For the last couple of years, poverty reduction got much importance as the country's key objectives to achieve the related Sustainable Development Goals (SDGs) under the 2030 development agenda set by the world. As development is prerequisite for achieving the targets under SDGs, the country very recently qualified for graduating to a developing country from the least-developed country (LDC) status thanks to the people's untiring efforts to that end. It is important to say that poverty is a curse. The banks in the country are offering lucrative packages to eradicate poverty by empowering the marginal and distressed people financially to change the face of rural economy. They are offering the people small-scale credit facilities, popularly known as micro finance, which came to the fore decades back. Non-government organisations (NGOs) have also been running such programmes for years. A book titled Agricultural Economics and Agribusiness by Gail L. Cramer and Clarence W. Jensen has revealed that the farm credit system in the United States of America is very well-managed. But we are lagging behind in terms of giving facilities to marginal farmers. In the USA, commercial banks lent 48 per cent credit support, the production credit association 15 per cent, the Farmers Home Administration 13 per cent, the Commodity Credit Corporation 5.0 per cent and individuals and others 19 per cent. In Bangladesh the banks are alone providing the loan facilities. Is it possible for the banks only to develop the rural economy only? The state has to come forward to have enough rural financiers. We may follow the policies adopted by the US-based Federal Land Bank and the Farmers Home Administration to promote the rural economy.
In Bangladesh banks are playing their part. With credit support from a bank, a 42-year-old man from Hamlakola village of Shahjadpur in Sirajganj overcame his misfortune. Md Abdus Sattar received credit support to the tune of Tk 60,000, Tk 80,000 and Tk 100,000 under a group-based lending programme. He is now successfully maintaining his five-member family by expanding his weaving activities with the loans. He now commands much respect in society for being financially solvent. Now he has gained the ability of shopping ahead of any festival for his school-going children which was completely a dream earlier. He is one of the beneficiaries of the newly-initiated microfinance programme of the bank. He now can consult physicians. Now he runs fourteen weaving machines and he plans to increase his business operation, if the bank stands by him all the time. "I never expect loans from NGOs as their activities are not borrower-friendly at all and the interest rate is higher than that of banks," he said. Once upon a time he was unable to meet basic needs during the rainy days of life. But today he has established himself as one of financiers in society.
However, alongside microfinance programmes, the banks are contributing much to credit disbursement in the country's hard-to-reach areas under the agriculture credit programme of the Bangladesh Bank. The rural economy saw a turnaround as the banks in recent years scaled up activities under their newly-launched need-based financial products, designed especially for the welfare of the low-income group of people who live in remote areas. The programme being implemented by financial institutions with their manufacturing-based products is enhancing the purchasing power of the rural people.
Farmers, sharecroppers, fishermen, poultry farms, livestock farming, women entrepreneurs engaged in off-farm activities like running grocery, handicraft or weaving business or working in rural transport or other areas, are the target groups of this scheme. A Shariah-based private commercial bank seeking anonymity told this scribe that they disbursed Tk 156.6 million (15.66 crore) and Tk 596.1 million (59.61 crore) among 7,505 and 18,192 people in 2016 and 2017 respectively. Tk 106.2 million is likely to be disbursed in 2018 among 37,800 people as targeted by the bank to attain the BB threshold.
The loan ceiling under the microfinance programme has been set at not more than Tk 120,000, beginning from Tk 20,000. But the agriculture loan ceiling has been designed based on necessities. Many steps earlier were taken by the BB and in response to that the commercial banks including foreign ones are in a race to launch the rural economy-friendly products which would help raise the living standard of the people who live from hand to mouth. Those who have the capacity to pay back the loan amounts within the stipulated time are getting higher amounts of loans depending on the background check.
As the banks experienced a fat amount of non-performing loans in recent financial years, they are giving priority to microfinance, not large-scale lending, right now. The repayment rate under the programme is excellent, which is nearly 99 per cent. Why have the banks adopted the NGO model of lending after so many years? The answer is: It has proved safe and the repayment of loan is better than expectation. Moreover, the demand for such loan facilities is on the rise in remote areas. Amid much enthusiasm of such borrowers the banks also do not want to wait to tap the demand with various products.
According to the Handbook of Economic Development edited by Kuotsai Tom Liou, group-based microfinance was introduced in parts of Asia such as India in early 1970. In 1975, the World Bank declared that "the best prospects in future will lie in some form of group responsibility for individual loans". Starting in 1974 with the disbursement of $30 in loans to a group of 42 basket weavers, the Grameen Bank emerged as an integrated community development organisation that disbursed over $1.3 billion in credit to more than 2.0 million borrowers in 35,000 villages out of 68,000 in Bangladesh.
The Bangladesh Bank data says the loans disbursed under the agriculture and rural credit policy and programme were around Tk 33.52 billion in the fiscal year 2015-16 against Tk 209.98 billion in 2016-17. It is very imperative to note that the ethnic people living in hilly areas in the country have been brought under the programme and with access to such facilities their fate and living standard are changing rapidly. Around Tk 479.1 million was disbursed among the ethnic people in the three hill tract districts of the country in the last financial year and the amount is likely to increase in the next financial year. A hotline has been developed between the loan takers and the BB. It is the Customers' Interest Protection Centre. It is accessible at 16236 to ensure hassle-free smooth services to the customers. If any wrongdoings are proved, the impact will be left on the concerned bank's CAMELS performance.
Specialised state-owned Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) are disbursing small-scale loans to lift the extreme poor out of poverty. There is room to scale up their operation, as they can render their services through their branches in remote areas. Most banks including foreign ones are doing so with the help of local NGOs. The banks should directly render their services in the rural areas without involving the NGOs which charge higher rates of interest than those of commercial banks. The government can take more banks to rural areas to serve the unbanked people. As the Dhaka-based SAARC Agriculture Centre has been set up to ensure sustainable agricultural development and poverty alleviation in the region, the government can take the help of it in addressing the issue of poverty effectively.
More than eighty five per cent people contribute to our agriculture-based rural economy. It is important to bring all of them under the banking net by offering more rural economy-friendly products. The financial institutions need to be more active to tap the untapped area of potential. Rangpur division, where the poverty rate was above 60 per cent and it experienced a rise in poverty by almost 4.0 percentage points between 2016 and 2010, must be brought under the microcredit programme of banks. Until the rural sleeping entrepreneurs' access to finance is ensured, the total poverty alleviation will remain a distant dream.
The writer is executive officer of Social Islami Bank Ltd, Bangladesh
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