Amended PRSP-2 to be finalised by Dec Fri, Sep 25th, 2009 12:20 am BdST Dhaka,Sep 24(bdnews24.

com)--The government is set to start implementing second amended Poverty Reduction Strategy Paper (PRSP-2) from early next year after finalising the procedure by December. The approximate expenditure for implementing the two-year strategy paper, styled "Steps towards Change: National Strategy for Accelerated Poverty Reduction-II," and prepared with the five-year plan, is estimated at Tk 31,0827 crore. Finance minister A M A Muhith and planning minister A K Khandaker briefed the press after a meeting with LCG representatives at Economic Relation Division (ERD) auditorium on Thursday. ERD secretary and LCG co-chaiman M Mosharraf Hossain Bhuiyan, DFID chief cum LCG cochairman Cris Austin and representatives of the World Bank, Asian Development Bank and donor countries attended the meeting. Planning minister AK Khandaker said, "The PRSP will reflect public opinion and it has been placed in the parliament to this end." "The implementation of the paper will start after it is finalised by December," Khandaker said. He said, the donors had assured Bangladesh of required financial assistance for alleviating poverty through achieving high growth at that time. He alleged that the preceding governments formulated and followed PRSP blindly without any discussion. No evaluation was made in the past to determine the outcome - positive or negative of the PRSP, the minister said. Even the caretaker government formulated second PRSP without consulting anyone, the minister said. "We have moved to amend second PRSP formulated during the immediate past caretaker government in line with our electoral pledges," the minister said. Amended second PRSP was placed before the cabinet on Sep 9 and the planning minister tabled the amended PRSP-2 in the House on Sep 15 for the opinions of the lawmakers. The government would finalise the amended second PRSP after getting green signal from the House in November, the minister said Stressing the need for rapid steps for implementing the PRSP project, the minister said, "Bangladesh Bureau of Statistics and the planning ministry will have to be strengthened and relevant ministries must work seriously." Sounding optimism, the minister said ,"We will be able to implement PRSP much better and reach near our target."

The first PRSP titled "Unlocking the Potential: National Strategy for Accelerated Poverty Reduction (NSAPR I) was implemented during the FY 2005-07 in the tenure of former BNP government. The parliament members' opinions were overlooked at the time, Khandaker said. It was extended up to June 2008. The minister criticised the last caretaker government for preparing and approving the second PRSP without assessment. He had told parliament it was difficult to reach the success of development activities to the people without the help of people's representatives. The government is interested to adopt PRSP-2 as an interim system as it has initiated to implement the sixth 'five-year plan' from the year 2010-11 to 2014-15. It includes five strategies -- macroeconomic management, enhancing investment, infrastructural development for economic growth, social security and human resource development -- for poverty reduction. Finance minister AMA Muhith said it was not calculated during formulation of the first PRSP how much money would be required for implementing project. On PRSP-2, he said, as much as $ 1658 crore in loan and aid would be needed during the next three years to implement the second PRSP. "A big chunk of it will come from local and overseas investment under public-private partnership." Muhith said the donors at the meeting stressed the need for beefing up monitoring to gain the objectives of PRSP. At the beginning of the meeting, General Economic Division (GED) member Shamsul Alam highlighted different aspects of the project. Alam said the project would cost Tk 31,0827 crore plus accompanied expenditures (including interests on loan) of Tk 64,259 crore. The total expenditure will amount to Tk 37,5086 crore, of which Tk 20,9040 crore will come from government revenue and Tk 50000 crore in loan from internal sources. The deficit in implementing PRSP will amount to Tk 1,60,000 crore equivalent to $1.66 billion. DFID's Chris Austin said they would continue assistance in necessary strategy implementations, including macroeconomic management and economic growth. bdnews24.com/mhc/srn/of/bd/2132h.

History of Microcredit Regulatory Authority (MRA) Background

In December 1997 the Bangladesh Bank commissioned a study to examine "the Regulatory Aspects of Microfinance Institutions (MFIs) and Linking it with the Formal Financial Sector". The study was completed in 1998 and the major findings and recommendations were as follows; 1. The regulation available in the form of statutory requirement under the existing banking and financial laws will not cater to the special needs of this sector, 2. Legal recognition of MFIs through enactment of law is required to access formal sources of funds, so that they can operate under an agreed "Code of norms/ Conducts" under the form of a special licensing arrangements, 3. Self-regulation based on agreed "Code of norms/ Conducts" can be an alternative or may supplement the existing or new government regulation, which may be introduced

