Current Issues, Challenges & Success Stories Of
Bangladesh in Agricultural/Rural Financing &
Development
Shitangshu Kumar Sur Chowdhury
Deputy Governor, Bangladesh Bank
THE 62nd EXCOM MEETING AND CEO’s OPEN
FORUM OF APRACA
25February-1 March2012
Bangkok and Phuket, Thailand
Presentation Outline
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
2
Country Profile
Area
: 144000 Sq.Km
Population
: 150 Million
Male : Female : 71.2 Million : 71.0 Million
Birth Rate
: 1.34%
Population density : 964/ sq. Km.
Villages (rural)
: 87,319
Rural profession
:Agriculture (70%)
Scheduled Banks
: 47
Non-Bank Financial Institutions : 30
Microcredit Institutes : 553
Cooperative Agencies
: 57,000
3
Background/Introduction
o
Agriculture is one of the prime sectors of Bangladesh‘s economy.
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.
4
Issues and Challenges
o
o
o
o
o
o
o
o
o
o
Rapid increase of population and shrinkage of agricultural Land .
Agriculture is dependent on the impulse of nature and is risky.
Widespread poverty among the population engaged in agriculture.
Inadequacy of appropriate technology considering farmers' socioeconomic conditions.
Decreasing yields of different crops due to slow expansion of modern
technology as well as unplanned use of soil and water.
Uncertainty of fair price of agricultural commodities due to
underdeveloped marketing system.
Absence of efficient as well as effective farmers' organization at the grass
root level.
Inadequate use of improved seeds, fertilizers, irrigation and other inputs.
Very weak backward-forward linkage in agriculture.
Climate change and variation
Objectives of the Government of Bangladesh
oTo
make the nation self-sufficient in food through increasing
production of all crops.
oEnsure a profitable and sustainable agricultural production
system and increase the purchasing power of the farmers.
oPreserve and Develop land productivity.
oReduce excessive dependence on any single crop to minimize
the risk.
oIncrease production and supplies of more nutritious food
crops and thereby ensuring food security and improving
nutritional status.
oTake up programmes for the introduction, utilization and
extension of bio-technology.
oProduce and supply of agricultural commodities as required
by the industrial sector.
6
Objectives…… (Contd…..)
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.
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.
o Create opportunities for establishing agro-processing and
agro-based industries, and
o Develop contingency management system to combat natural
disasters.
7
Some Initiatives and Success Stories
of Bangladesh in
Agriculture/Rural Development
8
Women's Participation in Agriculture






Women are engaged in Agriculture related activities like:
post harvest operations, seed preservation, nursery business,
jute stripping, vegetable cultivation, homestead gardening,
floriculture, production of horticultural seeds,
establishment and management of cottage industries based on locally
produced agricultural commodities etc.
Extensive training programmes are conducted and capital supports are
provided to encourage women's interest and improve their skill in such
activities.
9
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.
 Recently, genome sequencing of jute has been discovered by
Bangladeshi scientists.
 This invention is treated as the prime success of Agricultural
sector of Bangladesh.

10
Cash Assistance for the Jute Cultivator




Government has taken a massive programme for the
development of the quality of Jute.
An amount of Taka 200 per head was assisted among 1.54
million farmers through their bank account.
Besides 15396 pieces ribner are distributed among a group
of 100 farmers (one pieces for each group).
The cost incurred for this program was about 337.9 million
taka.
11
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.
 Through these cards about 7220 million taka are
distributed as assistance for purchasing Diesel for
irrigation.

12
Modernization of Agriculture
A project for about 1500 million taka is in the pipeline for
modernization and mechanization of Agriculture.
 The farmers will get 25% subsidy to purchase modern agricultural
machineries.
 Purchasing of about 64,140 machines will be subsidized under this
project.

13
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.
14
Subsidy in Agricultural Sector

During the fiscal year 2010-2011 about 40,000 million
taka were subsidized in the agricultural sector for
purchasing urea, non-urea fertilizer and diesel.
15
Accustom farmers with agricultural technology
Arrangement of special programme for the farmers in
National Radio & Television.
 Establishment of Community Radio station for the farmers.
 Development of website (www.ais.gov.bd) with latest
agricultural related information for the farmers.
 Introduction of Agricultural Information & Communication
Centre (AICC).
 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.

