THE micro-finance institutions licensed with the Micro-Credit Regulatory Authority, Grameen Bank and other public agencies together disbursed Tk 2,857.57 billion in microcredit in the 2023 financial year. The institutions licensed with the regulators disbursed Tk 2,493.02 billion in all, which is an increase on Tk 1,918 billion disbursed in the 2022 financial year and Tk 1,511 billion in the 2021 financial year. The institutions have also recovered Tk 2,176.17 of the amount disbursed. Grameen Bank disbursed Tk 247.57 billion, government departments and institutions disbursed Tk 84.75 billion and public and private banks disbursed Tk 32.23 billion in the period. Micro-credit is meant to empower the economically disadvantaged or low-income people in remote areas with small amounts of capital without collateral and it serves as a means for borrowers to invest in self-employment ventures. The Micro-Credit Regulatory Authority reports 31.5 million borrowers and 40.8 million clients under the micro-finance institutions. The total amount loaned out to borrowers as of June 2023 was Tk 1,504.18 billion. But the rate of interest on the money loaned out in micro-credit remains too high. The regulators set 24 per cent in the maximum interest rate on micro-credit while some micro-finance institutions still charge between 24 and 30 per cent.
While the prime minister, Sheikh Hasina, calls Nobel laureate Dr Muhammad Yunus, the founder of Grameen Bank who headed the institutions until 2011, ‘a loan shark’, the government appears no less of a loan shark because of such high interest rate on the amount given out in loans in microcredit to ensure economic and social development of the economically disadvantaged or low-income people living in remote areas. The government set the maximum interest rates on micro-credit loans, 27 per cent, for the first time in 2010 and earlier, there had been set rate, allowing micro-finance institutions to charge interest on micro-credit loans at their will. The government now, at least, willing to bring down the interest rates from the existing 24 per cent in the maximum has betrayed only failure in the task. The Microcredit Regulatory Authority — set up under the Microcredit Regulatory Authority Act 2006, to monitor microfinance operation and promote sustainable growth of the sector — in 2021 instituted a committee of 10 members, headed by the executive vice-chairman of the regulatory authorities, to revise the service charge, but the committee was disbanded as it failed to make any decisions. The government in 2022 instituted another committee of 11 members, headed by the Grameen Bank chair, but the committee has failed to make any decision on bringing down the interest rate from 24 per cent as it has so far failed to reach a conclusion.
In addition to promoting a sustainable development of poor sections of society, micro-finance institutions also play a major role in addressing broader society needs, contributing to areas such as health, education, higher education and disaster management. The earlier the government can bring down the interest rates on micro-credit loans, the better will be the impact of the system. The government must, therefore, do this at the earliest.
More about:
