MFIs must have bank backing: Rahman
Aug 28 2013 , Kolkata
“MFIs have also been participating in joint platforms with banks to deliver remittances at a faster speed. Quite like in India, all these moves in Bangladesh are also aimed at fostering financial inclusion,” Bangladesh Bank governor Atiur Rahman told Financial Chronicle.
Rahman said, “It is clear from the research evidence that microfinance can protect households from shocks, contribute to changing norms about the role of women in society and help households move out of poverty. Therefore such linkages are crucial. The stronger the linkages, the better the financial inclusion in an economy, particularly in countries like Bangladesh and India.”
He, however, sounded a word of caution. “At the same time we need to be mindful that not everyone utilises loans productively and there is a risk of falling into over-indebtedness. So, the role of microfinance should be strengthened through further innovations by taking into account such pitfalls,” said Rahman.
While admitting that there is an immediate need for overseeing and regulating microfinance institutes, he said, “We are striving to maintain the right balance for MFIs to innovate while maintaining oversight of poor people’s money. We have set up the Microcredit Regulatory Authority (MRA) to achieve this balance and we aim to strengthen its capacity to achieve these goals. However, MRA also needs to focus and as the regulator of the overall financial system and as the chair of the MRA board, my priority is to focus on regulating large and medium MFIs first, as any problem with these MFIs can impact the entire system.”