Q&A: Atiur Rahman, Governor, Bangladesh Bank

Business Standard, April 20, 2011

‘We’ve made microfinance humane’

Atiur Rahman, 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 Bank?

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 can’t comment.

Will Yunus’ exit have any impact on Grameen Bank?

Grameen Bank is moving on very well.

After you 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 behave.

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 Bangladesh’s experience.

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.

This news item can also be viewed at: