agricultural credit in Bangladesh

7/27/2019 agricultural credit in Bangladesh

1/40

WELCOME


2/40

GROUP LINEUP

Name Registration No:

Omar Faruk 2010731010

Reza Nurtaz Jaman 2010731023M.H Jamil 2010731046

Md. Shamsuddin Imran 2009731012

Estehad Chowdhury 2009731029

Md. Salman Hossain 2009731004


3/40

SUPERVISEDBY:

Mohammad Ashraful Ferdous Chowdhury

Lecturer,

Department of Business Administration,Shahjalal University of Science and Technology,

Sylhet-3114


4/40

SEMINAR REPORTON

ROLEOFBANKSONAGRICULTURAL

DEVELOPMENT: A STUDYONSYLHET

REGION


5/40

Agricultural credit is crucial for realizing the potential gain fromagriculture as a profitable activity. Ensuring access to credit to smallfarmers who are operating at the subsistence level is a substantive issue.Small farmers in Bangladesh do not have sufficient assets to carry on withtheir production expenditure. They depend on agricultural credit frominstitutional and non-institutional sources to meet the various expenses ofagricultural productivity. There are various inefficiencies in the institutionalsources regarding interest rate and other conditionality. Indebtedness of

peasants in Bangladesh has long been a phenomenon caused by shortage ofcash funds. Alternative credit system is required for providing peasantswith necessary funds. Unless the farmers get secured access to the sourcesof credit, they will not be able to invest in land and as such sustainabledevelopment in agriculture will not be possible. Therefore, intervention isneeded from the state as well as from the private sector. But properimplementation of the adopted policies needs to be seriously monitored. It

is necessary for the state and different organizations to carry on with theirinitiatives for increasing farmers access to institutional credit. It isindispensable to construct a strong institutional base which would be ableto provide farmers with sufficient credit facilities as and when necessary.


6/40

CHAPTER ONE:

INTRODUCTION


7/40

Agriculture is one of the prime sectors of Bangladeshs economy. This sector

contributes about 20% of the countrys Gross Domestic Product (GDP) and

employs 44 per cent of the total labor force. Agricultural sector contributes

significantly in respect to attaining marginal food sufficiency creating employmentopportunity, improving standard of living, and finally reducing poverty. The success

has achieved due to continuous reform of agricultural policies and its

implementation. The agricultural credit has been considered one of the crucial

factors toward sustainable development of agricultural sector particularly to increase

agricultural production. It is apparent from previous studies that credit plays an

important role in increasing agricultural productivity. The central bank of

Bangladesh has recently shifted agricultural credit policy through incorporating all

scheduled banks (including Private Commercial Banks and Foreign Commercial

Banks) under agricultural credit program. In fact, agricultural credit plays an

important role in enhancing productivity of agriculture and the participation of all

formal banks obviously added extra value. Agricultural credit system has beenadopted by the Bangladesh Bank, that is, Agricultural Credit Monitoring System.

This seminar paper also tries to show the relationship between agricultural credit

and agricultural development.


8/40

CHAPTER TWO:Literature Review


9/40

Studies by Farid Ahmed M. (1980) and Hasanath Ali M. & Serazul I.M

(2005) refer to earlier stages of the disbursement process . The latestworks on Bangladesh agriculture efficiency were made by Chowdhury

(2002). Khalily M.A.B & R.L. Meyer (1993) their results support the findings

of other studies that reform efforts initiated by the Bangladesh government

from 1991 to 2005 have not yet led to a real improvement in the agricultural

sector. Agricultural credit program was given more importance from 2009 by

Bangladesh Government. There is not enough seminar paper or research

about Agricultural Credit & Development in Sylhet. Few researches were

done on this topic (Farid, 2009). Their result showed that the agricultural

development is likely related with disbursement of Agricultural Credit.


10/40

CHAPTER THREE:AGRICULTURE IN

BANGLADESH


11/40

Agriculture is an economic sector that has to provide society withsufficient amount and quality of food and fiber production, avoidingharmful environmental effects on land, soil, air and water livestock.Agriculture is crop and animal husbandry for producing food stuffs,raw materials and services (including biodiversity and landscape)for the society.

