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 CEOs 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

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 Bangladeshs
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 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
system.
o Absence of efficient as well as effective farmers'
organization at the grass root level.
 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,
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 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,
salinity and high temperature tolerant crop variety.
o 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 1991-2009.
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 Food grain Total production

population requirement
(million)
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
agro-commodities 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
DistributionOf Bangladesh
of loan Bank
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. Farmers 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
Weavers 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 Micro-Finance 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

33
 Sector-wise Agricultural and Rural
Credit Disbursement in FY 2011-12
(Tk. 131.32 billion)

34
Banks Disbursement of Agri-loan in FY
2011-2012

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
Integrated Cow
Rearing and Bio-Gas
Plant

As of
December2012, an
amount of Tk.133.20
million is re-financed
in 820nos
Some of
features of these
Integrated cow
Bio-gasand
rearing plants:
Bio-gas
No. of Beneficiaries: 980
plant.
families
No. of cows in the project:
3550
No. of Chicken in the project:
14150
Volume of Bio Digester: 4089
cubic meter
38
Milk production per day:
Green Banking Activities in Agriculture and Rural
EffluentTreatment
finance
Plant(ETP):
As of December 2012, an
amount of Tk. 90.40 million
disbursed for establishing 8
ETP which reduces
environmental pollutions.

SolarHomeSystem(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
 SolarAssemblingPlant
As of Decemebr 2012, an
amount of Tk. 248.80 million
disbursed for establishing Solar
PV module assembling plant.

Biofertilizer
As of Decemebr2012, an amount
of tk. 0.4 million has been
disbursed through banks in Bio-
fertilizer 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.ofSharecroppersinlac

All scheduled banks are

advised to disbursed
agri-credit towards
sharecroppers on
individual or group
basis.
Agricultural Credit
towards sharecroppers Disbursementamountinbilliontaka
has been increased (in
no. of farmers and
amount) gradually from
2009-10 to 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)
During
and
FY2011-12,
weekly-basis
Private and Foreign
monitoring
Banks from BB.have
participated in
disbursing agri-credit at
4% concessional rate.
Out of Tk.816.30
million, PCBs and FCBs
disbursed TK. 115
million .

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 Disbursement
(amount in million
taka)
2010-11 1153 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 countrys
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 BB Branches

Head Office 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
 Rewar
d&pu
nitive
measu
refor

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 banks
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
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