Interest Rate Policy
1. interest rate
Institution will levy interest/service charge as per Declining Balance Method at 24% per annum. Alternatively a maximum flat rate of 12% may be applicable if the flat method is followed.
2. Type of loan
| Type of loan | Amount | duration | interest |
|---|---|---|---|
| General microcredit | 10,000-50,000 rupees | 12 months | 24% Declining |
| Small business loans | 50,000–1,00,000 Tk | 12–24 months | 24% Declining |
| Agricultural loans | 10,000–1,00,000 Tk | seasonal | 20–22% Declining |
| emergency loan | 5,000–20,000 Tk | 6–12 months | 22% Declining |
3. Method of calculating interest
Interest will be calculated on the remaining principal after each installment payment.
Example:
- Loan amount = Rs.50,000
- Annual Interest = 24% (Declining)
- Tenure = 12 months
- Interest will be calculated on Rs 50,000 in the first month.
- As part of the principal is repaid through installments in subsequent months, interest will accrue on the remaining principal.
- As a result, the total interest amount of the member will gradually decrease.
4. Late Payment
- If the installment is not paid on the due date, the member will be notified to pay the outstanding installment.
- It is best not to charge extra penal interest for delay, unless the MRA's approved policies contain it.
- Rescheduling may be considered for long-term problems.
5. Pay off the loan in advance
If the member wants, he can repay the entire loan before the stipulated time. In that case only the interest earned till the date of repayment will be charged. No future interest will be charged.
6. Service Charge Policy
- No hidden charges or additional fees other than the approved interest rate.
- If there is an application fee, processing fee or membership fee, it should be clearly mentioned in the policy.
- Each member must be informed of the interest rate in writing before disbursing the loan.
7. Interest rate changes
The Board of Directors may change the interest rate as per the directions of the MRA if necessary. All members must be notified in writing prior to the change.
8. Management of interest income
The income earned from the interest on the loan will be used for the following purposes—
- Operating expenses of the organization
- Salaries and allowances of officers and employees
- Training and capacity building
- Technology and software development
- Risk Fund
- Member service development
- Future expansion
9. Fairness and transparency
Prothik Agrajatra Foundation will follow the following principles for determining interest rates—
- Transparency
- Fairness
- Member Friendly Services (Client Protection)
- Follow the rules of MRA
- Secret No Charge Loans
- Provide written loan agreement and installment schedule
Recommended model for Prothik Agrajatra Foundation
- Loan Amount: 10,000 to 1,00,000
- Interest Rate: 24% per annum (Declining Balance Method)
- installments: Weekly or monthly
- Duration: 6, 12, 18 or 24 months
- Hidden charges: no
- Advance payment: allowed
- Reschedule: Subject to due approval