16
Addressing the Adverse Effects of Climate Change
o
o
o
The climate change has resulted in changes in cultivation time of
many crops and hampered traditional cultivation in many areas.
Research are continued to invent flood, draught, salinity and high
temperature tolerant crop variety.
Bangladesh Rice Research Institute (BRRI) have already invented
some climate adapted varieties of Rice and many others to cope with
changes of climate.
17
Food Security Status of Bangladesh







The major cereal crops are rice and wheat although main focus is on rice
production.
79.4 percent of the total cultivable land area under rice crop.
Almost 90% population depend on rice.
Rice contributes to over 63% of the caloric intake for urban consumers
and over 71% for the rural population.
The agriculture sector has grown at 3.2 percent annually during 19912009.
Growth rate of agriculture sector during FY 2009-10 & 2010-11 were
5.2 & 5.1 .
This trend resulted Bangladesh as the self sufficient country in
production of food grain from the year 2010.
18
Food Security Status of Bangladesh(Contd…)
Actual & Projected population, Food grain
requirement and production
Year
Mid-year population
Food grain
Total production
(million)
requirement
2010
148.10
24519.60
27587.04
2015
156.70
25943.42
29797.54
2020
166.90
27632.14
30947.00
19
Initiatives taken by
Bangladesh Bank
in
Agriculture & Rural
Financing & Development
20
Background of Formulation of ACP
In line with the pro-poor agricultural policy of the
government, 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,
using the limited agricultural land for the best purposes of
agriculture,
deciding the courses of action for adapting to the impact of
climate change.
keeping the price level of foodstuff within the purchasing power of
the mass people through increasing agricultural production.
21
Background….. (contd….)



Considering the importance of food security and employment of the
country, Bangladesh Bank designing agricultural credit policy and
programme since 1977 and implemented through nationalized and
specialized banks.
From the FY 2008-2009 all private and foreign commercial Banks
along with nationalized and specialized banks are advised to disburse
agri/rural credit .
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.
22
Major Area Covered in ACP








Crop
Fisheries
Livestock
Agri-Equipments
Irrigation Equipments
Grain storage and marketing
Poverty
Alleviation
&
Employment generating activities
Others
23
Salient Feature of Annual Agricultural &
Rural credit policy Of Bangladesh Bank






Priority will be given to the major three sectors such as Crop, Fisheries,
livestock.
Credit shall be disbursed in an area approach method i.e. comparative
advantages of producing crops in different regions.
Ensure timely availability of agricultural credit for the small and
marginal farmers including share-croppers.
Less developed and neglected areas (i.e. char, haor, coastal belts etc.)
shall be given priority.
Credit facilities shall be allowed at a concessional interest rate (4%) for
cultivation of import substitute products such as pulse, oil seeds, spices
and maize.
Other than Agricultural credit different self-employment/income
generating activities are encouraged in order to stimulate the rural
economy.
24
Salient Feature of Annual Agricultural &
Rural credit policy Of Bangladesh Bank





Women borrowers shall be given priority for disbursing agricultural &
rural credit.
To ensure transparency, 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.
Contract Farming: Banks are advised to provide loan to the agrocommodities producing farmers engaged in contract farming as well as
the entrepreneur to ensure fair prices of agri product.
Crop Diversification:
 Nutritious food such as potato, pulse, oil seeds, maize etc. are given priorities to
others.
 Banks and Financial Institutions are advised to disburse loan for cultivating and to
popularize the various ways of consumption of them.
25
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.e. three year auto renewal of
agricultural-loan has been introduced.
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.
 Banks are asked to facilitate credit to cultivate salt tolerating crops in salty
areas, water tolerating crops in flood affected areas, drought tolerating
crops in drought areas.
 Fish culture in cage: Banks are advised to disburse loan in fish culture in
cage i.e. culture fish in a controlled environment to produce commercially
viable fish.
26
Salient Feature of Annual Agricultural &
Rural credit policy Of Bangladesh Bank
Distribution of loan to coastal aquaculture:

Banks are advised to disburse loan for cultivation of Mud crab, Lates
calcarifer, Gray mullet etc. in the potential coastal area of Bangladesh which
are limited to shrimp cultivation.

A significant amount of foreign currency could be earned through export of
this fish variety.
Credit Disbursement through 10 Tk. Farmer’s Account

For Financial Inclusions instructions are given to the Banks to open a
farmers account by taking 10 Tk. initial deposit.

To develop savings habit among the farmers and to attract un-tapped rural
savings, banks are instructed to allow higher rate of interest to these
accounts.

Farmers are encouraged to channel their foreign remittances through these
accounts.

