Business Visas in Bangladesh | Types, Eligibility and Requirements and how to get them | Immigration Law Firm in Dhaka, Bangladesh

Business Visas in Bangladesh | Types, Eligibility and Requirements and how to get them | Immigration Law Firm in Dhaka, Bangladesh

Bangladesh Business Law –  Top Commercial Law Firm in Dhaka Bangladesh

Business Visa in Bangladesh | Types and Requirements

Tahmidur Rahman, Managing Partner

8 jan 2020

Business Visa in Bangladesh

Business visa is valid for six months in Bangladesh and as it is a multi-entry visa. From up to three to five (3-5) years, you can extend your business visa to Bangladesh.

You don’t get a business visa to work in Bangladesh. If you’re going to get a job, you need a work permit.

Nevertheless, you can use your business visa to carry out activities such as:

 

  • Meeting your (potential) business partners or government officials
  • Visit different business sites
  • Conducting feasibility studies and market research
  • Meeting with employees
  • Establishing a company in Bangladesh

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Carpe Noctem Bangladesh

Obtaining process of a visa in Bangladesh 

Bangladesh offers various types of visas to foreign nationals who want to use the current investment and work opportunities provided by the Bangladesh government. Visa from any foreign country is relatively easy to obtain, but there are no clear guidelines and the procedure of diplomatic missions in Bangladesh varies from mission to mission.

A visa to be obtained from the Bangladeshi diplomatic mission in the country of the visa applicant will be required for business visitors to Bangladesh. Depending on the political climate and other domestic issues, visa availability varies. It is generally recommended to obtain a visa before arrival in your home country.

General Requirement of visa (There will be additional requirement based on the type of visas)

  • Filled-in application form
  • Photographs (Size: 37mmX37mm and recent one): 02 copies
  • Valid passport and
  • Payment receipt of visa fee

Types of Visas:

 

Here are the Visa Classifications in details:

 

 Business Visas in Bangladesh

 

Business visa is usually approved for business people who want to make use of the possibility of doing business in Bangladesh. For example, meeting various business people and government officials to make investments in Bangladesh, visiting factories and workers, testing legal barriers, contacting various staff to discuss possible business strategy in Bangladesh. However, the purpose of such a visit should be limited to the type of activities mentioned above and the person with business visa is not permitted to do any kind of business without the permission of the relevant authority (e.g. BIDA, BEPZA) or to engage in any kind of work without work permit.

  • Eligible individuals: entrepreneurs or their members.
  • Authorised length of stay: In general, B visa is granted with a fixed length of stay in each entry for a period of 3 to 6 months. The applicant must indicate the intent of the visa and how long the applicant wishes to stay in the application form in Bangladesh.
  • Indicative list of required documents: Endorsement from recognised chambers of commerce or local sponsor’s endorsement in Bangladesh and declaration of good standing / business credentials.

        Employment Visa in Bangladesh

A Bangladesh employment permit enables its holder to work and be employed in the country. It is a multi-entry visa and is valid for three (3) months in the beginning. Therefore, once it loses its value, you can also expand it. Note, however, that the period of validity depends on the duration of the contract of employment. The Department of Immigration and Passports will subsequently extend the validity of a multi-travel facility visa for a maximum period of 1 (one) to 2 (two) years at a time, based on the receipt of a work permit for employees, airlines, banks and insurance companies and on the recommendation of Bangladesh’s sponsors. 

Eligible persons:

(A) Govt-employed experts / consultants / employees. /Half Govt. Organization, organisations that are independent and similar.

(B) Local and Foreign Govt./Private, Industrial / Trading Organizations and Liaison Office, Branch Office employees and employees.

(C) Local and foreign workers and individuals. /Private undertakings and institutions of the same class.

Authorized duration of stay: The relevant Bangladesh Mission initially issues visa for a maximum period of 3 (three) months subject to submission of papers/documents in support of the appointment with application.

Indicative list of required documents: Letter of Appointment and Letter of recommendation from the concerned Ministry in Bangladesh / Bangladesh Investment Development Authority (BIDA) / Bangladesh Export Processing Zones Authority (BEPZA)

 

 

 Investment Visas in Bangladesh

 

The primary purpose of the Bangladesh investment visa is to allow the holder to attend business meetings and keep them. But these meetings will, of course, be linked to their domestic investments.

The initial duration of this visa is one (1) year with a maximum of three (3) months per year, which means that every three (3) months the investor has to leave and re-enter Bangladesh. The visa may be extended up to five (5) years if the investor decides to continue investing in Bangladesh.

