Regulating microfinance NGOs in Bangladesh
Although there are over 1000 microfinance NGOs in Bangladesh, most of the volume of loans comes from a few large NGOs. At present NGOs are not permitted by law to take deposits from the public or even to on-lend the savings of loan clients, even though this is not usually enforced. The author argues that a three-tier system should be established to regulate microfinance activities: in the first tier the majority of NGOs should be permitted to accept savings from loan clients; in the second, the larger NGOs should be permitted to offer deposit accounts to the general public; and in the third, normal MFIs should be set up with private investment. The first tier should be supervised by a coalition of three second-tier institutions, PKSF, CDF and ADAB; the two further tiers should be supervised by the central bank.