Yunus for standard interest rate on micro-credit

3-day int’l microfinance conf concludes
Grameen Bank founder and Nobel laureate Muhammad Younus on Wednesday urged the government to fix a standard rate of interest for all microfinance organisations, rebutting criticism that micro-credit borrowers were charged ‘higher interests’.
‘Let us know what the interest rate is. Because people often say that it is high but don’t know what the rate is,’ he told the closing ceremony of the three-day conference titled ‘Microfinance Regulations: Who Benefits?’ at Hotel Sheraton in the city on Wednesday.
He insisted that the Micro-Credit Regulatory Authority should determine the interest rate for microfinance operations. ‘The basic contribution that it [regulatory authority] should make to the sector is setting up a standardised interest rate and defining the meaning of micro-credit in the new global world,’ said Yunus.
The finance minister, Abul Maal Abdul Muhith, addressing the opening session of the conference on Monday, said ‘There are many allegations against the micro financing institutions including high interest rates that tangle the borrowers in unending debt.’
Yunus pointed out that many organisations took collateral against loans, some give loans to middle-income people and some even lend money to buy consumer items – all, he said, in the name of is microcredit.
Insurance for the rural poor could be another avenue for the microfinance institutions, he said adding that disaster and health insurances could be introduced for the rural population utilising microcredit.
‘The newest challenge for MFIs now is to cater to the needs of the second generation,’ sad Yunus, the winner of 2006 Nobel peace prize. ’We have to think about the children of the borrowers, how they can break out from the cycle of sickness, poverty and uncertainly.’
Referring to the funding for microfinance operations by development partners, BRAC chairman Fazle Hasan Abed said the scenario had changed. ‘The high interest is charged for sustainability of the MFIs,’ he said.
Abed felt that the regulatory authority could help the microcredit operators and consider awarding them banking licenses.
Masihur Rahman, economic affairs adviser to the prime minister, expressed his agreement with Younus and said the microfinance institutions should be allowed to carry out other activities in the financial sector for the rural poor.
Appreciating the repayment record of organisations such as BRAC, he stressed on the importance of reducing supervision costs of loans to slash down interest rate.
The Bangladesh Bank governor and also chairman of regulatory authority, Atiur Rahman, also addressed the conference attended by representatives of 20 countries. The authority organised the conference at Pan Pacific Sonargaon Hotel.

Courtesy of NewAgebd