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Current Issues, Challenges & Success Stories Of

Bangladesh in Agricultural/Rural Financing &

Shitangshu Kumar Sur Chowdhury
Deputy Governor, Bangladesh Bank


25February-1 March2012
Bangkok and Phuket, Thailand

I . Country Profile
II. Background/Introduction

III. Issues and Challenges

IV- Objectives of the Government of Bangladesh
V. Some Initiatives and Success Stories of
Bangladesh in Agriculture/Rural development
VI. Food Security Status of Bangladesh

VII. Initiative taken by Bangladesh Bank in
Agriculture & Rural Financing & Development
VIII. Conclusion



Country Profile
Area : 144000 Sq.Km

Population : 150 Million
Male : Female : 71.2 Million : 71.0
Birth Rate : 1.34%
Population density : 964/ sq. Km.
Villages (rural) : 87,319
Rural profession :
Agriculture (70%)
Scheduled Banks : 47
Non-Bank Financial Institutions :
Microcredit Institutes : 553
Cooperative Agencies : 57,000


o Agriculture is one of the prime sectors of Bangladesh‘s
o About 80 percent of the total population lives in rural
areas, with 70 percent of them employed in agriculture.
o Agriculture contributes about 20 percent to the country's
GDP, about 15 percent of which is contributed by the crop
sector alone.
o Food security, employment creation and poverty alleviation
are closely related with the development of agriculture.
o The government has set a target of 8% GDP growth within
2015. Besides, there is another issue on achievement of
self-sufficiency in food production within 2013.
o In Bangladesh, it is possible to reduce rural poverty and
raise the living standard of common people by establishing
agriculture as a profitable sector.

Issues and Challenges
o Rapid increase of population and shrinkage of
agricultural Land .
o Agriculture is dependent on the impulse of nature
and is risky.
o Widespread poverty among the population
engaged in agriculture.
o Inadequacy of appropriate technology considering
farmers' socio- economic conditions.
o Decreasing yields of different crops due to slow
expansion of modern technology as well as
unplanned use of soil and water.
o Uncertainty of fair price of agricultural
commodities due to underdeveloped marketing
o Absence of efficient as well as effective farmers'
organization at the grass root level.

6 . oPreserve and Develop land productivity. oIncrease production and supplies of more nutritious food crops and thereby ensuring food security and improving nutritional status. oEnsure a profitable and sustainable agricultural production system and increase the purchasing power of the farmers. oReduce excessive dependence on any single crop to minimize the risk. Objectives of the Government of Bangladesh oTo make the nation self-sufficient in food through increasing production of all crops. oTake up programmes for the introduction.

o Create opportunities for establishing agro- processing and agro-based industries.) o Take appropriate steps to develop an efficient irrigation system and encourage farmers in providing supplementary irrigation during drought with a view to increasing cropping intensity and yield. 7 . Objectives…… (Contd…. and o Develop contingency management system to combat natural disasters. o Establish agriculture as a diversified and sustainable income generating sector through strengthening of 'Farming System' based agricultural production and agro-forestry programmes.. o Take effective steps to ensure input supplies to the farmers at fair prices in a competitive market and remove difficulties at the farmers' level.

Some Initiatives and Success Stories of Bangladesh in Agriculture/Rural Development 8 .

production of horticultural seeds. vegetable cultivation.  Extensive training programmes are conducted and capital supports are provided to encourage women's interest and improve their skill in such activities. homestead gardening.  jute stripping. Women's Participation in  Agriculture Women are engaged in Agriculture related activities like:  post harvest operations.  floriculture. seed preservation. 9 . nursery business.  establishment and management of cottage industries based on locally produced agricultural commodities etc.

 Recently.Invention of Genome Sequence of Jute Jute was called the Golden Fiber of Bangladesh as Bangladesh was the largest jute production country of the world.  This invention is treated as the prime success of Agricultural sector of Bangladesh. genome sequencing of jute has been discovered by Bangladeshi scientists. 10 .