Note that a letter of recommendation is required for this visa. It can be from either a local or a Bangladesh sponsor from abroad. Another prerequisite is that you need a BEPZA or BOI certificate to prove you have a Bangladesh investment.

In general, seven (7) working days are the process time for this visa. You must seek a visa from a foreign embassy in Bangladesh.

Recall also that the investment visa does not allow employment to be taken up. Therefore, if you are planning to be employed in Bangladesh by a corporation, you must also obtain a work permit.

FE VISA in Bangladesh

Eligible Individuals: spouse and other dependent members of the Principal Visa group E.

Authorized period of stay: the same length of stay as the Principal visa trip in the E category.

Indicative list of required documents: Relevant documents e.g. birth/ marriage certificates / letter from recommending authority

 

“Visa from any foreign country is relatively easy to obtain, but there are no clear guidelines and the procedure of diplomatic missions in Bangladesh varies from mission to mission.”

Visa on Arrival in Bangladesh:

 

Eligible people: HSIA may also apply for VOA from foreign investors and business persons. VOA may not be qualified for by all nationals. The issuance of this visa is the Bangladeshi immigration officer’s sole discretion.

Permitted length of stay: 30 days.

Required document indicative list:

a. The candidate for the LP / VOA must have a return ticket together with

b. Letter or identity certificate from various associations of export-oriented commercial / industrial organizations (i.e.–FBCCI / BGMEA) in their letterhead specifying the relationship between the claimant and the organization and the length of the relationship.

c. The VOA applicant must have US $500 or equivalent foreign currency endorsed in his/her passport, credit card, debit card, travellers’ cheque or in cash.

 

 

 

➤ E1 Visa in Bangladesh –

 

Authorized length of stay: E1 visa is granted by the Embassy of the People’s Republic of Bangladesh of the country concerned for a maximum period of 6 (six) months, subject to the presentation of papers / documents in support of the appointment.

 

Eligible persons: Persons visiting equipment and software / project supervision supply / installation / maintenance etc. Indicative list of required documents: invitation from the local sponsor, copy of the agreement, recommendation from the Bangladesh Investment Development Authority (BIDA)/Bangladesh Export Processing Zones Authority (BEPZA)/department / agency.

 

 

 

➤ PI Visa in Bangladesh:

 

 

Eligible Persons: Investors in existing / new / under construction / new industrial / commercial entity in the private sector under a joint venture or a 100% foreign-owned company Authorized length of stay: PI visas shall be issued at the first application for a period of 3 months, if applied with the relevant documents.

Authorized duration of stay: PI visas are issued for a period of 3 months at the first application, if applied with relevant documents.

Indicative list of required documents: Certificate / Letter of BIDA / BEPZA (if applicable) certifying that the applicant is a genuine investor

 

 

 

➤ A3 Visa in Bangladesh-

 

Eligible Persons: Experts / advisers / officials / staff members / labors working in any project under the bilateral / multilateral agreement between Bangladesh government

and development partner agencies

Authorized duration of stay: The concerned Bangladesh Mission grant A3 visa for a maximum period of 3 (three) months subject to submission of appointment letter upon application.

Indicative list of required documents:

1. Recommendation from concerned Ministry / ERD / Govt. Organization and copy of agreement.

2. Security clearance from Ministry of Home Affairs.

 

 ➤FPI Visa in Bangladesh

 

 

 

Eligible Persons: Spouse and dependent members of the Principal travelling on PI category visa

Authorized duration of stay: same duration as Principal travelling on PI category visa.

Indicative list of required documents: Relevant documents e.g. birth/ marriage certificate / letter from recommending authority

➤FA3 Visa in Bangladesh:

 

 

Eligible Persons: Spouse and other dependent family members of A3 visa holders.

Authorized duration of stay: same duration as Principal traveling on A3 category visa.

Indicative list of required documents:

1. Recommendation from concerned Ministry / ERD / Govt. Organization/copy of agreement/MOU etc. with GOB.

2. Police Verification Report

 

 

➤ J visa in Bangladesh

Eligible Persons: Journalists of newspapers / magazines / TV or radio networks / news agencies / representatives of print, electronic or satellite media / freelance journalists etc.

Authorized duration of stay: usually 3 years

Indicative list of required documents: A clearance from the Ministry of Foreign Affairs ‘ External Publicity Wing is required for the issuance of J category visa. Usually it takes 21 days to process after the application has been submitted. The applicant must also apply, together with the visa application form, duly filled in FF-I and FF-II forms.

 

 

 

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How to Submit Taxes in Bangladesh | Income Tax, Customs Duties, VAT.

How to Submit Taxes in Bangladesh | Income Tax, Customs Duties, VAT.

How to do Tax Submission in Bangladesh | Complete Overview of Income Tax, Customs Duties, VAT.

