MRA plans to slash interest rate by 2pc

The micro-credit regulator is mulling over fixing the interest rate on agricultural loan at 25 per cent from existing 27 per cent for the clients of micro-finance institutions (MFIs).
If the proposal is implemented, the interest rate in the sector will come down since the ceiling of the interest rate was fixed at 27 per cent in 2011.
The proposal for reducing the interest rate came at a coordination meeting held among the Bangladesh Bank (BB), Bangladesh Securities and Exchange Commission (BSEC), Office of the Registrar of Joint Stock Companies and Firms and Insurance Development and Regulatory Authority (IDRA), Microcredit Regulatory Authority (MRA), Department of Cooperatives (DoC) at the central bank in Dhaka on Wednesday with BB governor Atiur Rahman in the chair.
"We are taking the proposal positively. After carrying out feasibility study and holding meeting with stakeholders, we will finalise the decision," MRA Director Shazzad Hossoin told the FE on Friday.
Currently, the number of MFIs stands at 906, including 208 which got licences for three years to prove themselves to be able 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, 2010 capped the interest rate on microfinance at maximum 27 per cent which took effect from June 2011.
The MRA said the rate would be slashed gradually through improving the efficiency of micro-finance institutions (MFIs).
Earlier, Bangladeshi micro-financiers had been charging rates ranging from 30 per cent to 50 per cent or even more.
When contacted, former Credit and Development Forum (CDF) Chairman Md Mosharraf Hossain said it is not possible to implement the proposal as micro-credit is disbursed to the members of a group at grassroots level.
"How we could manage separate interest rates in a group where most of our clients are uneducated," he said.
However, two largest NGO-MFIs have already cut the interest rate on agricultural sector.
An official of Association for Social Advancement (ASA) said they had already planned to cut the interest rate on agricultural sector.
"BRAC also cut the interest rate on agri loan by 1 per cent to 26 per cent few months back," a MRA official told the FE.
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