Sectors of Agriculture:

Crop

Fisheries

Poverty alleviation

Grain storageLive-stock

Agriculture equipment

Marketing Agriculture goods


12/40

CHAPTER FOUR:AGRICULTURAL CREDIT

IN SYLHET


13/40

Agricultural credit is a financial term that refers to loans and other

types of credit extended for agricultural purposes. It is a credit

financing vehicle, such as a loan, bankers acceptance or letter ofcredit that is designed specifically for agriculture producer. The

credit needed by farmers to grow the agricultural sector is termed as

Agricultural Credit.

Types of Agricultural Credit: i) Short-term Loans

ii)Intermediate-term Loans

iii)Long-term Loans


14/40

Source of Agricultural Credit:

Credit in the farm sector is available from two sources

1) Non-Institutional Sources

2) Institutional Sources

Non-Institutional Sources Institutional Sources

i) Money lenders i)Agricultural Development Bank

ii) Friends ii) Commercial Banksiii) Relatives

iv) Landlords

v) Shopkeepers

vi) Commission agents


15/40

Programs & Policies of Bangladesh Bank in Agricultural Credit:

Agriculture being the key driving force as well as the priority sector of

Bangladesh economy, Bangladesh Bank (BB) has formulated Annual

Agricultural Credit Program and Policy for the Fiscal year 2011-12 with view

to ensuring food security of the country.

Programs of Bangladesh Bank:

The target for disbursement of agricultural credit has already been fixed at

around Tk. 13,136.91 crore for FY 2011-12 & it has been increased by

Tk.952.51 crore compared to that in FY 2010-11 (Tk. 12,184.40 crore).

Programs of Bangladesh Bank in Agricultural credit on Sylhet region:

Target( in Crore) Disbursement(in Crore)

FY 2009-10 374 237

FY 2010-11 497 411

FY 2011-12 639 193 (July-Feb)


16/40

Policies of Bangladesh Bank:

A farmer may be sanctioned credit for up to 15 bighas (5 acres) of

cultivable land as determined by credit norms.

As per Agricultural Credit Policy, in disbursement of agricultural credit

three core sectors of agricultural credit have to be given priority compared

to other sectors. Sixty percent of agricultural credit has to be disbursed to

grain and crop sectors only.

Banks are encouraged to disburse group-based loans to fishermen in

various water bodies, haors and pools.

Bangladesh Bank will consider providing refinancing facility to

encourage credit distribution programs in haor and coastal areas areas.

Banks and other concerned institutions are directed to provide

necessary credit to successful farmers so that other farmers to get

inspired by their success.


17/40

Contribution of Commercial Banks to the Credit Market:

All banks collectively disbursed Tk 13,136.91 crore, or 95 per cent of the

target, in farm loans in the just concluded financial year of 2011-2012

according to the Bangladesh Bank data.

State-owned, specialized, private and foreign commercial banks had a

target to disburse Tk 13,800 crore in FY 2012. In FY 2011, the banks

disbursed Tk 12,431.93 crore, or 96.50 per cent, in agriculture loans against

the target of Tk 12,184.40 crore.

The state-owned commercial banks

Sonali, Janata, Agrani and Rupaliand the two specialized banks, Bangladesh Krishi Bank and Rajshahi Krishi

Unnayan Bank in the FY 2011-12 had disbursed Tk 8,314.16 crore in farm

loans or 97.70 per cent of their annual loan disbursement target of Tk 8,510

crore. In FY 2010-11, the six banks disbursed Tk 8,457.62 crore, or 102.95 per

cent of their annual loan disbursement target of Tk 8,215 crore.

The PCBs and FCBs disbursed Tk 4,822.75crore in agriculture loan in FY2011-12, which was 91.17 per cent of their total annual loan disbursement

target of Tk 5,290 crore. In FY 2010-11, the banks had disbursed Tk 2,974.31

crore, or 81.91 crore of their annual loan disbursement target of Tk 3,631.40

crore.


18/40

Contribution of Commercial Banks to the Credit Market on Sylhet

region:

Bank Name Target amount( in Lakh) Actual disbursement(in

Lakh)

State-owned Commercial

Bank

7713.2 3373.02

Specialized Bank 36477 11410.24

Private Commercial Bank 12005.4 1972.4

Islami Bank 6897 1894.09

Foreign Commercial Bank 807 600

Table: Total Target & Actual Disbursement of Agricultural Credit on Sylhet Region

by Various Banks (FY - July, 2011-Feb, 2012)


19/40

CHAPTER FIVE:Data Analysis

& Findings


20/40

Figure 1: Target & Disbursement

of Bangladesh Bank in Agricultural Credit on Sylhet Region

374

497

639

237

411

193

FY 2009-10 FY 2010-11 FY 2011-12

Target( in Crore) Disbursment( in Crore)

Target & Disbursement


21/40

Figure 2: Disbursement Rate of Bangladesh Bank in Agricultural Credit Program

on Sylhet Region

Disbursement Rate

FY 2009-10

FY2010-11

FY 2011-12(July-Feb)

30%63%

83%


22/40

Figure 3: Total Target & Actual Disbursement

of Agricultural Credit on Sylhet Region by Various Banks (FY - July,2011-Feb,2012)

7713.2

36477

12005.4

6897

807

3373.02

11410.24

1972.4 1894.09600

0

5000

10000

15000

20000

25000

30000

35000

40000

State-owned

Commercial Bank

Specialized Bank Private Commercial

Bank

Islami Bank Foreign Commercial

Bank

Target amount( in Lakh) Actual disbursement( in Lakh)

Total Target & Actual Disbursement


23/40

Figure 4: Disbursement Rate of Agricultural Credit on Sylhet Region by

Various Categories Bank in FY 2011-12(July-Feb).

Disbursement Rate (FY : July, 2011 - Feb, 2012)

State-owned Commercial Bank

Specialized Bank

Private Commercial Bank

Islami Bank

Foreign Commercial Bank

74%

44%

31%

16%27%


24/40

Figure 5: Total Disbursement, Outstanding & Recoveryof Agricultural Credit on Sylhet Region by Various Bank in FY 2011-

12(July-Feb).

0%

20%

40%

60%

80%

100%

KrishiBank

DhakaBank

Trust

BankUttaraBank IFIC Bank Mercantile

Bank LtdPubaliBank

18480.81170

30.515.75

112.6426.3

200.5

7819.24

11.50 1.25

3.420

2.45

10661.57

158.530.5 14.5

109.22 26.3 198.05

Total Disbursment( in lakh) Outstanding (in lakh) Recovery (in lakh)

Total Disbursement, Outstanding & Recovery


25/40

Figure 6: Interest Rate of Agricultural Credit on Sylhet Region by Various

Bank.

Interest rate

Krishi Bank

Pubali Bank

Uttara Bank

Mercantile Bank

Trust Bank

Dhaka Bank

IFIC Bank

10%

13%

13%

13%

15%

13%

13%


26/40

Figure 7: Total number of borrower & defaulter in agricultural credit

program on Sylhet region from 2009-2012 (July-Feb).

79714

572 56 30 27 425 258

43045

7 4 0 0 12 70

10000

20000

30000

40000

50000

60000

70000

80000

90000

Krishi Bank Pubali Bank Uttara Bank Mercantile Bank Trust Bank Dhaka Bank IFIC Bank Ltd

Total borrower Total defaulter

Total Number of Borrower & Defaulter


27/40

Figure 8: Total number of farmer's bank account (2006-12) in fourdistrict of Sylhet division.

110611

48502

116794

155345

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

Sylhet Moulovibazar Hobigonj Shunamgonj

Total Number of Farmer's Bank Account


28/40

Figure 9:Total Production

oThe actual production in Khorip-1 (Aamon), Khorip-2 (Aaush) and Robi (Boro) seasons was respectively 261266 metric ton,

760594 metric ton and 1537602 metric ton in FY 2007-08.The total production was 2559462 metric ton in 2007-08.

o In 2008-09 the actual production in Khorip-1 (Aamon), Khorip-2 (Aaush) and Robi (Boro) seasons was respectively 245581

metric ton, 825531 metric ton and 1391442 metric ton. The total production was 2559462 metric ton in 2007-08.

oIn 2009-10 the actual production in Khorip-1 (Aamon), Khorip-2 (Aaush) and Robi (Boro) seasons was respectively 253493metric ton, 900535 metric ton and 1555690 metric ton. The total production was 2709718 metric ton in 2009-10.