Tahmidur Rahman, Senior Associate

25 November 2019

Tax Submission in Bangladesh:

What are the process of Tax Submission in Bangladesh ( Personal Income Tax,  Corporate Income Tax, Custom Duties etc.) and what are the rules and regulations that relate to specific custom duties, supplementary duties, regulatory duties and their relationships with HS code and brand valuation and how to deal effectively with the issue? This post in details will provide a complete overview of Tax Submission in Bangladesh and will hopefully answer to your quries in regards to Tax Law in Bangladesh.

Taxation in Bangladesh 

 

In Bangladesh, the history of income tax submission dates back to 1860 when British rulers introduced it in this country under the title of the Income Tax Act, 1860. Many changes have occurred since then. Recently, taxation facilities have become one of the Bangladeshi business organization’s important and complex compliance issues. Tax levy and taxes were updated by the promulgation of the Finance Act almost every year. Tax facilities in Bangladesh are usually regulated by the 1984 Income Tax Ordinance.In Bangladesh, legal aid related to VAT, tax and customs is high in demand. Because of its complexity, particularly for businesses, new investors and entrepreneurs understanding the various formalities involving taxation is a big challenge.

With income tax in particular, different statutory requirements for e.g. income advance tax, source tax deduction, tax exemptions, tax rebate, procedures for filing annual tax returns along with their assessments, etc., and their correlation, which can be found difficult without proper knowledge. Here one by one, we will explain the procedures and regulations in regards to Tax Submission in regards to Bangladeshi Law.

Income Tax in Bangladesh 

One has to pay his or her income tax at the end of each fiscal year, and a number of Bangladesh taxpayers are doing the job quite successfully.But there are also many clashes with filing their tax returns because they have little or no idea of the process.Things seem to be rather difficult, particularly for the first time people who pay taxes.

Are you actually Suppose to Pay Income Taxes? Are you in the Bracket? Find out whether you are actually eligible for Tax Submission in Bangladesh First!

In accordance with the stipulation set out in the Finance Act, if any person earned more than Tk 220,000 during the 2013-14 income year, he / she must send his / her income return along with the source(s) of income. Nonetheless, the total non-taxable income limit will be Tk 275,000 for women and senior taxpayers aged 65 and above, Tk 350,000 for physically challenged mentally handicapped workers, and Tk 400,000 for war injured freedom fighters serving in the gazette.

The following person must also submit his / her income tax return, however, if he / she did not earn much more than the maximum limit, if he / she:

(i) resides in a municipal corporation or paurashava or divisional headquarters (HQ) or district headquarters and owns a motor vehicle including a jeep / microbus or is a member of a VAT registered club;

(ii) runs a business or profession licensed and operates a bank account;

(iii) has registered as a doctor, dentist, lawyer, income tax practitioner with a recognized professional body;

(v)     is a candidate for an office of any paurashava, city corporation, or a Member of Parliament;

(vi)     assessed to tax for any of the three years immediately preceding the income year;

(vii)     participates in a tender floated by the Government, semi- Government, autonomous body or a local authority. In addition, any registered company/Non-Government Organisation (NGO) shall file a return of its income or the income of any other person for whom the company/NGO is assessable to the authority.

 

The tax rates during the assessment year 2014-15 for individual taxpayer other than female, taxpayers of 65 years and above, differently able person, retarded employee and gazetted war-wounded freedom fighter are as follows:

Income Tax Submission in Bangladesh

Income tax submission in Bangladesh/ Income Tax Return in Bangladesh

The income tax return is something that people are required to submit each year by November 30. And by that time, you will have to update your employment, property, and income tax data through a form. The main reason is that the data submitted for a fiscal year may vary from the information submitted a year earlier.

A taxpayer has to notify the state on its current status after using a TIN. Punitive measures are also in place to avoid taxes.

Every income tax payer is entitled to receive income tax return form free of charge from tax offices or NBR i.e. National Board of Revenue website. In addition, NBR has launched online tax calculator on www.nbrtaxcalculatorbd.org to promote the assessment of their taxes by assessees. Additionally, for small businessmen, doctors and lawyers, NBR offers spot assessment. Anyone who invests Tk 1000,000 as initial capital shall pay Tk 4000 and pay Tk 2000-4000 as income tax to those doctors and lawyers who have practiced their profession for 5-10 years.

For Tax Submission in Bangladesh, each assessee shall deposit the amount to the govt after assessing the amount of income tax. Exchequer by pay order, challan treasury or online via www.nbrepayment.gov.bd and submit duly signed and verified return form along with the necessary documents to the tax circle concerned.

