Bangladesh’s High Court on Monday issued a rule asking the authorities concerned to explain in four weeks why directions should not be given to reduce the interest rates charged by Grameen Bank on microcredit loans to landless borrowers in rural Bangladesh.
The bench of Justice Khizir Ahmed Choudhury and Justice Md Ziaul Haque issued the rule after hearing a public interest litigation filed by senior lawyer Masood R Sobhan.
Masood R Sobhan, who argued the case before the court, alleged that Grameen Bank was charging around 20 per cent interest on microcredit loans while commercial banks charged around 9 per cent.
The court asked why Bangladesh Bank, as the controlling authority of banking and financial institutions, should not be directed to reduce the interest rates charged by Grameen Bank under its microcredit scheme, describing the rates as excessively high compared with those charged by scheduled banks.
The HC further also asked why Bangladesh Bank should not ensure that microcredit borrowers who have already repaid the principal amount along with twice the principal as interest are exempted from paying any further amounts.
The respondents are Bangladesh Bank, the finance ministry, Grameen Bank and Nobel laureate Muhammad Yunus, who was made a respondent as former managing director and current adviser/consultant of Grameen Bank.
Masood claimed that nearly 20 million borrowers, mostly poor rural women, were under constant pressure to repay weekly or monthly instalments and interest.
Masood said that many borrowers remained trapped in debt for years despite taking small loans ranging between Tk 15,000 and Tk 25,000.
He further said that Grameen Bank had effectively been operating like a commercial financial institution by making huge profits from poor landless borrowers.
Masood also claimed that the high interest burden caused mental suffering for borrowers and argued that the state had a constitutional obligation to protect poor citizens from exploitation.
The PIL writ included a series of allegations against Muhammad Yunus over his tenure at Grameen Bank, including issues relating to his reappointment as managing director after retirement age, tax matters involving a trust fund, and the bank’s operations.
Masood was assisted by his associate lawyer Fatema S Chowdhury.
