Microfinance institutions demand a digital bank

Executive Vice-Chairman of the Microcredit Regulatory Authority (MRA) Mohammad Helal Uddin has said the regulator will support approval if microfinance institutions (MFIs) jointly propose setting up a digital bank. Speaking on Saturday at a meeting with chief executives of MFIs from the Chattogram region in Halishahar, he said: "MFIs are keen to establish a digital bank. Representatives from five or six organisations have already come forward.

"This sector in Bangladesh now needs to go digital. But if each institution designs its own digital devices and systems, it will be very costly." Organised by the MRA, the views-exchange session was attended by representatives of MFIs from Rangamati, Chattogram, Cox's Bazar, Khagrachhari, Bandarban, Feni, Cumilla, Noakhali, Lakshmipur and Chandpur, bdnews24 reports.

"If there is one digital bank with the necessary infrastructure," Helal Uddin added, "the MFIs connected to that bank can use it. Those outside that group could also access the digital service mechanism for a nominal fee." The MRA official said: "The MFI-owned bank would be set up using surpluses from the MFIs. They would collect savings, use them themselves, and lend to others. 

One MFI knows another MFI better than a commercial bank does.

"The MFI bank could then lend from these savings to small and medium clients among them. I told them: five or six of you have come; find out who else in the sector wants in. If you all give me a comprehensive proposal, our research wing will professionalise it further."

Helal Uddin continued: "I told them I'd ask the governor to give us one bank for this purpose. Before applications open, I'll seek assurance that this bank will be earmarked for the MFI sector. I will still apply. Please do the work and send me the concept.

"When five or six approached, others started thinking of forming separate groups. That's a problem because Bangladesh Bank won't issue that many licences from this pool. So we've written to the top thirty (MFIs).

"They will be at the meeting tomorrow. If this comes together, we can approve it more easily. You've also said you face problems when trying to raise funds from banks."