NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, February 13, 2015

The ongoing political turmoil continues to take its toll on the small and medium businesses who have borrowed money from micro finance institutions (MFIs) as the big MFIs have tightened their vigilance fearing the future impact on loan recovery.

Although there is a little impact on the loan recovery rate during the non-stop countrywide blockade that started since January 06 last, big MFIs, regulators and lending organisations are closely monitoring the situation fearing adverse impact in the coming days on microfinance operation at field level if this situation prolongs, said industry insiders.

However, most of the MFI officials said they are adjusting the weekly instalments from the savings of the micro or medium loan borrowers that can make them sustain for two to three months of any crisis moment.

BRAC Communications manager Shararat Islam told the FE that while there have been difficulties this year, the effects on borrowings and repayments have not been pronounced so far.

“The impact of the political problems will depend on how long it continues. In the past, prolonged political unrest had affected disbursements and repayments,” she said, adding: as an NGO, our top concern has always been the security and welfare of our clients, not their ability to repay loans.

BRAC is operating in 64 districts of the country and has 5.5 million members and 4.5 million borrowers.

Chief of micro finance of Development Organisation of the Rural Poor (DORP) Nurul Islam told the FE that although there was no severe impact on micro finance operation yet, their loan recovery fell to 91 per cent in the second week of February from 98 per cent recovery in the first week.