UNB:
Chief Adviser Professor Muhammad Yunus on Saturday stressed the need for establishing a dedicated ‘Microcredit Bank’ to enable microcredit to play a more significant role within the formal banking system, moving beyond its current NGO-style framework.
“We have to think about something new – establishment of Microcredit Bank – as the success of microcredit reached a new height,” he said.
The Chief Adviser made the remarks while inaugurating the Microcredit Regulatory Authority building in the city’s Agargaon area, seeking efforts to help move microcredit away from the concept of NGO and adopt the concept of banking to serve broader borrowers.
“I feel good to be here today and meet the old friends,” Prof Yunus said.
The Chief Adviser said microcredit is now seen as an NGO and to become a full-fledged bank, it is necessary to have a transition from NGO to bank.
“Clearly, it will have to be a bank, and we need a separate banking law,” he said.
Prof Yunus said currently a microcredit organisation can collect deposits from its members only and this needs to be expanded to give a real shape as a bank.
Highlighting the importance of microcredit, he laid emphasis on giving more focus on the future banking system based on trust, stressing that it would be the future-oriented real baking system.
“It’s the appropriate time to talk about the issue,” he said, adding that the banks, which were considered as the real banks have disappeared today with looting public money, but the microcredit exists with a transparent base.
Stressing the need for paying attention to real banks, Prof Yunus said they saw people busy with fake banks.
Created in 1976 in Bangladesh, the Grameen Bank uses microcredit to fight against poverty.
By creating a banking system based on trust and creativity, Prof Yunus breathed new life into traditional banking mechanisms.
Remembering about the beginning of Grameen Bank, Prof Yunus said when they started Grameen Bank, there was an objection whether it could be called a bank or not.
“We said, ours is a real bank. Our banking is based on people. We give money on the basis of trust without collateral. Today we are talking at a time when many of the banks (collateral), who used to consider themselves real banks, are now nothing and are gone (looting money). And look at the statistics of microcredit. No one has run away with money. This is a joke,” Prof Yunus said.
Microcredit is the future of banking, he said, adding that this is real banking, the banking of the future in which people will work on their own identity and the banking which will be based on their own beliefs, not on money.
The Chief Adviser said not only Bangladesh but also every country where microcredit has been implemented has faced problems regarding who the regulatory authority should be.
“I have told them time and again that you don’t have to worry so much because Bangladesh has provided a solution. The Microcredit Regulatory Authority has not only worked for Bangladesh, it has also been helpful to many countries internationally, Prof Yunus said.
Finance Adviser Dr Salehuddin Ahmed, Chief Adviser’s Special Assistant Dr Anisuzzaman Chowdhury, Bangladesh Bank Governor Dr Ahsan H Mansur, Executive Vice Chairman of Microcredit Regulatory Authority Professor Dr Mohammed Helal Uddin and Secretary of Financial Institutions Division Nazma Mobarek, among others, spoke at the event.
The Finance Adviser said the law should be made in such a way that there is user-friendly regulation without being strict on the regulator, so that nothing is imposed.
The MRA will now have to look at promotional activities along with regulation, he said. “Pay attention to making the return of savings, service charges easy. Make it easy for the beneficiaries.”
Bangladesh Bank Governor Ahsan H Mansur said microcredit has come a long way today. Currently, the microcredit sector has assets equivalent to 10 percent of the banking sector.
He said the most important thing is that microcredit is in a strong position in the areas where there are weaknesses in the banking sector.
The Governor said members’ savings have increased to over Tk 68,000 crore and the accumulated surplus has increased to over Tk 61,000 crore.
“This is a big achievement. They are building themselves with their own savings and surplus. There is no foreign aid or grants. Donor funds are about Tk 3,000 crore. This is very insignificant,” he said.
The Governor said the rural economy is growing in Bangladesh and agent banking is spreading. “There are about 26,000 microcredit branches. The number of agent banking branches has exceeded 20,000. A healthy competition has started here.”
He said the formal sector is increasing in the rural economy and will increase.
“Microfinance institutions will have to face this challenge and survive. The regulatory authority and Bangladesh Bank will work together to make microcredit more functional,” he added.
To bring Non-government Microfinance Institutions (NGO-MFIs) under a regulatory framework, the government of Bangladesh enacted ‘Microcredit Regulatory Authority Act, 2006’ (Act no. 32 of 2006) on July 2006 with effect from August 27, 2006.
Under this Act, the government established the Microcredit Regulatory Authority (MRA) with a view to ensuring transparency and accountability of microcredit activities of the NGO-MFIs in the country.
The Authority is empowered and responsible to implement the said act and to bring the microcredit sector of the country under a full-fledged regulatory framework.