Cash Assistance for the Jute Cultivator  Government has taken a massive programme for the development of the quality of Jute.  Besides 15396 pieces ribner are distributed among a group of 100 farmers (one pieces for each group).  An amount of Taka 200 per head was assisted among 1.54 million farmers through their bank account. 11 .9 million taka.  The cost incurred for this program was about 337.

12 .  Through these cards about 7220 million taka are distributed as assistance for purchasing Diesel for irrigation. Introduction of Agricultural Card & Assistance of Diesel for irrigation through this Card  There are about 13.8 million Agricultural Cards are distributed among the farmers family.

13 . Modernization of Agriculture  A project for about 1500 million taka is in the pipeline for modernization and mechanization of Agriculture.  Purchasing of about 64.140 machines will be subsidized under this project.  The farmers will get 25% subsidy to purchase modern agricultural machineries.

14 .Rehabilitation programme for the farmers  There are about 0.39 million flood affected farmers has got assistance through distribution of free fertilizers and Boro seed for cultivation of Boro rice.  About 484.90 million taka is subsidized by the government for this purpose.

000 million taka were subsidized in the agricultural sector for purchasing urea. Subsidy in Agricultural Sector During the fiscal year 2010-2011 about 40. 15 . non-urea fertilizer and diesel.

Accustom farmers with agricultural technology  Arrangement of special programme for the farmers in National Radio & Television. 16 .  Development of website (www.  There are about 20 AICC are already running and about 225 are in pipeline though which 1000 Union Council will be covered for online video services.gov.bd) with latest agricultural related information for the farmers.  Establishment of Community Radio station for the farmers.  Introduction of Agricultural Information & Communication Centre (AICC).ais.

o Bangladesh Rice Research Institute (BRRI) have already invented some climate adapted varieties of Rice and many others to cope with changes of climate. salinity and high temperature tolerant crop variety. Addressing the Adverse Effects of Climate Change o The climate change has resulted in changes in cultivation time of many crops and hampered traditional cultivation in many areas. o Research are continued to invent flood. draught. 17 .

 The agriculture sector has grown at 3. 18 .  Almost 90% population depend on rice.  79. Food Security Status of Bangladesh  The major cereal crops are rice and wheat although main focus is on rice production.  Rice contributes to over 63% of the caloric intake for urban consumers and over 71% for the rural population.4 percent of the total cultivable land area under rice crop.1 .2 & 5.  Growth rate of agriculture sector during FY 2009-10 & 2010-11 were 5.2 percent annually during 1991-2009.  This trend resulted Bangladesh as the self sufficient country in production of food grain from the year 2010.

10 24519.60 27587.70 25943.00 19 .14 30947.54 2020 166.42 29797. Food grain requirement and production Year Mid-year Food grain Total production population requirement (million) 2010 148. Food Security Status of Bangladesh(Contd…) Actual & Projected population.04 2015 156.90 27632.

Initiatives taken by Bangladesh Bank in Agriculture & Rural Financing & Development 20 .

 using the limited agricultural land for the best purposes of agriculture.  deciding the courses of action for adapting to the impact of climate change. Background of Formulation of ACP In line with the pro-poor agricultural policy of the government. 21 . Bangladesh Bank has formulated its own Agricultural & Rural Credit Policy and Programme with a view to:  expanding banking services to rural areas using information technology.  keeping the price level of foodstuff within the purchasing power of the mass people through increasing agricultural production.

Background….  From the FY 2008-2009 all private and foreign commercial Banks along with nationalized and specialized banks are advised to disburse agri/rural credit . (contd…. Bangladesh Bank designing agricultural credit policy and programme since 1977 and implemented through nationalized and specialized banks.  BB made mandatory for all banks to disburse a specific percent of their total loans & Advances in agriculture and rural sector from FY 2011- 2012..)  Considering the importance of food security and employment of the country. 22 .

