84% of microfinance institutions faced losses in Covid time: Study

Around 83.9% of borrowers of Microfinance Institutions (MFIs) in the country faced losses in their businesses during the Covid-19 period and 18.5% of them managed to repay in time, according to a study.

A total of 442 borrowers were covered under the study through interviews from 14 MFIs across nine districts of the country. According to the report, 40% of borrowers did not lose their jobs during Covid. But 21.3% of respondents said hikes in daily essentials prices affected them adversely. 

INAFI Bangladesh – a global network of development practitioners – 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 the situation. 

The report was revealed at a seminar at the Brac Centre on Saturday. Mahbuba Haque, executive director of INAFI Bangladesh, inaugurated the seminar. 

Md Fashiullah, executive vice chairman, Microcredit Regulatory Authority (MRA), who was present as a guest at the seminar, praised the initiative taken by INAFI Bangladesh and others.

He also shed light on the amendments MRA has already made 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.

The major challenges faced by borrowers mentioned in the report include on-time loan realization as clients faced a reduction in income; frontline staff faced obstacles during branch visits (especially in rural areas) from the local administration and social community; difficulty in institutional fund management as income decreased; crisis in staff management as some MFIs struggled to pay full salary and bonuses on time, some experienced unusually high staff turnover and some mentioned vulnerable state of staffs' mental health.

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 fund; rescheduling loans for borrowers who could not pay instalments on time; emphasizing client verification process before providing loans; allowing payment of a higher number of advance instalments; increasing the ceiling for consecutive loans.

In his speech as the chief guest, Sheikh Mohammad Salim Ullah, secretary, Financial Institutions Division, said research should be undertaken to find if there is any gap between the condition of those who received stimulus packages and those who did not.