The Microcredit Regulatory Authority (MRA), a Bangladeshi government body that oversees the operations of NGO microfinance institutions (MFIs), reportedly has announced plans to cut the maximum interest rate MFIs are allowed to charge to an unspecified level. In 2011, MRA established a microcredit interest rate cap at 27 percent per year.
Khandakar Muzharul Haque, executive vice chairman of MRA, reportedly said that while microfinance in Bangladesh is expanding, “…the sector is not properly regulated. So, the MRA is working with the government, especially with the Bangladesh Bank, to bring in sound rules and regulations.” Bangladesh Bank is the central bank of the country and its chief regulator of the financial and monetary system.
In 2010, the microfinance sector recorded 10.5 percent growth, and it grew 20.6 percent in 2011. As of December 2012, the sector was serving approximately 35 million clients through approximately 673 licensed MFIs in Bangladesh. MRA recently has revoked 20 licenses from institutions that did not comply with MRA regulations.
By Nicole Boyd, Research Associate
About Microcredit Regulatory Authority (MRA)
The Microcredit Regulatory Authority (MRA) is Bangladesh’s primary regulator over the activities of NGO microfinance institutions (MFIs). MRA has three primary functions: to license MFIs, to supervise MFIs for compliance with licensing requirements and to enforce sanctions in cases of non-compliance. In addition, MRA conducts audits and addresses customer complaints. The board of directors of MRA consists of heads of executive levels of government including the governor of Bangladesh Bank, Dr Atiur Rahman who serves as chairman of the board.
About Bangladesh Bank
Bangladesh Bank (BB) is the chief regulator of the country’s monetary and financial system. Established in 1972, BB’s mission is to regulate reserves, foster development of the country’s economy and manage the country’s monetary and credit system. As of November 2012, BB operates ten branches and has a staff of 4,951. The bank’s total reserves stand at USD 12.7 billion as of December 2012.
Sources and Additional Resources:
New Age, “MRA moves to cut further microcredit interest rate” http://www.newagebd.com/detail.php?date=2013-01-07&nid=35905#.UPTnVm9thf4
MicroCapital, December 11, 2012, “MICROCAPITAL BRIEF: Central Bank of Bangladesh Requires Banks to Open 50% New Branches in Rural Areas,” https://www.microcapital.org/microcapital-brief-central-bank-of-bangladesh-requires-banks-to-open-50-new-branches-in-rural-areas/
MicroCapital, November 18, 2010, “MICROCAPITAL BRIEF: Bangladesh Microcredit Regulatory Authority (MRA) to Restrict Fees, Cap Microloan Interest Rates at 27%, Discourage Flat Interest Rates,” https://www.microcapital.org/microcapital-brief-bangladesh-microcredit-regulatory-authority-mra-to-restrict-fees-cap-microloan-interest-rates-at-27-discourage-flat-interest-rates/
MicroCapital Universe Profile: Microcredit Regulatory Authority (MRA) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Microcredit+Regulatory+Authority+%28MRA%29
MicroCapital Universe Profile: Bangladesh Bank (BB) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Bangladesh+Bank+%28BB%29
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