For details of filing system, click here or in the image below-

 

Time limit to submit the tax return in Bangladeh

Deadline for submitting a return A company / NGO shall submit an income tax return by the fifteenth day of July following the year of income or by the fifteenth day of July before the expiry of six months from the end of the year of income, before the expiry of those six months and in all other cases by the thirtieth day of September following the year of income. Nevertheless, with the permission of the Inspecting Joint Commissioner, the last date for the return can be extended by the DC of Taxes for up to six months. The state can also expand the time limit in addition to this.

Income Tax exemption in Bangladesh

Many individual classes enjoy tax holidays. For example, if you own savings certificates, invest in the stock market and have life insurance, a certain amount of your income tax will be waived.

For this purpose, income tax lawyers suggest savings tools as they are most risk-free and can be found at the National Savings Bureau, post offices, and banks.

Punishment for infringement of the tax rules in Bangladesh

An assessed person shall be guilty of an offense punishable by imprisonment for a term of up to three years, but not less than three months or for a fine or both, if he / she makes a statement in any confirmation, return or other document furnished in compliance with any provision of the ITO 1984 which is false or intentional and involves other persons.

In addition, an assessee shall be guilty of an offense punishable by imprisonment for a term that may extend to one year or a fine or both if he / she refuses to provide the return of income in due time without reasonable cause. In addition, the DC of Taxes will impose fine Tk 10 percent of the last estimated amount, but not less than Tk 1000, and will also impose fine Tk 50 late on each day.

Therefore, a person will be guilty of an offense punishable by imprisonment that may stretch to five years but may not be less than three months or fine or both if he disguises the information or intentionally gives false details of his earnings in regards to tax submission in Bangladesh .

The established income tax collection schemes are soft, complicated, time-consuming and are not yet taxpayers ‘ trouble-free. In this regard, the entire system of tax management should be effectively structured to prevent tax evasion.

Where to complain in regards to Tax Submission in Bangladesh

If you have a service allegation or other tax-related issues, you can file a written appeal to the tax commissioner detailing the problems.

The prosecutor must hold a hearing on it after receiving the petition, leading to its settlement.

If not, with his or her issues, the taxpayer should petition a jury. The person still has the option to move to the High Court as a last resort remedy in the event of a further failure to substantiate the complaint.

And last but not least, a taxpayer will know that whatever service they get is not safe. In fact, a taxpayer gets the services by paying money.

 

Value Added Tax (VAT) in Bangladesh | Tax Submission in Bangladesh

All goods except those listed in the VAT Act’s First Schedule and all services except those specified in the Second Schedule are taxable goods and services. Originally, a comprehensive list comprising the list of services subject to VAT was the Second Schedule of the VAT Act. The First and Second Schedules now list respectively statutory exemptions to goods and services. The third schedule lists the goods and services subject to additional duties (SD) and their relevant statutory rates.

NBR has now listed the number of VAT-able products and their range clarified by a Statutory Regulatory Order (SRO) at 79. For various types for VAT–Gross-Product VAT, Income-Type VAT and Consumption-Style VAT–Bangladesh has adopted the consumption-type VAT and its invoice-based credit or credit-subtractive system for calculating VAT payable by a company in each tax cycle. By applying the tax rate to each individual sale and subtracting all input taxes previously paid on sales, company calculates the tax liability according to this process.

 

Rates of Vat in Bangladesh

 

Most of the countries that implement VAT worldwide operate a single standard VAT rate. Appendix 1 indicates certain countries ‘ VAT rates with the year in which they launched VAT. In regards to Tax Submission in Bangladesh, country’s VAT legislation provides a standard rate of 15 percent for home consumption goods and services in line with best international practice and a zero rate for exports. Under the rule, all taxable goods and services manufactured and sold for sale in the country are subject to VAT at 15%. For all goods and services to be exported and deemed to be exported from the country, a rate of 0 percent applies. In practice, however, there are some other rates  that emerged from different methods

Registration of  VAT in Bangladesh 

 

All importers, zero-threshold exporters and suppliers (manufacturers, dealers, wholesalers, retailers) of all taxable goods and services with an annual turnover limit of BDT 60 millions (BDT 6 million, equivalent to US$ 80,400) and above are required to be registered under VAT. The VAT law requires a divisional VAT office to issue a certificate of registration within 2 (two) working days of receiving a request.

 

Businesses below the threshold can opt for voluntary registration of VAT in Bangladesh, in line with international practice. The amount of VAT collected shows that the majority of VAT registered persons are optionally or voluntarily registered.

One of the reasons is that while the threshold has undergone upward revision quite a few times over the past 20 years, those with their existing threshold within voluntary VAT registration could not escape the net once the threshold was increased due to administrative convenience as well as external pressure.

