He also called for creating employment opportunities with better wages for the poor to minimise the rich-poor gap.

Since the emergence of micro credit the ultra poor have been deprived of credit for their inability to repay loans, he said.

He was speaking at a national conference of International Network of Alternative Financial Institutions (Inafi) Bangladesh titled 'Policies, frontiers and performance of micro finance industry in Bangladesh: Looking for alternatives' in Dhaka.

So far, a large part of the 10 percent of the poorest are out of the micro credit facilities, he said, adding that the graduates in micro credit programmes need to go for enterprises employing the poorest part of the society.

"As the micro credit system expands, there is a need for a regulatory framework not to constrain, but to support further progress of the sector," the economist said.

Over the period the system has become much self reliant with less dependence on the subsidised funds from the government or foreign donors, he said, adding, "It can become entirely self reliant even at the current interest rates if the micro finance institutions can collect funds even from the non-members."

"The commercialisation of these organisations however must not be at the cost of deviation from its main focus -- poverty alleviation," Mahmud warned.

Atiqun Nabi, executive director of Inafi Asia and Bangladesh, said to reduce the vulnerability of the borrowers at any disaster, micro finance insurance can also be introduced in collaboration with the private insurance companies.

Quoting an Inafi survey, he said about 90 micro finance organisations are trying to provide the borrowers with security through health insurance or a lump sum amount during emergency or after the death of the members.

"In this context, the micro finance insurance, if brought under a disciplined system, can help the ultra poor in a big way," Nabi observed.

Responding to a question Fakruddin Ahmd, managing director of Palli Karma-Sahayak Foundation (PKSF), said he has no idea if there is any legal provision in introducing micro finance insurance, but added, "There was also not any legal provision while micro credit was introduced in the country, but it is established now."

Professor Syed Mainul Ahsan of Concordia University, Canada, Iffat Sharif of North South University, Imran Matin of Brac, Sajjad Zohir, research fellow of BIDS, and Rashed Al Hasan of Inafi Bangladesh, made presentations in the conference.