Three of the largest microfinance institutions (MFIs) in Bangladesh have suspended repayments of loan instalments for the surviving victims of Cyclone Sidr until 2008. Both the army chief, General Moeen U. Ahmed, and the media in the country have been lobbying for this suspension to be made by all MFIs working in the cyclone-struck region.
As a result of the November 15 cyclone – the second most powerful on record – nearly 3,300 people died and an estimated 564,000 were left destitute. Although the microcredit providers have written off all the loans and interests of the borrowers killed in the disaster, there still remains approximately USD 172 million (Tk 11.5 billion) of loans outstanding with 1.5 million people in the 12 south and south-western districts, according to the Daily Star.
The New Nation, Bangladesh’s independent daily newspaper, claimed that NGO pressure for repayment was so intense that some of the credit recipients were selling out the relief materials they received to meet the demands, or were hiding themselves from NGO supervisors to escape harassment. “Such a pressure for loan recovery by the NGOs including the large ones like BRAC, ASA and even the semi-government Grameen Bank has shocked the conscious section of the people,” said the news source.
At the same time, the army said in a statement, “Considering the suffering of the people in the cyclone-affected areas, the army chief (General Moeen U. Ahmed) has asked all microcredit lending organisations to waive payments of loan instalments until April 2008.”
However, a week after the disaster, the Grameen Bank had already agreed to suspended collection of loan repayment instalments until June 30, 2008. It also plans to provide fresh fund of USD 14.8 million (Tk 1 billion) for reconstructing the houses of its affected members.
A couple of weeks later BRAC announced that it would be suspending its loan repayment programme till March 2008. The organization also said it would write off microfinance loans of up to USD 14.8 million (Tk 1 billion) in the cyclone affected areas, affecting 125,000 of the most seriously affected borrowers.
At the same time ASA announced that it would be suspending all loan repayments till June 2008 and that it would be offering interest-free loans to help cyclone survivors get back on their feet.
PKSF said it would suspend loan repayments for a month, as reported by MicroCapital, and TMSS said it would postpone loan repayments indefinitely and look at cancelling loans completely on a case by case basis. There are also a number of other smaller MFIs working in the region, estimated between 15 and 40 in number.
Cyclone survivors have demanded that banks write off all loans although Muhammad Yunus, pioneer of microfinance and founder of Grameen bank, who won the Nobel Prize in 2006, has rejected the calls.
Amy Rennison, MicroCapital writer
Additional Sources:
The Daily Star:
http://www.thedailystar.net/story.php?nid=13241
The New Nation:
http://nation.ittefaq.com/issues/2007/12/04/news0808.htm
http://nation.ittefaq.com/issues/2007/12/07/news0952.htm
Relief Web:
http://www.reliefweb.int/rw/RWB.NSF/db900SID/DPAL-79NE2F?OpenDocument
http://www.reliefweb.int/rw/RWB.NSF/db900SID/PANA-79LDR2?OpenDocument
Microfinance Gateway:
http://www.microfinancegateway.org/content/article/detail/45577
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