Major Area Covered in ACP  Crop  Fisheries  Livestock  Agri-Equipments  Irrigation Equipments  Grain storage and marketing  Poverty Alleviation & Employment generating activities  Others 23 .

e. char. oil seeds.  Other than Agricultural credit different self- employment/income generating activities are encouraged in order to stimulate the rural economy.) shall be given priority. coastal belts etc. livestock.  Less developed and neglected areas (i. comparative advantages of producing crops in different regions.  Ensure timely availability of agricultural credit for the small and marginal farmers including share-croppers.  Credit facilities shall be allowed at a concessional interest rate (4%) for cultivation of import substitute products such as pulse. haor. spices and maize.  Credit shall be disbursed in an area approach method i. Salient Feature of Annual Agricultural & Rural credit policy Of Bangladesh Bank  Priority will be given to the major three sectors such as Crop. 24 .e. Fisheries.

oil seeds.  Crop Diversification:  Nutritious food such as potato. maize etc. 25 . are given priorities to others. pulse.  To ensure transparency.  Banks and Financial Institutions are advised to disburse loan for cultivating and to popularize the various ways of consumption of them. emphasis is given on disbursement of agriculture credit publicly(open credit disbursement) at union level.  High Value Crops shall be given priority in extending credit facility. Salient Feature of Annual Agricultural & Rural credit policy Of Bangladesh Bank  Women borrowers shall be given priority for disbursing agricultural & rural credit.  Contract Farming: Banks are advised to provide loan to the agro-commodities producing farmers engaged in contract farming as well as the entrepreneur to ensure fair prices of agri product.

culture fish in a controlled environment to produce commercially viable fish. drought tolerating crops in drought areas. Climate Change Effect:  Banks are advised to make flexible of the schedule of credit disbursement and recovery to adapt the adverse effects of climate change. 26 .e.  Fish culture in cage: Banks are advised to disburse loan in fish culture in cage i.e. water tolerating crops in flood affected areas. three year auto renewal of agricultural-loan has been introduced.  Banks are asked to facilitate credit to cultivate salt tolerating crops in salty areas. Salient Feature of Annual Agricultural & Rural credit policy Of Bangladesh Bank Revolving Crop Credit Limit System:  To ensure continuous credit flow revolving crop credit limit system i.

 Farmers are encouraged to channel their foreign remittances through these accounts. 27 . Lates calcarifer.  A significant amount of foreign currency could be earned through export of this fish variety. Gray mullet etc.  Banks also instructed to allow credit up to 90% of their total deposit at a lower rate against the deposit on this account. Credit Disbursement through 10 Tk. in the potential coastal area of Bangladesh which are limited to shrimp cultivation. banks are instructed to allow higher rate of interest to these accounts. Farmer’s Account  For Financial Inclusions instructions are given to the Banks to open a farmers account by taking 10 Tk. initial deposit. Salient Feature of Annual Agricultural & Rural credit policy DistributionOf Bangladesh of loan Bank to coastal aquaculture:  Banks are advised to disburse loan for cultivation of Mud crab.  To develop savings habit among the farmers and to attract un-tapped rural savings.

Salient Feature of Annual Agricultural & Rural credit policy Of Bangladesh Bank Besides the core agricultural sector.  Tissue culture  Jute cultivation  Betel leaf cultivation  Apiculture  Mushroom cultivation  Palm oil  Cotton cultivation  Weaver’s loom industry  Silk industry 28 28 . following sectors are encouraged by Bangladesh Bank:  Salt cultivators at 4% concessional rate of interest.

Salient Feature of Annual Agricultural & Rural credit policy Of Bangladesh Bank Credit for Green Banking activities:  Solar irrigation pump  Bio-gas driven irrigation pump  Integrated cow rearing and Bio-gas plant  Bio-fertilizer  Solar Home System  Vermiposting: composting the earth worms 29 .

Effective use of Bank-MFI partnership  Foreign and Private commercial banks which have limited branch coverage in rural areas are advised to provide agricultural & rural credit in partnership with the micro-finance institutions (MFIs). it is considered as disbursement by bank only when the fund is disbursed to the actual borrowers and not the Micro-Finance Institutions (MFIs) 30 .  To ensure that the bank funds disbursed through MFI partnership goes in agriculture.

Low Interest Rate in Agricultural & rural Financing  Interest rate cap for agricultural & rural credit for banks is currently 13% on reducing balance method. 31 .

