The New Nation - Internet Edition

Bangladesh Bank has made disbursement of agricultural credit mandatory for all commercial banks including the foreign commercial banks. Since the introduction of the 1990 Financial Sector Reform Programme the commercial banks were free to decide whether they would provide agricultural credit. The present decision represents a departure to the right direction from BB's October 2007 decision asking only eight state owned banks and financial institutions to disburse loans. BB is not going to impose any credit target for the banks but would take necessary regulatory measures to ensure rational targets keeping with their respective financial condition. The foreign banks having no branches would do the same through NGO network. One salient feature of the decision is the introduction of a new three-year-long mechanism of revolving crop credit limit to relieve farmers of fresh applications, documentation, approvals and involving middlemen for a fresh loans.

Agriculture, the lifeline of Bangladesh economy and the largest private enterprise, had a contribution of more than 21 percent to the GDP in 2006-07. It sustains the livelihood of about 52 percent of the population and remains a major supplier of raw materials for agro-based industries. According to Bangladesh Labour Force Survey 1999-2000 more than 62 percent of total labour force is engaged in this sector. With diversification of agriculture, it has opened up new avenues to absorb a broader section of unemployed masses. The above facts and figures strongly justify the BB decision.

Agricultural loan distribution should be done strictly on banking rules of appraisal and economic viability study. If the credit disbursement is kept restricted to farm loans alone, the goal of overall development of agriculture is not likely to be achieved. Disbursement of agri-credit needs to be elevated to rural institutional credit-flows.

Ariful Huq

Dhaka