The study of different VAT regimes, particularly those of developing countries, suggests that in a simpler procedure, despite the distortionary effects of the different treatment between undertakings above and below the threshold, many countries tax undertakings differently and at a much lower rate.

This is done primarily because of the administrative and compliance costs, equity and competitive advantages and disadvantages of the economically involved parties. In Bangladesh, this is no exception. Section 8 of the Act provides that undertakings whose annual turnover is below the VAT threshold and for which VAT registration has not been made compulsory are entitled to pay turnover tax @ 3% of declared and approved annual turnover without the possibility of claiming input tax credit. Nevertheless, most of the taxable products listed and a number of items are not eligible for turnover tax as they are required to register VAT.

The number of businesses registered under VAT system is 480,467, which is glaringly poor as compared to the number of total businesses in the country. According to the economic census of 2001 and 2003 the total number of businesses in different sectors was 3,674, 971 of which 1,127, 613 were registered with the trade licensing authorities

 

Vat Filling in Bangladesh | Vat Submission in Bangladesh

Compliance with taxes is ensured by submitting periodic returns. In Bangladesh VAT, a registered person is required to submit a return in a tax period in accordance with section 35 of the VAT Act. Submitted in a prescribed form –(Mushak 19) in duplicate to the local VAT office within 15 days of the following month, VAT returns are normally submitted on a monthly basis, although there are provisions for quarterly and semi-annual returns for certain companies. Compliance with taxes is ensured by submitting periodic returns. In Bangladesh VAT, a registered person is required to submit a return in a tax period in accordance with section 35 of the VAT Act. Submitted in a prescribed form –(Mushak 19) in duplicate to the local VAT office within 15 days of the following month, VAT returns are normally submitted on a monthly basis, although there are provisions for quarterly and semi-annual returns for certain companies.   The Bangladesh VAT filing scenario shows a huge difference between what’s being taught in the book and what’s being done.

Although Return should be the core of all VAT activities in an ideal VAT system, namely tax liability, input tax credit, drawback, and revenue statistics, VAT returns were not given the importance they deserve in Bangladesh. Return filing rate is very low. According to the latest statistics, out of 480,467 registered VAT-payers, the number of returning units in 2009-2010 was only 77,619, i.e. 16.15% (NBR, 2011).

 

 

One of the reasons for weak return filing is that VAT is obtained at sources in the case of firms with more than 70% (estimated) registered individuals, such as construction firm, procurement provider. The lack of a culture of voluntary tax compliance is another reason for the unsatisfactory rate of return submission. Due to the lack of successful compliance, the situation is further compounded.

Until now, there has been no significant VAT system automation in Bangladesh. Although most VAT commissioners have data processing units with the VAT Information Management System (VIMS) computer program in place, returns are not processed systematically.

 

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Custom Law in Bangladesh

 

Bangladesh is implementing the Harmonized Commodity Coding System. Import ProceduresDocuments required for importation include a letter of credit authorization form, a lading or airway bill, commercial invoice or packing list, and origin certificate. For certain imported items or services, the relevant government agencies require additional certifications or import permits related to health, safety or other matters. For the public sector, reduced documentation requirements are applicable.

Foreign companies must obtain permission from the Chief Import and Export Controller and submit the following documents: photocopies of an import registration certificate; photocopies of invoices, lading bills and import permits duly certified by the bank; a copy of the General Index Register (GIR) certificate; a certified copy of the last tax order; name and description of each impairment.

The following documents must be submitted by private sector importers: certificate of affiliation to a registered chamber of commerce and local industry or professional association established in Bangladesh; proof of payment of renewal fees for import registration certificates (IRC) for the tax year; copy of tax identification number (TIN) certificate; three copies of previou proof of payment.

A new Custom Law in Bangladesh

A new customs law is likely to soon be put in parliament under which the government will have to digitalize the associated environment, said National Revenue Board (NBR) officials.

The new draft law also implements various measures in line with global trends to promote the clearance of goods planned for export and import from ports to encourage international trade, they said.

“In view of international best practices, we have drafted the new law. The latest one is more up-to-date and more pragmatic, “a senior official of the NBR said, trying to remain unnamed as he was not allowed to speak to the media.

The new law includes various measures to promote faster trade, followed by advanced economies.

One of the clauses is the Advance Cargo Declaration, which provides companies with the ability to request customs-related import documentation prior to the arrival of goods in ports.

Under a mechanism called Post Clearance Audit, the new law will also open up the scope for compliant businesses to quickly clear goods.

