Bangladesh, formal sector has ourished in recent years in disbursing agricultural credit where previously
informal sector dominated. NGOs have a stronger network throughout the country and many local private
commercial banks (PCBs) and foreign banks use this channel to provide agricultural credit. NowNGOs are
in a signicant role in rural economic upliftment by generating growth & creating employment through
agricultural credit disbursement. Bangladesh thus created a semi-formal credit sector that includes
autonomous credit institutions like the Palli Karma Sahayak Foundation (PKSF), Bangladesh Rural
Development Board (BRDB), and numerousNGOs.
Bangladesh Bank, the central bank of Bangladesh, has mandated all local and foreign Private Commercial
Banks (PCBs) to invest in agricultural sector. Banks that do not have adequate branches in rural areas were
allowed to use linkage with Non-Governmental Organizations (NGOs) for disbursement of agricultural
and rural credit. NGOs in Bangladesh have much scope to play role in agricultural credit distribution as
they havewider range of branches throughout the country.
Bangladesh Bank made it a policy that processing of application form and sanctioning of credit for the crop
loan (up to 5 acres), banks andmicro credit organizations disbursing agricultural and rural credit bymaking
partnership with banks will not be able to take any sort of charge documents except DP note, Letter of
Hypothecation andLetter of guarantee (Personal).
III. Future Innovations Required
Despite several initiatives and innovations, there are still quite a few issues concerning agricultural and
rural credit that are festering. Anewarray of innovations are required to be directed to tackle these issues. A
fewof these important issues are elaborated below:
I. The capital formation in agriculture has been showing a declining trend over the years. This is due to
overemphasis on food grain crops. Long term investment credit in agriculture is required to address
the issue of stagnant productivity and diversication. Since investment credit is the major driver of
private sector capital formation in agriculture, the persistent decline in its share raises concern about
the agricultural production andproductivity.
II. Avoiding grant of loans to farmers beyond their credit absorption capacity.
III. Extension of the coverage of all small/marginal farmers to ensure inclusive growth.
IV. Ensuring of adequacy and timely credit disbursement.
V. Effectivemonitoring of enduse of credit.
VI. Reporting of credit information to credit bureaus for creating credit history of borrowers.
With this narration, I propose to conclude about innovations in rural credit in South Asia. There may be
many more innovations in other countries of the region which I might fail to narrate due to absence of
seamless cross country exchange.
I thank Bank Indonesia, IFAD and the APRACA for inviting me to this workshop and for giving me
opportunity to participate in this discussion session.
I also thank the audience for givingme a patient hearing.
8
