Yunus clarifies his statement on interest rates for microcredit institutions
Tuesday, 23 March 2010
Nobel laureate Prof Muhammad Yunus, also managing director of Grameen Bank, has said that he did not make any proposition that the government should fix the interest rates for microcredit institutions, as reported in various newspapers, reports UNB.
"I did not say that. But that's how it was interpreted," he told Sunday.
At the International Conference on Microcredit, organised by the Microcredit Regulatory Authority (MRA) of Bangladesh, on March 17 Prof Yunus claimed that he said that microcredit interest rates should be standardised.
"This is an ongoing issue where MRA and PKSF are actively involved with the support of the Finance Minister. This is to standardise the way in which interest rates are expressed by microcredit institutions."
He mentioned that some micro credit organisations do it in declining basis and some do it in an upfront basis with several variations.
"This does not allow easy comparison of various interest rates. There is a good chance that the borrowers will be misled," Prof Yunus added.
He said that in the USA all interest rates are required to be expressed in the equivalent of Annualised Percentage Rates (APR). This is a legal requirement.
"We can do the same for microcredit interest rates in Bangladesh too.
This is what I was proposing in my remarks on March 17," he said.
The Grameen Bank managing director said that each microcredit institution can quote its interest rate according to its own preference, but it would also have to quote how much it will mean in standard annualised rate, every time, in clear bold letters.
"This will bring additional transparency to the microcredit," he added.
"I did not say that. But that's how it was interpreted," he told Sunday.
At the International Conference on Microcredit, organised by the Microcredit Regulatory Authority (MRA) of Bangladesh, on March 17 Prof Yunus claimed that he said that microcredit interest rates should be standardised.
"This is an ongoing issue where MRA and PKSF are actively involved with the support of the Finance Minister. This is to standardise the way in which interest rates are expressed by microcredit institutions."
He mentioned that some micro credit organisations do it in declining basis and some do it in an upfront basis with several variations.
"This does not allow easy comparison of various interest rates. There is a good chance that the borrowers will be misled," Prof Yunus added.
He said that in the USA all interest rates are required to be expressed in the equivalent of Annualised Percentage Rates (APR). This is a legal requirement.
"We can do the same for microcredit interest rates in Bangladesh too.
This is what I was proposing in my remarks on March 17," he said.
The Grameen Bank managing director said that each microcredit institution can quote its interest rate according to its own preference, but it would also have to quote how much it will mean in standard annualised rate, every time, in clear bold letters.
"This will bring additional transparency to the microcredit," he added.