According to the draft, compliant and honest traders will receive a green channel for importing and exporting goods as authorized economic operators.

 

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Regulations of Microcredit & Financial Institutions in Bangladesh

Regulations of Microcredit & Financial Institutions in Bangladesh

Regulations of Microcredit & Financial Institutions in Bangladesh

 

Tahmidur Rahman, Senior Associate

5 Aug 2019

What are the rules and Regulations of Microcredit & Financial Institutions in Bangladesh regarding incorporating and then managing a microcredit and microfinance institutions in Bangladesh? What are the regulatory compliances to maintain for an already established one? We explain everything in details in this post.

The concept of Microcredit and Microfinance

 

Before diving on to the rules and Regulations of Microcredit & Financial Institutions in Bangladesh, let’s recap the concept of microcredit and microfinance. Although the practice of lending small amounts of money for investment and consumption purposes has been popular in Bangladesh, modern structured, systemic, group-based and institutionalized micro-credit operations are Bangladeshi developments, pioneered by the Grameen Bank and replicated around the world with local modifications and adaptations. The system has experienced explosive growth here and elsewhere, and has given hope to millions of poor and lower middle class men & women and to generate income to get out of poverty. The Microfinance Management System has overcome the structural problems of targeting and providing financial services to millions of poor people.

The Societies Registration Act 1860, Companies Act 1994, Cooperative Societies Act 1984, Charitable and Religious Trust Act 1920 and Trust Act 1882 are the acts under which NGOs operating under microcredit programs may be registered. NGOs eligible to receive donations from different foreign sources must be registered with the NGO Office of International Contributions (Voluntary Activities) Regulation Ordinance 1978.

The MFIs was found to have transaction costs. Identifying and choosing target lenders and maintaining a high level of loan recovery are also expensive.

Before we deep dive into the details of Microcredit institutions in Bangladesh, if would like to know the rules for registration of a company in Bangladesh, visit the blog post below.

If you want to know how to open a company in Bangladesh or about company formation click here!

  • Step by Step Process of Registering a Company in Bangladesh

Microcredit in Bangladesh

The continued “double-dip” slowdown in the investment markets is impacting Bangladesh’s economies. In addition, recent over-indebtedness problems in several countries have shown that there is over-supply of micro-credit. In this context, Bangladesh’s microfinance sector has shown great resilience and continues to contribute to the improvement of macroeconomic development. Bangladesh has achieved a remarkable achievement in financial inclusion in Asia. Approximately 81% of its adult population, including both the formal and microfinance markets, has been put under financial inclusion under the guidance of Micro regulation authorities, i.e MRA and Bangladesh Bank.

According to a recent World Bank survey, Bangladesh is second amongst the Asian countries to Sri Lanka in terms of financial inclusion indicators. The report shows that 40% of Bangladesh adult’s accounts are in formal financial institutions, which is 35% in India and 10% in Pakistan. MFIs in Bangladesh are already working with remittance channeling banks and mobile money transfer software. Bangladesh has also made good progress in terms of consumer rights and empowerment. The total savings has also increased by 23.25 percent to BDT 63.3 billion in June 2011 compared to previous year from 26.1 million clients, over 93 percent of them are women.

Regulations of Microcredit & Financial Institutions in Bangladesh

The Microcredit Regulatory Authority (MRA) was founded by the Government of the People’s Republic of Bangladesh under the Microcredit Regulatory Authority Act 2006 to promote and promote sustainable development of the microfinance sector by establishing an enabling environment for NGO-MFIs in Bangladesh. As the regulatory organ, MRA determines the rules and regulations of Microcredit & Financial Institutions in Bangladesh, i.e the NGO-MFIs. The Authority’s license is required to carry out microfinance operations in Bangladesh. MRA provides statistical information on the microfinance market on a regular basis. The NGO-MFIs provide operating data on the specified format twice a year and financial information on a yearly basis. The Government passed the Microcredit Regulatory Authority Act 2006 in July 2006 on the basis of suggestions made by the Committee. Under this Act, the Government established a separate Microcredit Regulatory Authority (MRA) and appointed its Board of Directors, chaired by the Governor of the Bank of Bangladesh. Under this new law, all operating MFIs will have to apply for a license from the Authority. No MFIs will be allowed to operate within the country without a license from the Authority. According to the legislation, all organizations that have a microcredit operation must separate their financial operations from other development works and keep their accounts separate.

The top three MFIs contribute 54% of the total outstanding loans as well as deposits of the microfinance sector in Bangladesh. Two of the largest MFIs, BRAC & ASA, each represent more than five million lenders. There are a few more of them evolving quickly. On the other hand, the smallest 428 NGO-MFIs contributed just 4 per cent of the total outstanding loan and 5 per cent of the total savings. The corporate dominance ratio is highly skewed in favor of large MFIs: only 22 companies hold 76% of the market share, while the three largest entities manage more than 50% of both the clients and the total financial portfolios.

