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Grameen style microfinance NGOs for small businesses
View(s):Non-governmental organisations will be allowed to start microfinance businesses under provisions of a Microfinance Bill to be introduced in Parliament. NGOs registered under the Voluntary Social Service Organisations (Registration and Supervision) Act will be eligible to apply for a certificate of registration as microfinance NGOs.
The Microfinance Bill provides for the licensing, regulation and supervision of companies carrying on microfinance business; the registration of NGOs accepting limited savings deposits as microfinance NGOs and sets up procedures for the regulation and supervision of such NGOs.
Microfinance is a system that provides financial services for small businesses that lack access to banking and related services. The Grameen Banking system started in Bangladesh by Nobel Peace Prize winner Prof. Muhammad Yunus is a microfinance organisation.
In terms of the Bill, the Registrar of Voluntary Social Service Organisations is empowered to set the terms and conditions for loans and credit facilities to be granted by a microfinance NGO. The Registrar also sets the maximum rates of interest that may be charged on loans and credit facilities; the number of borrowers and depositors, internal controls, risk management and a code of corporate governance to be adopted by microfinance NGOs and the types of activities that they can carry out.
The Registrar is also empowered to cancel the registration of a microfinance NGO on several grounds including failing to pay any debt incurred by it, failing to pay the annual registration fee or when the microfinance NGO is adopting unsound or improper financial practices detrimental to the interests of its depositors and other creditors.