking over the installment payments of an existing refrigerator financed under another borrower’s account. According to his account, a loan of Tk 45,000 had been recorded in the name of the original customer for the appliance.

Responding to the allegation, TMSS Deputy Executive Director Sohrab Ali Khan acknowledged that product-related activities were still taking place but said the organization intends to discontinue them soon.

Concerns over mandatory savings and additional charges:
Several borrowers interviewed for this report alleged that they were required to maintain savings deposits before receiving loans. According to them, a portion of the approved loan amount remains withheld as savings, while installment payments are calculated on the full sanctioned amount.

A branch manager, speaking on condition of anonymity, also alleged that borrowers are often charged for additional services, including stamp fees, health cards, insurance and other administrative items.

Asked about the matter, Sohrab Ali Khan said borrowers are not required to deposit 10 percent in all cases, but acknowledged that charges ranging from Tk 2,500 to Tk 5,000 may be collected under different categories depending on the loan product.

Microfinance observers note that the compatibility of such practices with existing regulatory guidelines would require examination by the MRA.

Families await refund of savings deposits:
Family members of two deceased borrowers alleged that they had submitted applications for the refund of savings deposits eight to ten months ago but had yet to receive the funds.

TMSS officials said efforts are underway to simplify and accelerate the refund process for beneficiaries.
Employees allege excessive working hours:
Several current employees of the organization alleged that their workday often extends from early morning until late at night, with responsibilities including loan recovery, promotion of health cards, product-related activities and various collection programs.

Some employees claimed that pressure to maintain repayment targets occasionally leads staff members to make temporary adjustments from personal funds, though they provided no documentary evidence.
Responding to the allegation, the Deputy Executive Director said TMSS strives to ensure employee satisfaction and does not instruct staff to pay borrowers’ installments from their own money.
Tk 4 billion loan write-off request:
TMSS has reportedly applied to the Microcredit Regulatory Authority for approval to write off approximately Tk 4 billion (Tk 400 crore) in non-performing or unrecoverable loans.
According to Sohrab Ali Khan, the application relates to long-outstanding loans that have become difficult to recover and has been submitted in accordance with applicable procedures.

The size of the proposed write-off has prompted discussion among sector observers regarding loan management and risk-control mechanisms within the institution.

MRA responds
MRA Executive Director Yakub Hossain said TMSS had previously sought approval to finance several non-microcredit ventures, including hospitality and other commercial projects, using microcredit-related funds. According to him, such approvals were not granted by the regulator.

He further stated that the authority had identified a limited number of instances where microcredit funds were reportedly used outside approved purposes and had instructed the organization to recover those funds within a specified timeframe.

Regarding the allegations of product sales, the MRA official said the regulator would examine the matter in accordance with existing laws and regulations. He also noted that the authority would carefully review the justification behind the Tk 400 crore write-off request before making any decision.

Labour Department advice:
AKM Salauddin, Deputy Director General of the Department of Inspection for Factories and Establishments, said employees who believe their labour rights have been violated may file complaints through the government hotline 16357 free of charge.

“Complaints can be submitted confidentially, and appropriate legal action may be taken following investigation,” he said.

Findings of the investigation:
The allegations involving product sales despite regulatory restrictions, deductions before loan disbursement, delays in savings refunds, extended working hours and the proposed write-off of a substantial volume of non-performing loans have drawn attention to governance and compliance issues within the institution.

Industry observers say the allegations warrant careful review by the relevant regulatory authorities to determine whether existing laws, regulations and operational standards are being properly followed.