Muhith dismayed by MFIs' performance
Sunday, 7 November 2010
FE Report
Finance Minister A M A Muhith Saturday said the micro-finance institutions (MFIs) have failed to eliminate poverty from the country and improve the condition of some 20 million hardcore poor despite working for many years.
"Micro-credit programmes have covered nearly 40 million people across the country. But we do not notice any significant role of the MFIs in cutting the extreme poverty over the years. The number of hardcore poor is still at 20 million," said Mr Muhith.
"In Bangladesh, some 60 million people are living under the poverty-line, and 20 million of them are extremely poor. But I am surprised to see that the rate of extreme poverty is not decreasing significantly over the last few years," he said.
The MFIs should play an important role in alleviating poverty from the country, said the finance minister at the inaugural ceremony of the Palli Karma-Sahayak Foundation (PKSF)'s four-day Development Fair and 20th anniversary in the city.
Mr Muhith said a large number of people throughout the country are sunk under their debt burden. "The PKSF will have to play a pivotal role in rescuing them through its innovative ideas and debt management."
"I am not against the MFIs. They have played a commendable role in empowering women," the finance minister said. "The MFIs have reached at those areas of the country where the government has failed to reach even after several attempts."
He said: "Some 20,000 MFIs are working throughout the country. I am surprised why extreme poverty is not being alleviated even after their functioning across the country."
Bangladesh is one of the poorest countries in the world with nearly 37 per cent people living under the poverty line.
PKSF chairman Qazi Kholiquazzaman Ahmad said micro-credit is not being able to cut extreme poverty, though the purpose of the PKSF remains the same.
"It is not possible to alleviate poverty through micro-credit alone. An integrated action, assessing the socio-economic conditions of the poor people and their needs, is required to serve the purpose," he said.
"We, the MFIs, never ask the borrowers the questions such as how would they repay the loan or are they making profit or loss after investing the borrowed money or what is the educational condition of their children or when and how they would be self-reliant," Mr Ahmad said.
"When an MFI starts disbursing loans to the borrowers, it charges inflated rates of interests on the poor people, much higher than its actual service cost, which is extremely unrealistic," he said.
"The MFIs do not charge interest using the declining method. They charge at flat rate, which ultimately raises the repayment amount to double. It sometimes increases the interest rate to 30 to 60 per cent."
Now the PKSF has taken some innovative programmes for the poor, so that they could come out of hunger, and the country could be free from extreme poverty.
"Since its inception, the PKSF has disbursed 70 per cent conventional loan and given 30 per cent other types of financial support. The conventional loan system is not working well," he said.
As of June 2010, the PKSF has disbursed a total of Tk 551.57 billion (US$ 8.46 billion) loan to about 9.0 million beneficiaries through its 262 partner organisations (POs) with a record credit recovery rate of over 98 per cent.
In the FY 2010, the PKSF has disbursed Tk 20 billion, and has set a target of disbursing Tk 23 billion in the current fiscal (FY 2011).
In the function, the state-run organisation handed over lifetime award to former finance minister M Syduzzaman for his outstanding role in establishing the micro-credit provider.
Information Minister Abul Kalam Azad, and PKSF managing director Quazi Mesbahuddin Ahmed also spoke on the occasion.
Finance Minister A M A Muhith Saturday said the micro-finance institutions (MFIs) have failed to eliminate poverty from the country and improve the condition of some 20 million hardcore poor despite working for many years.
"Micro-credit programmes have covered nearly 40 million people across the country. But we do not notice any significant role of the MFIs in cutting the extreme poverty over the years. The number of hardcore poor is still at 20 million," said Mr Muhith.
"In Bangladesh, some 60 million people are living under the poverty-line, and 20 million of them are extremely poor. But I am surprised to see that the rate of extreme poverty is not decreasing significantly over the last few years," he said.
The MFIs should play an important role in alleviating poverty from the country, said the finance minister at the inaugural ceremony of the Palli Karma-Sahayak Foundation (PKSF)'s four-day Development Fair and 20th anniversary in the city.
Mr Muhith said a large number of people throughout the country are sunk under their debt burden. "The PKSF will have to play a pivotal role in rescuing them through its innovative ideas and debt management."
"I am not against the MFIs. They have played a commendable role in empowering women," the finance minister said. "The MFIs have reached at those areas of the country where the government has failed to reach even after several attempts."
He said: "Some 20,000 MFIs are working throughout the country. I am surprised why extreme poverty is not being alleviated even after their functioning across the country."
Bangladesh is one of the poorest countries in the world with nearly 37 per cent people living under the poverty line.
PKSF chairman Qazi Kholiquazzaman Ahmad said micro-credit is not being able to cut extreme poverty, though the purpose of the PKSF remains the same.
"It is not possible to alleviate poverty through micro-credit alone. An integrated action, assessing the socio-economic conditions of the poor people and their needs, is required to serve the purpose," he said.
"We, the MFIs, never ask the borrowers the questions such as how would they repay the loan or are they making profit or loss after investing the borrowed money or what is the educational condition of their children or when and how they would be self-reliant," Mr Ahmad said.
"When an MFI starts disbursing loans to the borrowers, it charges inflated rates of interests on the poor people, much higher than its actual service cost, which is extremely unrealistic," he said.
"The MFIs do not charge interest using the declining method. They charge at flat rate, which ultimately raises the repayment amount to double. It sometimes increases the interest rate to 30 to 60 per cent."
Now the PKSF has taken some innovative programmes for the poor, so that they could come out of hunger, and the country could be free from extreme poverty.
"Since its inception, the PKSF has disbursed 70 per cent conventional loan and given 30 per cent other types of financial support. The conventional loan system is not working well," he said.
As of June 2010, the PKSF has disbursed a total of Tk 551.57 billion (US$ 8.46 billion) loan to about 9.0 million beneficiaries through its 262 partner organisations (POs) with a record credit recovery rate of over 98 per cent.
In the FY 2010, the PKSF has disbursed Tk 20 billion, and has set a target of disbursing Tk 23 billion in the current fiscal (FY 2011).
In the function, the state-run organisation handed over lifetime award to former finance minister M Syduzzaman for his outstanding role in establishing the micro-credit provider.
Information Minister Abul Kalam Azad, and PKSF managing director Quazi Mesbahuddin Ahmed also spoke on the occasion.