Subsequently in the light of the above recommendations Bangladesh Bank and other stakeholders also raised the issue of regulation for this sector to the government. In this circumstance, the government formed a Committee of seven members with the chairmanship of the Governor of Bangladesh Bank in October 1999 to a) recommend an effective credit and savings policy for this sector, b) ensure transparency and accountability into their activities and c) make some recommendations regarding a regulatory framework and to propose a body to regulate and supervise these institutions. The Committee submitted its report in March 2000, the major recommendations consist of formulating the following policies and actions; 1. Policy to remove overlapping problem, 2. Policy regarding establishment of linkage between NGOs and formal financial sector to solve NGOs' funding problem, 3. Policy for loan classification, provisioning, interest rate, reserve requirement against savings/ deposit, and investment of savings/ deposits, 4. Legal basis to recover default loan, 5. Proper definition of member and non-member, 6. Policy for uniform accounting standard, internal and external audit, 7. Fix up the upper limit of administrative expenses of NGOs, 8. Formulation of a prudential guideline for the microfinance sector, 9. Formulation of performance standard to monitor and rating NGO-MFIs, 10. Creation of a separate regulatory body or a subsidiary organization of On the basis of the above recommendations there was a meeting in Ministry of Finance on May 28, 2000 under the chairmanship of the then Finance Minister. According to the decision of that meeting a Unit namely "Microfinance Research and Reference Unit (MRRU)" was established in Bangladesh Bank under the supervision of a National Steering Committee formed through a government order on June 18, 2000. The Governor of the Bangladesh Bank headed this Committee and it consisted of 10 other members from, ministry of finance, social welfare ministry, NGO Affairs Bureau, PKSF, Grameen Bank, ADAB, BRAC, and others. Members were selected from both government and private sectors. Terms of References (TORs) of the Committee were as follows; 1. Formulation of policy guidelines to regulate the NGO-Micro-Finance Institutions (NGO-MFIs) and setting performance standard to ensure their qualitative improvement. 2. Preparation of uniform accounting guidelines for MFIs to ensure their transparency and accountability. 3. Monitoring the activities of the MFIs in compliance of the policy guidelines prepare by the Steering Committee. 4. Recommendations for preparing a legal framework in support of the Micro-finance Research and

Reference Unit or a new regulatory authority for the MFIs. The Steering Committee was given three years time to complete its work under the above TORs. Accordingly, by June 2003 the Committee completed following works with the help of a technical committee headed by the then, Managing Director of PKSF; 1. Prepared a financial guideline, TOR of external and internal auditor to ensure financial transparency and accountability, 2. Prepared a guideline to assess the performance of NGO-MFIs, 3. Prepared some formats for collecting information from NGO-MFIs for developing Management Information System that would help monitoring the activities of the MFIs. However, the Committee could not prepare a legal framework of a regulatory body to act as the regulatory authority for the micro-finance institutions (TOR (d) above) because of time constraint. The Committee submitted its report to the Government in June 2003; major recommendations were as follows: 1. MFIs should not be permitted to accept deposits from the non-member/ general public. 2. Steps should be taken for implementation of the guidelines, format, prepared by the Committee to ensure use of best practices by the MFIs. 3. The above steps should to be taken immediately, for which a regulatory body is necessary. Until such a legal regulatory authority is constituted the government may consider giving authority to this Committee/ the Unit to implement the recommended guidelines as an interim arrangement. 4. The Committee will prepare a legal framework for the regulatory body to act as a regulatory authority in the second term if the government permits. 5. The government may extend the time of the Committee for two more years to formulate a regulatory framework. The government accepted those recommendations and extended the time of the committee for two more years. Steps taken by the Steering Committee/ the Unit in the second term were as follows. 1. A separate office was established in Bangladesh Bank for the Unit to implement Committee's guidelines. Initial technical and financial supports in establishing a separate office were given by the Bangladesh Bank and the Palli Karma-Sahayak Foundation (PKSF). 2. A public notice was published on daily newspapers regarding prohibition of deposit collection from nonmembers without having formal licenses to do so. 3. Published an operational guideline on the basis of recommendations given the Steering Committee for monitoring management and financial system of microfinance institutions. It contains reporting formats, guideline for measuring performance and an accounting procedure as well as terms of reference for internal and external audit. 4. Based on that guideline MRRU requested NGO-MFIs to provide quarterly information since January 2004 to the Unit. The Unit has published two analytical reports on NGO-MFIs in Bangladesh based on the information provided by the NGOs. 5. The Unit provided training to NGO-MFIs on the operational guideline.

Proposal for Special Enactment for a Regulatory Authority The Steering Committee has prepared a draft law for setting up a separate regulatory authority for this sector and submitted it to the government for taking necessary action. Two renowned lawyers and a few microfinance specialists were involved in the process of drafting the law. Before submitting the final draft to the government, the