oIn 2010-11 the actual production in Khorip-1 (Aamon), Khorip-2 (Aaush) and Robi (Boro) seasons was respectively 228628

metric ton, 931953 metric ton and 1669404 metric ton. The total production was 2829985 metric ton in 2010-11.

oIn 2011-12 the actual production in Khorip-1 (Aamon), Khorip-2 (Aaush) and Robi (Boro) seasons was respectively 293099

metric ton, 994462 metric ton and 1715462 metric ton. The total production was 3003023 metric ton in 2011-12

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

2007-08 2008-09 2009-10 2010-11 2011-12

A.P (k-1) in M.T

A.P (k-2) in M.T

A.P ( R) in M.T

Total Production ( in M.T)


29/40

Figure 10: Relation between total Disbursement & total Production

Total disbursement in FY 2009-10 was 2370000 thousand & total production was

2709718 metric ton,

In FY 2010-11 total disbursement was 4110000 thousand & total production was2829985 metric ton,

In FY 2011-12 (July-Feb) total disbursement was 1930000 thousand & total

production was 2203023 metric ton.

So, Agricultural production is increasing as a result of increasing Agricultural

credit

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

FY 2009-10 FY 2010-11 FY 2011-12 (July-Feb)

Total Disbursment ( inThousand)

Total Production (in MetricTon)

Relation between total Disbursement & total

Production


30/40

Statement 1: Agricultural credit is important for the development

30%

70%

0% 0% 0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Agree Strongly agree Disagree Strongly disagree neither agrees nordisagrees

Importance of AC

Importance of AC


31/40

Statement 2: The performance of banks for agricultural development is not

satisfactory

0%

10%

20%

30%

40%

50%

60%

Agree Strongly agree Disagree Strongly disagree Neither agree nordisagree

Banks

Farmers

Performance of Banks


32/40

Statement 3: The procedure of getting agricultural credit is difficult

67%

23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

yes No

Difficulties in getting AC

Difficulties in getting AC


33/40

Statement 4: Agricultural credit is beneficial for the farmers of Bangladesh

84%

16%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

yes No

Beneficience of AC

Beneficience of AC


34/40

Statement 5: Agricultural credit helps to increase production

92%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

yes No

Increase of production

Increase of production


35/40


36/40

CHAPTER SIX:Recommendations and

Conclusion


37/40

Recommendations:

Sufficient loans in time should be supplied to farmers so that they never feel thewants of agricultural capital to invest in farmland.

Though interest rate is comparatively lower than other sectors, it is to beminimized between 5% to 6%

Regular visiting and planned monitoring from banks should be increased sothat borrowed money is utilized accurately to have a good return.

Government must have to play a vital role in uprooting communication gapamong banks and peasants through infrastructural development.

More rural branches should be launched by banks to make direct link withmarginal farmers.

Awareness programs on loans and positive approach of it among marginalpeasants are required to be organized.

Expanding time duration of loan in case of failure to repay is to be kept underconsideration.

Promotional activities at root level is a crying need to involve farmers as wellas first-hand training by banks especially by agricultural bank need to beintroduced.


38/40

CONCLUSION:

Agricultural credit thus assumes great importance in an agrarian county that

us trying to modernize traditional agriculture. Agricultural sector financial

access has expanded over the decades with the combined efforts of scheduled

banks and NGO-MFIs. Not to mention, Bangladesh bank policy on agriculturalcredit has promoted the access to credit for small and marginal farmers.

Although PCBs and FCBs contributed limited in respect to credit disbursement

but their participation in agriculture financing deemed as major movement of

formal private banks to financing in rural Bangladesh. Many PCBs and FCBs

have formed linkages with NGO-MFIs for expanding market horizon in aviable and sustainable manner, while NCBs and SBs have been using their

existing branch network to do so. Since, there is a significant positive

relationship between agricultural credit and production, there should have

demand for favorable agricultural credit policy and implication which can

increase the budgetary allocation as well as will take steps to overcome thetarget shortfall. Finally, there should have incentive for financial intermediaries

to encourage them to financing the agricultural sector and rural areas in a

sustainable manner.


39/40

ANY QUESTION


40/40

THANKYOU

Documents

agricultural credit in Bangladesh