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rates charged by commercial banks and said monetary transactions
maintained by the banks and their effective rates of interest
remained fishy. At the seminar on 'Microfinance Interest Rate and
Transparency' on Tuesday, they pointed out that the microfinance had
ensured access of a large number of poor to the formal financing,
despite the controversies surrounding the higher interests.
Wahiddin Mahmud, a senior economist and chairman of Institute of
Microfinance, also underlined the importance of bringing
transparency in the micro-credit lending rate and suggested that
alternative financing for microfinance institutions to fund micro
enterprises might help reduce the much-talked interest rate.
'There are questions about micro-credit interest rate but not about
transactions of crore of Taka. For banks, it is the transactions, if
not interest rate, which is the grey area. Transparency should be
ensured to show the effective interest rate and method of
transactions of the commercial banks,' he observed. Presiding over
the opening session of two-day seminar, the economist said the
commercial banks followed fishy practices while rescheduling the
loans of the 'big fishes'. He also mentioned that there should be
transparency in interest rates and overall operations of the
microfinance institutions to prove their positive role and stop bad
players from making windfall profits from hedge- financing business.
'There is no reason to hide and seek with lending rate. It will be
slightly high because the MFIs have to reach the doorstep of the
poor,' Wahiduddiin said adding that interest rates must come down and
the microfinance institutions should also be made sustainable. The
Institute of Microfinance and the Micro- credit Regulatory Authority
jointly organised the seminar at Palli Karma-Shahayak Foundation to
discuss wide ranging issues of interest rates charges by microfinance
institutions, mainly NGOs, and transparency in their operations.
The finance minister, AMA Muhith, addressing the inaugural session,
said the interest rate had come down in recent years and would
decrease further if they improve efficiency. He also stressed the
need for containing cross-financing to save borrowers from
indebtedness. 'The more micro-credit has expanded, the less the
interest rate has been charged,' he said lauding the growth of the
micro-credit in the country. The governor of Bangladesh Bank,
Atiur Rahman, explained a set of factors that should be taken into
consideration for calculating interests rates. Such factors include
inflation, cost of funds, administrative expenses, efficiency of
operation, and cost of losses. He recalled that today's Grameen
Bank evolved based on a project of the central bank, which was
almost rejected by the board of governors in view of its 'lack of
financial sustenance'. 'What was valued eventually was the social
benefits and professor Yunus rose to the occasion to meet the needs
of the poor in the rural areas,' added Atiur, known to be economist
of the marginalised people. The executive vice chairman of the
Micro- credit Regulatory Authority, Khandaker Muzharul Haque
mentioned that they wanted to issue a cap on the interest rate but
they failed to reach a consensus on such issue. The interest rate
charged by the microfinance institutions is said to be up to 30 per
cent. 'The decision was taken to calculate the interest rates
through stakeholders' meeting,' he said. The amount of
micro-credit disbursed annually has stood at around Tk 25,000 crore,
said Baqui Khalily, executive director of the Institute of
Microfinance.