Committee discussed the important contents of the draft with the representatives of NGO-MFIs in a workshop held in December 2004. A number of relevant recommendations from this workshop were taken into account during finalizing the draft law for a separate regulatory body. The draft law suggested for an independent regulatory authority that would be responsible for providing license to the MFIs and monitoring their activities. The new law passed by the Government The government passed the law, ' Microcredit Regulatory Authority Act 2006' in July 2006 on the basis of the suggestions given by the Committee. Under this law the government has established a separate Microcredit regulatory Authority (MRA) and constituted its board of directors with the governor of the Bangladesh Bank as the chairperson. According to this new law all active MFIs will have to apply for license from the Authority. No MFIs will be allowed to work within the country without having license from the Authority. According to the Law all institutions who have microcredit operation should separate their financial operations from other development works and keep their accounts separate. The Authority has been given power to monitor and supervise all these MFIs who will get license from it. The Authority also has the power to prepare detail rules related to the operations of microcredit including conditions for spending any income, area of operations, guideline of internal and external audit and accounts, collection of deposits, and use of earned profit, governance structure of MFIs, reporting requirements etc. The Authority has the mandate to take punitive measures if any institution does not comply with any of the provisions of law and rules. Establishment of MRA To bring Non-government Microfinance Institutions (NGO-MFIs) under a regulatory framework, the government of Bangladesh enacted "Microcredit Regulatory Authority Act, 2006" (Act no. 32 of 2006) on July 2006 with effective from August 27, 2006. Under this Act, the government established Microcredit Regulatory Authority (MRA) with a view to ensuring transparency and accountability of microcredit activities of the NGO-MFIs in the country. The Authority is empowered and responsible to implement the said act and to bring the microcredit sector of the country under a full-fledged regulatory framework.

About RAKUB
Rajshahi Krishi Unnayan Bank is a state-owned bank in Bangladesh with regional approach. The bank emerged as the government's plan of intensive care to agriculture of Rajshahi and Rangpur Division providing livelihood to 33 million people of the area. The region is less developed compared to other parts, yet full of potentials in agriculture. The two Divisions characterized by its surplus food grain production is popularly called the "granary of the country". Besides catering to agricultural credit, RAKUB, as it is acronymed, renders deposit banking services through all the 367 branches. The headquarters of the bank is stationed at Rajshahi city, some 270 kilometer to the north of Dhaka.

RAKUB Activities Functions:

As the largest development partner in the northwest region RAKUB aims at overall development of farmers and all the sectors and sub-sectors of agriculture in this region. The bank also performs functions like financing agri-business and agro-based industries and poverty alleviation programs.

Capital:

Authorized capital of the bank amounts to Tk 7500 million. Paid-up capital amounts to Tk 5700 million and reserve Tk 208.50 million.

We extend credit facilities for Crop production, Livestock & Poultry, Farm machinery, Fishery, Agro-industries and agri-business, Continuous credit, Poverty Alleviation, SME and more.

Zero Poverty Loan Scheme The bank has initiated a special group-based micro-credit program entitled "Zeropoverty Loan Scheme" for the extreme poverty stricken 23 upazilas in greater Rangpur district. Poor people in the area pledge labour at lower to landlords during lean season for borrowing money. The program is expected to restrain the tendency and eradicate poverty from the region by providing up to Tk 3000 collateral-free credit to day-laborers at only 6% interest rate. 6%
RAKUB

Marginal & Small Farm System Crop Intensification Project (MSFSCIP) The project aims at increasing productivity in agriculture as well as off-farm activities, helping target group people achieve sustainable development, resist the increasing trend of losing land under cultivation and attain self-dependence. 12%

RAKUB RAKUB Self-help Credit Program (RSCP) The project aims at self-employment generation among landless and marginal farmers through collateral-free credit distribution. The program is a propagation of MSFSCIP model at bank's own initiative. 12% RAKUB Swanirvar The term Swanirvar means self-dependence.The bank has introduced the credit program under the auspices of Swanirvar Bangladesh, an NGO to improve socio-economic condition of the helpless rural poor by creating employment opportunities. 11% RAKUB/ Swanirvar Bangladesh Semi-intensive black bengal goat rearing program Marginal, small & medium farmers, unemployed youth of Rajshahi & Rangpur division are the target group of the program. The program will make contribution to the economy through goat skin export & production of high quality meat for domestic & export markets. 11% RAKUB/GoB United Nation Capital Development Fund (UNCDF) Under the program, credit facilities are extended to entrepreneurs of cottage industries for creating self- employment opportunities. The program aims at economic

development and upliftment of the craftsmen . 12% RAKUB/ UNCDF/BSCIC RAKUB-NGO Linkage Program (RNLP) Under the program RAKUB provides fund to selected NGOs for financing micro-credit among landless, marginal & small farmers within Rajshahi division. Under the program NGOs provide credit to the farmers at 17% rate of interest while they achieve loan at 14% rate of interest from RAKUB. 14% RAKUB/ NGOs Shashya Gudam Reen Prokalpo (Food grain godown credit program) RAKUB implementing since 1988 as support to the sharecroppers, marginal and small farmers having up to 5 acres of land. Small and marginal farmers receive loan against stored crops in godown immediately after harvest. The farmers sell out the produces when they get desired price for their produces and repay the loan. 12.5% RAKUB/SIDA Northwest Crop Diversification Project (NCDP) A special program financed by Asian Development Bank (Bank) started in 2002. Under the program RAKUB rovides credit facility to selected four NGOs namely BRAC, PROSHIKA, RDRS & GKF. 6% ADB/BB/NCDP/RAKUB