Minister questions microlenders' role to alleviate poverty

Pressures mount on microlenders after the finance minister yesterday urged them to analyse their failure to bring down the number of extreme poor people in the country.
The call from Finance Minister AMA Muhith came at the inaugural of the four-day event, 20 Years of PKSF and Development Fair 2010, at the auditorium of Palli Karma Sahayak Foundation (PKSF) in Dhaka yesterday. The fair is being held at the Bangabandhu International Conference Centre to celebrate 20 years of operation of the state-run lender.
Muhith suggested that the microfinance institutions (MFIs) should ask themselves why nearly one-third of the country's population, that is, around 6 crore people are still ultra poor and why the number is not shrinking.
"Some micro-financiers say consumption power of the poor in the areas they work have gone up by 30 percent. But I wonder why the total number of poor people is not dropping if their claims are true," he said.
"The number of the extreme poor should go down and the micro-financiers are supposed to play an important role in this regard," the minister said, putting the number of micro-financiers operating in Bangladesh at as high as 20,000.
"They should categorically look into the issue and find out the reasons," Muhith said.
At the fair, the partner and non-partner MFIs of PKSF are showcasing their products and activities at 130 stalls.
PKSF Chairman Qazi Kholiquzzaman Ahmad presided over the opening ceremony, while Information Minister Abul Kalam Azad, former Finance Minister M Syeduzzaman and PKSF Managing Director Quazi Mesbahuddin Ahmed spoke.
Muhith said apart from microcredit, special attention should be given to the areas such as education, human resource development, health, skill development and information and communication technology.
"Perhaps we are not improving in these areas. As a result, we are not being able to achieve our goal with the help of microcredit alone."
The minister said poor people are lost in the credit maze, as they get loans from various organisations. "We will have to work now to call them out of the labyrinth."
He said around 4 crore of the country's 15 crore population borrow from the micro-financiers. "But we do not see any reflection of that while we would like to see them graduate from poverty to living well."
"Micro-credit is one tool. We have to connect other tools to it," Muhith said.
Ahmad said the MFIs realise money from borrowers as stamp charges, form charges, savings and deduction of 10 percent at the time of loan issuance. "Different micro-financiers charge different rates," he said.
He said most borrowers do not know how much interest they pay. They know that they are paying 12.5 percent interest on flat rate, but they do not know that it doubles, as so many charges exert a cumulative effect, the PKSF chief clarified.
"They also have to pay insurance fees. I think that in total the interest rates reach 50 to 60 percent," he said.
Ahmad said they have recommended that the Microcredit Regulatory Authority (MRA) fix
lending rates on a declining basis. The micro-financiers have to mention how much they are charging exactly, he said.
"While disbursing loans to partner organisations, we have so far focused merely on recovery rate and health of the MFIs. We did not consider how the borrowers are repaying loans. We did not try to know whether they sold assets to repay loans and if any job opening has been created rendering the process sustainable," he said.
"We do not even ask since when the borrowers have been taking money from MFIs. Time has come and we have to ask these questions. The poverty rate will not go down without a comprehensive initiative that takes into account the borrowers' social and other standings," said Ahmad.
"Disbursing loans is not enough. We need to consider people's needs too and expand micro-credit programmes. People have been taking loans for years without creating any assets. We are now focusing on creating assets," he said.
The information minister said the poverty eradication efforts have to be humanised. He also said free flow of information should foster people's social and economic development.
At the inaugural, PKSF paid tribute to M Syeduzzaman for his distinguished role in the country's socio-economic development.