On the other hand, Grameen Bank offers credit without collateral for a wide range of revenue generation and asset building activities. It also provides its members with housing loans. During the 2009-10 fiscal year, its cumulative microcredit disbursement amounted to Tk 91.9 billion, which was more than 28 per cent of the previous year. The number of its borrower members rose to 90,000, and 95% of them were women. It operates in over 45.000 villages. Several major micro-credit initiatives in Bangladesh that implement Grameen’s group-based approach include Brac, an NGO with more than 1 million members, and the Bangladesh Rural Development Board (BRDB), a government agency offering micro-credit to some 500,000 members.

Legal Requirements to be an NGO-MFI in Dhaka, Bangladesh

 

The organization/person willing to operate Microcredit activities in Bangladesh shall submit application to the Microcredit Regulatory Authority in Prescribed Form and Prescribed manner, which is available to access by legal entities in Microcredit Regulation Authority office (MRA) in Bangladesh. And that is only possible or applicable for the prospective applicant institutions after getting registration as an NGO under any of the following acts:

  1. The Societies Registration Act, 1860 (Act XXI of 1860);
  2. The Trust Act, 1882 (Act II of 1882);
  3. The Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (Ordinance No. XLVI of 1961);
  4. The Companies Act, 1994 (Act XVIII of 1994).


 License Issuing Procedure of MFI-NGO’s in Bangladesh

 

(1) In order to obtain a license, a person shall apply to the Authority in the prescribed form set out in the given form by MRA.

(2) Upon receipt of the request in the following form, the Authority shall evaluate the information provided with the request and, upon satisfaction, request the payment of the required license fee. (Follow the figure below).

 

(3) The Authority shall issue the license in the form set out in Annex B within 10 (ten) days of receipt by the applicant of the license fee referred to in sub-clause (2).
(4) If the application is denied, the Authority shall inform the applicant in writing within 30 (thirty) days of the rejection.
 


 License Issuing Procedure of MFI-NGO’s in Bangladesh

 

(a) The licensed entity shall abide by the law and all provisions of this Microcredit Authority Provisions 2010;

(b) the licensed organization shall not be able to operate its Microcredit Activities outside the area of operation approved by the Registration Authority;

(c) the full address of the Head Office and the Branch Offices of the company shall be notified to the Authority;

(d) any alteration in the area of operation permitted by the Registration Authority; 

(e) any change of address of the Head Office shall be notified to the Authority in advance;

(f) changes to the address of the Head Office or Branch Office shall be notified to the Customers and to all other relevant parties;

(g) the licensed organization shall pay the annual fees mentioned in the table beforehand;

(h)The licensed organization must provide all information as required by the Authority and extend all co-operation in carrying out any inspection and investigation by the Authority.

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Models of Lending in Bangladesh 

 

1. Grameen Bank Style Microfinance

 

For all practical purposes, existing regulations of Microcredit & Financial Institutions in Bangladeshis is regulated by working out the presented by the Grameen Bank’s simple group-based approach. The basic structure is as follows: poor women and men are grouped into classes or groups that meet once a week to deposit a small amount of savings to build up their own resources. The Bank or MFIs lends a one-year loan (some MFIs repay loans within 43-46 weeks) which the lender repays in equal weekly instalments along with interest. Once the lender repays one loan, it is entitled to obtain another loan normally of a higher amount within the total loan limit, which, of course, is adjusted upwards over time.

 

The methodology was found to be so reliable and efficient that almost the entire industry adopted this method with minor adjustments to savings / credit policies such as savings and loan interest, savings withdrawal rules, etc. Today, almost 33 million women and men are working on this basic system every week. With time, however, both the Bank and other MFIs have modified their processes to deliver more than one form of savings and credit products, as the complexity of demand has changed and MFIs have also learned to deal with more complex situations.

 

        2: Self Help group system

 

A handful of non-governmental organizations have attempted and are still pursuing the so-called self-help group approach to creating a financial service delivery system. In this case, the organizer or NGO organizes self-help groups with the goal of promoting the mobilization of savings among disadvantaged women and men. If the participating members need a loan, they can borrow from their samity, i.e. their own savings funds. If the funds are not sufficient, the self-help Samities may seek to borrow additional capital from banks or the NGO. The second option was tried in Bangladesh, but the first alternative was not possible.