Banks also instructed to allow credit up to 90% of their total deposit at a
lower rate against the deposit on this account.
27
Salient Feature of Annual Agricultural &
Rural credit policy Of Bangladesh Bank
Besides the core agricultural sector, following sectors are encouraged by
Bangladesh Bank:
 Salt cultivators at 4% concessional rate of interest.
 Tissue culture
 Jute cultivation
 Betel leaf cultivation
 Apiculture
 Mushroom cultivation
 Palm oil
 Cotton cultivation
 Weaver’s loom industry
 Silk industry
28
28
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).

To ensure that the bank funds disbursed through MFI partnership
goes in agriculture, it is considered as disbursement by bank only when
the fund is disbursed to the actual borrowers and not the MicroFinance Institutions (MFIs)
30
Low Interest Rate in Agricultural & rural
Financing

Interest rate cap for agricultural & rural credit for
banks is currently 13% on reducing balance
method.
31
Achievement & Success of Bangladesh Bank





Disbursements of agricultural credit rises from Taka 92.84 to
131.37 billion respectively from FY09 to FY12.
A specialized department exercises oversight on hassle free credit
disbursement and other customer interest protection issues.
Mobile phone based financial service delivery processes.
Facilitate cost effective agricultural credit delivery and recovery to
and from farmers in remote areas.
More than 9.5 million accounts of farmers have been opened by
the State-owned Banks with an initial deposit of Tk. 10/- only
(<20 cents).
32
Target Achievement Trend in last 5 years
14000
138.00
131.32
126.17 121.84
115.12
Amount in billion Taka
12000
111.17
93.79
10000
92.84
83.09
.8580
8000
6000
4000
2000
0
FY2011-12
FY2010-11
FY2009-10
Target
FY2008-09
FY2007-08
Achievment
33
Sector-wise Agricultural and Rural Credit
Disbursement in FY 2011-12
(Tk. 131.32 billion)
32.99 (25.12%)
53.50 (40.74%)
Crops
Irrig. Equip
Agri Equip
Livestock
16.09(12.25%)
Fisheries
Grain Storage
0.7(.54%)
2.75(2.09%)
Poverty
alleviation
Others
2.59(1.97%)
10.26 (7.81%)
12.44 (9.47%)
34
Banks’ Disbursement of Agri-loan in FY 2011-2012
Private
Commercial Banks:
Tk.43.33 billion
(33.00%)
Total Disbursement: Tk. 131.32
State owned
Commercial Banks: billion
Tk. 24.33 billion
( 18.53%)
State Owned Commercial
Banks
State OwnedSpecialized
Banks
Foreign Banks
Private Commercial Banks
Foreign Banks:
Tk. 4.82 billion
(3.67%)
State owned
Specialized Banks:
Tk.58.84 billion
(44.80%)
35
Green Banking Activities in
Agriculture and Rural finance

Special Refinance Program of Tk.2000 million for Solar
energy, Bio gas plant, ETP, HHK etc.
36
Green Banking Activities in Agriculture and Rural finance
Solar Irrigation Pump:


As of December2012, an amount of
Tk. 2.39 crore disbursed for 8 solar
energy driven irrigation pumps.
No. of beneficiary farmers are 618
and 920 Bighas of land will be
cultivated with uninterrupted water
flow in the land.
37
As of December2012, an
amount of Tk.133.20 million
is re-financed in 820nos of
Integrated cow rearing and
Bio-gas plant.
Some features of these Bio-gas
plants:
No. of Beneficiaries: 980 families
No. of cows in the project: 3550
No. of Chicken in the project: 14150
Volume of Bio Digester: 4089 cubic meter
Milk production per day: 25560 litre
Production of Bio-gas per day: 1635 cubic
meter
Organic Manure per day: 21300 kg
13.32
14
Amount in Crore Taka
Integrated Cow Rearing and
Bio-Gas Plant
12
10
8
5.02
6
4
2
0.19
0
2009-10
2010-11
2011-12
38
Green Banking Activities in Agriculture and Rural finance
Effluent Treatment
Plant(ETP):
 As of December 2012, an amount of
Tk. 90.40 million disbursed for
establishing 8 ETP which reduces
environmental pollutions.
Solar Home System(SHS):

As of December 2012, an amount of Tk.
87.80 million disbursed for 3763 Solar
Home systems through which at-least 3714
families will be benefited and the
production capacity is 164100kwp per day.
39
Solar Assembling Plant
As of Decemebr 2012, an
amount of Tk. 248.80 million
disbursed for establishing Solar
PV module assembling plant.
Bio fertilizer
As of Decemebr2012, an amount
of tk. 0.4 million has been
disbursed through banks in Biofertilizer sector under a refinance
program.
40
Vermiposting : composting the earthworms

Using worms in an indoor bin to break down scraps into compost,
known as "vermiposting”, .

