Rahman, Governor, Bangladesh Bank
Business Standard, April 20, 2011
governor of Bangladesh Bank, the country's central bank, was in
New Delhi to participate in a seminar on economic regulation. In
an interview with Indivjal Dhasmana, Rahman says Bangladesh's
Grameen Bank and micro financial institutions are performing well.
He also says India can learn from Bangladesh's experience in the
micro finance sector. Edited excerpts:
The move to oust
Muhammad Yunus from Grameen Bank evoked sharp criticism. Do you
think the criticism was valid? How are micro finance institutions
(MFIs) is Bangladesh faring after Yunus' exit?
MFIs are in a very
good shape. Bangladesh is the only country in which MFIs are
regulated. The Microcredit Regulatory Authority looks after the
sector. A total of 500 MFIs have been given licences and in
addition to this, they are also inspected and monitored by the
regulatory body. Bangladesh can also boast of making micro finance
more humane because we have capped interest rates. There is now a
succession plan in the body governing micro finance. You cannot go
on staying for as many years as you want. I don't think the micro
finance scenario in Bangladesh will deteriorate because of the
exceptional events that may have taken place.
What about Grameen
That is not within the
purview of the Microcredit Regulatory Body. It is regulated by its
own board and partially, by the central bank. All financial rules
and regulations will apply to them.
How valid is the
criticism on Yunus' removal?
I am sorry. I canít
Will Yunus' exit
have any impact on Grameen Bank?
Grameen Bank is moving
on very well.
deregulated interest rates, there are reports of many banks
charging exorbitant rates. How true are these reports?
Actually, we did not
deregulate all interest rates. It was only on working capital.
Nowhere in the world is working capital capped. All long-term
loans, except working capital, are under regulated. One must also
understand if you always keep interest rates under caps,
inefficiency increases. One has to consider both the aspects.
Still, we are monitoring interest rates and expect banks to
In India, the micro
finance sector has drawn a lot of criticism. What lessons can our
country learn from yours?
(Criticism is there)
because, in India, the micro finance sector is not regulated.
India can learn from Bangladesh because we have a regulatory body
on micro finance. Recently, we had issued some rules on every
aspect of regulation. These include their functioning, the
question of how would they be monitored and how would the
insurance depositors be insured. India can definitely learn from
In India, there is
no consensus on capping interest rates charged by the MFI sector.
What are your views?
We have capped
interest rates charged by the micro finance sector in Bangladesh.
I feel these rates should be capped because the poor cannot handle
very high rates. A lot of private business is being carried out in
the name of poverty reduction. I think that should be stopped.
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