The 3.0 billion credit scheme launched by the Bangladesh Krishi Bank (BKB) to mark the birth centenary of Bangabandhu Sheikh Mujibur Rahman may be viewed as an endorsement of his concern for the poor. Through this credit programme, the bank wants to take its service to the marginal poor of the country. Farmers can avail of the loan from Tk 20,000 to 100,000 at the rate of 7.0 per cent interest and that too without any collateral. In banking parlance it is called a financial inclusion initiative exactly what corresponds to Sheikh Mujib's special provision accommodated in the development plan for the small and marginal farmers.
Until now access to official credit line for the landless extreme poor has remained next to nothing mostly because of their lack of collateral. If the BKB's latest initiative can really make a breakthrough on this front, it will prove highly salutary. Much will however depend on how this credit programme is implemented. Selection of the deserving loan recipients is crucial here. In villages, the non-government organisations (NGOs) operate credit programmes at atrociously high rates of interests - from 18-20 per cent. The method of disbursement is cleverly developed where an entire group - comprising women only-is responsible for a defaulting member. This explains why default in repayment by the marginal poor is almost nil. The system of weekly payment of instalment is key to ensuring both monitoring and no non-payment for long. Thus accumulation of interests or instalments can be avoided.
This is impossible for the BKB loan disbursers at the grassroots level. Although the bank authorities have claimed that utilisation of credits by recipients will be monitored from time to time, one cannot be convinced of its merit. There is no alternative to regular and systematic monitoring and evaluation of loan utilisation by borrowers. Even more important here is to stick to the principle of proper investment of the money for production and profit.
Those who qualify for the credit must have land below 1.5 acres and an annual income below 100,000. Now this makes people with no land, no homestead and no permanent trade qualified on paper to apply for the loan. But will such applicants be considered for the loan and if done, how will they be traced? Here is a problem that cannot be overcome by even forming groups. Also a Tk 3.0 billion credit is not enough for the purpose of covering the deserving candidates.
So the selection of enterprising farmers who could use the low-cost fund as a primary investment becomes very important. Not all are expected to be successful entrepreneurs on their own. There has to be a cell and its extension at the field level like the agriculture extension service. Before the loan is sanctioned, doing some ground work like the feasibility of the enterprise, development of managerial skill and technical skill, marketing of the products etc., has to be done. In case of shift in cultivation of crops, the agriculture extension service may be of help but where it concerns agro-industry of small and medium scale, technical and entrepreneurial knowledge will be in demand.
In this context, production of corn oil from maize can be a good example. The country produces 4.7 million tons of maize but only 5.0 per cent of this, according to a report, is consumed by people and this too mostly in the form of scorching it over burning charcoal. The rest 95 per cent is used as feed for poultry, dairy and fish farms. Now experts are of the opinion that oil can be extracted before using the maize as fish, poultry and dairy feed without harming its quality. Similarly, soyabean and sunflower with their lush growth in some areas of the country point to the potential of developing related agro-industries. In case of soybean, milk can as well be extracted.
What is needed is spotting the right crops and setting up of factories or industries for addition of values to such crops when those are cultivated on a mass scale. Not only will such initiatives diversify agriculture but also lessen the country's dependence on imported cooking oil. More importantly, such enterprises will create employment for people who cannot organise similar economic activities. Here the extreme poor not covered by credits from NGOs and BKB and many others unbanked people in villages will find employment.
In this respect, the government, banks or local governments must have to play a role of both catalyst and facilitator. The unemployed extreme poor must be trained for employment to the new ventures. The traditional labour force cannot meet the demand of such enterprises. Sanctioning loan alone cannot guarantee successful implementation of the programme. The loan disbursement has to be done in a package where the objective of entrepreneurship development must be realised through a combination of policies and programmes. If addressing social inequality is the ultimate goal, it has to be done under a comprehensive plan. Small and medium productive units will be established depending on locations, supply of raw materials or produces, marketing channels and such other facilities in order to raise income of the rural people. This is how income inequality in society can be narrowed down.
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