A file photo shows the Grameen Bank head office in Dhaka. The Microcredit Regulatory Authority has taken further move to trim down the rate of interest on microcredit. — Reuters photo

The Microcredit Regulatory Authority has taken further move to trim down the rate of interest at which the micro finance institutions are lending money to their clients who are mostly poor.
Currently no MFI is allowed to provide loans at more than 27 per cent rate of interest to their clients.
‘Now, we are working to cut down on the rate again,’ Khandakar Muzharul Haque, executive vice-chairman of the MRA, told New Age on Sunday.
He said most MFIs had charged poor borrowers allegedly 35 to 40 per cent of interest against their loans before the MRA set the rate at 27 per cent.
‘In July 2011, the MRA, for the first time since its inception in 2006, set the rate for the MFIs,’ he said. ‘What will be the new rate is yet to be finalised. But, we are checking the cost of fund of the MFIs as part of the move.’
Profits from microcredit business in Bangladesh are entirely tax-free.
But in India, our neighbouring country, doing microcredit business is not tax-free and the country has set the maximum rate of interest at up to 26 per cent against such loans.
‘So, there is a scope to reduce the interest rate further in our country too,’ Khandakar said. He observed that the potential microcredit sector in Bangladesh was growing day by day.
‘But, still the sector is not properly regulated. So, the MRA is working with the government, especially with the Bangladesh Bank, to bring in sound rules and regulations, like commercial banks, for the sector.’
According to the latest data of MRA, the MFIs’ outstanding loans stood at around Tk 24,800 crore and savings at Tk 16,800 crore till December, 2012.
The total clients in the sector reached to around 35 million, over 93 per cent of them were women. In 2010, the sector recorded a 10.49-per cent growth, which accelerated to 20.6 per cent in 2011.
A loan amounting to maximum Tk 50,000 is generally considered a microcredit and any loan above the amount is considered micro enterprise credit, though there is no exact definition of it, MRA officials said.
The officials said there were around 673 licensed MFIs in the country and 200 applications seeking licences were under process. As of August, 2012, 3,380 applications had been rejected.
Recently, the MRA has cancelled 20 licences for violating the rules of MRA, the officials said.
The microcredit sector contributed around 3 per cent to the country’s gross domestic product in 2011, the MRA data showed.