Covid-19 and Microfinance institute in Bangladesh

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The Covid-19 pandemic has affected almost everybody across the world, yet its effects are especially intense for individuals in neediness. The nature of the Covid-19, there is a real risk of repeated spikes and possibly repeated and localized lockdowns. These have the potential to disrupt the recovery process intermittently. The present study aims to
explore the specific operational and financial difficulties faced by the MFIs during Covid-19 period. It highlights the
changes in the portfolio at risk (PAR) of the MFIs due to the crisis and the operational and crisis management
measures adopted by the MFIs as a precaution against Covid-19 impacts. Finally, the study suggests supportive
measures that can be adopted for the MFIs to carry out their mission of serving the poor and disadvantaged in a
more elective manner in the post Covid-19 period.

Financial and Operational Challenges faced by MFIs:

Portfolio at Risk (PAR) of MFIs: Among the major issues, the developing portfolio in danger (PAR) is the most prominent financial challenge that they have experienced because of the pandemic. The PAR is determined as the proportion of the volume of the advance portfolio that is past due for a specific period (generally taken as surpassing 30 days) and the absolute advance portfolio. All MFIs size classes have been confronting rising PAR due to
the Covid-19 pandemic (Figure 1). Around 93% of the example MFIs demonstrates that their PAR levels have risen strongly during the Covid-19 period thought about with their pre Covid-19 levels. Among the exceptionally enormous MFIs, the PAR has dramatically increased for 50%; while for the rest, PAR has multiplied. For all enormous MFIs, the PAR has multiplied. Then again, among the medium MFIs, 59% and, among the little MFIs, 55% have encountered a dramatically increasing of their PAR; while 35% of both little and medium MFIs report a multiplying of PAR over their pre Covid-19 levels. Just 10% of the little MFIs have generally unaltered PAR.

Operational Difficulties of MFIs: More than 85% of the MFIs have difficulties of their staff in gathering with the borrowers at the field, while 88% deal with issues in conveying nonfinancial administrations, for example, preparing and business improvement, wellbeing, instruction and different administrations. Around 83% of the MFIs report confronting difficulties in gathering advance reimbursements, while 73% has difficulties in dispensing new credits. It very well might be seen that the difficulties experienced by the MFIs are firmly connected with the financial reasonability and supportability of the MFIs. In that capacity, these operational difficulties have likewise set off other significant short-and long haul financial challenges for all MFIs including rising PAR, difficulties in portfolio and hazard the board, mass withdrawal of investment funds by the individuals, and deteriorating liquidity emergency.

Financial Difficulties of MFIs: Irrespective of MFIs size category, most surveyed MFIs face financial difficulties due
to the pandemic (Figure 3). About 88 per cent of the MFIs report rapidly rising PAR, while 85 per cent face
deterioration in outstanding loan portfolio and 80 per cent face the problem of high rates of savings withdrawal by
the borrowers. Around 78 per cent of the surveyed MFIs face difficulties in repaying their borrowed fund to the
banks and/or other borrowing agencies. More than 73 per cent of the MFIs have inadequate equity capital to cope
with the Covid-19 crisis. No doubt, these financial difficulties represent a challenge for the entire microfinance
sector for both the short and medium terms.

Covid-19 Challenges: Path from Crisis to Recovery
The survey shows that more than half of the MFIs have initiated discussion with the regulatory authority (MRA) and
apex organization (PKSF) to revise/relax rules and regulation to meet the pandemic situation. It is seen that most
MFIs acted on their own to face the Covid-19 challenges since the beginning of the pandemic. Around 51 per cent
of the MFIs revised their loan distribution policy, mostly by the very large and large MFIs. The medium and small
MFIs could exercise little leverage in revising their loan distribution policies. Nevertheless, most of them
implemented restructuring in loan repayments. Almost 90 per cent of the medium and small MFIs have
restructured the loan portfolio for the benefit of the clients.

Source- http://inm.org.bd/wp-content/uploads/2020/11/InM-Covid-19-Research-No-4-2210.2020.pdf

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