Service Charge of MF-NGOs in Bangladesh: A Case Study of Sadar Thana In Tangail District

摘要

In Bangladesh, according to CDF [5] about 721 Microfmance NGOs (MF-NGOs) are providing microcredit in different parts of the country through its 16.62 million rural poor borrowers acting as a tool for poverty alleviation. From the beginning of the microcredit operation in Bangladesh, it has been often criticized for its high service charge (interest rate). But still today, there is no standardize interest rates or determination system of service charge for MF-NGOs to follow. It always varies within arange of 20-40% [14]. MF-NGOs calculate their services charges by various ways such as flat rate method and decline balance method. Charitonenko and Rahman [7] stated that more than 85% MF-NGOs calculates service charge at the rate of 15% (in flat method) in the field level from their member borrowers. Hossain and Ahmed [8] stated that a wide range of interest on loan and variations in applying method on interest creates financial indiscipline in the sector. The result causes the variations of servicecharges, as well as additional costs imposed on poor rural borrowers [2]. What should be the ideal or optimum rate is a serous question.