Microcredit regulator forms committee to cut microloan interest rates

Microcredit regulator forms committee to cut microloan interest rates


A move is underway to slash the existing 24 per cent interest rate or service charge, as imposed by the micro-finance institutions (MFIs), to give poor borrowers some relief.

The Microcredit Regulatory Authority (MRA) formed a 10-member committee to revise the existing interest rate.

In 2019, the regulator fixed the maximum interest rate for microloans at 24 per cent after almost nine years. In 2010, the MRA capped interest rate for microloans at 27 per cent for the first time.

The microcredit regulator’s board has recently taken the decision, MRA director Mohammad Yakub Hossain told The Financial Express (FE).

MRA executive vice-chairman Md. Fashiullah is the head of the committee, while representatives from the central bank, finance ministry, Credit and Development Forum (CDF), and PKSF will be in it.

The committee will hold its first meeting next week to revise the interest rate, he added.

However, Chairman of CDF, an association of the MFIs, Murshed Alam Sarkar said they will oppose any decision to cut service charge.

“The MFIs are already in a crisis due to the pandemic. So, any move to cut their service charge will affect the micro lenders,” he told the FE.

The earlier committee in 2019 recommended reviewing interest rate as per the declining balance method after two years.

Mr Yakub Hossain said rationalising microcredit service charge is now under the government’s active consideration.

Experts on different occasions said the interest rates or service charges that the MFIs charge are too high at present. It is very important to lower such charges to help alleviate poverty and ensure economic growth.

They opined that the existing microcredit service charges are intolerable for the poor borrowers.

The government established the MRA under the Microcredit Regulatory Authority Act 2006 to monitor microfinance operation in the country and promote sustainable growth of the sector.

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