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.

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.
As of December 2012 an amount of TK. 6929.59 million agri.
credit has been provided through BRAC (MFI) towards 5,52,047
sharecroppers (in 250 upazillas of 48 districts) .
42
Disbursement to the Sharecroppers through Banks
No. of Sharecroppers in lac
6


All scheduled banks are advised 5
to disbursed agri-credit towards 4
sharecroppers on individual or 3
group basis.
2
Agricultural
Credit
towards 1
sharecroppers has been increased
0
(in no. of farmers and amount)
gradually from 2009-10 to 201112.
1200
5.01
4.27
3.74
2009-10
2010-11
2011-12
Disbursement amount in billion taka
1000
800
10.86
600
7.44
400
200
4.31
0
2009-10
2010-11
2011-12
43
Credit at concessional interest rate promoting
cultivation of spices, lentils, oilseeds, etc
Agricultural Credit for Pulse
seed, oil seeds, Spices and Maize
at 4% concessional rate has been
increased
due
to
media
campaign (print and electronic)
and weekly-basis monitoring
from BB.

During FY2011-12, Private and
Foreign Banks have participated
in disbursing agri-credit at 4%
concessional rate.
Out of Tk.816.30 million, PCBs
and FCBs disbursed TK. 115
million .

100
Amount in million Taka

706
80
816.30
60
40
20
123.30
0
2009-10
2010-11
2011-12
44
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.
Financial Year
No. of Farmers
2010-11
1153
Disbursement
(amount in million taka)
42.20
2011-12
1310
108.70
45
Special Credit towards women
In financial year 2011-12 an amount
of Tk. 5.31 billion were disbursed
among 0.27 million women as
agricultural and rural credit for crop
production, running agro processing
and agricultural related small
business & activities, so that they
can change their
economic
conditions.
46
Credit towards tribal farmers in Hill Tracts Areas
During FY 2011-12 around 273.90 million taka was
disbursed only at 5% interest rate among about 13100
tribal farmers of Bangladesh.
47
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,
fruits, flowers, spices, oilseeds) in the country’s poverty ridden
North-Western region through whole selling of MFI (BRAC).
48
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.
Bangladesh Bank (BB) issued a detailed directive titled "Mainstreaming
Corporate Social Responsibility (CSR) in banks and financial institutions
in Bangladesh“.
From the year 2009, 2010, 2011 & 2012 all banks disbursed an amount
of Taka 550 million , 2330 million, 2190 million and 3046.69 million
respectively in CSR program
Banks are advised to distribute free crops seed like oil pump, strawberry,
baul kool, appel kool etc. to the farmers.
Some banks are disbursing interest free agricultural credit towards share
croppers landless farmers in cyclone affected areas.
49
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
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. Such as:

Monitoring at disbursing bank level


Monitoring by Branch offices of BB
Monitoring by HO of BB
51
Flow Chart of 3-Tier Monitoring System
BB Head Office Monitoring Cell
(Under ACFID)
Commercial Banks
Head Office
BB Branches
Monitoring Cell
Divisional/Regional Level
Branch Level
Farmers
Farmers
Farmers
52
52
Monitoring at disbursing bank level



Participating banks will establish a separate monitoring system.
The branch Offices of the participating banks shall visit the
farmers
regularly, 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
Monitoring by Branch offices of BB





Every branch office of BB has a monitoring cell.
They collect & evaluate the comprehensive statement regarding
agricultural and rural credit disbursement and give necessary
instructions to the regional office of the banks.
BB officers from Branch office attend in the meeting with
government representative.
Representative from BB branch visit the farmers and the branch
office of participating bank.
Finally branch office of BB send their findings to HO.
54
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.
 Giving some instructions and decisions on the basis of review and
analysis.

On site supervision:

Visit bank branches and their borrowers on sample basis.

Coordinate with BB branch office monitoring cell of BB branch offices.

Monitoring through District Agricultural Credit Committee.

Meeting with senior Officials of participating banks.
55
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).
Failure will punished by :
 Depositing the shortfall amount of total target in BB for 1
year.
56
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. Central bank’s developmental role, therefore, act
as an in-built stabilizer of the financial system; helping avert
situation like those creating the global financial crisis of
2008-2009.
57
58