"If we follow the government's suggestion for reducing interest rate and giving larger loans to the poor, the system would collapse," said Shafiqul Huq Chowdhury, managing director of Asa, a top microcredit institution.

He argued that if the poor are given big loans many of them would not be able to repay them. On the other hand, the NGOs would fail to meet running costs at low interest rate.

About regulating the NGOs, he said the microcredit system did not flourish under tight rules and systems.

Shafiqul also refuted the allegation that the microcredit institutions lack transparency.

"The fact is there is no unified system to monitor our transparency," he said. "The NGOs borrowing funds from the government-owned Palli Karma Shahayak Foundation (PKSF) are bound to report to them about their activities. On the other hand, those who receive foreign aid are accountable to the NGO bureau."

He alleged that the PKSF takes loan from the government at 1 percent and charges NGOs 7 percent.

"The cost of operation in microcredit is high because the NGOs reach every single borrower," said Grameen Bank Managing Director Dr Muhammad Yunus.

Microcredits are small in size but need intensive supervision with a large number of staff, he noted.

"It is immaterial whether we charge high or low because the money goes to the Grameen Bank members," he added. "The bank belongs to its members and they are the main beneficiaries if interest is set high."

Regarding the regulatory framework, Dr Yunus said it was necessary to monitor microcredit operation.

PKSF Managing Director Dr Salehuddin Ahmed admitted that high interest is charged on microcredit. "But under the existing system it is not possible to run microcredit programmes at low rate."

The PKSF chief said the issues raised at the recently concluded microcredit summit would be discussed with the government. The summit resolution would also be placed before the SAARC Secretariat for a regional approach to the issues high interest rate, lack of transparency and high operational cost, among them.