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NGOs charging high interest unacceptable


Published : 15 Nov 2022 09:47 PM | Updated : 16 Nov 2022 07:35 PM

The non-governmental organisation (NGO) sector is charging high interest on loan taken by the poorest people, but it is not morally acceptable, says Bangladesh Bank governor Abdur Rouf Talukder.

“If the exchange of cash in small loans is reduced, transparency will increase,” he said while speaking at the inaugural programme of Microcredit Regulatory Authority’s (MRA) e-service on Tuesday.

At the e-service programme, he also said, “NGOs provide services, but why do they charge so high interest? Use of cash in microcredit should be reduced.”

Urging them to come out of the culture of profit, the central bank governor said there is no alternative but to reduce interest rate.

There are around 881 MRA-registered microfinance institutions across the country. Of them, 747 institutions are carrying out the microcredit activities through about 22,000 branches.

The loan collection rate by non-governmental organizations (NGOs) is more than 98 percent.

Over 3.52 crore families of the country are covered under microcredit services. Average four members of a family take loan which are about 14 crore. As a result, about 75 percent of the country's people are directly or indirectly are involved in microcredit.

According to the Credit and Development Forum (CDF), a coalition of NGOs, about 73 percent of rural finance is provided through microfinance institutions. 

Nearly 40 percent of loan is disbursed to the agriculture sector and 31 percent to the microenterprise sector. Contribution of microcredit to GDP is 14.37 percent.

According to the CDF, without a consistent supply of micro and enterprise credit to the micro, productive and service sectors in the rural and semi-urban economy, the existing poverty rate in the country would have added about 14 percent of poverty. 

Because the microcredit institutions disburse loans of about Tk 180,000 crore every year and about Tk 15,000 crore every month, the majority of which is invested in the rural agricultural economy.

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