Badrul Ahsan :
The Micro-credit Regulatory Authority (MRA) is mulling a plan to lower the farm loan interest by two percent for the benefits of the clients of micro-finance institutions, sources said.
If the proposal is implemented, the interest rate in the sector will come down to 25 percent from 27. The current rate was fixed in 2011.
The proposal for reducing the interest rate was discussed at a coordination meeting participated by the Bangladesh Bank (BB), Bangladesh Securities and Exchange Commission (BSEC), Office of the Registrar of Joint Stock Companies, Insurance Development and Regulatory Authority (IDRA), Micro-credit Regulatory Authority (MRA) and Department of Cooperatives (DoC) held in the auditorium the central bank recently presided at by BB Governor Atiur Rahman.
“We have discussed the issue positively in the meeting. After carrying out feasibility study and holding meeting with stakeholders, we will finalise the decision,” MRA Director Shazzad Hossain told The New Nation on Thursday.
“Considering the socio-economic conditions of the poor farmers as well as of the borrowers of micro finance institutions, we are going to reduce the interest rate. It would help small farmers a lot in producing agro products,” he said.
Currently, the number of MFIs is 906, including those, who got licences for three years to prove their capacity to continue with operation. At present, the sector has 20 million borrowers and 26 million members and its total outstanding loan is now Tk 350 billion.
Of the total outstanding loan, some 25 per cent are disbursed in greater agricultural sector, according to MRA.
The micro-credit regulator on November 9 in 2010 capped the interest rate on micro-finance at maximum 27 percent that took effect from June 2011. The MRA said the rate would be slashed gradually through improving the efficiency of micro-finance institutions (MFIs).
Earlier, interest rate of Bangladeshi micro-financiers was high. They used to charge their clients ranging from 30 per cent to 50 per cent or even more. However, experts have expressed their mixed opinion over the upcoming decision of slashing interest rate on a particular group.
“It is not possible to implement the proposed interest rate as micro-credit is disbursed to the members of a group at grassroots level and it is not possible to maintain a separate interest rate on a single issue,” former Chairman of Credit and Development Forum (CDF), Md Mosharraf Hossain said.
“How we could manage separate interest rates in a group where most of our clients are uneducated,” he said. Meanwhile, two largest NGO-MFIs have already cut the interest rate on agricultural sector in the meantime and some other are also planning to do the same, according to MRA.
An official of Association for Social Advancement (ASA) said, they have already planned to cut the interest rate on agricultural sector. “BRAC has also cut the interest rate on agro-loan by one per cent to 26 per cent few months ago,” an MRA official told The New Nation.
