Microlenders asked not to recover loans from the flood-hit

The Microcredit Regulatory Authority yesterday asked microfinance institutions to temporarily suspend loan recovery from borrowers who have been seriously affected in recent floods.

It directed micro-lenders to put off the loan recovery and reschedule loans by giving grace periods for the time being, if necessary, according to a notice of the MRA. 

“Microcredit institutions will take steps considering the situation of borrowers based on field assessment. Not all are affected. It will be done as per their need and we will monitor,” said MRA Executive Vice-Chairman Amalendu Mukherjee.

He said it might be needed to suspend the loan recovery for more than six months or less than six months, depending on the condition of borrowers.

The MRA move came a week after the central bank relaxed loan rescheduling rules, suspending recovery for six months from the farmers and small entrepreneurs in the flood-hit areas.

The floods, which started affecting farmers in April, initially damaged quite a large amount of boro paddy in the backwater swamps in the country's northeastern region. Various parts of the northwest and other regions got submerged in July.

The flood situation deteriorated in August, affecting 32 districts, mostly in the north, and damaged crops on nearly 6 lakh hectares of land, according to official data.

“People in some districts are passing their days with immense sufferings. It is noticeable that microloan borrowers, who have lost houses, crops and other livelihood means, do not have the capacity to repay the loans,” said the MRA.

Flood victims need more relief support and fresh loans to continue income generating activities, the regulator added, directing MFIs to continue distributing relief, pure drinking water and medicine among the poor and vulnerable from surplus funds.

The regulator also suggested MFIs take steps so that clients get fresh loans or disaster loan quickly. 

At present, 705 MFIs including Brac and ASA are operating under the MRA. Grameen Bank, also a microlender, operates under a separate law. Until June 2016, the number of borrowers rose 13 percent to 2.31 crore from 2.04 crore the previous year, according to the MRA. Total outstanding loans increased 28 percent to Tk 45,400 crore in June 2016 from Tk 35,200 crore in June 2015.

MFI lending to agriculture soared 32 percent to Tk 35,300 crore in June 2016. Loan recovery rate was 98.84 percent in June last year, up from 96 percent in June 2015.