10/.  Facilitate cost effective agricultural credit delivery and recovery to and from farmers in remote areas.  More than 9.84 to 131.5 million accounts of farmers have been opened by the State-owned Banks with an initial deposit of Tk.  Mobile phone based financial service delivery processes.  A specialized department exercises oversight on hassle free credit disbursement and other customer interest protection issues.37 billion respectively from FY09 to FY12.only (<20 cents). Achievement & Success of Bangladesh Bank  Disbursements of agricultural credit rises from Taka 92. 32 .

Target Achievement Trend in last 5 years 33 .

32 billion) 34 . 131. Sector-wise Agricultural and Rural Credit Disbursement in FY 2011-12 (Tk.

Banks’ Disbursement of Agri-loan in FY 2011-2012 35 .

Green Banking Activities in Agriculture and Rural finance  Special Refinance Program of Tk. ETP. HHK etc. 36 .2000 million for Solar energy. Bio gas plant.

of beneficiary farmers are 618 and 920 Bighas of land will be cultivated with uninterrupted water flow in the land.Green Banking Activities in Agriculture and Rural finance Solar Irrigation Pump: As of December2012.39 crore disbursed for 8 solar energy driven irrigation pumps.  37 . 2.  No. an amount of Tk.

20 million is re-financed in 820nos Some of features of these Integrated cow Bio-gasand rearing plants: Bio-gas No.133. of cows in the project: 3550 No. of Beneficiaries: 980 plant. an amount of Tk. of Chicken in the project: 14150 Volume of Bio Digester: 4089 cubic meter 38 Milk production per day: .Integrated Cow Rearing and Bio-Gas Plant As of December2012. families No.

Green Banking Activities in Agriculture and Rural Effluent Treatment  finance Plant(ETP): As of December 2012. 87.40 million disbursed for establishing 8 ETP which reduces environmental pollutions. 39 .80 million disbursed for 3763 Solar Home systems through which at-least 3714 families will be benefited and the production capacity is 164100kwp per day. an amount of Tk. 90. an amount of Tk. Solar Home System(SHS): As of December 2012.

0. 248. an amount of tk. Bio fertilizer As of Decemebr2012. an amount of Tk.80 million disbursed for establishing Solar PV module assembling plant.4 million has been disbursed through banks in Bio- fertilizer sector under a refinance program. Solar Assembling Plant As of Decemebr 2012. 40 .

 Bangladesh Bank has taken initiative and advised to the banks to promote this sector.  Nationalized banks already issued directive to provide credit to the farmers in this sector. known as "vermiposting”. . Vermiposting : composting the earthworms  Using worms in an indoor bin to break down scraps into compost. 41 .

Special Refinance Scheme for providing finance to the share-croppers  Introduction of a special refinance program of taka 5 billion exclusively for the share- croppers/tenant farmers.52. 42 .  As of December 2012 an amount of TK.59 million agri.047 sharecroppers (in 250 upazillas of 48 districts) . 6929. credit has been provided through BRAC (MFI) towards 5.

of farmers and amount) gradually from 2009-10 to 2011-12. of Sharecroppers in lac  All scheduled banks are advised to disbursed agri-credit towards sharecroppers on individual or group basis. Disbursement to the Sharecroppers through Banks No.  Agricultural Credit towards sharecroppers Disbursement amount in billion taka has been increased (in no. 43 .

Credit at concessional interest rate promoting cultivation of spices. PCBs and FCBs disbursed TK.  Out of Tk. etc  Agricultural Credit for Pulse seed. oilseeds.816. oil seeds. Spices and Maize at 4% concessional rate has been increased due to media campaign (print and electronic)  During and FY2011-12.have participated in disbursing agri-credit at 4% concessional rate.30 million. weekly-basis Private and Foreign monitoring Banks from BB. 44 . lentils. 115 million .

70 45 . Financial Year No. of Farmers Disbursement (amount in million taka) 2010-11 1153 42.20 2011-12 1310 108.Credit Disbursement at concessional Interest Rate (4%) for Salt production in coastal areas  Credit (against the interest loss subsidy provided by government) shall be made available on easy terms to the salt cultivators at a concessional rate (4%) from FY 2010-11 in the coastal belts of the country.

