BRAC, Grameen Bank and Ashar have reduced their loan disbursements by 60%
Merchant Message: The private sector or NGO sector provides more than 80 percent of the investment in the rural economy. NGOs finance rural households through agriculture and micro-enterprises through micro-credit activities. But due to the global epidemic, like all other economic activities, the loan activities of NGOs also came to a standstill. Debt disbursement and recovery are alarmingly low.
BRAC, Asha and Grameen Bank, the three leading non-governmental organizations in the country, have a major role to play in financing the rural economy. According to Bangladesh Bank, in the last quarter of the 2019-20 fiscal year (April-June) due to Corona, the loan disbursement of these three institutions has decreased by more than 60 percent. At the same time, debt collection has decreased by more than 75 percent.
The global corona outbreak began earlier this year. The first case of Kavid-19 in the country was identified on March 7. Since then, loan disbursement and collection activities of private development agencies have been shrinking. With the commencement of the general holiday from March 26, the collection and disbursement of loans has come to a standstill, which is reflected in the picture of disbursement and recovery of loans in the last quarter of the last financial year (April-June).
BRAC is the top private development agency in the country. Apart from Bangladesh, the organization has a reputation as the largest NGO in different countries of the world. In the first three quarters of the last 2019-20 fiscal year, BRAC has disbursed an average of around Tk 10,000 crore in loans. Of this, the company’s loan disbursement in the third quarter was Tk 8,930 crore. But due to Corona, it has come down to Tk 1,750 crore in the last quarter of the financial year. In other words, the loan disbursement has decreased by 81.52 percent in the last quarter as compared to the previous quarter.
BRAC has taken new steps to disburse and collect loans during the Kavidka period. The company has started disbursing loans through new and innovative programs outside the traditional activities. Through these activities, the distribution of loans has also gained momentum. However, the realization activities could not turn around completely. Shams Azad, Chief Operating Officer, BRAC Micro Finance, said that the recovery activities will be normal soon. “Through discussions with customers at the field level, we have come to realize that a lot of funding is needed right now to turn the rural economy around,” he told Banik Barta. Many customers will be able to turn around very quickly if they get a loan. For this, BRAC has provided loans through refinancing activities to about two and a half lakh customers who could not repay their previous loans but were able to take loans. As a result of this program, many people have now started repaying both loans in moderation. As a result, I hope that BRAC will be able to return to normalcy quickly due to the overall stagnation in debt collection and disbursement.
Asahar, another leading private development agency in the country, has come to a standstill due to the Corona strike. The company disbursed an average of Tk 6,060 crore in the first three quarters of the last financial year. Of this, loan disbursement in the third quarter (January-March) was Tk 8,920 crore. But during the last quarter or April-June, it came down to only Rs 1,500 crore. As a result, the company’s loan disbursement has decreased by about 63 percent in three months.
Asha board member and chief managing officer of Asha International. Enamul Haque said NGOs, which disburse loans for agriculture, education, health and other initiatives, could play a key role in helping the country’s economy recover quickly. But if the Corona situation worsens, the bad debts of the institutions may increase in the future. This can make small organizations more sick. However, Asha’s lending activities are conducted with full membership and self-funding. It goes without saying that there is no foreign dependence at all. Liquidity is in a good position considering the situation. Hopefully they will be able to deal with the Cavid crisis very well as they have a distinct status compared to other organizations.
Corona, another of the country’s top private companies, has also been hit hard by Grameen Bank’s lending activities. The company disbursed an average of Tk 8,400 crore in the first three quarters of the last financial year. Of this, the distribution amount in the third quarter alone was Tk 8,430 crore. But when the corona infection started in March, Grameen Bank’s loan disbursement in the April-June quarter came down to Tk 1,290 crore. In other words, the loan disbursement has decreased by about 70 percent in three months.
Apart from disbursement of loans, the recovery of loans of NGOs has also come down. In the 2018-19 financial year, the overall collection was around Tk 96,480 crore, but in the last financial year only Tk 62,480 crore was collected. In the last quarter of the last financial year, the debt collection has decreased by about 6 percent as compared to the previous quarter. In the third quarter, BRAC, Asha and Grameen Bank had a loan collection of Tk 23,480 crore, which came down to Tk 5,590 crore in the last quarter. Of this, BRAC’s debt collection fell from Tk 9,060 crore to Tk 2,060 crore, Ashar’s from Tk 6,160 crore to Tk 2,220 crore and Grameen Bank’s debt collection from Tk 8,220 crore to Tk 1,320 crore.
A large section of the rural population is still out of banking and financial services. There, micro-credit activities of NGOs are playing an important role in the rural economy. More than three crore people are involved in this sector. More than one crore people have been employed. In this situation, if there is stagnation in the loan disbursement and collection activities of the top three non-government organizations of the country, the amount of bad loans may increase in the coming days and there may be stagnation in the expansion activities of NGOs. Analysts also fear that the lack of credit could disrupt the rural economy.
Professor MA Baki Khalili, former executive director of the Institute for Inclusive Finance and Development (INM), said the distribution and collection situation had declined mainly due to a kind of ban on debt collection activities during the Kavid period. Institutions repay and repay the loan. As a result, if the loan disbursement activities of the three major institutions come to a standstill, the recovery of the rural economy will be disrupted. If there is stagnation in the disbursement of loans, the people of the village may become dependent on the sale of assets, borrowing of informal loans, use of savings, grants from government and non-government organizations or moneylenders to return to normalcy. NGOs will play a helpful role in reducing that dependence. Therefore, steps have to be taken to deal with the situation in the future by keeping the activities of NGOs normal.