 

        3: Individual Lending System

 

As the Regulations of Microcredit & Financial Institutions in Bangladesh are maintained by both the MRA and the Bangladsh Bank, the central issue in designing an individual system as opposed to a group-based system is to deliver flexible and demand-driven services to each client / borrower. The group-based system is seen as a’ one-size fits all’ system. The individual loan strategy, i.e. providing savings and credit services to each customer on the basis of the particular client’s request. Flexibility may occur in the form of the amount and frequency of the deposit of savings, the amount of the loan and the length of the loan, the repayment of the amount of the loan and the frequency of installments (no fixed schedule is considered flexible) etc.

Nevertheless, lending to individuals does not necessarily make it entirely’ flexible.’ For example, ASA and BRAC disburse loans to individual clients under their respective microenterprise loan programs but offer a fixed one-year loan and a fixed monthly repayment plan.

 

4.Fin-tech money lenders 

 

Although currently there’s no money lending MFI which is solely operating on FinTech-enabled payment processing and modelled their micro finance institutions according to that modern app based payment skeleton structure presented in other countries all around Asia, like Moneytap or koinworks. Implementing a credit based money lending through apps in bangladesh will play a huge role in modern era of lending credits. This  will also reduce the amount of cash needed for printing and distributing currency notes. In addition, it will help mitigate the risks of counterfeit currencies circulating in the country. Reduced cash requirements would help the central bank reduce costs and manage risks.

Currently in Bangladesh, specialized financial institutions for processing transactions are generally referred to as payment banks. Payments banks are especially useful for people who do not have a bank account but engage in payment activities. FinTech allows these banks to keep their operating costs to a minimum. Payments banks are exploiting mobile telecommunications infrastructure and their large subscriber base to remove the barriers to entry. They compete with cash transactions to provide their customers with a simpler, faster and cheaper alternative. FinTech will help to achieve all of this for payment banks. With the right kind of guidance from regulators, the payment sector in Bangladesh could grow rapidly.

5.Informal money lenders

 

Informal money lenders are another typical source of micro-loans that follows’ individual loans.’ No up-to-date information and research on their activities is available. Nevertheless, it is assumed, on the basis of anecdotal evidence and small studies, that rural poor are no longer dependent on money lenders for small loans due to the proliferation of MFIs. We have the potential to borrow from one or more MFIs for investment or, in some cases, for consumption purposes. Nevertheless, due to the lack of a large-scale agricultural loan from MFIs, money lenders can still be found borrowing for emergency loans to the poor and also for agricultural loans.

 

 

“Implementing a credit based money lending through apps in bangladesh will play a huge role in modern era of lending credits.”

Can fintech loan apps can mushroom in bd 

The four key elements of the Digital Bangladesh Vision Government are the creation of human resources, the participation of women, civil services and, finally, the use of technology in businesses. Since the use of technology in industry is one of the key elements of “Virtual Bangladesh Vision,” MFS has made the most significant improvement over the years. However, only 47% of the population is still financed. Meaning that only 47% of the population has access to useful and affordable financial products and services that meet their needs–transactions, payments, savings, credit and insurance–delivered in a responsible and sustainable manner.

 

Fintech & Microcredit in Bangladesh

 

MFS still in its infancy has many downsides, for example: interoperability, limited service and withdrawal restriction among others. On the other hand, MFIs are currently facing competition from the finance and agent banking sectors. MFIs lack a comprehensive IT infrastructure that limits their ability to provide a variety of products and services to the financially excluded remote parts market. On the other hand, if we take a look at agent banking, we’ll see how both the collection of deposits and the disbursement of loans have grown. As of September 2018, the loan disbursement through the agent banking network amounted to BDT 150 crore, up 9.8% from a quarter earlier that year.

At the same time, the collection of deposits increased 28 per cent to BDT 2,577 crore, according to data from the central bank. As MFS and agent banking are more like an extension of traditional banks or in association with banks and mobile phone operators, they can easily remove customers from MFIs.
In fact, despite infancy in some cases, these MFS now even deliver savings to consumers, and they also have technical support. Nevertheless, social inclusion is not their main objective.
MFIs can use FinTech’s ability to address poverty in a pro-poor way by actively leveraging their large customer database.

Given all the benefits, the complete digitization of the microfinance sector will be strenuous as a number of challenges emerge.

First of all, the costs of developing virtual field applications are very high for MFIs. In a report published by UNCDF, one of the senior managers of a large MFI developed in Bangladesh suggested that hardware costs, for example: smartphone, tablets, would be too high for them.

One of the most difficult challenges for MFIs is to win customer trust. As most MFI clients are peasants, they lack financial and technical literacy. In fact, the TMSS Senior Manager stated that, if they ask their customers to apply for a loan.

 

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