MRA to go tough on errant micro-lenders

Rezaul Karim | Published: July 21, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

The Microcredit Regulatory Authority (MRA) will take action against micro finance intuitions found to be violating the interest rates on lending and savings as set by the regulator, officials said.
Tough action will also be taken against the MFIs that collect installments of credit from their clients infringing on the grace period, they said.
"We are monitoring interest rates on both savings and lending to ensure discipline in the microcredit sector," an MRA official said.
"We will take action against non-compliant MFIs under the existing rules and regulations. We are working on the issues," he said.
No MFI is allowed to charge interest on loans at more than 27 per cent rate of interest while savings rate should not be less than 6 per cent, Md. Shazzad Hossain, Director of the MRA told the FE Friday.
In a circular on July 08, the MRA issued a warning, asking heads of the MFIs to follow the existing rules and regulations on the rates of interest on savings and credits.
The regulator also asked the MFIs to collect their first installment of credit from their clients after the grace period of 15 days.
"Our measure will help monitor the overall interest rates situation more closely," another MFI official said, adding that microlenders will have to comply with the set interest rates properly."
The latest move came against the backdrop of alleged violation of capped interest rates on credit and savings by many MFIs, officials said.
They said the MRA is now investigating into allegations.
The MFIs have to provide 6.0 per cent interest rate on mandatory savings to their clients in line with the MRA regulation, but many microfinanciers are allegedly not complying with the rules, an official of the MRA who is close to the issue.
"We learnt that most of them provide to their clients lower rate of interest on mandatory savings," he said. Â
"Many MFIs have been charging poor borrowers 30 to 35 per cent instead of 27 per cent by calculating the flat rate method instead of declining balance method," he added.
Presently, the MFIs under MRA have Tk 300 million in outstanding loans. The number of total clients of this sector is 35 million, MRA data showed.
The amount of deposits in the microcredit sector is estimated at Tk 75,205.69 million until June 2012, according to the MRA data.
Currently, 745 MFIs are registered with MRA, serving more than 40 million people.