Access to rural finance project to help farmers proposed
WB for re-capitalisation of BKB, RAKUB
Rejaul Karim Byron
The World Bank (WB) has proposed a new project to increase access to finance for the small farmers and rural micro and small enterprises (MSEs) through reform in two government-run specialised banks for agriculture and creating funds for natural disasters.It conducted a study by its mission in April to assist the micro finance institutions (MFIs) to develop new products for small and marginal farmers and MSEs. Another WB mission is due in Dhaka in July to discuss with the government for pre-appraisal of the Access to Rural Finance project. According to the World Bank, through linkage with Palli Karma Sohayak Foundation (PKSF), the project will assist the microfinance sector to develop a robust computerised system that can accommodate the upscaling of its operations into large volume of micro and small enterprise lending and can also facilitate their graduation into commercial banks' clients. Together with the PKSF, the project will assist selected insurance companies and MFIs to develop a commercially viable index based weather insurance product. A consultant will carry out a re-capitalisation plan of the state-run specialised banks for agriculture, Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB), with a proposal for a new governance structure. The project will also sponsor the creation of an appropriate financing mechanism and technical assistance to the commercial banks so that the selected banks can reach out profitably to the micro and small enterprises (MSEs). Referring to the fact that for every Taka of deposit collected in rural Bangladesh, only half a Taka is on-lent in rural areas, the WB aid proposal said private banks are virtually non-existent in the rural financial market, while micro finance institutions (MFIs) account for roughly 30percent. The WB said the nationalised commercial and two specialised agriculture banks disburse about 60 percent of the rural lending (in volumes). The lending volume to agriculture and small business from banks has been decreasing, while micro finance lending has marked a rise in the rural areas, the WB study found. It said limited products have been developed for small and medium farmers and micro and small enterprises. In fact, neither micro and small enterprises, nor small and medium farmers are the traditional clients of micro finance institutions, the study revealed.
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