5. Special Credit towards women In financial year 2011-12 an amount of Tk. running agro processing and agricultural related small business & activities.31 billion were disbursed among 0. 46 . so that they can change their economic conditions.27 million women as agricultural and rural credit for crop production.

90 million taka was disbursed only at 5% interest rate among about 13100 tribal farmers of Bangladesh. 47 .Credit towards tribal farmers in Hill Tracts Areas During FY 2011-12 around 273.

oilseeds) in the country’s poverty ridden North-Western region through whole selling of MFI (BRAC). spices. 48 . flowers. fruits.Special Credit program in supporting of Agricultural and rural development An ADB assisted crop diversification credit project is extending credit for growing of higher value crops (vegetables.

to the farmers.  Some banks are disbursing interest free agricultural credit towards share croppers landless farmers in cyclone affected areas. 2010. strawberry. 2190 million and 3046.  From the year 2009. 2011 & 2012 all banks disbursed an amount of Taka 550 million . 2330 million.69 million respectively in CSR program  Banks are advised to distribute free crops seed like oil pump. appel kool etc. Agricultural assistance through CSR(Corporate Social Responsibility) Program  CSR actions aim at mitigate the diverse environmental impacts of the activities of the business and at reducing inequalities and alleviating deprivation and poverty in the communities across the country. baul kool. 49 .  Bangladesh Bank (BB) issued a detailed directive titled "Mainstreaming Corporate Social Responsibility (CSR) in banks and financial institutions in Bangladesh“.

ADB fund for improving brick kiln efficiency  A refinance scheme (ADB funded) for 50 million USD is ongoing to improve the efficiency of existing brick kiln for reducing carbon emission. 50 .

Such as:  Monitoring at disbursing bank level  Monitoring by Branch offices of BB  Monitoring by HO of BB 51 . Monitoring of agricultural credit  To ensure timely and hassle-free disbursement of agricultural Credit to real farmers BB has set up three- tier monitoring system.

Flow Chart of 3-Tier Monitoring System BB Head Office Monitoring Cell (Under ACFID) Commercial Banks BB Branches Head Office Monitoring Cell Divisional/Regional Level Branch Level Farmers Farmers Farmers 52 52 .

 The branch Offices of the participating banks shall visit the farmers regularly. Monitoring at disbursing bank level  Participating banks will establish a separate monitoring system. and arrange group discussion.  Head office of participating bank shall arrange fortnightly/monthly evaluation of the overall agricultural credit disbursement and recovery position and give necessary instruction to branches/regional offices. 53 .

54 . Monitoring by Branch offices of BB  Every branch office of BB has a monitoring cell.  Representative from BB branch visit the farmers and the branch office of participating bank.  BB officers from Branch office attend in the meeting with government representative.  They collect & evaluate the comprehensive statement regarding agricultural and rural credit disbursement and give necessary instructions to the regional office of the banks.  Finally branch office of BB send their findings to HO.

On site supervision:  Visit bank branches and their borrowers on sample basis.  Monitoring through District Agricultural Credit Committee. Monitoring by Head offices of BB: Off-Site Supervision  Collection of Basic Information of Loan disbursement & recovery of individual bank through prescribed Form.  Developing of broad Database for agricultural credit.  Review and analysis of Data.  Meeting with senior Officials of participating banks.  Giving some instructions and decisions on the basis of review and analysis. 55 .  Coordinate with BB branch office monitoring cell of BB branch offices.

56 . Failure will punished by :  Depositing the shortfall amount of total target in BB for 1 year. Rewar d & pu nitive  measu re for  Success in agri & rural-credit will be awarded by:  giving permission of new branches  opening foreign exchange dealership license.  Liquidity support and  banks rating (CAMELS Rating).

57 . therefore. Concluding remark The developmental role played by BB indicate that this role of a central bank can be carried out without conflict with the primary role of preserving monetary and financial stability. helping avert situation like those creating the global financial crisis of 2008-2009. act as an in- built stabilizer of the financial system. Central bank’s developmental role.

58 .

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