Innovations in Rural and Agricultural Finance - page 4

The GDP for the region including Afghanistan was USD 2.69 trillion in 2015 (Source: data.worldbank.org).
India is the sub-regional giant with a GDP (over $2.1 trillion followed by Pakistan with 0.27 trillion) and
population size (over 1.31 billion), as well as land area, which far outweigh any other country in the sub-
region. Sri Lanka, Bhutan and the Maldives clearly have greater progress in per capita GDP. At the same
time, Bangladesh, Bhutan and Nepal are classied as less developed countries. India & Pakistan fall
somewhere in the lowermiddle.
The largest proportion of the region's poor live in rural areas. They tend to live in remote areas that are great
distances from the nearest markets and basic banking services. Agriculture is predominant employment
provider in this part of the world. Its share in the national economy, though varies, is substantial. In India
54.6% of the population is engaged in agriculture and allied activities (census 2011) and it contributed 17%
to the country's Gross Value Added in 2015-16 as per Government data. In Pakistan it is estimated as 21
percent to the GDP and provides employment to nearly 43 percent of the workforce; similarly for
Bangladesh 16%&48%and Sri Lanka 18%&33%. For Bhutan, it is 15%&60%respectively.
The best way to tackle rural poverty is to increase agricultural production and productivity. Rural credit can
and does play an important enabling role. Financial innovations need to address the issues of enhancing
productivity of the agriculture sector and its access to markets for better returns, especially in the context of
small and marginal farmers. Innovations are also required for ensuring sustainability and robustness of
rural nancial institutions.
Keeping in view the overwhelming presence of India in the South Asian Region in terms of geographical
size, population and GDP, I propose to encapsulate the initiatives and experiences largely of India. The
experiences of two other countries viz. Pakistan andBangladesh are also duly incorporated.
II. InnovationsAndExperiments inSouthAsia
A. India Experience
1. InnovationStrategies
In the backdrop of the foregoing, it is important that the innovations in the rural nancial sector have to
bemulti-pronged and at various levels as under:
i. Policy level - Government andCentral Bank
ii. Design andprocess level
iii. Implementation level
iv. Monitoring level
v. Delivery infrastructure level
i. Policy Level - Government AndCentral Bank
a. Multi-agency approach
The Government of India has taken several important initiatives in the agriculture and rural
nancial sectors. They include setting up of Regional Rural Banks in 1975 and NABARD (that I
represent today) in 1982. The most recent innovation in this direction has been establishment of
specialized banks viz: Small Finance Banks and Payment Banks. These banks have been set up
with specic objective of reaching out to the people of small means especially farmers, farm
labourers and inlandmigrants for fullling their nancial services requirements.
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