The rural small businesses and farmers are severely constrained by lack of access to finances, says a World Bank study.
“Operations of the rural agricultural enterprises suffer due to their inability to access finance from both banks, and microfinance institutions (MFIs),” it said.
The World Bank recently completed the study on 'Bangladesh access to rural finance study' and published a report titled 'Access to rural finance in Bangladesh: The forgotten missing middle'.
In the report, the bank indicated that for every taka deposited or collected in rural areas, only half of it goes back as loans.
“This is mainly because the institutions operating in the rural areas was unable to develop appropriate financial products matching the demand of the farmers or rural small business,” it said.
The report, however, said that the MFIs started to craft financial and non-financial products and delivery mechanisms befitting the rural economy.
The World Bank said that considerable investment is needed for Bangladesh's agriculture sector to become more commercial and for its non-agriculture activities to grow.
“Yet 53 percent of the rural enterprises (both agricultural and non-agricultural) consider access to finance a major and very severe obstacle to their operations. Making matter worse, no agricultural insurance scheme exists in Bangladesh,” the report mentioned.
The World Bank found some challenges for lending to agriculture, which included government interventions, internal and external constraints, and problems of non-performing asset.
The bank suggested, for helping banks to increase lending to MSMEs, to reform the enabling environment for micro, small and medium-size enterprises (MSME) by reviewing rules on provisioning requirements, reforming and implementing a new legal framework for secured transactions, strengthening the credit bureau's operations and create technical assistance fund to help selected banks with potential to develop appropriate products and producers of MSMEs.
The key findings of the report titled 'Access to rural finance in Bangladesh: The forgotten missing middle' were discussed yesterday at a seminar organised by the World Bank in collaboration with Bangladesh Bank, Palli Karma Sahayak Foundation (PKSF) and Insurance Association of Bangladesh.
Bangladesh Bank Executive Director Naba Gopal Banik, Insurance Association of Bangladesh Chairman AKM Rafiqul Islam, Mosharraf Hossain of PKSF and World Bank Bangladesh Operational Adviser Mohamed A Toure, among others, spoke at the seminar.